Mainboard IPO

What is a Mainboard IPO?

A mainboard IPO, or Initial Public Offering, refers to the process through which a company offers its shares to the public for the first time on the main stock exchange.

This allows the company to raise capital from public investors. Companies listed on the mainboard are usually larger and more established than those on platforms like the SME exchange. Mainboard IPOs involve a rigorous process, including meeting stringent eligibility criteria set by the stock exchanges and regulatory bodies like the Securities and Exchange Board of India (SEBI).

This ensures that only companies with robust financials and good governance practices can access public funds through the stock market.

How to Invest in Mainboard IPOs?

Investing in a mainboard IPO involves several steps. Here are the key highlights:

1. Open a Demat and Trading Account: To invest in an IPO, you must open a new demat account if you don’t have one. It can be opened with a registered stockbroker.
2. Research Upcoming IPOs: Stay updated on upcoming mainboard IPOs by checking the announcements on stock exchange websites, financial news portals, and your stockbroker’s platform. Understanding the business model, financial health, and growth prospects of the company is crucial.
3. Check Eligibility: Ensure you meet the eligibility criteria for the IPO, including KYC (Know Your Customer) compliance. This usually involves providing identification documents, proof of address, and PAN details.
4. Apply for IPO: Once you have identified the IPO you want to invest in, you can apply through the Application Supported by Blocked Amount (ASBA) process via your bank or broker’s platform. If applicable, fill in the required details, such as the number of shares and the bid price.
5. Block Funds: The ASBA process blocks the application amount in your bank account until the shares are allotted. This ensures that funds are available when required without transferring them immediately.
6. Allocation and Allotment: After the IPO subscription period closes, shares are allotted based on demand. If the IPO is oversubscribed, shares may be allotted pro-rata or through a lottery system.
7. Receive Shares: If you are allotted shares, they will be credited to your demat account. If not, the blocked funds will be returned to your bank account.

Who Can Invest in a Mainboard IPO?

Investing in a mainboard IPO is open to various categories of investors. Here are the key highlights:

1. Retail Investors: Individuals investing up to Rs. 2 lakhs in an IPO are classified as retail investors. Companies typically reserve a significant portion of shares (at least 35%) for this category.
2. Qualified Institutional Buyers (QIBs): They include financial institutions such as asset management companies (AMCs), insurance companies, and foreign portfolio investors. They are crucial for an IPO's success because they bring credibility and stability.
3. Non-Institutional Investors (NIIs): These investors apply for shares worth more than Rs. 2 lakhs. They include high-net-worth individuals (HNIs) and other entities not qualifying as QIBs.
4. Anchor Investors: A subset of QIBs, anchor investors are allotted shares before the IPO opens to the public. They provide a base of committed investment, which can instil confidence among other investors.