The Hindu Business Line : Nuts and bolts of allotment

A company making an issue to public can reserve some shares on "allotment on firm basis" for some categories as specified in DIP guidelines. Allotment on firm basis indicates that allotment to the investor is on firm basis.

The SEBI guidelines provide for maximum percentage of shares which can be reserved on firm basis. The shares to be allotted on "firm allotment category" can be issued at a price different from the price at which the net offer to the public is made provided that the price at which the security is being offered to the applicants in firm allotment category is higher than the price at which securities are offered to public.

What is reservation on competitive basis?

Reservation on Competitive Basis is when allotment of shares is made in proportion to the shares applied for by the concerned reserved categories. Reservation on competitive basis can be made in a public issue to the Employees of the company, Shareholders of the promoting companies in the case of a new company and shareholders of group companies in the case of an existing company, Indian Mutual Funds, Foreign Institutional Investors (including non resident Indians and overseas corporate bodies), Indian and multilateral development institutions and Scheduled Banks.

Is there any preference while doing the allotment?

The allotment to the Qualified Institutional Buyers (QIBs) is on a discretionary basis. The discretion is left to the Merchant Bankers who first disclose the parameters of judgment in the Red Herring Prospectus.

There are no objective conditions stipulated. The Merchant Bankers are free to set their criteria and mention the same

in the Red Herring prospectus.

Who is eligible for reservation and how much? (QIBs, NIIs, etc.,)

In a book built issue allocation to Retail Individual Investors (RIIs), Non Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs) is in the ratio of 35: 15: 50 respectively.

In case the book-built issues are made pursuant to the requirement of mandatory allocation of 60 per cent to QIBs, the respective figures is 30 per cent for RIIs and 10 per cent for NIIs. This is a transitory provision pending harmonisation of the QIB allocation in terms of the aforesaid Rule with that specified in the guidelines.

How do I know if I am allotted the shares? And by what timeframe will I get a refund if I am not allotted?

The investor is entitled to receive a Confirmatory Allotment Note (CAN) in case he has been allotted shares within 15 days from the date of closure of a book Built issue. The registrar has to ensure that the demat credit or refund as applicable is completed within 15 days of the closure of the book built issue.

How long will it take after the issue for the shares to get listed?

The listing on the stock exchanges is done within 7 days from the finalisation of the issue. Ideally, it would be around 3 weeks after the closure of the book built issue. In case of fixed price issue, it would be around 37 days after closure of the issue.

Source: www.sebi.gov.in

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