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Understand the systematic approach behind the allocation of shares during an Initial Public Offering (IPO).
An Initial Public Offering (IPO) is a significant step for a company entering the stock market. For investors, the IPO represents an opportunity to participate in a company's early public ownership. However, when demand exceeds supply — a frequent occurrence — understanding the IPO allotment process becomes vital. The IPO allotment determines how many shares each investor receives, especially in cases of oversubscription. This process ensures fair distribution of shares while adhering to regulatory norms.
This guide explains the IPO allotment process, the role of investor categories, and the key factors that influence allocation. It also covers how to check your allotment status and what to expect post-allotment.
IPO allotment is the process through which shares offered in an IPO are distributed among applicants. When an IPO receives more applications than the shares available (oversubscription), not all applicants may receive shares. The allocation is governed by SEBI regulations and follows a defined process to ensure fairness.
Allotment is carried out by the Registrar to the IPO, in consultation with the company and under SEBI’s oversight. The process ensures transparency and equal opportunity for all eligible investors.
Can apply for up to ₹2 Lakh worth of shares.
Reserved 35% of the total offer.
Allotment may be through lottery if oversubscribed.
High Net-Worth Individuals and corporates.
Apply for more than ₹2 Lakh.
Reserved 15% of the total offer.
Allotment is proportional.
Includes mutual funds, banks, insurance companies, etc.
Reserved 50% of the total issue.
Allotment based on proportion of demand.
Specific quota reserved in some IPOs.
Allotment within respective reservation limits.
Undersubscription: All applicants receive full allotment.
Oversubscription: Allotment done via lottery or proportionately, depending on category.
For RIIs, allotment is done in lots.
More lots increase allotment probability (subject to cut-off and category).
Retail applicants selecting “cut-off price” are eligible for allotment at the final issue price.
Bidding at a lower price than cut-off may lead to no allotment.
Investors must apply in multiples of the minimum lot size.
Example: If lot size = 30 shares, application should be in 30, 60, 90, etc.
Investors place bids using ASBA (Applications Supported by Blocked Amount) via their bank or broker. Funds remain blocked until allotment.
At the end of the 3-day IPO window, bidding stops. The registrar compiles all applications.
The registrar prepares a 'Basis of Allotment' (BoA) document outlining how shares will be distributed.
Based on the BoA:
RIIs may be allotted via lottery.
NIIs and QIBs are allotted proportionately.
Allotted shares are credited to the investor's demat account. Refunds are processed for unallotted shares.
Shares begin trading on the scheduled listing day. Investors can then sell or hold their shares.
This is the methodology used by registrars to fairly distribute shares among investors.
Oversubscription Ratio = Total Number of Shares Applied / Total Number of Shares Offered
Shares offered to retail: 1,00,000
Applications received: 5,00,000
Oversubscription: 5x
Registrar uses a lottery mechanism to randomly allocate shares to 1 in every 5 applicants.
For NIIs:
If 30,000 shares are reserved and demand is for 60,000, each eligible applicant receives 50% of the shares they applied for.
Go to the IPO registrar’s website.
Select IPO name.
Enter PAN, application number, or DP ID.
Visit: bseindia.com/investors or nseindia.com
Follow the IPO status link.
Allotment status is announced 5–7 days after the IPO closes.
Verify share credit in your demat account on or before the listing date.
If no allotment is made, blocked funds are automatically unblocked or refunded.
Observe market response on listing day. Note that the listing price can differ from IPO price.
All valid applicants receive full allotment.
Remaining shares may be reallocated to other categories.
Lottery system used for RIIs.
Proportional allotment for NIIs and QIBs.
Occurs when the number of shares applied for exceeds availability, but the investor receives fewer than requested.
Early applications reduce the risk of last-minute payment failures.
UPI mandates require authorisation within 24 hours.
Incorrect PAN, bank, or DP ID can result in rejected applications.
The IPO allotment process plays a key role in ensuring fair and transparent distribution of shares. Whether you’re a retail or institutional investor, understanding this process helps set realistic expectations and interpret the outcome of your application. While oversubscription often leads to partial or no allotment for retail investors, proper bidding strategies and accurate application details can improve the odds.
Being well-informed about timelines, refund procedures, and how to check allotment status enhances the IPO experience and prepares you for the listing phase.
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.
Sources
SEBI – Public Issues Regulations
NSE IPO Process
BSE IPO Listing Process
Chittorgarh IPO Allotment
Zerodha Varsity – IPO Module
Groww – IPO Allotment Guide
It is the process of allocating shares to investors who applied during the IPO based on predefined rules.
Retail investors receive allotment via a lottery system. Institutional investors are allotted shares proportionately.
The status is available typically within 5–7 days after the IPO closes.
On the websites of the IPO registrar, NSE, BSE, or your broker’s platform.
Your application money remains unblocked or is refunded to your bank account.
