IPO Subscription Through UPI Apps using UPI ID

When a new company wants to garner some fund, it issues the Initial Public Offer (IPO). A person who invests in the IPO becomes a shareholder of the company. Most of the investors invest in IPO by the money blocking system i.e. ASBA.

But now you can invest in IPO through the UPI Payment system. SEBI (Securities and Exchange Board of India), the statutory regulatory body, has given permission for UPI as a payment option.

So, investment in IPO through UPI is not only easy but it takes half time than the old method. In this article, I will tell you the method of IPO subscription through UPI.

What is IPO?

As I told you, IPO is the way to sell shareholding of a company. Public invests in a company through the IPO (Initial Public Offering). After the IPO public gets the shares of a company by paying the required amount.

Further public can trade shares among it, the company rarely bothers about it. The price of shares also decided by the market. The company don’t have any say on it.

Why an IPO?

A company comes with the IPO to get more money from the public. There are some other reasons as well.

• A private company wants to be a public company
• To grow up the business
• To entertain some other expenses
• When the Government wants to disinvestment in a government company

Before IPO Subscription

So, if you want to bid in an IPO of a company, you have to follow a process. But before it, you have to complete the basics.

Firstly, you have to choose the IPO in which you want to invest. You can search by the prospectus of the company or you can go through the SEBI’s website. Here you can easily get an idea of the company’s business plan. It helps you to choose an IPO.

Secondly, you should arrange the funds. You can use your savings. Or you can go for a loan. Many institutions give loan for this purpose. But you should compare the interest rate of the loan and terms & conditions as well.

Normal Process of IPO Subscription

After arranging the funds go for the next stage. From here the normal process of IPO subscription starts. For the subscription in IPO, there are two methods- Offline and Online. Let us see both the methods-

Offline Method

1. Through the offline method, you have to fill the application form available to the broker. In the form, you have to give some details with your bank details as well.
2. Then you have to submit it to broker.
3. The broker will verify it with the bank.
4. Then you have to pay the price of booked shares through the bank draft or cheque.
5. After some more process, you will get the necessary documents of your booked shares.
6. In the offline method, there is no need to open a Demat account. But you must have a bank account.

Online Method

Online Method is quite simple and time saver compare to offline method. Let us see the process-

Demat Account.

The first requirement is a Demat account. It is necessary for the online subscription of IPO. It is an electronic method to store your shares, stocks and financial securities. So before start trading, you must have a Demat account. Generally, investors open a Demat cum Trading account.

Application process

This is the second step. You have to apply for IPO through the trading account or bank account. Some banks give the facility of Trading, Demat and Bank account, altogether. So you have to Login to the trading interface of the broker.

Bidding

Now go for a bid. You have to apply for the shares in a lot size manner. Lot is a bundle of numbers of shares decided by the company. For example, suppose, there are 40 shares in a lot. And if you apply for two lots, it means you are applying for 80 shares.

There is a bid price too. Generally, the company sets a price band. You have to bid between this range. The upper limit is cap price and the lowest is floor price.

ASBA

Now, you have to block the bid money in your bank account as well. It happens through the Application Supported by the Block Amount (ASBA) method. In this method, banks block the bid money in your account to pay directly to the company. Thus there is no need for payment through the demand draft or cheque.

Allotment

Now the company go for allotment of IPO. There are three chances of allotment. You may get full allotment or partial allotment or nil allotment. These conditions arise due to over subscription of IPO. Whatever is the condition, you get a confirmation message of allotment within 6 working days after the closure of the issue.

Payment and Unblock the amount

The amount of the allotted shares is automatically deducted from your account. If there is a partial allotment, the rest amount will be released.

Once the allotment is completed, the shares are credited in your Demat account. Now you have to wait only for the listing of the shares in the stock exchange. It takes approximately 7 days. After then, you are eligible to sell the shares.

Per Day Limit of UPI Apps – Google Pay, Phonepe, Paytm and SBI Pay

How UPI is Used in IPO Subscription

Both the above methods of IPO subscription takes much time. But the UPI system takes only 3 days. Moreover, It does not require the blocking of amount in your account.

As you know Unified Payment Interface (UPI) is a quick and easy mobile payment system. It is developed by NPCI (National Payment Corporation of India).

Now, SEBI allows the investors to make payment for the IPO through their UPI ID. After bidding for the IPO, you receive a request to block fund in your UPI App. Then through the My Mandate feature of UPI app, you can block the bid amount..

It is just like the ASBA process. In other words, we can say this process as ‘IPO ASBA using BHIM UPI’. Because of the UPI Mandate, the money would be deducted from your account if the Shares are allotted to you. If there is no allotment, there would not be any deduction from your account.

Useful Post – How To Find UPI ID in Amazon Pay

How to Apply for IPO Through the UPI

Now we see, how you can use your UPI app to apply for the IPO. Firstly, you have to download BHIM UPI App or any other UPI enabled app in your mobile. Moreover, you can download your bank’s UPI enabled app as well. Now make a UPI ID. The process of downloading the app and making UPI ID is the same as in other uses.

Let us see the further process-

Step1 – Fill the Application

In the Online method of IPO application, you have to visit the portal of your share broker. In the IPO section you choose the IPO and fill the price you want to pay. Now in the payment method you would see the option of UPI. Select that option.

Step 2– Enter UPI ID

As you select the option of UPI payment, you have to enter the UPI ID. If you have already installed an UPI app, you must have the UPI ID. If you don’t know your UPI ID, you can get it from your UPI app.

Recommended – How to find out UPI ID in Phonepe, Paytm and Google Pay

Step 3- Approve Mandate Request

As you submit your UPI ID, the online system would send a request to your UPI App. The UPI system also send you an SMS to notify you about the Mandate request. So Open the UPI app.

Note You have to open the app from to which UPI ID belongs. Different UPI apps have different UPI ID.

As you open the UPI app, you see a request to approve the mandate of IPO subscription. Approve this request by entering your UPI PIN. This PIN is used for the authentication of UPI Payment.

Step 4– Check SMS

When the bidding is done, you will receive an SMS from the Stock Exchange in your mobile as well. This SMS is related to successful bidding.

Step 5– Check IPO Mandate

Now check and verify the details of IPO subscriptions in your UPI app. You can see this through the Pending option of My Mandate tab.

Because of the UPI Mandate, the money will be blocked in your account and you earn bank interest as before.

Note:- There is a facility to cancel or modify the bid after blocking. But you can not do it yourself. You have to contact your broker.

Step 6– Wait For Listing

Now you have to wait upto listing date. The day before listing, the IPO registrar allots shares to the subscribers.

As per the mandate, the money would be deducted from your account for the allotted shares. If the allotment is less than the applied shares, the deduction would be also less.

If you don’t get any shares in the IPO, there would not be any deduction from your account.

The allotted shares are credited in your Demat account. Now, wait for the listing of shares in the stock exchange. After the listing you can sell your shares.

Benefits of UPI Payment

Is not it the easiest way to invest in an IPO? You might feel the benefits of UPI payment in the IPO process-

• It saves your time.
• The easiest method to pay for the IPO
• Activity through the mobile
• Fewer chances of manual faults
• Reduces the processing cost
• Safe and speedy method.
• Reduces manpower and broker cost
• Reduces the bank’s workload as well.