Frequently Asked Questions on IPO

An Initial Public Offering (IPO) enables a private company to offer its shares to the public and list them on a stock exchange. Understanding common IPO-related questions can help investors navigate the application process, share allotment, UPI payments, subscription timelines, withdrawal rules, and listing procedures more confidently. 

Key points:

• IPO shares are generally credited to your Demat account before the company's listing date.
• IPO applications can usually be withdrawn only during the subscription period.
• Companies may launch an IPO through the fixed-price method, the book-building method, or a combination of both.
• A PAN card and a valid Demat account are mandatory for applying to an IPO.
• SEBI permits IPO applications through BHIM UPI by approving the fund-blocking mandate.
• Investors cannot sell IPO shares before they are listed on the stock exchange.
• Multiple IPO applications using the same PAN are not permitted and may be rejected.
• Market lot size refers to the minimum number of shares that an investor can apply for in an IPO.

IPO FAQ 1: When can I expect credit for my IPO shares in the Demat account?

The exact timeline for credit cannot be specified, as each company has its own. However, ideally, investors can expect to receive the credit in their Demat accounts before the listing dates of the said shares. Once listed, these assets can then be traded by the investors.

IPO FAQ 2: How can I withdraw from an IPO?

Here is a step-by-step method for IPO application withdrawal:

• Log in to the broker's account (the account from which the application was submitted).
• Next, you must go to the 'order book' section and select the IPO.
• Now, click on 'withdraw'.
• The blocked money can be expected to be released within a couple of days once it is withdrawn.
• However, please note that withdrawal can only happen during the bidding period.
• If the specific IPO does not have the online withdrawal option, consider contacting the bank or broker (the source that helped with the application).

IPO FAQ 3: Is there a difference between the fixed price and book-building method?

When launching an IPO, a company can opt for one of the following options:

1. Fixed-price method: In this method, the IPO offering price is set before it opens for public subscription.
2. Book-building method: This is a price discovery mechanism in which the company sets upper and lower limits when launching the IPO. Investors can bid within this range for subscriptions.
3. A combination of both methods

IPO FAQ 4: Is there a difference between the 'floor price' and the 'cut-off price' in the book-building method?

Floor price refers to the minimum price point at which the bidders can order using the book-building method. The cut-off price, on the other hand, refers to the highest price point at which the company allots its shares, and the investor buys those shares.

IPO FAQ 5: Do I need to have a PAN card to apply for an IPO?

It is mandatory to have a PAN card to apply for an initial public offering. Investors need to ensure that the PAN details are entered correctly in the form to avoid cancellation of the application.

IPO FAQ 6: How long does an IPO remain open for subscription?

As per clause 8.8.1, the subscription list for public offerings should remain open for a minimum of three working days and should not exceed ten working days. This subscription period gives eligible investors sufficient time to review the IPO details, complete the application process, and submit their bids within the prescribed timeline. Investors should ensure that their applications are submitted before the subscription window closes, as applications are generally not accepted once the IPO subscription period has officially ended.

IPO FAQ 7: Can I sell my stocks before an IPO is listed on the stock exchange?

No, investors cannot sell their shares before an IPO is listed on the stock exchange. They must wait for the listing to trade assets.

IPO FAQ 8: Can I use BHIM for an IPO application?

Yes, SEBI has approved the use of BHIM UPI ID for IPO applications.

• You need to specify your ID in the application form to proceed.
• Your broker will request to block the funds, and you must approve the block mandate in your BHIM UPI app.
• As the final step, the applied amount will be blocked in your bank account and debited post-allotment.

IPO FAQ 9: Can I apply for an IPO through multiple applications?

Investors cannot apply for an IPO through different applications using the same name. This is not permitted. Hence, the applications will be rejected if they are tried. However, one option is to use the Demat accounts of your family members to apply. No account should be repeated, and all members should have unique accounts for this option.

IPO FAQ 10: What do ‘Market Lot Size’ and ‘Minimum Order Quantity’ mean?

A market lot size or minimum order quantity refers to the lowest number of shares an investor can apply for once a company launches an IPO. For example, if a company has specified 100 shares as the minimum order quantity, the investor can only purchase in multiples of 100—100, 200, 300 shares, and so on.

IPOs provide companies with an opportunity to raise capital during economic downturns when traditional lending is constrained or when they wish to expand their business. Through IPOs, they can get listed on major stock exchanges, enhancing their appeal to prospective investors and improving company transparency.