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Wednesday, April 4, 2018

How to invest in IPOs online

While fixed deposits, mutual funds, ULIPs remain top investment options for Indian Investors, if you have an understanding in direct stock investing, Equity IPO is an option too.

Investing in IPOs are getting increasingly popular amongst the retail investors in India. IPO market in India has given big returns in the year 2016-17, IPOs like Avenue Supermart, CDSL, BSE, Salasar etc has helped investors get a listing gains above 50%. The websites like Chittorgarh and IPO central tracks IPO market very closely, listing of IPOs - current IPO, Upcoming IPO, IPO allotment dates,  etc. They also provide reviews on IPO shares. For a new investor, it will be a good idea to check these websites to get an idea of the upcoming IPOs and look for IPO reviews as one of the parameters to decide to buy new IPO. One must check few IPO reviews, read the company details carefully before investing.

What is an Equity IPO?

Many retail investors in India who have exposure in equity investments and mutual funds are unaware about IPO investments. 
An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately owned companies looking to become publicly traded.- Wikipedia

IPO (Initial Public Offering) helps the equity shares to be listed on stock exchanges BSE and NSE. Once listed, investors can buy from any trading platform freely.

How IPO works for retail investors?

For the new IPO, Companies in consultation with book running lead managers come up with price band for the issue. The issue is then divided into lots. Investors can get the information on current IPOs and Upcoming IPOs in newspapers and business channels. The crucial details like price band, IPO opening date, closing date and lot size are key factors to look at. For example IPO issue of company A is opening on 15th April, 2018 with a price band of Rs. 95 - 100 and lot size of 150. An investor will be able to bid for a minimim quantity of 150 shares and multiples. Generally in normal IPO the minimum investment quota is Rs. 15,000 and the upper limit for application for individial investor in any IPO is Rs. 2 lakh.

How to invest in IPO online?

To invest through online method, one has to have an internet banking enabled Banking account. Trading account with a registered equity broker/platform and demat account with CDSL/NSDL which comes by  default with a trading account. 

Online IPO follows a process called ASBA, ASBA (Applications Supported by Blocked Amount) is a process developed by the India's Stock Market Regulator SEBI for applying to IPO. In ASBA, an IPO applicant's account doesn't get debited until shares are allotted to them. (Source - Wikipedia)

For test case, lets take Axis Bank online banking. 

Step by step guide to buy IPO online -

1. Login to your internet banking

2. click on Investments, go to the Online IPO section

3. One clicking the Online IPO Tab, (it will take you to a registration page, which will ask for Client Id (trading account) and depository ID. On submitting them, Bank will generate an OTP to complete online IPO registration) it will confirm the demat details and you can click on equity and debt IPO. 

4. This post is dedicated to Equity IPO. Hence, click the Equity IPO tab. It opens up the next page with list of equity IPO. Once the IPO name is chosen it moves on to the next page where you have to choose the bank account and investor type, for Indian individuals, you may chose the highlighted option and go to the next page which lists the details of the IPO including IPO lot size, price range etc.  

5. Submit the bid - chose the lot size and multiples you would like to apply for and confirm your bid. The Bank will generate OTP to conclude the transaction. 

Following the procedure, bank will send a confirmation message. After closing date, you will have to wait for the allotment date. Depending on the application no.s, electronically allotment takes place, the bank will deduct the money only if you are allotted the shares. 

The following day, the company gets listed on the stock exchange, and many retail investors likes taking advantage of high listing price and sale it for listing gains. 

#IPO #current IPO #Upcoming IPO #personal finance

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