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
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.
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.
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.
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.