Under-Subscription in IPOs

IPO subscription data reflects the level of participation recorded during the issue period and is closely monitored during public offerings. Subscription outcomes provide context on how an issue is received across different investor categories and market conditions. Reviewing subscription trends helps explain how demand aligns with issue size within the primary market framework.

Under-subscription in an IPO refers to a situation where investor applications do not cover the total number of shares offered during the subscription period. In such cases, demand remains lower than the issue size.

Under-subscription may occur across the entire issue or within specific investor categories such as retail, non-institutional, or institutional segments. Depending on regulatory provisions and the issue structure, unallocated shares may remain unsubscribed or be considered for reallocation, subject to minimum subscription requirements.

IPO under-subscription is commonly associated with a combination of pricing decisions, company-specific financial factors, and broader market conditions prevailing during the issue period.

Valuation Considerations

When the issue price is set at levels that are higher in comparison to prevailing market benchmarks or peer valuations, subscription levels may remain limited. Investors often assess pricing metrics such as earnings multiples and growth assumptions while evaluating public issues.

Company Financial Profile

Issuers with high leverage, inconsistent revenue patterns, or limited operating history may experience lower subscription levels. Financial disclosures that indicate constrained profitability or elevated risk factors can influence participation across investor categories.

Market Conditions

Periods of market volatility, economic uncertainty, or declining equity indices are often associated with lower participation in primary market offerings. Under such conditions, IPO subscription levels across segments may remain subdued.

Information and Disclosure Factors

Publicly available information such as regulatory observations, litigation disclosures, governance-related disclosures, or adverse news coverage may affect subscription outcomes. These factors are evaluated alongside the offer document during the issue period.

An IPO is considered under subscribed when investor demand falls short of the total shares offered during the issue period. The outcome depends on whether the issue meets the minimum subscription requirement prescribed under SEBI regulations.

Under current norms, an IPO must achieve at least 90% subscription of the total issue size based on valid applications across all investor categories. If this threshold is not met, the issue is treated as unsuccessful. In such cases, the IPO is withdrawn and the entire application amount blocked through ASBA or UPI is released back to investors within the stipulated timelines.

If the minimum subscription requirement is met but certain investor categories remain under subscribed, the issue may still proceed. Shares not taken up in one category may be reallocated to other categories, subject to the allocation structure outlined in the offer document and applicable regulatory provisions.

In under-subscribed issues, application amounts corresponding to unallotted shares are unblocked or refunded in line with SEBI-prescribed timelines, typically within a few business days. Subscription outcomes, including any category-wise under-subscription, are reflected in regulatory filings and form part of the issuer’s public market record.

Post listing, under-subscribed IPOs may see relatively lower trading volumes or increased price volatility, as initial demand levels influence secondary market activity. In some instances, limited participation at listing can also affect opening prices. However, post-listing performance varies based on broader market conditions, company fundamentals, and investor participation after trading begins.

In an IPO, subscription levels indicate how investor demand compares with the number of shares offered during the issue period.

Under-subscription occurs when the total number of shares applied for is lower than the shares offered in the IPO or within a specific investor category. In such cases, unallocated shares may remain unsubscribed or be reallocated in accordance with SEBI norms, subject to minimum subscription requirements.

Over-subscription occurs when investor demand exceeds the number of shares offered. This leads to allocation being carried out based on prescribed mechanisms such as proportionate allotment or category-specific rules, depending on the investor segment.

Both scenarios reflect market demand at the time of the issue and influence allotment outcomes, refund processes, and post-listing dynamics, without altering the issue price in an ipo once the subscription window closes.

Under-subscription occurs when investor demand during an IPO does not fully match the number of shares offered. It reflects a combination of factors such as issue pricing, company fundamentals, sector trends, and prevailing market conditions at the time of the offer. Subscription levels may also vary across investor categories, leading to partial or category-wise under-subscription.

From an issuance perspective, subscription levels indicate how the offer is received across different investor segments. If minimum subscription requirements are not met, the issue proceeds in line with regulatory provisions, including withdrawal and refund processes where applicable. Market participants also observe subscription data as part of broader assessments related to valuation positioning and demand visibility.

For investors, under-subscription can influence allotment outcomes, as applications in under-subscribed categories may be allotted in full, subject to issue terms. Any unallocated application amounts are released or refunded according to prescribed timelines. Post-listing trading activity and price movements typically reflect the same demand conditions observed during the subscription window.

Overall, under-subscription reflects how pricing, disclosure, and market sentiment interact during the IPO process, shaping allocation mechanics and secondary market participation without being driven by a single factor.

IPO subscription status data is published by stock exchanges during the issue period and reflects category-wise demand against the shares offered. This information is updated at regular intervals until the issue closes.

• On the National Stock Exchange of India (NSE) website, subscription details are available under the IPO section, showing cumulative bids received across investor categories such as retail, non-institutional, and qualified institutional buyers.
  

• On the Bombay Stock Exchange (BSE) website, IPO subscription data is displayed issue-wise, indicating the number of shares subscribed relative to the total shares offered in each category.
   

The published figures represent demand received up to the last update and are used by market participants to assess subscription trends during the IPO window.

Undersubscription does not automatically determine post-listing price movement. IPOs with lower subscription levels may record muted trading activity initially, which can influence early price discovery. However, post-listing performance is also affected by broader market conditions, company financials, sector trends, and subsequent investor participation.

• Reduced liquidity: Lower subscription levels may be associated with comparatively lower trading volumes after listing.
  

• Post-listing activity: Securities issued through under-subscribed IPOs may experience limited trading activity in the period following listing.
  

• Subsequent fundraising context: Historical subscription outcomes may be referenced by market participants during future capital-raising exercises.

Under-subscription is analysed in relation to issue pricing, disclosures, and prevailing market conditions at the time of the offering. Subscription data is reviewed alongside listing behaviour, trading volumes, and broader market indicators to assess how the issue was received during the subscription window.

Patterns observed in undersubscribed IPOs often relate to valuation expectations, company fundamentals, and prevailing market conditions. IPOs that are priced aggressively relative to earnings, growth visibility, or sector benchmarks tend to see lower subscription levels. Similarly, issues launched during periods of weak market sentiment or heightened volatility may face limited participation across investor categories.

Historical subscription data also shows that companies with limited operating track records, inconsistent financial performance, or unclear business models are more prone to under-subscription. Additionally, muted institutional participation, particularly from Qualified Institutional Buyers (QIBs), has frequently coincided with lower overall demand, reflecting cautious market positioning rather than retail disinterest alone.

These factors collectively influence subscription outcomes and help explain why certain IPOs do not receive full investor participation during the offer period.

Under-subscription in an IPO reflects the level of participation recorded during the issue period and may be influenced by pricing, financial disclosures, and prevailing market conditions. Such outcomes affect allotment results, post-listing trading behaviour, and how the issue is positioned within broader market activity. Under-subscription is therefore assessed as part of the overall subscription and listing framework applicable to public offerings.

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.