Understanding IPO Subscription

IPO Subscription reflects the demand for shares during the initial public offering (IPO) process. It shows the number of shares that investors have applied for during the subscription period, which typically lasts between 3-10 business days, depending on the type of IPO. Real-time subscription data is available on platforms like BSE and NSE.

Subscription status reflects the demand for shares and evolves over the course of the IPO window, being settled when the bidding period ends. Strong subscription levels can be an indicator of strong demand and a likely successful investment, while weak demand may indicate concern about the appeal of the offering.

How IPO Subscription Data Assists Investors

• Assesses Demand: Strong subscription levels reflect strong demand, which can imply a good IPO investment.
• Investment Strategy: Subscription data assists investors in developing strategies by determining the demand for shares and adjusting bids accordingly.
• Maximizes Profit Potential: Real-time subscription data enables investors to decide what category to apply under (e.g., retail, NII, employee) to improve the probability of receiving an allotment.
• Grey Market Insights: It is essential in determining the IPO grey market price.
• Borrowing Choices: Investors are able to evaluate if it's worth borrowing money to invest in an IPO.
• Probability of Allocation: Greater demand tends to equate to lower allotment probability, so subscription information is key in selecting an IPO with better chances of securing shares.

Sula Vineyards IPO Subscription Statistics

Sula Vineyards launched its IPO in December 2022, offering a total of 18,830,372 equity shares to the public.

IPO Subscription Procedure

• Investor Submits Bid: Investors submit their bids through brokers or banks on the online exchange of the stock.
• Bids Processed by Brokers/Banks: Brokers or banks aggregate the bids and send them to the stock exchange.
• Real-Time Subscription Data: The exchange releases real-time subscription status between 10 AM and 5 PM.
• Registrar's Role: After the IPO window closes, the stock exchange releases the subscription data to the registrar, who allots shares as per SEBI guidelines and information in the Red Herring Prospectus (RHP).
• Allotment Status: The registrar releases the allotment status on its website and sends allotment emails.
• Release of Funds: Banks are directed to release unused blocked funds, and the allotted IPO shares are credited to investors on the day prior to the listing.

Timing of IPO Subscription

• Broker/Bank to Investor: Submissions of bids may be made at any time during the open period of the IPO (24/7).
• Stock Exchange to Bank: Bids are submitted between 10 AM on the opening day of the IPO and 5 PM on the closing date.
• Cutoff for Last Day: Banks/brokers usually close the subscription window on the last day between 2 PM to 3 PM.

IPO Subscription Charges

There are no charges for submitting bids via stockbrokers or banks. Brokers may, however, charge a brokerage fee and taxes when shares are sold after allotment.

IPO Bidding Categories

• Retail Individual Investors (RII): Bidders seeking less than Rs. 2 lakhs.
• Non-Institutional Investors (NII): Bidders bidding for more than Rs. 2 lakhs.
  • Small NIIs: Bids below Rs. 10 lakhs
  • Big NIIs: Bids greater than Rs. 10 lakhs
• Qualified Institutional Investors (QIB): Includes anchor investors who invest in excess of Rs. 10 crores.
• Employees/Shareholders: In certain IPOs, there are reserved portions for employees and shareholders as given in the RHP.

IPO Subscription Calculator

The IPO Subscription Calculator assists investors in computing the number of times an issue has been subscribed. Investors can compute the total demand for shares across various categories (retail, NII, QIB) by observing the number of shares offered and the bid count using this calculator.

Important Points to Remember

• Calculation of IPO Subscription: Number of shares bid for divided by the number of shares offered.
• Price-Fixed Issues: Shares offered are stated in the Red Herring Prospectus (RHP).
• Book-Built Issues: Allocation ratios typically are 35% for RII, 15% for NII, and 50% for QIB.

Retrieval of IPO Subscription Data

Statistics on number of bids received are available in NSE and BSE websites. Reserved categories like employees can be part of investor categories. These are found in bidding documents.

Exclusions in Share Offer

Public shares do not include the market maker portion in SME IPOs or anchor investor portion in Main Board IPOs.

Types of IPO Subscription

Types of IPO subscription indicate the level of demand for the shares. An oversubscribed IPO occurs when the subscription rate is more than 1. An undersubscribed IPO occurs when the rate is less than 1.

1. Oversubscribed IPO

Bids for more shares than issued. Example: Sula Vineyards IPO was subscribed 2.33 times.

Advantages:

• Company can raise more capital.
• Likely to be listed with a premium.
• Shows popularity and investor confidence.

2. Undersubscribed IPO

Fewer shares applied for than issued. Example: Company issues 10 lakh shares at Rs. 90, but only 8 lakh are applied for.

IPO Subscription and Listing Price

Subscription figures help forecast listing prices. Oversubscription usually means premium listing. Influencing factors include:

• Market Sentiment
• Grey Market Premium (GMP)
• Future Prospects
• Promoter-offloaded Shares
• Economic or Policy Shifts

IPO Subscription and Grey Market Premium (GMP)

GMP is the unofficial premium paid for IPO shares before listing. It reflects demand and potential pricing after listing.