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Understanding the Process to Apply for IPO

Understanding the Process to Apply for IPO

An IPO application has to be preceded by a thorough understanding of the company and the IPO process. As an investor, you can apply for the IPO through the offline bidding process or through the online bidding process. The allotment process does not differentiate between whether the bid was online and offline and the allotment is accordingly made out of the total number of applications.

Under What Category to Invest in the IPO

Before you apply for an IPO, you need to understand that there are 3 categories of investors in any IPO; retail, non-institutions and Qualified Institutional Buyers (QIB). As an individual investor you can either invest under the Retail Quota or under the non-institutional quota. Applications of less than Rs.2 lakh in value can be logged in the retail quota while individual applications above Rs.2 lakh are logged in the non-institutional category. Retail investors get allotment based on maximum ownership while non-institutional investors get proportionate allotment.

What to Know While Applying for a Book Built IPO

Offline and online investing
The IPO application for any book built issue can be either made offline by filling up a physical form or online through your online trading account. The data pertaining to your account is automatically downloaded from your DP master data and the online application process for IPOs is a lot simpler and more efficient.

Role of investment bankers
The issuer sits with the investment bankers and finalizes the price of the issue. Normally, the company gives an indicative range for the price and one can apply within that range. Those who apply for the IPO below the range will have their IPO applications rejected.

How to bid for IPO
In case you are not sure what price to bid at, then you can just bid at the cut off price. In that case, it will be assumed that you have bid at the discovered price and the allotments will be done accordingly. You will be allotted shares at the discovered price. This is a good idea if you don’t want to bid at a price and get rejected because your bid was lower than the discovered price of the IPO.

Retail versus HNI quota
Mention clearly what quota you are applying under. Normally, the decision is taken based on the quantum of investment and any investment amount of above Rs.2 lakh is treated as an HNI application while below Rs.2 lakh is treated as a retail application. Ensure that all your bank details and DP details are filled up fully and properly.

Timely logging of bids
Don’t wait till the last hour to log in your application. You can instruct your broker to log in your bid at least one day prior to closing of the issue. Normally, brokers do not accept fresh bids after the cut off time and if your bids are logged in after than they you may lose out on the chance to participate in the IPO. Ensure that you make it well on time.

Three Minor Things You Must Not Overlook When Applying for IPO

In our focus on the bigger picture, most investors tend to ignore the smaller aspects of the IPO application. Here are 3 such cases we must not miss out on.

Form completion
In case you are filing the application for IPO physically ensure that the IPO form is complete in all respects. The application can be rejected if any of the fields is left incomplete. Also ensure that your signature in the application form match with your signature in the records of the DP as well as the records of the bank.

Understanding ASBA
In case you are making an online bid, prefer the ASBA facility. Under the ASBA facility your bank account is not debited but only blocked for the application bid amount. On the date of the allotment of shares, only the proportionate allotment is debited to your account and the block on the remaining funds is immediately removed.

Bid cancellation
Remember, even after the bid is made, the bid can still be cancelled till the cut-off time. In fact, you can cancel your bid any number of times before the cut-off time. There is absolutely no restriction on that.



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