IPO Application Process: A Step-by-Step Guide
This comprehensive guide walks you through the entire process of applying for an IPO in India. From prerequisites to submission methods and post-application tracking, we cover everything you need to know to successfully apply for IPOs.
Prerequisites: What You Need Before Applying
Before you can apply for an IPO in India, ensure you have the following essentials:
Demat Account
A Demat account is mandatory for holding shares in electronic form. Open one with any registered depository participant (DP) like banks or brokers.
Trading Account
Usually linked with your Demat account, this allows you to buy and sell shares. Most brokers offer 2-in-1 Demat and trading account packages.
PAN Card
Permanent Account Number is mandatory for all financial transactions in India, including IPO investments.
Bank Account
A bank account for debiting the application amount through ASBA. It should be linked to your Demat account.
UPI ID (for Retail Investors)
For retail investors (investing up to ₹2 lakh), a UPI ID linked to a bank account is required for the ASBA process.
Sufficient Funds
Adequate balance in your bank account to cover the application amount. This will be blocked (not debited) during the application.
Understanding ASBA and UPI
The SEBI has mandated that all IPO applications must use the Application Supported by Blocked Amount (ASBA) facility. This is a significant improvement over the traditional system as it:
- Only blocks the application money in your bank account (instead of debiting it)
- Releases the funds immediately if shares are not allotted
- Ensures you earn interest on your money while it's blocked
- Provides a smoother, more transparent application process
UPI as an ASBA Payment Mechanism
For retail investors, SEBI has introduced UPI (Unified Payments Interface) as a payment mechanism for ASBA. This works as follows:
- You apply for an IPO through a broker or exchange platform
- You provide your UPI ID instead of bank account details
- A mandate request is sent to your UPI app (BHIM, PhonePe, Google Pay, etc.)
- You approve the mandate on your UPI app, authorizing the block of funds
- After allotment, funds are debited only for the shares allotted
Note: As of 2023, UPI-based applications are mandatory for retail investors applying for IPOs with an investment value of up to ₹5 lakh.
IPO Application Methods
There are several ways to apply for an IPO in India. Here are the most common methods:
1. Through a Stockbroker's Online Platform
This is the most convenient method for most investors. Here's how to apply:
Step-by-Step Process
Log in to your broker's trading platform
Use your credentials to log in to your broker's website or mobile app.
Navigate to the IPO section
Most platforms have a dedicated "IPO" or "Investments" section.
Select the IPO you want to apply for
You'll see a list of open IPOs. Click on the one you're interested in.
Enter your bid details
Specify the number of lots you want to apply for and the price. You can bid at cut-off (the final determined price) or at a specific price within the price band.
Enter your UPI ID (for retail investors)
Provide your UPI ID linked to the bank account from which you want the funds to be blocked.
Confirm your application
Review your application details and submit. You might need to verify via OTP.
Approve the mandate on your UPI app
Open your UPI app, check for the IPO mandate request, and approve it within the specified time (usually 24 hours).
Popular Broker Platforms for IPO Applications:
- Zerodha
- Upstox
- Angel Broking
- ICICI Direct
- HDFC Securities
- Groww
2. Through Your Bank's Net Banking Portal
Many major banks in India offer IPO application facilities through their net banking platforms:
Process Overview
- Log in to your bank's net banking portal
- Navigate to the investment or IPO section
- Select the active IPO from the list
- Enter your Demat account details
- Specify the number of lots and bid price
- Confirm the application (the ASBA process happens automatically as you're already using your bank's platform)
3. Through the BSE/NSE Platforms
Stock exchanges offer direct IPO application facilities:
- BSE's platform at bseindia.com
- NSE's platform at nseindia.com
4. Physical ASBA Form at Bank Branch
While less common now, you can still apply through the traditional method:
- Collect an ASBA form from your bank branch or download it from the bank's website
- Fill in the form with your details, Demat account information, and bid specifications
- Submit the completed form at your bank's designated branch
- The bank will process your application through the ASBA mechanism
Important Considerations
- Online applications through brokers or banks are processed faster and are more convenient
- UPI-based applications have a limit (currently ₹5 lakh)
- For larger applications, you'll need to use traditional ASBA or consult your broker for institutional routes
- Make sure your UPI app is updated and functional before applying
IPO Bidding Strategies
When applying for an IPO, you need to make a few key decisions regarding your bid:
Price Bidding Options
Cut-off Price Bidding
You agree to pay whatever final price is determined at the end of the book-building process. This option is only available for retail investors.
