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What is IPO & How to Invest in IPO

  • Highlights

  • What is IPO

  • How To Invest In IPO

  • Eligibility Required To Invest In An IPO

What is IPO & How to Invest in IPO

IPO full form – Initial Public Offering. IPO Meaning- A privately held company makes its shares available for sale to the public for the first time

Initial Public Offering, commonly known as IPO is when the shares of a company are introduced in the primary market. The shares are offered to both institutional investors and retail investors (individuals). It is a transformation of a privately held organization into a public company. IPO helps the Company to raise capital for its various business operations. Post the IPO, the shares get listed on stock exchange and can be traded freely in the secondary market.

 

Launch of IPOs are interesting times from investor’s perspective as well, as it gives them an opportunity to buy shares of the Company for the first time. Investors get a chance to apply for shares at the issue price (it may be a fixed price, or a price band will be defined). Applying in IPO can be profitable if enough research is carried out before investing. There are risks associated alongside the benefits. It is necessary to get familiar with the fundamentals before going in for it.

TYPES OF IPO:

The IPOs are generally of two kinds which are as follows:

Fixed Price Offering:

In Fixed Price IPO, the company fixes the issue price at which the initial sale of the share offering is done.

Book Building Offering:

In a book building offer, a price band is offered by the issuer. The lowest share price is called the floor price and the highest share price is called the cap price. The investors can bid on prices between this price band.

Additional Read:- How To Open Demat Account?

 

How to invest in IPO:

You need to follow some steps before investing in IPOs. These steps are as follows:

- Make the Decision:
The first step is to decide the IPO in which you want to subscribe. You can make a rational decision by analyzing the Draft Red Herring Prospectus of the company that is offering the IPO. The prospectus of the company will allow you to make an informed decision.

- Arrange for Funding:
The next step in the process is to arrange funds for the IPO. The investor can utilize his/her savings to subscribe to a company’s IPO. HNI clients can avail IPO financing through us to increase their quantum of allotment during IPO.

- Get a Demat Account:
A Demat account is the most important requirement to apply for an IPO online. The Demat account holds the shares and other financial securities electronically. Bajaj Finance Securities Ltd (BFSL) offers the facility of opening the Demat Account online. It is a 100% paperless process. BFSL offers IPO application through UPI ID, without any paperwork.

- Applying for IPO:
To apply in IPO, you need to have a Demat Account. You can apply though our platform even if you have demat account with any other stockbroker. Just visit https://ipo.bajajfinservsecurities.in/ and fill the details.
In case you have an account with us, you can apply swiftly with the below steps:

- Visit https://ipo.bajajfinservsecurities.in/
- Enter Client Code & click Proceed
- Validate OTP
- Select the Company in which you want to bid
- Select the number of shares
- Enter UPI handle details
- Tick the checkbox to agree to terms & conditions and submit the application

Note that: It is mandatory to approve the block mandate else your IPO application will get rejected. In some cases, there may be some delay in the request to appear on your UPI app.

- Bidding Process:
The application for an IPO is made through the bidding process. The process considers something called the “Lot Size” specified in the company’s prospectus. The Lot Size is the minimum number of shares for which an investor has to apply for in an IPO.
A price range is pre-decided and investors have to put the bid within the price range. The funds are required to be blocked while bidding. The amount deposited in the banks for IPO generates interest until the process of allotment is started.

- Allotment of shares
The final step is allotment. If the demand for the shares surpasses the number of shares offered, one may receive lesser number of shares than the applied quantity. The amount for which the shares have been allotted gets debited from the blocked amount while the remaining is released. After the allotment of shares, they are credited to the Demat account of the investor. Finally, when the stocks are listed in the share market, investor can sell his holdings.

Eligibility required to invest in an IPO

Investing in an IPO requires an individual to meet the below conditions:

  • Should have a valid PAN card 

  • Should have a Demat Account, because while applying in IPO, details of Demat Account has to be submitted. Demat Account is essential since the allotted shares will gets credited in it.

Apart from these, an investor will need a Trading Account if he wants to sell the shares post allotment.

Advantages of investing in IPO:

  • If the IPO lists at a higher premium than its price band, you can make an immediate profit by selling the shares - if you have received your allotment.

  • The price transparency is on the higher side. The information about the price is appropriate. However, the share prices post IPO completely depends on the fluctuations pertaining to the market.

So, if you are keen to turn your savings into investments, applying in IPO can be an exciting route. Keep an eye on the upcoming IPOs and review the company’s fundamentals before making an investment. If you don’t have a Demat Account yet, which is essential to apply in IPO, you can open one with us in less than 10 minutes. Click here to open account.

Disclaimer

Disclaimer: Investments in securities market are subject to market risk, read all the related documents carefully before investing. Visit our website for other Terms & Conditions.

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