Nowadays primary market is more active and back-to-back IPOs are coming giving a wonderful opportunity to investors to earn good returns in the shortest period with listing gains. However, all the shares of IPOs are not listed at the premium.
However, owing to positive sentiments among the investors in the secondary market, most of the IPOs are getting a good response and are listed at higher prices compared to their issued price. And you can also apply to these IPOs and earn money if get the shares.
Getting the shares in the IPO allotment is not possible every time, especially when the IPO is oversubscribed many times. And if you have applied various times in IPO through the retail category but did not get the allotment, then you can try the HNI category.
What is HNI Category in IPO?
HNI stands for High Net worth Individuals which is a separate category in IPO created under the Non-Institutional Investors(NII) section. And in the NIIs section other categories are also included like NRIs, HUFs, FPIs, Trusts and Companies.
The IPO application in HNI is a part of the NII portion of the IPO allotment. According to the guidelines issued by the SEBI, 15% of IPO shares are kept reserved in a private company. The minimum application amount under the HNIs is Rs. 2,00,000. Further, HNI investors are classified into two subcategories with different amount limits.
S-HNI Category: This category is higher from retailers but smaller from B-HNI. Under this category, you can invest between Rs2 lakhs and Rs10 lakhs in any IPO. And the allotment will be shown separately when applied through this category.
B-HNI Category: This is the highest category under HNI, also called the Big HNI category you can invest above Rs10 lakhs and there is no upper limit for applying in the IPO for B-HNI investors.
Under these categories, subscription status is represented by the exchange on a daily basis. The subscription status shows the S-HNI category separately and the B-HNI category separately with the consolidated picture of both HNI categories.
Benefits of Applying IPO in the HNI Category
One of the biggest advantages of applying for an IPO through the HNI category is that compared to the retail section, the chances of getting the allotment of shares are much higher under this category. Here you can apply for an IPO with an amount more than Rs. 2 lakh.
Another benefit of applying IPO in the HNI category is that despite HNI coming under the NII section you don't need to register with SEBI. While QIB investors have to register with SEBI before applying for higher amounts in the IPO process.
If you have tried multiple times under the retail category and not getting the allotment of shares, and you have enough funds to apply between Rs 2 to 5lacs, then the HNI category would be the best option for applying in the IPO and getting the shares. Under this category, when an IPO is oversubscribed there is a different procedure of allotment to investors.
How is Allotment in the IPO HNI Category Done?
Under the HNI category, the share allotment process can be done either through the lottery system or proportionate basis depending on the oversubscription of the IPO. This means, that if you have applied for more lots than the issue oversubscribed, the shares are allocated proportionately.
When you apply for a lesser lot than the number of times the issue is oversubscribed, the allotment is done percentage-wise in comparison to the total subscription. In such a situation, the allotment is not guaranteed as it’s done by a lottery system for each lot.
For example, if the issue is oversubscribed by 10 times in the HNI category, then for every 10 shares you have bid, you will be allotted one share. If the IPO is not fully subscribed, then you will be allotted the number of shares you have applied for.
Process of Applying IPO in the HNI Category
As there are no specific rules defined for applying in any IPO under the HNI category. Because when you apply or bid with an amount more than Rs 2 lacs, you will be automatically considered as an HNI investor.
However, there are certain specific rules for applying IPO in the HNI category that are different from the retail category. Hence, before applying under the HNI category you must read the rules and regulations defined by the SEBI and stock exchanges.
Rules for Applying for IPO in HNI Category:
- Individual investors can either apply in the retail investment category or the HNI category. You cannot apply in both categories.
- Applying through the HNI category, the bidding and application submitting timing is up to 4 PM.
- Under the HNI category you cannot delete or modify to decrease the application size. However, you can modify the application only to increase its size.
- If you are applying through the HNI category you have to bid at a fixed price in the issue price range. As HNIs are not entitled to Bid at the Cut-off Price.
- HNI bids are considered for allotment only when they are received at or above the Offer Price.
- Unlike retail investors, HNIs cannot withdraw their bid, as they have to take the delivery of the shares once the shares have been allotted.
- While applying for an IPO under the HNI category you cannot use the UPI method instead you have to use the net banking facility or physically submit the IPO application.
How to Apply IPO in HNI Category in Moneysukh?
Applying the IPO under the HNI category is similar to retail investors, you just need to choose the HNI category instead of retail. But at the time of making payments, you can use the ASBA or Application Supporting the Blocked Amount through the bank’s net banking website and mobile application. However, to apply for the IPO in the HNI Category through Moneysukh, you can follow the steps given below.
Steps of Apply IPO in the HNI Category:
Step 1: Wait until the IPO of any company opens for online bidding.
Step 2:Open the website https://trade.moneysukh.com/in your browser.
Step 3: Now to log in you have to use your User ID & password.
Step 4:Nowgo into the IPO section and select the name of the IPO you want to apply.
Step 5:Here you have to select the HNI category before proceeding.
Step 6:Now you can fill in other details like price, quantity, and so on.
Step 7:Now make the full payment before submitting your IPO application.
Applying in the IPO is the HNI category, it is not guaranteed you will get the allotment of shares, even in the oversubscribed bidding. But here the chances of getting some quantity of shares increased, as the minimum lot size increased in the HNI category.
Also Read: How to Increase the Chances of IPO Allotment
In the retail category, if the IPO is oversubscribed, the lottery system is used for the allotment. In an oversubscribed IPO, the chance of getting 1 lot is similar for an individual who applied for one lot of Rs. 15k or multiple lots up to Rs. 2L.Here a maximum number of bidders will be allotted 1 lot. While in the HNI category scenario is different if the IPO is oversubscribed.
In HNI, if you have applied for lots less than the number of times the issue is oversubscribed, a lottery is drawn for one lot allotment. For example, if the IPO is subscribed 100 times in NII and an HNI has applied for 90 lots, then the allotment will be done by lottery.
It is not necessary for every IPO will be oversubscribed, as depending on the sentiments of the investors and trends in the secondary market some of the IPOs even not fully subscribed. Even some of the IPOs are not subscribed enough and the IPO is cancelled.
Nevertheless, sometimes applying blindly in any company's IPO can be risky, and your money will be devalued due to listing at lower levels and you can incur a loss. There are various risk factors also involved while applying for the IPO.
When you choose the HNI category for applying IPO, the risk increases as your minimum amount of investment increases. Hence, if you can analyse yourself while applying to any company’s IPO always check the important factors or consult with the market experts or fundamental analysts to get the fundamentals and valuation of shares price in IPO.