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Allocations in an IPO
Fixed Price
Issues
There are two
buckets in the fixed
price IPO/FPOs:
Investors applying
for Rs. 1, 00,000 or
more and Investors
applying for upto
Rs.1, 00,000.
Bookbuilding
Issues
In a book built
issue, allocation to
Retail Individual
Investors (RIIs),
Non Institutional
Investors (NIIs) and
Qualified
Institutional Buyers
(QIBs) is in the
ratio of 35:15: 50
respectively. In
case the book built
issues are made
pursuant to the
requirement of
mandatory allocation
of 60% to QIBs in
terms of Rule 19(2)
(b) of SCRR, the
respective figures
are 30:10:60.
Definition of
Retail Individual
Investors (RIIs)
‘Retail individual
investor’ means an
investor who applies
or bids for
securities of or for
a value of not more
than Rs.1, 00,000.
Definition of Non
Institutional
Investors (NIIs)
All applicants,
other than QIBs or
individuals applying
for less than Rs. 1,
00,000 are
considered as NIIs.
Typically, this
category includes
High Net Worth
Individuals (HNIs)
and corporate
bodies.
Definition of
Qualified
Institutional Buyers
(QIBs)
QIBs are those
institutional
investors who are
perceived to possess
expertise and the
financial strength
to evaluate and
invest in the
capital markets. A
QIB is defined by
SEBI as
| a) |
public
financial
institution
as defined
in section
4A of the
Companies
Act, 1956; |
| b) |
scheduled
commercial
banks; |
| c) |
mutual
funds; |
| d) |
foreign
institutional
investor
registered
with SEBI; |
| e) |
multilateral
and
bilateral
development
financial
institutions;
|
| f) |
venture
capital
funds
registered
with SEBI. |
| g) |
foreign
Venture
capital
investors
registered
with SEBI. |
| h) |
state
Industrial
Development
Corporations. |
| i) |
insurance
Companies
registered
with the
Insurance
Regulatory
and
Development
Authority (IRDA). |
| j) |
provident
Funds with
minimum
corpus of Rs.
25 crores |
| k) |
pension
Funds with
minimum
corpus of Rs.
25 crores) |
These entities are
not required to be
registered with SEBI
as QIBs. Any
entities falling
under the categories
specified above are
considered as QIBs
for the purpose of
participating in
primary issuance
process.
All types of investors are required to bring in 100% of the application money as margin along with the application for securities in Public Issues. This has been done to avoid inflated demand in Public Issues and to provide a level playing field to all investors subscribing for securities.
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