An Initial Public Offering ( IPO ) is the process a company uses to sell its shares to the public . The period during which investors can apply for shares is called the IPO period.
However, you do not automatically get shares when you apply for an IPO. Shares are allotted thru the IPO allotment process.
This process helps investors understand what happens after they have submitted an IPO application.
What is IPO Allotment
IPO Allotment is the allotment of IPO shares to the eligible applicants.
When an IPO closes, the registrar checks all the applications. It reviews the number of valid bids and the shares available in each category of investors.
If the number of applications is less than or equal to the available shares, allotment can be made as per the terms of issue.
If demand is higher than the shares offered the IPO is said to be oversubscribed. Not all applicants may receive shares in such instances.
If the number of eligible applicants is higher than the number of minimum lots available, then there can be a lottery system for allotment for retail investors.
What are IPO Eligibility?
IPO eligibility refers to the conditions that an applicant must meet to apply for an IPO.
A typical investor needs:
- Valid PAN Card
- Active Demat account
- Bank account
- KYC details
- Proper Application Info
The applicant also has to comply with the lot size, price band and investor category mentioned in the IPO documents.
The application may get rejected on account of PAN details, duplicate application, demat details or payment issues.
Only valid applications are considered for allotment.
How is IPO allotment done?
The process can be broken down into a few simple steps.
1. Sign up for the IPO
Select the IPO and the number of lots that you want to apply for.
Applicants can bid at a price within the price band. Retail applicants also have the option of the cut-off price where available.
2. Authorise the Payment
Generally, the IPO funds are blocked either via ASBA or via a supported UPI process.
The money remains frozen in the bank account until the application has been processed.
At this point, no debit is made.
Step 3: Wait for the IPO to be done
When the IPO closes, applications are reviewed.
In the case of a book-built issue, the final issue price shall be determined by the bids received during the IPO period.
Step 4: Verifying the Applications
Registrar checks the application details.
This can include PAN, demat account details, investor category, payment status, bid details.
Applications found invalid will not be considered for allotment.
Step 5: Finalisation of allotment
Successful applicants will then be allocated the available shares.
The method is dependent on the demand and the investor category.
If the retail portion is oversubscribed, an applicant may receive one lot or nothing at all.
Step 6: Shares and Funds Settled
In case of allocation of shares the required amount will be debited from the blocked funds.
Allotted shares are credited to the applicant’s demat account.
In case of non-allotment of shares, the blocked amount is released.
Simple example of IPO Allotment
Suppose 10,000 lots are available to retail investors in an IPO.
It gets 20,000 good retail applications. Each applicant has applied for at least one lot.
There are not enough lots for all applicants.
Eligible applicants may, in this case, be selected by a draw in accordance with the applicable rules.
Blocked funds will be released for applicants who are not allotted shares.
How can I check the IPO allotment status?
Once the allotment process is over, the investors can check their status on the IPO registrar’s website.
Also the status is available thru the stock exchange or broking platform.
The following is a list of some of the things that applicants may be asked to provide:
- Application number
- PAN
- Details of demat account
Investors can also check out current IPOs and apply for the same via the Bajaj Broking platform. You can see issue details and apply for IPOs for your account in the IPO section. It can also be a way for investors to track IPO-related information in one place.
Things to Check Before Applying
Before you submit an IPO application ensure you:
- PAN information
- Details of Demat account
- Bank Details
- Category of investors
- Lot Size
- Bid Price
- ASBA/UPI Payment Status
Correct details will help prevent an application from being invalid.
Also, investors need to remember that applying for an IPO does not guarantee share allotment.
Conclusion
IPO allotment is the process of distribution of shares after the IPO is closed.
The process involves a valid application and correct IPO eligibility details. Last allotment is done on the basis of the number of shares available, category of the investors and demand for the IPO.
Shares will be credited to the demat accounts of successful applicants post allotment. Releasing funds of other applicants from freezing.
Following these steps can help simplify the IPO process.
 is the process a company uses to sell its shares to the public . The period during which investors.){kind=link}