New Feature of Paytm Money Allows Customers to Pre-Book IPO allotments
Paytm Money, an online retail brokerage, has launched a new feature that allows customers to pre-book IPO allotments before market hours, according to CEO Varun Sridhar.
The announcement comes as several high-profile startups and corporations, including Zomato, Life Insurance Corp of India (LIC), Paytm, PolicyBazaar, Care Health, and Nykaa, prepare to list on Indian stock exchanges in the coming months.
Retail investors will be able to request Initial Public Offering allotments prior to the official opening of subscriptions on exchanges. Typically, an investor can only purchase allotments on days when subscriptions are open.
“When we spoke to our customers, we found that a lot of them were enthusiastic about the upcoming IPO rush,” said Sridhar. “We wanted to create a service that takes away the panic and confusion of purchasing offers on the day of the IPO issue. A pre-booking service will allow investors to make planned purchases.”
According to Paytm Money, this is the first such initiative by an online brokerage in India.
A pre-booking is a purchase request submitted to a brokerage. Sridhar explained that when the offer goes live on the exchange, the brokerage will buy allotments on behalf of all the requests it has received from the investor.
“Since we won’t be collecting money during the pre-order it is not the same as booking a slot ahead of market hours,” he said, adding that a request made through the feature may or may not convert into an allotment depending on the size, the demand and the premium of the IPO.
Investors who receive an allotment through the new feature must clear a payment request on their Unified Payments Interface (UPI) app within 24 hours.
“Interest in IPOs has surged over the last couple of months, and we have seen cases where users have missed out from applying because of issues like tight schedules during market hours, and demand led processing delays in the markets,” Sridhar added.
The feature will first be available on the Paytm Money app for the upcoming Zomato IPO, which will take place on July 14-16.
According to him, the wholly owned brokerage subsidiary of Paytm's upcoming IPO will also consider introducing the after-market hours feature for other stock trading services.
The upcoming IPO rush is expected to increase competition among new age online broking entities - Paytm Money, Zerodha, Groww, Upstox, and Angel Broking - to onboard retail investors who enter the market during this period.
“As this feature gains traction, it might be possible to spread out the pre-open IPO applications evenly during the market hours, reducing load on exchanges and payment gateways, and ensuring a better experience for broad market participants,” the company said in a statement.
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