What is IPO Allotment Process

The IPO allotment framework forms a stage between IPO subscription and listing. This article explains what IPO allotment is and clarifies the IPO allotment meaning. It also outlines how the IPO allotment process fits within the broader public issue lifecycle, covering regulatory roles, allocation logic, and post-subscription timelines.

IPO allotment refers to the stage in the public issue lifecycle where shares are formally distributed to applicants after the subscription window closes. It bridges the gap between applying for an IPO and receiving shares in the demat account.

The IPO allotment framework can be understood through the following aspects:

• What allotment represents:
  Allotment indicates whether and how many shares have been assigned to an applicant. In the case of an oversubscribed IPO, share allocation is not guaranteed for every valid application.
  

• When allotment happens:
  The allotment process begins after the IPO closes and bids are finalised. It is completed before shares are credited to demat accounts and before the listing date.
  

• Why allotment is required:
  Since demand often exceeds the number of shares offered, allotment provides a regulated mechanism to distribute shares fairly across investor categories, in line with SEBI guidelines.
  

• Application versus allotment:
  Submitting an IPO application represents an intent to purchase shares, while allotment confirms the actual allocation. An application does not automatically result in shares being allotted.

The allotment process is carried out by the registrar to the issue, under regulatory oversight, to ensure transparency and consistency across all eligible applications.

IPO allotment is shaped by a set of predefined rules that determine how shares are distributed once the subscription period ends. These aspects explain how demand, investor classification, and regulatory frameworks interact within the Initial Public Offering (IPO) process.

• Oversubscription and demand:
  When the number of shares applied for exceeds the shares offered, the IPO is classified as oversubscribed, triggering structured allocation methods rather than full allotment to all applicants.
  

• Reservation categories:
  IPOs are divided into investor categories such as retail, non-institutional, and institutional investors, each with a predefined portion of shares reserved as per regulatory norms.
  

• Allotment rules defined by SEBI:
  The Securities and Exchange Board of India prescribes the allotment framework to ensure consistency, transparency, and equal treatment across investor categories.
  

• Proportional and lottery-based allocation:
  Depending on the investor category and level of oversubscription, shares may be allotted proportionately or through lottery to maintain fairness.
  

• Impact of cut-off price selection:
  In retail categories, bids placed at the cut-off price are considered for allotment at the final issue price, influencing eligibility when demand exceeds supply.

Together, these elements describe how IPO allotment operates within the Initial Public Offering (IPO) lifecycle from subscription closure to final share distribution.

The IPO allotment process is shaped by multiple variables that determine how shares are distributed once applications are reviewed. These IPO allotment factors explain what is IPO allotment in practical terms, especially when demand varies across investor categories.

Subscription level

The level of subscription directly affects how shares are allocated:

• Undersubscription:
  When applications are fewer than the shares offered, all valid applicants are generally allotted the shares they applied for.
  

• Oversubscription:
  When demand exceeds supply, allotment is carried out through a lottery system or proportionate distribution, depending on the investor category.

Number of lots applied

In retail, allotment is processed in lots rather than individual shares. The number of lots applied for determines how applications are considered during the allotment process, subject to category-specific rules and cut-off selection.

Cut-off price selection

Retail applications submitted at the cut-off price are considered at the final issue price. Applications placed below the cut-off may not be eligible for allotment if the IPO is oversubscribed.

Lot size and bid multiples

IPO applications are accepted only in multiples of the prescribed lot size. Where the lot size is defined as 30 shares, bids are recorded in quantities such as 30, 60, or 90 shares, in line with the terms specified in the issue documents.

Together, these IPO allotment factors outline how allocation outcomes are determined after the subscription window closes.

After the IPO subscription period ends, the registrar reviews and validates all applications before applying the prescribed allotment framework. This process determines how shares are distributed and when an application status is marked as IPO allotted.

• Retail category:
  In oversubscribed issues, retail allotment is carried out through a computerised lottery system.
  

• HNI and QIB categories:
  Shares are allotted on a proportionate basis, based on the demand submitted within each category.
  

• Oversubscription handling:
  When applications exceed available shares, category-specific allocation rules are applied in line with regulatory norms.
  

• Allotment status:
  Once allocations are finalised, application records are updated to reflect whether shares have been IPO allotted.

