There are different segments of Investors who invest in IPOs. The three important segments are Retail Investors, Qualified Institutional Buyers, and Non Institutional buyers. As per SEBI guidelines, there are a different set of allocation rules for different types of Book Building Issues. An issuer can issue securities to Investors in two ways: 100% book building and 75% book building (of the net offer to the public). We will see, these 3 important cases of allotment procedures below.
Case 1:
Allocation:
- Not less than 35% of the net offer to the public to Retail individual investor.
- Not less than 15% of the net offer to the public to NonInstitutional Investors i.e. investors other than retail individual investors and qualified institutional buyers.
- Not more than 50% of the net offer to the public to Qualified Institutional Buyer (out of which 5% to be specifically allocated to mutual funds) However 50% of net offer to the public shall be mandatory allotted to the qualified institutional buyers.
Case 2:
Issues made under Rule 19(2)(b) of Securities Contract Regulation, Rules 1957, with 60% mandatory allocation to Qualified Institutional Buyers (out of which 5% to be specifically allocated to mutual funds)
- Allocation: The percentage allocation to retail individual investors and non-institutional investors shall be 30% and 10% respectively.
Case 3:
CAn issuer company makes an issue of 75% of the net offer to
Allocation:
- In the book built portion, not less than 25% the net offer to the public to
non qualified institutional buyers. - Not more than 50% of the net offer to the public to Qualified Institutional Buyer (out of which 5% to be specifically allocated to mutual funds)
- The balance 25% of the net offer to the public offered at a price determined through building to retail individual investors who either not participated or have not received allocation, in the book built portion.