IPO Application: How to Apply for an IPO and What to Understand

An IPO application is the process through which an eligible investor applies for shares offered in an Initial Public Offering. The exact application method, eligibility requirements and payment process can depend on the applicable rules, issue terms and the platform used by the investor.

What Is an IPO Application?

When a company offers shares to the public through an IPO, eligible investors may submit an application for a specified number of shares according to the issue terms.

The application generally includes information such as the investor's details, category, quantity or number of lots, and the price or bidding preference where applicable.

What May Be Required Before Applying?

The requirements can vary depending on the applicable regulations and the method used to apply. Investors should ensure that the relevant accounts and details required for participation are properly maintained and updated.

• Valid investor identification and account details.
• The required securities holding or demat arrangements, where applicable.
• An eligible bank account or approved payment arrangement.
• Correct personal and account information.
• Compliance with the applicable issue and platform requirements.

How Does the IPO Application Process Generally Work?

Although the exact steps can vary, an IPO application generally follows a process similar to the following.

• Review the IPO details and official offer information.
• Check the opening and closing dates of the issue.
• Select the appropriate investor category, where applicable.
• Choose the number of lots or shares according to the issue rules.
• Select a bid price or permitted option, where applicable.
• Submit the application through an approved method or platform.
• Complete any required payment or fund-blocking authorization.
• Wait for the allotment process.

Understanding Lot Size

IPO shares may be offered in specified quantities known as lots. The minimum and maximum application limits can vary according to the issue and investor category.

Before applying, investors should check the official issue details to understand the lot size, price range and applicable investment amount.

Understanding the Price Band

Some IPOs may have a price range called a price band. The application process may allow investors to bid within the permitted range according to the applicable issue terms.

Investors should review the official issue information to understand how bidding works for the specific IPO.

What Happens After Submitting an Application?

After the IPO closes, applications are processed according to the applicable rules. Depending on the issue structure and demand, an applicant may receive shares, receive a partial allotment where permitted, or may not receive an allotment.

The relevant payment or fund-blocking arrangement is handled according to the applicable process and terms.

IPO Application Does Not Guarantee Allotment

An important point to understand is that submitting an application does not mean that shares will definitely be allotted.

When an IPO receives applications exceeding the available shares in a particular category, the allotment process is carried out according to the applicable rules.

Important Things to Check Before Applying

• Opening and closing dates of the IPO.
• Price or price band.
• Lot size and application limits.
• Investor category and eligibility.
• Company business and financial information.
• Purpose of the issue.
• Relevant risk factors.
• Payment and fund authorization requirements.

Common IPO Application Mistakes

• Entering incorrect account information.
• Ignoring the issue closing date and time.
• Not checking lot size and application limits.
• Applying without understanding the company or risks.
• Assuming allotment is guaranteed.
• Using funds needed for essential expenses.
• Making an investment decision based only on rumours or market excitement.

What If Shares Are Allotted?

If an applicant receives an allotment, the shares are generally processed and credited according to the applicable procedures. After the shares are listed and become available for trading, their market price can rise or fall.

Receiving an IPO allotment does not guarantee a profit or positive investment return.

What If Shares Are Not Allotted?

If an applicant does not receive an allotment, the relevant payment or fund-blocking arrangement is generally handled according to the applicable issue and banking process.

Investors should check the relevant platform, bank or official information for the specific status of an application.

Key Takeaways

• An IPO application is a request to participate in a public share offering.
• The process and requirements can vary depending on the issue and applicable rules.
• Investors should check lot size, price, dates and eligibility.
• Submitting an application does not guarantee allotment.
• IPO investments involve market and business risks.
• Official issue documents should be reviewed before investing.