While the prospect of an Initial Public Offering might seem attractive, the IPO application process involves strict timelines that you must follow. Many enthusiastic investors miss out simply because they do not understand the IPO timing in India. This guide will walk you through the entire schedule, including how to apply for IPOs.
What is an IPO?
An Initial Public Offering (IPO) is the process through which a company offers its shares to the public for the first time. Unlike listed stocks that you can buy and sell at any moment during market hours, an IPO is a primary market event with a fixed subscription period.
Companies launch IPOs to raise capital for expansion, debt repayment, or to allow early investors to exit. When you learn how to apply for IPOs, you will get to know that you are essentially offering to fund the company in exchange for partial ownership.
IPO Apply Time in India
Understanding the IPO timing in India is vital for a successful application. You cannot bid whenever you like, as you would with normal stock orders.
The IPO bidding time opens at 10:00 AM and closes at 5:00 PM. This window remains open only on trading days. If a weekend or a public holiday falls during the subscription period, the window remains closed.
On the final day of the issue, the official issue closing time is 5:00 PM. However, most brokers stop accepting applications by 4:00 PM or 4:30 PM. They do this to ensure they can upload the bids to the exchange servers before the deadline.
Many investors confuse the application window with the allotment date. The application window is when you submit your bid. The allotment date is usually the day after the issue closes. It is when the registrar decides who gets the shares.
Types of IPO Investors and the Respective Rules
The Securities and Exchange Board of India (SEBI) categorises investors into three distinct groups. Each category has a reserved portion of shares and specific rules for application.
Retail Investors
This category is for individual investors like you. If your bid amount is less than Rs. 2 lakhs, you fall under the retail IPO application category. This portion usually has a reservation of 35% of the total issue size.
HNI (High Net-Worth Individuals)
If you invest more than Rs. 2 lakhs, you automatically fall into the Non-Institutional Investors (NII) or HNI category. This category lets you bid for a higher quantity and does not allow you to withdraw your bid on the last day.
QIB (Qualified Institutional Buyers)
This category is reserved for large financial institutions like mutual funds, banks and insurance companies. QIBs are professional investors who often bid large amounts and play a major role in determining the price discovery of the IPO.
How to Apply for an IPO – Step-by-Step Process
The IPO application process is now entirely online and seamless. Here is a comprehensive guide explaining how to apply for IPOs.
Step 1: Check IPO Details
The first step is to review the details of the upcoming issue, such as the price band, lot size and company fundamentals.
Step 2: Ensure Demat and Trading Account
You need an active demat account to hold shares and a trading account to facilitate the transaction. Ensure your KYC details are updated and that the account is active to avoid rejection.
Step 3: Select IPO
To apply for IPO online, log in to your broker's platform. Then, navigate to the IPO section and select the 'Apply' button next to the company you wish to invest in.
Step 4: Enter the Bid Price or Cut-Off Price
When applying, you can either enter a specific price within the band or select the 'cut-off price' option. Cut-off price automatically selects the highest price in the band and ensures your bid remains valid.
Step 5: Enter Quantity (Lot Size)
The IPO application process only allows you to bid in multiples of lots. For example, if the lot size is 15 shares, you can bid for 15, 30, 45, and so on.
Step 6: Submit IPO Application
Once you have entered all the details, review them carefully and click on submit. The stockbroker will send your bid to the exchange.
Step 7: Block Funds via ASBA / UPI
You will receive a UPI mandate request. Using your preferred UPI payment app, approve this mandate. This blocks the required amount in your bank account until allotment.
Cut-Off Price vs. Bid Price Explained
The cut-off price is the final issue price determined by the company based on demand. It is usually at the upper end of the price band. Selecting the cut-off price option when you apply for IPO online allows you to bid without specifying a fixed number. By choosing this, you agree to buy the shares at whatever final price the company decides.
Ideally, you should always choose the cut-off price option. This way, you can ensure that your application remains valid regardless of the final pricing.
A common mistake investors make while bidding is that they enter a lower price in the band. In most public issues, the final price is almost always the upper cap. Placing a bid price that is at the lower end of the price band guarantees rejection in such cases.
What Happens After the IPO Application?
Now that you know how to apply for an IPO, let us try to understand what happens after you submit your application.
