Understanding IPO Allotment: How Shares Are Distributed in the Latest IPO

Understanding the IPO allotment process helps you manage expectations. Additionally, it offers an insight into the IPO market dynamics, demand from investors, and prospects of the business.

Understanding IPO Allotment: How Shares Are Distributed in the Latest IPO

A few of the most exciting investments readily available for retail and institutional investors are Initial Public Offerings or IPOs. But the allotment process in an IPO isn't as exciting as being part of a business's growth story. If you ever wondered how shares are allocated in an IPO, this guide will outline the basics and subtleties of the allocation procedure and your IPO allotment status.

What Is an IPO Allotment?

A business goes public and also creates a certain amount of shares on the market. For these shares, investors apply which includes retail individuals, qualified institutional buyers (QIBs) along with high-net-worth individuals (HNIs). In case demand surpasses available shares (oversubscription) the shares are allocated based on rules defined.

Key Factors Affecting IPO Allotment

1. Investor Category

IPO divide the shares into definite quotas for the following investor categories:

- Retail Individual Investors (RIIs): This category typically gets 35% of the shares.

- Qualified Institutional Buyers (QIBs): Around 50% of the shares belong to that class of shareholders.

- High Net Worth Individuals (HNIs): Within this category about 15% is kept in store.

2. Oversubscription

When more applications compared to shares are obtainable, the company allocates shares through a lottery for retail investors or proportionately for institutional and HNI categories.

3. Application Size Retail

investors can apply for shares up to 2,00,000. In case you apply for shares of this particular category, the allotment is accomplished so that at least one lot of shares goes to as many applicants as you can.

Distribution Of IPO Shares

1. For Retail Individual Investors (RIIs):

-  Lot-Based System: The business establishes the minimum lot size and splits shares into lots

- Lottery Mechanism: A computerized draw determines allotment when the IPO is oversubscribed.

2. For High-Net-Worth Individuals (HNIs) 

- HNIs apply for shares greater than 2,00,000 and the allocation is dependent on the invested amount.

3. For Qualified Institutional Buyers (QIBs):

- The company allocates shares based on the program's quality and the investor's long-term interest in the company

4. Anchor Investors:

- Anchor investors receive a slice of the shares to keep the company afloat and also attract new investors.

What Happens After IPO Allotment?

After the shares are allotted: -

Refund Process: The company refunds your application cash to your bank account if you don't get the shares.

Credit of Shares: The company credits allotted shares to your Demat account.

Listing: The shares are listed on The stock exchange. So the investor may trade them.

Tips for Increasing Your Allotment Chances.

1. Apply for a Single Lot: Multiple applications for smaller lots versus one large application boost your chances in oversubscribed IPOs.

2. Avoid several applications from a single PAN: This causes rejection.

3. Apply Early:  The timing will never impact allotment but ensures your application is submitted properly.

4. Under subscribed IPOs:  you have far better odds of obtaining the amount of shares you applied for if an IPO isn't over-subscribed.

Why IPO Allotment is Important

Understanding the IPO allotment process helps you manage expectations. Additionally, it offers an insight into the IPO market dynamics, demand from investors, and prospects of the business.

Whether you're an old timer or maybe a first timer, you know the way the shares are split. This will help you make the correct choices when applying for IPOs.

Follow the newest IPOs, their allotment status, and market developments to make the most of your investment journey! Platforms like Bajaj Broking simplify IPO applications, allowing investors to check allotment status and manage investments easily. 

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