How to Increase IPO Allotment Chances?

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I’ve not been allotted any shares in the last five public issues. What am I doing wrong and How to increase IPO allotment Chances? Is there a WAY to get Confirmed IPO Allotment?

Investors often have questions and concerns when they don’t get allotted shares in IPOs. Whether you’re a novice or an experienced investor, the process of share allotment in recent IPOs has left many disappointed. Due to the overwhelming subscription rates, it has become increasingly difficult for investors to secure allotments. We frequently receive inquiries about the IPO allotment process, so we’ve compiled this comprehensive guide to explain the process. Hopefully, this explains the process while also helping to increase IPO allotment chances.

IPO Allotment Process

Understanding the IPO Allotment Process

To increase your chances of IPO allotment, it’s essential to have a thorough understanding of the process. While there is no guarantee of receiving confirmed IPO allotment, the following tips will bring you closer to your goal.

Tip 1: Familiarize Yourself with the Process

Before taking any steps to increase your chances of IPO allotment, it’s crucial to understand the process in detail. Prior to October 2012, the Securities and Exchange Board of India (SEBI) mandated registrars to allocate shares in the retail category on a proportionate basis in the event of oversubscription. This meant that investors who applied for INR 100,000 or INR 150,000 stood a chance of receiving more shares compared to those who bid INR 15,000. This approach worked well in IPOs where the demand was equal to or less than the available shares.

However, this process inadvertently favored larger applications when the demand exceeded the availability. High-net-worth individual (HNI) investors often directed their investments into the retail category to corner shares through grey market, which didn’t sit well with SEBI.

As a result, SEBI introduced a new IPO allotment process in October 2012, which treated all retail individual investor (RII) applications equally. Under the current system, applicants are allotted at least the minimum application size, subject to the availability of shares. Following this guideline, two broad scenarios emerge and the system works in both cases.

IPO Allotment Process in Case of Undersubscription

If the aggregate demand of shares is less than the number of shares available in the retail category, every investor will get full allotment, irrespective for their application size.

On a lighter note, the chances are high that an IPO isn’t investment worthy if there is not enough demand for it. In such a case, investors wouldn’t lose big time by simply following the herd and skipping the IPO altogether. Once in a while, there may be instances of a company’s business model not understood well by the market and in such cases, further research and discretion are highly recommended before applying in the public offer. At times, taking a long-term view and discarding temporary setbacks can also help.

IPO Allotment Process in Case of Oversubscription

In the event of aggregate demand exceeding the number of shares available, the registrar will try to accommodate everyone by issuing one lot to as many applicants as possible. According to the current guidelines, no allotment can be less than the minimum bid lot size.

Tip 2: Practical Expectations

Maximum RII Allottees = (Total number of shares available for RIIs)/Minimum bid lot

In oversubscribed IPOs, investors can realistically hope to receive a single lot. To provide a more comprehensive understanding of how IPO allotment works, let’s consider a real-life example. Here is a longer explanation of IPO allotment process with real life example.

Six Tips to Increase IPO Allotment Chances

Now that we understand the rationale behind allotment, it’s time to explore strategies to increase your chances of IPO allotment. Although there are limitations when there is high demand for IPO shares, you can still avoid pitfalls and optimize your allotment results. Here are six effective tips to increase IPO allotment chances:

5 tips to increase IPO allotment chances

Here are 6 main ways to increase IPO allotment chances. While there is no way to get confirmed IPO allotment, these steps are very helpful that you don’t get out of consideration for silly reasons.

#1 Avoid Large Applications

As mentioned earlier, SEBI’s current allotment process treats all retail applications (below INR 200,000) equally. This means that making a big application of INR 100,000 in the case of oversubscription doesn’t provide any advantage. Large applications only make sense in large IPOs where there is a reasonable expectation of the retail segment remaining undersubscribed.

For instance, consider the recent INR 4,326 crore IPO of Mankind Pharma, where every retail investor had a chance of receiving an allocation. While the reasons for this undersubscription were different, it serves as a good example.

#2 Utilize Multiple Demat Accounts

Since large applications are not advantageous, you can consider using the same amount to make multiple applications from different demat accounts. The probability of successful allotment increases six-fold when you submit six applications for single lots instead of making a single application for six lots. However, it’s important to note that these demat accounts must be linked to different PAN accounts. In other words, you cannot make multiple applications in your own name.

Encouraging friends and family members to open demat accounts and apply for upcoming IPOs is an effective strategy to increase IPO allotment chances. Opening new demat accounts is quick and easy nowadays, with several brokers offering free demat and trading accounts. Additionally, the e-KYC process takes just a few minutes.

#3 Always Bid At the Cut-off Price

This aspect can be a bit confusing for investors, as they often struggle to differentiate between price bids and cut-off bids. When you select a specific price, you indicate to the registrar that you are interested in buying shares at that price. On the other hand, a cut-off bid indicates that you are flexible and willing to buy at any price within the price band. The cut-off price is determined as the point of maximum demand.

For example, in a price band of INR 100-105 per share, bids below INR 105 per share will not be considered for allotment if the cut-off price is set at INR 105 per share. Therefore, retail investors should place their bids at either the cut-off or the maximum price to increase their chances of IPO allotment.

#4 Avoid Last-Minute Rush

Many investors rely on subscription levels in the high-net-worth individual (HNI) and qualified institutional buyer (QIB) categories before placing their bids on the last day. While this can provide valuable insight into how the IPO is perceived by these well-informed categories, it can also become a disaster if your bank’s internet banking is temporarily down. You may not have funds available in other bank accounts, and adding demat account details at the last moment can be time-consuming.

