India was recently in the news for overtaking China as the most populous country in the world. While many sections are seeing this news adversely, there is also a silver lining to this news. India has a vast young population who is participating in the growth story of the country. India’s millionaire population is constantly on the rise and India is set to have more than 16.5 lakh HNIs by the end of 2027. While HNIs constantly look for investment opportunities to grow their capital, IPOs can be an excellent opportunity for HNIs to gain considerable market returns and also aim for long-term capital appreciation. Here’s everything you need to know about applying for an IPO under the HNI category.
Read More: Popular wealth management options available for the HNIs
What is the meaning of HNIs in India?
HNIs stand for High Networth Individuals and have an investible corpus of more than Rs. 5 crores. These individuals often have diverse income streams, including businesses, investments, properties, and other sources. They have the capacity to make significant investments and engage in more sophisticated financial strategies. HNIs may require specialised financial services to manage and grow their wealth, such as portfolio management, estate planning, tax optimization, and wealth preservation.
How can HNIs apply in an IPO?
IPOs in India can be subscribed to by a diverse category of investors like the QIBs (Qualified Institutional Buyers), Non-institutional Investors (NIIs), and Retail Individual Investors (RIIs). HNIs usually invest in the IPO through the NII category of investors. Through this category, HNIs can invest a minimum of Rs. 2,00,000 in the IPO and can bid in the required lots by filing the required details in the IPO application form.
HNIs can apply for an IPO through the Fisdom App. The steps for the same are mentioned below.
- Investors can use their Demat account on Fisdom app to apply for an IPO
- Select the tab ‘IPO’ in the app to proceed.
- This will take users to the list of available IPOs and they can select the desired IPO to invest in.
- After selecting the IPO, one can select the NII category for investment.
- Enter the number of lots to bid and the desired price.
- It is important to note that under this category, one can invest a minimum of Rs. 2,00,000 and maximum Rs. 5,00,000.
- As an HNI, investors cannot select the cut-off price. Instead, a block mandate will be created in their account at the highest bid price. This blocks the application amount until the final allotment.
- The amount will be debited only after the shares are allotted.
- In case of oversubscription, there will be a partial allocation of shares. Any additionally deducted amount will be credited back to the account.
Rules for applying in an IPO under HNI category
There are a few rules that have to be considered by the HNIs while investing in any IPO. These rules are highlighted hereunder.
- Individual investors can either apply in the retail investment category (if the amount of investment is up to Rs. 2,00,000) or the NII category (in case the amount of investment is more than Rs. 2,00,000) but not in both.
- HNIs are not eligible for any discounts that the company may offer to attract investors.
- HNIs are required to apply for a minimum amount of Rs 2,00,000 in an IPO in the NII category.
- HNI allotment is done on a proportionate or lottery basis, depending on the oversubscription in the Non-Institutional Investor (NII) category.
- HNIs must submit their IPO applications for the NII category by 4 p.m. IST on the issue closing day.
- HNIs are not permitted to bid at the Cut-off Price. They must place their bids within the price range specified in the IPO at a fixed price.
- IPO shares are distributed to HNIs within six working days of the Bid/Offer Closing Date.
- The number of equity shares in specified lots should not exceed the size of the Offer to be considered a Maximum Bid by NII, excluding the Qualified Institutional Bidders Portion.
Conclusion
IPOs are quite an attractive investment option for HNIs as it allows them to park significant funds into growth companies and earn potentially high returns for their investment. Along with investment in stocks, HNIs also invest in diverse asset classes like real estate, invest in any business as an angel investor or through venture capital firms, bonds, AIFs, etc. This helps them spread the risk of investment and at the same time acts as a hedge enabling them to maximise their returns.
FAQs
Shares are allotted to the High Net Worth Individual (HNI) category based on a proportionate allocation process. If an IPO investor category is oversubscribed, the allotment may be done through a lottery or proportionate formula.
HNIs can apply in an IPO either in the RII category or the NII category. However, the amount that can be applied in the RII category is restricted to Rs. 2,00,000
No. HNIs are not allowed to cancel their bids before the allotment process.
The common investment categories in an IPO include Retail Individual Investors (RIIs), Non-Institutional Investors (NIIs), and Qualified Institutional Buyers (QIBs).
