Initial Public Offering (IPO) is the process by which companies the first sale of a equity to the public. If a company already in existence, but with no shares listed on the stock exchange, decides to invite the public to buy shares.
IPO or initial public offering is a way for businesses to raise capital by sharing equity of their company. While the primary purpose of IPO is to raise capital. It required to companies for business expansion. It is a pride for companies to have their stock traded on national markets.
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How to apply
A demat account is a required to apply for an IPO. A demat account is facility to store your stocks and financial securities electronically. It can be opened by submitting your PAN card, Aadhaar card, address and identity proofs. You can apply through your trading account or bank account.
Once you have activated your trading and demat account. SEBI has now made available facility application supported by blocked amount (ASBA), which is compulsory for an applications. The ASBA is an application that authorizes banks to block money in your bank account. The advantage of an ASBA is that you do not have to issue a cheque or pay any money till the allotment is made.
You need to bid while applying for IPO, as per the lot size of shares is mentioned in the prospectus. Lot size is the minimum number of shares you have to apply for during an IPO.
There is a possibility that you may get fewer shares or sometimes, you might fail to get any at all. In these cases, the bank will unlock your bid money. But you get a full allotment; you would get a Confirmatory Allotment Note (CAN) within six working days after closure of the IPO process, also known as book-built issue.
Once the shares are allotted, they will be credited to your demat account. The next step is to wait for the listing of shares on stock exchanges.