Although there is the option of filling out physical forms, it is not an effective solution when time is running out. Several banks stop accepting applications after 4 PM on the last day.

Read Also: Investors need IPO exit strategy, here is why

#5 Avoid Technical Rejections

IPO applications can be rejected on technical grounds without the investor being aware of the errors. Since January 1, 2016, all IPO applications must be made through the Application Supported by Blocked Amount (ASBA) mechanism. Most investors apply through net banking, which minimizes the potential for errors such as spelling mistakes, name mismatches, or inaccurate cheque details. However, applications can still be rejected on technical grounds. Even a simple discrepancy like different names in the bank account and PAN can result in a missed opportunity.

#6 Invest in Parent Company Shares

Another excellent option to increase IPO allotment chances is to have at least one share of the parent or holding company in your demat account. This makes you eligible to apply in the shareholder category, but it’s important to note that the shares of the parent company must be in your demat account on the date of the Red Herring Prospectus.

Read Also: Upcoming IPOs with Shareholders Quota

This strategy applies only when the parent company of the IPO-bound company is already listed and there is a reservation for shareholders in the parent company. In the recently concluded IPO of Ujjivan Bank, for example, the retail category was subscribed 48 times, while the shareholder category was subscribed only 4 times.

These are simple yet effective steps that answer investors’ frequent question of how to increase chances of IPO allotment and move you closer to confirmed IPO allotment.

Also, check our page of IPO allotment status for the latest updates. Happy investing!

37 COMMENTS

  1. Thanks IPO Central for this good article on how to increase IPO Allotment chances.
    I had a query if you could please guide me on the same, can I open a Demat Account in my minor kids name and apply for these IPO.
    Thanks – Atul Mehrotra
    9810453451

    • Demat account can be opened in minor’s name, although income from the account will be treated as parent’s. It is not very common so not every broker or sales person will have knowledge but regulations allow this.

  2. We have only two demat accounts mera or. Wife ka please suggest him kitne lots ki IPO application Retail category me lagain jisme allotment ke chances better hon in cases of oversubscription. Thanks and waiting your valuable suggestion.

    • Subodh, like it is indicated in this article in case of oversubscription it does not make difference even if you are applying in multiple lots. Generally you can apply 1 lot in your name and 1 lot in your spouse name.

    • you can apply only in your two accounts. if you want to get more chances of allotment than you should increase your number of account by different pan numbers. This is the best strategy to get allotment in oversubscribed ipo’s.

  3. Can i apply for two different dp id&PAN from one bank account for same ipo ?
    As name on PAN and bank account will be different so my application wont be rejected ?

    • How one person can have two pan card, two bank pass book in different name….!!one person, one application is only possible

  4. I have two questions,plz help me to understand.
    1)Do you want to say that, In case of over subscribtion , for example 100 times subscription, if I go for bidding of 10 lots, probability of getting me 1 lots only is the obvious one and in no case I will get 2 lots allocated to me in this case?
    2)probability of getting 1 lot is same when I bid for 10lots or 1 lot?

    • If there is oversubscription even after technical rejections, registrar will try that everyone gets something. IN case of oversubscription, that something reduces to a single lot. So probability of getting more than a lot reduces to zero and everyone, whether with 10 lots or 1 lot, stands the same chance of allotment.

  5. My asba application was successful for newgen software ipo in 2 different DP/PAN from single SB A/c, but the amount was unblocked for 2 applications before the finalisation of basis of allotment ie (20-01-2018), kindly let me know hot it was happened.

  6. Name in Bank account is second holder and in demat account first holder it’s first holder, is there chance of rejection???

    • No, bank account and demat accounts can be in different names. I’ve been making applications of my family members from my bank account.

  7. In 2004 I opened a Demat account in my name without my surname as in my pancard also my surname was not there. Later I opened a saving account with full name and also got added my surname in pancard.At present my saving account with full name is registerd in my demat account and just wanted to ask will it affect my IPO applications.

    • This shouldn’t be a problem as the accounts are already linked but in any case, the best way to tackle this kind of situation is to update your full name in ALL accounts. It is a simple process to update your name in demat account so would suggest you to do it at the earliest. Happy investing!

  8. whether D-mat account, at the timing of applying for the IPO needs to be ACTIVE. Actually, I have opened some years back the D-mat A/C with IndiaBulls but didn’t make any transaction therein. So I am worried about the status. So please suggest.

  9. […] Now that we have established that this reservation doesn’t impact the shares allotted for retail investors, the next question arises if there is a way investors can benefit from this. The answer is yes! While one needs to be an employee in the company to take advantage of the employee reservation, almost anyone can apply under the shareholder quota, effectively doubling his chances of allotment. […]

  10. I have subscribed for 1 lot of route mobile on Day1 which was only 85% subscribed. At the end I didn’t get any allocation of shares. I choose higher cutoff price too. If it is FIFO, I should get allotted, right?

  11. Is there a higher chance of allotment when you apply for one lot only. It has happened with me. 5 out of 6 allotments when I bid for one lot only and only 1 out of 11 allotments when I bid for more than one lot.

    Is it a coincidence or some logic behind this?

  12. Is it possible to know the reason for not allotment of IPO, Whether any technical ground like wrong name in account and DP ID.

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