Investment in an IPO can deliver attractive and solid returns. If investors think that all measures are favourable, they choose to subscribe. Sometimes, due to high demand, the chances of getting an allocation to get reduced. As a result, a question pops up in my mind, “Can I apply for IPO from two Demat accounts?” This question is quite common.
Therefore, this article will focus on answering this question. Apart from this, readers will get to know other important aspects of IPO.
Initial Public Offering – What Is It?
Before answering the question, can I apply for IPO from two Demat accounts, it is important to understand what an IPO is.
The capital market is divided into 2 markets: Primary Market and Secondary Market. The capital market represents 2 interdependent segments. First, new issuers (primary market) and second, stock (secondary) market.
While the primary market is for raising fresh capital from investors through IPOs or rights issues, the secondary market helps promote growth of the primary market and capital formation.
This is because primary market investors are assured of a continuous market where they can easily sell their investment holdings. As explained, IPO is the selling of securities to the public in the primary market.
IPO is regarded as the largest source of funds with long or indefinite maturity. This is also an important step in business growth as it offers access to funds through the public capital market.
In terms of the economy, when a large number of IPOs are issued, it exhibits that the stock and economy are in good shape.
Why Do Investors Invest In IPOs?
History has shown that there are several IPOs where investors have seen strong listing gains.
IPOs look appealing to several investors as they believe that prices which are offered in an IPO are quite low, and if the company has strong growth potential, healthy returns can be expected.
This is principally expected if the company whose IPO is being offered is established and has a positive track record.
1. Listing Gains
One of the benefits of subscribing to an IPO is gain on a listing day. Companies tend to get their stock valued and mention the offer price in the prospectus. An investor is allowed to apply for a particular number of shares at a specific price (usually at the higher end of the price range).
If the share price on a listing day trades higher than the price which the investor paid at the time of applying for IPO, he will be able to see listing gains.
2. Early Entry
By making investments in an IPO, an investor can become a part owner from its basic level. Therefore, an investor gets an opportunity to become a shareholder at a very initial stage.
If the company has high growth potential, an IPO can help you fetch solid gains in a short time period. In the long run, these early investments can form the base for wealth creation.
3. Price Transparency
Being an early investor in an IPO gives access to the price which is mentioned in the prospectus. This will change in the post-IPO scenario. Once the stock is listed, the share price will depend on changing market rates and the best price that the stockbroker can provide.
These are a few benefits that investors can get while making investments in IPOs. Because of such advantages, investors try every possible way to get the allocation. But can I apply for IPO from two Demat accounts?
Applying For IPO
Since a number of stocks are not in alignment with demand, there are several investors who are not able to get allotments. As a result, investors try to apply for an IPO through multiple Demat accounts.
This gives rise to the question, “Can I apply for IPO from two Demat accounts?” If both Demat accounts are in your name, these accounts will have a single PAN.
As a result, the answer is no. If you do so, there is a possibility of both applications being rejected. This leaves your chances to get an IPO allotment at zero.
Therefore, you cannot apply twice from the same Demat account. This will make you liable for a violation of SEBI’s terms and conditions. Thus, your application can become void.
An alternative for this can be another way. You can try to apply using the Demat accounts of your family members. With their permission, you can submit their application as those members will have a different PAN.
This will make you eligible for increased chances of allotment.
We hope the question, “can I apply for IPO from two Demat accounts?”, has now been answered. More often than not, companies having solid financials are the ones who get oversubscribed.
This is because investors believe that such companies will be in a better position to face economic difficulties. Such companies tend to perform in the long run and are ideal for making investments at an early stage.
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