Minimum Subscription in IPOs: Meaning & Benefits

Going public through an Initial Public Offering (IPO) requires sufficient investor participation before shares can be allotted. Minimum subscription refers to the regulatory threshold that determines whether an IPO can proceed to listing. This mechanism forms part of India’s primary market framework and is designed to ensure adequate demand before capital is raised.

Minimum subscription refers to the minimum level of shares that must be subscribed to in an IPO before allotment and listing can take place.

Regulatory Requirement

Under Securities and Exchange Board of India regulations, companies must generate bids for at least 90 per cent of the shares offered. Without meeting this threshold, the IPO is considered invalid and cannot go forward.

Process and Refund Mechanism

Once bids meeting the 90 per cent requirement are received, the issuer proceeds with allotment based on applicable allocation rules. If this level is not achieved, the IPO is withdrawn and application money is returned to applicants within prescribed timelines.

Minimum subscription is evaluated using only valid bids, excluding withdrawn or rejected applications. Oversubscription levels are assessed separately and do not affect the minimum eligibility requirement for allotment.

Minimum subscription rules serve multiple functions within the capital markets by supporting structured issuance and participation thresholds in public offerings.

Assurance of Demand

Reaching the threshold confirms that the offer has incurred adequate participation.

Protection Against Launch Failures

Failure to meet minimum subscription results in cancellation and refund, preventing incomplete issuances.

Market Signals and Perception

Subscription levels provide an early indication of demand conditions ahead of listing.

Minimum subscription is assessed at the close of the IPO bidding period. If at least 90% of the offered shares receive valid bids, the issue moves to allotment.

If the threshold is not met, the offer is withdrawn and funds are returned. This ensures that capital is raised only when sufficient participation exists.

Minimum subscription is calculated as 90% of the total issue size.

For example, if an IPO offers 1,00,000 shares, at least 90,000 shares must receive valid bids for the issue to proceed. Only confirmed applications are included in this calculation.

If subscriptions fall below this level, the IPO is cancelled and refund procedures are initiated.

The minimum subscription framework supports orderly primary market functioning by:

• Ensuring IPOs proceed only with sufficient demand

• Preventing capital raising in under-subscribed offers

• Providing early visibility into market participation

• Supporting transparent allotment processes

• Supporting completion of issues only after regulatory participation thresholds are met

SME IPOs, listed on platforms like NSE Emerge and BSE SME, follow similar norms but may have more flexible timelines and thresholds tailored for smaller companies.

Special Thresholds or Timeframes

While the 90 per cent rule applies, extended bidding periods may be permitted to accommodate the smaller investor base typically associated with SME offerings.

Minimum subscription applies only to public issue participation and does not guarantee post-listing performance. It is evaluated independently of oversubscription levels and operates strictly as a regulatory eligibility requirement.

Minimum subscription applies only to public issue participation and does not guarantee post-listing performance. It is evaluated independently of oversubscription levels and operates strictly as a regulatory eligibility requirement.

This content is for informational 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.