HNI in IPO: How to Apply, Meaning and Benefits

As per Knight Frank’s flagship study, ‘The Wealth Report 2024’, India is poised to witness a remarkable 50% increase in the number of UHNIs from 13,263 in 2023 to 19,908 in 2028 and the number of HNIs to rise to 1.65 million by 2027. This record increase is expected to create a ripple effect in the stock markets, leading to higher investments by HNIs in stock market securities and IPOs. But what is an HNI in IPO, and how do you apply IPO in the HNI category? Dive into this blog to learn all about HNIs in IPO and the specific rules that apply to this category of investors in an IPO. 

What is HNI Category in IPO?

High-net-worth individuals (HNIs) have a minimum net worth of Rs. 5 crores. They are part of the NII (Non-Institutional Investor) category in an IPO, along with NRIs, HUFs, FPIs, Trusts, and Companies. 

SEBI regulations specify that a 15% portion of the IPO can be allocated to the NII category, within which eligible HNIs can invest or subscribe for an IPO.  HNIs must submit a minimum application of Rs. 2,00,000 in the NII category, providing an increased investment opportunity in an IPO. This threshold differentiates them from retail investors who cannot bid for more than Rs. 2,00,000 in an IPO. 

How Do you Apply for an IPO in the HNI Category?

The primary requirement to apply for an IPO in the HNI category is to first check for eligibility and have a valid Demat account to get credit for shares upon allotment. The steps for applying for an IPO in the HNI category are highlighted below.

• Log in to the net banking account.

• Go to the IPO/ASBA section, usually found under the 'Services' tab and click on 'Apply for IPO.'

• Select the ‘HNI’ category from the available application options.

• Enter the IPO name, the number of lots (shares) to bid for and the bid price per share, ensuring the total bid amount is at least Rs. 2,00,000.

• Double-check your bid details and submit the IPO application.

• The total bid amount will be blocked in the bank account. 

• Once the IPO allotment process is closed, the shares get credited to the demat account, and the bid amount will be debited from the bank account. 

• If the IPO is oversubscribed, only the proportionate amount will be debited based on the shares allotted. 

Benefits of Applying IPO in the HNI Category

Along with an attractive investment opportunity, there are multiple benefits for investors to apply for an IPO in the HNI category. Some of these benefits of HNI in IPO are mentioned hereunder. 

• Higher Allotment Chances: Applying in the HNI category can increase the chances of getting more allotted shares than retail investors.

• Potential for Higher Returns: Investing larger sums can lead to higher returns with a higher allotment of shares if the IPO performs well, increasing the potential for listing gains.

• Investment Diversification: Participating in IPOs allows HNIs to diversify their investment portfolio with new and potentially high-growth companies.

• Participation in Anchor Investments: HNIs can participate as anchor investors, securing shares before the IPO opens to the general public, often at favourable terms.

Rules for Applying for IPO in HNI Category

The NII category is a particular category for the HNI investors to apply in an IPO. However, there are specific rules set for the HNI category investors that they need to abide by to ensure successful application and allotment. These rules include,

• An individual investor can apply under the retail investor or HNI category in IPO but not both.

• HNIs cannot bid at the cut-off price, as the bid price for HNIs is set at the highest price within the IPO's given price band.

• HNIs must select the HNI category in the IPO application form and bid for a minimum of Rs. 2,00,000 equity shares.

• HNIs applying for shares between Rs 2 -5 Lakhs can apply on FYERS website or FYERS App.

• For amounts exceeding Rs 5 lakh, the application should be made through ASBA (Application Supported by Blocked Amount) using net banking or UPI or by submitting the physical IPO application form.

• The bid amount is blocked until the allotment is complete; however, HNIs bidding through savings accounts can continue to get interest on the blocked amount. 

• HNIs must submit their IPO application by 4 PM IST on the issue closing date.

• Allotment of shares is proportionate or through a lottery system based on applications and oversubscription.

• HNIs are not allowed to withdraw or decrease their bids like retail investors, and they must take delivery of shares once they are allotted. 

Tips for Investing in HNI Category IPOs

Retail investors willing to invest more than Rs 2,00,000 in an IPO prefer investing in the HNI category as it can lead to preferential allotment or higher chances. Therefore, HNIs should consider a few points before investing in an IPO to ensure a successful investment.

• HNIs should carefully examine the company’s Red Herring Prospectus to assess its financials, business model, growth prospects, and competitive position in the market.

• They should stay updated on the latest companies coming to the IPO market and any new changes in the rules for subscription in the HNI category in IPO.

• HNIs can seek professional or expert analysis for personalised guidance tailored to their risk appetite and investment goals.

• Finally, HNIs should monitor their investments regularly to meet their investment parameters. 

Conclusion

HNIs typically have higher surplus funds and a longer investment horizon, which is ideal for an IPO investment opportunity as it can lead to potentially higher returns in the long term. This significant advantage is one of the many reasons IPOs have seen increasing HNI investors. However, investing in the HNI category in an IPO comes with specific rules that must be considered before making the investment decision.