The initial public offer is a practice in which a private company makes the shares of the company available for buying to the general public. This offer is accessible for bid participants in the authorized banks and online. However, let’s understand the IPO allotment process in detail.
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IPO Allotment Process
If there is a minimum amount and also the lot size to be tendered by an investor of any one category it will never happen that all investors are allocated their shares in case of over subscription.
The reason is that when the IPO is released it comes to fixed size, which means that there are factors, such as the size of the IPO & the number of shares that are issued.
The firm always defines the quota allotted for each kind of investor in the draft Red Herring Prospectus (DRHP), including retailers, institutional buyers, Non-institutional buyers, employees & shareholders of parent company etc.
Over-subscription
The firm’s prospects are greater demand for its share and also the underwriter can modify the price of the issue in order to raise more cash compared to the anticipated issue size.
Even if the fund has received bids for three times the amount of shares it was intended for, the issue is said to have been oversubscribed by three times.
In instances when the public issue is raised, the firm can even increase the issue price and sell a greater number of stocks than initially expected.
When over-subscribing, the allocation of shares for each different kind of investor varies. thus this will be adjusted for each category of subscriber.
Allotment Rules Before October 2012
Earlier to October 2012, market watchdog SEBI made registrars mandatory to allot retail stocks proportionately if an IPO got over subscription. This method increased the chances of allotment for people who bid Rs 100,000 or Rs 150,000 rather than who bid Rs 15,000.
This method used to function perfectly in IPOs where demand was similar or lower than the number of stocks offered by the company. Whereas the method obviously supported large applications when demand surpassed supply in IPO.
Numerous high-net-worth individuals (HNI) investors put their funds into the retail segment to buy stocks, which irritated SEBI.
Allotment Rules From October 2012
SEBI introduced a new IPO allotment method in October 2012, Which handles all retail individual investor (RII) submissions equally. Under the new process, people are guaranteed at least the minimum application size, according to the share available in the retail category.
Scenario 1
If the quantity of stocks remaining in the retail category is less than the requirement, every investor will receive a complete allotment.
Scenario 2
If demand for stocks is more than the offered stocks, then the maximum number of people who can be applied for the minimum bid lot is identified. After that they divide the total number of equity stocks offered by the company by the minimum bid lot.
No allotment is less than the required bid lot size entertained under the existing rules. (Total quantity of stocks authorized for RIIs)/(Minimum bid lot) equals to Maximum RII Allottees.
In reality, this means that for oversubscribed IPOs, investors can only wish for 1 lot if they’re extremely lucky.
IPO Allotment Time
Most people check the register website multiple times and don’t get information about the IPO allotment timings. Mostly the allotment takes place at night on the date of allotment.
So if you are looking for time of IPO allotment there are no perfect timing. However, once the allotment started you will receive a message from your bank if you got the allotment. This is the best way to confirm that you got the allotment before even the Registrar upload the allotment list on their website.
IPO allotment Timing according to the Registrar
These are the major registrar & most of the time they follow these timings:
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Link intime
In case of IPO allotment Timing of link intime you don’t even need wait for the allotment in the night. They mostly upload the allotment list on their website on the next day.
Bank message is the best way to know that you got the allotment. You can check the allotment of link intime on below links
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Kfintech
Kfintech is much better & faster than Link intime in terms of IPO allotment Timing. Mostly allotment will take place between 8pm to 11 pm on the date of allotment if Kfintech is the registrar of the IPO. They upload the allotment list of their website and on their app as well.
Websites sometimes don’t work due to too much traffic. You can use their app to get the details faster. You can check the allotment of Kfintech on below links:
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Bigshare
In case of IPO allotment Timing of Bigshare you don’t even need wait for the allotment in the night. They also mostly upload the allotment list on their website on the next day.
Bank message is the best way to know that you got the allotment with this registrar as well. You can check the allotment of Bigshare on below links
Reasons for No Allotment
These are main Reasons for no allotment:
- Due to incorrect Demat account number
- Wrong PAN number
- Duplicate applications submitted to the same IPO from the same Demat account or Pan Card.
- In the scenario of a substantial over-subscription, your name was not chosen at the lucky draw.
Conclusion
Most people get frustrated when they don’t get the allotment in the IPO. However, it happens with everyone as getting your name in a lucky draw every time is not possible.
This is all from our side regarding IPO Allotment Process & IPO Allotment timing. Although, if you have any doubts about ipo allotment rules for retail investors you can just comment below.
Other Related Blogs to IPO Allotment Process
FAQ About IPO Allocation Process
Why I never get IPO allotment?
There are some reasons like incorrect details, Duplicate application or in case of oversubscription you name didn't come in the lucky draw.
NSE IPO allotment status
You can verify your bids on NSE. However, if you want to check allotment status than you need to go to registrar website or BSE website.
How is IPO allotment done in case of oversubscription
In case of Oversubscription allotment is mostly done by lucky draw for retail category.
IPO allotment status
You can check the allotment status on the registrar website on the allotment date of the IPO.
IPO allotment process for NII?
Investors applying for 100 shares receive 1 share if the IPO is subscribed 100 times in the category of NII.
