How to Increase IPO Allotment Chances?

By
Krishna Bagra
-
32

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 frequently express their concerns and questions when not receiving shares in Initial Public Offerings (IPOs). The share allotment process in recent IPOs has left many feeling disheartened, whether new to investing or seasoned participants. Due to the exceptionally high subscription rates, securing allotments has become increasingly challenging for investors. We often receive inquiries regarding the IPO allotment process; therefore, we have created this detailed guide to clarify how it works. This guide aims to enhance understanding of the process and potentially increase IPO allotment chances.

increase ipo allotment chances

Understanding the IPO Allotment Process

To boost your chances of securing an IPO allotment, it’s crucial to have a comprehensive understanding of the process. Although there are no guarantees of receiving a confirmed IPO allotment, the following tips can help you move closer to achieving your goal.

Tip 1: Familiarize Yourself with the Process

To increase your IPO allotment chances, it is essential to thoroughly understand the process involved. Before October 2012, the Securities and Exchange Board of India (SEBI) required registrars to allocate shares in the retail category on a proportionate basis in cases of oversubscription. This meant that investors applying for larger amounts, such as INR 1,00,000 or INR 1,50,000, had a higher likelihood of receiving more shares compared to those who applied for smaller amounts like INR 15,000. This method was effective in IPOs where demand was equal to or less than the number of shares available.

However, this process inadvertently favoured 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 the grey market, which didn’t sit well with SEBI.

In response to the challenges faced by investors, SEBI implemented a new IPO allotment process in October 2012 that ensures all retail individual investor (RII) applications are treated equally. Under the current system, applicants are guaranteed at least the minimum application size, depending on share availability. This framework creates two primary scenarios for allotment, both of which function effectively within the established guidelines.

IPO Allotment Process in Case of Under-Subscription

If the total demand for shares is less than the number of shares available in the retail category, every investor will receive a full allotment, regardless of the size of their application.

On a lighter note, if there isn’t sufficient demand for an IPO, it’s likely that the investment may not be worthwhile. In such situations, investors can avoid significant losses by choosing to skip the IPO altogether rather than following the crowd. Occasionally, a company’s business model might not be fully understood by the market, so conducting further research and exercising discretion is highly advisable before applying for the public offering. Additionally, adopting a long-term perspective and overlooking temporary setbacks can often prove beneficial.

IPO Allotment Process in Case of Oversubscription

If the total demand exceeds the number of shares available, the registrar will make an effort to accommodate as many applicants as possible by issuing one lot to each. Under the current guidelines, no allotment can be less than the minimum bid lot size.

Read Also: How to Apply For IPO in Zerodha?

Tip 2: Practical Expectations

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

In oversubscribed IPOs, investors can realistically expect to receive at least one lot. For a more in-depth understanding of how IPO allotment operates, it’s helpful to examine any recent IPO that has experienced oversubscription.

Six Tips to Increase IPO Allotment Chances

With a clear understanding of the rationale behind allotment, it’s time to delve into strategies that can enhance your chances of receiving an IPO allotment. While high demand for IPO shares presents certain limitations, you can still navigate potential pitfalls and optimize your allotment outcomes. Here are six effective tips to boost your chances of securing an IPO allotment:

Here are 6 main ways to increase IPO allotment chances. While there is no way to get a 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 2,00,000) equally. This means that submitting a larger application of INR 1,00,000 during oversubscription does not provide any advantage. Large applications are only beneficial in substantial IPOs where there is a reasonable expectation that the retail segment will remain undersubscribed.

For instance, consider the recent INR 27,870 crore IPO of Hyundai India, 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 do not offer any advantages, you might consider using the same amount to submit multiple applications from different demat accounts. The likelihood of successful allotment increases significantly—up to six times—when you submit six applications for single lots rather than one application for six lots. However, it’s important to note that these demat accounts are linked to different PAN accounts. In other words, you cannot submit multiple applications under your 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.
Read Also: IPOs with 500% Returns: Explore Best Performing IPOs

#3 Always Bid At the Cut-off Price

This aspect can be somewhat confusing for investors, as they often find it challenging to distinguish between price bids and cut-off bids. When you choose a specific price, you are signalling to the registrar that you want to purchase shares at that price. In contrast, a cut-off bid indicates that you are flexible and willing to buy shares at any price within the specified price band. The cut-off price is established as the point of maximum demand.

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

#4 Avoid Last-Minute Rush

Many investors look at the subscription levels in the high-net-worth individual (HNI) and qualified institutional buyer (QIB) categories before placing their bids on the final day. While this can offer valuable insights into how the IPO is viewed by these knowledgeable investors, it can also lead to complications if your bank’s Internet banking is temporarily unavailable. You might not have funds in other bank accounts, and entering demat account details at the last minute can be a time-consuming process.

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 even realizing there are errors. Since 1 January 2016, all IPO applications must be submitted through the Application Supported by Blocked Amount (ASBA) mechanism. Most investors use net banking for their applications, which helps reduce the risk of errors such as spelling mistakes, name mismatches, or incorrect cheque details. However, applications can still face rejection due to technical issues. Even a minor discrepancy, such as differing names on the bank account and PAN, can lead to a missed opportunity.

#6 Invest in Parent Company Shares

Another excellent option to increase IPO allotment chances is to buy 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 BLS e-Services, for example, the retail category was subscribed 237 times, while the shareholder category was subscribed only 15.32 times.

ipo application form

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

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

32 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.

  5. 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.

  6. 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.

  7. 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.

  9. 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!

  10. 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.

  12. 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?

  13. 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?

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

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

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