All There is to Know About IPO Investment

Post-pandemic, investing has become a popular source of income, especially for millennials. Investors today have the opportunity to invest in high-quality private companies to generate returns. This process is known as an Initial Public Offering (IPO) from which both investors and companies benefit.

Investment plans

Generate wealths Earn 1 Cr^# in maturity with Zero LTCG tax^¶
Double tax savings^ On premiums (under 80C) and on maturity (under 10(10D)
Compare & Choose 30+ Plans and 150+ Fund options

We are rated⁺⁺

13.2 Crore

Registered Consumer

Insurance Partners

6.29 Crore

Policies Sold

Top Performing Plans With High Returns

Your Name

+91

Mobile Number

Your personal information is secure with us

By clicking on ''View Plans'' you, agreed to our Privacy Policy and Terms of use

Get Updates on WhatsApp

This article explores multiple aspects of an IPO investment in detail.

IPO Investment: What Is It?

In an IPO or Initial Public Offering, a private company offers its shares to the public for the first time. A private company's shareholders may include its angel investors or venture capitalists (VCs). Once the IPO goes live, the general public can also become a shareholder through a share purchase.

Alternatively, we can say that promoters sell their shares to the public. An IPO requires compliance with the regulations of the Securities Exchange Board of India (SEBI). Companies hire credible underwriters to supervise the entire process from documentation to issuance.

Why Invest in IPOs?

Today, there are many IPOs lined up in the market. But why is it so popular? Besides raising capital, it can also increase companies' visibility that furthers the contribution to their valuation. Early investors can enjoy high returns on exit due to the liquidity. Also, companies do not need to borrow to finance the operations that save them the interest costs.

Now, let us talk about the benefits of IPO investment for investors.

First mover advantage

The companies that launch an IPO are typically startups or growing businesses. These are the companies with high potential growth that need to raise funds for expansion. By investing in these rapidly growing companies before they grow, investors benefit from the first-mover advantage.
Affordable investment

With an IPO, companies are seeking growth and expansion. Hence, the IPO price is usually at a discounted price. In the future, this could result in a rise in the share price of the company. Thus, the IPO market allows investors to invest in such companies at an affordable price at the start of their growth.
Long-term goals

As an investor's life progresses, their financial goals change. From buying a house to sending children to college, to planning for retirement. IPO investments can help with these long-term savings goals. Through IPOs, investors are mainly investing in equity instruments and can reap better returns.
Transparency

To launch an IPO, a company must comply with SEBI regulations. In addition, SEBI has imposed penalties on companies that do not comply with these terms. Thus, the entire process of issuing shares as well as documents are transparent. This builds investor trust. Furthermore, it is beneficial for the company to gain more clients.

Investing in IPOs: Things to Consider

To distinguish between a good and a bad IPO investment, proper research and analysis are crucial. Before discussing how to invest in IPO, there are some things that every investor must analyze:

Credibility and track record of management

Promoters and top management are the ones who run a company and decide its goals. The market reputation of the promoters of the company represents the fairness of its management, so it is vital to evaluate it. To understand the company's working culture, investors can also find out how long the top management has been with the company.
Past performance of the company

Evaluate the financial health of the business. Analyzing the profitability metrics will be able to reveal how the company has performed in the past. It will show if the company is on track and favorable for investment. To gain a better insight, the financial accounts can also be put in comparison with its market peers.
Risk factors

Risks are inherent in every investment. A successful investor assesses both returns, and risk in an investment. Investing in an IPO requires careful consideration of a company's litigation history and liability burden. Debts could affect the company's ability to operate.
Purpose of IPO

Investors must understand the purpose of an IPO launch by the company. This can be done by reading the draft red herring prospectus of the company. The prospectus provides details on how the company plans to use the money raised, and the risks involved. By doing so, it outlines its plans. If the company does not intend to expand or grow, it may not be the ideal option.

How to Invest in IPOs?

You can use the following methods to invest in an IPO.

