How to invest in IPO without Demat Account?

IPOs are a popular way for companies to expand their operations and attract investors. However, IPOs can be challenging for investors without a Demat account, which is required for all investors to invest in or trade stocks. Demat accounts, formed with a depository participant, hold share certificates in electronic or dematerialized form. This makes it easier to purchase and sell stocks and other assets, making it essential for all stock market investors. A strong track record and many takers can make it difficult for prospective investors to secure a piece of the pie. Let’s understand how to invest in an IPO without a Demat account.

Understanding the concept of Demat Account

When a private company enters the growth phase, it requires capital for development and expansion, or current investors to monetize their interests. As a result, firms issue an Initial Public Offering (IPO) to the investing public to obtain capital. Following the IPO launch and the first involvement from interested investors, the company's shares are listed on the secondary market, also known as the stock exchange, and may be purchased and sold. 

Investing in an IPO may be profitable if the firm has competent management, growth potential, a reasonable IPO price, and strong financials. This is why some IPOs are highly sought after by investors.

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How to invest in IPO without Demat Account?

Many beginner traders ask, how to invest in IPO without Demat account? The answer is yes you can. Although you should have your Demat and trading accounts in place, you may still file for an IPO without them. The strategy for investing in an IPO without a Demat account is rather brilliant. This is how it's done—

1. Contact a broker to open a Demat account.
2. Submit the appropriate papers, including PAN information, photos, proof of address, and an opening fee.
3. Get a DP ID from your broker right away.
4. Apply for the IPO using this ID, but omit the 'beneficiary account number' portion of the application.
5. Once you apply, the amount of money for the number of shares you requested will be banned in your account via the Application Supported by Banned Amount (ASBA) method. The SEBI has made ASBA essential for all IPO applications. The sum necessary for the application is frozen until the shares are allotted.
6. The registrar will notify you of the omission of the beneficiary account number throughout the allotment process. However, at this point, you will have obtained your actual beneficiary account number.
7. You can contact the registrar to correct the omission, following which the shares will be reimbursed to your account.

IPO application process with Demat account 

1. Log in to your trading platform and choose the required issue (company) from the Current IPO section.
2. Enter the number of lots and price you wish to apply for.
3. Enter your UPI ID and click Submit. With this, your bid will be sent to the exchange.
4. You will be notified to ban funds in your UPI app. Approve the block request.
5. The appropriate amount will be frozen in your bank account after successful approval.
6. The blocked amount is withdrawn from your bank account and the shares are deposited to your Demat account upon allocation. Your bank will unlock any additional funds equal to the number of shares applied but not allotted.

How does IPO Work? 

Technically, an IPO is when a company sells a portion or all of its equity (in the form of shares) to public investors for the first time to raise funds. The corporation determines how many shares to release to the market. Investment banks work closely with the firm and analyze its financials to establish the share price band, launch date, allotment date, and other important factors. SEBI monitors the whole IPO process to verify that everything is in line. SEBI authorizes the Draft Red Herring Prospectus (DRHP), which comprises all of the company's financials, including the balance sheet, net proceeds, earnings statement, legal opinions, underwriting document, and so on.

Conclusion

While a Demat account allows you to keep all your securities electronically, a trading account facilitates the buying and selling of shares. Brokers often consolidate these accounts, with some DPs offering 3-in-1 accounts, combining Demat, trading, and banking services. Notably, some platforms enable invest in IPO without Demat account. Open your Demat and trading account with the reliable stock market app now to begin buying and selling shares and investing in an IPO.