IPO - Retail limit increased to 2 Lac - comments

#1
As you all are aware SEBI has increased Retail Limit to 2 Lacs from present 1 Lac .

your comments are welcome for this -
why SEBI might have done it ?
will it be benifitial to Retail Investors?

my comments are :
-Few years back Retail Limit was 50,000 without any IT PAN required - it resulted in thousands of bogus application by a single person
-Then this Limit was increased to 1 lacs with no IT PAN required upto 50000 - result same frequency of bogus application upto 50000
-Then IT PAN was made compulsory for IPO application of any amount - result grey market operators started borrowing demat a/c on some fixed amount , popularly known as KOSHTAK rates , offering amount for application of 1 Lac ,allotment made for any quantity.
-Now Retail Limit increased to 2 Lac - may have results like less demat a/c borrowing/offering on KOSHTAK rates - reason one clause of INCOME TAX " APPLICAIONS IN IPO ABOVE 1 LAC WILL BE UNDER THEIR SCANNER" this clause was introduced to check HNI investments in IPO which are hardly 5000 application , while Retail Applications are sometimes upto 10 to 15 Lacs

I feel that actual Retail Investors having limited demat a/c in family will be benifitted with better allotment chances.

Please post your comments
 

magnet

Active Member
#2
Retail limit increased but not number of shares allotment to retail.

This news will help big investor and merchant banker to come under retail segment.Hence people applying for 50k worth of shares and ipo over subscribing more than 5 to 7 times.chances of them getting shares is even lower.

Move definitely to interest merchant bankers and big pocket people.
 
#3
As you all are aware SEBI has increased Retail Limit to 2 Lacs from present 1 Lac .

your comments are welcome for this -
why SEBI might have done it ?
will it be benifitial to Retail Investors?

my comments are :
-Few years back Retail Limit was 50,000 without any IT PAN required - it resulted in thousands of bogus application by a single person
-Then this Limit was increased to 1 lacs with no IT PAN required upto 50000 - result same frequency of bogus application upto 50000
-Then IT PAN was made compulsory for IPO application of any amount - result grey market operators started borrowing demat a/c on some fixed amount , popularly known as KOSHTAK rates , offering amount for application of 1 Lac ,allotment made for any quantity.
-Now Retail Limit increased to 2 Lac - may have results like less demat a/c borrowing/offering on KOSHTAK rates - reason one clause of INCOME TAX " APPLICAIONS IN IPO ABOVE 1 LAC WILL BE UNDER THEIR SCANNER" this clause was introduced to check HNI investments in IPO which are hardly 5000 application , while Retail Applications are sometimes upto 10 to 15 Lacs

I feel that actual Retail Investors having limited demat a/c in family will be benifitted with better allotment chances.

Please post your comments
You are raising some real issues, which hardly get addressed in any policy making. What is the we can distinguish a real retailer from a bogus one? Once this can be done, and this limit setting / control mechanism can be removed.
I assume that, idea behind this classification is to ensure the retailer a fair share in the allotment process.May be after introduction of UID , we can identify the intended beneficiaries (Even there also they may be sponsored by KOSHTAK like).

In short there is always a chance of any law being followed on in letter, and not in spirit. But does that prove that we dont require a law at all?
 
#4
You are raising some real issues, which hardly get addressed in any policy making. What is the we can distinguish a real retailer from a bogus one? Once this can be done, and this limit setting / control mechanism can be removed.
I assume that, idea behind this classification is to ensure the retailer a fair share in the allotment process.May be after introduction of UID , we can identify the intended beneficiaries (Even there also they may be sponsored by KOSHTAK like).

In short there is always a chance of any law being followed on in letter, and not in spirit. But does that prove that we dont require a law at all?

we do require a Law , Law breakers find out Loop holes and Law makers try to plug the Loop holes.

I remeber in 2005-06 when no IT PAN was required for IPO appl upto 50000(maxm retail limit ) IPO used to get subsribe 30 to 40 times in Retail and people like Rupel used to make 60000 application having same address and bank , he used to manage in getting refund while your banker will not honour cheque for petty spelling mistake done in refund order.for that IPO scam this years some small amount 300/ refunded to all old applicants.

after IT PAN made mandatory , such huge oversubscription stopped .

now grey market KOSHTAK appl rates are being done in bulk for 1 lac Rs application.

my simple querry is suppose some one approaches me to sell my 2 lac appl for a KOSHTAK rate , and if I know that this 2 lac appl may attract IT scruitiny of my return , certainly I will try to avoid . this will lead to less gray market applications resulting in more genuine appl and oversubscription.

hope SEBI's this move help to regularise the things.
 
#5
GBji

I have a question.I usually apply 3 to 4 applications with 1 lakh limit in my name and my parents and wife's name. The other 3 ppl I mentioned are either retired or housewife and are not regular tax payers as their income is not in the tax bracket. Suppose with my spare cash I start applying with the 2lakh limit in IPOs in their names,will there be questions on their source of income etc from the IT dept? Please clarity. Thanks in advance..
 
#6
GBji

I have a question.I usually apply 3 to 4 applications with 1 lakh limit in my name and my parents and wife's name. The other 3 ppl I mentioned are either retired or housewife and are not regular tax payers as their income is not in the tax bracket. Suppose with my spare cash I start applying with the 2lakh limit in IPOs in their names,will there be questions on their source of income etc from the IT dept? Please clarity. Thanks in advance..
what I have quoted is from adv by IT deptt for guidelines to check various investments and one clause is" IPO application above 1 lac is under their scanner"

An IT PAN holder need not to be Tax payer too. he may be having Income below taxable limit . source of Income is not important ,but source of funds is necessary even if it may be borrowed one.

1. your parents must be having IT PAN for applying in IPO. Retired person need not to be regular tax payer ,but may be having sufficient funds and non taxable income , so no need to worry.if required you may give them Loan on Interest/Interestfree to apply in IPO
2. House wife - similar position must be having IT PAN and Funds with declared sources, Regular Tax payer is not necessay. even required any one can give her a loan on interest to apply in IPO

since till now IPO appl above 1 lac were made by hardly 5000 people ,it was easy to keep check on this range, while application below 1 lac were being made in lacs so left from scanner. Lets see if IT deptt also change their criteria to make it "IPO application above 2 lac to be under their scanner"
 
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