Investing in a company before it is listed on the stock exchange can be a rewarding way to participate in India’s growth story. Initial Public Offerings (IPOs) allow everyday investors to buy shares directly from companies going public. If you live abroad but want a stake in Indian companies, the process may seem daunting. This beginner‑friendly guide explains how non‑resident Indians (NRIs) can take part in Indian IPOs with confidence.

Kickstart Investing through an NRI Demat Account

What is an IPO?

An IPO is a way for an unlisted company to raise capital by issuing shares to the public for the first time. When a firm “goes public,” it lists its shares on stock exchanges and sells them to investors. IPOs help companies raise funds for expansion or debt repayment while offering investors a chance to own a portion of the business from the very beginning.

Accounts NRIs Need

Before you can invest in an IPO, you’ll need to set up a few accounts to handle rupee‑based investments and hold your shares:

NRE, NRO and FCNR accounts

• NRE (Non‑Resident External) account – A rupee‑denominated bank account for earnings you bring from abroad. It offers full repatriation, meaning you can send both the principal and interest back to your country of residence.

• NRO (Non‑Resident Ordinary) account – Used for income you earn in India (rent, dividends, pension, etc.). Repatriation is limited (currently up to US$1 million per financial year) and withdrawals may attract taxes. It is suitable if you plan to keep funds in India for future needs.

• FCNR (Foreign Currency Non‑Resident) account – An optional fixed deposit account maintained in foreign currency such as US dollars or pounds. It protects savings against currency fluctuations and is generally not used for IPOs but is useful for long‑term financial security.

Demat and trading accounts

To hold shares electronically, you must open an NRI demat account. This account is linked to either your NRE or NRO bank account depending on whether you want investments to be repatriable or non‑repatriable. A trading account (with a registered broker) is needed if you plan to sell the shares later or invest in secondary‑market stocks.

Portfolio Investment Scheme (PIS) and PINS approval

The Reserve Bank of India’s Portfolio Investment Scheme allows NRIs to invest in Indian shares and mutual funds. Your bank manages a PIS account that reports all buy and sell transactions to the RBI. To trade shares, you may also need PINS approval (Portfolio Investment Scheme approval). This letter is issued by the bank maintaining your PIS account and ensures every transaction is transparent and compliant.

Repatriable vs. Non‑Repatriable Investments

When you invest through an NRE account, both your principal and profits can be freely remitted abroad. These are called repatriable investments and are useful if you want to bring money back to your resident country later.

Investing through an NRO account is termed non‑repatriable beyond the permitted limit. Funds must largely remain in India. This route is often used when the IPO issuer does not permit NRI participation on a repatriation basis or when you plan to keep the proceeds within India.

Required Documents

Brokers will ask for standard documents to open NRI demat/trading accounts and apply for an IPO:

• Identification proof – Passport, visa and proof of overseas address.

• PAN (Permanent Account Number) – A tax identification number required for investments in India.

• PIS approval letter – A letter issued by your bank confirming that your PIS account has been set up (where applicable).

• Bank account details – Evidence of your NRE or NRO account (chequebook copy or statement).

How NRIs Apply for IPOs

1. Check if NRIs can invest

Some companies reserve IPO shares only for Indian residents. Read the company’s Red Herring Prospectus or ask your broker to ensure NRIs are eligible to subscribe. If the firm permits only non‑repatriable investments, you must use your NRO account.

2. Use the ASBA facility

India uses the Application Supported by Blocked Amount (ASBA) method for IPO subscriptions. When you apply, money in your NRE or NRO bank account is “blocked” but not debited. Funds are debited only if you receive shares. Most banks provide ASBA through net banking or mobile apps.

1. Login to your bank’s net‑banking portal. Navigate to the investments or IPO section.

2. Select the IPO and enter details. Provide your demat number, name, bid quantity and price. Choose the bank account (NRE or NRO) from which funds will be blocked.

3. Confirm and submit. The bank will block the required amount. If you get shares, the money is debited and shares are credited to your demat account. Otherwise, the blocked funds are released.

Some brokers also offer IPO applications using the UPI (Unified Payments Interface) method. However, not all banks support UPI for NRI accounts, so confirm with your bank before applying.

3. Avoid using both accounts at once

If you hold both NRE and NRO accounts, you must pick only one to apply because both accounts are linked to your PAN. Submitting multiple applications can lead to rejection.

4. After allotment

On the allotment date, check whether you have received shares. If you do:

• Shares are credited to your NRI demat account; you may hold them or sell them later through your trading account.

• Funds are debited from your bank account; if you did not receive shares, your blocked funds are released.

• If you operate through a PIS account, your broker may ask you to submit annexures and a bank statement to update the PIS ledger.

Tax and Compliance Considerations

• Capital gains tax – Profits from selling IPO shares are subject to capital gains tax in India. Short‑term gains (shares sold within 12 months of allotment) are taxed at a higher rate than long‑term gains. Many countries also tax overseas income, so consider any double taxation avoidance agreements.

• Dividend tax – Dividends received from Indian companies may be taxed in India and your country of residence. Check whether your country has a tax treaty with India.

• Investment limits – NRIs cannot own more than 10 % of the paid‑up capital of any company. The RBI sets overall limits for foreign shareholding in each firm.

• Trading restrictions – NRIs may only carry out delivery‑based trades; intraday trading and short selling are not allowed.

Tips for Beginner NRI Investors

• Start small and diversify.  Invest only a portion of your capital in IPOs and diversify across sectors to reduce risk.

• Research the company.  Study the prospectus, financial performance and growth potential before bidding. Avoid applying solely based on hype.

• Keep your documentation ready.  Processing times for demat, trading and PIS accounts can be long. Complete KYC paperwork well before an IPO opens.

• Stay aware of currency risks.  Exchange‑rate fluctuations can affect returns when repatriating gains. Investing through an NRO account avoids these swings but keeps money within India.

• Follow regulatory updates.  RBI and SEBI often update rules on foreign investments. Subscribe to alerts from your bank or broker to remain compliant.

Final Thoughts

Indian IPOs offer NRIs a valuable opportunity to invest in high‑growth companies early on. While the process involves a few more steps than local investors face, it is straightforward once your bank, demat and trading accounts are in place. Choose the account type that fits your repatriation goals, use the ASBA facility to block funds securely, and pay attention to taxation and compliance rules. With careful planning and research, NRIs can participate confidently in India’s vibrant equity market.

Read More - NRI Demat account mistakes | Power of attorney in NRI demat account | Bond investing for NRIs | PIS essentials for NRIs trading