As the old cliché goes, investing your money is one of the best ways to save your money. Now there are various ways and places to invest your money, but one of the most popular way of investing money these days is investment in IPOs. IPOs or Initial Public Offerings can be described as a way of buying the shares of a company which is going Public. It gains popularity from the fact that this investment has a real potential to grow many folds and that too in a really short period of time.
This makes us wonder, exactly how can we invest our money in IPOs if such is their potential. Let’s find the answers below.
Make a Decision
The first step obviously would be to make a decision to invest your money in the IPOs. You must realize that you are entering the share market with this and it has its own risks. Hence you should be careful about the decision and go through a company’s prospectus to know all the terms, conditions, prospects, company’s plans, purposes as well as limitations of investing. You can easily find this prospectus on SEBI’s website.
Ensure Adequate Funds
You need to have adequate funds in your kitty before you go on and invest. You can use your own savings for that. But in case you don’t have much, then also you can lend money through some banks or from non-banking financial institutions at a fair interest rate.
Have a Dematcum Trading Account Opened
To apply for an IPO, this is one of the most important pre-requisites. This is a different kind of account from your normal bank account as in this, one can easily store their and financial securities electronically. All that you are needed to do is to visit your nearest bank branch and fill in a form for it. Also attach Pan Card or Aadhar Card copy with it as well.
Processing of your Application
After your demat cum trading account is opened, you can apply the ASBA (Application Supported by Blocked Account) facility, which is compulsory while filing in your IPO application. Through this, your bank gets the authorization to block the money in your account, and hence, this eliminates the use of Demand Drafts and Cheques.
Bid for the Shares
After applying for the shares of any company, you will need to apply for the shares as per the lot size, which is the minimum no. of shares you need to apply for in an IPO, mentioned in the prospectus. The price band for the bidding is often decided by the company and while the upper limit is known as the Cap Price, the lower limit is called the Floor Price. This sets the range in which one can bid. Note that the bid can be revised but the amount will need to be blocked in the bank account, which is eligible for interest until the time the shares are allotted.
Allotment of Shares
It is highly possible that the demand for the shares is much more than the actual numbers of shares in the market. Hence, it is also a possibility that one might get less numbers of shares than what they wanted. And in some cases you may not even get a single share. In such cases, the bank unblocks your money. But in case you get the full allotment, then you get a CAN or Confirmatory Allotment Note in six working days from the day of closure of the IPO process.
After the shares are allotted, the listing can be checked on stock market within 7 days. It totally depends upon your luck and wise decisions if your investment will bear sweet fruits and multiple in numbers or not. You can keep a check on it on online trading apps such as 5Paisa.