How to Bid for an IPO?

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Every time the equity market is in a bull phase, unlisted companies  want to get listed by raising funds to meet their growth requirement. The way in which a company can get listed is by going through the IPO route. 

The long drawn process of making a company ready for IPO after getting all the permissions in place requires many parties to work together. These include Merchant Bakers, Underwriters, Advisors, media consultant, investor relation companies among others. 

With time and effort the company manages to get all the necessary clearance for the IPO. It is now ready to hit the market. 

While the company is ready, what about the investors, what should they be doing to invest in companies through the IPO route. Let’s have a closer look.

How to bid for an IPO?

For any new investor, if they wish to subscribe or bid for an IPO then there are certain things to have in place. 

• The choice of IPO should be selected based on research and homework, sound advice from banks or broking firms or other reliable sources.
• A PAN card, address proof attested and other documents as specified by your DP
• A designated bank account, a demat and trading account with a registered Depository Participant (DP)
• A duly filled and signed form from ASBA. This is mandatory as it authorizes the banks to block the funds in your account for this particular process. 
• In case you change your mind, you can also withdraw from the IPO by contacting your broker
• You have the option of investing at a cut-off price or making a bid. The maximum bids you can make is 3 at once.
• Fill out the details of your Premium Account and number of bids you are making with the broker and submit
• After submitting, you will get details such as the IPO allocation number and other transaction details
• If the shares are allocated, it will automatically reflect in your Premium Account
• If there is no allocation, then you will get a refund of the money in your bank account.

Offline IPO Bid Process

• You can visit the bank or your stock broker agent 
• Fill in the form with all the necessary details and mention the number of stocks you wish to purchase
• Ensure you mention your 16 digit Premium Account number and the bid price and attach the cheque for payment. Ensure you have sufficient funds in your account
• Shares will automatically be deposited into your Premium Account if you get the allotment. That will complete the bidding process.

IPO Bidding Process in detail

• How much to bid? – When bidding for an IPO, it is not possible to just buy one share or buy a specific number of shares. The company provides a minimum number of shares known as lots. When applying you have to mention the number of lots you wish to bid for. For example, if a lot comprises 100 shares then you can bid for a minimum of 100 shares and in multiples of 100 thereafter. Ensure that you have sufficient funds in your account for the same as if you purchase more than your budget then you may not get any of the lots at all. The maximum subscription amount for retail investors is Rs. 2 lakh.
• Where to bid? – You can bid online for an IPO through your online Premium Account . Most if not all brokers offer this facility. For TradeSmart you can check out the process of doing it here. You can also bid offline by visiting the bank or brokers office and provide all the necessary documents. 
• What price to bid at? – Wait for the book to build up before placing your bet. If other investors are bidding at the cut-off price, it is better to place your bet at this price otherwise the chances of allotment will diminish. 
• Bidding online – In today’s digital age, all broking firms have IPO pages on their websites and apps to apply. Once you log in, you can place the number of bids you want. For a retail investor, the maximum is three bids. To know how to bid for an IPO through TradeSmart, you can have a look here.
• Getting allotment – If the IPO is a successful and oversubscribed you will receive fewer shares than what you had bid for. In case of a huge oversubscription, chances are you may not get any allotment. In case you get shares allotted, you will receive a Confirmatory Allotment Note (CAN) within six working days from the date of IPO closure. If the IPO is oversubscribed then the allotment is made in a way that everybody has to get at the least one lot. If the IPO is extraordinarily oversubscribed then even giving one lot to every investor is hard so the allotment is carried out via fortunate draws, that’s computerised and absolutely impartial.

How to bid for an IPO? Here are few pointers that may assist you:

• Always do a thorough research before finalizing on the IPO you want to invest.

• Wait for the book to build up before applying. Check where maximum applications are coming and apply accordingly. 

• Apply through more than one account by opening a Premium Account of your own circle of relatives’ members.

Possible Reasons for Not Getting an Allotment

1. The bid which you made for the IPO becomes invalid and removed because of the wrong Premium Account number, wrong PAN number, or more than one package submitted for the IPO.

2. Your call wasn’t picked out in the case of a big oversubscription.

3. While dishing out stocks’ agencies don’t allot to traders having extraordinary pan numbers for Demat, Bank account, and UPI Id.Know that while selecting which IPO to bid for may be a time consuming process more importantly if you want to successfully be eligible to apply for an allotment then you must have a demat and trading account with you as fundamental eligibility.