IPO Allotment

What is IPO Allotment?

A distribution system determines how Initial Public Offering (IPO) shares get allocated to investors who participate in IPO applications. The registrar of the issue operates with the stock exchange to manage this allocation process. Inspection of IPO allotment results starts approximately three to four days following the IPO bidding conclusion date through internet-based share status tracking.

How IPO Allotment Works

• An IPO with a limited subscription leads to the complete allotment distribution of shares to every interested investor.
• When an IPO receives more applications than shares available for allocation these shares get distributed according to set instructions for diverse stockholder categories.
• The issue either gets withdrawn or canceled when the IPO fails to achieve a minimum 90% subscription level.

IPO Allotment Rules

1. The stock exchange approves IPO allotment procedures together with the registrar responsibilities.
2. The sharing distribution depends on which investor segment applies (Retail, NII, QIB, and so on).
3. The acceptance process only looks at proper submissions while it excludes requests using improper PAN/Demat data.
4. The allocation process follows a minimum threshold of cut-off price because it accepts only offers that meet or exceed this requirement.
5. Shares that remain unsubscribed in the QIB category will not receive allocation among other categories.
6. The Basis of Allotment document serves as a public document to guarantee transparency in the share allocation procedure.

IPO Allotment Methods by Investor Category

1. Retail Individual Investors (RII) Category

• Retail investors apply through lots that contain a standard quantity of shares.
• All valid applicants who participate in an undersubscribed IPO receive full allotment in their applications.
• A computerized lottery system operates for selecting one lot per applicant when oversubscriptions occur.
• The investors who are selected receive their shares on a proportional basis after the first round of allocation has finished.

During the retail category subscription process a maximum of 2,000 investors should receive their allotted shares because 500,000 shares are available and each lot contains 250 shares. A lottery system becomes the allocation method when more than 2,000 applicants submit applications.

2. Non-Institutional Investors (NII) Category

The NII investor group comprises two basic subdivisions:

• The reserve for Small NII contains investments within ₹2 lakh to ₹10 lakh (1/3rd of the NII allocation).
• The investment threshold for Big NII exceeds ₹10 lakh with a target to allocate 2/3rd of the available quota for this segment.
• The stock distribution occurs through proportional assignments according to specified bidding quantities.

3. Qualified Institutional Buyers (QIB) Category

• The distribution of shares goes to every QIB applicant with an accepted application.
• Mutual funds within QIB can obtain a maximum of 5% of the QIB category.

4. Anchor Investors Category

• The IPO enables Anchor Investors to obtain up to 60% of QIB quota before the issue begins.
• Anchor Investor Allocation Rules:
• ₹10 Cr allocation → Max 2 Anchor Investors
• ₹10-250 Cr allocation → 2-15 Anchor Investors
• ₹250 Cr+ allocation → 5-15 Anchor Investors for the first ₹250 Cr, plus 10 more for every additional ₹250 Cr.

5. Employee Category

• The issuing company allows its staff members to receive specific reservation privileges during IPO allocation.
• An oversubscription leads to a proportional allocation of shares under all categories of applicants.
• The allocation rules state that employees cannot obtain more than ₹2 lakh worth of company shares.

6. Shareholder Category

• If a parent company has shareholders these investors can use the Shareholder Quota for application.
• The sales process remains proportionate when there is a subscription in excess of supply.
• A total bid exceeding ₹2 lakh translates into multiple bidding that will lead to rejection of the bid.

IPO Allotment Methods by Investor Category

IPO Allotment Process: Step-by-Step

1. IPO closes for subscription.
2. The registrar verifies applications (invalid ones are rejected).
3. The allotment is finalized based on the rules for each category.
4. The basis of the Allotment document is published.
5. Investors check their allotment status online.
6. Refunds are processed for non-allottees.
7. Shares are credited to Demat accounts.
8. IPO lists on the stock exchange.

IPO Allotment status verification can be accessed through the registrar's website (e.g. Link Intime, KFin Technologies) three to four days after the IPO closing date.

You can check IPO allotment status through the registrar website (Link Intime for instance or KFin Technologies) after 3-4 days when the IPO stops receiving applications.

Steps to Check IPO Allotment Status

• Visit the registrar’s website.
• Select the IPO name.
• Users can enter their PAN number Application number and Demat account number to access the status check.
• The status of your allotment will appear after pressing the Submit button.

IPO Allotment Chances along with the Variables that Influence Them

How Are IPO Shares Allotted?

• Full share allotments will be given to every registered applicant in IPOs with less demand.
• In cases where an IPO receives more subscriptions than available shares, the selection of retail investors happens through a lottery process.
• NII & QIB investors obtain allotted shares according to the size of their bidding amount.

Factors Affecting IPO Allotment Chances

• Oversubscription Level: The higher the subscription, the lower the allotment chances.
• Pro-rata distribution methods are used by NII whereas retail investors experience the process through a lottery system.
• The bid value at the cut-off price directly enhances the possibility of obtaining shares.
• Multiple lot applications during IPOs will not enhance the probability of retail allotment.

FAQs

1. What length of time does IPO allotment require?

Authorization for IPO distribution occurs between 3 to 4 days at the completion of the IPO period.

2. I need to know the process of examining my IPO distribution outcome.

Users can verify their IPO allotment state through PAN or with application numbers or Demat account records on the registrar's website.

3. What happens if I don’t get an IPO allotment?

Refunds of your funds happen automatically if you fail to receive IPO allotment.

Your refunded money will arrive back to you during the few subsequent days in case you miss out on an allotment.

4. Is there any way I could enhance my opportunities for receiving an IPO allotment?

Retail investors increase their chances of getting IPO allotment through separate Demat account applications under different family members.

5. Can I submit my application for both the Retail and NII sections?

The policy rejects all applications when a person submits their application twice through one PAN.

6. I receive a rejection from my IPO application for unidentified reasons.

The application gets rejected primarily because of inaccurate information applications exceeding the PAN limit or missing money in the account.