7 Mistakes To Avoid While Applying For IPO in Nepal

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In this article, we are going to cover the 7 most important things you have to consider while applying for IPO. These are the most common mistakes that lead your application to rejection in the verification process. Not getting the share is so sad,  but being rejected before the allotment is even more painful.

In every IPO,  many new applicants get rejected in the verification process. So, make sure you do not make these mistakes while you apply for an IPO.



7 Mistakes To Avoid While Applying For IPO in Nepal

1) Use Only One Demat Account

According to the prevailing rule, one person can open up to two Demat accounts. But CDSC strongly recommends using only one Demat for single scrip i.e. for one IPO use only one Demat. Applying from multiple Demat accounts by a single person will lead you to rejection. So, avoid using more than 1 account for applying in IPO.

2) Make Sure You Have Enough Bank Balance

One common reason for IPO rejection is insufficient balance. So, while applying for an IPO, make sure you have more balance than your application unit. For example, if you apply for 10 units, make sure your bank balance is at least 1100. It is because banks deduct the C-ASBA charge per application. In general normal equity shares costs 100 per share. So, Rs. 1000 will be for IPO, and 100 is for the C-ASBA charge. Likewise, if you are applying for 20 units, make sure your balance is at least Rs. 2100.

The balance will be charged by the banks once you apply for IPO until the allotment time. Nepali banks charge minimum of Rs. 10 to maximum of Rs. 100 as C-ASBA charge.


ReadWhat is ASBA and C-ASBA and Its Charges in Nepal


3) Apply For Right Lot Unit

If you are applying for IPO physically from ASBA member bank and financial institution, then one important thing you must consider is making sure that you apply for the right lot. You have to apply for the multiplication of 10. For example 10, 20, 30…. etc.

IPO Application disqualify

4) Make Sure Your CRN is Registered

Client Registration Number (CRN) is a unique identifier number that links Demat number and bank account. Sometimes, CRN number is not registered with the bank account, in this case, your IPO may be rejected. So, you have to make sure that your CRN is properly registered.

CRN

NOTE – CRN number is provided by the respective banks. Some banks use bank A/C number as CRN. 



5) Make Sure BOID is Right

Your IPO may get rejected if you enter the wrong BOID. This does not happen while you are applying through Mero Share. But when you submit the physical form at the bank, you have to write the correct BOID.

BOID is 16 digits number consists of 8 digits DP ID + 8 digits Client ID. BOID is your Demat number.

BOID
Beneficiary Owner Identification Number

NOTE:  DPID = Depository Participant ID 

6) Recognize The Type of IPO

Many people do not know the difference between Ordinary Shares, Debenture, and Mutual Fund. All ordinary shares, debenture, and mutual funds are issued through IPO so new investors randomly apply for debenture and mutual funds without knowing them. So, you have to be careful whether it is an ordinary share or other instruments.

ASBA Mero Share


ReadWhat is Debenture? Is Debenture Good?  How to Invest in Debenture in Nepal? 


7) Check the IPO Grading

Before applying for any IPO blindly, you have to check the IPO grading of that company. Rating companies such as ICRA Nepal and Care Ratings Nepal rate the company. This raring will show whether the company is strong enough to meet the financial obligation or not.

ICRA Nepal’s five-point IPO Grading scale is as follows:

  • [ICRANP] IPO Grade 1: Strong fundamentals
  • [ICRANP] IPO Grade 2: Above-average fundamentals
  • [ICRANP] IPO Grade 3: Average fundamentals
  • [ICRANP] IPO Grade 4: Below-average fundamentals
  • [ICRANP] IPO Grade 5: Poor fundamentals

You can check the care rating list here.

Note – Every company must mention their IPO Grading in the offer letter at the time of the IPO Issue. An example of IPO Rating of Sahas Urja Limited is shown below.

Sahas Urja IPO Grating

8) If  You Already Have Share Then Do Not Apply Again

If you have already bought shares in “Local IPO” or “IPO For Employee“, then you can not apply for a general public IPO. Because those who already have shares of the particular company will not be eligible for a second time.

So, if you already own the local or employee share, do not apply again. You can have the option to apply but ultimately your IPO will be rejected.


What Are the Reasons For IPO Rejection in Nepal?

The common reasons for IPO rejection are as follows.

  • Applying from multiple accounts by a single person in a single IPO.
  • Insufficient balance
  • Incorrect entry. of BOID
  • Unregistered CRN
  • Selection of odd-lot unit

7 Mistakes To Avoid While Applying For IPO in Nepal

1) Use Only One Demat Account
2) Make Sure You Have Enough Bank Balance
3) Apply For Right Lot
4) Make Sure Your CRN is Registered
5) Make Sure BOID is Right
6) Recognize The Type of IPO
7) Check the IPO Grading

Watch About IPO in Nepal

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