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How Shares Are Allotted in Oversubscribed IPO: Allocation Process

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How Shares Are Allotted in Oversubscribed IPO

Equity shares offered in Initial Public Offer (IPO) sometimes give lucrative returns in a short span of time. Yes, I’m talking about the shares you can get in oversubscribed IPOs that can give you the listing gains in secondary stock markets.    

Usually IPO are oversubscribed when the valuation of stock of the issuing company is cheaper than compare to its peer group companies. Or there is huge potential growth in the company in terms of high revenue and profit growth or various other favorable aspects making the shares of company attractive for the investors.    

What happens if IPO is oversubscribed?

If such growing companies’ shares are available at cheaper rates in primary markets (IPOs), every investor tries to put his money into the company with expectations to get good returns to compare to other shares, resulting in IPO is oversubscribed.    

Also Read: How to Check IPO Allotment Status on NSE BSE & ICICI DIRECT

While issuing the shares through IPO, the company allocates the proportion of equity shares to different types of investors like QIB, HNI, FIIs, DIIs and Retail Investors. And shares are allotted as per the subscription status into different categories of investors.

How Shares are allotted in Oversubscribed IPO?

As I’ve already told you in the previous section, IPO oversubscription allocation is done differently for the different categories of investors, let’s find out below.

IPO Oversubscription Allotment Process:

Qualified Institutional Buyer (QIB): If IPO is oversubscribed in QIB category, shares are allocated proportionally. For example, if the issue is subscribed by 10 times, then a QIB applicant who has applied for 20 lakh shares will be allotted 2 lakh shares only.

High Net worth Investors (HNI): HNI also receives allotment on a proportionate basis.

How IPO Shares are allocated to Retail Investors?

Though, as per the regularity authority SEBI’s guidelines, if an IPO is oversubscribed in the retail category, the shares are to be allotted in a manner that ensures that every retail bidder gets at least one minimum lot. The remaining shares, if any, are then allotted on pro rata basis. But companies follow the different criteria as disused below.  

If RII Applications are Less or Equal to Offered Lots: In this case, each applicant first gets at least minimum 1 lot. And, the rest available lots are allocated proportionally.

If RII Applications are Greater than Offered Lots: In this case, the allotment is done through a computerized draw to pick applicants for IPO allotment.

Also Read: What is Cutoff Price in IPO Application: Why Bid at Cutoff Price

Usually, IPOs offered by companies having good prospects and the potential to grow in the future are very often oversubscribed. The demand for shares of such companies is also high in the secondary markets. And getting shares allotted in an oversubscribed IPO is very much depends on your luck. If you get allotments you can enjoy the listing gains on the first day.

Also Read: How to Increase Chances of Getting Shares in IPO: Allotment Tips

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How to Increase Chances of Getting Shares in IPO: Allotment Tips

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tips for ipo allotment

An oversubscribed IPO means investors are willing to invest in the shares of a company having promising business growth prospects and can give lucrative returns in the stock market. And in such cases most IPO applicants including retail investors not get the allotment to become disappointed with the money returned into their account.

If you are one of them not get the shares in IPOs, you need to read this article to know how to ensure IPO allotment. Actually, when an IPO is oversubscribed multiple times, the chances are very low, but if you follow the rules discussed below you will maximize your chances of getting an allotment and enjoy the lucrative returns in the short-term.

Also Read: How Shares Are Allotted in Oversubscribed IPO: Allocation Process

5 Tricks & Tips for IPO Allotment

Tricks & Tips for IPO Allotment

#1 Fill the Correct Details in the Form

The first criterion of rejecting the IPO applications is incomplete or mismatch information provided in the form. So make sure while filling the IPO application form fill all the details like your name, PAN & Demat Number, etc. to become eligible. 

#2 Apply with Multiple Demat Accounts

You cannot apply multiple applications in an IPO using the same PAN number, if you do this, your first application could be also rejected. But you can open multiple demat accounts in the name of your family members and friends. 

Yes, applying through multiple accounts increases the change of allotment significantly in case of oversubscribed IPO. For example, if an IPO is oversubscribed 5 times, your chances of getting the allotment are 20%. But if you apply in the IPO using 5 family members’ names, there is a high chance that you will get an allotment in any of the applications.

#3 Always Bid at Cut-off Price

IPOs offered with the book building process have price bands and you have to bid for either bid for upper band limit or opt for cut-off price. If you bid at a lower bid price your application could be rejected or would be not eligible for the allotment.

Also Read: What is Cutoff Price in IPO Application: Why Bid at Cutoff Price

#4 Avoid Last Moment Subscription

Some investors wait for the subscription levels in HNI, QIB and retail categories before placing their bids. If the response is good then they are placing their bids on the last day. But if you are going to apply it on the last day but it might cause few issues like your bank account or net banking is not responding due to HNI and QIB high subscription.

#5 Buy Shares of Parent Company

Yes, this trick could be also workable if the IPO issuing company’s parent or holding company is already listed and giving a reservation to existing shareholders. If you have a few even single shares of a parenting company you would be eligible to apply for IPO and sometimes IPOs are offered at a discounted price to existing shareholders.

Reason for Not Getting IPO Allotment:

  1. Your application was not considered as valid i.e. invalid PAN No. or invalid Demat account number or multiple applications submitted from the same name.
  2. Your name was not selected in the lucky draw for allocation of shares (in case of huge over-subscription).

Let me tell you one thing, in oversubscribed IPOs, it is not confirmed that you will get the allotment of shares. As there are different types of allotment criteria, few of them follow the lucky draw and few companies go through the Pro-rata basis to make sure every investor can assuredly get the same amount share into their Demat account.   

