Many Retail investors get fed up when they don’t get allotment in IPOs. They want to find a way to maximize their chance to get the allotment. One of the ways is to apply in the HNI category if you have enough money with you as HNI has more chances then retail category. Let’s find out how to apply IPO in HNI category in this article. However, before that let’s understand IPO & It’s categories.
Table of Contents
Initial Public Offering
When an unlisted firm (one that is not traded on a stock market) seeks to generate capital for the first time by selling securities or shares to the general public, it launches an initial public offering (IPO).
In other terms, an initial public offering (IPO) is the sale of securities to the general public on the primary market. A primary market deals with the first-time issuance of new stocks.
The corporation becomes a publicly-traded company when it is listed on the stock exchange, and its shares may be exchanged freely in the open market.
Categories of IPO investors
As per SEBI rules, Investors have three categories for subscribing to the IPOs. The following are the details:
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Retail Individual Investors
This category is also famous as RIIs. Individuals, HUFs, and NRIs choose to invest in this category. Their average investment is less than Rs. 2 lakh. They receive around 35% or 15% of IPO shares allocation in most of the IPOs.
They also have the option to bid on the cut-off price. The allotment of shares, on the other hand, is based on whether or not the stocks are oversubscribed.
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Qualified Institutional buyers
This category is also famous as QIBs. Financial institutions, commercial banks, international portfolio investors, and mutual fund investors are the only ones that employ this type of investing.
As you can see, this is not an investment for the common person. Approximately half or 75% of the issue is reserved for QIB investors. They have the option to withdraw their bids even after the IPO has closed.
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Non-Institutional Investor
Approximately 15% of the total issue is allocated to high-net-worth individuals. They need to bid a minimum 2 lakhs, yet the majority of them invest in crores.
They are not permitted to bid at the cutoff price, nor are they permitted to withdraw their offers until the day of allotment.
In the event of an oversubscription, allotments are made proportionally or by lottery.
Note: You might also find the employee category for employees of that company which comes with IPO and shareholders quota for shareholders of parent company as well.
Difference Between HNI and Retail Investor
As an individual investor, you may be unsure which path to pursue and which would best fit your needs. As a consequence, the table below will assist you in identifying the major differences between the retail investors and High net-worth investors
Difference Between HNI and Retail Investor
| Basis | High Net-worth Investors | Retail Investors |
| Allotment | In the event of an over-subscription, allotments are made proportionally or through a lottery method. If you applied for a number of lots equal to or greater than the number of times the NII category (which includes HNIs, NRIs, FPIs, and others) has been oversubscribed, you will almost certainly be assigned at least one lot. | If there is an over-subscription of IPO, a lottery method is used to distribute them. A person who applies for one lot is treated the same as someone who applies for several lots. The allotment totally depends on luck. |
| Investment | Minimum 2 Lakh | Maximum 2 Lakh |
| Discount | HNI doesn’t get any discounts in IPO | Some companies offer discount to RIIs |
| Cut-off | HNI cannot apply on the cutoff rate. | RII can apply on a cutoff rate. |
Note:
You cannot apply in both of the categories in an IPO. You can only apply in the Retail category or HNI category.
How to Apply IPO in HNI Category?
After difference between hni and retail investor, Here are the steps & chances of getting ipo in hni category :
- Log in to your online banking account first.
- In the IPO tab, select “IPO application.”
- This will lead you to the IPO system’s online version.
- There, investors must select the HNI category. Then, enter the number of stocks you want to bid on and the price you want to pay. The sum must be greater than Rs 2 lakhs.
- The HNI is unable to select the cut-off price. A block mandate is established in the account at the maximum bid price.
- You will block the amount of the application until the final allocation if you do this. Only after the allotment of stocks will the account be debited.
- In the case of an IPO oversubscription, just a portion of the shares will be allocated. The account will be debited in accordance with the allocation.
Examples of How to Apply in HNI Category?
Assume Mr. A has purchased shares in the Abc corporation. He submitted an application for 200 shares of the firm. There are two scenarios in which an allocation can be made.
Scenario 1
Let’s pretend the shares aren’t fully subscribed. The investor will then receive everything he has applied for in this case. That’s a total of 200 stocks.
Scenario 2
Assume the shares are 200 times oversubscribed. The investor will then be allocated proportionally, which in this case is one share.
However, because many HNI candidates pick stocks worth millions of rupees, they must obtain a loan from their individual brokers to fund the transaction.
This is done with the understanding that an oversubscription will result in proportionate allotment, and that by applying for more than you want, you will end up with the quantity you anticipate.
It’s crucial to note, though, that when you borrow money, you’ll have to pay interest on it to get chances of getting ipo in hni category.
Profits and losses in HNI Category
HNI investors, like Retail investors, are primarily looking forward to their listing profits. However, it is dependent on a number of circumstances.
They need a large number to balance the costs since they spend a lot of money and have to pay interest and other fees.
For example, although krsnaa diagnostics is listed on premium, HNI investors lost a lot of money. Zomato shares, on the other hand, yielded enormous gains. As a result, the decision to choose HNI or RII must be based exclusively on the type of the IPO stocks.
That is why the majority of HNIs wait until the very last minute to subscribe to the shares. So they can have a general sense of what the subscription would be like and whether or not they will make a profit.
Conclusion
Always do proper research and analysis before applying in an IPO irrespective of the category you choose. IPOs are very good income sources if you select them with proper knowledge.
This is all from our side regarding How to Apply IPO in HNI Category? Although, if you have any doubts about how to become hni investor? you can just comment below.
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FAQ About How to Apply in HNI Category?
HNI category IPO allotment?
HNI category will get 100% allotment if the issue is under subscribed or equally subscribed. Whereas in the case of an IPO oversubscription, just a portion of the shares will be allocated.
What is HNI category in IPO
HNI category means High Net-worth Individuals category. They need to apply for minimum 2 lakhs worth stocks in an IPO.
HNI investors meaning?
High net worth individuals in India are those who have an investable excess of more than 2 crores rupees. These people manage their money in terms of preservation and appreciation, as well as net worth.
How to become HNI investor?
You must have investments more than 2 crores rupees to become an HNI investor in India.
Difference between HNI and retail investor?
Individuals who apply for less than Rs 200,000 in an IPO are eligible for the Retail Portion. People who apply for more than Rs 200,000 are classified as HNIs. The HNI bids fall under the NII (Non-Institutional Investor) category.
