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 Helps 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 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.
| Category | Shares Offered | Shares Bid For | Subscription |
|---|---|---|---|
| QIB (Qualified Institutional Buyers) | 5,380,106 | 2,22,40,512 | 4.13x |
| NII (Non-Institutional Investors) | 4,035,080 | 60,88,446 | 1.51x |
| Retail Investors | 9,415,186 | 1,55,07,996 | 1.65x |
| Total | 18,830,372 | 4,38,36,954 | 2.33x |
IPO Subscription Procedure
The IPO subscription process entails all stakeholders: investors (individuals, QIBs), brokers/banks (e.g., Zerodha, ICICI Bank), stock exchanges (BSE, NSE), and the registrar (e.g., Link Intime, Karvy). This is a step-by-step explanation:
- 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.
- 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 so that there is sufficient time to process and submit bids to the exchange by 5 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
Investors are categorized into three wide categories depending upon the investment size:
- Retail Individual Investors (RII): Bidders seeking less than Rs. 2 lakhs.
-
Non-Institutional Investors (NII): Bidders bidding for more than Rs. 2 lakhs. This is again divided into:
- Small NIIs (bids below Rs. 10 lakhs)
- Big NIIs (bids greater than Rs. 10 lakhs)
- Qualified Institutional Investors (QIB): Consists of 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 by observing the number of shares offered and the bid count using this calculator. The majority of subscription rates are easily found on stock exchange websites.
Types of IPO Subscription
1. Oversubscribed IPO
An IPO is said to be oversubscribed when bids for more shares have been received than the shares issued. This implies that demand is higher than supply for the IPO shares. For example, during the Sula Vineyards IPO, the subscription was 2.33 times, which represents an oversubscription.
Advantages of an Oversubscribed IPO:
- The firm can raise more capital through issuing additional shares to satisfy demand.
- The IPO will probably be listed with a premium.
- A fair gauge of the popularity of the company and investor confidence.
2. Undersubscribed IPO
An IPO is said to be undersubscribed if less number of shares is applied for than offered. In this situation, demand for shares is lesser in comparison to the supply.
Example: When a company issues 10 lakh shares at Rs. 90 each, but only 8 lakh shares are applied for, the IPO is undersubscribed.
IPO Subscription and Listing Price
Subscription figures are very important in forecasting listing prices of shares when they get listed on stock exchanges. Oversubscription of an IPO generally suggests higher demand, and it could lead to listing at a premium. But there are numerous factors that determine the ultimate listing price, such as:
- Market Sentiment
- Grey Market Premium (GMP)
- The future prospects of the company
- Any promoter-offloaded shares
- Economic or policy shifts in the industry concerned
IPO Subscription and Grey Market Premium (GMP)
Grey Market Premium (GMP) is the amount of premium that investors are ready to pay for IPO shares prior to listing. This is actually an unofficial market in which IPO shares are exchanged prior to being listed on stock exchanges. The GMP can show the demand and premium pricing that is potential once listing for the IPO is done.