In fact, luck draw is the most common reason and applied to 90% of the applicants for not getting shares. In all good IPO’s, due to oversubscription, the lucky draw process is followed and all investors don’t get allotment or get full allotment.

Also Read: How to Check IPO Allotment Status on NSE BSE & ICICI DIRECT

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How to Check IPO Allotment Status on NSE BSE & ICICI DIRECT?

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how to check ipo allotment

Applying in the Initial Public Offering (IPO) can be a profitable bet compare to buying the shares from the stock market. Yes, shares having potentials and offered at fairly priced at discounted rates surely get a positive response by investors and can give you the high returns on the listing with an option to monetize your shares on that day.

And if you regularly apply for the IPO or applied for an IPO at the cutoff price, you can check your share allotment status before the listing day. Actually, after IPO closure day when the company decides the allotment process, the money is refunded to the applicants. So you can check here the various ways to check IPO application status. 

Also Read: What is Cutoff Price in IPO Application: Why Bid at Cutoff Price

How to Check IPO Allotment Status Online?

How To Check IPO Allotment Status BSE:

Step1: First of all visit at BSE India.

Step2: Here you will see two types of issues, just select “Equity”.

Step3: Now select issue name- ‘Company Name’.

Note: Please note the company will only appear once the allotment is done.

Step4: Now you have to enter your ‘Application Number’ of IPO.

Step5: After that, you have to enter ‘PAN Card No’ and click Search.

How to Check IPO Allotment Status NSE:

Apart from BSE, you can also check IPO status on the national stock exchange (NSE). Just follow the stepwise guidance given below.  

Step1: First of all visit at NSE India.

Step2: Now login with your user name and password.

Step3: If you don’t have registered just create an account.

Step4: Now login with the credentials and select the company symbol.

Step5: Your PAN detail will be visible just enter the application number and get data.

How to Check IPO Allotment Status in ICICI DIRECT?

If you have a trading account with ICICI Direct you can check IPO application status there also only when you have applied for the IPO from there.

Step1: Login into your ICICI Direct Account.

Step2: Now Navigate to the IPO section.

Step3: Here in IPO Section select order book.

Step4: Now find just below “Status Application No.

Step5: Click here on ‘Executed” and a popup window opens.

Step6: When you click on executed you can see the allotted quantity.

Note: If you have not allotted any share you can see the refund amount.

How to Check IPO Status Online on other Platforms:

On Linkintime

Step: First of all visit the Linkintime website click here.

Step2: Now click on the drop-down and ‘Select Company’.

Step3: Just enter your PAN card detail correctly.

Step4: Now enter the captcha and click on submit.

Once you fill all the required details and submit you will your name along with the status of your IPO application showing the total securities you have applied and securities you have been allotted. If IPO is oversubscribed multiple times, there are lesser chances of allotment as in such situations it is not possible to get confirmed allotments.    

Also Read: How Shares Are Allotted in Oversubscribed IPO: Allocation Process

However, if you have bid at less than the higher band or not cutoff price and the company decided to issue IPO at a lower band then you would be not eligible to get the allotment. Because first of all such applications are rejected then allotment is done.

Also Read: How to Increase Chances of Getting Shares in IPO: Allotment Tips

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What is Cutoff Price in IPO Application: Why Bid at Cutoff Price?

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what is cut off price in ipo

Many times investing in the primary stock market gives lucrative returns in short time period compared to the secondary market. Yes, bidding at the initial public offer (IPO) can you give multiple times returns but biding at right price is important to get the allotments.

Actually, in IPO the shares are offered within the price range and investors are required to bid within that range. Do you know at which price you should bid to become eligible for the allotment of shares so that you can enjoy listing gains, especially when IPO is oversubscribed and you go the allotments? 

Also Read: How Shares Are Allotted in Oversubscribed IPO: Allocation Process

Actually, while applying to IPO through your broker, you will get options to bid between the floor prices to the upper price range or at cut-off price.  In this article we have discussed cut-off price and why you should bud at cut-off-price. 

What is Cut-Off Price in IPO?

Used in the initial public offer (IPO) Cut-off price is the offer price decided by the share issuing company with the help of book running lead managers and IPO consultation. Compare to the price band, the Cut-off price could be any price within the price band.

Actually, in an IPO launched through the book-building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. And Cut-off price is different from a floor price, which is the minimum price at which inventors can bid.

Why You Should Bid on Cut-off price?

As, I’ve already told you cut-off price is decided by the issuer and lead managers after considering the book and investors’ appetite for the stock.

If you bid at cut-off-price it indicates that you are willing to apply for the IPO or subscribe to the shares issued at any price decided by the Merchant bankers within the price band through the book-building process.

In an IPO all the eligible employees bidding in the employee reservation portion and retail individual Investors are entitled to bid at the cut-off price. While on the other hand all the other types of investors like QIBs (including anchor investors) and non-institutional investors are not entitled to bid at the cut-off price. 

Also Read: How to Increase Chances of Getting Shares in IPO: Allotment Tips

The best advantage of bidding at cut-of-price is that unlike price bids, where a specific price can be invalid if the price indicated by the applicant is lower than the price discovered, the cut-off bids always remain valid for the purpose of allotment.

Example to Bid at Cut-off-price

IPO Price Range: Rs. 250-260

You Applied 10 Shares at Rs 255

If Shares Issues at Rs. 253 (you will receive allotment at Rs. 253)

If Shares Issues at Rs. 257 (you will not receive allotment)

If applied at Cut-off-price (you are eligible for allotment at any determined issue price).

Also Read: How to Check IPO Allotment Status on NSE BSE & ICICI DIRECT

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