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Thread: Now, rent out your demat account
Views: 2347 | 29-07-07, 06:31 PM #1
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Now, rent out your demat account
AHMEDABAD: The Gujarati investor will stop at nothing if he sees an opportunity. Lured by handsome gains from recent IPOs, investors refuse to be tied down by guidelines that you can file only one application for allotment of shares. Smart investors are now ‘hiring’ demat accounts to corner more shares.
A demat account, according to market insiders, can fetch a rent ranging from Rs 300 to Rs 1,000 per IPO application. The trend has caught on not only in cities like Ahmedabad, Rajkot and Vadodara, which figure in the list of country’s top-10 cities in terms of number of IPO applications , but also in smaller centres like Unjha, Mehsana and Patan where per-capita investment in stock markets is higher than big cities.
“Rent for such surrogate accounts depend upon size and quality of IPOs. We have witnessed people giving their demat accounts on an average rent of Rs 300 to Rs 400 for an IPO application ,’’ a Bhavnagar financial intermediary said. With the PAN card becoming mandatory to operate a demat account, the rent amount has also gone up to Rs 1,000 in certain highprofile IPOs.
The trend of hiring demat accounts is particularly popular in towns in north Gujarat. The modus operandi is simple. An investor approaches a broker to find someone who has a demat account and is not applying for the particular IPO. After such a demat accountholder is found the rent is fixed. The investor then applies for shares in the name of the account holder. Once the allotment of shares is done, the accountholder transfers the allotted shares to the investor through an off-market deal. Brokers say that since the deal is based on trust, the fad is catching on in smaller towns where most people know each other.
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