How are Refunds of IPO Credited?
Investing in an IPO is a great choice as it allows you to diversify your portfolio. However, when you participate in an IPO, your funds are often blocked until the allotment process is complete. If you don’t receive shares, or if there’s any issue with the allocation, a refund of your blocked amount will be issued. This guide will walk you through the reasons for IPO refunds, how to initiate the refund process, check the status of your funds, and understand the typical time limits for receiving your refund. Knowing these details can help you navigate the IPO process more smoothly and efficiently.
Key Highlights
- A lack of stock delivery or a few public subscriptions is why there is not enough approval for listing or why QIBs do not meet all requirements.
- Refunds are managed by the IPO registrar in cooperation with banks and SCSBs who will refund the amounts for non-allotment using ASBA, UPI, and other electronic means.
- Investors can reach out to their banks, registrars, or SEBI if they experience delays in refunding unblocked money.
- Normally refunds take place four days following issue closure although any hitches should be reported to pertinent officials first.
Table of Contents
Reason Behind IPO Blocked Amount Refund
Knowing why your IPO funds are unblocked can give an insight into why a refund may be essential. Here are some common reasons for refunds in blocked IPO funds, let’s discuss them in brief:
Non-Allotment
In case any shares are not allotted to an investor or he is allotted only part thereof, the registrar or bank has to release the blocked portion.
Non-receipt of Minimum Subscription
If this issuer does not reach a minimum level of 90% of net offers for its subscriptions, it should either return the reservation money or give up the claim on it.
Failure to Obtain Listing Approval
If an issuing organisation fails to obtain approval from stock exchanges for trading, the issuer is required to refund the IPO application amount advanced by investors.
Failure to Allot to Minimum Number of Allottees
The total number of allottees is not greater than one thousand units, the issuance authority is bound to reimburse or free from restriction funds solicited in Initial Public Offering (IPO).
Failure to Allot 75% of Offer to QIBs
If a company does not give at least 75% of its offer to Qualified Institutional Buyers (QIBs), it will have to return all the money that has been paid for subscribing in case of a QIB-route issue.
How to Start IPO Refund?
To start off, the IPO registrar is accountable for the refund process. They work together with banks and self-certified syndicate banks (SCSBs) to unblock wallets on accounts and handle IPO refunds. Here are some steps to initiate an IPO refund:
Step 1: The allotment is finalised by the registrar in consultation with the stock exchange and lead manager.
Step 2: In case of non/partial allotment banks are notified by the registrar for releasing the funds.
Step 3: SCSB lifts the lien on funds blocked for applications submitted through ASBA or UPI.
Modes of Refund Initiation
There are several ways in which the SCSB refunds the IPO money to investors. The way of refunding depends on the mode of applying for IPO and the category of investors. Here is a table showing the different refund modes:
| Mode of Refund | Instruction of Return of Funds | Investment Category |
| ASBA | Unblocking the amount | Retail Individual Investor (RII)·Non-Institutional Investor (NII)·Qualified Institutional Buyer (QIB) |
| UPI | Pause the mandate | Retail Individual Investor (RII) |
| Electronic Mode | Refund order to be credited to anchor investor’s bank account via NACH, NEFT, Direct Credit, RTGS | Anchor Investor |
How to Check If IPO Funds Are Not Unblocked?
The amounts are often not released after an initial public offering or an investor does not receive the credit within the time limit in the offer document. Investors can perform the following actions in these cases:
Step 1: First, investors should verify that they have received the refund and unblocking instructions by contacting their bank.
Step 2: Call the Registrar if there’s no problem with your bank.
Step 3: If you need to contact the Registrar online, email or visit your nearest branch of the Registry.
Step 4: Contact SEBI as a last resort if no solution can be found.
Step 5: If you wish to file a complaint with SEBI for an IPO refund, please complain to SEBI.
Step 6: For investors, contact SEBI’s toll-free investor helpline.
If the refund is not completed or the funds are not released within the allotted time frames, the issuer may be required to pay interest at 15% per annum.
Cases Under Which an IPO Blocked Amount Refund Takes Place
Understanding why your IPO funds are unblocked can help you see why a refund might be necessary. Here are some cases undher which an IPO blocked amount refund occurs. Let’s briefly discuss them:
1. Failure to gain listing approval
The company that issues an IPO occasionally fails to obtain permission to trade shares on the authorised stock exchanges where these securities should be listed. The issuer must reimburse or release the investors’ IPO application funds in such circumstances.
2. The minimum number of allottees was not allocated
If the company’s projected allottee number is less than 1,000, the issuer must refund or unlock the buyers’ IPO subscription money.
3. Non-Allotment
The Registrar or the Bank shall unblock all or part of the amount if the investor does not receive an allocation or receives only a partial allocation.
4. Non-receipt of a minimum subscription
The issuer must refund or release the subscription amount if it does not receive the required minimum subscription of 90% of the total offering.
5. Failed to allocate 75% of the offer to QIB following the mandatory book-building process
The whole subscription fee must be refunded to the investor in the case of an issue via the QIB route where the issuer does not allocate at least 75% of the offer to QIB.
IPO Refund Time Limit
Typically, the IPO refund procedure starts four working days following the end of an issue. This varies depending on individual IPOs which usually indicate such information in their respective Red Herring Prospectuses (RHP). Here’s a table indicating the reason for the refund and the time taken:
| Reason for Refund | Timeline |
| Non-Allotment | Within four days of issue closure. |
| Non-receipt of listing permission | Within four days of receiving notification of rejection from the stock exchange/s. |
| Non-receipt of minimum subscription | Within four days of issue closure. |
| Minimum number of allottees not achieved | Within four days of issue closure. |
| Failure to allot to a minimum 75% of QIB under the QIB route | Within four days of issue closure. |
Conclusion
An IPO participant is unable to access their funds until the allotment process has been completed. If any shares were not allotted while there was a mistake in the allocation, the blocked amount gets returned. The refund will be processed by the IPO registrar working side by side with banks and self-certified syndicate banks (SCSBs). The method of refunding will depend on how one applied – ASBA, UPI, or electronic modes. Refunds normally happen four days after issue closure but if it takes longer one should contact either his bank, registrar, or SEBI.
FAQs on IPO Refund
Contact your bank and IPO Registrar to verify the status if you have not received any refund, or an amount has not been released. The responsibility to reimburse the initial public offering funds lies with the Registrar and banks.
Yes, IPO money gets refunded based on the allotment status, with refunds processed within four working days after the IPO closes, as per SEBI guidelines.
Yes, an IPO can be reversed through a reverse takeover (RTO), where a smaller private firm goes public by acquiring a larger publicly traded company, reversing the usual process.
You will receive your IPO refund within four working days after the IPO closes, according to SEBI guidelines. However, the refund process depends on your allotment status, with funds being released from your ASBA account on the specified refund date mentioned in the offer document.
Within four business days from the date on which the issue closes, an initial public offering refund should be initiated.