How to Apply for an IPO Offline?

Investing in an IPO has become popular among investors as it allows them to diversify their portfolios by investing in different companies. Since, IPOs are a favourable type of investment for many, understanding its application process becomes essential. You can apply for an IPO via both, online and offline methods. Though applying online is convenient, many investors opt to apply for an IPO offline. In this blog, you will understand how to invest in an IPO offline, its advantages, steps, and eligibility requirements.

Key Highlights

• To apply offline for an IPO, one must download a form, fill in personal details, and submit it to the brokerage or bank along with the necessary documents.

• Investors should thoroughly research and understand the company’s performance, promoters, and management before investing.

• To invest in IPOs, investors must submit certain documents like a PAN card and a valid Demat account.

• IPO investments allow investors to diversify their portfolios and earn potential returns.

How to Buy IPO Offline?

If investors are planning to sell their shares after listing, they will need to have a separate demat account to buy an IPO offline. To execute the offline application process,  here are some simple steps that you need to follow:

• Either visit the exchange site to download the IPO application form or go to a registered broker office.
  
• You need to provide your personal information such as name, mailing address, PAN number, phone number, etc.
  
• Indicate the kind of an investor you are, whether you are a retail investor, non-institutional investor, or qualified institutional buyer.
  
• All quantities and prices should be filled in the bid details.
  
• In addition to mentioning the price in numbers, you also need to include the amount in words and figures for the application.
  
• You will need an ASBA account number or UPI identification for IPO application confirmation and allotment.
  
• Then, you need to sign the paper.
  
• Lastly, submit it at your nearest bank.

Useful Tips for Applying for an IPO Offline

Investing in IPOs is a good investment decision that you will make. However, to make an informed and cautious one, here are some useful tips to consider when applying for an IPO:

Do your Research

Research reports on IPOs are often biased by stock market experts. Be sure you do not only rely on their reports but also do in-depth research. To evaluate a company’s actual performance compare it to its competitors.

Always Read the Prospectus

All the necessary information about the firm is kept in the Red Herring Prospectus (RHP) including its Initial Public Offering (IPO). It can be found on the company’s site, SEBI, and stock markets. Hence, this document should be perused before any choice regarding investments.

Know Where your Funds are Invested

Understanding how the company intends to make use of IPO funds can be of great importance. Normally, investments are made for business expansion or purchasing assets. If the cash raised is to pay debts, you should think about it before investing.

Analyse the Promoters and Management

The performance of a company significantly depends on the promoters and management. Therefore, the young professionals should be evaluated. Crossing over promoters or inexperienced leaders is a sign of financial hardship or an unstable economic state.

Invest in IPOs Backed by Strong Brokers

When considering an IPO, it is important to keep in mind the stockbroker’s credibility. Usually, reputable brokers are in charge of underwriting any public offerings of good standing. It is important to keep in mind that things can go wrong with an IPO even if you have one of the best brokers. Therefore, this aspect may be better assessed independently.

Invest a Cut-off Price

Allotment of shares will depend on bidding at a cut-off price in book-built public offers. It is a basic approach that ensures you are in line with the company’s predetermined final cost for its initial public offering.

Valuations Matter

Before you put your money in to buy shares of a firm that has just gone public, you should first check its worth. In the long run, companies with high valuations often perform badly. To get a decent price, look at indicators like P/E, P/B, etc, and compare them with other companies in the same sector.

Understand the Lock-in Period

All IPOs have a time of 6 months when earlier investors are not allowed to dispose of their shares. Hence, the locking period is important to avoid losing money through investment strategies as share prices may decline after this period.

Plan an Exit Strategy

Before investing in an IPO, always have an exit plan in mind. Some short-term investors may choose to liquidate their shares on the day when the lock-up period finishes. Whereas, ultra-short-term ones plan to sell within the first few days after listing.

Be Sceptical

Considering the unpredictability of IPOs, it is advisable to treat them with a lot of care. It’s important to take IPO advice from friends or stockbrokers with scepticism. Ensure to take your investment decisions after thorough research.

Benefits of Applying Offline

Offline IPO application is a traditional and established way for investors who like to use the hands-on approach in their investments; let’s discuss the benefits of applying for an IPO offline in brief:

Inflow of Additional Capital

An IPO is important for a company because it allows members of the public to invest in it. Unlike traditional funding which may take longer or be selective, IPOs bring in many investors who provide funds for advertisement, research, and development. This kind of funding aids in quickening the expansion of such entities.

Window of Opportunities

Purchasing IPO shares at lower prices by investors can lead to future prices increase. This means making a profit out of the investment. Being an investor also means being informed of all IPO details like the pricing and issue date which ensures fairness across the board.

Help You Achieve Your Goals

The ability to obtain better returns from IPOs allows you to accomplish financial goals by investing in them. An IPO offers investors equities with a very high risk but also a very high potential for a huge profit. Therefore, investors can profit from it by cashing out during times when the market is down or even when their companies are likely to grow quickly.

Attract New Investors

Through a public offering, a private firm can take its market position to another level. Such prominence boosts the brand visibility and image of the company, which attracts venture capitalists, institutional investors, and banks, hence raising the chances of adding more capital and development.

Liquidity

By raising money, an IPO presents a way for companies to improve their financial standing. This liquidity allows the company to expand while distributing returns to shareholders. Thus, supporting an equitable and profitable investment climate.

Eligibility Requirements for an IPO Application

To apply for an IPO, you must understand its eligibility requirements. Let’s discuss them in brief:

Legal Competence

An adult of legal age is eligible for application of initial public offering if he/she is competent in law.

PAN Card

A card with Permanent Account Number (PAN), is needed that comes from the Income Tax department.

Demat Account

It is mandatory to have a valid demat account. If you plan to sell shares afterwards, you will require a trading account while there is no need for one when applying for an IPO.

Trading Account

Although it is not mandatory for IPO applications, brokers usually recommend applying for a trading account and a Demat account for first-time applicants.

IPO Process

The process of applying for an IPO requires you to place an offer. The company examines bids together with its underwriters and shares are allocated based on the demand and allocation rules.

Share Allotment

After allotment of shares has been done, money is deducted from your bank and deposited into your Demat account respectively.

Conclusion

Submitting an IPO offline is a possible choice for investments looking at the classic and practical way of doing things. The online mode gives its users convenience but having direct contact is advantageous. However, investors can make sensible decisions through research, evaluation, and understanding of the prospectus.  Moreover, it is also essential to understand the eligibility criteria through a structured procedure. This makes IPO an appealing option to those who would like to invest strategically. Applying for an IPO, whether online or offline provides investors with opportunities for future returns and diversification of portfolios.

FAQs on IPO Offline Procedure