Can I participate in an IPO without a demat account? MintGenie answers
IPOs have gained popularity among retail investors, with many seeing their investments grow rapidly post listing. Applying for an IPO through a demat account using the UPI method is the preferred and simplest option.
The Indian IPO market has witnessed significant activity over the last two years, with several companies tapping capital markets to raise funds. This surge in IPOs has been met with a phenomenal response from retail investors.
What's interesting is that when these companies' shares hit the market, they often see a big jump in their price right from the start. This has made many retail investors book significant gains in just a matter of days.
Now, when it comes to applying for an IPO, there are a few ways to do it, but the most popular way is through a demat account, primarily using the UPI method. This account is mandatory if one wishes to apply for an IPO, and it is also the simplest and least complicated method.
So, a majority of retail investors choose to go this way when they're looking to invest in an IPO. However, there are alternative methods for applying for an IPO, including through net banking and offline channels.
In this article, we'll explore these alternative ways to apply for IPOs as well as the UPI route method.
UPI method
An initial public offering (IPO) is the process of converting a privately held organisation into a public organisation through the sale of equity to the public. The IPOs are generally offered through a fixed price process or book-building method.
To make applying for an IPO hassle-free, you'll need two things: a demat account and a linked bank account and a UPI account. The demat account is where any allotted shares are deposited, while the linked bank account is used to pay for the IPO shares.
The process for applying for IPOs through the UPI route is as follows:
Log in to your trading account and choose the IPO you want to invest in. Specify the price and number of lots you wish to apply for. Fill out the application form, providing your UPI ID. Approve the block funds request on the UPI app.
ASBA facility
In addition to applying for an IPO through a demat account, another option is to use your bank's website and the online ASBA facility. ASBA, or Application Supported by Blocked Amounts, lets you block the amount of money you intend to invest without actually withdrawing it from your account.
Here's how it works: First, you'll need to access your bank account online via net banking. Then, select the IPO you want to apply for from the list provided. Next, specify the number of shares (lots) you want to purchase and the price at which you're willing to buy them.
Fill in any required details, although some, like your PAN number, may already be filled in and uneditable. Once you've completed the application, authorise the request to block the funds in your bank account. After that, your application will be submitted for consideration.
Offline methods
In addition to the online application method, there's an offline alternative available for IPO applications.
There are two offline methods for applying for an IPO. The first method involves obtaining an IPO offline application form from a broker. Once you have the form, fill it out accurately with all the required data. After completing the form, submit it to the broker along with a cheque for the investment amount.
Upon submission, you'll receive an acknowledgement form. If your IPO application exceeds ₹50,000, you'll need to include a copy of your PAN card along with the application form.
The second method entails visiting the BSE/NSE website and locating the IPO application form for download. Once downloaded, fill in all the necessary details, such as your name, PAN number, bid price, etc. After completing the form, visit the nearest ASBA participating bank branch and present your application form for processing.
FAQs
What are blocked funds in an IPO?
Block funds in an IPO refer to the temporary reservation or hold placed on the funds in your bank account when you apply for shares in an IPO. This ensures that the required amount is available for the IPO application.
If you got the shares in the allotment process, the blocked funds will be used to pay for them. If you're not allotted any shares, or if your application is rejected, the blocked funds will be released back into your bank account, which is linked to you demat account.
Is it possible to apply for an IPO using multiple demat accounts?
No, it's not. Applying for the same IPO from two demat accounts linked to the same PAN card isn't allowed. Doing so will result in the automatic rejection of the IPO application.
Are there any fees associated with applying for an IPO?
No, there are no fees required for investing in an IPO. Simply provide your bank details during the IPO application process. The investment amount is debited, and shares are credited automatically upon IPO allotment. If not, the blocked amount will be released.
Can I cancel an IPO application after submitting it?
Yes, if you're a retail investor who applied in the retail category, you can cancel or modify the IPO application at any time while the IPO subscription window is open. However, once the IPO closes for subscription, an IPO application cannot be withdrawn. Additionally, after successfully cancelling the request, a retail investor can reapply for the IPO.
Under what circumstances might my IPO application be rejected?
Your IPO application may be rejected if you enter a bid price outside the price band, provide an incorrect ASBA account number, UPI ID, or UPI handle, submit incorrect PAN or DP details, make multiple applications using the same PAN in the same investor category, or have insufficient funds in the bank account. These are the primary reasons for IPO application rejection.
Can I modify my IPO bids?
Yes, you can modify IPO bids online or offline before the IPO issue closure date.
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