While applying for an IPO, the money is blocked by the bank under a Mandate till the allotment status is finalized by the company. If the investor does not receive any allotment of shares in the IPO then the blocked amount is refunded by revoking the mandate by the bank which takes 7-10 days from the last date of the issue of the IPO.
What is an IPO?
An IPO (Initial Public Offer) is a process through which a private company turns public company by selling a part of its Equity share capital to investors or issuing Fresh equity shares. In this process, the company gets listed on the stock exchanges like NSE (National Stock Exchange) & BSE (Bombay Stock Exchange) where the shares can be traded.
Requirements for applying for an IPO
- A valid PAN Number
- A Demat Account
- A Bank Account
- UPI ID or ASBA Facility
Process of application for an IPO-
To apply for an IPO one can log in from their broker’s account and apply for the number of shares wanted. After filling in all the required details one has to make the payment for the IPO through their UPI ID. After making the payment, the amount is blocked in their bank account through a “mandate” that is imposed from the bank.
This Mandate is placed till the allotment process is finalized by the company. Once an investor accepts the mandate, they cannot unblock it till the company instructs the bank to unblock the funds. By this process, the application for the IPO is submitted successfully to the Registrar of the IPO who takes care of the further process on behalf of the company.
When is the money refunded?
The amount blocked for the IPO is unblocked if the investor is not allotted any shares of the IPO. On the other hand, if they get the allotment of the shares then the amount will get debited from their bank account and the shares will be credited to their Demat Account before the listing date.
Generally if one does not receive the allotment in an IPO then the money is unblocked or refunded within 1-3 days after the date of allotment of the shares which is 7 days after the closing of the IPO. So in general it can be said that the amount is refunded in the event of Non-allotment within 7-10 days from the date of the IPO.