The Initial Public Offering (IPO) season is heating up, and 2024 promises to be an exciting year for investors, especially those looking to benefit from the shareholder quota.
This unique allocation allows existing shareholders of a parent company to have preferential access to shares of its subsidiary during an IPO. Understanding how this system works, and knowing which companies are offering shareholder quotas, can significantly increase your chances of securing an allotment.
Let’s delve into the key upcoming IPOs with shareholder quotas and how you can maximize your investments.
What is Shareholder Quota in an IPO?
The shareholder quota is a reservation category in IPOs that provides existing shareholders of a parent company a better opportunity to secure shares in the new listing. It works by setting aside a portion of shares exclusively for shareholders of the parent company.
This means if you own shares in the parent company, you can apply for the IPO under both the retail category and the shareholder quota, effectively doubling your chances of receiving an allotment.
Also Read: Manba Finance IPO Review: Invest or Skip?
How to Apply for IPOs Using the Shareholder Quota?
Applying for an IPO under the shareholder quota is straightforward, but there are a few essential steps to follow. To qualify for this quota, you must hold at least one share of the parent company before the IPO announcement.
Once the company files its Draft Red Herring Prospectus (DRHP) and announces the shareholder quota eligibility criteria, you can apply through the shareholder category using your Demat account.
Notably, you can submit two applications: one for the retail investor category and another for the shareholder quota, effectively increasing your chances of securing shares.
Benefits of Shareholder Quota
One of the key benefits of shareholder quota in an IPO is the increased likelihood of receiving an allotment. Since this category has fewer applicants compared to the retail category, the competition is lower.
Moreover, reserved IPO shares for shareholders give existing investors an edge. Even if the retail portion of the IPO is oversubscribed, those applying under the shareholder quota have a higher chance of securing shares.
For example, during the recent IPO of Bajaj Housing Finance, those who applied under both the retail and shareholder quotas saw a much higher success rate in securing allotments.
This dual-application strategy allowed investors to benefit from the listing gains and increase their overall profits.
Upcoming IPOs with Shareholder Quota in 2024
Here are some of the most anticipated upcoming IPOs with shareholder quota in 2024:
1. NTPC Green Energy IPO
Parent Company: NTPC
NTPC Green Energy is one of the largest renewable energy companies in India, and its upcoming IPO is expected to be one of the biggest in the sector. Investors holding shares of NTPC will be eligible to apply under the shareholder quota. The company is expected to raise between ₹7,000 crore and ₹10,000 crore.
2. Hero FinCorp IPO
Parent Company: Hero MotoCorp
Hero FinCorp, the financial services arm of Hero MotoCorp, is gearing up for an IPO in 2024. By holding even one share of Hero MotoCorp, investors can apply for the IPO under the shareholder quota, significantly boosting their chances of allotment.
3. SJVN Green Energy IPO
Parent Company: SJVN
Another giant in the renewable energy sector, SJVN is expected to list its subsidiary, SJVN Green Energy, in 2024. The IPO is set to raise approximately ₹12,000 crore. Holding shares of SJVN will give investors access to the shareholder quota in this promising listing.
4. ONGC Green Energy IPO
Parent Company: ONGC
Following in the footsteps of other energy giants, ONGC Green Energy is set to launch its IPO soon. Shareholders of ONGC will have the opportunity to apply under the shareholder quota, increasing their chances of allotment in this exciting new offering.
5. Bajaj Housing Finance IPO
Parent Company: Bajaj Finserv and Bajaj Finance
One of the most highly anticipated IPOs, Bajaj Housing Finance will allow shareholders of both Bajaj Finserv and Bajaj Finance to apply under the shareholder quota. This IPO promises to attract significant attention due to the strong performance of its parent companies.
6. HDB Financial Services IPO
Parent Company: HDFC Bank
HDB Financial Services, a subsidiary of HDFC Bank, is expected to hit the market in 2024. Shareholders of HDFC Bank will be eligible to apply under the shareholder category, giving them a better chance of securing shares in this popular offering.
Eligibility Criteria for the Shareholder Quota
To participate in an IPO under the shareholder quota, you need to meet certain shareholder quota eligibility criteria. Here’s a quick checklist:
- Ownership Requirement: You must hold at least one share of the parent company before the IPO announcement date.
- Demat Account: The shares must be held in a Demat account linked to the PAN card you intend to use for applying for the IPO.
- Cut-Off Date: You must ensure that you own the shares on the cut-off date, which is typically one day before the company files its Red Herring Prospectus (RHP).
Why You Should Consider Applying Under the Shareholder Quota
The shareholder quota is not just about increasing your chances of allotment; it also offers financial benefits. IPO allotment for existing shareholders often results in higher returns due to preferential treatment in allocation. Moreover, applying under this category helps you diversify your investment portfolio while ensuring that you benefit from the growth of companies in which you are already a shareholder.
For example, during the IPO of Bajaj Housing Finance, shareholders saw a preferential allotment that led to substantial profits on listing day. Similarly, past IPOs like Tata Technologies and SBI AMC have delivered robust returns to investors applying through the shareholder category.
How Many Shares Should You Hold?
When it comes to shareholder entitlement for IPO subscription, holding just one share of the parent company is sufficient to qualify for the shareholder quota. However, holding more shares does not increase your chances of allotment. Therefore, for cost-effective participation, buying a single share is usually enough.
Conclusion
2024 promises to be a dynamic year for investors, with numerous upcoming IPOs for shareholders of parent companies. By understanding how the shareholder quota works and keeping an eye on companies that offer this reservation, you can significantly improve your chances of securing shares in lucrative listings.
Whether you are an experienced investor or a newcomer, applying through the shareholder quota is a smart strategy that can yield higher returns and increase your allotment success.
As the IPO landscape evolves, keep a close watch on announcements and ensure that you hold the required shares ahead of time. With the right planning and strategy, you can make the most of the shareholder quota and capitalize on the upcoming IPOs in 2024.
