NCD Allotment Process

NCD Subscription

NCD subscription essentially gauges the popularity of a Non-Convertible Debenture (NCD) issue by showing how many times it has been subscribed. It gives us an idea of market demand for that particular NCD.

Typically, the subscription window for NCDs stays open for ten working days, from 10 am to 5 pm. However, the issuer has the flexibility to close the issue earlier or extend it, depending on a decision by the company's Board of Directors or the Securities Issuance and Investment Committee. If there are any changes to the schedule, the issuer must notify investors by placing adverts in the newspapers where the initial issue announcement was made. Many issuers also offer the convenience of subscribing to NCDs electronically.

An NCD issue can either be undersubscribed or oversubscribed based on the applications received. To proceed, the issuer must achieve at least 75% of the base issue size. Failing this, the issuer should release the blocked ASBA amounts and ensure investors' bank accounts are credited within eight working days after the issue closes. If there's any delay beyond this period, the issuer must pay interest at 15% for the delayed duration.

NCD Undersubscription

An undersubscribed NCD is one where subscription falls short of 100%. If the subscription does not reach 75%, the issue is canceled as it does not meet the minimum required level. If a particular series of NCDs doesn't get subscribed, those series won't be listed.

NCD Oversubscription

When NCD subscriptions surpass the base issue size, it is termed oversubscribed. Companies can choose to retain this extra subscription using the green shoe option. They can retain up to 100% of the base issue size, provided they have the necessary corporate approvals, a valid credit rating, and meet other conditions set by SEBI.

NCD Subscription Status

The BSE and NSE provide live updates on the NCD subscription status based on the bids received.

To view the subscription status on the BSE:

• Visit iposcanner.ai
• Click on the Public Issues tab
• Find the live Debt Issues section
• Select the desired issue
• Click on BSE Demand Schedule

This will show the subscription status for different investor categories for the NCD.

For the NSE subscription status:

• Visit iposcanner.ai
• Search for ‘IPO’
• Click on the IPO tab on the top bar
• Find live ‘Debt Issues’
• The table will show the bid size and overall subscription status
• Click on the required issue for detailed subscription status by investor category

You can also view the combined (NSE+BSE) live NCD subscription status on iposcanner.ai.

NCD Bidding Updates

1. NCD Bid Modification

During the NCD subscription window, you can modify your bid. To do this, submit a written request to the Designated Intermediary for the changes required.

However, not all fields on the electronic platform of the Exchange can be altered once a bid is placed. Fields like quantity, series, application number, and sub-category codes cannot be changed. In such instances, you’ll need to cancel your existing bid and submit a new application.

2. NCD Bid Withdrawal

You have the option to cancel your bid anytime before the closing date. Some issuers also allow you to cancel the bid even after the issue closure. In such cases, you must apply for withdrawal with the registrar before the finalization of the Basis of Allotment, but not later than two working days after the issue closure. Specific procedures will be detailed in the offer document.

NCD Allotment Process

NCDs are allocated on a first-come, first-served basis. The allocation depends on the date each application is uploaded to the exchange platform.

The company, in consultation with the lead manager and the designated stock exchange, carries out the allotment.

Points to remember:

• Only applications uploaded to the exchange's online system are considered for allocation.
• Applications uploaded on the same day are treated equally.
• If a revised application is submitted for fields which cannot be changed, the revised application's date is considered for allotment.
• For permissible modifications, the original application date is used for allocation.

NCD Basis of Allotment

1. NCD Basis of Allotment in Case of Under Subscription

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

If not fully subscribed in any category but oversubscribed at the aggregate level, allotment follows this priority based on NCD availability:

• Priority goes to retail individual investors.
• Next, to high net-worth individuals,
• Followed by non-institutional investors.
• Lastly, institutional investors.

2. NCD Basis of Allotment in Case of Oversubscription

In oversubscription scenarios, allotment follows a first-come, first-served basis with a proportionate method:

• Full allotment to applicants with bids submitted up to a day before oversubscription.
• Bids from the oversubscription day and afterward are allotted on a pro-rata basis. This involves rounding pro-rata allotments to the nearest whole number. If the rounded total exceeds the issue size, preference goes to applicants with the largest decimal place before rounding. When multiple applicants have the same entitlements, lots are drawn.

Let's look at an example:

NCD Basis of Allotment

Assumptions:

• Full allotment on a first-come, first-served basis for applications received before oversubscription.
• 1,000 NCDs remain for allotment.
• 2,181 NCDs are left for allocation.

Calculations:

• Pro-rata is calculated by dividing the applied quantity by total applied shares to find the applicant's share. For applicant 1, it’s 630/2181*1000 = 288.8583219.
• The result is rounded to 289.
• If total allotment exceeds the issue size, preference goes to the applicant with a higher decimal before rounding. Applicant 3 receives 237 shares, Applicant 2 gets 236 as only 1,000 NCDs are available.

This simple example illustrates allotment calculations, though the actual process can be more complex.

NCD Listing

Issuers can choose to list NCDs on either the BSE, NSE, or both. Once allotment concludes, NCDs are listed on the stock exchanges.

Typically, the NCD listing date is within six working days of the issue’s closing date.

Key Takeaways

Once the allotment is finalized, the registrar issues an NCD allotment letter or advice to the successful applicants, detailing the allotment. Post-allotment, the issuer submits the listing application and other disclosures to the stock exchange to get listing approval. Dates and deadlines are usually specified in the offer document.