What is IPO?

Initial Public Offering or IPO is a process by which a private company gets listed and becomes public. Becoming ‘Public’ means that the company can now start selling its shares to different groups of investors for the first time.

What is the Purpose of IPO?

A private company uses the IPO route to get listed on stock exchanges and raise capital from investors. The capital raised can be used to carry forward various organizational needs like meeting business goals, expansion, or clearing off debt.

Who can subscribe to IPO?

IPOs are available to three different groups of investors:

  1. Qualified Institutional Buyers (QIB)

    This category mainly includes:
    • Mutual Funds
    • Domestic Financial Institutions- Banks, Insurance Companies, and other Financial Institutions
    • Foreign Institutional Investors
  2. Non-Institutional Investors (NII)

    This category mainly comprises:

    • Corporate Businesses
    • Non-retail Individual Investors

How is IPO allotted?

After the launch of an IPO, all the bids are submitted online for further scrutiny. All the invalid and incorrect bids are eliminated and the remaining bids are considered for allotment. Now there can be two cases:

Case 1: When the registered bids are equal to or less than the total number of shares offered by the company.

Case 2: When the registered bids are more than the total number of shares offered by the company.

In Case 1, where the total number of bids is equal to or less than the number of shares, all the applicants are assigned the number of shares according to the placed bids.

There are two further scenarios in Case 2,

Scenario 1) Small Oversubscription- In this case, all applicants are assigned at least one lot of shares and the remaining lots are allotted on the basis of a lottery.

Scenario 2) Large Oversubscription- In case the IPO has received a huge number of subscriptions- large enough that it is not possible to allot even a single lot to every individual, the entire allotment of shares is done on the basis of a lottery.

What happens after IPO subscription?

After the IPO subscription period is over and the allotment is finalized, the shares get listed on stock exchanges and are traded freely in the market. Any individual can then buy and sell the share during market hours.

How to invest in an IPO?

IPOs offer a great opportunity for investors to buy shares of a newly listed company. It is also considered a great opportunity to earn a significant profit on the listing day if the stock price opens with a higher premium. Investing in IPOs is extremely easy these days. You just need to follow a few simple steps to subscribe to an IPO.

1. Choose the IPO you want to invest

A number of companies get listed through the IPO route every year. You will get a plethora of options for investing in IPOs throughout the year. However, it is not necessary to subscribe to all the IPOs. You should set your goals and then finalize the IPO to put your money in. For example, if you wish to have listing gain, consider checking subscription numbers, GMP etc of the IPO. IPOs with higher GMP and oversubscription have a good chance of providing good listing gains. On the other hand, if you have a long term goal, go through the fundamentals of the company.

Go through company's details

Every company that gets listed through an IPO shares a prospectus with the public that shows the company's goals, plans with the capital raised from the IPO's subscription, etc. Go through that prospectus thoroughly and make an informed decision before applying for the IPO.

Make sure you have the required accounts

Subscribing to a company’s IPO is similar to buying a stock. Hence, you are required to have all the necessary accounts that are needed to invest in the shares. IPOs are opened in the primary market but to trade them like any other stock in the secondary market, you need to have the following accounts:

  • Demat Account: This account stores your shares in an electronic form.
  • Trading Account: This account is used to buy and sell shares on stock exchanges.
  • Bank Account: This account is needed to add and withdraw funds. A bank account is also required to pay for an IPO’s subscription.

Make payment for the IPO

You can make payment for an IPO through your bank account. When you make a payment, the required amount gets blocked from your account. It will show in your available balance but cannot be used. Once the IPO allotment status is finalized, the funds will be deducted from your bank account and you will be assigned the shares. If you do not receive any share, the funds will get unblocked and will be available for use.

IPO on INDmoney

INDmoney offers one of the simplest IPO application processes for Indian IPOs, it just takes 3 steps to place an IPO bid.

  • No complicated hoops and flows to jump through to place your bid.
  • Track your bid status inside the INDmoney app
  • The user has to select a Demat Account + Broker with which they would like to apply for the IPO, and the shares if allotted would get credited to this account.

How to place an IPO bid on INDmoney?

  • Select the IPO you are looking at to apply for
  • Can read through a detailed review of the IPO on our blog (check important details such as price band and minimum investment in our catalogue at the IPO center)
  • Select any broker that you are auto-tracking on the platform to place your IPO application with
  • If not auto-tracking a broker, you can add any broker’s DP ID and Client ID/BO ID to place your order.
  • Enter your UPI ID , you can check in the INDmoney app which all UPI IDs are supported.
  • Your bid should be placed now and you would receive a UPI mandate on your UPI app within 24 hours of the bid being placed
  • We would also communicate all the updates on your UPI bids at every step

IPO FAQs

Can I enter a bid price less than the floor price while subscribing to an IPO?

Can I submit a bid for multiple lots of an IPO?

When can I sell shares that I got from the IPO?

What is the lot size in an IPO?

Where can I check the IPO allotment status?

Why do many investors not get shares from an IPO?