- Simplifies the application process
- Improves chances of allotment as your bid stays valid regardless of final price
Specific Price Bidding
You bid at a specific price within the price band (e.g., ₹490 in a ₹475-₹500 band).
- Bidding at the lower end may increase chances of profit but risks non-allotment
- Bidding at the higher end may increase chances of allotment but potentially reduces listing gains
Lot Size Considerations
IPOs are offered in lots, with each lot containing a fixed number of shares. Some strategies to consider:
- Multiple Applications: From different Demat accounts (e.g., yours, your spouse's) to increase allotment chances, though each application must be legitimate and comply with regulations.
- Category Strategy: If investing more than ₹2 lakh, consider whether to split across multiple retail applications or apply as an NII (Non-Institutional Investor).
Post-Application Process
After submitting your IPO application, here's what happens next:
Mandate Approval
After application, approve the mandate request in your UPI app within the specified timeframe (typically 24 hours).
Funds Blocking
The application amount is blocked in your bank account (not debited). You cannot use these funds until the allotment process is complete.
Allotment Process
After the IPO closes, the allotment process typically takes 4-6 working days, during which applications are processed and shares are allocated.
Checking Your IPO Allotment Status
There are several ways to check if you've been allotted shares:
- Through the Registrar: Visit the website of the IPO's registrar (like Link Intime, KFin Technologies, etc.) and enter your application details
- Stock Exchange Websites: BSE and NSE have dedicated sections for IPO allotment status
- Your Broker's Platform: Most brokers show IPO application status in your account
- Your Demat Account: Allotted shares will appear in your Demat account on the listing day
What Happens After Allotment?
If Shares Are Allotted
- The blocked amount for allotted shares is debited from your bank account
- Shares are credited to your Demat account by the listing date
- You can sell these shares on the listing day if you wish to book listing gains
- Otherwise, they remain in your Demat account as a long-term investment
If Shares Are Not Allotted
- The funds that were blocked in your account are unblocked automatically
- No further action is required from your end
- You can verify this by checking your bank account statement
- The unblocking typically happens within one working day after the allotment finalization
Tips and Best Practices
Research Before Applying
Always read the Red Herring Prospectus (RHP) or at least its summary to understand the company's business model, financials, and risk factors before investing.
Apply Early
While it doesn't affect allotment chances, applying early ensures you don't miss out due to last-minute technical issues or bank holidays.
Check UPI App Notifications
Keep an eye on your UPI app for the mandate approval request. Missing this can result in your application being rejected.
Be Wary of Oversubscribed IPOs
Extreme oversubscription may result in very small allotments or none at all. Consider this when planning your investment strategy.
Have a Post-Listing Strategy
Decide in advance whether you'll sell on listing for potential gains or hold for the long term to avoid making impulsive decisions.
Common Issues and Troubleshooting
| Issue | Solution |
|---|---|
| UPI mandate not received | Check if you entered the correct UPI ID. Contact your broker and consider reapplying if time permits. |
| UPI mandate expired | Mandates expire if not approved within the timeframe (usually 24 hours). You'll need to apply again. |
| Application rejected | Common reasons include incorrect details, duplicate applications, or insufficient funds. Check the specific reason and rectify for future applications. |
| Funds not unblocked after non-allotment | If funds remain blocked beyond 1-2 working days after allotment finalization, contact your bank with the application details. |
| Technical issues during application | If you face technical glitches, try using a different device, clearing browser cache, or using your broker's mobile app instead of the website. |
Conclusion
Applying for IPOs in India has become significantly more convenient with digital platforms and the UPI payment system. By understanding the process thoroughly and following the steps outlined in this guide, you can ensure a smooth IPO application experience.
Remember that while the application process is important, the decision to invest in a particular IPO should be based on thorough research about the company, its financials, management, and growth prospects.