IPO Refund Process Explained: How and When You Get Your Money Back

Initial Public Offerings IPOs have become a lucrative opportunity for emerging businesses to raise funds from the public and investors who want to participate in the growth potential of those companies Investing in IPOs offers potentially high returns which is the primary reason why people get attracted to them As a result sometimes the number of applications exceeds the number of shares offered Hence it will become impossible to provide allotments for all those applicantsApplicants who do not receive an allotment in the upcoming IPO will have their money refundedLetrsquos look at the IPO refund process and learn how and when the applicants get their money back after the allotmentWhat Happens to Your Money After an IPO ApplicationAfter the IPO application your money will be processed through two phases These are Phase 1 Blocking of MoneyAt first the total amount corresponding to your bid will be blocked within your savings account It occurs with the ASBA Application Supported by Blocked Amount system or UPI mandates for retail investors Though the money becomes blocked within your account you cant utilize it until the IPO allotment process is completed The blocked funds assure your financial commitment until the IPO allotment finalizesPhase 2 IPO AllotmentThe subscription period closed within a few days Then the company and the BRLMs BookRunning Lead Managers assess the subscriptions If the IPO becomes oversubscribed which means the number of shares applied is larger than the number of shares offered then the IPO allotment process is initiated The process is carried out based on a lottery system to ensure a fair distributionInitiation of Refunds Why Do Refunds Occur in an IPOThere are several reasons behind the refund of IPOsThe most common reason is the exceeding of the subscription number rather than the number of shares available So in this case not everyone who has applied would get an allotment As a result the applicants money will be refunded or unblocked in their bank account due to the unallotted sharesIf the company or the BRLMs decides to withdraw the IPO due to unforeseen circumstances before the allotment the applicants will also receive a refundIn some rare cases the IPO applications get rejected due to technical faults and the applicants will be refunded automaticallySometimes the company may decide to reduce the size of the IPO after the subscription period but before the allotment In such cases a refund might be issued for the additional application money receivedThe IPO Refund ProcessThe bank and the depositories such as NSDL National Securities Depository Limited and CDSL Central Depository Services Limited handle the refund process electronically Here is the stepbystep breakdown of the processFinalization of allotment After the closure of the subscription period the company and the BRLMs finalize the allotment It determines who will get how many shares This process would take a few daysChecking the allotment status The information will be available to the registrar of the IPO the lead managers and the NSE or BSE website The applicants can check the status through their application number PAN number or client IV and DP Depository Participant IDRefund process initialization At the time of allotment notification the company and the registrar also initiate the refund process for the unallotted applicants The method incorporates instructing the bank to unblock the applicants money in their bank accountsProceeding with the unblocking of funds After receiving the instruction the bank releases the specified amount held on the investors bank account This way the unblocking is completed Now the funds are again available for the investors to utilize This process is much faster than any physical refund The entire process is conducted by ASBA Application Supported by Blocked AmountPhysical refunds Nowadays physical refunds are rare In the cases where ASBA was not involved the registrar will issue the physical refund They will issue the refund through cheques Finally the amount will be dispatched to the applicants registered address This process is less convenient and much slower than the ASBA methodTimeline for IPO RefundsThe Securities and Exchange Board of India SEBI has built a timeframe that all IPOs must adhere to Also it becomes vital for the applicants to understand the timeline for receiving their IPO refundsHere is a quick enclosure of the timeframeDayType of ActivityDay 1The end of the IPO subscription periodDay 2Verification of applications and compilation of subscription dataDay 3 or day 4Finalization of the basis of allotmentDay 4 or Day 5 Intimation of allotment status to applicantsInitiation of refundsunblocking of fundsCredit of shares to the Demat accounts of successful allotteesDay 6 or Day 7Commencement of trading of the Listed IPO on the stock exchangesFactors affecting the Refund TimelineHere are the common factors that affect the SEBI mandate timeline for the refund process Banking infrastructureWeekend and public holidaysTechnical issuesMode of application Applications made through nonASBA systems will take a longer time to refundWhat to Do If Your Refund is DelayedWhen an investor experiences a significant delay in the refund process they must follow the strategies mentioned below Check allotment status Crosscheck and reconfirm that the share remains unalloyed and refundableContact the registrar The registrar is responsible for processing the refund So the applicant must reach out to the concerned team to inquire about the status of their refund The registrars contact details will be provided in the IPO prospectus and on the website where the allotment status is availableContact the lead manager When the issue is not resolved by the registrar the applicants should contact the BRLMs BookRunning Lead Managers Their contact details are available in the prospectus tooContact the bank If the applicant has applied with the ASBA they can contact the sponsoring bank to inquire about the status of the refundable amountComplaining with SEBI If all the abovementioned strategies fail the applicants must complain with SEBI For this they should provide the necessary information about their application and the refund delay SEBI has a dedicated platform named SCORES SEBI Complaints Redress System to file complaintsStay Informed About Upcoming IPOsThe investors interested in participating in the Upcoming IPOs must stay informed about each factor related to the IPO These include price band subscription date and the registrar of the issue The website of the investment banks reliable financial news sources like Kotak Securities and SEBIs guidelines are valuable resources that help individuals stay informed about the investment market These updates also help them to understand the IPO and the refund process wellConclusionThe IPO refund is a critical and systematic process regulated by SEBI It ensures that the applicants who did not receive any allotment will receive a refund promptly With the advent of ASBA the process becomes faster and streamlined By understanding the refund process and timeline the investors can participate in the IPO more confidently Also staying informed about the upcoming IPO participants can take proper precautions and get a smooth investmentDisclaimer The information provided on the Website does not constitute investment advice financial advice trading advice or any other form of advice and you should not interpret any of the financial content as such Please conduct your own due diligence and consult with a financial advisor before making any investment decisions Midday does not endorse or promote any such activities and you access them at your own risk fully understanding the monetary and legal consequences involved Midday shall not be held responsible for any losses you may incur as a result of using any such apps or websites

IPO Refund Process Explained: How and When You Get Your Money Back

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IPO Refund Process Explained: How and When You Get Your Money Back

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