NRI IPO Investment in India

Are you a NRI and want to know whether you can apply in IPOs in India or not? Here is the complete guide for you on NRI IPO investment in India.

Non-resident Indians can invest in India in various asset classes like equities, bonds, NCDs and can also trade in the F&O segment. Initial public offering (IPO) is a popular investment option for residents and NRIs. NRIs can invest in IPOs or initial public offerings of Indian companies. However, there are a number of rules and regulations that apply to investing in NRI IPO.

Let’s discuss everything in detail such as the types of NRI trading accounts required, how the NRI IPO investment works, NRI as a type of IPO investor, and much more!

Are NRIs allowed to invest in IPOs in India?

Yes, NRIs are allowed to bid in an IPO.

If you are a NRI, you can subscribe to an IPO of your choice only through a non-PIS account. NRIs can use either an NRE or an NRO savings account without PIS to bid for IPO. Thus, all eligible NRIs can invest in IPO on a repatriation or non-repatriation basis.

Investments by NRIs in IPOs are not covered under the Portfolio Investment Scheme of RBI (PIS). Therefore, NRIs that do not have a PIS account can invest in an IPO.

However, the IPO companies have the right to decide whether NRIs can invest in an IPO or not. Therefore, it is advisable for NRIs to read the IPO documents such as DRHP and RHP to check the eligibility for IPO.

NRI transactions through no PIS account are not reported to RBI. Therefore, the company going public has to inform RBI about the shares issued or allotted to NRIs.

Is PIS Permission required to apply for IPO in India?

No, RBI PIS approval is not required for IPO investments by NRIs.

Even if an NRI has a PIS-enabled NRE trading account, it cannot buy and sell IPO shares. The IPO investment option is only available to NRIs who do not have a PIS bank account. There are no additional requirements or approvals for NRIs to invest in IPOs.

An NRI needs the following three types of accounts to successfully participate in an IPO:

• NRI Demat Account to get the delivery of the allotted IPO shares
• NRI Trading Account to bid for the IPO
• NRE or NRO no-PIS Bank Savings Account

NRI IPO Application Categories

An IPO can have 4 types of IPO applicants; Retail Individual Investor (RII), Non-Institutional Investor (NII), Qualified Institutional Investors (QIBs), and Anchor Investors.

Now the question is, what type of IPO category belongs to NRI? An NRI can be either a retail investor or a non-institutional investor. Here’s how;

1. Retail Individual Investor

If a NRI makes an IPO bid for an amount up to Rs 2 lakh, he/she can apply as a retail investor. Thus, Rs 2 lakh is the maximum IPO bid amount for NRIs as a retail investors.

Note: If there is a discount for retail investors, the 2 lakh will be calculated as the total bidding amount net of retail discount.

2. Non-Institutional Investor

Bids from eligible NRIs for an amount exceeding Rs 2 lakh will be considered as non-institutional bidders for allotment of shares. In such case, the maximum bid amount cannot exceed the issue offer, subject to applicable limits.

NRI IPO Bid cum Application Form

For the purpose of uniformity and easy identification of IPO applications, SEBI has standardized the color of IPO Application-cum-Bidding form.

• White color IPO bid cum application form is specified to bid for IPO by residents and eligible NRIs bidding on a non-repatriation basis using NRO Account.
• Eligible NRIs who want to bid for IPO on a repatriation basis with NRE account should place a bid using the Blue color NRI IPO application form that is meant for non-residents.

How can NRIs apply for IPOs in India?

NRIs should first review the IPO prospectus to know whether or not they can apply. NRIs can subscribe to an IPO through UPI or Net Banking ASBA (Applications Supported by Blocked Amounts).

If a NRI wants to invest in Indian IPOs, the bid amount must be paid in Indian rupees and freely convertible foreign exchange to be considered for allocation.

Let’s discuss how NRI investment in IPO works:

NRI IPO Apply through ASBA Method

ASBA is an online IPO application process (physical or electronic) to subscribe to a public offering at your bank. When an NRI submits an IPO bid through Netbanking-ASBA, the application money is withdrawn from the bank only when the shares are allotted to the NRI bidder. Here are the steps of NRI IPO investment through ASBA:

1. Log in to your net banking where you have NRE or NRO bank account.
2. Go to “IPO” investment option.
3. Within the list of open IPOs, select the one of your choice.
4. Enter IPO bidding details like type of investor (Retail or Non-institutional investor), bid price, and quantity or number of shares.
5. Also, enter your NRI Demat account details for the credit of allotted shares.
6. Submit the IPO bidding application with your bank.
7. Once the request is successfully placed, you authorize your bank or SCSB (Self-certified Syndicate Bank) to block the IPO application money in your bank account till allotment finalizes.
8. NRI bidders on a repatriation basis should authorize SCSB to block their NRE or FCNR account for the IPO application amount.
9. NRI bidders on a non-repatriation basis should authorize SCSB to block their NRO account for the full bid amount.

Note: Most banks in India including ICICI, HDFC, SBI, Axis etc. offers online ASBA net banking IPO application facility. However, USA and Canada based NRIs are not allowed to invest in IPOs.

NRI IPO Apply – UPI Method

The IPO application process through UPI is the same for both residents and non-residents. Eligible NRIs may subscribe to an IPO through the UPI mechanism. The UPI method allows NRI bidders to accept the UPI mandate request to allow the IPO bidder account to be blocked. However, before submitting the IPO bid cum application form, NRIs should check whether their NRE or NRO bank account is linked to UPI or not.

1. Log in to your NRI (NRE or NRO) Demat account with your broker.
2. Go to the IPO option.
3. Tap on “Apply IPO” respective to the issue, you want to apply in.
4. Enter bid details like bid quantity, bid price, or your UPI ID.
5. Submit the details.
6. Now, accept the UPI mandate request sent to your UPI app to authorize the blocking of funds.
7. That’s done! You have successfully subscribed to the IPO.

Note: If an IPO gets oversubscribed and a NRI does not receive shares allotment, the bid amount refund will be processed in Indian rupees only, net of applicable bank charges and/or commission.

Important points to note about NRI IPO Investment:

• IPO by an Indian company does not have a minimum reservation for NRIs.
• NRI can participate in IPO using a non-PIS NRI account only.
• PIS account does not enable NRIs to bid for an IPO.
• According to FEMA rules, an NRI cannot hold more than 5% of the total paid-up capital of a company.
• Total holdings of all NRIs and OCIs together cannot exceed 10% of the company’s total paid-up capital.
• The above maximum 10% ceiling can be raised to 24% by passing a special resolution by the Indian company.