Imagine you are walking down the busy streets of Mumbai in the 1990s. You notice large hoardings declaring a new firm’s shares on offer for the first time. There are serpentine queues in front of banks with people waiting to fill out forms manually.
That time, waiting for an IPO (Initial Public Offering), was full of eagerness and optimism. Since then, India’s financial markets have increased significantly. Now, technology allows you to file an IPO at home, with just your smartphone or laptop. But what is an IPO, and how do you file for one in India? Let’s dive into the tale, the definition, and the entire step-by-step procedure.
What Is an IPO?
An IPO, or Initial Public Offering, is the first time a private company offers its shares to the public. Before an IPO, a company is privately owned by its founders, early investors, and sometimes a small group of private equity firms. By going public, the company sells part of its ownership to raise money. This money can help the company expand, pay debts, or fund new projects.
- Why Companies Choose an IPO
- Raise Capital: Getting funds for growth, new plants, or technology.
- Brand Visibility: Public companies often get more attention from customers and media.
- Liquidity: Founders and early investors can sell shares later in the open market.
- Employee Incentives: Share-based rewards keep employees motivated.
- Risks for Investors
- Limited History: IPO companies may not have long track records in the public eye.
- Price Volatility: New shares can swing in price quickly after listing.
- Oversubscription: If many apply, you may receive fewer shares than requested.
History of IPOs in India
India’s first modern IPO happened in 1992, when major public sector units listed on the stock exchanges. But the true boom arrived in the 2000s. Companies like Reliance Power (2008) and Coal India (2010) launched record-breaking IPOs, raising tens of thousands of crores. Since then, dozens of startups and established firms—from Zomato to LIC—have chosen to go public, giving retail investors a chance to own a piece of growing businesses.
How to Apply for an IPO in India
Applying for an IPO today is simpler than ever. Here are the main methods:
- Online ASBA via Net Banking
- What Is ASBA? Application Supported by Blocked Amount (ASBA) means your money stays in your bank account until shares are allotted.
- How to Do It:
- Log in to your net banking account.
- Find the IPO application link under “Investments” or “ASBA.”
- Select the IPO, enter the quantity of shares, and the price band.
- Authorize with your UPI PIN or net banking password.
- Advantages: Money is blocked, not debited, until allotment. You earn interest on unblocked funds.
- UPI IPO Subscription via Mobile Apps
- What You Need: A bank account linked to a UPI ID (e.g., yourname@okaxis).
- Steps:
- Open your trading app (Zerodha, Groww, Upstox, etc.).
- Go to the IPO section, pick the IPO, and enter details.
- Select “UPI” as payment method.
- Approve the blocking request in your UPI app.
- Advantages: Very user‑friendly on mobile, no net banking required.
- Offline Application via Broker or Registrar
- Offline Form: Obtain a physical IPO form from a broker or the Registrar (e.g., KFintech, Link Intime).
- Fill & Submit: Complete your personal details, share quantity, and price band. Attach a cheque or demand draft.
- Processing: Broker submits the form on your behalf.
- Disadvantages: Forms can get lost, and you miss interest since money is debited immediately.
- Direct via Registrar’s Website
- Registrar Portals: Some registrars allow direct online application on their website using ASBA.
- Process: Fill in the online form, upload KYC documents, and authorize block amount via net banking.
- Note: Less common than bank net banking or trading apps.
Key Terms to Know
- Price Band: The range (minimum to maximum) at which you can bid.
- Lot Size: The minimum number of shares you must apply for (e.g., 100 shares).
- Cut‑off Price: If you choose “Cut‑off,” you agree to accept the final issue price.
- Allotment: After IPO closes, shares are distributed. You receive an allotment status in your bank or broker portal.
- Refund: If you don’t get all shares requested, the extra money is released back into your bank account.
Comparison Table
| Feature | Online ASBA (Net Banking) | UPI via Mobile App | Offline via Broker/Registrar |
|---|---|---|---|
| Speed | Fast (real-time) | Fast (within minutes) | Slow (days for processing) |
| Funds Blocking | Amount blocked until allotment | Amount blocked via UPI mandate | Funds debited immediately |
| Ease of Use | Moderate (net banking login) | Easy (mobile-based) | Difficult (paper forms) |
| Interest on Funds | Earn interest until allotment | Earn interest until allotment | No interest after debit |
| Convenience | Good for experienced users | Best for smartphone users | Least convenient |
Conclusion
An IPO is a milestone event for a company and an opportunity for investors to purchase shares at the grassroots level. In India, ancient giants and agile start-ups alike prefer IPOs to raise funds today. Whether you like online ASBA, UPI-based mobile apps, or offline forms, the traditional way, the process is easy once you are familiar with the steps. Always read the IPO prospectus, know the price band, and apply sensibly.
Frequently Asked Questions (FAQ)
1. What is the minimum investment for an IPO?
The minimum investment equals the lot size multiplied by the floor price. For example, if the lot size is 100 shares and floor price is ₹100, you need at least ₹10,000 plus any brokerage or charges.
2. Can I apply for multiple IPO lots?
Yes. You can bid for multiple lots up to the maximum limit set for retail investors (usually ₹2 lakh worth of shares). However, your PAN must be the same.
3. When do I know if I got shares?
Allotment usually happens a week after the IPO closes. Check your bank or broker portal for “Allotment Status.”
4. What happens if the IPO is oversubscribed?
If more bids come in than available shares, the company uses a lottery system for retail investors. You may get fewer shares than applied, and the unallotted amount is refunded.
5. Are IPO gains taxed?
If you sell IPO shares within one year of listing, gains are treated as short‑term capital gains and taxed at 15%. For holding beyond one year, gains are long‑term and taxed at 10% above ₹1 lakh in a financial year.
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