An Initial Public Offering, is a great way to invest in a company when it goes public, but getting allotment every time is not that much easy or possible when any IPO gets oversubscribed. Many investors face the challenge of getting their share of the IPO. To maximise chances of getting IPO allotment you need to understand IPO allotment process & understand it. In this article we will discuss how to increase chances of IPO allotment & some stratergies to follow.
What is IPO Allotment?
Before look into tips, let’s quickly understand what IPO allotment means. IPO allotment is the process of distributing the shares to investors who applied for them. When an IPO is oversubscribed, meaning more people want shares than what’s available, the allotment process decides who gets the shares and how many.
If you’re applying for an IPO, it is important to know that sometimes you might not get the number of shares you applied for, especially if the demand is high.
How IPO Allotment Process Works
The allotment process works based on how many shares are available and how many people are applying. When you apply for an IPO, your chances of getting allotted shares depend on:
- How many shares the company is offering
- How many people are bidding for shares
- Your status as an investor (retail, HNI, QIB)
How IPO Allotment is Distributed Among RII, NII, and QIB
When a company goes public through an IPO, shares are allocated among three main investor groups:
- Retail Individual Investors (RII)
- Who they are: Investors applying for shares worth up to ₹2,00,000.
- Reservation: 35% of the total IPO shares.
- Allotment:
- If not oversubscribed, all applicants get shares.
- If oversubscribed, shares are allocated via a lottery system. Applying for the minimum lot size (around ₹15,000 in most IPOs) improves your chances.
- Non-Institutional Investors (NII)
- Who they are: High-net-worth investors bidding over ₹2,00,000.
- Reservation: 15% of the total IPO shares.
- Allotment: Shares are allocated proportionally to the bid size. There’s no lottery here—larger bids often mean better chances.
- Qualified Institutional Buyers (QIB)
- Who they are: Entities like mutual funds, banks, and FIIs.
- Reservation: 50% of the total IPO shares.
- Allotment: Shares are distributed proportionally at the final issue price. QIBs can’t revise or withdraw bids after the IPO closes.
Top Strategies to Increase Chances of IPO Allotment
Now that you know how the allotment works, let’s look at the best strategies to increase your chances of getting IPO shares.
1. Apply Early: Timing is Everything
A simple way to improve your chances of getting shares is to apply as early as possible. For many IPOs, shares are distributed on a first-come, first-served basis, especially for retail investors. By applying early, you increase your chances of being one of the first to get in before the IPO gets oversubscribed.
If you wait until the last minute, the IPO might already be oversubscribed, and you could miss your chance.
2. Bid for the Minimum Lot Size
If you’re wondering how to increase your chances of IPO allotment, one easy tip is to apply for the minimum lot size. For oversubscribed IPOs, those who bid for the smallest amount of shares have a better chance of getting some allotment.
Even if you don’t get all the shares you wanted, getting a smaller portion is still better than getting nothing at all.
3. Apply Through Multiple Accounts
Another way to increase your chances of getting shares is by applying through multiple accounts. If you have family members or friends who can apply on your behalf, you can submit several applications, which increases the number of chances you have for getting shares.
Just make sure you follow all the rules by SEBI (Securities and Exchange Board of India) to avoid any problems.
4. Research the Company and Sector
If you want to increase your chances of IPO allotment, it’s essential to do your homework. Some IPOs are more likely to be oversubscribed than others. IPOs in high-growth sectors or those with a strong track record often have a lot of interest.
By understanding the company and the sector it operates in, you can better gauge whether the IPO will attract a lot of demand. If the demand is expected to be high, you’ll know it might be harder to get shares.
5. Bid in the Book-Building Process
In an IPO with a book-building process, investors can bid within a price range set by the company. To improve your chances of getting shares, it’s often a good idea to bid closer to the higher end of the price range.
This doesn’t guarantee you’ll get the shares, but placing a bid at a reasonable price can improve your chances if the IPO gets oversubscribed.
6. Apply for IPOs with Lower Subscription Rates
The chances of getting shares in an IPO depend a lot on how many people are applying. If an IPO has a low subscription rate, meaning fewer people are bidding for shares, the chances of getting allotment are higher.
While it’s hard to predict which IPOs will be less popular, keeping an eye on trends and market conditions can help you identify IPOs with lower demand.
7. Don’t Overestimate High-Demand IPOs
It can be tempting to apply for high-demand IPOs, but these IPOs are often oversubscribed, meaning your chances of getting shares are lower. If you’re applying for a popular IPO, understand that the odds of getting a full allotment are slim.
One strategy is to apply for a mix of both high-demand and low-demand IPOs, so you have a better chance of getting shares.
8. Double-Check Your Demat Account Details
Before applying for an IPO, make sure your Demat account is in good shape. Incorrect or incomplete Demat details could cause your application to be rejected, and you’ll miss out on the chance of getting shares.
Always double-check your details before submitting your application.
Other Tips to Improve IPO Allotment
- Stay Informed: Keep track of upcoming IPOs and their subscription periods so you never miss an opportunity.
- Follow SEBI’s Guidelines: Make sure you’re following all of the rules and guidelines set by SEBI to avoid any issues with your application.
- Apply to Multiple IPOs: Don’t just focus on one IPO. Applying to multiple IPOs can increase your chances of getting an allotment in at least one of them.
Conclusion: How to Increase Chances of IPO Allotment
To increasing your chances of IPO allotment isn’t guaranteed, but there are several strategies you can use to improve your odds. Applying early, bidding for the minimum lot size, and using multiple accounts are just a few ways you can boost your chances.
By doing your research and staying updated on upcoming IPOs, you can make more informed decisions and have a better chance at getting your share of the action.
Pravin Bhosale
Since stepping into the world of trading in 2019, i have gained valuable experience navigating the markets, have knowldge in indices like Bank Nifty, Nifty IT, Sensex, Bankex, and Finifty. Also have sound knowldge about IPO industry & ipo process. our blog aims to make finance approachable, offering practical insights for readers to better understand and act on market trends.