Last Updated: Aug 31, 2024 Value Broking 6 Mins 2.1K
bid for an ipo

Bidding for an Initial Public Offering (IPO) is an important step for buyers who desire to purchase shares in companies before they get listed on an exchange. It’s an opportunity to become an early shareholder in a potentially successful venture. For Indian investors, they must know how to bid effectively in an IPO, as their chances of success depend on this knowledge. In this blog post, we will explore the bidding process, IPO application, and reasons for not getting an allotment.

Key Highlights

  • Investors can choose how they want to apply bids for IPOs. They can do it online via a trading portal or offline by directly visiting the bank or brokerage firm.
  • The bidding procedure includes choosing an IPO and specifying the quantity, and amount offered for the shares. Moreover, registering for the UPI Mandate or paying through cheques.
  • Demand might lead to variations in share allotment. If the subscription exceeds supply, a computerised system is used to distribute shares.
  • Wrong Demat account numbers or incorrect PAN details are among the factors leading to the rejection of bids. Multiple bids submitted will also be rejected. 

Procedure to Bid for an IPO (Online and Offline)

An IPO bid can be made online or offline. Here you will understand how you can execute both processes. Let’s discuss the steps in brief:

Online Process

Here are some steps to follow to place an IPO bid online:


Step 1: Go to your broker’s trading portal and log in.

Step 2: Locate the IPO section on the portal.

Step 3: Choose the public issue you want to invest in.

Step 4: Fill in the IPO details, such as the number of lots you wish to apply for and their price. Don’t forget to select the ‘cut-off price’ option to increase the chances of allotting shares.

Step 5: Finish UPI Mandate Registration Process.

Step 6: Send IPO application.

Offline Process

Follow these steps to place an IPO bid via offline mode:

Step 1: You have the option of going to your bank or contacting your stock broker.

Step 2: Complete the form by including all pertinent information and the number of stocks you want to buy.

Step 3: You must include your Demat account number (16 digits) and the bid price, also you should enclose a cheque for payment. It is advised that you ensure that there are enough funds in your account.

Step 4: If there is an allotment, automatically shares will be transferred into your Demat account. 

This signifies the conclusion of the bidding process.

The Bidding Process

The company sets a specific price range within which you place your bids during an IPO bidding process. This aspect is crucial because it affects your opportunity to purchase the shares at the targeted cost range. Let’s discuss the process in brief: 

How to Bid?

Buying a set of shares is not allowed when you place a bid for an IPO. This is because a minimum number of lots are provided by the company. The bidder needs to mention the number of lots he wants in the application form. For example, if a lot comprises 100 shares then you can bid for a minimum of 100 shares and in multiples of 100 thereafter. Moreover, the maximum subscription amount that can be offered to those who make retail investments is Rs 2 lakh.

Where to Bid?

You have the option to place an online bid for an IPO in your Demat account. Almost every broker provides this service. Moreover, you can also make your offer from a banking or brokerage office where you should submit all important documentation.

What Price to Bid at?

Read through the book build before placing your bets. It is advisable to place the bet at that price if other investors are bidding at the cut-off price; otherwise, the chances of allotment can be reduced.

Bidding Online

Today, almost all broking firms have their websites or applications where you can apply for an IPO. By visiting the app or web page of your broker, you can place a bid that suits your financial objectives and budget.

Getting Allotment

There are several cases of getting an allotment. For example,

1. If the IPO shares are wanted by many people, one can receive fewer shares than asked for. 

2. If the number of people interested in the IPO shares is too many, then one might not receive any shares.

3. If the number of people applied is uncountable, a computerised method is used to decide who receives the shares. 

However, if you are allotted shares, you will get a CAN (Confirmatory Allotment Note) within six working days from the date of IPO closure.

Understanding IPO Allocation

When a company offers an IPO, lots of people want to buy shares, which makes it competitive. If many people want the shares but there aren’t enough, you might end up with fewer shares or none at all.

If you don’t get any shares, the bank will give you back the money you tried to use to buy them.

When trying to buy shares in an IPO, it’s important to be patient and understand the market. It can be disappointing if you don’t get the shares you wanted, but this is a normal part of investing in IPOs. That’s why it’s a good idea to spread your investments around so you’re not too affected by these situations.

Possible Reasons for Not Getting an Allotment

Not receiving allotment for IPO shares is possible due to various reasons. Let’s discuss them in brief:

  1. Entering an incorrect Demat account number, a different PAN number, or exceeding the number of bids for an IPO will result in the cancellation of your IPO bid.
  1. In case of oversubscription and if your application is not selected, you might miss out on shares.
  1. Agencies do not give shares to investors with a separate PAN for their Demat account, bank account, and UPI ID. Keep in mind that it can take time to choose the right IPO. However, to be eligible for allotment you must possess a Demat and trading account as basic requirements.

Conclusion

Bidding for an IPO allows investors to take part in the company’s development from its early public stages. However, it is important to note that whether you place your bid online or offline, you must follow the right procedure. Moreover, many do not get share allotment due to oversubscription. However, you can increase your chances by being well-prepared. You need to ensure that all the details in your Demat account, PAN number, and other requirements are accurate. Therefore, staying updated about the market and taking cautious steps can help you apply for IPOs confidently.

FAQs On Bidding For An IPO Procedure

Bid 1 and  Bid 2 are two of the three types of bids an investor can make when applying for shares in an IPO. In a book-building IPO, the company decides on a price range, and investors can place bids with different prices and quantities.

The use of three bids in an IPO may increase the chances of share allocation by distributing the risk over various offers and price ranges.

The IPO bidding price is the range of the offer price that investors can use to bid their shares.

IPO money is refundable if a retail investor cancels his bid, while either the IPO process is going on, or if not allotted, or does not receive permission for listing and trading.

Investors may cancel or withdraw a subscribed IPO either online or offline. However, this is permissible only before the issue is closed for subscription. After the issue is closed for subscription, investors cannot cancel or withdraw their bids.