IPO Allotment Process and Basis of Allotment Explained
Written by Supratim Choudhury
Reviewed by Gaurav Garg, SEBI-registered Research AnalystYou apply for an initial public offering (IPO), approve the payment mandate, and see the money blocked in your bank account. Yet when allotment is announced, you receive no shares. Another applicant gets one lot despite applying for the same quantity. Why?
The IPO allotment process determines which valid applicants receive shares and how many. The basis of allotment records how those shares are distributed across investor categories and application sizes. In a heavily subscribed retail category, a draw can decide the outcome. However, oversubscription does not automatically mean every successful applicant receives only one lot.
This guide explains what happens after bidding closes, how retail allotment works at different levels of demand, and how to read a basis-of-allotment table. Simple examples will help you understand why a valid application may receive no shares, when applicants can receive more than one lot, and what happens to your blocked funds afterwards. The focus is on book-built mainboard IPOs, where investors bid within a price band, with a brief explanation of how small and medium enterprise (SME) IPO rules differ.
What Is the Basis of Allotment?
The basis of allotment is the approved framework for distributing an IPO’s available shares among eligible applicants. Its published tables show application quantities, successful applicants, shares allotted, and selection ratios where applicable.
Think of the distinction this way: allotment status tells you your result; the basis of allotment explains the distribution behind the results.
Subscription measures demand. The final basis accounts for valid applications after checks and any permitted transfers of unsubscribed shares between categories.
How the IPO Allotment Process Works
After bidding closes:
- Applications are reconciled and validated. The registrar, which processes investor applications, reconciles bidding and banking data. Checks include the Permanent Account Number (PAN), demat account details, payment blocking, and duplicate applications. Invalid applications are excluded.
- Eligible bids and category demand are established. In a book-built issue, investors bid within a price band. Once the final issue price is determined, bids below it are ineligible. A valid cut-off bid accepts the final price.
- The basis of allotment is finalised. The registrar and lead managers work with the designated stock exchange to apply the relevant allotment rules. The exchange approves the basis, and the company completes the allotment.
- Shares and funds are processed. Successful applicants receive shares in their demat accounts. Banks debit the amount payable for allotted shares and release the remaining blocked funds.
The broker helps submit your application; it does not choose who wins a retail allotment draw.
How Retail IPO Allotment Works
In a mainboard IPO, a retail individual investor applies for shares worth no more than ₹2 lakh. A lot is the specified number of shares used as the bidding unit.
Retail allotment prioritises giving each valid applicant one minimum lot, subject to availability. Remaining shares are distributed proportionately against unfulfilled demand. If the number of minimum lots is less than the number of valid applicants, selection is by lottery. These scenarios appear in the Securities and Exchange Board of India (SEBI) allotment rules.
These hypothetical examples assume an unchanged retail pool.
When demand does not exceed available shares
Suppose the retail category has 1,00,000 shares and valid applications seek 80,000 shares. Applicants can generally receive their full requested quantities, provided the issue satisfies its other requirements and proceeds to allotment.
An undersubscribed retail category does not necessarily indicate the failure of the whole IPO.
When the category is oversubscribed but everyone can get one lot
Suppose 1,00,000 retail shares are available, the lot size is 100 shares, and 800 valid applicants collectively seek 2,00,000 shares.
Demand is twice the available supply. However, giving each applicant 100 shares requires only 80,000 shares. Everyone can receive one lot, and the remaining 20,000 shares are distributed proportionately against their unfulfilled demand, subject to the approved basis and rounding.
An applicant who requested only one lot has no remaining demand. Someone who requested several lots may receive additional shares. Oversubscription alone does not make retail allotment an all-or-nothing lottery.
When there are fewer lots than valid applicants
Now suppose the same 1,00,000 shares and 100-share lot size attract 5,000 valid applicants.
The pool accommodates:
1,00,000 ÷ 100 = 1,000 successful applicants.
A draw selects recipients of one lot. In this simplified example, an applicant’s indicative chance is:
1,000 ÷ 5,000 = 20%.
Bidding for several lots does not create several entries in that retail draw. The relevant constraint is the number of applicants competing for the available minimum lots.
Do not calculate this chance simply as “one divided by the subscription multiple”. Subscription measures shares demanded, while the draw involves valid applicants, who may request different quantities.
Do Other Investor Categories Follow the Same Rules?
Retail rules do not apply to every category.
