Applying for an IPO in HNI Category – Key Considerations

Illustrative step by step view with a video description of how to apply for an IPO in HNI Category, highlighting the pros and cons of it

Should you apply for an IPO in HNI Category?

You cannot apply for an IPO via Retail and HNI categories simultaneously. You can only apply either in the Retail category or in the HNI category. There is a high chance for your application to get rejected if you apply in both categories.

Hence, an investor must first understand the advantages and disadvantages, in detail, before making a decision to apply for an IPO in HNI category.

ConsiderationRetail RouteHNI Route
LimitCan bid for shares worth less than 2
lacs only
Should bid for shares worth more than 2
lacs only
Allotment GuaranteeAllocation is not guaranteed. In case of
oversubscription, shares will be
allocated based on a lottery system
Allocation is guaranteed*. In case of
oversubscription, the allocation will be
proportional* to the amount bid
DiscountEligible for a discount the company
may offer
Not eligible for any discount the
company may offer
Cutoff Price BiddingYou can bid for the Cut off Price in
this route
You won’t have an option to bid at the
cut-off price
*Provided the proportionate shares equal to at least 1 lot

Note: Though allotment is guaranteed via HNI route, there are some disadvantages with the proportionate allotment criteria, especially when IPOs have a huge demand. There is a high chance for the issue to get oversubscribed in multiples of hundreds, reducing the total number of shares you can get for the same amount. If the proportionate shares that you could get do not equal to at least one lot, you wouldn’t receive any allocation.

For Example:

HNI category in Mrs Bectors Food IPO was oversubscribed 621 times, so an HNI subscriber will get 1 share for every 621 shares he bid i.e 1 share per every ₹1,78,848 rupees (₹288×621, Issue price – ₹288). To get one lot of Mrs Bectors Food (50 shares), you should have bid with an amount equal to ₹89,42,400; approximately ₹90 lacs.

whereas, HNI Category in Antony Waste Handling Cell IPO was oversubscribed 18.69 times, so an HNI subscriber will get 1 share for every 18.69 shares he bid i.e 1 share per every ₹5,887 rupees (₹315×18.69, Issue price – ₹315). You would have got one lot of Antony Waste Handling Cell (47 shares), with just ₹2,76,704, approximately ₹3 lacs.

The choice between Retail and HNI routes should be made based on the company filing the IPO, demand it has in the market and the amount you can set aside for the IPO.

Instructions to apply for an IPO in HNI Category:

The process to apply for an IPO in HNI category is very similar to how you apply for an IPO through your Bank account via ASBA route. Listed below are the detailed steps:

  1. Subscriber logs into the net-banking portal of his bank account.
  2. The subscriber checks for the IPO section and selects the “IPO Application” which redirects him/her to the IPO Online System
  3. Subscriber inputs the required information in the form by selecting HNI category and inputting the number of lots he would like to bid and the price at which he would like to bid them for (overall amount should be greater than Rs. 2 lakhs).
  4. A block mandate is created in the account on the total amount at the highest price bid by the subscriber. (The subscriber cannot choose the cutoff price option like he could in the Retail Category)
  5. Application money will remain blocked up to the finalization of allotment, till the refund date announced by the registrar of the IPO
  6. Application money is debited only after the allotment of shares.
  7. Post allotment finalization, funds will be either fully or partially debited or refunded.Full Allotment  – Funds will be completely debited when the IPO is not fully subscribed in the HNI category, all the lots applied by will be allocated to the subscriber
  8. Partial Allotment – When there is oversubscription, shares proportionate to the bid amount will be allocated to the subscriber, partial funds will be unblocked

How to apply for an IPO in HNI Category – Video

When applying for an IPO, select HNI Category instead of retail category as shown in the video

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