Do You Require a Demat Account to Apply for IPO?

An Initial Public Offering (IPO) is a way through which private firms can collect funds by selling their portions to the public for the first time. It enables people to acquire an interest in newly publicised institutions. While a demat account is not required for all IPO applicants, it is extremely important. This is because Demat accounts make receiving and managing shares electronically simpler which results in making trading quick. In this blog, you will understand the benefits of a Demat account while applying for an IPO and the steps to apply online and offline.

Key Highlights

• It is possible to apply for an IPO without a Demat account. However, a Demat account makes it easier to get and manage shares electronically. .

• There are different ways in which investors can apply for IPOs such as UPI, ASBA, and offline approaches that are flexible depending on the preference and resources of the investor.

• A Demat account makes IPO transactions easier and safely manages shares, making it an essential part of effective investment management.
  
• The benefits of applying for IPO through a Demat account are that it is convenient to you, is electronically maintained, is flexible, and offers access to corporate actions.

Is a Demat Account Needed for IPO Application?

Yes, a Demat account is essential for applying to an IPO, as it holds the allotted shares and manages your investments. However, here are the several methods through which you can apply for an IPO:

UPI method 

To proceed, open your trading account and select the IPO you want to invest in. Enter the number of shares you wish to purchase at that price and fill out the application form with your UPI ID. Lastly, approve funds block requests on your UPI app.

ASBA Facility

Alternatively, you can use the ASBA (Application Supported by Blocked Amounts) facility through your bank’s website. Login into your Internet banking account then choose the desired IPO. Next, you need to specify the number of shares before authorising fund blocking from within one’s account. With this technique, money intended for investment stays in the same bank account.

Offline Methods

To apply through the offline method, you need an IPO application from a broker, a cheque for payment, and a photocopy of your PAN card. Another option is to download the BSE/NSE IPO form, fill it out, and submit it at a nearby ASBA bank branch.

Benefits of a Demat Account for IPOs

There are several benefits of having a Demat account when applying for an IPO. Let’s discuss them in brief: 

• Convenience – Online applications for IPOs via a Demat account take little time and have no stress. This means you can apply for an IPO conveniently.

• Seamless Transactions – Your shares will be sent directly to your Demat account. Thus, the post-allotment period becomes easier.

• Electronic Records – This provides you with an opportunity to access your transaction history or portfolio statements at any time. This is because all transactions are maintained on a digital basis with the help of a Demat account.

• Trading Flexibility – When it comes to IPO shares on the Demat account, you are free to hold them until they mature or trade on the stock market exchange.

• Access to Corporate Actions – When using a Demat Account, one can take part in IPOs and also be part of dividends, bonus shares, and other things involving companies directly.

How to Apply for IPO with a Demat Account?

If you have a demat account, applying for an IPO becomes easy. This is because first, you have to buy shares via your trade account that fall within company stipulations. Then you need to wait until the IPO allotment. If the IPO is undersubscribed, or if it exactly matches available shares, then those shares will automatically allotted to you. However, in cases where shares are oversubscribed, such as during an auction system, it means that only high bidders get their shares.  However, you can apply for IPO with your Demat account by following these simple steps:

Step 1. Open an online Demat account with a stockbroker.

Step 2. Choose the initial public offering (IPO)

Step 3. Provide the lot size or the desired number of shares you wish to bid for

Step 4. Enter your UPI ID details and click on submit

Step 5. Your funds will be frozen until the allotment date, once the transaction is completed successfully

How to Apply for an IPO Online?

There are certain steps that you need to follow to apply for an IPO online. Let’s discuss them in brief:

Step 1: Login or Create an Online Account

If you want to get started with your trade, log into your broker account. If you have not done this yet, do not worry as registration can be done using an email and other details such as phone number.

Step 2: Find the IPO Section

Once in your account, find the IPO tab to see initial public offerings. Then, choose one from the ongoing ones.

Step 3: Enter Lot Size and Bid Price

Enter how many stocks you would like to bid at once (lot size). When selecting your bid price, make sure it is appropriate. To increase your chances of getting shares, it’s advisable to bid at a cut-off price or within the higher limits of a price band.

Step 4: Submit Your UPI ID

Here you need to briefly provide your UPI ID in the specified space and press the submit button after that please allow time for approval through the UPI application. For every transaction, this must be completed before anything else.

Step 5: Wait for Mandate Approval

Just wait for a notification about your mandate to appear in the UPI app. During this entire duration, application money will be kept dormant until the last day of the IPO. 

How to Apply for IPO Offline?

If you want to apply for an IPO via offline methods, that’s possible too. To do so you shall simply follow the below given steps:

Step 1: Visit Your Stockbroker or Bank Branch

To initiate the IPO application process, simply head to the closest branch of your stockbroker or bank.

Step 2: Complete the ASBA e-Form

The ASBA e-Form should be filled with the required details. This form can be downloaded from the NSE site.

Step 3: Submit the Cheque

Present a cheque for the amount which you want to invest.

Step 4: Fund Blocking

After an IPO application has been successfully made, the specified amount will be blocked in your account. 

The money will be taken away only if shares are allotted to you. This method can be used for applying IPOs through different banks throughout India.

Conclusion 

While a Demat account is not strictly required to apply for an IPO, it plays a crucial role in simplifying the process of receiving and managing your shares. Moreover, the benefits of having a demat account like streamlined transactions and secure handling of shares, make it an essential tool for investors. Furthermore, you can buy IPOs with confidence by understanding the role of a Demat account in the application process, whether you apply online or offline. Therefore, it is recommended to apply for an IPO through a Demat account to streamline your investments.

FAQs on Demat Account for IPO