019 How (applying to) IPO works
F*ck it, just listing what I found interesting this week:
Newsworthy
Byju Ravveendran, founder and CEO of Byju’s, spoke to the media for the first time in 4 years. Once the most valued Indian start-up at $ 20 Billion, it owes lenders north of INR 20,000/- crores (or more).
Blinkit announces a 10-minute return and exchange for apparel in select cities.
RBI orders 4 NBFCs, including Sachin Bansal’s NAVI, to halt lending operations in light of ‘excessive lending rates and predatory lending practices’. This is the biggest move by RBI against Fintech cos. for a while.
Market volatility has caused gold prices to hit a new high - INR 78,900/10 grams
Hyundai’s mega INR 28k crore IPO, #1 in India-ever, ‘flops’ with retail investors
First Zomato, now Swiggy, soon Zepto? Zepto looks to raise USD 100 million as it reportedly prepares for an IPO next year
In the first half of 2024, UPI transactions surged by 52%, reaching a whopping 78.97 billion. This sharp rise shows how digital micro-payments are becoming the norm in India, with UPI steadily taking over the payment ecosystem.
25% of last year’s US VC investors have paused new investments in 2024
Wild Stats
Industrial activity is responsible for over 25% of global carbon emissions
In 2022, 27% of India’s steel, iron, and aluminum exports—worth $8.2 billion—were sent to Europe. Europe’s new CBAM law might hurt this majorly.
Bajaj is the largest 3-wheeler manufacturer in the world
Two people communicate in dreams, read the article here
Getting a bit desperate now…
And since it’s Friday, this legend deserves his flowers…or whatever it is that he is asking for
(via The Daily Brief)
Why do I never get an IPO allotment?
When a company goes public, its shares are divided into different groups of buyers. Big institutional investors typically get 50%, regular retail investors get 35%, and high-net-worth individuals (HNIs) get 15%.
However, if the company hasn’t been profitable for the last three years, this split changes: institutional buyers get 75%, retail investors only get 10%, and HNIs still get 15%.
The number of shares you get depends on how many people want to buy shares in each group. If one group doesn’t use up its shares, those can go to a group with more demand.
Now, if there are more people wanting shares than there are shares available, things get a little trickier.
Let’s focus on retail investors, which is where most of us fall. There’s a portion of the shares saved for retail investors. The number of shares you can apply for depends on something called a "lot size." A lot is simply the smallest number of shares you can buy at once. In India, one lot is typically worth around ₹15,000.
Here’s an example: If there are 1,000 shares available for retail investors and each lot has 10 shares, that means there are 100 lots available (1,000 divided by 10). If fewer people apply than there are lots, each investor will get at least one lot.
But more often than not, IPOs get oversubscribed. When that happens, the allotment switches to a lottery system. This means the available shares are randomly given out, with each lucky investor getting at least one lot.
For HNIs, it works similarly. They’re split into two groups: those investing between ₹2 lakh and ₹10 lakh, and those investing more than ₹10 lakh. The shares for HNIs are divided with one-third going to smaller investments and two-thirds going to larger ones. If there are any leftover shares, they’re spread out on a pro-rata basis, which means bigger investments get a bigger chunk.
Institutional investors have a different system, where they get shares based on the size of their investment. But we’ll leave that for another day.
So, in short, whether you’re a retail investor or an HNI, when an IPO is oversubscribed, getting shares often comes down to luck. The process is set up to give a fair chance to as many investors as possible.