Chittorgarh logo
Contact Us  
IPO's in India
  IPO Dashboard
  Current IPO List
  IPO Calendar
  Performance Tracker
  Grey Market Premiums
  IPO Ratings
  IPO Reviews
  IPO Message Board
  Basis of Allotment
  IPO Alerts
  IPO Prospectus Docs
  IPO Reports (Historic)
  IPO News Live
  IPO Alert Blog
Current IPOs-BSE, NSE
More IPO's...
Current SME IPO's
More SME IPO's...
Subscribe with us...
Free Email Alerts  

India Stock Market
  Stock Message Board
  Stock Market Home
  NSE Bulk Deals
  NSE Circuit Filters
  Corporate Announcements
  Market Holidays
  Stock Gadgets
Bonds & NCDs
  Current Bonds / NCDs
  Discuss Bonds
Stock Trading Brokers
  Broker Comparison
  Stock Broker Articles
  Discount Brokers
  Zerodha (Trade at Rs 20)
  Trade Smart Online TSO
  Traditional Brokers
  ICICI Direct
  Kotak Securities
  SBI Securities
  HDFC Securities
  Reliance Securities
  Bajaj Capital
  Standard Chartered
  Geojit BNP Paribas
  IDBI Capital
  Motilal Oswal
  Angel Broking
  Indiabulls Securities (ISL)
  India Infoline (IIFL)
  Religare Broking

IPO FAQs » IPO Funding FAQ's

Ask your question

IPO Frequently Asked Question(s) provide answers to commonly asked questions about IPO’s in Indian Stock Market. This IPO FAQ Category helps IPO investors for their better understanding of IPO’s and to resolve their quires.

We welcome you for your comments to improve answers of the questions asked in this category. Please feel free to post comments. We appreciate your participation in building this page simple, easy to understand, relevant and correct information provider to the Indian Investor Community.

If you don't find answer of your question, do not hesitate to ask our expert team by clicking 'Ask your question' link on the top of this page.

<< Check out all FAQ's about IPO's


Explain IPO Funding in India?

IPO Funding is a short term loan which banks and other financial institutions provide to investors to fund their Initial Public Offer (IPO) application. An investor who would like to apply for equity shares in an IPO but do not have enough money can borrow the remaining amount from banks as a loan for 10 to 15 days. The Banks and Non Banking Financial Corporation (NBFC's) generally fund a part of IPO application while remaining is provided by the applicant.

IPO Funding is also known as IPO Financing or a Loan for applying in Public Issues.

The IPO Funding by banks is governed by RBI which allows banks to loan up to Rs 10 Lakhs for IPO Funding. The Loan Amount, Interest Rates and Duration of the loan vary from IPO to IPO.

    0 Comment(s) - Read / Post Comments  


Why should I take loan for applying in an IPO?

When an investor applies in an IPO, the full amount is blocked for around 2 weeks. If the IPO is of a popular company, the issue gets oversubscribed many times and only a small portion of the application is allocated to the investor. The best way to get maximum earnings from these IPO's is by getting the maximum shares allocated which can only be done by applying for more shares.

In this scenario IPO Funding offers an opportunity to investor to leverage its own funds in primary markets and thereby increase the allotment quantum manifold.

In simple words, a retail investor who want to apply for a maximum application amount of Rs 2 Lakhs but do not want block more than Rs 20,000. He can get remaining amount through IPO Funding.

While IPO funding is more popular in 'Non Institutional Investors (NIIs)' category of IPO investors, in recent years many retail investors are using this to fund good IPO's where chances of making money is high.

    0 Comment(s) - Read / Post Comments  


How much I can get in IPO Funding?

As per RBI guidelines, a bank can loan up to Rs 10 Lakhs for applying in IPO. But the loan amount greatly depend on the IPO, the risk involve in the IPO, expected oversubscription, expected listing premium, state of market and many other factors.

    0 Comment(s) - Read / Post Comments  


What is the tenure of IPO Funding?

IPO Funding is short loan which is usually given for around 2 - 3 weeks. The interest on the funding is charged mostly on daily basis.

Note that IPO Financing is done for specific IPO and cannot be used for multiple IPOs.

    0 Comment(s) - Read / Post Comments  


How much interest I have to pay on the loan I take to fund an IPO?

There is no fixed rate of interest. It depends on many factors including the IPO, the risk involve in the IPO, expected oversubscription, expected listing premium, state of market and many other factors.

    0 Comment(s) - Read / Post Comments  


Do I need a guarantor to avail IPO Funding?

No, an investor doesn't need a guarantor to get the IPO Funding.

Note: The person who is taking the loan has to provide a Power of Attorney (PoA) in favor of Bank/NBFC's to operate the applicant demat account. In case of a default, the lender may sell the holding to recover losses.

    0 Comment(s) - Read / Post Comments  


Is there a risk involve in IPO Funding?

Yes, there are risk involves as the investor may have to book significant looses when using IPO Funding.

Following are few scenarios where IPO Funding could be a risky bet:

  1. If IPO doesn't get listed at a high premium on listing day then investor either has to pay to the lender and hold the shares or sell it for loss.
  2. Investor allocated more shares than he expected. In case of positive listing, investor can make good profit but if it is other way then losses are significant.
  3. If IPO shares get longer time to list, investor has to pay the interest on the loan amount. This happens in few IPO's whose listing got delayed by 2 weeks to 8 weeks because of stay orders by SEBI, who governs the IPO Process in India.
  4. If no shares are allocated in IPO because of over subscription or application got rejected, the applicant still has to pay the interest on the loan.
    0 Comment(s) - Read / Post Comments  


More IPO FAQ  List of all IPO Investment related Frequently Asked Questions (FAQ's)

More IPO FAQ  Ask your question


Online Stock Trading ICICIDirect Sharekhan Zerodha Ventura Indiabulls RKSV Trade Smart Online (TSO) Reliance Sec Religare Motilal Oswal
IPO Dashboard Current IPO List IPO Calendar IPO Performance Tracker IPO Grading / Ratings IPO Basis of Allotment IPO FAQ's IPO Alert Blog
Home Page Current NCD's / Bond's in India Stock Market Message Board General Discussion Forums Contact Us Guest Book About Us Sitemap All rights reserved. For questions, comments, suggestions and praise Contact Us today.