Holding a few shares of companies whose subsidiaries plan IPOs is often beneficial for investors for increasing their allotment chances. As we will see in this article, shareholder quota in IPOs is a great way to boost allotment chances. Thus, we have compiled this list of upcoming IPOs with shareholders quota which should come handy for investors.
- What is Shareholder Quota in IPOs?
- Who can apply under the shareholder quota in IPOs?
- Maximum shares that can be applied under shareholder quota?
- What Are the Benefits of Shareholder Quota?
- Upcoming IPOs with Shareholders Quota
Before we begin defining the Shareholder Quota in IPOs or Shareholder Reservation Portion, let’s look at the categories that investors are familiar with. Among these well-known categories are
- Retail Individual Investor (RII): Generally, 35% of the offer is reserved for the RII category
- Non-institutional Investor (NII): 15% of the shares in an IPO are reserved for the NII category
- Qualified Institutional Bidders (QIB): 50% – 75% of the offer size is reserved for QIBs
What is Shareholder Quota in IPOs?
There is one more category that is known as the shareholder quota in IPOs. When a subsidiary of a listed company issues an IPO, it generally reserves some shares for shareholders of the parent company. This is known as shareholder quota in IPOs. Generally, it is 5% – 15% of the offer.
As one can imagine, this quota is beneficial for both parties i.e. investors as well as the company bringing the IPO. Investors have a great way of boosting their IPO allotment chances by picking just one share of the parent company. On the other hand, the IPO company would also like to see maximum subscription for its offer.
Let’s understand this with an example. In case of Aditya Birla Sun Life AMC, the company made an offer of 38,880,000 shares and reserved 1,944,000 shares for shareholders of its parent company Aditya Birla Capital Limited (ABCL). These shareholders could be individuals as well as Hindu Undivided Families (HUFs).
Who can apply under the shareholder quota in IPOs?
HNI, Retail investors and Employees of the parent company can apply under the shareholder quota in IPOs if holding at least one share of the parent company as on the record date which is usually the date when the Red Herring Prospectus (RHP) is filed. It is worth highlighting that shares of the parent company need to be in the investors’ demat accounts on the record date. Since we follow T+2 settlement cycle in India, it means that investors need to purchase the parent company shares two days ahead of the record date to be eligible.
To participate in the shareholding quota in IPOs, applicants must apply in the shareholders IPO category.
Maximum shares that can be applied under shareholder quota?
There are two cases for investors if they are applying under shareholder quota in IPOs.
Case 1 – Applying only in Shareholder quota
- The maximum limit in shareholder quota is the total number of shares reserved for the category. In the case of Aditya Birla Sun Life AMC IPO, one could have applied for all the 1,944,000 shares available under the shareholder quota if they were holding at least one share of Aditya Birla Capital as on the record date.
Case 2 – Applying in both Shareholder quota and Retail category
- Investors applying in both categories need to be mindful that their combined application amount should not exceed INR 200,000. Simply put, one can invest a total of INR 200,000 if applying in both categories.
- Combined application amount in both categories exceeding INR 200,000 will be considered multiple bids and thus rejected.
|Applying only in Shareholder quota||Total shares reserved|
|Applying in shareholder and retail categories||INR 200,000|
What Are the Benefits of Shareholder Quota?
There are several advantages for selecting a shareholder quota for investing in IPOs. To reap the benefits of upcoming IPOs with shareholders quota, one should keep track of them and own at least one share of their parent company. Some of the key advantages of the shareholder quota category are as follows
#1 Better allotment chances in Shareholder Quota
Generally, the retail category gets more subscription as compared to the shareholder quota. One classic example is the IPO of Ujjivan Bank, where the retail category was subscribed 48 times while the shareholder category was only covered four times. Needless to say, the chances of allotment are significantly higher in the shareholder category due to one extra layer of eligibility criteria of holding parent company share.
#2 Taking advantage of large applications
The retail category has a maximum limit of INR200,000 per application and this is problematic for someone who has more funds and wants to take advantage of the same. On the other hand, shareholder category allows investors to make large applications by simply purchasing one share of the parent company.
In the example of Ujjivan Bank, the IPO had a reservation amounting to INR77.08 crore for Ujjivan Financial Services shareholders. By purchasing just one share of Ujjivan Financial Services, investors made themselves eligible to put in applications as big as INR77.08 crore. This is especially attractive for HNIs as they are able to mobilize such funds and usually suffer from poor allotment due to high subscription in the category.
#3 Getting more shares allotted
Applying in both retail and shareholder categories is even more beneficial for investors as they enjoy higher allotment probability by having two applications in the reckoning. Applications in both categories will be accepted and investors have a better chance of allocation. Nevertheless, there is a cap of INR200,000 per PAN in such cases as indicated above.
Upcoming IPOs with Shareholders Quota
Here is a list of companies whose IPO is likely to have shareholders quota since their parents are already listed. This list of upcoming IPOs with shareholders quota is provisional, and the IPO launch may take some time but it is worth keeping an eye on.
|Sr No||IPO Name||Parent Company||Status|
|1||Balaji Specialty Chemicals||Balaji Amines Ltd.||Prospectus filed|
|2||JK Files and Engineering||Raymond||Prospectus filed|
|3||SBI Mutual Fund||SBI||–|
|4||Delta Gaming||Delta Corp||Prospectus filed|
|5||HDB Financial||HDFC Bank||IPO expected in 2023|
|6||HDFC Ergo||HDFC Ltd||–|
|7||HDFC Credila||HDFC Ltd||–|
|8||Kotak AMC||Kotak Bank|
|9||PNB MetLife Insurance||PNB Bank|
|10||Bajaj Energy||Bajaj Hindusthan Sugar|
|11||Reliance General Insurance||Reliance Capital|
|12||Reliance Retail||Reliance||IPO expected in 2023|
|13||Reliance Jio||Reliance||IPO expected in 2023|
|14||ICICI AMC||ICICI Bank|
|15||Axis AMC||Axis Bank|
|18||Tata Technology Ltd||Tata Motors|
How many shares do I need to purchase to be eligible for shareholder quota in IPOs?
You need to be a shareholder without any specific number of shares. Therefore, you can have just one share in your demat account to be eligible.
Why is record date important in shareholder quota?
You need to have the shares in your demat account as on the record date to qualify for shareholder quota in IPOs. This means that you need to purchase the parent company shares couple of days in advance.
What is the best way to be eligible for shareholder quota in IPOs?
Purchase just one share of the parent company as soon as DRHP is filed.
What is the maximum limit of the shareholder quota in IPOs?
In case applying only in shareholders reservation, one can bid for all the reserved shares.
In case of twin applications in shareholder and retail categories, combined application value should not cross INR200,000.