UPI is gaining traction among individuals applying for IPOs. Two-thirds of such applications, predominantly retail, are routed through UPI, according to industry estimates. The value of IPOs executed through UPI touched a peak of nearly ₹6,000 crore in October last year, RBI data showed.
“The incorporation of UPI in the public issue framework enhances user convenience, streamlines the process, and shortens the time required for public issues to be listed,” RBI said in a report.
Preferred mode
The UPI transaction limit was raised from ₹2 lakh to ₹5 lakh in December 2021 to promote increased participation of retail customers in financial markets, including investments in G-secs through the retail direct scheme and payments for IPOs.
“UPI has become the preferred mode for IPO applications among retail investors. Mandates are now processed within hours, unlike ASBA, which takes more time,” said an official from a large domestic brokerage.
He added that system enhancements had brought failure rates down from 8-10 per cent to below 1 per cent, improving reliability. While some challenges like bank downtimes remain, infrastructure upgrades are making the process more efficient, he said.
While ASBA and UPI are equally popular, many brokers provide the latter as it helps them cater to all clients who may have accounts with different banks, according to Ashish Nanda, President and Head of Digital Business at Kotak Securities. ASBA, on the other hand, will be restricted to the bank that brokers tie up with.
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“The only disadvantage is the maximum limit of ₹5 lakh in UPI which, to an extent, restricts clients from applying larger amounts in the HNI segment. But UPI is very much popular in the retail segment,” Nanda said.
The cut-off time for ASBA IPO applications in different banks is 2-3 pm on the last day whereas for UPI it is 5 pm. This means that while UPI investors have the option to apply earlier in the day they have time till 5 pm to accept or reject the IPO mandate. Only once the mandate is accepted the investor money get blocked in the bank account.
This feature is particularly useful when investors apply based on grey market premiums and oversubscription numbers. “This is where UPI investors have an edge,” said Jasani.
While the popularity of UPI has risen in the last 12-15 months, it is still a small portion of the overall collection — applications routed through UPI as a portion of the total issue size is now about 10 per cent compared with 5-8 per cent a year back, according to Jasani.
UPI applications also had a higher rejection rate due to invalid UPI ID, requests declined, technical issues and PAN mismatch.
2024 was a landmark year for IPOs, with over 90 companies raising ₹1.62 lakh crore — more than double the amount raised in 2023.