How to Apply for an IPO under the NIB or HNI Category

Post Date : January 3, 2025

How to Apply for an IPO under the NIB or HNI Category

Investing in an Initial Public Offering (IPO) can provide a rewarding opportunity to participate in a company’s debut in the stock market. For Non- Institutional bidders (NIBs) or High Net-Worth Individuals (HNIs), the application process involves specific requirements and considerations, distinguishing them from other investor categories. This guide outlines the steps and key aspects of applying for an IPO under the NIBs category, helping you navigate this investment opportunity with ease and confidence.

Understanding IPOs and NIBs Investments

An IPO is the process by which a private company offers its shares to the public for the first time, becoming publicly traded. Companies use the funds raised through IPOs to fuel growth, fund operations, or provide an exit opportunity for early investors. Investment banks set the IPO price based on the company’s valuation and market demand, allowing the company to access capital markets.

The Securities and Exchange Board of India (SEBI) classifies IPO investors into various categories, each with reserved quotas. Non Institutional Bidders (NIBs) or High Net-Worth Individuals (HNIs) enjoy a special status, with reserved shares and distinct investment criteria.

Who Qualifies as a NIB/ HNI?

In India, a NIB or HNI is a non-institutional investor who invests a minimum of ₹2,00,000 in an IPO. As per SEBI regulations, 15% of the shares in an IPO are reserved for this category. Eligible HNIs or NIBs include:

• High Net Worth Individuals
• Hindu Undivided Families (HUFs)
• Non-Resident Indians (NRIs)
• Foreign Portfolio Investors (FPIs)
• Trusts and Companies

This classification enables NIBs to apply with larger bid sizes, potentially yielding higher returns if the stock performs well post-listing.

Steps to Apply for an IPO under the NIB Category

Step 1: Log in to Your Brokerage Account

Access your Demat account via the web portal or mobile application. For example, RMoney users can use their credentials to log in.

Step 2: Navigate to the IPO Section

After logging in, go to the IPO section to view the list of ongoing and upcoming IPOs.

Step 3: Select the IPO

Choose the IPO you wish to apply for from the available options.

Step 4: Specify the NIB Investor Type

Ensure you select the NIB (Non Institutional bidders) category before proceeding.

Step 5: Enter the Bid Details

• Specify the number of lots you want to apply for.
• Enter your desired bid price within the price band.

Step 6: Make the Payment

• For bid amounts up to ₹5,00,000: Complete the payment using your registered UPI ID.
• For amounts exceeding ₹5,00,000: Use ASBA (Application Supported by Blocked Amount) via your bank’s net banking facility.

Step 7: Confirm and Submit the Application

• Review your application by clicking on “Apply for IPO.” Note that NIB applications cannot be canceled or reduced after submission.
• Finalize your bid by clicking “Confirm.”

Step 8: Await Allotment Confirmation

Once the IPO allotment process is completed, you will receive confirmation regarding the shares allotted to you.

Key Considerations for NIBs IPO Applications

Minimum Investment Requirement

NIBs must invest a minimum of ₹2,00,000, distinguishing them from Retail Individual Investors (RIIs), who have a lower investment threshold.

No Discounts on IPO Prices

HNIs are not eligible for discounts on the issue price and must pay the full price.

Oversubscription and Allocation

In cases of oversubscription, shares are allocated proportionately or via a lottery system. Each eligible applicant is guaranteed at least one lot if their bid size covers the oversubscription.

Benefits and Risks of Applying as an NIBs

Benefits

• Priority Allocation: NIBs enjoy a 15% reservation quota, increasing their chances of allocation compared to retail investors.
• Profit Potential: Larger investments can lead to significant returns if the stock appreciates post-listing.

Risks

• No Guarantees in Oversubscription: In heavily oversubscribed IPOs, only partial or no allotment may occur.
• Blocked Capital: Funds remain blocked until allotment, reducing liquidity for other investments during the IPO process.

Different Investor Profiles in IPOs

1. Retail Individual Investors (RIIs)

RIIs are investors who apply for shares worth up to ₹2,00,000. They benefit from a 35% reservation of IPO shares and the option to bid at the “cut-off” price, enabling easier participation.

2. Qualified Institutional Buyers (QIBs)

QIBs include mutual funds, banks, FPIs, and other financial institutions. SEBI mandates a 50% reservation of IPO shares for this category to stabilize demand and lend credibility to the offering.

3. Non-Institutional Bidders (NIBs)

NIBs include HNIs, NRIs, HUFs, trusts, and companies. This category requires bids exceeding ₹2,00,000 and enjoys a 15% reservation in IPOs.

Tips for HNI IPO Applications

1. Analyse the IPO: Assess the company’s financials, market position, and growth potential.
2. Monitor Market Sentiments: Consider recent IPO performance and overall market conditions.
3. Verify ASBA Facility: Ensure your bank supports ASBA for smooth fund blocking.
4. Prepare for Oversubscription: Maintain sufficient funds to manage partial allotments.

Conclusion

Applying for an IPO under the NIBs category offers unique opportunities but requires a clear understanding of the process and associated risks. By adhering to SEBI guidelines and using strategic insights, HNIs can maximize their chances of successful allotments and capitalize on lucrative investment prospects.

FAQs

Q1. Can I apply in both retail and NIB categories?

No, applying under both categories for the same IPO may lead to rejection.

Q2. Does investing more than ₹2,00,000 automatically classify me as an NIB or HNI?

Yes, any IPO application exceeding ₹2,00,000 falls under the NIB or HNI category.

Q3. Are NIBs or HNIs guaranteed shares if there is no oversubscription?

Yes, all valid NIBs or HNI bids receive shares in the absence of oversubscription.

Q4. What is the “cut-off” price in an IPO?

The cut-off price is available only to retail investors, allowing them to bid without specifying a price. The shares are allocated at the final issue price.

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