An IPO is marked as “allotted” after the registrar completes the investor-wise allocation process.

The IPO allotment process follows a defined sequence to ensure transparency and fairness. From application submission to final listing on the exchange, each step is monitored by the registrar under SEBI guidelines. 

Step 1: Application and Bidding 

Bids are submitted through Applications Supported by Blocked Amount (ASBA) using authorised banking or brokerage channels. 

Step 2: Bidding Window Closes

At the end of the IPO subscription window, bidding concludes and the registrar compiles all valid applications.

Step 3: Basis of Allotment Finalised

The registrar prepares the Basis of Allotment (BoA), which outlines the methodology used to distribute shares across investor categories.

Step 4: Share Allocation

Based on the BoA:

• Retail applications may be considered through a lottery mechanism in oversubscribed issues

• Non-institutional and institutional categories are allotted shares on a proportionate basis

Step 5: Credit of Shares

Allotted shares are credited to the investor's demat account. Application amounts for unallotted shares are released or refunded as applicable.

Step 6: Listing on Exchange

Shares are admitted for trading on the stock exchange on the scheduled listing date.

The basis of allotment defines the method used to distribute IPO shares among applicants, especially in cases of oversubscription. Allocation methods vary by investor category and are applied according to predefined ratios or lottery-based mechanisms.

Formula: Oversubscription Ratio

Oversubscription Ratio = Total Number of Shares Applied / Total Number of Shares Offered

Example Scenario:

• Shares offered to retail: 1,00,000

• Applications received: 5,00,000

• Oversubscription: 5x

In such cases, allotment in the retail category is carried out through a lottery-based system, where a proportion of applicants are selected in line with the oversubscription ratio.

For Non-Institutional Investors (NIIs):

If 30,000 shares are reserved and total demand amounts to 60,000 shares, allotment is calculated on a proportionate basis, resulting in each eligible application being allocated a corresponding portion of the requested shares.

Once the basis of allotment is finalised, allotment status information is made available through official channels, including the IPO registrar, stock exchanges, and, in some cases, broker platforms.

• Through Registrar Website

The information is typically accessed using identifiers such as the IPO name along with details like PAN, application number, or DP ID.

• Through BSE or NSE Website

The status is displayed through dedicated IPO sections available on bseindia.com/investors or nseindia.com

• Typical Timeline

Allotment status is generally announced within 5–7 days after the IPO subscription window closes. Shares, where allotted, are credited to demat accounts prior to the listing date.

After the IPO allotment process is completed, certain operational steps follow in relation to demat credit, refunds, and listing. These steps reflect how allocation and settlement activities are concluded.

1. Demat Credit

Shares are credited to the investor’s demat account on or before the listing date.

2. Refund Status

If no allotment occurs, blocked funds are automatically unblocked or refunded.

3. Listing Day

Shares begin trading on the listing day, and the market price may differ from the IPO price.

IPO allotment outcomes vary based on subscription levels and the number of valid applications received within each investor category.

Undersubscribed IPO

• When applications are fewer than the shares offered, full allotment is typically recorded for all valid applications.

• Any unallocated shares may be reassigned across categories, as permitted under regulatory guidelines.
  

Oversubscribed IPO

• In the retail category, allotment is carried out through a lottery mechanism.

• For non-institutional and institutional categories, shares are distributed on a proportionate basis.
  

Partial Allotment

• Partial allotment occurs when demand exceeds the number of shares available.

• In such cases, the number of shares allotted is lower than the quantity applied for.

Certain practices are commonly observed during the IPO application process based on operational and system requirements.

Observed points include:

• Application Timing – IPO applications are accepted during the defined bidding window. All valid applications submitted within this period are processed through the same allotment mechanism.
  

• Payment Modes – IPO applications can be submitted using UPI or ASBA, each following its respective authorisation and fund-blocking framework as prescribed under current regulations.
  

• Information Accuracy – Application processing is dependent on the correctness of details such as PAN, bank account information, and demat account identifiers, as verified during the allotment process.

The IPO allotment process defines how shares are distributed after the subscription phase of a public issue. It outlines the role of regulatory frameworks, investor categories, and allocation mechanisms in determining whether and how shares are allotted. By detailing timelines, allocation logic, and post-allotment steps, the process provides a structured approach to share distribution prior to listing.

This content is for educational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.