Interested in applying to an IPO but unsure how to bid for IPO? For a first-time IPO buyer, here is a quick “How to.” If you have the online demat account, online IPO bidding is among the most effective method. Here are some basic guidelines for the bidding procedure.
The terms “subscribing” and “bidding” for an initial public offering (IPO) are commonly used. Investors who are unfamiliar with the IPO bidding process.
Luckily, the guidelines for an initial public offering bidding have been greatly streamlined. However, knowing the fundamentals of IPO bids is always necessary.
Table of Contents
Types of Categories in IPO
There are 3 categories of initial public offerings (IPOs): retail, high net worth individual (HNI), and Qualified Institutional Buyers. The retail segment is open to the general public; retail investments in a Public offering are up to Rs. 2 lakhs.
SEBI created this limit to maintain that as many retail investors as feasible receive allotment. The division is comparable or contingent in the HNI and Institutional divisions.
Types of IPO
Fixed Price IPOs and Book Built IPOs are the two forms of IPO pricing
Book Built IPO
The firm offers a price selection in a Book Built IPO. This is the limit in which the bid price would fall. The cap amount is the most expensive, while the floor prices is the least expensive. The IPO’s Issue Price, also known as the Cut-off Price, is determined within the bidding and book-building phase.
It is determined based on the submitted bids. Only bidders who offered a price that was higher than or equal to this price were eligible for a share allocation. If you began too low or too high, you can adjust your bid price across an IPO, but you’ll need enough blocked money to do so.
Fixed Price IPO
In a Fixed Price Initial public offering, you can only subscribe at a predetermined price set by the firm, which is generally the sum of the par value and the premium.
How to Bid for IPO?
To begin, any investor engaging in subscribing and bidding in an initial public offering (IPO) must have a certain things in order Of course, picking an IPO should be based on thorough analysis and homework, or on sound advice from a brokerage company, bank, or other professional references. You also check out our article if you wish to do analysis on your own.
| How to Buy IPO in India |
A dedicated bank account as well as a demat account-cumulative trading account with a Depository Participant (DP), which may be a bank or a brokerage company.
Documentations
Your PAN card, attested identity proofs, and any other paperwork requested by your DP. An ASBA Form that has been completed and signed. The ASBA facility is needed because it allows banks to freeze funds in your account for this reason.
You plan to take for a specific quantity or “lot” of shares based on your finances and the IPO share cost. With ASBA, money is blocked from your assigned bank account up to the sum of your submission.
Only the sum used is deducted at the moment of allotment, depending on the number of shares allocated, leaving the leftover amount unblocked.
ASBA
The benefit of using ASBA is that you don’t have to write a check for the IPO until it’s allotted, and the blocked value generates interest.
ASBA is accessible in both print and electronic format. To obtain an ASFA, you must include your KYC information as well as IPO bidding information. You can start bidding after the ASBA is done.
IPO bidding Process
Lets about about the process of how to bid for IPO?
Lot Size
First step in the IPO bidding Process is knowing the lot size. Each IPO specifies the minimum quantity of shares that an investor must purchase in order to participate. This is referred to as the Lot Size.
When bidding for IPO, you must include your bidding information in accordance with the lot size specified in the proposal. You must ensure that your account is adequately funded. For retail investors, the overall investment amount is Rs. 2 lakh.
Application
Through your Demat and online trading accounts, you can bid for an IPO online. This service is provided by most major broking companies, including Zerodha. An online IPO bidding is a fast and effective way to register for an initial public offering (IPO) to be listed on a stock exchange.
You may also bid to an IPO by contacting a regional desk of their broking company and submitting the necessary documents in person, but online applications are now the favorite option.
IPO Bidding
You can either buy or sell at the cut-off price, but only retail buyers can bid at the cut-off price. Your possibilities of having shares are decreased if you bid at a lesser price and the issue/cut-off cost is higher. If the price range is 197-200 and you bid at 198, but the cut-off is 200, you are doubtful to receive any shares.
You should bid at the cut-off price to maximize your probability of being allotted, particularly if the offer is likely to be oversubscribed. However, since the cut-off price is not determined at the time of bidding, the submission is processed at the Cap Amount.
If the application price is higher than the cut-off price, the variance in price will be reimbursed after allocation.
Online IPO Bidding
An IPO page is available on all online brokerage platforms and broker dealers. This will assist you in deciding which IPO to apply to. Fill in the amount of shares you want to bid on, as well as the bid price. A total of three bids are allowed.
IPO Bid timing
you’ll get an IPO application number as well as other transaction information once you’ve submitted your application. While IPO application timing is mostly 10 am to 5 pm in most trading apps.
Allotment
Demand always surpasses the overall number of shares offered in a profitable IPO. As a consequence, you could be able to obtain fewer shares than you originally bid for. It’s possible that you won’t get any. In such cases, the bank will partially or completely release your blocked bid funds.
If you are lucky indeed to receive your entire allotment, you will receive a Confirmatory Allotment Note (CAN) within 6 business days of the IPO closing.
The shares are added to your Demat account once they have been allocated. The next process is to wait for the stock exchanges to list the shares, which usually takes seven days. After that, you will decide whether to keep the shares or sell them.
For the same ipo, bidding with several accounts or multiple accounts.
Do not bid for the IPO with the maximum bids from a single account; instead, bid for the IPO with different accounts. For highly oversubscribed IPOs, multiple IPO accounts should be used. Using numerous accounts to bid for an IPO might significantly boost your chances of being accepted.
Conclusion
This is all about How to Bid for IPO. However, if you wish to know the full IPO process for the firm which come with an IPO you can click here to know IPO Process in India.
While if you are a Beginners You check check out the Best Books For Stock Market Beginners in India.
We hope we are able to answer all you questions about IPO bidding process. If you don’t have Demat account open it now with Zerodha best trading app.
FAQ About How Does IPO Bidding Work?
Is online application for an IPO is possible?
Yes, Now a days all IPO offer online application process. It is the most favorite option for investors currently.
Is fraud happens in an IPO process?
No, There are no possibilities of fraud as the process is overlooked by regularities.
Is bidding process for an IPO is difficult?
No, Bidding process for IPOs now a days quite smooth in India. However, you can check out this How to bid for IPO blog for more details.
Which is better ASBA or NON- ASBA?
Mostly people use NON-ASBA. However, ASBA is more profitable.
What is the full form of ASBA?
Application Supported by Blocked Amount is the proper full form of ASBA.
