IPO Allotment happens 3-4 days after the IPO bidding period close. Your IPO application is being received by the Registrars of the IPO and the company. They are going to verify and process your IPO application further.
There won’t be any information about the IPO till the “Basis Allotment” day and you can check your IPO allotment status only after that. You need to wait till allotment happens with your fingers crossed.
What is Allotment in IPO?
“Allotment” refers to the process by which shares are allocated or distributed to all the eligible investors who have bid in the IPO.
IPO allotment is a process where the Registrar allocates IPO shares according to the bids placed by individual investors.
Once the IPO subscription period ends, the company and the investment banker associated with the IPO review the applications received and the number of shares each applicant has requested for. The allotment process involves determining how many shares will be allocated to each individual investor based on the, IPO cut-off price, subscription requests and the availability of shares.
#1. If the IPO is Oversubscribed
This means there is more demand for shares than the available supply. You may not receive the full number of shares applied for.
In such cases, the allotment is often done on a pro-rata basis, where each investor receives a proportionate number of shares based on the total number of shares they applied for relative to the total oversubscribed demand.
In case of huge oversubscription, something like more than 10x the issue size, then allotment can be done using a lottery system, where a computer picks investors for allotting shares.
#2. If the IPO is Undersubscribed
Which means less demand than available shares. All investors who applied for shares will generally receive the full number of shares they requested, and there might still be leftover shares.
For an IPO to be successful, it should be subscribed at least 90%.
Based on the result, shares get assigned to your name. The registrar updates the allotment status on its website, where investors can check the allotment status.
After the allotment is completed, the company’s shares are officially listed and start trading on the stock exchange BSE or NSE or both.
You may like to check the list of upcoming IPO 2023
Who is Responsible for Allowing Shares in IPO
The responsibility for allotting shares after the IPO to investors lies with the Registrar and transfer agent to IPO (the RTA).
The registrar and transfer agent is a third-party entity appointed by the company to manage various tasks related to shareholder services, including share issuance and transfer. RTA later becomes the registrar of the company.
The Registrar to IPO performs the following key functions –
#1. Receiving and Processing Applications
Registrar to IPO collects all the applications from investors, whether submitted physically or electronically and ensures that the applications are complete and meet the necessary requirements.
#2. Allotment Process
Based on the total number of shares available for sale and the subscription requests received, the registrar to IPO calculates the number of shares to be allotted to each investor. If the IPO is oversubscribed, they apply the pro-rata allotment method to allocate shares.
#3. Refunds
If an investor’s application is not fully allotted, the registrar and transfer agent arrange for the refund of the excess subscription amount to the investor.
#4. Issuance of Allotment Letters and Shares
Once the allotment process is completed, the registrar and transfer agent issue allotment letters to successful applicants, confirming the number of shares allotted to them. Subsequently, they facilitate the issuance of share certificates or demat credit for the allotted shares.
#5. Listing and Trading
The registrar and transfer agent also coordinate with stock exchanges and regulatory authorities to ensure the company’s shares are listed for trading on the stock exchange after the allotment process is completed.
Throughout this process, the registrar and transfer agent work in close collaboration with the company, the investment bankers, and relevant regulatory authorities like SEBI, NSE and BSE to ensure a smooth and transparent allocation of shares to investors after the IPO is closed.
How IPO Allotment is Done by the RTA
The IPO allotment process is carried out by the Registrar and Transfer Agent (RTA) after you have applied for the IPO. Below is an overview of how the IPO allotment is done by the RTA.
#1. Receiving Applications
During the 3 to 4-day IPO subscription period, investors submit their applications to subscribe to the company’s shares.
These applications can be physical forms submitted at designated centers or online applications through net banking or trading platforms and apps of your stockbroker. Ultimately all the IPO applications come to the Registrar to IPO.
#2. Consolidation of Applications
The RTA collects and consolidates all the applications received from various sources, including physical applications and online portals.
#3. Categorization
The RTA categorizes the applications based on the investor’s category, such as retail individual investors (RIIs), non-institutional investors (NIIs), and qualified institutional buyers (QIBs). Each category may have different allotment criteria as per SEBI regulatory guidelines and terms of the IPO.
#4. Calculation of Demand
The RTA calculates the total demand for shares in each investor category by adding up the number of shares requested by investors in that category.
#5. Determination of Subscription
If the total demand for shares (subscription) is higher than the number of shares available (issue size), the IPO is considered oversubscribed.
In case the demand is less than the number of shares available, the IPO is considered unsubscribed.
For an IPO to be successful, it should be subscribed at least 90%.
#6. Pro-Rata Allotment
In the case of an oversubscribed IPO, the RTA follows the pro-rata allotment method to allocate shares. This means that each investor will receive a proportionate number of shares based on the total number of shares applied for by them relative to the total oversubscribed demand in their category.
#7. Lottery System
For highly oversubscribed IPOs, the RTA may conduct a lottery system to allocate shares randomly among eligible applicants. The lottery is conducted to ensure a fair chance for allotment among retail investors.
#8. Finalizing Allotment
After performing the necessary calculations, the RTA finalizes the allotment and prepares the list of successful allottees along with the number of shares allocated to each.
#9. Allotment Letters and Refunds
The RTA issues allotment letters to successful applicants, confirming the number of shares allotted to them. For applicants who did not receive the full allotment, the excess amount they paid during the application is refunded.
The RTA works closely with the company, investment bankers, and regulatory authorities to ensure a smooth and fair allotment process for all investors participating in the IPO.
Final Thoughts
IPO Allotment is a tedious process with thousands of applications and that is why allotment takes 3-4 days after the IPO close.
You can take a clue from the IPO subscription figures. There are higher chances of allotment in a fairly oversubscribed IPO like a 2x, or 5x subscriptions. In a highly oversubscribed IPO something like 10 times or more then allotment is based on a lottery.
FAQs
Shares in an IPO are allotted based on the number of shares an investor applied for and the availability of shares. If the IPO is oversubscribed, allotment is done proportionately or through a lottery. If undersubscribed, investors usually get the full amount applied for.
Pro-rata allotment means shares are distributed proportionally among investors based on their subscription amount relative to the total oversubscribed demand.
The Registrar and Transfer Agent (RTA) is responsible for allotting shares after the IPO is closed. They manage the process of allotment and issuance of shares.
In the RII category, shares are allotted using the pro-rata allotment method. Each investor receives shares proportionally based on their application relative to the total oversubscribed demand.
In the case of a heavily oversubscribed IPO, allotment is made using a lottery system with the help of a computer picking a few of the successful investors.
The process for allocating shares to the NII category is the same as that applicable to the retail RII category.
If an IPO is undersubscribed in a category, all investors who applied in that category receive the full number of shares they requested. If there might still be leftover shares, then the shares are used for allocation in other categories as per SEBI regulations.
Yes, you can revise, modify or cancel your bid details in an IPO application online before IPO close.
Post-IPO close you can write to the Registrars to IPO for application cancellation. But before the allotment is finalized and submitted to the stock exchange.
Applications with errors or discrepancies may be rejected during the verification process. Investors should ensure accurate and consistent information to avoid such issues.
If your application worth is Rs. 2 Lakhs then it will be considered under the retail category. IPO applications worth over Rs. 2 Lakhs are placed in NIIs category.
You can’t apply to both categories at the same time.
