IPO: Pre-requisites, Application, and How to Apply

IPOs or Initial Public Offerings are top rankers of the stock market trends. In India, we see various companies going public and releasing new IPO. So why is it important for you to apply for the IPO application? 

So, let’s look at the requirements for the application of an IPO. 

Demat Account

If you purchased company shares, you’d receive a physical certificate of the share, which you could trade later. But today, companies allot shares in electronic format. Thus, you need an electronic vault to keep your shares. Therefore, a Demat account is necessary, and you can’t participate in an IPO without a Demat account. 

Note – You can open a Demat account easily on the Shoonya app, a zero brokerage Multi-asset trading platform. 

Two depositories manage Demat accounts, i.e., National Securities Depository Limited and Central Depository Service Limited (NSDL and CDSL). 

Once you open a Demat account, your broker sends you a CMR or Client Master Report file. This CMR file has two important components. 

• Name of your depository. It can be either CDSL or NSDL. 
• Demat account number. Your Demat account number is a 16-digit account number. The first eight digits make the DP ID or the depository participant ID, and the second half denotes your account ID. 

IPO Application Process

You can apply for an IPO through net banking. Most banks like Axis bank, ICICI bank, HDFC bank etc., offer IPO application services in their net banking option. 

Here, you’d find two different categories, namely retail and HNI. 

• Retail

Retail applicants are the applicants whose investment is less than 2 lakhs in an IPO. 

• HNI or High Net Worth

As the name suggests, HNI applicants invest in big amounts. Their investment is more than 2 lakhs. 

You can select your bidding price for the IPO if you are a retail investor. HNI, on the other hand, always has to bid on the highest price.

After selecting the bidding price, you must choose the number of lots you want to buy. A lot size is the minimum number of shares you need to purchase in an IPO. 

After filling in the details of the share, you also need to fill in the depository details. These details are 

1. Name of your depository- It can be either NSDL or CDSL. You’d find this detail in the CMR file that your broker sends you.
2. Name of your depository participant- Your depository participant manages your Demat account. For example, if you open an account with Shoonya, it would be your depository participant. 
3. Account Number – The 16-digit number that the broker provides you in the CMR file. 

Finally, after this, you can submit your application. Your bid amount is put on hold until the last day of the IPO. When the results are declared, the company either allots you shares or refunds your amount.

Conclusion

The IPO application process is easy. First, must have a Demat account and apply for IPO online. Then, you need to fill in all information correctly to save your application from getting overruled. You can check, Shoonya, the best website for IPO information.