What happens if IPO is not allotted

Companies are adopting ways to allot shares to their investors when the IPO gets over subscripted in the primary markets. SEBI has laid down rules and regulations that are to be precisely applied if the IPO is over subscripted.

The article spots the reasons behind the non allotment of the shares to retail investors, qualified institutional buyers, traders, etc.

It also explains to retail investors the tips to obtain an allotment for an overly rated IPO script.

Investors & IPO Issuers Benefit Mutually in Money Markets

When a company plans to expand its business operations, or builds a new venture, it does require a good capital market.

Besides its partners, and business promoters the company opens up in the money markets to attract different qualified Institutional buyers.

It encourages retail investors, QIB, and traders to partner in its businesses. The public offer helps the companies to manage the public funds effectively and gives investors more opportunities to earn higher percentages.

Over-Subscription Minimizes the Allotment Possibilities

Usually, when an issue attracts more investors and the issue gets over subscripted then your chances of being allotted with shares becomes thinner. However, if you are lucky then you can get in a lottery established by the issuer.

In case of the retail investor, the shares are divided by a minimum lot size. Every issuer has a right to choose the number of lots, while each lot accommodates the shares.

If you divide the total number of the shares of allotment for the retail investor by the minimum lot size shall reveal the possible beneficiaries.

For instance,

When Quess Corp.’s IPO was announced in the stock markets, the issuer made each lot having 45 shares, and on calculating with the upper end of the price band, the application value for a single lot was 14,265.

It was observed that the retail investor had reserved 1.27 million shares and total shares on bid were 43.50 million.

As per the BSE records, the issuer got over subscription 34 times, it is clear indication that all will not receive allotment.

Validate your Approach towards IPOs

Before filling in an application of the Initial Public Offering, IPO, you need to make a careful study of the details published by the issuer. Every issuer mentions his specific requirements and you are expected to fit in and apply for the IPO as per the issuers terms and conditions.

For instance, each IPO defines its own lot size, bid price, etc. There are several reasons that keep you away from owning the IPO shares.

You must check thoroughly the reasons for non- allotment of shares by issuers. To illustrate them, you will have to evaluate them one by one.