On failing to receive required subscription to its initial public offering (IPO), PKH Ventures, a construction and development company, withdrew its public offer last week.
The IPO was open for subscription between June 30 and July 4. The total subscription that the company received on the last day of bidding was only 65 percent, much lower than the required 90 percent for IPOs to go ahead. This was due to qualified institutional buyers' portion receiving poor response.
As per the Red Herring Prospectus (RHP), QIBs were allocated 50% of the total offer while the company received only 11% subscription from them.
What happens to investors' money now?
During an IPO, a bidder's bank account is blocked with the amount needed for the required number of shares. Upon allotment of shares, the amount is deducted from the account based on the number of shares allotted. In the case of withdrawal of IPO as the case with PKH, the applicants are provided with full refund of the amounts blocked for their bids.
Typically, the refund/unblocking process takes time when the issue sees oversubscription. However, in this case, the issue has been withdrawn because of under subscription which means that there were less bidders. This could imply that the unblocking is quick and smooth.
Through the registrar to the issue, which is Link Intime India Private Limited in this case, the book running lead manager (BRLM) (IDBI Capital in this issue), notifies the Self-Certified Syndicate Bank (SCSBs) and the Sponsor Banks, in case of UPI bidders, to unblock the accounts of the ASBA bidders within one working day after receiving the notification of withdrawal.
It is to be noted that there is no physical refund unless it involves a dispute regarding blocking and unblocking.
In case you don't receive the refund
Investors should contact the merchant bankers and registrar either via phone or letter if the refund hasn't been received. Ideally one should contact the bank first for it to release the fund before contacting the registrar.
Moreover, compensation needs to be given to the investor if the unblocking takes longer than estimated time for completion.
