Applying for an Initial Public Offering (IPO) does not guarantee that you will get any shares. If too many people apply for a particular issue, there may be some investors who do not receive any shares. This depends on how many people are applying shares in your category, how many valid applications there are, and what the rules of the issuing are. This can be confusing for new applicants. An IPO trading app can also help investors track an issue and check its allotment status.
What Happens After an IPO Closes?
The allotment process begins once the IPO subscription period ends. During the issue period, investors submit applications through their brokers, banks, or other permitted channels. After the closing date, the registrar and other parties involved start processing the applications.
The process generally includes the following stages:
- Verification of applications: Applications are verified for their correct information, mode of payment, and other issue related requirements.
- Classification: Applications are classified on the basis of category of the investor.
- Evaluation of demand: The number of valid applications and availability of shares are evaluated for each category.
- Allotment: Shares are allocated by the Registrar as per the rules.
- Refunds and share credit: Funds blocked for unsuccessful applications are released, while allotted shares are credited to the successful applicants’ Demat accounts.
The registrar prepares the basis of allotment in consultation with the stock exchange and other relevant parties. This document records how shares have been distributed among eligible applicants.
How Shares Are Allotted to Different Investor Categories
An IPO is divided into investor categories, and each category follows its own allocation method. The final allotment depends on the issue of structure and applicable SEBI regulations.
Retail Individual Investors
Retail investors apply within the prescribed investment limit. If the retail portion receives more valid applications than the available shares can accommodate, allotment is generally made through a lottery-based process. The aim is to provide eligible applicants with a fair chance of receiving shares.
For example, if an IPO receives a large number of valid retail applications but has shares available for only a smaller number of applicants, everyone may not receive an allotment. Successful applicants may receive the minimum permitted lot, depending on the available shares and the basis of allotment.
Non-Institutional Investors
The non-institutional investor (NII) category includes eligible applicants who do not fall under the retail or qualified institutional buyer categories. Applications in this segment follow the applicable proportionate allocation rules. The final quantity depends on the valid demand and shares reserved for the category.
Qualified Institutional Buyers
Qualified Institutional Buyers (QIBs) include institutions such as mutual funds, banks and insurance companies. Their applications are considered under the allocation framework applicable to this category.
Some IPOs may also have reserved portions for employees or existing shareholders. Applicants must meet the stated eligibility conditions to apply under these categories.
Why Some Applicants Do Not Receive IPO Shares
Not receiving shares does not necessarily mean that an application was incorrect. Several factors can affect the outcome.
- High Subscription: When demand exceeds the available shares, the allotment process cannot accommodate every valid application.
- Category Limits: Shares reserved for one investor category cannot automatically be distributed to applicants in another category.
- Invalid Application Details: Incorrect PAN details, Demat information or other application errors may lead to rejection.
- Payment Issues: Problems with the mandate or blocked funds can affect the validity of an application.
- Duplicate Applications: Multiple applications that violate the applicable rules may be rejected.
How to Check IPO Allotment Status
Once the basis of allotment is finalised, investors can check whether shares have been allotted to them. The result is usually available through the registrar’s website and other permitted channels.
An IPO trading app may provide an allotment status option or direct users to the relevant registrar. The usual steps are:
- Open the platform or registrar’s official website.
- Select the IPO for which the application was submitted.
- Enter the required details, such as PAN, application number, or Demat account information.
- Submit the information to view the allotment results.
If shares are allotted, they are credited to the investor’s Demat account before listing.
Conclusion
The allotment of IPOs is dependent on several factors like the number of valid applications, the demand for various categories, and the number of shares available. There are various factors that can impact your IPO allotment, such as oversubscription, eligibility criteria, and mistakes during the application. Although you can track all information related to the IPO through an IPO trading app, there is no guarantee that you will receive any shares. Using 5paisa Alpha can help to provide investors with the necessary market information.
