IPO Allotment Process: Most of the people complain that they apply for IPO of every company but they are never allotted shares. This happens when the reserve portion gets oversubscribed. Oversubscribed is the situation when the company has received applications for more shares than the number of shares the company has issued IPO. In such a situation, the number of shares applied for is not available and many applicants do not get even a single share. In such a situation, it is important to know what is the process of allotment in IPO so that next time while applying in IPO, you can increase your chances of getting your name in the lucky list.
This year 2021 is raining IPOs and retail investors are showing tremendous interest in it. The interest of retail investors can be gauged from the fact that the portion reserved for retail investors gets tremendous subscription bids. Explain that the share allotment through IPO is reserved for Qualified Institutional Buyers (QIBs), non-institutional investors and retail investors, i.e. some part of the IPO is reserved for each type of investor category.
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Allotment Process for Qualified Institutional Buyers
In the case of QIBs, the right to allot the shares lies with the merchant banker and he decides it at his discretion. If the IPO is oversubscribed, the shares are allotted on a proportionate basis. This means that if the shares are oversubscribed 4 times, then for 10 lakh shares, the applicant will get only 2.5 lakh shares.
This is the process of allotment for retail investors
According to the rules, retail investors can invest up to a maximum of Rs 2 lakh i.e. they can bid in an IPO for a maximum of Rs 2 lakh. If the portion reserved for retail investors is not oversubscribed, then at least one lot is allotted to all the applicants and the remaining shares are allotted on a proportionate basis. Conversely, if an IPO is heavily oversubscribed, allotment is done through lucky draw and it is a computerized system i.e. there is no bias. This means that retail investors should bid in more lots and in the name of their relatives, which increases the chances of allotment.
Tips For IPO Allotment: IPO allotment is expected to increase, if you keep these things in mind while applying
Allotment Process for High Net Worth Individuals
Usually HNIs (High Net Worth Individuals) invest a large amount in IPOs and these are provided capital by financial institutions for investment. However, it is not necessary that HNIs get the number of shares they have applied for. If an HNI has applied for 10 lakh shares and the share reserved for HNI is oversubscribed 150 times, then 6666 shares will be allotted to him.