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Initial Public Offering or IPO refers to a process when a company decides to offer its shares to the public and raise money. Usually, a company keeps bidding open for 3 days, during which investors can apply for an IPO and submit an application. After submitting the application, the IPO allotment process starts.
Want to know how the IPO allotment process works? Stay tuned!
Here is a step-by-step guide on the IPO allotment procedure.
Investors have to apply for IPO via online or offline mode. They must have sufficient balance in their account for the bid they have placed. Market regulators mandated a ‘Blocked amount facility’ for IPOs. Hence, investors must have the required amount in their accounts.
IPO allotment process occurs behind closed doors, and the selection process depends on the number of submitted bids and the validity of the same. Remember, all applicants do not get requested bids because demands surpass supply by a large margin.
At this stage, the registrar finishes the approval process and allots shares to successful bidders.
From the above discussion, investors can get an idea about the IPO allotment process in India. Now, let’s focus on the role of the Registrar regarding IPO allotment.
After a successful IPO application, one of two things ideally happens. These are as follows,
Let’s discuss these in detail!
In the first case, meaning where a total number of bids is less than (<) shares offered by a company, the Registrar need not intervene as eligible investors will get the requested lot.
On the other hand, if total number of bids is more than (>) than shares offered by a company; the Registrar needs a strategy to distribute allotment. Here, they need to follow the guidelines set by SEBI (Securities and Exchange Board of India), which mandates providing a minimum of one to every applicant.
An example is represented in a tabular format below for a better understanding of the above-mentioned statement.
|
Particulars |
Amount |
|
IPO shares |
8,00,00 |
|
Minimum lot size |
80 |
|
Maximum number of investors who will get at least one lot (Total number of shares /total number of shares in 1 lot, that is, 8,00,000 ÷ 80) |
10,000 |
As a result, 10,000 investors will definitely get at least one lot.
In addition, there can be different sub-cases. These are as follows:
Small Over-subscription: In this case, successful applicants would receive shares of 1 lot initially. Next, the allotment of balance shares occurs evenly.
Large Over-subscription: In cases where the over-subscription is massively large, then applicants with successful bidding would not get allotment for even 1 lot of shares. In such circumstances, the IPO allotment process for retail investors or eligible applicants occurs on a lucky draw basis as per the SEBI guideline.
After applying for an IPO, investors may wish to check the IPO allotment status. Read the following section to learn about this in detail.
Applicants can check the IPO allotment status on the IPO registrar’s website. An IPO registrar is a financial institution that is registered with SEBI and stock exchanges. Applicants can check IPO allotment status on the websites of BSE and NSE.
Applicants willing to check the IPO allotment cannot immediately see the result. They have to wait for some time. Wondering how long? Read along!
One can find the IPO allotment status on the website within 1 week of the closing date of the public issue. The registrar announces the IPO allotment.
If applicants cannot see IPO allotment status, there are some reasons behind it. The following section discusses the same.
Here are some major reasons for IPO rejection,
The IPO allotment process is a crucial stage that pushes investors a step closer to realising benefits or utilising them by acquiring some more shares. After this process, investors have to wait for the listing date (available at NSE, BSE website). Once a company gets listed, investors can buy more shares and sell them. An individual cannot know beforehand whether he or she will get the allotment of shares. However, having an idea about certain particulars can help applicants make bids judiciously.
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