Zomato IPO: 28% of applications through UPI route get rejected

Overall, about half a million rejected on technical grounds

About 28 per cent of applications made by retail investors in Zomato’s initial public offering (IPO) through the unified payments interface (UPI) route were rejected, said investment bankers in the know.
 
In comparison, only 5 per cent of non-UPI retail applications –those coming from bank-backed brokerages– were rejected.
 
To be sure, part of the rejection was due to issues at the applicant’s end, such as multiple entry, name and PAN mismatch, and non acceptance of payment mandate. Meanwhile, a substantial amount of UPI bids also got rejected on account of issues at the remitter bank.
 
Industry players said the UPI payment system for IPOs – first introduced in 2018 – has seen reduction in failure rates but there is scope for further improvement.
 
According to the ‘basis of allotment’ filed by Zomato on Thursday, the issue received 2.7 million applications in the retail segment. Those in the know said the total applications received in the IPO were close to 3.2 million. However, close to half a million were rejected on technical grounds. The bulk of these applications was made via the UPI route.
 

“Banks have been working hard on reducing the failure rate for UPI. However, the technical declines for some banks remain high. An IPO like Zomato saw a record number of retail applications. The system was not geared to handle this much load,” said a banking sector official.
 
At present, retail applicants that have trading accounts with bank-backed brokerages can apply through their 3-in-1 accounts. Such accounts seamlessly link the bank account, demat account and the trading account. Meanwhile, those who have accounts with a standalone broker have to apply through the UPI route.
 
Typically, a little over a third of the applications in any IPO come through the UPI route, while the majority still comes from the so-called 3-in-1 accounts.
 
Going ahead, market players expect the share of UPI-based applications to grow further as discount brokers are gaining market share.
 
“Application for IPOs through UPIs is fast gaining popularity. The system has to scale up, given the kind of demand we are seeing. Now that we have started publishing the data of success and failure rates, hopefully, banks will get their act together. NPCI is working very closely with the banks so that the IPO declines on the UPI platform reduce to an acceptable level,” said a source close to the development.
 
According to data put out by NPCI for June, the so-called technical declines (TD) for UPI IPO transactions for several banks were steep. For instance, Indian Overseas Bank, Punjab National Bank and AU Small Finance bank had TD of 55.6 per cent, 49.4 per cent and 30 per cent. In the case of State Bank of India (SBI) – which handled the maximum volume – the approval rate of 84.6 per cent, business decline was 13.9 per cent and TD was 1.5 per cent.
 
In June, according to NPCI’s data, more than 1.94 million mandate creation requests were made through the UPI platform, and SBI saw the highest mandate creation applications, with a volume of 486,555, followed by HDFC Bank with 307,185, ICICI Bank with 216,456, Bank of Baroda with 173,853, and Axis Bank with 121,395 applications.