- Application Status
Once you have made a retail IPO application, you can track its status on your broker's app or the stock exchange’s website. Initially, it will show as 'Submitted' or 'Bid Placed'. Once the mandate is approved, it confirms that your funds are successfully blocked.
- Basis of Allotment
The Registrar and Transfer Agent (RTA) to the IPO processes all valid bids and determines the basis of allotment. If the issue is oversubscribed, they use a computerised lottery system to allocate shares to ensure a fair chance for all retail applicants.
- Refund Timeline
If you do not get an allotment, the RTA instructs the bank to unblock your funds. You will receive a notification, and the money in your account will be unblocked and available for use again.
- Shares Credit Date
In the case of an allotment, the allotted shares are credited to your demat account one day before the listing. You will see them in the ‘Holdings’ or ‘Portfolio’ section of your trading platform.
- Listing Day
Finally, the company’s shares are listed on the stock exchanges on the mentioned date. You can start trading them from 10:00 AM onwards on this day.
Common IPO Application Mistakes to Avoid
While knowing how to apply for IPO is important, it is equally crucial to ensure that you avoid making common mistakes.
Applying After Cut-Off Time
The most common mistake is waiting until the last minute on the last day. Although the IPO apply time is until 5 PM on the last day of the public issue, exchange servers often slow down due to high traffic in the final minutes. Delaying your decision till the last minute can lead to you missing the cut-off time for the application.
Wrong UPI Approval
You might submit the application, but forget to go to your UPI app to approve the mandate. Without the UPI mandate approval, your bid becomes invalid. Sometimes investors approve the request after 5:00 PM on the closing day, which leads to rejection.
Applying Multiple Times
You cannot submit multiple retail IPO applications using the same PAN. The system will detect duplicate entries and reject all of them.
Incorrect Lot Size
When it comes to the IPO application process, you must adhere to the lot size or multiples of it. If the lot size is 15 shares and you enter 20 shares, the system will show an error. You must check the exact lot quantity before typing in the number.
Not Checking the Fund Balance
Before you apply for an IPO online, always ensure your bank account has sufficient funds. If the block request fails due to insufficient balance, your application will be void.
Best Time to Apply for an IPO
Applying on the first day can help you avoid last-minute server crashes, UPI mandate issues and technical glitches. However, it does not guarantee allotment or improve your chances of success in any way.
If the demand far outweighs the supply, some public issues may see oversubscription. However, this should not stop you from making a retail IPO application if the company is good. The computerised lottery system offers equal probability to all valid bids irrespective of when they were placed.
Now, it is important to ensure that you approve the UPI mandate immediately upon receiving it. Any delays in approving the mandate can lead to the bank not confirming the fund block to the exchange in time.
Can You Modify or Cancel an IPO Application?
Yes. The Securities and Exchange Board of India (SEBI) allows flexibility during the IPO bidding time period.
For example, you can modify your bid details, such as quantity or price, anytime when the subscription window is open. Furthermore, you can also withdraw or cancel your application entirely during the bidding hours. If you cancel, your blocked funds are released.
However, you must ensure that you make all modifications or cancellations before the market closes on the final day. Once the IPO bidding time ends, you cannot make any changes or cancel your application.
FAQs
What is the maximum time by which you can apply for an IPO on the last day?
The official closing time for a retail IPO application on the last day is 5:00 PM.
Can I apply for an IPO after market hours?
Yes. Some stockbrokers allow you to apply for an IPO online after market hours, which is then uploaded when the market opens the next day.
Is applying on the first day better?
No. Applying for a retail IPO application on the first day might eliminate the risk of technical glitches, but it does not increase your allotment chances.
What happens if the UPI mandate is not approved?
If you do not approve the UPI mandate before the deadline, your application will be rejected.
Can beginners apply for IPOs?
Yes. Beginners can easily apply for IPO online and offline as long as they have a PAN and a demat account.
Conclusion
Mastering how to apply for IPOs is the first step towards disciplined investing. As an investor, it is important to ensure that your funds are ready and your accounts are active before a major issue opens.
By adhering to the correct IPO timing in India and using the cut-off price feature, you can increase the chances of success. Start your journey today and apply for your next public issue with clarity and assurance.
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