IPO Allotment

IPO allotment is the process by which shares of a company going public are distributed to investors who applied during the initial public offering subscription period. If an IPO is oversubscribed, allotment is done through a lottery system for retail investors, and on a proportional basis for other categories.

What Is IPO Allotment?

When you apply for an IPO, you are not guaranteed to receive shares. If the number of applications exceeds the shares available, SEBI-prescribed allotment rules apply:

– **Retail Individual Investors (RII)**: Allotment is done by lottery. Each applicant who applied for at least one lot either gets exactly one lot or nothing. If demand is still unsatisfied, additional lots are distributed by lottery.
– **Non-Institutional Investors (NII)**: Allotment is proportional to the number of shares applied for.
– **Qualified Institutional Buyers (QIB)**: Proportional allotment from their reserved portion.

IPO Categories and Reservation

SEBI mandates the following minimum reservations in book-built IPOs:

– QIBs: minimum 50% of shares
– NIIs (HNIs): minimum 15% of shares
– RIIs (retail investors): minimum 35% of shares

How to Check IPO Allotment

After the IPO closes and allotment is finalised (typically 6 days after closing), you can check allotment status:

1. Visit the registrar’s website (e.g., Link Intime, KFin Technologies)
2. Enter your PAN number, application number, or Demat account details
3. The portal will show if you received shares and the number of shares allotted

Timeline: IPO to Listing

– T: IPO closes
– T+1: Basis of allotment finalised
– T+2: Refunds initiated for unallotted applications
– T+3: Shares credited to allotted investors’ demat accounts
– T+6: Shares listed on stock exchange

Practical Example

Sunita applied for 1 lot (14 shares) of a retail IPO that was subscribed 80 times in the retail category. Only 1 in every 80 applicants could get allotment. Through the computer-based lottery, Sunita’s application is selected and she receives 1 lot. Her application money for additional lots is refunded automatically via UPI mandate release or ASBA unblock.

Key Takeaways

– IPO allotment for retail investors uses a lottery system when oversubscribed, ensuring fairness
– Each retail applicant gets at most one lot in a heavily oversubscribed IPO
– Allotment status can be checked on the registrar’s website using your PAN
– Shares are credited to your demat account about 6 days after the IPO closes
– Unallotted application money is automatically unblocked or refunded