Published : May 14, 2019
IPO investment is a good source of earning to the retail investor if selected properly. But even after due consideration of fundamentals and valuation of any IPO and subsequent subscribing, it is not necessary that one get share allotment. Thus, merely subscribing to any public issue does not guarantee for share allotment. This is a true limitation especially when there is lots of buzz going on any particular issue. So, to enhance the possibility of share allotment, it is always better to keep the following 3 IPO bidding rules in mind before actually bidding to an IPO.
An incomplete or improper filled IPO application is liable for rejection. And even if properly filled the chances of allotment are less for every retail participant. The present article highlights 3 IPO bidding rules that increase chances for allotment.
These rules are very simple to understand and apply while filling the ASBA application form. The IPO bidding rules is the same for both online and offline application process. So, don’t hesitate or confuse while applying offline or online. Always remember that only discipline with your IPO bidding process will make you a successful IPO bidder. Therefore, go through these 3 IPO bidding rules before you plan to apply for the next IPO.
The chances of rejection are high in case if the IPO applications are incomplete or filled with some error. So it is always better to fill the application for the IPO form with due care. The application must be complete in every sense. Furthermore, no column is to be left blank. Also, every detail needs to be filled accurately in the space provided. The following are the checklist to ensure accuracy –
Ensure that name of the applicant must be same as that of the attached PAN card copy, Demat and Bank account. Do not forget to ensure PAN number, Demat number, and account number.
Applying IPO through net banking is quite simple then applying through the physical application. Since January 2016, SEBI has made ASBA (Application Supported by Blocked Amount) mandatory for subscribing any IPO. Under this method, the applicant either use net banking facility or his trading member (a broker) or to the SCSB (Self Certified Syndicate Bank). List of SCSB and their designed branches where ASBA application form can be submitted is available here.
A detailed blog covering the details on how to use ASBA to apply an IPO is also there on Raghunandan Money research section. In this blog article, you will discover all the essential key points of IPO bidding rules through ASBA. Who are eligible to apply through ASBA application, the process of applying online and physical IPO through ASBA and ASBA benefits are also there. Not only this you will also learn about the reasons that might result in rejection of your ASBA application.
This is the second most important aspect of giving considerable thought to any retail investor. All IPO comes with a price band for the subscription. The lower price band and the upper price band.
Most of the investor does a mistake for subscribing at the lower band, thinking that they will save some money while doing so. However, they forgot that the company allows shares over and above cut off-price.
The cutoff price is mostly near the upper band. You can check for cutoff price and price band for any issue here. This link will work only when the issue remains open for subscription.
So it is always good to bid at the upper band of the issue as even if cut off come below the upper band, then also chances for getting allotment remains high because of the fact that you had subscribed above the cutoff.
Alternatively, retail investors can tick the cut-off option which indicates their willingness to subscribe to shares at any price discovered within the price band. The retail investor has permission to subscribe to the IPO at the cutoff rate.
SEBI allows maximum 5 application to an IPO from a single bank account to a retail investor. Also, a retail investor can bid for shares worth a maximum of Rs.2 lac in an IPO. And this is the third very important thing is to consider by any retail investors, i.e. the number of bids.
It is always advisable to subscribe in minimum lot size but the number of application should be on the higher side, i.e. 5 application per bank account. Apply in the name of your family members in such a way that lot size remain minimum but application becomes five or around it. Further, you also ensure that the total application value is within the set limit of INR 2 lac per account.
There is the draw of lots for allotment to retail investors in case any issue has multiple times subscription.
And the lucky investors get a bid of minimum one lot. Hence, if you want to apply for an IPO at the higher price or at cut-off price in smaller bid lots (say 5 applications per bank account) chances for you getting shares in the draw are better. Better than that when you apply for only one application.
Still, you have a question on IPO bidding through ASBA? Don’t worry. Here is the 30 most frequently asked question on ASBA IPO bidding process. Hope this will clear the air around the concept and make your applying process simple.
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