How to Apply IPO in HNI Category?

Last Updated: 15 May 2024

Individual applicants may choose to file under the retail or HNI categories when submitting their applications for an IPO. The non-institutional investor (NII) or HNI IPO category is another name for it. The essential thing you need to know is how to apply for an IPO in the HNI or NII categories. In this article, we’ll go over the specifics of applying for an IPO under the high net worth investor (HNI) category.

In any IPO, the HNI or NII category is typically allocated 15% of the total. For this reason, you must understand how to apply for an HNI in IPO under the HNI category. But you must first be able to bring in the required funds, either as personal funds or as borrowed funds, in order to comprehend how to apply under the HNI category. So, let’s explore this in detail.

What is the HNI Category in IPO?

The term HNI, or high net worth individuals, refers to a distinct IPO group established under the Non-Institutional Investors (NII) segment. In the NIIs section, other categories, such as NRIs, HUFs, FPIs, Trusts, and Companies, are also listed.

A component of the NII element of the IPO allotment is the HNI IPO application. A private business may retain 15% of its IPO shares in accordance with SEBI requirements. The HNIs require a minimum application amount of Rs. 2,00,000. HNI investors are further divided into two classes, each with a distinct monetary cap.

Process of Applying IPO in the HNI Category

The Application Supporting the Blocked Amount, or ASBA, must be completed by HNIs who wish to file for an IPO. The blocked amount for IPO stock will be deducted from the investor’s account if they are selected for allocation. HNIs wishing to apply for an IPO are not permitted to use the UPI method via a broker. Either they must physically submit the IPO application, or they must access the online banking facility.

The procedures to apply for HNI application for IPO are as follows: 

• You must first sign into your net banking portal as an HNI investor.
• Select “IPO Application” from the IPO tab.
• You will be able to access the IPO application system online.
• Here, you have to choose the HNI category. Next, indicate how many lots and how much you’re willing to bid. It is imperative that the total bid amount not go below INR 2,00,000.
• This cannot be used to determine the cut-off bid price under the IPO mechanism. By default, it is the most expensive. Up until the final allocation, the amount of your application is blocked.
• The account is only debited with the blocked amount following the share allotment.
• You might only get a portion of the IPO if there is an oversubscription. Also, a corresponding reduction is made to the debit amount.

Types of IPO Investors

During an initial public offering (IPO), a variety of investors subscribe to company shares. A certain percentage of shares are set aside for each type of investor. The various categories of IPO investors are as follows:

1. Retail Individual Investors (RII)
This category includes any Indian resident, non-resident investor, or HUF applying for an IPO up to INR 2,00,000. Furthermore, at least 35% of the overall IPO offer is reserved for shares in this category. Up to the allocation day, investors are able to bid at the cut-off cost and withdraw their bids. Furthermore, the minimum lot shall be allocated in the event of an oversubscription. In the event of no oversubscription, the entire allocation will be made.

2. Non-Institutional Investors (NII)
IPO candidates with a minimum investment of INR 2,00,000 or more fall into this category. NRIs, HUFs, businesses, individual investors, and trusts are examples of applicants. The NIIs reserve at least 15% of the overall IPO offer. Additionally, HNIs fall into this group and set themselves apart from other investors with their net worth exceeding two crores and their investible surplus. These investors are also unable to bid at the cut-off price and then withdraw their bid prior to allocation. The shares are distributed proportionately in the event of an oversubscription.

3. Qualified Institutional Buyers (QIB)
This group includes foreign portfolio investors, mutual funds, and public financial institutions. This category is not as popular as others. The corporations must reserve at least 50% of the total shares offered in the IPO. To participate in an IPO, these investors must also register with SEBI. In addition, QIBs are not permitted to bid at the cut-off price or to withdraw their bid prior to allocation.

Tips for Investing in HNI Category IPOs

Now that we have gone through the application process, here are a few tips to keep in mind while investing in an HNI category IPO:

• Research and stay informed about upcoming IPOs to make well-informed investment decisions.
• Make sure to read the company’s prospectus and understand its financials before investing.
• Contact a professional advisor for more guidance on choosing an IPO to invest in.
• Ensure to keep track of all your investments and review the overall performance regularly.

The Bottom Line

Investing in IPOs, especially in the HNI category, can be a lucrative opportunity for high-net-worth individuals. It allows them to invest in a company at its early stages and potentially earn high returns in the long run.

However, it’s important to do thorough research, consult with experts, and carefully consider all factors before investing in an IPO. By following the steps outlined in this guide and keeping these tips in mind, you can successfully apply for an HNI category IPO and potentially reap the benefits of being an early investor in a promising company.

Frequently Asked Questions

What is the first step in investing in an HNI category IPO?

The first step is to select a broker who can facilitate your IPO application. This could be an online trading platform or a traditional brokerage firm.

Can anyone invest in an IPO under the HNI category?

No, only individuals or entities with high net worth who can afford to invest a minimum amount of Rs.10 lakhs are eligible to invest in an HNI category IPO.

How do I know if I am eligible to invest in an HNI category IPO?

Apart from the minimum investment amount, there may also be specific eligibility criteria set by the company going public. This could include factors such as age, citizenship, and financial background. It’s important to research and understand these criteria before applying for an HNI category IPO.

Can I apply for an HNI category IPO through my broker?

Yes, your broker will provide you with an application form to fill out and submit along with the required documents and investment amount.