Post-COVID-19 pandemic, investing in stocks has become a popular source of earning some extra income among Indians, especially millennials. However, trading in stocks already listed on the stock exchanges is highly risky and requires in-depth market knowledge. This is why most rookie investors turn towards Initial Public Offerings (IPOs).
When a private company issues its shares for the first time for public sale, it is known as an IPO. Investing in IPOs allows you to acquire shares of promising companies at much lower rates and make decent profits at the time of listing. If you can follow a bit of diligence, IPO investing is not as risky as investing in already listed stocks.
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Investing in stocks already listed on the stock exchanges is relatively easy. All you need to do is open a Demat account with a stockbroker, and then go to its trading platform to place buy or sell orders during the active market.
However, the process of investing in an IPO is a bit different. You need to bid for shares in one or multiple lot(s) in the price band decided by the company. Once the bidding closes, the issuing company decides on the issue price and then finalises the allotment of shares to eligible investors through a lottery system.
You will receive the shares in your Demat account before the listing date if allotted. Post listing, you can sell these shares in the secondary market anytime.
There are several upcoming IPOs where you invest and make some quick money. To invest in an IPO, you will need the following accounts:
A Demat account is a short form for Dematerialised account. It is an account where you can receive and store IPO shares post allotment electronically.
A trading account allows you to invest in IPOs online. You will need to link your Demat account with your trading account. You can also open a 2-in-1 Demat-cum-trading account for seamless investing.
You will also need a savings bank account with the required balance to invest in an IPO. In the case of allotment, the payment for IPO shares will be debited from your bank account
Once you have all these three accounts, you can apply for an IPO in any of the following ways:
You can take the help of the Application Supported by Blocked Amount (ASBA) facility provided by your bank to apply for an IPO. For this, you need to follow the steps mentioned below:
Step 1 - Visit your net banking account on the respective bank’s website or smartphone app
Step 2 – Go to the “Request” tab and click on the “IPO” option
Step 3 – Select the IPO for which you want to apply from the list of Live IPOs
Step 4 – Submit details regarding your Demat account, PAN, number of shares, and bid price
Step 5 – Accept the terms and conditions, and place a request with your bank to block the required amount in your savings account
If applying for an IPO through net banking seems complex, you can also do so through the trading platform of your stockbroker in the following steps:
Step 1 – Go to the IPO section on the trading platform to view a list of live IPOs
Step 2 – Select the IPO for which you want to apply and click on the “Apply Now” button
Step 3 – Enter details such as bid price and number of lots
Step 4 – Enter your UPI ID in the designated space. If you don’t have a UPI ID, download a UPI app on your smartphone and register
Step 5 – Approve the request on your UPI app to block the required amount in your bank account
Once your IPO application is complete, your bank will block the required amount in your savings account. The blocked amount will be paid to the issuing company if you get the allotment. Or else it will be unblocked by your bank. With Motilal Oswal, you can open a Demat account for free and enjoy seamless investing.
Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | How does a 2 in 1 Demat Account work | Relying on Grey Market Premium Wont Always Yield IPO Profits | Types Of Demat Account & Trading Account