Non-institutional investors (NIIs) include individual mainboard applicants bidding above ₹2 lakh. Their portion includes separate subcategories for applications that are above ₹2 lakh but up to ₹10 lakh, as well as for those that exceed ₹10 lakh. Minimum allotment requirements apply, with remaining shares distributed proportionately. Heavy demand can require a draw, so a larger bid does not guarantee allotment.
Qualified institutional buyers (QIBs) include eligible institutions such as mutual funds and banks. Allotment in the non-anchor QIB portion is generally proportionate. Anchor allocations follow a separate mechanism.
Employee, shareholder, or other reservations, where offered, have their own eligibility and allocation terms. Refer to the issue’s offer document instead of assuming that one category split applies to every IPO.
The important SME distinction
Small and medium enterprise (SME) IPOs have different application rules. For issues opening from 1 July 2025, the former retail category was replaced by an individual-investor category applying for exactly two lots, with a minimum application value above ₹2 lakh. Individual applications for more than two lots fall under the non-institutional category. Cut-off bidding is unavailable.
Consequently, the mainboard example of a retail applicant bidding for one lot cannot be carried over unchanged to an SME IPO.
How to Read a Basis-of-Allotment Table
Find your category, then the row matching your application quantity. Common columns include:
| Column | What It Means |
|---|---|
| Shares applied for | Application quantity represented by that row |
| Applications received | Applicants in that quantity group, usually after technical rejections |
| Shares allotted per applicant | Quantity received by successful applicants in the row |
| Ratio of allottees to applicants | Selection ratio for that group |
| Total shares allotted | Aggregate shares distributed through the row |
For example, a hypothetical row showing 100 shares allotted per successful applicant and a 1:5 selection ratio means approximately one in five applicants in that group receives 100 shares. It does not mean every applicant receives 20 shares.
Read footnotes too. Additional share allocations, rounding adjustments, or transfers between categories can explain why a simple calculation does not exactly match the final table. The published basis describes group outcomes; use the registrar’s individual status facility to confirm your own result.
What Happens After Allotment?
Under the SEBI listing framework, T is the issue closing date, followed by this indicative schedule:
| Stage | Indicative Working-Day Timeline |
|---|---|
| Basis of allotment finalised and approved | T+1 |
| Fund debit, unblocking, and share credit | T+2 |
| Trading begins | T+3 |
These are working days, not calendar days. Check the issue’s published dates rather than counting through weekends or holidays.
With Application Supported by Blocked Amount (ASBA), including applications using Unified Payments Interface (UPI) mandates, unallotted money is released from the block. It normally does not require a refund of money already paid out.
For instance, if ₹30,000 was blocked and allotted shares cost ₹10,000, ₹10,000 is debited and ₹20,000 is unblocked. With no allotment, the full block is released.
Key Takeaways
- A valid application does not guarantee allotment: you may receive no shares if there are too few lots for all eligible applicants and you are excluded from the draw.
- Assess demand in your category rather than relying on the overall subscription headline.
- Use the basis-of-allotment table to understand distribution and the registrar’s status page to confirm your result.
- Allotment establishes ownership, not investment quality or assured listing gains.
Frequently Asked Questions (FAQs)
Q: Does applying on the first day improve IPO allotment chances?
A: Applying early does not give priority in a retail draw. It allows you more time to resolve submission or payment issues before the deadline.
Q: Can I apply through two brokers to improve my chances?
A: Multiple applications under the same Permanent Account Number (PAN) in the same category can be rejected. Using different brokers or demat accounts does not create separate eligible identities. Permitted applications across reservation categories depend on the offer document.
Q: Does choosing the cut-off price guarantee allotment?
A: No. In an eligible book-built mainboard application, choosing the cut-off price means accepting the final issue price. It avoids bidding below that price but does not guarantee selection. This option is unavailable in SME issues under the revised rules.
Q: Why did I receive no shares even though my money was blocked?
A: Blocking confirms funds were reserved, not that shares were allotted. Your valid application may have missed selection, or later checks may have identified a technical rejection. Before assuming what occurred, check the registrar’s recorded result.
Q: What should I do if my funds remain blocked after non-allotment?
A: Check the issue’s scheduled unblocking date, then contact your bank and the registrar with your application details and mandate reference. If unresolved, escalate through the applicable investor grievance process. Non-allotment should release the amount reserved for that application.
