IPO Investing


Allocations in an IPO


Fixed Price Issues  

In case of Book Built issue

1. In case an issuer company makes an issue of 100% of the net offer to public through voluntary book building process under profitability route:

a) Not less than 35% of the net offer to the public shall be available for allocation to retail individual investors;

b) Not less than 15% of the net offer to the public shall be available for allocation to nonā€institutional investors i.e. investors other than retail individual investors and Qualified Institutional Buyers;

c) Not more than 50% of the net offer to the public shall be available for allocation to Qualified Institutional Buyers.


2. In case of compulsory Book - Built Issues


a) at least 75% of net offer to public being allotted to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded.

b) Not more than 15% the net offer to the public shall be available for allocation to nonā€institutional investors.

c) Not more than 10% the net offer to the public shall be available for allocation to retail individual investors.


In case of fixed price issue

The proportionate allotment of securities to the different investor categories in a fixed price issue is as described below:

1. A minimum 50% of the net offer of securities to the public shall initially be made available for allotment to retail individual investors.

2. The balance net offer of securities to the public shall be made available for allotment to:

a.  Individual applicants other than retail individual investors, and

b. Other investors including corporate bodies/ institutions irrespective of the number of securities applied for.


Categories of Investors:

Investors are broadly classified under following categories:

(i) Retail Individual Investors (RIIs)

‘Retail individual investor’ means an investor who applies or bids for securities of or for a value of not more than Rs. 2,00,000.

(ii)  Non Institutional Investors (NIIs)

All applicants, other than QIBs or individuals applying for less than Rs. 2,00,000 are considered as NIIs. Typically, this category includes High Net Worth Individuals (HNIs) and corporate bodies.

(iii) Qualified Institutional Buyers (QIBs)

QIBs are those institutional investors who are perceived to possess expertise and the financial strength to evaluate and invest in the capital markets. A QIB is defined by SEBI as:


(i) a mutual fund, venture capital fund, Alternative Investment Fund and foreign venture capital investor registered with SEBI;

(ii) a foreign institutional investor and sub-account (other than a sub-account which is a foreign corporate or foreign individual), registered with SEBI;

(iii) a public financial institution as defined in section 4A of the Companies Act, 1956;

(iv) a scheduled commercial bank;

(v) a multilateral and bilateral development financial institution;

(vi) a state industrial development corporation;

(vii) an insurance company registered with the Insurance Regulatory and Development Authority;

(viii)a provident fund with minimum corpus of twenty five crore rupees;

(ix) a pension fund with minimum corpus of twenty five crore rupees;

(x) National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the Government of India published in the Gazette of India; (xi) insurance funds set up and managed by army, navy or air force of the Union of India;

(xii) insurance funds set up and managed by the Department of Posts, India;

These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.

All types of investors are required to bring in 100% of the application money as margin along with the application for securities in Public Issues. This has been done to avoid inflated demand in Public Issues and to provide a level playing field to all investors subscribing for securities.


 

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Disclaimer:

Information provided herein is purely for dissemination of information and creating awareness among the investors about various aspects of investing. Although due care and diligence has been taken, the Institute of Company Secretaries of India (ICSI) shall not be responsible for any loss or damage resulting from any action taken by a person on the basis of the contents hosted on the website. It may also be noted that laws/regulations governing the markets are continuously evolving, hence an investor should familiarize himself with the latest laws/ regulations by visiting the relevant websites or contacting the relevant regulatory body.