IPOs are a great opportunity for companies looking for expansion, fundraising, and growth. While investing in an IPO, the amount of money you invest is categorised into various types. Let’s look at the HNI category, its IPO allotment rules, the minimum limit for the HNI category, and everything else you need to know.
Who is an HNI?
According to SEBI rules and regulations, an HNI investor is an individual who has an investable asset over Rs. 2 crores. They have certain rules and regulations, which are –
- Investment Limit
The minimum limit for an HNI category is Rs. 2 lacs. You’re an HNI only if you apply for shares above this amount. There is no maximum limit to this investment.
- Specific Quota
The specific quota reserved for HNI investors in an IPO is 15%. Therefore, even if an IPO gets oversubscribed, 15% of the shares are always given to the HNI investors.
- Bidding Amount
HNI investors cannot bid on the cut-off price. Instead, they always bid on the cap value. (A price band has an upper limit called the cap value and a lower limit called the floor value.)
Investable Asset- An HNI investor has investable assets over Rs. 2 Crores.
Process of application for an IPO as an HNI?
If you want to apply for the HNI category, you can follow the following steps.
Note
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- Log in to your internet banking or broker portal.
- Go to the IPO section and select the HNI category.
- Select the number of lots you want to bid for. Make sure that your investment exceeds Rs. 2 lacs.
- You cannot bid at anything below the cap price. So, apply according to the cap price.
- Fill in the ASBA or Application Supporting the Blocked Amount where you allow the blocking of the bid amount until the IPO allotment.
After that, you have to wait for the results. In the case of under-subscription, you get the desired share amount, but if the IPO is oversubscribed, you get proportionate shares. If the oversubscription is high, the company uses a lottery system..
In any case, the reserved quota, i.e., 15%, is always given to the HNI category.
Risks and Benefits
HNI investments come with a huge deal of risks as well as benefits.
In case of oversubscription, the company gets a higher price listing. In this case, you can immediately sell your shares and earn a good profit. Conversely, share prices will go down if the IPO is undersubscribed. This puts HNI investors prey to higher risks.
In a Nutshell
HNI investors are investors with a high net worth. However, the whole process comes with high risks. Therefore, one should only invest in HNI after gaining an experience in the market.