Ipo Bidding

IPO bidding means applying for shares during an Initial Public Offering (IPO). In a book-built IPO, you apply for the required quantity and choose a price within the given price band or select the cut-off option if eligible.

• Check the minimum bid lot before calculating how much money you need.
• A Retail Individual Investor can apply for up to ₹2 lakh.
• Individual applications above ₹2 lakh and up to ₹5 lakh fall under the Non-Institutional Investor category and can use UPI under applicable rules.
• Your application money is blocked through Application Supported by Blocked Amount (ASBA).
• Cut-off means you accept the final issue price.
• A valid application does not guarantee allotment.

The main things to understand are how much money gets blocked, which price option you choose, and what happens to your money after allotment.

The amount depends on the IPO's minimum bid lot and price.

Every IPO specifies a minimum quantity that you can apply for. Further applications must follow the permitted bid multiples given for that IPO.

For example, suppose an IPO has:

Your application amount would be:

150 × ₹100 = ₹15,000

If you apply for 300 shares at ₹100:

300 × ₹100 = ₹30,000

So, first check the minimum bid lot and price band. Then calculate how much money can be blocked.

IPO bidding means submitting an application for shares during the IPO bidding period.

In a book-built IPO, the company gives a price band.

Suppose the price band is:

₹95 to ₹100 per share

You can enter an allowed bid price within this range. Eligible retail investors can also choose the cut-off option.

Your bid also includes the quantity of shares for which you are applying. That quantity must follow the minimum bid lot and bid multiples specified for that IPO.

There is no negotiation between you and the company. You choose from the options allowed in the IPO.

A price band is the range within which investors can place bids in a book-built IPO.

For example:

Floor price: ₹95
 

Cap price: ₹100

This means the permitted bid price is within ₹95 to ₹100, subject to the IPO terms.

After the bidding period closes, the final issue price is determined through the book-building process.

Cut-off means you agree to accept the final issue price instead of entering one specific bid price.

Suppose an IPO has a price band of ₹95 to ₹100.

You can enter an allowed price, such as ₹98, or choose cut-off if you are eligible.

If you choose cut-off and the final issue price is ₹99, your application is considered at the final issue price of ₹99.

This does not mean you get the shares automatically.

Cut-off affects the price at which your valid application is considered. It does not guarantee allotment.

Your application money remains in your bank account but gets blocked.

This process is called Application Supported by Blocked Amount (ASBA).

You cannot use the blocked amount while the IPO application is being processed.

After allotment:

• money required for allotted shares is debited, and
• the remaining blocked amount is released.

If you receive no shares, the blocked amount is released.

Example

Suresh is an auto driver. He has ₹50,000 in his bank account.

He makes an IPO application that requires ₹15,000.

After he completes the required payment authorisation, ₹15,000 is blocked.

Now suppose he receives shares requiring ₹10,000.

₹10,000 is debited.

The remaining ₹5,000 is unblocked.

If he receives no shares, the ₹15,000 is unblocked.

So, the amount is not fully taken from his account when he submits the application.

An individual application of up to ₹2 lakh falls under the Retail Individual Investor category.

This limit decides the investor category.

It should not be confused with the ₹5 lakh UPI limit.

So, ₹2 lakh is the retail-category limit.

The ₹5 lakh figure relates to the UPI mechanism available to eligible individual applicants.

You place an initial public offering (IPO) bid online through your broker's trading app or net banking using ASBA (Application Supported by Blocked Amount) and a UPI mandate.

• Check your requirements
  • Active PAN card.
  • Linked Demat and trading account.
  • Bank account with net banking or UPI enabled. 
•  Open Broker App
  • Log in to your preferred trading app.
  • Navigate to the IPO or Invest section. 
• Select the IPO
  • Choose an active company from the Open IPO list.
  • Read the minimum lot size and price band. 
• Enter Bid Details
  • Select the number of lots you want to buy.
  • Choose the cut-off price or type your own bid price. 
• Submit and Approve
  • Enter your UPI ID and submit the application.
  • Approve the UPI mandate notification in your UPI app to block funds. 

A book-built public issue is generally open for 3 to 7 working days.

If the price band is revised, the bidding period can be extended by 3 working days, subject to the applicable rules.

The actual opening and closing dates are stated in the IPO documents.

Check those dates for the specific IPO rather than assuming every IPO follows the same closing date.

Will you definitely get shares after bidding?

No. Submitting a valid IPO application does not guarantee allotment.

Suppose there are enough shares for 60,000 minimum bid lots but 1,00,000 valid retail applicants.

There are not enough minimum lots for every applicant.

Some valid applicants can therefore receive shares while others receive no allotment.

The final allotment follows the applicable basis of allotment.

Start with the money involved, then check the company.

Check the application

• What is the price band?
• What is the minimum bid lot?
• How much money will be blocked?
• Which investor category applies to you?
• When does bidding close?

Check the company

• What does the company do?
• Is it making a profit or loss?
• How much debt does it have?
• How is its cash flow?
• Why is it raising money?
• What risks are listed in the offer documents?
• How is the issue priced compared with its financial position?

Do not judge an IPO only by how many people are applying.