How to get assured allotment in an IPO
Stock markets circles have recently been buzzing with excitement around Ujjivan Small Finance Bank’s IPO of Rs 750 crore, which was open for subscription between December 2nd and 4th.
Those who applied and got allotment were delighted with a bumper listing, as the bank made its debut on the stock market on December 13, opening at Rs 58.75 on the NSE, compared to the issue price of Rs 37.
That’s a premium of 59%!
But everyone who applied for the issue was not so fortunate. Being oversubscribed by close to 170 times means that a lot of investors were left disappointed…
Did you know that you can get assured allotment, on a proportionate basis in the shareholder category, in the public issue of a subsidiary company, if you hold even 1 share in the parent company?
Yes. Holding even one share of the parent company entitles you to apply in the shareholder category of its subsidiary. In addition, you can apply in the retail category as well, thereby increasing your chances of allotment further.
So, for example, while only 1 out of every 30 retail applicants of UjjivanSmall Finance Bank’s IPO got allotment, those who had shares of Ujjivan Financial Services got firm allotment, if they applied in shareholder category.
Here’s the good news…there are a number of upcoming IPOs with listed parent companies that you can consider.
Upcoming IPO candidate and their parent companies
Now, there are some things to keep in mind…
1. To avail this facility, you will have to apply under the shareholder category.
2. The biggest caveat for this strategy is that there is no standardized cut-off date for deciding the shareholding in the parent company. More so, issuing companies reveal this date relatively close to the date of the issue. So, for instance, UjjivanSmall Finance Bank chose 22 November 2019 as its cut-off for a shareholding in Ujjivan Financial Services and the issue opening was on 2 December 2019. But other companies have had cut-off dates that are many months before the issue. It’s a chance you have to take. So, the earlier you purchase shares of the parent company, the better.
3. Irrespective of how many times the IPO is oversubscribed, you will be allotted some shares, on a proportionate allotment basis under the shareholder category.
4. You can apply to the extent of Rs 2 lakh each in both the retail as well as shareholder categories (total of Rs 4 lakh) and if you are lucky, you may receive allotment in the retail category as well.
5. As always, when you invest in an IPO, make sure that you do your homework. Invest wisely and make the most of listing and/or long-term gains.
We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:
We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.