Understanding the IPO Allotment Process in India

Investing in an Initial Public Offering (IPO) can be an exciting opportunity to become a shareholder in a promising company. However, the process of IPO allotment can seem confusing, especially for first-time investors. How are shares allotted? What happens if the IPO is oversubscribed? And how do you check your allotment status?

In this blog, we’ll break down everything you need to know about the IPO allotment process in India. By the end of this guide, you’ll have a clear understanding of how IPO allotment works, what factors influence it, and how to check your allotment status.

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What is IPO Allotment?

When a company launches an IPO, it offers its shares to the public for the first time. Investors apply for these shares by submitting bids during the IPO subscription period. Once the subscription period ends, the company, along with the registrar and stock exchanges, determines how many shares each investor will receive. This process is called IPO allotment.

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How Does the IPO Allotment Process Work in India?

The IPO allotment process in India follows a structured and transparent system regulated by SEBI (Securities and Exchange Board of India). Here’s a step-by-step breakdown:

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1. IPO Subscription Period

The first step in the IPO allotment process is the subscription period, which typically lasts 3-5 days. During this time, investors can apply for shares through:

• ASBA (Application Supported by Blocked Amount): A process where the application amount is blocked in your bank account until shares are allotted.
• Broker Platforms: Online platforms like Zerodha, Groww, and Upstox.

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2. Bidding and Categories

Investors can bid for shares in three categories:

1. Retail Individual Investors (RII): For individual investors applying for up to ₹2 lakh.
2. Non-Institutional Investors (NII): For high-net-worth individuals (HNIs) and corporate investors.
3. Qualified Institutional Buyers (QIB): For institutional investors like mutual funds and insurance companies.

Each category has a reserved portion of shares, ensuring fair distribution.

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3. Oversubscription and Allotment

If the IPO is oversubscribed (i.e., the number of applications exceeds the number of shares available), the allotment is done through a lottery system. Here’s how it works:

• Retail Investors: If the IPO is oversubscribed, retail investors may receive fewer shares than they applied for. For example, if you applied for 10 shares, you might only receive 5.
• NII and QIB: These categories may face stricter allotment rules, especially if the IPO is heavily oversubscribed.

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4. Refund of Excess Amount

If you don’t receive the full number of shares you applied for, the excess amount is refunded to your bank account. For example, if you applied for ₹2 lakh worth of shares but only received ₹1 lakh worth, the remaining ₹1 lakh will be unblocked and returned to your account.

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5. Listing of Shares

Once the IPO allotment process is complete, the shares are credited to your Demat account. The company then lists its shares on stock exchanges like the NSE or BSE, and trading begins.

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Factors Influencing IPO Allotment

Several factors determine how shares are allotted in an IPO:

1. Demand for the IPO: Oversubscribed IPOs may result in fewer shares being allotted to each investor.
2. Lot Size: The number of shares you can apply for is determined by the lot size specified in the IPO.
3. Category: Retail investors often have a higher chance of allotment compared to NIIs and QIBs.
4. Random Lottery System: In oversubscribed IPOs, allotment is done randomly to ensure fairness.

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How to Check IPO Allotment Status

Once the IPO allotment process is complete, you can check your allotment status through the following methods:

1. Registrar’s Website

Most IPOs in India are managed by registrars like Link Intime or KFin Technologies. You can visit their websites, enter your PAN number, DP ID, or application number, and check your allotment status.

2. NSE or BSE Website

You can also check your allotment status on the NSE or BSE website by entering your application details.

3. Broker Platforms

If you applied through a broker like Zerodha or Groww, you can check your allotment status directly on their platform.

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What Happens If You Don’t Get IPO Allotment?

If you don’t receive any shares during the IPO allotment process, the blocked amount in your bank account will be released. You won’t lose any money, but you’ll miss out on the opportunity to invest in that particular IPO.

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Tips to Increase Your Chances of IPO Allotment

While the IPO allotment process is largely random, here are some tips to improve your chances:

1. Apply in the Retail Category: Retail investors often have a higher chance of allotment compared to NIIs and QIBs.
2. Apply with Multiple Demat Accounts: If you have family members with Demat accounts, you can apply through each account to increase your chances.
3. Avoid Applying at the Last Minute: Submitting your application early can help avoid technical glitches.
4. Apply for the Minimum Lot Size: Applying for the minimum number of shares can increase your chances of allotment in oversubscribed IPOs.

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Conclusion: Understanding the IPO Allotment Process in India

The IPO allotment process in India is a fair and transparent system designed to ensure equal opportunities for all investors. By understanding how it works—from the subscription period to the final allotment—you can make informed decisions and increase your chances of securing shares in a promising IPO.

Remember, investing in an IPO is not just about luck; it’s about careful planning and staying informed. So, the next time you apply for an IPO, keep these insights in mind and approach the process with confidence.

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FAQs About IPO Allotment