The move comes at a time when several high-profile startups and corporations such as Zomato, Life Insurance Corp of India (LIC), Paytm, PolicyBazaar, Care Health and Nykaa are set to debut on Indian stock exchanges in the coming months.
The feature will allow retail investors to request for Initial Public Offering allotments ahead of the official opening of subscriptions on exchanges. Typically, an investor can only buy allotments during the days when subscriptions are live.
“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.”
Paytm Money said this was the first such initiative by an online brokerage in India.
A pre-booking is a purchase request made to the brokerage. On the day when the offer goes live at the exchange, the brokerage would buy allotments on behalf of all the requests it has received from the investor, Sridhar explained.
“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.
On receiving an allotment through using the new feature, investors will have to 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 go live on the Paytm Money app for the upcoming Zomato IPO on July 14-16.
The wholly owned brokerage subsidiary of IPO-bound Paytm will also consider introducing the after-market hours feature for other stock trading services, he said.
“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.
The upcoming IPO rush is expected to trigger heightened competition among new age online broking entities – Paytm Money, Zerodha, Groww, Upstox, Angel Broking – to onboard retail investors entering the market during this period.