How to Apply for an IPO in a Minor’s Name?

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Pleasant minor offering a tablet in her hand

What Is An IPO?

IPOs or Initial Public Offering begins to form when a private company or a firm converts itself to a public name and give away their shares in a new stock issuance. Before the company process the new issuance, the shares of the companies stay with a very limited amount of people. The important people like, the founder, some angel investors and other major investors are the only one’s known to be the shareholders. Making a private company transform into a public one and listing it as an IPO is a very big step for the whole company and it’s employees too.

It only happens when a company is sure if it’s own success and they believe that the public offerings won’t create doubtful changes in the company. Now, the sale of the shares as a public offering allows the company to raise capital and money from the investors in a total corporate structure. SEBI also known as the Securities and Exchange Board Of India is the sole organization responsible for keeping track of the IPOs and it also oversees if the company is eligible enough to transform it’s shared from private into public offerings. It also monitors the investors and brings the whole process into consideration in front of prospective buyers.

Why Are IPOs Important?

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IPOs as we know, are clearly not a new concept. They have been existing since over four centuries now and offers the companies listed a lot if capital. However, an IPO exist in two forms – (i) fixed price (ii) book building. We are now talking about why IPOs are important. IPOs are a very credible way for the companies to make money and hence gets a lot of media attention. Now, these media attention and experts advice are all created mostly by the companies themselves to increase and hype up the shares in the eyes of public.

On the other hand, investors get impressed by the volatile movement that the company makes and hence give them profitable returns and rewards for making their investments. Despite having profitable returns, it is crucial for the investors to know the facts that IPOs also face uptrends and low trends and fluctuations. It depends on the investors about their financial state and their risk tolerance, on how much fluctuations can they suffer and afford to make.

Why Invest In A Minor’s Name?

Starting early with a Minor’s investments skills can be one of the most important responsibility a parent can do for their children. Many parents wants for their children to have a stable financial background, they plan for them to be able to stand in their own and have a good educational background. While other regular investments are not bad financial strategies, IPOs also do list as one of the major financial investment hit among the investors. IPO provides a great amount of opportunity to multiply funds and maximize the rewards that were invested.

Furthermore, we believe that all the equity-linked investments works better when done for long term and hence, a child can stay invested and allotted with the shares until he or she turns the age 18. One of the greatest benefits of starting early is that you can teach your child the importance of saving and how it can be really valuable when it comes to multiplying funds, if the whole investment is done by regularity. Funds that are build up in the name of the minor’s account until they are adults are called upon to be solely theirs without any interference coming from their parents.

How To Apply For An IPO In A Minor’s Name?

The very first step for a minor to have an applicant for the IPO is for them to have a DEMAT account. A DEMAT account should be issued under their own respective names. However, a DEMAT account needs to have a  PAN card as the verification ID and since being minors they can not have access to a PAN card, as they don’t have their own source of stable income, that part of the formality can be done by their parents.

Despite having an access towards a DEMAT account, a minor is not allowed to have a control over trading accounts. And hence, a minor’s DEMAT account should be linked to one of their parents’ or guardian’s trading account in order to give the brokers the access of their accounts. To have an interest towards any if the IPO this DEMAT account should be linked to the bank account that the minor use and the KYC forms of application should be filled and submitted in the name of the minor and the parents’ name. A public bank allows an investor to have five IPO application under one bank account. Among these five IPOs, it is allowed for a minor to have one IPO under his/ her name.

And when the minors are finally turned age 15, they can apply for their own IPO with the help of their parents’ ID and account. Once, the minors have turned towards their adulthood, they can easily close their previous account and open a new one that would solely be under their name with all the trading accounts and bank accounts and PAN card linked. Also, if the minors don’t want to close their previous account they can turn the same account into theirs by just submitting all of their official documents and not of their parents’.

Takeaway

IPOs are great for investment, but always be aware of the facts that surrounds the companies. Reading the red herring prospectus of the companies should be primary step before indulging in any company. Try to know why a company decides to make its shares public from private. Sometimes a company does so to get rid of their own debts, which means that your money is not used by the company to build up their profits but to pay off their debts. Thus, it’s true that IPOs do provide a transparency but it will not be a harm if you get to know things better.

Also read:

List of Best Stock Brokerage Companies

Best Retirement Investment Plans In India

The Shadow Economy

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