Initial Public Offerings (IPOs) allow private companies to become publicly listed and sell ownership shares to raise funds. When companies issue new stock, they allow investors to bid for the shares in a 3-day window.
Within these three days, investors can subscribe to an IPO of their choice by bidding within the price range. On the allotment day, the amount will be debited from your account, and your account will be credited with IPO units.
Read on to know more about how the IPO allotment process works and how you can check the IPO allotment status.
Simply put, an IPO divides the company’s stock into several shares and sells them to raise funds for business expansion or daily operations. These stocks are sold to investors based on their subscriptions during IPO allotment. Once the initial public offering has ended, the IPO listing will be completed.
Investors can track their IPO allotment status to see if their stocks have been allotted. If yes, investors must also know to track how many shares were allotted.
The procedure for IPO allotment takes place when all investor orders have been placed but before the commencement of trading of the stock. However, this procedure may vary depending on whether the company is issuing one or multiple asset classes.
Allocation of IPO stocks involves calculating the share distribution among investors and the cost of acquiring these shares. The first step in IPO allocation is for the company’s Board of Directors to decide how many shares they wish to sell.
Secondly, they decide on share distribution and issue prices with assistance from investment banks or underwriters. Once these details are finalised, the IPO allotment process also begins.
If you have already subscribed for an IPO, you must wait for the subscription window to close. On the allotment day, the securities will be credited to your account depending on the issue price and subscription level.
You can track the IPO allotment status online to check whether securities have been allotted. Here are the steps you need to follow to check your IPO allotment status:
Open the official website of the NSE/BSE
Click on the ‘IPO’ section
Select the IPO for which you want to track the allotment status
Enter your application number and your PAN
Wait to get redirected to a new page where you will see your IPO allotment status and the number of shares allotted
When an IPO remains undersubscribed or gets fully subscribed, investors get the exact number of lots for which they bid. However, if there is a slight oversubscription, investors will be allotted shares based on proportionate terms.
On the other hand, if an issue becomes hugely oversubscribed, the investors will be allocated lots on a lucky draw basis.
Note that the procedure of IPO allotment depends on the response it receives from the public. For instance, if the issue remains undersubscribed, you will surely get the IPO allotment as per your bidding. However, bear in mind that you will need a Demat account to participate in the IPO.
If you wish to improve your chances of getting an IPO allotment, ensure you do not make multiple applications. Moreover, bidding at the cut-off price will undoubtedly help you secure the allotment of IPO shares.
Usually, companies open the subscription window for three days, after which an allotment date is fixed.
When you apply for an IPO, the amount gets blocked in your account and is only deducted if an allotment is made. Hence, you will not have to apply for any refund if no IPO allotment is made.
You can check the IPO allotment status online on the official website of the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE).
No, the allotment of IPO is not based on a first-come, first-serve basis. Instead, in case of oversubscription, IPO allotment is done on a lucky draw basis.