An Initial Public Offering is initiated when a private company provides shares at large to the public. Since the private company makes its shares public for the first time, investors get an opportunity to become shareholders in it. Before offering the shares publicly, all companies must fulfil the conditions put forth by the Securities and Exchange Board of India. Individual and institutional investors believe that a company offering an IPO will grow.
They purchase shares in the hope of making good returns. The share volume that the company sells as well as the price of these shares sold determine the ‘new’ equity worth or value. When the company ‘goes public’, the shares owned by the initial investors are of the same price at which they get publicly traded.
Need for Demat Accounts
All public offerings are conducted through Applications Supported by Blocked Amounts or the ASBA process. The amount you wish to invest in the upcoming IPO gets blocked in your Bank Account without getting debited till the shares are allotted to you. Since all the transactions take place electronically, you can easily invest in public offerings from your smartphone. A Demat Account holds shares electronically.
You can open it at a brokerage or bank and link it to your Bank Account. However, select a good broker for the process. The Depository Participant or DP is an entity holding the right to open the account on your behalf. If the broker has an online platform, you can open the account digitally.
Procedure
You need to fill out the online account opening form and fill it with relevant details. Submit it on the portal with a scanned copy of your KYC documents, including identity, address, residence, and age proofs. A verification procedure takes place where the DP checks your records. You may visit the DP in person with the original documents. After verification, sign an agreement with your DP explaining all the rights and responsibilities of both parties.
Your application gets processed after you receive a reference ID number to track all ongoing transactions with the dematerialised account.
Applying for IPOs and the latest offerings
It is easy to apply for an IPO through a brokerage after filling out the application form. You can do so online or by visiting the brokerage firm. You must include your Demat ID number along with other details as requested. Wait for the shares offered by the public offering to get allotted to you. IPOs are a rage among investors since they can bring in big returns over the long term.
The list of recent IPOs includes Oravel Stays, Byju’s, Swiggy, Go First, and Mamaearth. Before investing in them, you must check the company’s fundamentals and prospectus. Spend enough time to assess their execution abilities, vision, and thought processes. Once you get a 360-degree view of the business, go ahead and invest in one.
