With the recent surge in Initial Public Offerings (IPOs) in India, more investors are looking to capitalise on this opportunity. Let us discuss some effective tips to help investors in India increase their chances of IPO allotment and make the most of this investment opportunity. These tips are based on market research and expert opinions and can be applied by individual and institutional investors.
So, let’s dive in and explore how one can enhance their chances of getting allotted shares in an IPO in India.
Apply for a Single Lot
There is no advantage in applying for more than a single lot for IPO allotment. Applying for a single lot can potentially enhance your likelihood of securing an allocation. Note that this approach may vary in cases where the IPO is undersubscribed or if the IPO size is substantial, allowing for multiple lot applications.
In such instances, it is advisable to carefully consider the IPO size and align your application accordingly, opting for a single lot if the IPO size is relatively small.
Utilise Multiple Demat Accounts
Applying for IPOs in different Demat accounts can enhance the probability of getting allotted shares. However, a crucial factor must be considered: the accounts must have a different PAN number from the one you are applying with.
This approach allows you to spread your applications across various accounts, increasing your chances of securing an allocation. While this strategy can be helpful, it follows all legal and regulatory requirements and ensures compliance with applicable guidelines for each Demat account used.
Avoid Big Applications
SEBI’s allotment process treats all retail applications below equally. For oversubscribed IPOs, making a big application may not be beneficial. Instead, it is recommended that you opt for minimum bids using multiple accounts.
This strategy increases the likelihood of getting an allotment. It enables you to invest any spare funds in multiple IPOs simultaneously. By diversifying your application size and utilising multiple accounts, you can enhance your opportunities for IPO allotment and maximise your returns in the new IPO and upcoming IPO market.
Bid at Cut off Price/Higher Price Band
When investors participate in an IPO, they often encounter confusion between the bid price and the cut-off price. The cut-off price refers to the investor’s willingness to pay whatever price the company determines at the conclusion of the book-building process.
By selecting the cut-off price, investors agree to bid at the highest price band, which enhances their chances of securing shares in the IPO. If the final price is lower than the bid, any excess amount is refunded to the investor.
Understanding the distinction between the bid price and the cut-off price is essential for navigating the IPO market and increasing one’s chances of participating in a new or upcoming IPO.
Avoid Last Moment Rush
Avoiding a last-moment rush while applying for an IPO can increase your chances of getting an allotment due to a more balanced and systematic approach. When you apply early, your application is processed smoothly without the risk of technical glitches or network congestion, which are common during the final hours. This ensures that your bid is timely and accurately recorded, reducing the chances of errors that might disqualify your application.
Additionally, early applicants often benefit from a thorough review of their applications. This allows for any necessary corrections or adjustments before the deadline, ensuring compliance with all IPO requirements.
Purchase Parent Company Shares
This tactic allows you to secure a stake in the parent company at a lower cost, with the possibility of benefiting from any potential gains following the IPO. By identifying and investing in the parent company’s shares, which can be as minimal as a single share, you position yourself for potential growth and increased opportunities in the new IPO or upcoming IPO.
Conduct thorough research and analysis before making investment decisions, ensuring alignment with your financial goals and risk tolerance.
Avoid Technical Rejections in IPO Applications
Attention to detail is crucial when applying for an Initial Public Offering (IPO). Even minor mistakes in the application form can lead to technical rejections, which can be frustrating and prevent participation.
Common errors that often result in application denials include discrepancies in personal information, such as mismatches in the applicant’s name as registered and as provided in the form. Similarly, inaccuracies in bank account details, including mismatched signatures or incorrect account numbers, are frequent issues.
Other typical errors that could lead to a rejection include spelling mistakes across various sections of the application or incorrect or incomplete filling out of required fields. So, to avoid these pitfalls, double-check all entered information for accuracy and completeness before submitting the form.
Conclusion
The IPO allotment process in India can be unpredictable and competitive. However, following these tips and doing thorough research can increase your chances of securing an allotment.
Remember that IPO investing comes with risks, and it is important to consider all factors carefully before making investment decisions. With patience and diligence, you can benefit from IPOs’ opportunities in the Indian market.
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