A Basic Guide to IPO Process

An IPO (initial public offering) is a significant milestone in a company's history. It's an indication that a firm has finally evolved into a fully-fledged, effective organization with enough market goodwill to begin raising capital from the general public. An IPO is frequently baked into the list of things that a venture-capital-funded firm must accomplish to fulfill the expectations of their investors by providing an 'exit.'
IPOs are usually done on a large scale and result in a few changes in a company's ownership structure. Companies can now expand operations, engage in product development, recruit superior people, and so much more with a fresh inflow of cash. This occurs at the cost of dilution in the ownership structure, and the price at which the stocks trade reflects the investors ' faith in the company's future potential.
Needless to say, a firm that has developed enough to declare an IPO has already weathered numerous storms and has established itself as a leader in the market category in which it works. The initial public offering procedure for such companies gets a lot of attention and hype because there will be a lot of potential investors looking to jump on the bandwagon.
The initial public offering procedure has a few quirks that account for mismatches between the number of shares being offered and the number of bids received. To learn more about how these situations are handled, we must first comprehend the IPO allotment procedure.

Before you even consider subscribing to an IPO, you must first have the following:

• Demat account
• Investing Account
• The amount in your Demat that corresponds to the amount you bid

If you have all of the prerequisites in place, you must begin the application process. It's a rather simple technique that takes place in the following order:

• 1. Begin the application process

This can be done both online and offline, and your account must have the funds to pay the bid you submit. Since the 'Blocked amount facility' has been made mandatory for IPOs by market authorities, your bid is unlikely to be accepted if you do not have the funds put aside.

• 2. An allotment process

This takes place behind closed doors and might go either way depending on the number of bids received or the authenticity of those offers. It's worth noting that not all applicants receive exactly what they asked for, as demand often outstrips supply by a large margin.

• 3. Approval is the third step.
The IPO's registrar completes and confirms allotment of the too successful bidders in around 7 days. The status of an IPO allotment can be checked on the registrar's website. It's also available on the NSE's and BSE's websites. For the IPO allotment status check, you'll need your PAN and DPID/Client ID number, or the bid application number. Now that we've seen how the allotment process works, it's time to go deeper into the dynamics underlying the process and how fringe instances are handled.

Investing in an initial public offering (IPO) can be a thrilling experience. It has the potential to generate massive capital gains in the long run. Not only that, but your investment in a profitable initial public offering (IPO) can help the firm develop, expand, and deliver cutting-edge goods and services.
Popular IPOs, on the other hand, are frequently oversubscribed, implying that demand for their shares outnumbers supply. For example, the Zomato IPO was 38 times subscribed, implying that there were 38 applications for each share. Let's see how to boost your IPO allotment chances if you've decided on an interesting IPO stock.

• 1. Stay away from huge applications

In the current SEBI allocation method, all retail applicants are treated equally. That means that even if you submit a large application worth lakh rupees, you may not be eligible for a refund if the lottery is oversubscribed. Large applications are ideal for large IPOs with a reasonable likelihood of remaining subscribed IPOs in the retail segment.

• 2. Make an application with multiple Demat accounts

Another option is to submit multiple applications using different Demat accounts. However, while you can apply for an IPO several times, you can only apply for the IPO with a single PAN number. You can, however, encourage family and acquaintances to apply for the same IPO on your behalf several times. As a result, having many Demat accounts can boost your chances of receiving at least one allotment.

• 3. Bid at the cut-off price every time

Assume an initial public offering (IPO) has been launched with a price range of $2 to $2.25 per share. If you bid at the cut-off price, it means you're willing to buy at any price between $150 and $155 for the item. As a result, using a cut-off price when filling out the IPO application form is a good idea.

• 4. Make sure you don't make a snap decision at the last minute

Several investors look at subscription numbers in the High Net Worth Individual [HNI] and Qualified Institutional Buyer [QIB] categories before putting their builds on the last day. Some investors are waiting to see how the HNI and QIB categories purchase IPOs. However, you may have trouble submitting your application if there is a technical issue. Furthermore, because most banks close at 4 p.m., submitting an IPO application may be too late.

• 5. Invest in the parent company's stock

Buying at least one share of the parent or holding business in your Demat account is a smart strategy to make your IPO a good deal. This will verify that you are eligible to apply for a position as a shareholder.

• 6. Don't forget to give your approval to the mandate request

New investors, especially those eager to get their feet wet in the IPO market, frequently make this mistake. They apply for the initial public offering (IPO) offered by the brokers and consider the work completed. When you apply for the IPO, you will receive a mandate request. This request must be approved using the banking app or website. If the mandate is not authorized, the funds will not be locked in your account, and you will not be considered for the IPO allotment.

• 7. Make an application during the first two days

You may see that the IPO is open for three days when filling out the IPO application form. If you want to enhance your chances of getting an IPO, you should apply during the first two days. This is because if too many individuals apply on the last day, there may be technological difficulties. Some investors prefer to submit their application forms on the last day since it allows them to gauge the early reaction of investors to the IPO. However, if you want to maximize your chances of getting an IPO allotment in a specific IPO, you should avoid waiting until the last day.

• 8. Double-check all of the details

You must conduct due research when filling out the IPO form, just as you must when filling out other formal applications and filings. Make sure your name, Demat account number, application category, and other details on the form are correct. IPO applications have been denied in several instances due to basic errors and incorrect information.

The IPO status is a reflection of the stock market's collective trust in the company. An IPO has become a massive event in recent years, attracting enormous media attention and interest from both regular investors and large financial institutions wanting to buck the trend. After the allocation procedure is completed, the shares are listed on the exchange within days, allowing trading to begin. When an IPO is oversubscribed, allotments are distributed by a lottery mechanism. As a result, keeping an eye out for undersubscribed IPOs is a good idea. You could also hunt for undervalued IPOs with low subscription rates. While no one can foresee how an IPO will be distributed, following the steps outlined above will help you increase your chances of earning an IPO allotment.