The LIC IPO will have a sizable portion reserved for HNI investors.
LIC IPO has created a lot of buzz in the market. It is expected to become the largest IPO listing in India. It’s worth noting that the government announced disinvesting a 3.5% stake in PSU life insurance company to haul a sizable amount to meet its disinvestment target. The IPO will open for subscription from 4 May to 9 May and will have approximately 15% of the offered size reserved for HNI investors.
Let’s look at the requirements to apply for LIC IPO in the HNI category.
Who are HNI investors, and how can they invest?
Against the backdrop of the volatile market, participation from all segments of investors is critical for the success of the offer. Since a sizable portion is reserved for NII investors, it has attracted a lot of focus. NII or the Non-institutional investor’s category comprises HNI, NRIs, HUFs, Companies, FPIs, and Trusts.
HNIs are High Net Worth Individuals. SEBI has defined HNI investors as individual retail investors who invest a minimum of Rs 200,000 in IPO shares. While launching an IPO, companies can reserve a standard 15% portion for HNI investors.
HNI applications are high-value applications and therefore are treated differently from retail applications. Besides the minimum application value difference, retail and HNI investors differ on several other aspects.
Unlike retail investors, HNI investors can’t apply for IPO through UPI. Their applications are backed by an ASBA form filled online or submitted physically at the bank.
It is also worth noting that HNI investors need to specify the exact price they are ready to pay for the IPO. The cut-off price rule only applies to retail investors.
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Reason to separate HNI applicants from retail
The separation helps maintain balance and gives small retail investors more chances to get an allotment. IPO shares are allotted through a lottery in the retail category, which increases your chance of receiving IPO shares. In contrast, QIB and NII segments follow the proportionate basis of the allotment procedure.
Rules to apply under the HNI IPO quota
A particular set of rules govern HNI applications.
- The application size is more than Rs 2 lakh, supported by an ASBA form.
- Once applied, HNI investors can only modify their application only when the bid volume is increased. For example, if the application is for Rs 2.5 lakh, you can only change it between 2.51 and 5 Lakhs.
- There is a time limitation for HNI bidding. Applications are allowed till 3:45 PM IST only. On Day 1 and Day 2, bids placed after 3:45 PM will be pushed as AMO orders. On Day 3, bids placed after 3:45 PM will be rejected by the exchange.
- Investors can’t withdraw their applications.
HNI applications point to remember
- HNI applications can’t be withdrawn or revised.
- HNI investors can’t apply at the cut-off price. The applicants should mention the exact price they are ready to pay for the IPO.
- IPO allotment is done on a lottery or proportionate basis depending on the status of oversubscription in the segment.
- The shares will get allotted within six working days from the offer closing day.
- There is no lock-in period for the HNI category like QIB. Investors can sell their shares after the stocks get listed on the exchange.
- The maximum bid size shouldn’t exceed the size of the offer, excluding the QIB portion.
Applying in the HNI category
HNI investors need to use the online ASBA IPO application facility of net banking or the bank’s mobile app.
- ASBA application service is available only with the bank. Go to the net banking application and select the IPO to apply.
- Fill up the IPO form with your details.
- Choose NII from the investor’s category.
- Submit the application.
- You will receive a unique application number when your application gets accepted.
- Use the application number to check the status of your application.
Advantages and Disadvantages of HNI application
Should you apply in the HNI category? To help you decide, let’s consider the advantages and disadvantages of filing under the category.
- You can increase your chances of receiving more IPO shares above the Rs 2 lakh cut-off imposed in the retail segment
- Easy IPO loans are available with most banks at a 7-10 percent annual interest rate.
- The blocked fund in your savings account will continue to earn interest
- There is no lock-in period, and HNI investors can sell their shares on the day of listing
- HNI investors don’t have to register with SEBI as QIBs
- HNI NRI investors can also apply like resident Indians
On the flip side, big bidding volume also comes with significant risks. Let’s apprise you of the risks associated with applying under the HNI category.
- HNI applicants can’t withdraw their application or modify it.
- HNI applications require a considerable sum of money. So, if the IPO doesn’t list well, you may incur a significant amount of loss.
- All the HNI Biddings are valid if they are executed before 3:45 pm. Orders placed on day 1 and day 2 after 3:45 will be pushed as AMO orders. Any orders placed on Day 3 orders placed after 3:45 will be rejected by the exchange.
- HNI investors need to mention the exact amount in their application. They can’t apply at the cut-off limit.
- There is no discount available in this segment, like retail or employee categories.
- The NII segment is usually oversubscribed and may not guarantee the full allotment.
- If the number of lots applied is less than the number of times the issue is oversubscribed, there is no guarantee of allotment.
- The funds that remain blocked in your account can’t be used for other purposes.
The government may seek special dispensation from SEBI and RBI to relax the recently introduced norms regarding the QIB (Qualified Institutional Buyers) lock-in period and caps on HNI IPO funding for the upcoming LIC IPO.
In a recent update, RBI has changed the QIB lock-in period from 30 days to 90 days and capped HNI IPO funding to Rs 1 crore by Non-Banking Financial Institutions.
LIC’s IPO will open for subscription from 4 May to 9 May but it has already created a lot of excitement in the market. Marquee investors like BlackRock, Abu Dhabi Investment Authority, Singapore’s GIC, Canada’s CPPIB, Fidelity, and Capital International are likely to bid in the QIB segment.
Follow the LIC IPO page for more details on the offer and to apply.
Can I apply under the Retail and HNI categories?
You can apply either in Retail or HNI. If you make multiple applications with the same PAN card, all the applications will get rejected.
If a Retail investor bids IPOs worth more than Rs 2 lakh, the application is considered an HNI bid.
Can I apply for IPO in the HNI category?
You can do it by increasing the size of your bid to Rs 2 lakh minimum. Resident Indians and NRI investors can apply as HNI investors, part of the NII or Non- Institutional Investors.
What is the minimum investment amount in the HNI category?
The minimum bid amount in the HNI segment is Rs 2 lakh. You need to apply through an ASBA form as UPI payment is not applicable for HNI investors.
How can you apply for IPO in HNI from Angel One?
Stockbroking firms like Angel One don’t offer IPO applications in the HNI category since they don’t offer banking services. They offer IPO applications only through UPI. Since UPI has a max limit of Rs 2 lakh, you can’t use the payment method for HNI bidding.
If you have an Angel One account, you can apply in the following ways.
- Using the bank’s net banking facility
- Submitting the ASBA form to a bank branch
The online application process to receive IPO shares in the Angel One Demat account.
- Sign in to the net banking or mobile banking app of the bank
- Go to the IPO investment section
- Select IPO and click, ‘Apply’
- Select NII as the investor’s category
- Select depository
- Fill in Angel One Demat account details
- Enter bidding details and Submit your application
What is the IPO allotment process in HNI?
The share allotment in this category follows the proportionate basis of the allotment process. If the number of lots applied by you is less than oversubscription in the NII category, distribution will be done on a lottery basis for one lot.