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Table of Contents

  1. IPO Allotment Introduction
  2. Key Factors Influencing IPO Allotment
  3. IPO Allotment Rules
  4. IPO Allotment Methods by Category
  5. IPO Allotment Process

IPO Allotment: The Share Allocation Process

IPO allotment means the allocation of shares to the applicants for shares during an Initial Public Offering (IPO). The allotment is done by the Registrar to the IPO along with consultation with the appointed stock exchange.

The status of IPO allotment is usually given 3 to 4 days after the period during which IPO bidding is open. Investors can see their allotment status on the official website of the registrar.

Key Factors Influencing IPO Allotment

  • Allotment is based on the demand for the IPO shares.
  • In an oversubscribed IPO, the applicants may not get the full allotment.
  • In an undersubscribed IPO, all valid applicants generally receive full allotment.
  • The IPO needs a minimum of 90% subscription to be successful.

IPO Allotment Rules

  • Share allocation is the responsibility of the Registrar, in consultation with the Exchange.
  • Allotment is category-wise:
    • Retail Individual Investors (RII)
    • Non-Institutional Investors (NII)
    • Qualified Institutional Buyers (QIB)
  • Merely valid bids are entertained. Spurious bids, like improper demat details or duplicate bids for the same PAN, are refused.
  • Bids equal to and above the cut-off price qualify for consideration.
  • Oversubscription in a category (with the exception of QIB) can be meted out by adjustment against another under-subscription, pending approvals from the issuer, registrar, and lead manager.
  • Under-subscription by QIB cannot be transferred to any other category.
  • The registrar prepares the Basis of Allotment (BoA), which details how shares were allocated.

IPO Allotment Methods by Category

1. Retail Individual Investors (RII)

Shares are allotted in lots. A lot is a specified quantity of shares, priced at approximately:

  • ₹15,000 in case of Mainboard IPOs
  • ₹1,00,000 in case of SME IPOs

Maximum number of retail investors that get allotment is:

Maximum RII Allottees = Total RII Shares Offered ÷ IPO Lot Size

Scenario Allotment Process
RII category under-subscribed Full allotment to all applicants
Total RII applications > Maximum retail investors who could get allotment Computerized lottery where the winners get maximum 1 lot of shares
Total RII applications < Maximum retail investors who could get allotment Each retail investor gets at least one lot, and remaining shares are distributed on a pro-rata basis

2. Non-Institutional Investors (NII)

NII Sub-Categories:

  • Small NII or sNII: Application size between 2 lakhs and 10 lakhs
  • Big NII or bNII: Application size over 10 lakhs

Allotment Rules:

  • Shares are allotted proportionately on the basis of the number of shares applied.
  • No lottery system in this category.
  • A greater bid amount increases the likelihood of getting more shares.

3. Qualified Institutional Buyers (QIB)

  • The allotment to QIB investors is done on a proportionate basis in the event of oversubscription.
  • In the event of undersubscription, all QIB investors are allotted in full.
  • The under-subscribed size in the QIB category cannot be transferred to other categories of investors.

4. Anchor Investors

  • For mainboard bookbuilding IPOs, anchor investors are invited for a maximum of 60% of the QIB category.
  • Sixty percent thereof is allotted to domestic mutual funds one-third of the said amount.
  • It is the decision of the issuer along with consultation of the lead manager regarding selection and allotment of anchor investors.

IPO Allotment Process

Allotment procedure is looked after by the registrar. Final basis of allotment is decided by the registrar along with the appointed exchanges. Below are the steps generally followed by the Registrar for finalizing the IPO allotment procedure:

  • Getting IPO application details from the stock exchange once the issue is completed.
  • Checking the IPO applications which fail to fulfill the eligibility conditions.
  • Verification of IPO application information with depositories and banks to ascertain third-party IPO applications.
  • Rejection of deficient applications with technical faults.
  • Processing valid applications at or above cut-off price at the lot size level to ascertain total demand for shares in each category.
  • Completion of basis of allotment (BOA) in concurrence with designated exchanges.
  • Transmission of the allotment advice through email/SMS to notify investors about the allotment status.
  • Informing banks and depositories and getting the cooperation of the same so that the investor's bank account is debited on the allotment date as per schedule and the shares are credited to the investor's demat account.