How to apply under the shareholder category in an IPO on Zerodha

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Certain Initial Public Offerings include a shareholder reservation portion, a tranche of shares set aside for existing shareholders of the issuer’s parent company, holding company, or a specified group entity. Applying under this category can offer an allotment advantage because the shareholder portion is separately subscribed and allotted, independent of the general retail (RII) pool. This guide covers eligibility, how to select the shareholder investor type in Zerodha Kite, and the specific pitfalls of this category.

For the generic Kite web procedure see the Kite web IPO guide. For UPI ASBA background see the wiki article.

Understanding the shareholder reservation portion

Under SEBI ICDR Regulations 2018 (Regulation 33), the issuer may reserve up to a certain percentage of the post-issue paid-up capital for persons who are shareholders of the promoter companies or specified group entities. The following are key parameters, all of which are disclosed in the RHP:

  • Qualifying entity, the specific company whose shareholders are eligible. This is not always the issuer itself; it is commonly the promoter holding company or the parent entity in a demerger structure.
  • Record date, the date by which qualifying shares must be held. Shares acquired after the record date do not qualify even if held at the time of application.
  • Minimum holding, some RHPs specify a minimum number of shares or minimum value to be eligible; others require simply any holding.
  • Reservation size, typically up to 5% of the post-issue paid-up equity share capital, expressed as a number of shares in the RHP.
  • Application size, the minimum and maximum lot range for the shareholder portion is disclosed in the RHP. The maximum bid value for UPI ASBA in the shareholder category follows the same ₹2,00,000 retail ceiling unless the RHP provides otherwise.

Importantly, the shareholder reservation portion is allotted on a proportionate basis in cases of oversubscription, similar to the NII category, not by draw-of-lots as in the general retail category.

Step-by-step procedure

Verify eligibility on the record date

Open the RHP of the issue (available on the Kite issue card, the SEBI public issues portal, or the exchange). Identify:

  • The name of the entity whose shareholders are eligible.
  • The record date or cut-off date for shareholding.
  • The minimum holding requirement (if any).

Log in to your depository interface (CDSL easi/easiest, NSDL IDEAS, or the Console portfolio view on Zerodha) and verify that the qualifying shares are held in your demat on the record date. The holding must be in a demat account linked to the same PAN as your Zerodha trading account. Shares held in a family member’s demat, even if the family member is a joint holder, do not qualify for your application.

If you hold the shares in a physical certificate (not dematerialised), you are generally not eligible for the shareholder category through UPI ASBA; rematerialisation is a separate process and may not complete before the record date.

Sign in to Zerodha Kite and navigate to the issue

Go to kite.zerodha.com and sign in with your client ID, password, and TOTP 2FA. Click Bids in the top navigation, then IPO. Locate the issue offering a shareholder reservation portion.

Click Apply and change investor type to Shareholder

Click the Apply button on the issue card. In the bid entry modal, the investor type defaults to Individual (retail). Use the dropdown to change it to Shareholder. The form may reconfigure to reflect the lot range applicable to the shareholder portion.

Enter lot quantity, price, and UPI ID

Enter the number of lots within the shareholder reservation lot range. The RHP specifies the minimum and maximum lot quantity for the shareholder portion. If the RHP allows bids up to ₹2,00,000 under the shareholder quota, the UPI ASBA route is available; above that, bank ASBA is required.

Select Cut-off or a specific price within the price band. Enter your UPI ID. The UPI ID must be linked to a bank account where the PAN matches the PAN on your Zerodha demat.

Tick the SEBI undertaking and submit

Tick the SEBI undertaking checkbox. For the shareholder category, the undertaking additionally covers the declaration that you hold qualifying shares in the specified entity on the record date.

Click Submit. Zerodha routes the bid to the exchange. The bid status changes to Pending Mandate within thirty seconds.

Approve the UPI mandate

Open your UPI app and authorise the Block Funds for IPO mandate before 5 PM IST on the bid closing day. See the generic mandate approval guide for the step-by-step UPI app procedure.

Verify bid status and allotment

Navigate to Bids → Order history on Kite. The bid card shows the status. After issue close, the registrar validates your shareholding against the depository records for the qualifying entity on the record date. If the registrar finds no qualifying holding, the bid is rejected and the lien is released.

Allotment for the shareholder portion is published on T+1 alongside the main allotment. Shares are credited to your demat on T+2 and tradable from T+3.

What the registrar checks

During the allotment process, the registrar (KFin Technologies, Link Intime, Bigshare Services, Cameo Corporate Services, or Maashitla Securities) performs the following verification for shareholder-category bids:

  1. Confirms the PAN on the bid matches the PAN on the demat account holding the qualifying shares.
  2. Confirms the qualifying shares were held in the demat on the record date (via a depository snapshot at record date).
  3. Confirms the bid does not duplicate another application under the same PAN for the same issue.

If any of these checks fails, the bid is rejected without a notification to the applicant; the only indication is a Rejected status on Kite and a lien release on the bank statement.

What can go wrong

  • Shares transferred to demat after the record date. The record date is a hard cutoff at the end of the trading day on which it falls. Shares acquired after that date do not qualify.
  • Shares held in a different demat or a different PAN. Even if you genuinely hold qualifying shares, they must be in a demat registered under the same PAN as your Zerodha account.
  • Applying under both retail and shareholder categories under the same PAN. One or both bids will be rejected as duplicate applications.
  • Shareholder portion not offered in this issue. Not all issues include a shareholder reservation. If the investor type dropdown on the Kite apply form does not show Shareholder as an option, the issue does not offer this category.
  • Mandate not approved by 5 PM IST on closing day. The bid is rejected regardless of eligibility.

References

  1. SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018, Regulation 33 (Reservation on competitive basis), https://www.sebi.gov.in/legal/regulations/aug-2018/sebi-issue-of-capital-and-disclosure-requirements-regulations-2018_39971.html.
  2. SEBI Circular SEBI/HO/CFD/TPD1/CIR/P/2023/140 dated 9 August 2023, T+3 listing timeline.
  3. NPCI UPI 2.0 mandate specification, https://www.npci.org.in/what-we-do/upi/product-overview.
  4. FAQs on IPO applications, Zerodha Support Portal.

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