Maximise Your IPO Allotment Chances — Shareholder Quota Gives An Edge

Initial public offerings, or IPOs, are relentlessly swarming the Indian markets. In September, we saw a record number of listing attempts on Dalal Street. The bull market as well as increased retail participation have ensured that there is good demand for most debutants. So, how does one increase their chances of getting an IPO allotment?

Well, some IPOs come with a reserved quota for shareholders of the parent company, providing them with an exclusive opportunity to apply for shares under this special category. The prospectus details all the eligibility criteria, including bid limits, IPO allotment processes, and other rules related to shareholder reservations.

Typically, shareholders, whether individuals or Hindu Undivided Families (HUFs), holding shares on a specified record date qualify for the shareholder reserve quota. For retail investors looking to apply in both the retail and shareholder categories, the maximum allowable bid in the shareholder category is capped at Rs 2 lakh.

Also, its worth noting that you will be eligible to apply under the shareholders' quota even if you hold just one share of the parent company.

Each IPO may set specific conditions for shareholder reservations, which can vary from one issue to another and are clearly outlined in the prospectus. These conditions ensure transparency and guide shareholders through the process.

Shares purchased under the shareholder reservation do not have any lock-in period, meaning they can be freely traded once the IPO is listed. This provides flexibility similar to that of retail investors, allowing shareholders to capitalise on market movements post-listing.

• Higher chances of allotment: Applying under the shareholder quota can improve the chances of receiving an allotment.

• Discounts: Companies may offer a price discount to those applying through this category.

• Increased investment opportunity: Shareholders can bid for the entire amount of shares available under this quota.

• Dual application: Applicants in the shareholder quota are still eligible to apply in other categories, such as retail and employee quotas, expanding their chances of participation.

Several parent companies are gearing up for IPOs through their subsidiaries, offering exclusive opportunities to their shareholders. For instance, companies like NTPC Ltd, Hero MotoCorp, and Coal India are preparing to launch IPOs for their subsidiaries such as NTPC Green, Hero FinCorp, and Bharat Coking Coal, respectively. Shareholders of these parent firms can leverage the shareholder quota, which may boost their chances of receiving an allotment and unlock potential benefits like discounted prices.

Below is a table that maps the upcoming IPOs and their parent companies. NTPC Green, HDFC Credila, HBD Financial Services, SJVN Green Energy are some of the listings on the horizon which can be targetted via parent company shareholding.