When you apply for an IPO as an individual, you have the option of applying under the retail or HNI categories. The HNI category is also known as the NII or non-institutional investor (NII) category. The main question you must address is whether you should apply for an IPO in the HNI or NII categories. In this section, we will go over how to apply for an IPO as an HNI, or high-net-worth investor. In most IPOs, the HNI or NII category receives a 15% allotment. As a result, you must understand how to apply for an IPO in the HNI category.
Here is how to apply HNI IPO.
UNDERSTANDING THE HNI CATEGORY
In any IPO, there are three basic categories: retail, HNI/NII, and qualified institutional buyer (QIB). Individuals applying for more than Rs 2 lakh in investment amount fall within the HNI category, as do corporates, NRIs, HUFs, FPIs, Trusts and corporate bodies, NBFCs, and so on. The HNI rules are the same whether it is a new offer or an offer for sale. Let us first define what an HNI is and who they are.
In IPOs, the HNI / NII category enjoys a 15% reservation of IPO shares as per extant SEBI regulations. HNIs typically invest with a minimum capital of Rs. 200,000 in IPOs.
The HNI category is now classified into two further subcategories.
1. Retail Individual Investors (RII)
- An NRI, a HUF, or an Indian Resident individual applying with up to Rs 2 lakh in funds falls under this category.
- This category reserves at least 35 per cent of the total IPO offer.
- It allows bids at cut-off prices. In addition, RII investors can withdraw their bids up until allotment day.
- In an oversubscribed IPO, the allotment shall be the minimum bid lot. If there is no oversubscription, then allocation will be in full.
2. Non-institutional Investors (NII)
- These include all applicants for IPOs over the amount of Rs 2 lakh. It includes NRIs, HUFs, corporations, Indian individuals, and trusts.
- The Non-institutional investors reserve 15% of the total IPO offer.
- High net-worth individuals (HNIs) fall into this category. They differ from other investors regarding their investible surplus and net worth, which is more than two crores.
- Investors cannot bid at the cutoff price. Also, they cannot withdraw their bid before the allotment.
- In the event of oversubscription, allotments are proportionate.
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3. Qualified Institutional Buyers (QIB)
- Public financial institutions, mutual funds, and foreign portfolio investors can apply in this category.
- It is not as common as other categories.
- The IPO offer for this category must be a minimum of 50%.
- Institutions must register with SEBI before applying.
- Investors cannot bid at the cut-off price. Additionally, they cannot withdraw their bid even after the close of allotment.
HOW CAN HNIS APPLY FOR AN IPO?
HNIs opting to invest in IPOs must fill out the Application Supporting the Blocked Amount (ASBA) form. They can only make minimum investments of Rs2 lakhs, not below that. In the event that they are shortlisted for allotment, the relevant amount is blocked and on the date of allotment the amount is blocked. HNIs can either access the IPO application through their net banking account or by physically submitting the IPO application.
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Let us now look at the steps to follow to apply to IPO as an HNI through net banking:
- The first step is to access your internet banking portal. Log in to your internet banking account using username and password.
- Check out for the IPO tab and find “IPO Application” button. This will redirect you to the online IPO application system where, you can select the HNI category
- Once you are inside, you can go ahead and bid for the lots presented. In the HNI category, remember to bid for minimum amount of Rs. 200,000 to be valid.
- IPO system does not permit HNIs to bid at the cut-off price, unlike retail. The amount blocked is the highest bid amount of the range. Block your application amount and wait until the final allotment.
- If you are allotted shares in the HNI category, the amount you blocked will be debited from your account and lien removed for the amount not debited.
- If there is an oversubscription of shares, you only get partial allotment of IPO and the debit amount will be proportionately reduced.
Here are some concluding thoughts on the HNI allotment of shares. Unlike retail, HNIs cannot get discount on IPOs. For the S-HNI category, the same allotment rules as base minimum lot allotment and then lottery system is followed.
