Can I apply for IPO without a demat account?
When companies get into the growth phase, they need funds for growth and expansion, or for existing investors to monetise their holdings. So, companies come out with an Initial Public Offer (IPO) for the investing public to raise money from them. After the IPO launch and initial participation from interested investors, the shares of the company are listed on the secondary market, also known as the stock exchange, where they can be bought and sold.
Investing in an IPO can pay off if the company has good management, growth prospects, reasonable IPO price and sound finances. That’s why some IPOs are much sought after by investors.
Why you need a demat account?
IPOs are like buying shares. Since physical share certificates are no longer issued, these shares are registered in your name electronically in demat form.
You can open a demat account at any depository participant (DP), which could be a big bank subsidiary offering stock trading facilities, stockbrokers, or non-banking financial company (NBFC). To open your account, you need to fill an account opening form and submit passport-size photograph and copies of documents to prove your identity and address like Aadhaar card, PAN card, electricity bill, passport etc. Refer to the Official Valid Documents list before you submit your application to open the demat account. You can open the account, both online as well as offline.
Applying for an IPO
You can apply for an IPO online through internet banking or trading account. Once you apply, the IPO amount you have applied for will be blocked in your account through ASBA (application supported by blocked amount). What this means is the required amount will be blocked until share allotment. SEBI has made ASBA mandatory for IPO applications.
Do I need a trading account for IPO?
Well, you don’t really need a trading account for an IPO. However, if you want to sell the shares you have been allotted through an IPO, you will need to have a trading account. So it’s a good idea to have a trading account before you apply for an IPO. After all, you don’t want to hold the shares you have been allotted in perpetuity.
You can open a trading account either with a stockbroking firm. Few banks or broking firms offer what is known as a 3-in-1 account that combines banking, trading and demat facilities. 3-in-1 accounts help streamline your stock market investments under one account, saving you the trouble of opening separate accounts for each facility.
Stockbroking firms too offer demat and trading accounts. Irrespective of where you open your account – whether it is a brokerage firm or a big bank subsidiary offering demat and trading services; you have to deposit a certain amount to cover the cost of buying shares.
So, if you are interested in investing in IPOs and becoming one of the first public investors in a company, it is best not to delay opening your demat account
Disclaimer: The contents herein mentioned are solely for informational purpose and shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.