Preferential reservations are specific quotas of shares set aside by the issuer company for certain eligible groups, such as employees and existing shareholders of a parent company. These are distinct from the main investor categories for the general public (Retail, HNI, QIB).
The two primary types of preferential reservations are:
- Employee Reservation Quota: The issuing company may reserve a portion of shares for its eligible employees. Employees can apply for these shares at a discount to the offer price and may have a higher chance of allotment compared to the general public.
- Shareholder Reservation Quota: When a subsidiary of an already listed company goes public, it may reserve shares for the existing shareholders of its listed parent company. This quota generally ranges between 5% to 15% of the total issue size. You will need to have the share(s) of that company or its listed parent company before a specified date known as the record date to be eligible for the Shares. This offers existing shareholders an opportunity to increase their stake and can enhance their allotment chances, as this category often sees less oversubscription than the general retail category
