If you are about to open a demat account, you may know that IPO’s full-form is “initial public offering.” But, did you know that you can apply for an IPO under the high net worth individual (HNI) category? Before we explain how to apply for an IPO under the HNI category, let us understand a few interesting facts about this category.
Keen to invest in IPOs under the HNI category? Keep these things in mind:
1. Hnis Are A Kind Of Non-Institutional Investor (Nni)
When a company announces an IPO, several categories of investors can invest in it, including NII, retail investors, and qualified institutional buyers (QIB).
As per a regulation of the Securities and Exchange Board of India (SEBI), companies have to reserve not less than 15% of their IPO for the NII category.
Hence, when an investor applies to an IPO under the NII category, he is allotted shares from the 15% reservation meant for NII investors.
2. When You Apply As An Hni For An Ipo, Your Net Worth Is Not Checked
One of the most interesting aspects of this category is that no one checks the net worth of an investor to confirm whether he is an HNI or not when he applies to an IPO as an HNI. So, how does an IPO subscription qualify as an HNI subscription? To understand this, please read the next point.
3. Minimum Investment Determines Whether You Are An Hni Or Not
If an individual wants to invest in an IPO under the NII/HNI category, he has to invest at least ₹2 lakhs to be eligible as an HNI. No one will check your net worth to know whether you are an HNI or not.
However, you will have to invest a minimum of ₹2 lakhs. When a company announces an IPO, it also announces a price range for its shares. Based on that, you have to bid for a sufficient number of shares so that your investment in an IPO is at least ₹2 lakhs.
Regulations To Keep In Mind When Investing In An Ipo As An Hni
- If you are applying in the HNI category, you are not allowed to place your bid at the cutoff price.
- After placing your bids, you cannot withdraw or cancel your bids if you are applying in the HNI category.
- An HNI category investor is not allowed to modify his bids downwards. He can modify his bids only upwards. For example, if he has placed a bid for 300 units of an IPO at ₹400,000, he cannot modify his bid to 250 units. However, as an example, he can modify his bid upwards to 320 units.
- Once an investor decides to apply for an IPO in the HNI category, he cannot apply for the same IPO as a retail investor.
- When an IPO is oversubscribed, investors who applied in the HNI category receive only a portion of the amount for which they applied.
How To Apply For An Ipo In The Hni Category?
If you have a demat account with an online broker, it is very easy to apply for an IPO in the HNI category with just a few clicks. Here is what you have to do:
- Login to the website or app of the broker with whom you have a demat/trading account.
- Go to the equities menu of the website/app and find the ipo full form section under it.
- You will see a list of available IPOs there. Select the IPO you want to apply for.
- On the IPO application page, modify the IPO application category to HNI. The trading software will change the minimum order quantity and value based on the lot size.
From this step onwards, the process may change a bit from broker to broker; however, it will more or less remain the same.
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