How to Apply for an IPO in HNI Category

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In the Indian stock market, there has been a recent rise of IPOs especially for Indian companies as well as MNCs. An Initial Public Offering (IPO) is a way for companies to raise capital by selling their shares to the public.

High Net Worth Individuals (HNIs) also invest in IPOs to get the early mover advantage. In this article we have covered how HNIs can apply for an IPO, it’s benefits and things to consider before investing.

What is HNI in IPO?

Investors who submit an IPO application for INR 2 lakhs or more are classified by SEBI as HNIs, or Non-Institutional Investors (NIIs).

Aside from retail and other institutional investors. The HNI category investors are able to contribute a substantial amount to an IPO which gives a confidence boost to the overall market. The NII category, which includes HNIs, actually receives 15% of the IPO from SEBI.  

Benefits of Applying for IPO in HNI Category

Aside from the early access to invest in a company, there are several benefits for applying for IPO under HNI Category. Some of these benefits are mentioned that one can take advantage of are:

• Higher Allotment: Compared to retail investors, HNIs are more likely to receive more shares in the IPO.
• Better Returns: With more shares allocated to HNIs, they have the opportunity to get significantly higher returns on their investments as per the IPO performance.
• Portfolio Diversification: Investing in IPOs gives HNIs the opportunity to diversify their investments, they can choose to invest in companies with high growth potential and different asset types such as equity, debt or hybrid.
• Anchor Investor Access:
• Investment Services: HNIs can always avail services such as wealth management services that can help them in taking advantage of IPO while ensuring it matches the needs of the HNI.
• Flexibility: When it comes to investing in IPOs, HNI can choose to invest in various IPO instruments such as equity, debt, or hybrid based on their return and risk preferences.

Types of HNI Investors for IPO

There are two main types of Non-Institutional or HNI investors recognised by SEBI:

SEBI guidelines states that one third of the NII allocation is reserved for NII and two-thirds for bNII, to ensure fair opportunities among HNI investors.

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Also Read: Difference Between Direct and Indirect Tax

Eligibility Criteria for HNI IPO Application

• Your IPO subscription amount should be worth more than INR 2 lakh in a single IPO to be classified under HNI category.
• The HNI category is open to foreign portfolio investors, Indian residents, and NRIs.
• HNI looking to invest in IPO should invest through the Application Supported by Blocked Amount (ASBA) mechanism which allows HNIs to apply for IPO without immediate fund transfer.

Important Documents Required for HNI in IPO

As an HNI in IPO there are a few documents that will be required during the application process:

• PAN Card
• Income Tax Returns of past 2 years, showing income proof of INR 2 crore and above.
• HNI indicator form and Bank statements and other documents as proof of net worth.
• Bank account linked to your Demat account.

How to Invest in IPO as HNI

It’s important to be aware on how to apply for IPO in HNI category to ensure a successful IPO allotment. Follow these simple steps for submitting an HNI application for IPO: 

1. Step 1: Log in to your bank’s investment portal and go to IPO section.
2. Step 2: Select the IPO you want to apply for and ensure that the application amount is above INR 2 lakhs
3. Step 3: Decide how many lots and what price you wish to subscribe for in the initial public offering.
4. Step 4: Verify the application and use ASBA to block the funds from leaving your bank account.
5. Step 5: After submitting your application, keep a track of allotment status on the portal.

HNIs should consider the DBS Treasures premium savings account for its exclusive banking privileges, dedicated relationship management, and access to sophisticated wealth solutions that cater to their complex financial needs and lifestyle aspirations.

Also Read: Hedge Fund vs Private Equity: Which is Better

SEBI Regulations for HNI Category in IPO

It is crucial that when investing under the HNI Category in IPO, that you follow the SEBI regulations, by being aware of these rules you can avoid any issues or penalties regarding your investments:

• Window Timing: HNIs typically have an earlier closing time for their IPO application than retail investors, with the window closing at 4 PM on the final day of bidding.
• Application Restrictions: HNI applications cannot be withdrawn or reduced once submitted, only increase in application amount is allowed.
• Early Bidding

Tax Implications for HNI Investors

If you are investing as HNI in IPO, your investment is subject to taxation. The tax rate is determined by the holding period and the amount of gains. Here are different types of tax rates applicable to HNI investors:

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Conclusion

Applying for an IPO in the HNI category is a smart move for HNI investors who want to diversify their investment portfolio or take advantage of the early opportunity. When investing HNIs must be aware of the application process and guidelines mandated by the SEBI. 

The DBS Treasures wealth management services can assist you in making such investments with expert-backed professionals and personalized investment plans according to your financial goals.