When it comes to investing in the stock market, one of the major strategies adopted by investors is to participate in IPO Application. IPOs allow companies to raise capital by offering shares to the public for the first time. As an investor, timing is of the essence when applying for an IPO. In this article, we will explore the best time to apply for an IPO and provide you with information about the IPO application process, categories, fees, rules and status.
IPO Application Process
The IPO application process is relatively simple. Investors interested in applying for the IPO need to follow these steps:
Research the company: Before applying for an IPO, it is essential to do thorough research on whether the company is going public. Understand its business model, financial health, and growth prospects.
Open Demat Account: A Demat account is required to hold shares in electronic format. If you do not already have an account, you will need to open a demat account with a registered depository participant.
Apply through a bank or broker: IPO applications can be made through banks or stockbrokers who act as intermediaries between investors and the issuing company. Most banks provide online IPO application facility, making the process convenient.
Fill the IPO application form: Fill the IPO application form with accurate details such as your name, address, demat account number and the number of shares you want to apply for. Double-check the form for any errors before submitting.
Make Payment: Make payment for the shares you have applied for using Net Banking or ASBA (Application Supported by Blocked Amount). ASBA ensures that the funds remain blocked in your bank account until the shares are allotted.
Submit Application: Submit the IPO application form along with the payment instrument to the specified bank or broker. Keep a copy of the application form and payment receipt for future reference.
Read More: IPO Allotment Tips – Increase Your IPO Allotment Chances
IPO Application Categories
IPOs can be classified into different types based on various factors. Here are some common IPO categories you may be familiar with:
Mainline IPO: These are IPOs where companies offer their shares to the general public for the first time. Mainline IPOs typically generate significant demand and attract both institutional and retail investors.
SME IPO: Small and medium enterprises (SMEs) that meet certain eligibility criteria can go public through an SME IPO. SME IPOs provide investors with an opportunity to participate in the growth story of these promising businesses.
Offer for Sale (OFS): In an offer for sale, existing shareholders such as promoters or private equity investors sell their shares to the public. OFS is a way for these stakeholders to exit their investments and receive profits.
IPO Application Time
Timing of IPO application is important and can significantly impact your chances of getting allotment. Here are some factors to consider:
An IPO remains open for minimum 3 days and maximum 10 days. Stock exchanges accept membership applications between 10:00 am to 5:00 pm. On the days when the IPO is open for subscription, except on stock exchange holidays.
Most banks and stock brokers allow investors to submit IPO applications any time (24 hours) that the IPO is open for bidding. Although the application can be submitted at any time, it will not be sent to the exchange until 10:00 am of the next day.
The deadline for submitting IPO applications on the last day varies as per the bank or broker, as they require buffer time to send the application to the exchange before 5:00 pm. Online applications for ASBA IPO will close at 2 pm for retail investors.
IPO Application Fee
When applying for an IPO, you should be aware of the charges involved. Here are the common fees associated with IPO applications:
Application Processing Fee: Banks and brokers may charge processing fees for facilitating the IPO application. Fees vary between institutions, so it is important to be aware of the charges beforehand.
Brokerage charges: If you apply for an IPO through a stockbroker, they may charge brokerage charges on the transaction. These fees are usually a percentage of the application amount.
Demat account charges: Some banks or depository participants may charge an annual maintenance charge for maintaining a demat account. Make sure you are aware of any charges associated with your demat account.
IPO Application Rules
To ensure a smooth IPO application process, it is important to follow certain rules and guidelines:
Read the Prospectus: The prospectus contains essential information about the company, financials, risks and other relevant details. Read it carefully before taking any investment decision.
Invest as much as you can afford: Assess your financial situation and invest as much amount as you are comfortable with. Avoid investing more than you can afford, as IPOs can be risky.
Multiple applications: Most IPOs allow investors to make multiple applications using different bank accounts or brokers. However, make sure you comply with the rules set by the issuing company and regulators.
IPO Application Status
Once you have applied for an IPO, it is natural to be curious about the status of your application. Here’s how you can check the status of your IPO application:
Registrar’s website: The Registrar of IPOs provides an online facility to check the status of your application. Visit their website, enter the required details like PAN number and application number, and you will get the latest status.
IPO allotment status: After the IPO subscription period is over, the IPO allotment status is declared by the registrar. You can check the allotment status on the registrar’s website or through the online portal of your bank or stockbroker.
Ultimately, the best time to apply for an IPO depends on various factors such as market conditions, demand-supply dynamics and the opening and closing dates of the IPO. By following the IPO application process, considering different IPO categories, understanding the fees and rules, and tracking the application status, you can make informed investment decisions. Remember, thorough research and careful deliberation is important before participating in any IPO.