Withdrawal of IPO applications Post Issue Closure

SEBI Guidelines

Yes, withdrawal of Initial Public Offer (IPO) application can be done even after the issue closure!!

It is commonly known that in book built issues applicants can revise or withdraw their bids till the issue closure date. However not many investors know that they can cancel their application even after the issue closure date. In a book-built issue the applicants can withdraw their applications anytime before finalisation of the basis of allotment of shares by the company. Investors have the right to withdraw application before finalization of allotment even if the application money has been realized by the company.

Issue of securities in an IPO is, inter alia, governed by SEBI (Disclosures and Investors Protection) Guidelines, 2002 – popularly known as SEBI DIP Guidelines, which provides that an applicant can withdraw applications in a public issue. However, note as per the SEBI DIP Guidelines, Qualified Institutional Bidders (QIBs) are not allowed to withdraw their bid after the closure of the bid. This rule is to prevent any possible manipulation of the IPO subscription by the QIBs. For example, Cairn India IPO in 2006 saw many QIBs withdrawing bids on the last day of the issue. While the bid withdrawal was done by QIBs before the IPO closure, which is well within the guidelines, but this was not viewed very positively by the SEBI, which called for data regarding their subscription from the merchant bankers of the issue. SEBI’s action was guided by the fact that Retail investors often look at institutional investment details of an IPO before deciding to apply for the same and they could get mislead by the initial QIB rush.

IPO application may be withdrawn by an applicant by writing a letter, to the Registrar of the issue, highlighting the Company’s name and clearly mentioning complete application number, names as in the application and signatures of all applicants. The applicant has to ensure that the withdrawal application is received by the registrar prior to finalization of the Basis of Allotment. The withdrawal or cancellation of withdrawal will not be considered if the issuer has finalized and submitted Basis of Allotment to the Stock Exchange.

ASBA bids can also be withdrawn. During the bidding period you can approach the same bank to which you had submitted the ASBA and request for withdrawal through a duly signed letter citing your application number. After the bid closure period, you may send your withdrawal request to the Registrars, who will cancel your bid and instruct Self Certified Syndicate Banks (SCSB) to unblock the application money in the bank account after the finalization of basis of allotment.

Some of the IPOs which have seen withdrawal of applications by retailers and HNI categories post closure but before allotment of shares are Purvankara Projects, Deccan Airlines, Cairn India, Housing Development Infrastructure Limited, IVR Prime, KPR Mills, SVPCL, Vaswani Industries, etc.

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