Indians have growingly inclined towards financial markets in recent years. Their investment patterns, philosophy and attitudes are evolving. The growing number of demat accounts is evidence of this evolution. Moreover, the number of IPOs is also on the rise in the country. However, a part credit for this growth also goes to the various stakeholders of this investment process.
One such stakeholder is a Depository Participant or DP. It is a common term in the stock market, IPO application process and demat account functioning. Understanding the nature of their service can help investors manage their investment process seamlessly. Let’s understand the service of DPs, dematerialised accounts, IPO demat accounts, etc.
What is a depository participant (DP)?
These are entities that establish a crucial link between investors and regulatory bodies like the Securities Exchange Board of India (SEBI). In India, there are two main depositories. The organisations that fulfil the threshold criteria and facilitate the trading process are registered on these depositories. These are known as depository participants.
In India, the total number of depository participants as of December 16, 2024 is as follows:
- National Securities Depository Limited (NSDL) = 297
- Central Depository Services (India) Limited (CDSL) = 614
It plays a crucial role in the regular stock trading and IPO application process. The main function of depository participants is the management of dematerialised accounts. Apart from this, DPs play a crucial role in different services for investors.
Explore more: Depository Participants and Clearing Corporations
Significance of DP
Some of the main services by depository participants are as follows:
- Smoothens the settlement process: The entity is liable to distribute and settle shares finally to the investor’s account after the depository settles the transaction.
- IPO demat account: While applying for the IPO or trading securities in the market, investors need to open a demat account. DPs process this verification and provide a seamless transaction process with the help of Beneficiary Owner (BO) ID.
- Portfolio management: DPs are in charge of the securities while the settlement is processed by the depositories. As this settlement takes 0 to 1 day, the DPs act as a transit point in tracking and collecting them from the investors.
- Regulatory checks: Due to the management of trading accounts and processing transactions, DPs need to constantly manage the regulatory norms. Moreover, during the IPO application process, these entities help manage the compliance and ‘Application Supported by Blocked Amount’ (ASBA) process.
- Share pledging: It is a crucial activity of traders. They get a margin from the market by pledging their shares. Depository Participants are liable for this process.
Dive deeper: NSDL and CDSL: Differences, Features, and Functions Explained
Role of DPs in the IPO application process
An investor needs to open an IPO demat account with a depository participant to invest through an IPO. This demat facility has simplified the online application process. DPs play a crucial role in linking the investors bank account for the ASBA process, where the amount is frozen in the investor’s bank account before the final allotment status. After this allotment, DPs process the shares received by investors in their IPO demat account. For further transactions, DPs also allot the BO ID to the investors.
Where can we find DP names in IPO applications?
During the allotment of shares, the financial instruments are first transferred into the DP account for IPO, and then these shares are transferred by DPs to the owners. Investors should know their depository participant details. It can be obtained from the following sources:
- Stockbroker / Brokerage firm’s website
When investors open a demat account for IPO or regular investment/trading, one can obtain its details from the stockbroker website or mobile application. One can log in with their email to get the DP name and ID no.
- Demat account statement issued by the DP
During opening the account, post successful transactions, or at the month-end, the DPs issue the account statement indicating the holdings, investment value, allocation, balance, etc. Here, investors can also find the DP name.
- Depository letter or email
When a new demat account is opened, the depository sends an email or letter which mentions all the details regarding the depository and DP.
The DP name or ID can be obtained after the clear activation and linking with the respective bank account. Investors should also check the depository account number for better clarification.
Bottomline
The depositories are crucial stakeholders of the overall trading and investment transactions. Organisations registered as depository participants process the settlement of stocks, opening IPO demat account, compliance, verification and other facilities. Investors can find the DP name on their brokerage firm’s website or application welcome letter and demat account statements.
Also, read Depository Charges: Levied Charges You Pay for Trading Through a Broker
FAQs
- What is DP ID?
It is the identification code of depository participants. In India, it will differ for entities registered on CDSL and on NSDL. It helps establish the link for settlement of transactions and in the process of IPO application.
- Where can I find the DP name in the IPO application process?
There are nearly 921 depository participants in India, and knowing the respective DP’s name is crucial for investors. It can be traced on the stockbroker’s website or mobile application, frequent demat account statements, depository letters or emails, etc.
- What is the role of depository participants in an IPO?
From the opening of demat accounts to the final allotment of IPO shares, DPs play a crucial role. DP’s manage the demat account for IPO, and its verification. Further, it helps in applying for the IPO through the ASBA facility. Finally, if an investor receives the allotment it is processed by the DPs.
- What is a demat account?
For all financial market transactions, investors need an account linked with their Permanent Account Number (PAN) card and bank account. This account in digitalised form is known as a demat account. It helps investors operate in different financial markets or with different investment products.
- Who is the registered owner of securities?
Registered owners are the ones dealing directly with the companies. In India, depositories are the registered owners. They later transfer the purchased instruments to the investor’s account, which is known as the beneficial owner.
