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Applying for IPO using UPI Here is all you need to know

Initial Public Offers (IPOs) are quite popular among investors. They allow you to buy a new company's stock at a low price and benefit when the stocks list and the prices rise. The Securities and Exchange Board of India (SEBI) has simplified the IPO application process by allowing UPI payment.

As a retail investor, you can now pay through your UPI (Unified Payment Interface) ID while applying for shares offered through an IPO. Let's understand the basics.

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What is an IPO?

An IPO is an unlisted company's first offer to interested investors to apply for its shares. It is the process through which an unlisted or private company can list its shares on a stock market platform. After the IPO, the company becomes a publicly traded company and its shares get listed on a stock exchange platform.

Who can participate in an IPO?

Individuals and institutional investors can participate in upcoming IPO in 2023 to subscribe to a company's shares. Each share in the IPO has a fixed price band, and a specified number of shares are issued in one lot.

How to apply for shares offered in an IPO?

You can apply for shares offered in an IPO either by using your net banking account or by using your UPI ID. While the former involves the ASBA (Applications Supported by Blocked Amount) mode of applying, which is quite a time taking process, the latter uses your UPI ID to apply instantly.

In fact, given the various benefits, the UPI mode of applying for IPOs has become quite popular. Let's understand what it's all about and how to apply through UPI.

What is a UPI ID?

The UPI ID is a digital payment ID that is used to send and receive funds directly in your bank account. It is a seamless process to transact digitally, which has been developed by the National Payments Corporation of India (NPCI).

UPI allows real-time payments for peer-to-peer and person-to-merchant transactions. Each transaction involves an inter-bank payment without needing physical cash or funds changing hands. You can get a UPI ID through any UPI-enabled bank or authorised third-party payment providers.

Applying for the IPO using UPI ID

You can apply for an IPO using the ID. Here are the steps –

Generate your UPI ID through your bank's net banking facility. Alternatively, download the mobile application of a verified third-party payment provider, link your bank account and create a UPI ID.
Subscribe to the IPO through your Demat account and enter your UPI ID. Submit your IPO application online.
Once the application is submitted, the bank will request you approve the UPI mandate for the IPO so that the relevant funds can be blocked.
Open your UPI payment gateway and approve the mandate to block the funds.

If you get an allotment of shares, the bank will be informed to unblock the blocked amount for payment. The amount would be paid, and the shares would be credited to your Demat account. Alternatively, if you do not get an allotment, the block on the amount will be removed, and the funds in your bank account will be free.

What are the benefits of using UPI for IPOs?

UPI has become the common norm for IPO applications because of its various benefits. These include the following –

The UPI mode is quick and instant. After you apply, you get an instant alert in your UPI payment gateway to approve the mandate. Just approve, and your IPO application is successfully subscribed.
There are no hidden charges for using UPI payments. The process is completely transparent and free to avoid ambiguity.
For any failed payments or technical glitches, you can contact the customer care department of the payment gateway and get a quick refund.
You can track your funds to know whether you have received the allotment.
The payment gateways provide regular notifications and alerts about your UPI activities and keep you updated.

Things to keep in mind when applying for IPO through UPI

Here are some things that you should remember when using UPI for IPO applications –

Your bank account should be linked to your mobile number for creating the UPI ID. The creation is an OTP-enabled process that requires linking the account to your mobile so you can get the OTP. Furthermore, if your bank account is linked to your mobile number, you can get real-time alerts about your UPI transactions, including the IPO application and allotment status.
When using your UPI ID, the maximum application limit is restricted to ₹2 lakhs. Moreover, one bank account is allowed per IPO application. Submission of multiple applications using the same UPI is not possible.
With a single PAN number, you can apply only once. Multiple applications per PAN are not allowed.
Apply for the IPO during market hours. If you apply after the market closes, the application will be executed the next day. If you are applying on the last day of the IPO, you might miss subscribing.
Different third-party application providers create different UPI IDs. You can have multiple IDs, so ensure you use the proper ID for a successful application. Even if you change the UPI ID after a successful application, the application would not be affected since your bank account remains the same.
You can also withdraw your IPO application within the IPO closure date.
Even if you can have multiple IDs, use the account with sufficient funds for a successful application. If there are insufficient funds, the IPO application would be rejected or declined.
You will not be allowed to de-register from the UPI app until the blocked amount is processed.
The UPI ID can be generated only if you have a bank account. Open a bank account if you have none to generate your UPI ID.
Each UPI transaction is protected by your unique 4-digit or 6-digit UPI PIN. Keep your PIN private and confidential to avoid unauthorised use. Also, check whether the UPI payment gateway is marked 'verified merchant'. This would help you avoid fraudulent block requests.
Till the shares are allotted, the relevant funds remain in your bank account and keep earning interest. Upon allotment, the funds are debited from the account. If not, the blocking mandate is removed without affecting interest earnings.
The blocked amount is refunded within 3-4 working days after the allotment date if you do not get the shares allotted.
You can use third-party payment providers to generate a UPI ID and apply for the IPO if your bank does not allow the same.

The bottom line

UPI IPO applications are quick, simple, and convenient. As you can apply for an IPO using UPI instantly, understand the process and the terms and conditions involved in such applications before applying. Generate a UPI ID if you don't have one and apply for the next IPO. If you have a UPI ID, use it for the next IPO application.