The journey of a company culminating in an IPO (initial public offering) is a pivotal moment in its history. It signifies that the company has evolved into a mature and thriving organization, garnering enough market trust to raise capital from the public. For many startups backed by venture capital, an IPO is a significant milestone, often aimed at delivering an ‘exit’ to their investors.
IPOs are monumental events conducted on a grand scale, and they bring about changes in a company’s ownership structure. With the infusion of fresh capital, companies can expand their operations, invest in product development, hire top talent, and pursue various growth avenues. However, this transformation is accompanied by a dilution of ownership, and the stock’s trading price reflects the faith that investors place in the company’s future potential.
When a company reaches the stage of announcing an IPO, it attracts significant attention and excitement in the market. Numerous potential investors seek to become a part of this exciting journey.
IPO Allotment Status
The IPO Allotment Status is the process of assigning shares to investors who applied for an Initial Public Offering (IPO). This allows companies to raise funds by selling shares to the public for the first time. The status informs you how many shares you’ve been allocated out of your application.
To check your IPO Allotment Status online, you can visit the IPO registrar’s website. Provide details like your PAN number, application number, DP ID, or client ID. Select the IPO name and submit to see your allotment status.
Alternatively, you can check on the BSE or NSE stock exchange websites. Go to the IPO section, select equity, and enter your application and PAN numbers. This will display your IPO allotment status, along with the issue price and listing date.
IPO allotment status is typically announced about a week after the IPO closes. It relies on a computerised lottery system for fair allocation. The basis of the allotment document, explaining the allocation process, is published on the registrar’s website after allotment.
This status is crucial for investors as it determines whether they’ve received shares or not. If allotted, they can trade these shares on the stock market for profit or loss. If not, they receive a refund within 15 days.
The IPO Allotment Process
Before diving into the intricacies of the IPO allotment process, here are some prerequisites:
- Demat account (essential for buying shares).
- Trading account (required for selling shares).
- Sufficient funds in your Demat account to cover your bid.
Once you have these basics in place, you can initiate the IPO application process, which unfolds as follows:
Step 1: Initiate Application
You can initiate your IPO application either online or offline. It’s crucial to ensure that your account holds adequate funds to cover your bid. Market regulators have made the ‘Blocked amount facility’ mandatory for IPOs, meaning your bid may not be considered if you fail to set aside the required amount.
Step 2: Allotment
The allotment process happens behind closed doors and can take different routes depending on the number of bids and the validity of the bids submitted. It’s important to note that not all applicants receive the exact number of shares they requested since demand often surpasses supply by a considerable margin.
Step 3: Approval
Approximately seven days after the IPO closes, the registrar of the IPO completes and confirms the allotment to successful bidders. You can check the IPO allotment status on the registrar’s website or on the NSE or BSE websites. To do this, you will need your PAN (Permanent Account Number) and DPID/Client ID number or the bid application number.
How Does the Registrar Decide on Allotment?
The IPO application process usually leads to one of two scenarios:
Case 1: Total Number of Bids Equals Shares Offered by the Firm
In this scenario, if the total number of bids aligns with the number of shares offered by the company, there’s no need for the registrar to intervene. Every applicant with a valid bid will receive the exact number of shares they requested.
Case 2: Total Number of Bids Exceeds Shares Offered by the Firm
This scenario is more common and necessitates careful consideration by the registrar to determine allotment. SEBI (Securities and Exchange Board of India), the country’s market regulator, mandates that at least one lot must be allocated to each applicant.
To illustrate, let’s delve into an example: Company B announces 8,50,000 shares in its IPO, with a minimum lot size of 85. According to SEBI’s guidelines, a maximum of 10,000 investors (8,50,000 ÷ 85) will receive at least one lot.
The allotment process varies based on the level of oversubscription:
- Slight Oversubscription: If the IPO receives a modest oversubscription, such as the one in our example, where the minimum lot is 85, it will be allocated to all applicants. The remaining shares are distributed proportionally among those who submitted multiple bids.
- Significant Oversubscription: In cases of substantial oversubscription, a random draw may be used to determine allotment. Investors whose bids aren’t drawn during this process will not receive any shares.
If your IPO application doesn’t result in an allotment, it could be due to an invalid bid (incorrect PAN/Demat account number) or your name not being selected in the lucky draw.
Understanding the IPO allotment process is crucial for every investor looking to participate in the exciting world of initial public offerings in the Indian stock market. It helps manage expectations and prepares investors for the uncertainties that can arise during the allotment phase. So, whether you’re a seasoned investor or a first-timer, navigating the IPO allotment process is an essential step in your stock market journey.
IPO allotment refers to the process of assigning shares to investors who have applied for an IPO. It’s managed by the IPO registrar, and successful applicants are informed through email or SMS. Allotted shares are credited to their demat accounts on the listing date.
After an IPO is allotted, investors receive confirmation and allotted shares are credited to their demat accounts on the listing date. Those who didn’t get shares or received fewer than applied for get refunds. Investors can then trade shares in the secondary market.
Securing an IPO allotment isn’t guaranteed, but you can improve your chances. Apply in the retail category, apply on the last day for a better subscription idea, bid at the cut-off price, and use multiple demat accounts (up to Rs. 2 lakhs total) to increase your chances.
Getting 100% allotment in an IPO is rare but possible. Choose an under-subscribed IPO with high lot size or price band, or select a high-quality company with strong fundamentals and reputation. These strategies can increase your chances of full allotment.
Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.