Reasons for Non-allotment of Shares in an IPO

The non-allotment of IPO shares commonly occurs when demand exceeds the number of shares available in the issue. Such outcomes can feel disappointing, especially when popular or oversubscribed IPOs limit the number of investors who can be accommodated.

By examining the common reasons for non-allotment; including subscription levels, application eligibility, and procedural factors, investors can understand how IPO allocations work. This article also reviews available solutions to IPO non-allotment, along with ways to track status once allotments are finalised.\

IPO allotment refers to the process where shares are distributed among investors who apply during an Initial Public Offering. Since the number of applicants often exceeds the number of shares available, the distribution follows specific rules based on demand and investor categories.

How the IPO allotment process works:

• Applications are received and validated for accuracy and eligibility.

• SEBI-defined quotas are applied for different investor categories such as Retail Investors, High Net-Worth Individuals (HNIs), and Qualified Institutional Buyers (QIBs).

• Shares are allocated depending on subscription levels - proportionately or through a lottery method in case of oversubscription.

• Allotted shares are credited to investors’ demat accounts after final approval.

Types of allotment outcomes:

• Full Allotment: Entire applied quantity is allotted when demand is lower than available shares.

• Partial or No Allotment: Occurs when the issue is oversubscribed and shares are distributed to applicants in limited quantities, or through a draw of lots.

Understanding how an IPO allotment processes provides context for why some applications may not receive shares even when submitted correctly.

When a company opens a public issue, investors place bids within the approved price range. However, not every applicant receives shares because the demand, eligibility rules, and application validation processes determine allotment outcomes.

Below are the key factors leading to IPO non-allotment:

Oversubscription of the IPO

If the number of applications exceeds the total shares offered, allotment becomes competitive. In such cases, the distributor uses defined rules such as category-wise distribution and a computerised lottery system. Oversubscription is particularly common in IPOs with strong market interest, which increases the probability of some investors not being allotted shares.

Computerised Lottery Allocation

In book-built IPOs with high demand, allotment for retail applicants is done through a digital draw. This automated method ensures that each eligible application has equal consideration, but outcomes may still result in many investors receiving no shares.

Limited Allocation for Retail Category

Retail investors are assigned at least 35% of the overall IPO. When interest from institutional investors and High Net Worth Individuals (HNIs) rises sharply, the retail pool may see increased competition, leading to reduced allotment or rejection even for valid retail bids.

Application Size and Bid Quantity

The number of lots applied for influences allocation probability in certain scenarios. In the NII category, larger bids may receive proportional allotment in some cases, while smaller bids under heavy subscription often rely on the lottery mechanism.

Invalid or Erroneous Applications

Incorrect PAN, mismatched applicant names, signature variations, insufficient UPI mandate approvals, or KYC discrepancies can result in instant rejection. System validation checks ensure only compliant applications are considered for allotment.

Bid Price Below Final Issue Price

If the bid is placed below the cut-off or final issue price, the application becomes ineligible for allotment. This situation arises mainly in price-band IPOs where investors manually enter bid prices instead of selecting the cut-off option.

Insufficient Blocked Funds

Under the ASBA mechanism, funds must remain unencumbered until allotment finalisation. Any failure in fund blocking, such as inadequate bank balance or UPI mandate expiry, may lead to application rejection.

Regulatory or Eligibility Restrictions

Some IPOs issue specific bidding rules, such as eligibility limited to particular investor groups or capped shares per PAN. If investor category norms are not met, or guidelines are breached, applications may be excluded from consideration.

IPO allotment depends on subscription levels, system validation, and regulatory compliance; which is why even a correct application may not always secure shares in highly sought-after public issues.

After knowing the reasons behind unsuccessful allotment, certain factors can shape the likelihood of an application being considered valid during the selection process:

Application Accuracy

Ensuring correct PAN, account holder details, and UPI mandate reduces the chances of system-based rejection.

Application Size Within Retail Limits

Retail bids are treated uniformly under SEBI’s framework, so exceeding the category limit may shift the application into NII, altering the allotment method.

Multiple Eligible Accounts in a Household

Submitting applications through immediate family members, each with a unique PAN and demat linkage, increases the number of valid entries in the system.

Cut-Off Price Selection

Opting for the cut-off ensures the bid remains valid even when the final issue price is fixed at the higher end of the range.

Timely Submission

Avoiding last-hour rush minimises the chances of UPI expiration, payment time-outs, or technical issues that lead to invalid applications.

Shareholder Category Eligibility

In cases where the issuer has a listed parent company, applying under the shareholder category (if permitted) introduces an additional allocation route.

Although these elements contribute to application validity and processing, allotment outcomes in oversubscribed IPOs continue to depend on the final subscription status and the lottery mechanism used for distribution.

If you have applied for an IPO and are wondering whether you’ve been allotted shares, there are several ways to check your allotment status.

Checking IPO Allotment Status on Registrar’s Website

Each IPO has a designated registrar that manages the allotment process. The registrar’s website provides a facility to check the allotment status by entering your application number or PAN details.

• Common IPO registrars in India include KFintech and Link Intime.

• Visit the registrar’s website, find the relevant IPO listing, and enter the required information to check the status.

How to Check Allotment Status on NSE/BSE

Investors can also check their IPO allotment status on the official websites of the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE).

• Log on to the official NSE or BSE website.

• Locate the IPO section and enter your application number or PAN details.

• The website will display whether or not you have been allotted shares.

Experiencing non-allotment in a public issue is common, especially in heavily subscribed IPOs. After such an outcome, many applicants focus on how their future IPO participation is structured.

Applying via multiple eligible family accounts

Some households submit applications through more than one demat account, where each account is linked to a different PAN and investor. This increases the number of valid applications entered into the allotment process, subject to SEBI and registrar norms.

Tracking subscription levels during the issue period

Observing category-wise subscription data (retail, NII, QIB) helps applicants understand how crowded a particular IPO has become. Issues with relatively lower subscription tend to see a wider distribution of units among valid applications.

Considering smaller or less publicised IPOs

Public issues from smaller or lesser-known companies may receive fewer applications than high-profile offerings. In such cases, the probability of receiving allotment differs from that in oversubscribed issues.

Reviewing application and banking details carefully

Verifying PAN, demat account, applicant name, and UPI or bank mandate before submission reduces the likelihood of technical rejection due to mismatches, incomplete information, or payment-related failures.

These approaches illustrate how investors often prepare for subsequent IPOs after a non-allotment outcome, with a focus on valid applications and process accuracy.

If your IPO application does not receive allotment, it’s important to know what to expect and how to proceed.

Refund Process for Non-Allotted IPOs

In the event that you do not receive an allotment, the money invested in the IPO application will be refunded. The refund process typically takes a few days, and you will receive your money back in the account linked to your demat account. If you applied via UPI, the refund will also be processed through UPI.

Other Market Options

Non-allotment occurs in IPOs, after which you may consider mutual funds, exchange-traded funds (ETFs), or secondary market investments. These options represent different ways of participating in the capital markets, each governed by its own structure, risk profile, and regulatory framework.

Tracking Upcoming IPO Activity

Market participants often monitor upcoming public issues to stay informed about new listings. Reviewing offer documents, issue timelines, and market disclosures can help maintain awareness of future IPO activity and how different offerings are structured.

IPO non-allotment is common in highly subscribed offerings and can occur due to process requirements or demand conditions. By understanding how allotment works and the factors involved, investors gain clearer expectations about different outcomes when applying for public issues.

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.