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?

These are some of the most common questions of investors after not getting shares allotted in IPOs. Whether you are a newbie or an experienced one, share allotment in recent IPOs has left investors disappointed with the process. As most of the recent public offers are attracting massive subscriptions, it is becoming harder for investors to get allotments. In our social streams and on this website, we are often asked about the IPO allotment process so we have put together this guide. Hopefully, this explains the process while also helping to increase IPO allotment chances.

First of all, we need to understand the IPO allotment process in detail before taking steps to increase IPO allotment chances. While there is no guarantee to get confirmed IPO allotment, these tips will take you closer to your goal.

How to increase chances of IPO allotment? – Understand the process first

Prior to October 2012, market regulator SEBI had mandated registrars to allot shares in the retail category on a proportionate basis in case of oversubscription. This means that an investor making an application of INR100,000 or INR150,000 stood to be allotted more number of shares than an investor making a bid of INR15,000. In IPOs where the demand is equal or less than the shares available, it used to work fine.

However, the process naturally helped big applications when the demand exceeded availability. Many high-networth individual (HNI) investors channeled their money into retail category to corner shares. Naturally, it did not go down very well with SEBI.

As a result, SEBI implemented a new IPO allotment process in October 2012 that called for all retail individual investor (RII) applications to be treated equally. Under the new system, applicants are allotted at least the minimum application size, subject to availability of shares in the aggregate. Again, if the demand is less than the number of shares available in the retail category, every investor will get full allotment.

In case of demand exceeding the availability of shares, then the maximum number of investors who can be allotted the minimum bid lot will be computed by dividing the total number of equity shares available for allotment to the category by the minimum bid lot. Under the current guidelines, no allotment is less than the minimum bid lot size.

Read Also: IPO Process in India – All you want to know

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

Practically speaking, investors can only hope to get a single lot in oversubscribed IPOs. Here is a longer explanation of IPO allotment process with real life example.

6 Tips to increase IPO allotment chances

Now that we know the logic behind allotment, it is time to see what can be done to increase IPO allotment chances. As one can sense, there is not much that investors can do if there is too much demand for IPO shares. Nevertheless, there are ways to avoid the pitfalls and optimize the allotment results. Here are some simple ways to increase IPO allotment chances:

5 tips to increase IPO allotment chances

Here are 6 main ways to boost your 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 Big Applications

As mentioned above, SEBI’s current allotment process treats all retail applications (less than INR200,000) equally. This means there is no advantage of making a big application of INR100,000 in case of oversubscription. Big applications only make sense in large IPOs where there is reasonable surety of retail segment remaining undersubscribed.

A recent example is the INR11,372.64 crore IPO of General Insurance Corporation (GIC) where every retail investor stood a chance to get allocation. Although the reasons behind this undersubscription were different, it served as a good example.

#2 Use Multiple Demat Accounts

Since large applications are ineffective, one can go for using the same amount in making multiple applications from different demat accounts. Probability of successful allotment increases to six times when one goes for six applications of single lots than making one application of six lots. It is important to understand that these demat accounts need to be linked to different PAN accounts. In other words, one can’t make more than one application in his/her own name.

Asking friends and family members to open demat accounts and apply in upcoming IPOs is a perfect method to improve IPO allotment chances. Opening new demat accounts is a breeze nowadays and several brokers open demat and trading accounts for free. What’s more, it is a matter of just a few minutes with e-KYC.

#3 Always Bid At Cut-off Price

This is a tricky part as investors are often confused between price bids and cut-off bids. By selecting a specific price, investor tells the registrar that s/he is interested in buying shares at that price while cut-off simply conveys that the investor is flexible to buy at any price within the price band. This price is determined as the point of maximum demand.

As an example, in a price band of INR100-105 per share, no bids below INR105 per share will be considered in allotment if the cut-off price is decided at INR105 per share. Thus, retail investors should place their bids at either cut-off or maximum price to increase IPO allotment chances.

#4 Avoid Last Minute Rush

Many investors rely on subscription levels in HNI and QIB categories before placing their bids on the last day. This may be quite a smart way to figure out how an IPO is perceived by these well-informed categories but could turn out to be a disaster if your bank’s internet banking is down temporarily. One may not have funds in other bank accounts and additional work of adding demat account details may be required at the last moment.

Of course, there is always the option of filling up physical forms, this is hardly an effective solution at the last moment. Even if one manages to fill the form, it may be too late. 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 may be rejected on technical grounds without the investor knowing about the errors. Starting 1 January 2016, all IPO applications are mandatorily through ASBA (Application Supported by Blocked Amount) mechanism and most investors apply through netbanking which minimizes potential errors of spelling mistakes, name mismatch, inaccurate cheque details. Nevertheless, applications are still rejected on technical grounds and something as simple as different names in bank account and PAN may result in a lost opportunity.

#6 Buy Parent Company Shares

Here is another one and an excellent option, where applicable, to increase IPO allotment chances. Having at least one share of the parent or holding company in the demat account will make the investor eligible to apply in shareholder category. It should be noted that the shares of the parent company must be in the investor’s demat account as on the date of Red Herring Prospectus.

Read Also: Understanding employee and shareholder reservation in IPOs

Of course it applies only in the cases where the parent of the IPO-bound company is already listed and there is a reservation for shareholders in parent company. In the recent concluded IPO of Ujjivan Bank, retail category was subscribed 48 times while the shareholder category was subscribed only 4 times. Needless to say, chances of allotment are much better in the shareholder category. The icing on the cake is that one can place bids in both categories!

These are simple yet effective steps that increase IPO allotment chances and move you closer to confirmed IPO allotment.

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

36 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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