Initial Public Offering (IPO) is a process that helps private companies in India to go public. By launching an IPO, a corporate entity sells its shares to the public for the first time. By liquidating its shares to retail, institutional, and other investors, the company becomes public.
You can easily apply for an IPO and hold shares of a company that has recently become public. To launch an IPO, a company has to seek permission from the Securities and Exchange Board of India (SEBI). Besides investing your money in an IPO, you can also seek a loan from a reputed lending institution.
Read on to understand how to apply for IPOs and seek financing.
Understanding the IPO Application Process in India
To apply for an IPO in India, you must have the right resources. The first thing is to open a registered trading account in India. Without a trading account, you cannot buy or sell securities in India, including IPO investments. Another thing to acquire on your name is a Dematerialisation (Demat) account.
A trading account will help you buy/sell securities, whereas a Demat account will enable you to hold securities. You can connect with a reliable stockbroker to have both trading and Demat accounts in your name for free. Not to forget, you need a registered bank account in India to invest in IPOs. After you have all these things, follow these steps to apply for an upcoming IPO:
- Research for the right IPO to invest
- Select a trading platform to invest in the desired IPO
- Locate your desired IPO from the list of upcoming IPOs on the trading platform
- Choose to bid for your desired IPO
- Choose to apply at the Cut-off Price or place a bid
- After placing your bid and selecting the lot size, submit the IPO application
- Wait for the approval or rejection of your IPO application
- You can track the status of your IPO application on the trading platform anytime
Understanding the IPO Financing Process
Since IPOs are rewarding investments, everyone wants to jump in. Sometimes, corporate entities also witness the situation of oversubscription before launching an IPO. It occurs when investors have applied for more shares in advance than the total number of shares available. In such a case, the corporate entity might distribute shares on a proportionate basis to investors. Retail investors might apply only for a few shares in an IPO. However, the same cannot be said for HNIs (High Net Worth Individuals) and institutional investors. They apply for more shares in an IPO and try to maximize their profits.
To place a higher bid and apply for a greater lot size, investors might need additional funds. It is where the IPO financing process comes into the picture. With the help of IPO funding, HNIs and institutional investors collect additional funds for buying more shares. You can consider IPO funding as a loan provided by a lender to buy more shares. Besides financial institutions in India, stockbrokers offer IPO loans to HNIs and large-scale investors. Through the IPO financing process, investors can maximise their chances of IPO allotment. Like any other loan, you can repay the IPO loan in installments.
Usually, the tenure of an IPO loan in India is short, ranging from a few days to 3-4 months. The lender will also apply interest on the IPO loan. Usually, the interest rates for IPO loans in India range between 8% to 12%. The IPO loan amount will depend on your repayment capacity and credibility as an investor.
In a Nutshell
Have you decided to invest in an upcoming Indian IPO and earn returns? To maximise the chances of IPO allotment, you can apply for an IPO loan. You can apply for more shares by taking an IPO loan from a trusted lender. Learn more about how to apply for IPOs right away!