Posted on 7th Jun 2018
There are lots of investors who only want to invest in IPOs as a safe investment and want to take the listing gain. Such investors need demat and trading account with a broker house.
Usually asked questions in this category are:
To answer such questions we have built new category called "Best Broker for IPO investment”. Let’s begin with answering few commonly asked questions:
To Invest in IPO, you need Trading and Demat account with Broker, Bank Account with Net Banking (For ASBA Application).
Yes, you can do this, you can open a 3-in-1 account (which is Bank Account + Trading Account + Demat Account) with ICICI Bank (ICICI Direct), HDFC Bank (HDFC Securities), SBI Bank (SBI Securities), Axis Bank (Axis Direct) and so on.
With Banks listed above, you can get direct access to apply in IPO on a single click. You don't have to submit an application via ASBA. These banks are part of Self Certified Syndicate Banks. They are providing you a platform whereon single click you can apply in IPO.
Advantage: This process is quick and easy. You don't have to log in to your bank portal for ASBA.
Disadvantage: Charges are very high compared to other brokers. Usually, retail investor applies or get one application which will be around 14 to 20K price range, selling IPO script with such banks/brokers will take your good amount of profit. ICICI Direct, HDFC Securities, Axis Direct, SBI Securities charge approx .5% brokerage on selling of these scripts in equity delivery trading.
If you don't want to open a 3-in-1 trading account and don't want to pay heavy brokerage, the second option for you is to open a 2-in-1 account with any discount broker. When you open 2-in-1 account you will get trading and demat account. Now using this demat account number, you can apply in any open IPO.
Some banks like SBI, Axis will allow you to register your demat account details one time and allow you to use it for any future application. You can add up to 5 demat account information with these banks. Where banks like ICICI, HDFC will not allow you to save your demat information and each time you apply for IPO, you need to manually enter your demat information.
Note: You can apply through any number of applications providing each application should be unique with different PAN number.
Advantage: while selling your allocated equity shares, you need to pay very minimum brokerage. Some discount brokers are providing free delivery trading. In such case, you will sell your script without any brokerage.
Disadvantage: You need to apply your application via ASBA process.
When you are only an IPO investor, AMC charges will effect your IPO investment cost. If you apply in10 to 30 IPOs in a year,then you need to consider Trading and Demat AMC. Maximum brokers are providing free trading account, but demat AMC can increase your expense for IPO investment. Assume you need to pay Rs 400 as Demat AMC per year and if you have applied in 20 IPOs, in such case, your each IPO investment get 20 Rs extra cost.
In this article, we are assuming you as an investor who invests in 20 IPOs per year and try to find out the best 5 brokers for your IPO Investment.
With Zerodha for the first year you need to pay Rs 600 and after that Rs 300 PA. With reference to our 20 IPO per years calculation, for the first year per IPO expense is 30 + 13.5 =43.5 (Approx) and second-year onward its 15+13.5 =28.5 Rs (Approx).
With Upstox(RKSV) for the first year you need to pay Rs 600 and after that Rs 300 PA. With reference to our 20 IPO per years calculation, for the first-year per IPO expense is 30 + 13.5 =43.5 (Approx) and second-year onward its 15+13.5 =28.5 Rs (Approx).
With 5paisa for the first year you need to pay Rs 650 and after that Rs 400 PA. With reference to our 20 IPO per years calculation, for first-year per IPO expense is 32.5 + 25 + 10 =67.5 (Approx) and second-year onward its 20+25 + 10=55 Rs (Approx).
Prostocks don’t have trading and demat account opening charges. A broker is taking Rs 1000 refundable deposit for the demat account, so you don’t have to pay any AMC with Prostocks. With reference to our 20 IPO, per IPO expense is 0 + 13.5 + 15 =28.5 Rs.
With Fyers you need to pay demat AMC of Rs 400 PA. With reference to our 20 IPO per years calculation, per IPO expense is 20 + 25.5 =45.5 (Approx).
With Samco, you can open your trading and demat account for free, you just need to pay Rs 400 for demat AMC PA. With reference to our 20 IPO per years calculation, per IPO expense is 20 + 10 + 20 =50 Rs (Approx).
On the conclusion note, if you are only IPO investor, opening an account with a discount broker is worth. Zerodha and Upstox are two discount brokers who are charging demat AMC but giving you free delivery trade coming up approx 30 Rs per IPO expense, where Prostocks is not charging any demat AMC also coming approx Rs 30 per IPO expense. Samco is charging demat AMC and equity delivery brokerage, coming approx Rs 50 per IPO expense. 5paisa and Fyers both are charging demat AMC and higher demat transaction charge per ISIN to go above Rs 50 per IPO expense.
Here we have covered complete comparison point by point, which will help you to choose the best broker for your IPO Investment need.
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