NCD Subscription and Allotment Process

NCD subscription

NCD subscription refers to the number of times an NCD issue is subscribed. NCD subscription reflects the demand for the NCD in the market.

The subscription window for NCDs is usually kept open for 10 working days from 10 am to 5 pm.

However, the issuer may close the issue earlier or later based on the decision of the Board of Directors of the Company or the Securities Issuance and Investment Committee. In the event of an early closure or extension, the issuer is obliged to inform investors by placing an advertisement in all the newspapers in which pre-issue advertisement for opening of the said Issue is given. Many issuers offer the option of subscribing to the NCD in electronic form.

An NCD issue may be undersubscribed or oversubscribed depending on the number of applications received. The issuer should receive a minimum subscription of up to 75% of the base issue size. Otherwise, the issuer is required to unblock the ASBA amounts and credit the investors' bank accounts within eight working days of the closure of the issue. If the release of the amounts is delayed beyond the specified period, the issuer is required to pay interest of 15% for the delayed period.

NCD Undersubscription

When an NCD is not subscribed 100%, it is said to be undersubscribed. If the subscription is less than 75%, the issue gets cancelled as it does not meet the minimum subscription level of 75%.

If one or more series of NCDs are not subscribed, such series(s) of NCDs do not get listed.

NCD Oversubscription

When the subscription of the NCDs exceeds the size of the base issue, it is termed as oversubscribed. The companies have the option to retain the oversubscription, known as the green shoe option. An issuer can retain an oversubscription of up to 100% of the base issue size, subject to the fulfilment of requisite corporate approvals, credit rating and other conditions specified by SEBI.

NCD Subscription Status

BSE and NSE display the live NCD subscription status based on the bids uploaded.

To check the subscription status on the BSE,

• Visit the www.bseindia.com
• Click on the Public Issues tab.
• Look for the live Debt Issues.
• Click on the desired issue.
• Click on BSE Demand Schedule.

The screen will display the investor category-wise subscription status for the said NCD.

To check the NCD subscription status on NSE,

• Visit the www.nseindia.com
• Search for the word ‘IPO’.
• Click on the IPO tab on the top bar.
• Search for live ‘Debt Issues’.
• The table will display the bid size and overall subscription status.
• To check the detailed subscription status across each investor category, click on the required issue.

You can also check the live NCD cumulative (NSE+BSE) subscription status on Chittorgarh.com.

NCD Bidding Updates

1. NCD Bid Modification

NCD bids can be modified anytime during the NCD subscription window. The investor should submit a written request to the Designated Intermediary for the required changes.

However, it should be noted that not all fields on the electronic platform of the Exchange can be changed once the bid is placed, e.g. quantity, series, application number, and sub-category codes. In such cases, the investor is required to cancel his previous bid and submit a fresh application.

2. NCD Bid Withdrawal

The applicant can cancel the bid at any time before the closing date of the issue.

Some issuers also allow the applicant to cancel his bid after the issue closure period. In this case, the applicant must submit an application for the withdrawal request to the registrar before finalization of the Basis of allotment, but not later than two working days after the Issue closure or early closure. The issuer-specific procedure can be found in the offer document.

NCD Allotment Process

NCDs are allocated on a date priority basis, i.e. first come, first served, based on the date of upload of each application on the exchange platform.

The allotment is done by the company in consultation with the lead manager and the designated stock exchange.

Points to Note:

• Only applications uploaded to the exchange's online system get considered for allocation.
• All applications uploaded on the Exchange's electronic platform on the same day get treated at par with each other.
• In case of submission of a revised application for the fields which are not allowed to be changed on the electronic platform of the Exchange, the date of the revised application gets considered for allotment.
• In the case of changes in the permissible modification fields, the date of the original application gets used for allocation.

NCD Basis of Allotment

1. NCD Basis of Allotment in Case of Under Subscription

In case the issue is under subscribed (less than 100% but more than 75%) at the overall issue level, each applicant receives full allotment.

In case the issue is not fully subscribed in any category but is oversubscribed at the aggregate Issue level, allotment will be made as per priority below based on availability of NCDs for allotment:

• First preference is given to retail individual investors.
• Secondly, high net-worth individuals,
• Thereafter, non-institutional investors.
• Followed by institutional investors.

2. NCD Basis of Allotment in Case of Oversubscription

In the event of oversubscription, the allotment is done on a first-come, first-served basis using proportionate allotment method as stated below:

• Full allotment of NCDs to the applicants who have submitted bids up to one day before the date of oversubscription.
• All bids uploaded on the date of oversubscription and thereafter will get allotment on a pro-rata basis as described below:
  • The pro-rata allotment is calculated.
  • The derived pro-rata allotment may be in decimals. This gets rounded to the nearest whole number.
  • If the allocation size after rounding to the nearest whole number is greater than the issue size, preference will be given to the applicant whose allotment size before rounding has the largest decimal place.
  • If there are several applicants with the same entitlements, the allotment gets done based on the draw of lots.

Let us have a look at the below calculations to understand the above:

Assumptions

• Full allotment on a first-come, first-served basis for applications received before the date of oversubscription is done.
• Thereafter, 1,000 NCDs remain available for allotment.
• Applications remaining for allotment after full allotment in bullet 1:2181 NCDs.

Calculations:

• In the first step, the pro rata calculation is performed by dividing the applied quantity by the total applied shares to determine the applicant's pro rata share. Using the example of applicant 1, the proportionate share for applicant 1 would be 630/2181*1000 =288.8583219
• The derived share is then rounded to the nearest whole number, which in this case is 289.
• If the total allotment is more than the available issue limit, the applicant whose decimal place before rounding is higher is given preference. In the above scenario, Applicant 3 would receive 237 shares while Applicant 2 would receive 236 shares as only 1000 NCDs are available for allotment.

This is a very simple example to understand the concept of allotment calculation. The actual allotment process can be more complex.

NCD Listing

The issuer can list NCDs on the BSE/NSE or both. Once the allotment is completed, the NCDs will be listed on the stock exchanges.

Generally, the NCD listing date is within 6 working days of the closing date of the issue.

Key Takeaways

Once the allotment is finalized, the Registrar will issue an NCD allotment letter/NCD allotment advice to the allotted applicants giving the details of the allotment. After allotment, the issuer is required to submit the listing application and other disclosures to the stock exchange to obtain listing approval. The dates and deadlines are sometimes mentioned in the offer document.