IPO Investment - How can an individual invest in an IPO?

Initial Public Offering (IPO) happens when a company decides to go public and list itself on the stock exchanges. Buying shares of a company is very easy when you buy it from the secondary market i.e. when the company is already listed on the exchanges. However, when a company comes out with a fresh issue, an individual needs to buy shares directly from the companies.

The Buying Process involved in an IPO (Initial Public Offering)

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Usually, when any company comes out with an IPO, it advertises heavily in the media. This is because the company wants to gain maximum publicity in order to ensure that the issue is a success. It is through this advertisement that one gets to know about the upcoming IPOs. It is very important that before applying for any IPO investment, an individual goes through the company’s financial statements, its track record and management’s future plans.

Get an Application Form

An individual needs to fill up the application form which is easily available with the brokers or any agent who sells mutual funds. The forms come free of cost. Fill up the form as per the directions mentioned in the form. Also, attach a cheque for the amount of shares you wish to buy. There is a minimum number of shares one needs to buy for specific issues, which is specified in the application form. Submit the form within the mentioned time frame.

Online Option

An individual can also apply for an IPO online through ASBA (Applications Supported by Blocked Amount). This is a process developed by SEBI while applying for an IPO. Through ASBA, the IPO applicants’s money doesn’t get debited until shares are allotted to them. An individual can login to his netbanking account and apply for IPOs directly.

While there are a lot of companies which come out with their IPO, it is not necessary that every company’s IPO perform well. There are some investors who have faced huge losses by investing in wrong IPOs. An individual should be very sure about the company and should have faith in the company’s management and its growth prospects before IPO investment.