Companies have various sources to raise capital from, ranging from debt to equity. Privately held companies tend to have fewer avenues of capital to turn to as compared to public companies, particularly after reaching a certain scale of operations.
In such a scenario, widening the company’s investor pool is a feasible option, which is where the concept of an Initial Public Offering or IPO comes into the picture. In this article, we shall discuss what is an IPO, and how you can apply for an IPO in India online.
Initial Public Offering – Meaning
As its name suggests, an IPO is the initial offer of shares for public subscription by a previously privately held company. An IPO is an effective way of raising capital, becoming a listed company, having greater market presence, offering higher liquidity to shareholders, and enhancing the scale of operations of the issuing company.
In India, there is a specific procedure for launching an IPO, which is highly regulated by the Securities and Exchange Board of India (SEBI). Companies have to follow all the necessary steps and ensure compliance with the regulations.
Process To Assess A Potential Ipo Investment
Since there are several IPOs to choose from across sectors as diverse as Information Technology and Manufacturing, Food Delivery to Pharmaceuticals, you must carefully assess a prospective IPO investment. The major factors that you must take into account during such an evaluation are:
- Your investment goals and risk tolerance
- The financial and operational strength of the issuing company
- The accuracy of the company’s valuation
- The reasons stated for the IPO and the planned use of the funds
- The market standing of the company
- The company’s future prospects
Ways to Apply for an IPO in India
The process of applying for an IPO in India is fairly straightforward. Once you have determined which IPO investment to proceed with, you can submit your IPO application online or offline. Let us discuss the two major ways of submitting an online IPO application in India.
- Through your demat account: You can apply for an IPO online through a functional demat account. All you have to do is follow the steps mentioned below.
- Log in to your demat account on the official platform of the depository participant/ stock broker.
- Search for the option titled IPOs.
- Select the relevant IPO from the list of active public issues.
- Enter the lot size, bid price, and other important details.
- Check the particulars, including the total application amount.
- Submit your IPO application and complete the payment via ASBA (Application Supported by Blocked Amount). The application amount will be blocked in the savings bank account linked to your demat account.
- Await allotment of shares post the closure of the issue. If you get selected for partial or full share allotment, the application money shall be debited from your linked bank account and the requisite number of shares shall be credited to your demat account. In case of no allotment (which is likely due to oversubscription), your blocked application money shall get unblocked.
- Through Internet Banking: You can also use your bank’s Internet Banking facility to apply to an IPO. Here’s how you can do so.
- Log in to your bank’s Internet Banking platform (website or mobile application).
- Search for the option called IPOs.
- Locate the required IPO and select it.
- Proceed to enter the requisite details, including the lot size and bid price.
- Verify the application form and submit it with the payment method being ASBA. The applicable application money shall be blocked in your savings bank account.
- In case of allotment of shares, your demat account shall be credited and your bank account debited. Should you not get allotted shares, the blocked application money shall get unblocked and become available for use.
The Bottomline
Applying for an IPO through the online route is swift, convenient, and seamless. You can choose IPO investments to add to your investment portfolio, and apply for the issue through your demat account or Internet Banking service.