HNI IPO Application Process: Step-by-Step Guide

Individuals applying for IPO with applications of 2 lakh and above are included under the HNI category. However, understanding HNI IPO rules and processes is crucial to leverage this privilege effectively.

What is HNI Category in IPO?

The HNI full form in IPO stands for High Net-worth Individual. The term HNI meaning in IPO refers to High-Net-Worth Individuals who can invest substantial amounts in Initial Public Offerings. As per SEBI regulations, 15% of the IPO allocation is reserved for the Non-Institutional Investor (NII) category, which includes eligible HNIs. When you ask what is HNI in IPO, it’s essentially a premium investment category designed for those who can invest more than ₹2,00,000 in a single IPO application. These investors play a crucial role in the success of IPOs by bringing significant capital and market confidence.

Who Can Apply for IPO Under HNI Category?

To qualify as an HNI in IPO, investors must meet specific criteria established by SEBI. The primary qualification is the ability to invest more than ₹2,00,000 in a single IPO application. Both Indian residents and Non-Resident Indians (NRIs), can participate in IPOs under the HNI category, provided they meet the minimum investment requirements.

Types of Investors in the HNI Category

The HNI category IPO segment includes various types of investors, each with unique characteristics and investment approaches. Understanding these types helps clarify HNI meaning in IPO from different perspectives.

• S-HNIs: These are individual investors who consistently invest between ₹2 lakhs to ₹10 lakhs in IPOs. They often use personal funds and focus on building a diversified portfolio through IPO investments.
• B-HNIs: Investors who apply for IPOs with investments exceeding ₹10 lakhs, typically including affluent individuals or entities aiming to make significant contributions to an IPO.
• Ultra HNIs: Investors who routinely apply for IPO shares worth more than ₹10 crores fall into this category. They frequently utilise HNI IPO funding to maximise their application size and potential returns.
• Corporate HNIs: Companies and institutions that invest through the HNI category, often with sophisticated investment strategies and longer investment horizons.

How to Apply IPO as an HNI

Follow these steps to know about – How to apply for IPO in HNI category online to ensure a successful HNI application for IPO:

Step 1: Check Eligibility: Ensure your bid amount is ₹2,00,000 or more. This is the primary criterion for the HNI category.

Step 2: Open a Demat Account: You need an active Demat account to receive credited shares.

Step 3: Log into Net Banking: Most banks provide an ASBA (Applications Supported by Blocked Amount) feature.

• Navigate to the IPO section.
• Select the HNI category IPO option.

Step 4: Submit the Bid

• Specify the number of shares and bid price.
• Ensure the total value exceeds ₹2,00,000.

Step 5: Block Funds: The application amount is blocked in your account until the HNI IPO allotment process is complete.

Step 6: Monitor Allotment Status: Once the IPO closes, track your allotment through the registrar’s website or your broker.

Eligibility Criteria for HNI Category

• Minimum Bid Amount: ₹2,00,000 or more.
• Application Timelines: Submit before 4 PM on the issue’s closing day.
• Cut-Off Price: HNIs cannot bid at this price; they must specify an exact amount within the IPO price band.

Documentation Required

1. PAN card.
2. Bank account linked to your Demat account.
3. Sufficient funds to cover the bid amount.

How IPO Allotment Works in the HNI Category

Proportionate Allotment

The HNI IPO allotment process follows a systematic approach based on subscription levels. When an IPO receives applications within its total offered shares, all eligible HNI applicants typically receive full allotment. However, the more common scenario involves oversubscription in IPO, where proportionate allotment comes into play.

For example, if an IPO reserves 1 million shares for the HNI category and receives applications for 5 million shares, each applicant might receive 20% of their bid quantity. The exact proportion depends on various factors including total subscription levels and individual bid sizes.

Oversubscription Management

Oversubscription happens when the demand for shares is higher than the number of available units, making it challenging to distribute them fairly. To handle this, companies and lead managers use different methods.

• Lottery System: This method randomly selects eligible High Net Worth Individual (HNI) applicants to allocate shares. It ensures fairness, giving all investors an equal chance regardless of the size of their investment.
• Predefined Allocation Criteria: Companies can set specific rules to decide how shares will be distributed. These rules might prioritise certain investors based on factors like the amount they invest, how long they plan to hold the shares or their existing relationship with the company.

Benefits of Applying IPO in the HNI Category

Investing through the HNI in IPO category offers several distinct advantages. First, HNI investors often receive preferential treatment in terms of information access and service quality from brokers and investment bankers. The benefits of HNI in IPO extend beyond just better allotment chances.

Key advantages include:

• Access to a reserved portion of IPO shares (15% of total issue)
• Better chances of meaningful allotment in premium issues
• Professional research support from brokers
• Priority in corporate actions and future offerings
• Potential for higher returns through larger investment sizes

Rules and Guidelines for IPO Applications in the HNI Category

Key HNI IPO Rules

• Minimum Investment: ₹2,00,000.
• Blocked Amount: Funds remain blocked until allotment.
• Allotment Timelines: Shares are allocated within six working days post-closure.
• Restrictions: HNIs cannot apply in both the retail and HNI categories for the same IPO.

Important Guidelines

1. Read the company’s Red Herring Prospectus for financial details.
2. Monitor application deadlines and ensure timely submissions.
3. Use only SEBI-registered brokers for applications.

Conclusion

Investing in the HNI category IPO opens doors to exclusive opportunities for individuals with substantial capital. You can maximise returns and strategically diversify your portfolio by understanding the HNI IPO allotment rules, benefits, and application process.