How to Bid for an IPO – Tips and Strategies
IPOs or Initial Public Offerings have been a lucrative option for investors for a long time. Many investors invest in IPOs to make listing gains or acquire shares at the lowest prices. However, getting the allotment of IPO shares is not as straightforward as it seems.
If you’re a first-time investor, you might be clueless about the IPO bidding process. It is recommended that you do thorough research about the company before bidding for its IPO. In this article, we will explain to you how to bid for IPO along with the tips and strategies that can help you place your bid successfully.
IPO bidding can be done in two ways – online and offline. To initiate the bidding process, you will require a Demat or Trading Account with a Depository Participant (DP) and a designated savings bank account linked with your Demat account.
Additionally, you should keep your KYC documents, including your PAN card and address proof, ready along with other documents mentioned by your DP.
Online Bidding Process
- If you don’t have a Demat account, open it with an online stockbroker of your choice and link your savings bank account with it
- Check if the IPO is open for subscription for retail investors
- Sign and submit the Application Supported by Blocked Account (ASBA) form to your stockbroker. This will permit them to block adequate funds in your bank account and release it once you get the allotment of IPO shares
- Go to the IPO subscription page of your stockbroker or download the app on your smartphone
- Enter your bidding amount, the number of shares for which you want to bid, and submit the bidding application
- Once you submit your application, you will receive your IPO application number and other details on your smartphone and e-mail address
- Wait for the allocation of the shares. If the shares get allotted to you, they will be automatically deposited in your Demat account. Else, you will receive a refund of your bidding amount
Offline Bidding Process
- Visit the bank or stockbroker with which you have opened your Demat account. If you don’t have a Demat account, open it
- Fill in an offline IPO bidding application form and mention the number of shares for which you want to apply
- Mention your 16-digit Demat account number, bidding price, and attach a cheque or DD for payment
- Wait for the allotment of shares. If you get the allotment, they will be deposited in your Demat account. Else, you will get a refund of your bidding amount
Tips for the Bidding Process
Keep these questions in your mind while completing the IPO bidding process:
1. How many shares?
Each IPO specifies a minimum number of shares an investor has to buy. This is called a lot size. You can apply for one or multiple lots as per your choice. However, the maximum subscription amount allowed for a retail investor is ₹2 lakhs. Therefore, it’s recommended to bid for a single lot to increase your chances of getting the allotment.
2. What price to bid at?
When a company floats its IPO, it specifies its IPO share price band within which you can bid for its shares. If you want to maximise your chances of getting the allotment, you should bid at the maximum price within the price band. For example, if the price band for an IPO is ₹300 to ₹310, you should place your bid at ₹310.
3. What are the details required?
While applying for an IPO, make sure that you fill in all details correctly. Incorrect details may lead to the cancellation of your bid. Also, maintain a sufficient balance in your bank account while placing the bid.
Now that you know the IPO bidding process, you can go ahead and bid for the IPO of your favourite company. However, take due precautions while placing your bid. If the demand for an IPO exceeds the number of shares offered by the company, you might get a lesser number of shares than what you’ve bid for. It may also happen that you won’t get any of the shares.
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Frequently Asked Questions
After IPO bidding, the allotted shares will be credited directly to your Demat account. In addition, you will also receive a confirmatory allotment note (CAN) as a confirmation of your allotment.
After completing the bidding process, the IPO company decides a cut-off price based on the number of bids received from the investors. Only those investors who have placed their bids at a price equal to or higher than the cut-off price are allotted the shares.
No. You cannot bid for the same IPO twice. However, you can ask your friends and family members to also place bids for an IPO.