KSH International’s IPO Misses 90% Mark — What's Next For Investors?

After opening for subscription on December 16, the KSH International IPO closed on December 18, ending its third-day bidding without being fully subscribed, at just 83%, due to subdued investor demand. The undersubscription raises a common question among investors: what happens next when an IPO fails to meet the minimum subscription threshold?

Under India’s capital market regulations, an IPO must meet specific subscription levels of 90% to proceed.

As per SEBI regulations, an IPO must be subscribed to at least 90% of the issue size for it to be considered successful. This requirement applies to the overall issue, not to individual investor categories such as retail, institutional, or non-institutional investors.

If total subscriptions fall below this level at the close of the issue, the IPO is deemed to have failed the minimum subscription requirement.

If an IPO’s subscription falls below the 90% threshold, the company can take corrective measures such as extending the subscription period, revising the price band, or reducing the Offer for Sale component.

However, if the issue still fails to achieve 90% subscription, it must be withdrawn. In such cases, the issue is cancelled and all application money must be refunded to investors. Refunds are typically processed within a few working days after the issue closure, which is the timeline prescribed by SEBI.

For investors who applied to an undersubscribed IPO, there is no financial loss, as the application money is refunded in full. The funds are typically unblocked from the application, or returned to bank accounts automatically, depending on the path chosen by the investor. There is also no carry-forward of allotment to a future issue.

The company does have options going forward. It can refile or relaunch the IPO at a later date. It may also revise pricing, issue size, or timing based on market conditions.

Some companies choose to further delay public listing altogether and seek alternative funding routes. Any fresh IPO attempt would require a new regulatory process and approvals.

An undersubscribed IPO is often interpreted as a signal of weak investor demand, which may prompt closer scrutiny if the company returns to the market later.

However, undersubscription doesn't necessarily reflect poor fundamentals. IPO subscription levels can be influenced by multiple factors, including broader market sentiment, competing IPOs at the same time, valuation concerns, and limited awareness or institutional participation.

Back in 2018, the ICICI Securities IPO struggled to attract investors, largely due to concerns over its steep valuation. The issue fell short by over Rs 50 crore against its target of raising more than Rs 4,000 crore.

During the same week, Hindustan Aeronautics Ltd. (HAL) saw its IPO subscribed to only 50% by the third day. However, when LIC stepped in with an investment, the subscription level surged dramatically to 99%.