Applying in an IPO

Prerequisites
 

1.	Demat account
	An investor has the option to apply for and receive the shares in physical form. However, it is advisable to get the allotment in demat form as the shares issued through an IPO are tradable only in the demat form. In any case, for all IPOs of any security of issue size of Rs 10 crore or more, issues have to be compulsorily be only in dematerialized form, while QIBs and large investors (applying for more than Rs. 1,00,000), can apply only in demat form.   There are two depositories in the country-National Securities Depository Ltd. (NSDL) and Central Depository Services ( India) Ltd. (CDSL) .Both have An extensive network of authorized Depository Participants (DPs). An investor can open a demat account with any of these DPs.   The investor should fill in his the correct DP ID and Client ID details in the application forms.
2.	Permanent Account Number (PAN)
	Where the bids are for Rs. 50,000 or more, the bidder, or in case of a bid in joint names, each of the bidders, should mention his/her PAN allotted under the Income Tax Act. The copy of PAN card or PAN allotment letter is required to be submitted with the application form. Applications without this information and documents are treated incomplete and are liable to be rejected. (For more details, the investors should read the application form)
3.	Bank account/DD
	Applications for IPOs are valid only if payment is made through a cheque or a demand draft. Application money cannot be paid in cash.
Process of applying in an IPO An investor needs to first obtain an IPO application form. Forms are normally available from share brokers, lead managers, syndicate members and collecting banks. Application forms can also be picked up from the vendors at major commercial streets in most towns (for example outside the Bombay Stock Exchange)   In the case of fixed price issues, the application form along with a cheque/demand draft for the requisite amount has to be deposited with the designated collecting bankers to the issue, whose names and addresses are printed on the application form. In the case of bookbuilding issues, the application form along with a cheque for the requisite amount has to be deposited with the designated syndicate members of the issue, whose names and addresses are printed on the application form. Application forms should be filled carefully as incomplete/incorrect forms can be rejected due to incomplete details. Applying for IPOs on the internet Websites of various brokerage firms now allow the facility to their clients to apply for IPOs online. Withdrawal of an application after the closure of an IPO The Indian laws allow for a withdrawal of an application before the date of allotment. Proof a bidder can request from a trading member for entering bids The syndicate member returns the counterfoil with the signature, date and stamp of the syndicate member. The investor can retain this as a sufficient proof that the bids have been taken into account. Changing/revising the bids The investor can change or revise the quantity or price in the bid using the form for changing/revising the bid that is available along with the application form. However, the entire process of changing of revising the bids should be completed within the date of closure of the issue. Knowing about IPOs currently open or are about to hit the market Every week SEBI issues press releases for information of the public, details of offer documents filed with SEBI and observations issued. At what price should a retail investor apply? A retail investor is not required to make his bid at a specific price. Since he is not able to take a call on the right price, he should use the cut-off option. This would ensure that his application will be considered valid at all prices, including the final price decided by the issuer. For making bids at cut-off price, the payment has to be made at the highest price of the price band. In case a lower price is finalized or in case the investor is an unsuccessful allottee or is allotted lesser shares than applied for, he would get the necessary refund. How to improve the chances of allotment in an IPO? As most IPOs get oversubscribed, a retail investor is often disappointed in not getting any allotments or getting miniscule allotments. If an investor has decided on investing in a specific IPO based upon merits, he should commit as much resources as he can to that IPO. He should apply for as many shares as possible, within the limit of Rs.1, 00,000. It would also be worthwhile to apply in the names of all family members, provided all of them are applying from their own accounts and all of them have a valid demat account.