Initial Public Offerings (IPO) can at times be the golden goose for many as they have the potential to bring high returns. However, subscribing to an IPO often confuses a lot of people even though it is quite simple in nature. The article aims to address the questions that arise with regard to subscribing to an IPO. The subscription is available both online and offline.
The first step should be keeping your basics ready. Begin with keeping your documents in place. The essential government-issued documents include your PAN card, address proof, demat cum trading account. Merely subscribing to an IPO does not require a trading account but the selling of the shares requires a trading account along with the demat account.
The next step involves research. Research is the most crucial part while trading, subscribing, and bidding for an IPO. It is really important to be well-aware and alert about the market functioning. Begin by researching about the company, its financial health, past records, future prospects and business goals. Seeking assistance from broking firms and depository participants is any day better than getting swayed away by the rumours and false promises.
There are two ways of subscribing to an IPO:
Online IPO Application - individuals can subscribe to IPO by applying online to the trading website or to the mobile apps meant for trading. Online mode is comparatively easier and user-friendly. It is preferred over the offline mode as it reduces the application time and the form filling process is quite simple
Offline IPO Application - this requires the individuals to subscribe to an IPO by visiting the branch of their broking firm. This mode is a little tedious in nature.
Irrespective of the medium chosen to apply for an IPO, an investor is required to fill out the Application Supported by Blocked Amount (ASBA) application form along with the necessary ‘Know Your Customer’ (KYC) details. The process for filling in the ASBA form is quite simple. The ASBA form requires the PAN card details, Demat account number and the bidding details.
The number of shares you wish to apply for depends on the price of the share and your funds. ASBA enables the bank to block money in your account for the purpose of subscribing to an IPO. It blocks the amount as per the application made by you. On the day of the allotment it debits the amount for the number of shares allotted.
For example, if you applied for shares worth rupees 50,000 but were allotted shares worth only rupees 35,000, then the bank will debit only rupees 35,000 from your account. The remaining amount gets unblocked.
Make sure you receive the acknowledgement slip along with the reference number after applying to an IPO.