Each investor must ask himself three questions before investing in an IPO:
- What amount are you interested in investing in the IPO?
- Is it possible for you to invest the necessary funds?
- What is your risk appetite? Are you willing to accept a certain level of risk?
- What is the purpose of investing in an IPO? In other words, what are the financial objectives?
To invest in an IPO, investors will need the following accounts:
- Demat Account - This is a dematerialized or electronic account where shares are stored. It is a must that every investor has one.
- Trading account - Investors who wish to invest online in an IPO must have a trading account. This will allow them to trade in shares according to their preferences.
- Bank account -An IPO application requires a bank account. If the IPO application is accepted, the payment will be debited from the bank account.
Now, investors have the option to apply for an IPO through two routes:
- Via ASBA facility provided by the bank
- Via UPI
ASBA facility
- ASBA route requires investors to log into their net banking account.
- In the request tab, they need to click on the IPOs option and apply for the one under the list of IPOs.
- Investors must submit information regarding the number of shares and the bid price. Since it’s a bank account, personal details like name, PAN will already be prefilled.
- After investors accept the terms and conditions and confirm the transaction, the amount will be blocked from their account and debited if their IPO application is accepted; otherwise, it will be released.
UPI facility
- Log into a trading account.
- Choose the IPO to invest in.
- Submit the number of shares and the bid price of shares.
- Fill in the required personal information, including the UPI ID.
- Complete the IPO form and accept the terms and conditions. Amounts will be blocked from their accounts and debited if the IPO application is accepted. If not, the funds are released.

Understanding with Example

Let us understand the process further through an example.

You have an HDFC net banking account and wish to invest in an IPO like Aditya Birla Sun Life AMC Ltd. You can either visit their nearest branch or apply online. In this case, we will talk about applying through the online ASBA application process.

You will then follow these steps:

Log in to your HDFC net banking account. Choose the "IPO application" option from the bottom left menu. Only resident individuals have access to this option.
After being directed to the IPO online system, you can select your IPO, bid price, and the number of shares.
The hold will be marked on the total amount that will be the highest bid price in your account. The money will remain blocked until the allotment is completed.
You should ensure that you have sufficient available funds equivalent to the IPO application amount. In case of inadequate funds, the application will be rejected.
If you are allotted shares, then this amount will be deducted from the account. If any information furnished is incorrect, the bid will be rejected. Neither the bank nor the company will be responsible for any losses.

Requirements for IPO Investment Application

Valid PAN number
Demat account details
Personal identification documents like Aadhar
Savings account with bank through which IPO application is being made.
UPI ID if applying through the UPI

Final Thoughts

By now, we hope you have a fair idea about how an IPO can turn into a smart investment IPO with due diligence and research. Consider the above factors when deciding if a particular IPO is worthwhile. Investors must ensure they fill out all the required information appropriately to avoid rejection of their IPO investment application. For any assistance, you can always consult a financial advisor.

FAQ's

Q1: Is it worthwhile for beginners to invest in IPOs?

Ans: An IPO investment offers investors a good rate of return over a short period. Additionally, since these are high-quality companies and SEBI-regulated, they are suitable for beginners.
Q2: How can I check if the allotment has been made or not?

Ans: The allotment can be checked on the registrars or NSE/BSE websites. You will need your PAN, client ID, and bid application number.
Q3: Why do IPOs reject allotments?
Ans: The reasons for rejection may include the following:
- Invalid bid
- Invalid PAN
- Invalid Demat account
- Multiple applications from the same name
- Incorrect information

Invest More Get More!

You Get

₹1 Crores*

You Invest

₹10K/month

You Get

₹80 Lakhs*

You Invest

₹8K/month

You Get

₹50 Lakhs*

You Invest

₹5K/month

Calculators

Show More Calculator

Investment Calculator

One time
Monthly

Amount I wish to invest ₹

Invest for (Years)

Stay invested for (Years)

Expected rate of return (in %) / Year

Sensex has given 10% return from 2010 - 2020

You invest

You get

View plans

Investment plans articles

Explore the popular searches and stay informed

˜The insurers/plans mentioned are arranged in order of highest to lowest first year premium (sum of individual single premium and individual non-single premium) offered by Policybazaar’s insurer partners offering life insurance investment plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in

Past 10 Years' annualised returns as on 01-03-2026

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).