Don't ignore these 4 things while applying for initial public offerings

#Expert Columns, #IPO - News

The initial public offering is a first-hand opportunity to grab the shares of a company at the first stage when it goes public. The major reason for investing in IPO is to grab the early gains of a high potential firm, the second is to get a big return with a long gestation period, the third one could be to buy cheap and earn big to be rich in less time. These are major reasons, while the reasons are not constant, they may vary from person to person, depending on the investment capacity, the time horizon of holding the investment, and goals of investment.

Whatever may the reason be, we all want that share to be allotted, when we fill the subscription form. But, alas!!!, sometimes, even after trying best, the investor return empty-handed from the IPO market.

Why does it happen?

We ask our broker, I filled the subscription form for these many lots at the best price, then why am I not being allotted the shares. Your broker may give you any answers. But isn’t better to know the reason beforehand, so we don’t make such mistakes next time and be sure of getting the hands on the shares.

1) Erroneous details

The most basic mistake is filling in the wrong details. If you fill the form with incorrect Demat A/c no, bank A/c no. UPI ID and Pan number. You certainly lose your chances of getting shares allotted. Mismatch of name on PAN with Demat is one most common mistake, that negates your chances of getting shares allotted.

So, before you file your application, double-check your form for such mistakes and correct them, in case you have any.

2) One Demat one application

To be in the running of getting the share allotted, one must fill only one application for IPO. In case, an investor tries to fill multiple applications with the same Demat and PAN number, even in that scenario, the application is rejected in the first go itself.

3) Bid Price

Every company issues the IPO with a price band and sometimes a fixed price. One has to make sure that the bidding price must lie within the range of the bid or higher than the range. In the case of a fixed price, the rule stays the same, the price or higher than the price. If your bid is lower than the price range or the fixed price, the bid will then be considered invalid. The investors bidding lower are filtered out and you stand no chance of getting shares allotted.

Let’s say, an XYZ company comes with a public issue of price range between Rs 1000 -Rs 1100, an investor has bid for Rs 1010.

After receiving the application and looking after the bids, the company closes the price at Rs 1080, so anyone bidding below Rs 1080, will not be allotted shares.

So, bid wisely, if you want the shares to reflect in your Demat a/c.

4) Lottery system

What do I say, it’s all luck. Even after following the above two given points religiously, if the IPO has received an oversubscription, the firm goes for a lottery system to allot shares.

Cross your finger and pray that the IPO is not oversubscribed or you have a stroke of brighter luck with the other people in the line.

However, there is a way to increase your chances, by bidding with multiple Demat a/c with different Pan numbers. This strategy of bidding doesn’t give you surety but increases the probability of winning the lottery.

If you have filled your form with due diligence and bid wisely, you will certainly get the shares allotted, if the issue is not oversubscribed and doesn’t go for the lottery for allotment.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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