IPO Allotment Process and Basis of Allotment Explained
Basis of allotment is the document a registrar publishes after an IPO closes, showing how shares were split among applicants in each category. In an oversubscribed issue, retail investors are allotted a maximum of one lot each through a computerised draw of lots, which is why a Rs 2 lakh application does not improve your odds over a one lot application.
The rules come from the SEBI ICDR Regulations, 2018, and they are mechanical. Once you understand the category quotas and the lottery, most of the confusion around “why did I not get shares” disappears.
How the Issue Is Divided
Every book built mainboard IPO splits the offer into three buckets. Which split applies depends on whether the company meets the profitability and net worth conditions in the ICDR Regulations.
| Category | Standard issue | Issue by a company not meeting the profitability test |
|---|---|---|
| Qualified institutional buyers (QIB) | Not more than 50% | At least 75% |
| Non institutional investors (NII or HNI) | Not less than 15% | Not more than 15% |
| Retail individual investors (RII) | Not less than 35% | Not more than 10% |
Within the QIB portion, 5% is reserved for domestic mutual funds, and up to 60% of the QIB portion can be allocated to anchor investors on a discretionary basis one working day before the issue opens.
Retail and NII definitions
Retail means an application of up to Rs 2 lakh. Above that you are a non institutional investor. The NII portion is itself split: one third for applications between Rs 2 lakh and Rs 10 lakh, and two thirds for applications above Rs 10 lakh.
How Retail Allotment Works
This is the part worth getting right, because it decides what you should apply for.
- The registrar first removes invalid applications: duplicate PANs, mismatched demat details, unapproved or unconfirmed UPI mandates, and third party bank accounts.
- If the retail category is undersubscribed, every valid applicant gets what they asked for.
- If the category is oversubscribed but the number of applicants is less than the number of lots available, everyone gets at least one lot and the balance is allotted proportionately.
- If applicants outnumber available lots, nobody gets more than one lot, and a computerised draw of lots decides who gets that lot. The draw runs in the presence of a stock exchange representative and a public representative, and the outcome is recorded in the basis of allotment.
So in a heavily oversubscribed IPO, a Rs 15,000 application and a Rs 1.95 lakh application have the same chance per application. What raises your odds is more valid applications, using different PANs and demat accounts of family members who are actually investing their own money, not a bigger cheque from one PAN.
How the NII draw works
Since 2022, allotment in both NII sub categories is also by draw of lots, with a minimum allotment equal to the minimum application size for that sub category. Proportionate allotment for HNIs, which used to reward the biggest funded applications, no longer applies the way it did.
The Timeline After the Issue Closes
Mainboard IPOs follow a T+3 listing timeline, where T is the issue closing date.
- T: Bidding closes, usually at 5 pm. Brokers often set an earlier internal cut off so UPI mandates can be approved in time.
- T+1: The registrar finalises the basis of allotment with the exchange, and blocked funds start getting released for unsuccessful applicants.
- T+2: Shares are credited to demat accounts of successful applicants.
- T+3: Trading begins, with a special pre open session for price discovery on listing day.
An issue also needs a minimum level of subscription to go ahead at all. If it falls short of the threshold set in ICDR, the entire application money is refunded and the issue is withdrawn. Mainboard issues additionally need a minimum number of allottees, which is why very large single applications cannot substitute for broad retail participation.
How to Check Your Allotment
Three free routes, all official. The registrar’s website, which will be MUFG Intime, KFin Technologies, Bigshare or a similar SEBI registered registrar named in the RHP. The NSE and BSE websites, which host allotment status pages. And your own broker app or the bank account itself, where a partial debit tells you a partial allotment happened before any website updates.
Common Myths That Cost People Allotment
- “Apply on day one for better odds.” Timing has no effect on the draw. Applying early only protects you from last day technical load.
- “Multiple applications from my PAN improve chances.” They get every one of those applications rejected. One PAN, one application per category.
- “Bidding above the cut off price helps.” Retail investors bidding at cut off are treated as bidding at the final price, so a higher bid gains nothing. Bidding below the final price gets you rejected.
- “A bigger application always wins.” Only true where the number of applicants is smaller than the number of lots, which is rare in a popular issue.
- “Shares are allotted first come first served.” The basis of allotment is finalised only after the issue closes.
Frequently Asked Questions
Why was my IPO application rejected even though funds were blocked?
The most common causes are a UPI mandate that was never approved, a mismatch between the PAN and the demat account details, a duplicate application under the same PAN, or a bid below the final issue price. The registrar publishes rejection reasons in the basis of allotment document.
How many lots should I apply for in an oversubscribed IPO?
In a heavily oversubscribed retail category, one lot is enough, because nobody receives more than one lot anyway. Applying for more only blocks additional money for a few days without improving the odds of the draw.
Can I apply in both the retail and NII categories?
The same PAN cannot bid in both categories in the same issue. A single applicant chooses one, and an application above Rs 2 lakh automatically falls into the non institutional bucket.
What happens to the money if I get partial allotment?
Only the amount corresponding to the shares allotted is debited from your bank account, and the rest of the blocked amount is released. Under the ASBA framework the funds stay in your account and continue to earn interest until they are debited.
Does applying through a broker give better allotment chances than a bank?
No. The registrar treats every valid application identically regardless of whether it came through a broker with UPI or a bank with net banking ASBA. Choose the route you find more reliable, not one you think is favoured.
Key Takeaways
- Category quotas are fixed by the SEBI ICDR Regulations, commonly 50% QIB, 15% NII and 35% retail.
- Retail allotment in an oversubscribed issue is one lot per successful applicant via a computerised draw of lots.
- The NII portion splits one third for Rs 2 lakh to Rs 10 lakh bids and two thirds above Rs 10 lakh, also by draw.
- Mainboard IPOs settle on a T+3 timeline from issue closing to listing.
- Multiple applications on one PAN are rejected; separate valid PANs are the only legitimate way to raise your chances.
