Initial Public Offering (IPO) is an event for investors to invest in private companies before listing on stock exchanges. But getting share allotment in an IPO can be difficult for investors if the IPO is already oversubscribed. In this blog article, we will learn about How to get an IPO allotment ? And how to increase chances to get an IPO allotment.
What is the IPO process
What is an IPO ?
IPO is a process for public investors to buy share of private companies before listing in stock exchanges. Investors can apply for these IPOs through our bank net-banking or via stockbroker Demat account. If the public demand is too high for this IPO is oversubscribed and can be difficult for getting IPO allotment.
Types of IPOs
There are two types of IPOs-
1. Book Building IPO: In book building IPO method, company set the price range of share price and investors bid for the share price with this price range.
2. Fixed Price IPO: In fixed price IPO method, company set the fixed price of share and investors apply for that fixed price.
How IPO allotment Works
- If company IPO Undersubscribed all the IPO applicants get the IPO allotment.
- If company IPO Oversubscribed (Higher public applicants investors then issue shares) all the investors get allotment with the lottery bases.
Eligibility Requirements for IPO
To get an IPO allotment, you need to some most important things in mind.
- Pan Card– You should have valid Pan Card. It is very important document for financial transaction such as IPOs, bank transactions etc.
- Demat Account– If you have your Demat account, you can hold your allotted share digitally in your Demat account.
- Trading Account– You should have a trading account linked with your Demat account for applying for an IPO.
- Bank Account– You should have a valid bank account with sufficient balance to block your funds until you get the IPO allotment.
How to apply for an IPO
You should consider some step before applying for the IPOs. Here are some step-by-step tips to apply for an IPO.
1. Research The IPO– Before applying for any IPOs you should read company Red Herring Prospectus (RHP) to get informational insight about the business, financial, risks and do not follow the hype created on Social Media.
2. IPO application date– Check the IPO’s application date. Mostly IPO’s application date open for just 3–4 days only. Apply early to avoid last time technical error.
3. Place Your Bid– Investors have two options to place their bid, (I) Through Your Broker, (ii) Through Your Net banking. After placing the bid order for IPO, the fund will be blocked from your account, ensure that your account has sufficient balance.
4. Check allotment status– After placing order and closing the IPO, check your allotment status on stock exchanges (NSE, BSE) using your Pan/Application number on your registrar.
How to Increase Your IPO Allotment Chances
Here are some 5 best step to increase your IPO allotment chances-
| 1. Apply in the Retail Category– In IPOs, the Retail investors category has reserved quota (up to 2 lakh). |
| 2. Bid at Cut-off Price– If you place bid at cut-off-price (Upper Band) in Book Building IPOs, the chances are high for you to get IPO allotment. |
| 3. Multiple Demat Account– You can apply for you family member’s demat account (Separate Pan Number). It will increase your chances to get IPO allotment. |
| 4. Avoid Repeated Applications– Don’t apply for the IPO multiple times with the same Pan Number. |
| 5. Use UPI for Payments– Use UPI payment method for IPO to avoid transaction failure. |
Common Mistakes to Avoid
1. Apply IPO with insufficient fund- If you don’t have sufficient fund in your bank account. You will not get the IPO allotment even if your application was accepted.
2. Ignoring the Lot Size– Apply in multiples of the lot size specified in the IPO. Partial bids are invalid.
3. Panic Applying– Do not apply to every IPO, apply for only those IPOs, apply only for those whose business you understand and believe in their future.
4: Not Checking Allotment Status– Always check your IPO allotment status in stock exchanges official website with your pan or application number, If you will not get the IPO allotment your fund will be credited on you bank account within 4-5 days.
Conclusion
Investing in IPO can be great opportunity for Investors to make money but getting IPO allotment can be little difficult if the IPO is oversubscribed, but if you consider above things, your chances of getting IPO allotment can be increased. I think I told you the ways to how to get an IPO allotment. Do you think I miss something important topic about IPOs, please let me know in the comment below, and you need me to improve my blog article quality, you can Contact us.
Very Nice Information
Good work