NHPC IPO has been open just one day, and itâ€™s already been oversubscribed three times. But, this headline figure of 3 is a little misguiding, as far as retail investors are concerned.
When a company declares its IPO, it has to declare the number of shares it will issue. Along with this; it also needs to declare the number of shares it will issue within each category of investors.
These are the main categories:
- Qualified Institutional Buyers
- Non Institutional Investors
- Retail Investors
People who invest less than 1 lakh (100,000) in an IPO fall under the Retail Investor category, and subscription numbers in this category is the only thing that matters to them.
But, when an over-subscription number is reported, it is normally the sum total of all categories, and is generally misleading.
To understand this, take a look at the over-subscription numbers broken down by the different categories for the NHPC IPO.
|Qualified Institutional Buyers
|Non Institutional Investors
|Retail Individual Investors
Numbers as at 7th August 2009 from NSE’s Website
If I am going to bid under the retail segment, then I am only concerned with the â€œRetail Individual Investorâ€ category in this table. That is just at 0.09 times. So, it hasnâ€™t even been subscribed once, let alone thrice! The over-subscription has been driven by the QIBs, but that doesnâ€™t impact my allotment as a retail investor.
But hearing the â€œthree times oversubscribed numberâ€, without telling me what the retail portion is; influences me wrongly in two ways:
- It makes me think that I need to apply for much more than I really want, because the issue has been so much oversubscribed. I think that I will only get pittance, if I donâ€™t apply for a large number of shares.
- If I was going to apply for a small lot, it makes me think that there is no point in applying at all, because my small application wonâ€™t get any shares at all.
So, you need to ignore all headline over-subscription numbers, and specifically look for your category to make sense out of this number.
Here is how to do that.
- Go to NSE Indiaâ€™s website.
- In the middle of the page, you will see IPO: NHPC. Click on â€œNHPCâ€
3. Scroll down the page that opens and you will see a table with the title â€“ â€œNHPC LIMITED â€“ Bid Detailsâ€. Â In this table â€“ â€œ3 Retail Individual Investors (RII) is what you are interested in.
You can check this site, and see what the latest numbers are. This is the source of the data, and will help you cut through the noise in the news, and get to the real number you are interested in.
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