Over the past few years, the Indian stock market has been witnessing a rise in the number of companies coming out with their Initial Public Offerings (IPOs). A majority of these public issues have been well received by investors and have even provided stellar returns.
Moreover, a plethora of upcoming IPOs from fundamentally strong companies like the National Securities Depository Limited (NSDL), Tata Technologies Limited and SBFC Finance Limited are in the lineup as well.
If you’ve always wanted to invest in a public issue of a company, now may be the right time to do it. Here’s a brief overview of what you need to do to start investing in IPOs.
How to Start Investing in Upcoming IPOs?
Currently, there are two different ways to invest in an IPO – through a trading and demat account or the Application Supported by Blocked Amount (ASBA) method. Let’s take a look at each of these two IPO investment methods in detail.
Through a Trading and Demat Account
A trading account is an account that enables you to buy and sell a wide range of securities including IPOs online. A demat account, meanwhile, is an account that enables you to safely and securely store the securities that you purchase through a trading account or otherwise in an electronic format.
When it comes to investing in upcoming IPOs, the first step that you need to take is to open a trading and demat account with a stockbroker. When opening the account, make sure to choose a reputed stockbroker with a robust platform and strong track record like Bajaj Financial Securities Limited.
Once you have your account up and running, all you need to do is log into your stockbroker’s trading portal or their trading and demat account app and navigate to the IPO section. Browse through the list of IPOs available for subscription and choose the one you wish to invest in. Enter all the details as required in the IPO application such as the bid price and the quantity of shares you want to purchase. Once you’ve filled out the application, submit it online.
Through the Application Supported By Blocked Amount (ASBA) Method
Alternatively, if you don’t have a trading account or prefer to not open one, you can still invest in an upcoming IPO as long as you have a demat account. The Application Supported By Blocked Amount (ASBA) is a unique mechanism that requires you to only have a demat account and a bank account.
To apply via this method, all you need to do is download an ASBA application form for the IPO you wish to apply for. While filling out the application, make sure to enter details such as your demat account number, the number of shares you want to purchase and the bid price. Submit the duly filled ASBA application form along with the necessary KYC documents at your nearest Self-Certified Syndicate Bank (SCSB) branch. Once you submit the form, the required funds will be blocked in your bank account. If you’re eligible for share allotment, the blocked amount will be debited from your account. If not, then the blocked amount will be released.
Many public and private sector banks have integrated the ASBA mechanism into their internet banking portals, enabling you to apply for public issues online. Therefore, if you’re planning to apply for an IPO via this method, check if your bank’s net banking portal supports online ASBA before proceeding further.
Tips for Investing in Upcoming IPOs
A public issue of a company can be an attractive investment opportunity for long-term wealth creation. However, it requires careful planning and consideration. Here are a few simple tips that can help you make an informed investment decision.
- Stay Informed
As an investor interested in public issues, you need to be aware of upcoming IPOs. The best way to keep yourself informed is by tracking financial news, market updates, and IPO announcements. You can find this information through financial websites, news outlets, and company filings with regulatory authorities.
- Get to Know About the Company
Once you identify an upcoming IPO, the next step is to conduct thorough research into the company. Thoroughly read through the company’s prospectus to understand its industry, business model, strengths and risks, competitive landscape and future growth prospects.
- Focus on the Financials
The prospectus also has substantial financial information. Use this information to analyse the company’s financial health, revenue growth through the years, cash flows and profitability. A fundamentally strong company must exhibit consistent and sustainable financial performance.
- Review the IPO Pricing
Not all public issues may be priced right. Some IPOs may be significantly overvalued. It is crucial to assess whether the valuation is reasonable compared to the industry peers and the company’s financials.
- Consider Long-Term Prospects
Some IPOs offer short-term wealth creation opportunities, while others may take time to realise their full potential. It is important to ensure that the IPO you invest in aligns with your investment goals and risk tolerance. The best way to do that would be by analysing the long-term growth prospects.
According to the Securities and Exchange Board of India (SEBI), every individual desirous of investing in the Indian financial markets is required to have an active demat account. Bajaj Financial Securities Limited, one of the top stockbrokers in India, offers an intuitive and feature-rich trading and demat account. So then, what’re you waiting for? Download the Bajaj Securities demat account app and apply today!