You apply for an IPO with high hopes. Your money gets blocked. The listing day excitement builds. Then comes the message no shares allotted. This experience is extremely common for Indian retail investors. The real problem is not rejection. The real problem is that most investors never understand how IPO allotment actually works.
Once you understand the logic behind IPO share allotments, frustration disappears and expectations become realistic. The process is not random, not lucky, and not influenced by brokers or timing. It runs on strict SEBI rules and mathematical allocation systems.
Let us now break down the entire IPO allotment system in the simplest and clearest way.
What IPO Share Allotments Actually Means
IPO share allotment is the process through which shares are finally distributed to investors after an issue closes. Applying for an IPO does not mean you will automatically receive shares. It only means you are requesting shares at a particular price.
After the IPO closes, total demand is matched against total available shares. If demand is higher than supply, not everyone gets shares. If demand is lower, everyone gets full allotment.
That is the foundation of the entire system.
What Is the “Basis of Allotment” in an IPO
The Basis of Allotment is the official document that explains how shares were distributed across all investor categories. It contains:
- Total applications received
- Total shares available
- Category-wise subscription
- Allotment ratios
- Number of successful investors
This document is prepared by the registrar and approved by the stock exchange. It is also published publicly, which makes the IPO allotment process completely transparent.
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Who Decides IPO Share Allotments in India
IPO allotment is not decided by the company alone. Three major entities control the entire process.
The registrar to the issue processes all applications and prepares the allotment structure.
The stock exchange verifies and approves the Basis of Allotment.
SEBI regulates the full process and ensures investor protection.
This three-layer system makes manipulation practically impossible.
Investor Categories in IPO Allotment
Every IPO is divided into fixed investor categories.
- Retail Individual Investors get up to 35 percent reservation.
- Qualified Institutional Buyers get up to 50 percent.
- Non-Institutional Investors or HNIs get up to 15 percent.
- Employee and shareholder quotas are carved out separately when applicable.
This structure ensures retail investors always get protected access to IPOs.
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What Happens When an IPO Is Under-Subscribed
When total demand is lower than the number of shares offered, the IPO becomes under-subscribed. In this case, every valid applicant receives full allotment.
There is no lottery, no proportionate distribution, and no rejection unless there is a technical error.
Under-subscribed IPOs are rare in strong bull markets but still occur in weak sentiment phases.
What Happens When an IPO Is Over-Subscribed
Most popular IPOs are oversubscribed. This means demand far exceeds available shares. This is where the real IPO allotment logic begins.
Retail investors do not get shares based on the amount they apply for. The system focuses on distributing minimum lots to the maximum number of investors.
If even that is not possible, a computerized lottery system is used.
How Retail IPO Allotment Works in Oversubscription
In heavily subscribed IPOs, the registrar first tries to allocate one minimum lot to as many retail investors as possible.
If total retail applications exceed total available lots, then a lottery system is applied. This system is fully automated and exchange-supervised.
Applying for more lots does not increase your chances in such IPOs. One application equals one probability.
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How HNI and QIB IPO Allotment Is Done
HNI and institutional segments follow a proportionate allotment system. If their category is subscribed five times, each investor gets roughly one-fifth of their requested shares.
Anchor investors are allotted shares separately before the IPO opens. Their process is also heavily regulated by SEBI.
There is no lottery system in these two categories.
Step-by-Step IPO Allotment Process After Issue Closes
Once the IPO closes, the following steps take place:
- Application data is collected and verified.
- Invalid applications are removed.
- Oversubscription is calculated category-wise.
- Basis of Allotment is prepared.
- Stock exchange approval is taken.
- Shares are credited to demat accounts.
- Refunds are processed for non-allottees.
This entire process usually takes two to three working days.
Does Applying at Cut-Off Price Improve Allotment Chances
Applying at cut-off price only guarantees that your application remains valid at the final price. It does not improve your chances of getting shares.
All retail applications at cut-off go into the same pool. Timing and amount do not change your probability.
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How Many Shares Does a Retail Investor Usually Get
In high-demand IPOs, most retail investors receive only one minimum lot. In low-demand IPOs, they may receive full allotment.
The deciding factor is not money invested. It is the number of applicants versus available lots.
How to Check IPO Allotment Status
IPO allotment status can be checked on the registrar’s official website using PAN or application number. It is also available on NSE and BSE platforms.
Once shares are credited, they appear in the demat account before the listing day.
Common Reasons for IPO Allotment Rejection
Allotment rejection does not always happen due to oversubscription. Common technical reasons include:
- Incorrect PAN details
- UPI mandate failure
- Duplicate applications
- Name mismatch between PAN and demat
- Wrong DP ID or client ID
Any one of these errors can automatically disqualify an application.
SEBI Rules That Ensure Fair IPO Allotment
- Retail reservation protects small investors.
- Lottery systems prevent favoritism.
- Mandatory exchange approval ensures data integrity.
- Public disclosure of allotment ensures transparency.
These rules make the Indian IPO market one of the safest for retail participation.
The Reality Behind Popular IPO Allotment Myths
- Applying early does not help.
- Applying more money does not help.
- Using multiple accounts with the same PAN leads to rejection.
- Broker selection has no impact.
Only demand-supply math decides allotment.
Why Understanding IPO Allotment Changes Investor Behaviour
Once you understand the system, frustration reduces. Decision-making improves. Capital allocation becomes smarter. Emotional investing declines.
IPO investing becomes a calculated opportunity instead of a lucky draw.
Final Conclusion
IPO share allotment is a structured, regulated, and transparent process. It is not controlled by brokers, not influenced by timing, and not decided by luck. Every allotment follows strict SEBI-approved mathematical distribution rules.
Once you understand this, you stop blaming the system and start investing with clarity and discipline.
Disclaimer
This article is published strictly for educational and informational purposes only. It does not constitute investment advice or a recommendation to apply for any IPO. IPO investments are subject to market risks. Readers should consult a qualified financial advisor before making any investment decisions. The publisher and author shall not be responsible for any losses arising from the use of this information.
FAQ
Q1. What is IPO share allotment?
IPO share allotment is the process of distributing company shares to investors after the public issue closes based on total applications, available shares, and SEBI allotment rules.
Q2. Who decides IPO allotment in India?
IPO allotment in India is managed by the registrar to the issue and approved by the stock exchange under SEBI regulations to ensure fair and transparent share distribution.
Q3. How is IPO allotment decided for retail investors?
Retail IPO allotment is decided using a computerized lottery system when the issue is oversubscribed, where each valid application has an equal chance to receive one minimum lot.
Q4. Does applying with more money increase IPO allotment chances?
Applying with more money does not increase IPO allotment chances in the retail category because allotment depends on the number of applicants and available lots, not the investment size.
Q5. Where can investors check IPO allotment status online?
Investors can check IPO allotment status on the official registrar website, NSE or BSE portal using their PAN number, application number, or demat account details.
