IPO Allotment Process

Investors in the IPO can be retailers, qualified institutional buyers (QIBs) and they include pension funds, fund managers, investment banks, mutual funds, and insurance companies. These qualified institutions invest a huge volume of stocks in trading.

Securities and Exchange Board of India, SEBI, is the capital market regulator that sets in the rules and regulations in the allotment of the shares @IPO.

Allotment of Shares @IPO:

On the day of closing of the IPO, if an issue is fully subscribed then every investor shall be allotted the number of shares mentioned in the IPO application.

Condition:

Any company that hosts an IPO must obtain a subscription of at least 90 percent of its listing. Else, IPO is disqualified and the subscriber gets their investment refunded irrespective of the underwriter’s assurance.

Over Subscription @IPO

Yes, if you find an oversubscription at the IPO then it means more number of applicants have applied for the share allotment.

In such circumstances, an applicant shall always be eager to understand the share allotment from the total number of shares applied at the IPO.

The SEBI regulatory authority states that each retail bidder must get at least one bid from the allotted retail individual quota.

The company defines a lot that mentions shares per lot in the IPO application form. You (retail investor) can apply in lots for the equity share offerings.

Limitation:

You shall receive a minimum of one lot size or more and never shares allotted in a lot defined by the issuer. The company makes an allotment of shares on a proportional

If the subscription is over subscribed then the decision in selecting the subscribers for the allotment of the shares is simple.

The company will divide the total number of shares by the selected lot and arrive at the total number of available lots for allotment.

The company then checks the ratio between the total number of retail individual investors and the total number of available lots.

When the ratio is not in the 1:1 proportion then the company picks at random the retail applicants to allot the shares as a result several applicants are dropped out due to non-availability of the lots.

Note:

A retail investor is entitled to purchase share-lot up to a value of INR 2.00lakhs. Likewise, non-institutional investors can dream of getting allotted shares worth above INR 2.00 lakh. They do involve NRIs, companies, trusts, etc.

A thumb-rule states, an IPO governs retail investors ( 35 percent), NIIs ( 15 percent), and for QIBs ( 50 percent) that includes anchor book.

How to Check IPO Allotment Status:

There are multiple websites to check an IPO allotment status like linkintime.co.in, bseindia.com, kfintech.com

You must select the company name, enter the PAN, or Application number, or DP ID/Client ID. Further, enter captcha, and then submit the status query form.

Note:

In case you are not allotted with shares then two sections shall remain unfilled, and they are securities, and adjusted amount.

In the later stage, the registrar of the IPO will send information in regard to the ‘share allotment’ through messages, and emails.

The registrar of IPO sends emails and messages informing applicants about the allotment status.

Non-allotment of Shares for You:

After the finalisation of the allotment, if you are not allotted with shares then your spent money shall be refunded through the ASBA account. Else, your money gets deducted from the subscribers account against the allotment of the shares.

How Early Can I Put the Allotted Shares to Trade?

The retailers get their shares into their account on the fifth day from the IPO closing date and then subsequently they can do trading in the secondary markets.

Tabular column: Allotment of Shares @Overlysubscripted IPO

Allotment Procedure for Oversubscription Shares: 

A comparative study is conducted on the investments made by the investors before selecting for share allotments. The software tool arranges a list of applicants and shares allotment in a tabular form.

Consider an example that states ten investors have placed an IPO, at a price which the shares are issued to the investor also known as cut-off price.

Let us assume that these investors have placed their bid in the range of 1 to 5 shares.

If you have observed you can find ten investors having applied for 29 shares. But as per the oversubscription, the demand may limit the allotment to say 5. Then, the computer makes a random pick and allotts the shares to investors.

As per the information made available in the tabular column, the investors Investors (2), (3), (7), (8), and (9) have obtained eligibility through lottery.

The registrar conducts the entire selection process against the IPO application.

Note:

In such circumstances, the registrar considers to pick up only investors having enrolled for the upper price band.