Sharekhan Blog

How To Bid For IPO?

  • Apr 1, 2024

You must first understand how IPO bidding operates if you intend to engage in a company's initial public offering (IPO). Your decision to invest will be better and more well-informed due to this. So, let’s explore what is bid in IPO and varied other things in detail: -

Are All IPOs the Same?

No. IPOs vary from one another. The two forms of initial public offerings (IPOs) are book-built and fixed-price, categorised based on the company has chosen pricing strategy.

1. Book-Based Initial Offering: With this kind of IPO, the book-building process is used to determine the price at which the shares will be issued to the public. The business gives investors a range of prices. The term "floor price" refers to the lowest price in the range, while "cap price" refers to the maximum price. The company determines the cut-off price based on the quantity of bids received. Share allocation is limited to investors who place bids at or above the cut-off price.

2. Fixed-Price Initial Public Offering: The business sets a single, precise price in a fixed-price IPO. In contrast to a book-built IPO, a fixed-price IPO does not include a bidding procedure and IPO bidding price. Those who wish to subscribe to the company's shares must apply the IPO price.

How to Bid For IPO?

Investors in initial public offerings (IPOs) often have no knowledge about the IPO bidding process and IPO bidding time. An extensive study is advised before placing a bid on a specific IPO. The timing of your IPO bid is essential, much like it is for stock market investments. You have two options for placing an IPO bid: online and offline. Nevertheless, in order to complete both transactions, a Demat account is required. The following is a detailed IPO bidding process:

Online Bidding for IPO

1. To begin with, you must have address verification, identification proof, and other pertinent paperwork to complete the process.

2. A stockbroker must help you open a Demat account, but make sure your bank account has enough money. Additionally, ensures individual investors can participate in an IPO.

3. The ASBA form must be signed and turned in to the broker. Through the Application Supported by Blocked Account (ASBA) feature, banks are able to block funds in your account and deduct the appropriate amount when shares are allotted.

4. The main benefit of ASBA is that interest on the blocked money is still paid to you. Your money does not get trapped, in contrast to brokerages.

5. You can even opt out of the initial public offering by contacting your broker.

6. Selecting the IPO issue you wish to apply to is available on each broker's IPO page.

7. Investing at a cutoff price is one option; bids are another. Up to three bids may be placed simultaneously.

8. Put in the number of stocks you want to buy and bid using your Demat account number. Complete the application by adding the remaining fields and submitting it.

9. Details like the IPO application number and other transaction details are sent to you after submitting the application.

10. Your Demat account will automatically get the shares if they are allotted.

11. Refunds will be deposited into your bank account if the shares are not allotted.

Offline Bidding for IPO

  • Orders can be placed by contacting your relationship manager, going to your bank or brokerage, or both.
  • Complete the application and indicate how many stocks you want to buy.
  • Mention the bid price in IPO, the 16-digit Demat account number, and the payment check attached.
  • You can view the shares in your portfolio, which will be automatically deposited into your Demat account. Your IPO subscription will then finish.
  • After that, you can decide whether to sell the shares for cash or keep them.

Tips and Tricks for Bidding for IPOs

1. Do Your Due Diligence

2. Stay Updated on the IPO Process

3. Consider Long-Term Potential

4. Keep an Eye on Market Conditions

5. Consider Long-Term Potential

The Bottom Line

Although it carries some risk, investing in an initial public offering (IPO) can be financially advantageous. Conducting due diligence, comprehending the IPO procedure, and arriving at well-informed judgments are crucial. You can raise your chances of winning IPO bids by paying attention to the tips that we have discussed above. Always make thoughtful investments, and never put all of your money in one place.

Team Sharekhan
by Team Sharekhan

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