IPO allotment for retail: how are shares allotted for the retail category

 IPO allotment refers to the process of allocating shares to investors who have applied for them during an initial public offering (IPO). It is a crucial step in the IPO process as it determines how many shares each investor will receive based on various factors such as demand, availability, and regulatory requirements. The IPO allotment is typically conducted by the underwriters or syndicate members, who carefully assess the applications and allocate shares accordingly. 

The importance of IPO allotment for retail investors

The IPO allotment is particularly important for retail investors, as it allows them to participate in the offering and potentially benefit from the company's growth. It provides an opportunity for individual investors to own a stake in a publicly traded company and potentially generate returns on their investment. Additionally, the fair and transparent allocation process ensures that all investors, including retail investors, have an equal chance of receiving shares based on their application and market conditions.

The IPO allotment process for retail investors is designed to ensure fairness and equal opportunity. Retail investors are typically allocated a certain percentage of the total shares available for public offerings, allowing them to participate in the company's growth alongside institutional investors. This allocation process aims to prevent any preferential treatment or unfair advantages, ensuring that retail investors have a fair chance of receiving shares based on their application and market conditions.

An overview of the IPO allotment process for retail investors

The IPO allotment process for retail investors involves submitting an application for shares during the IPO subscription period. Once the subscription period ends, the shares are allocated based on various factors, such as the number of shares applied for, market demand, and the total number of shares available for retail investors. This process ensures that retail investors have an equal opportunity to participate in the IPO and benefit from the company's growth potential.

Factors influencing the IPO allotment to retail investors

Include the size of the retail investor's application, their investment history, and any priority given to certain types of investors, such as employees or existing shareholders. Additionally, market conditions and demand for the company's shares can also impact the allocation process.

IPO Allotment: Predefined Rules and Regulations

• The Registrar, in cooperation with the designated stock market, allocates shares in an initial public offering (IPO) based on the quantity of shares offered and the bids received from investors in the relevant investor category (i.e., retail, NII, QIB).

• The IPO allotment rule varies depending on the type of investor (retail, NII, or QIB).

• For allocation purposes, only complete submissions will be reviewed. Applications that are deemed invalid (those that use the wrong Demat account number, have duplicate PANs, etc.) will be denied.

• Allocation consideration is restricted to those applications received at or above the threshold price.

• In the event of an under-subscription in a particular category (other than the QIB category), the issuer, the registrar, the exchange, and the lead manager may use an over-subscription in a different category to make up the difference.

• The registrar develops and publishes the Basis of Allotment document, which details the allotment, and unsubscribed shares in the QIB category are not eligible for subscription in other categories.

IPO Allotment Method

The IPO allotment mechanism for any IPO, i.e., Tata Technologies’, IREDA, Gandhar Oil, or any other, strictly varies as per investor classification and the IPO subscription level status.

Note:

• First of all, let the IPO be categorized into two major parts: undersubscribed or oversubscribed.

• If an IPO is undersubscribed in each investor group, the whole allotment will be distributed to all investors who submitted a valid application. The IPO will be successful if it is subscribed to by at least 90% or more. If one category of the IPO is oversubscribed while another is undersubscribed, the oversubscription may be adjusted with the undersubscribed portion of the other category, with the exception of QIB.

• If there is an overwhelming demand for shares (in case of oversubscription), i.e., Tata Technologies, Gandhar Oil, or IREDA, the issuer will use a lottery system or divide them up proportionally among the various types of investors. Let us have a look at the IPO allocation criteria for each investor category.

IPO Allotment Status Check

If you are an investor in an initial public offering (IPO), you can check your allotment status to see if you have received your shares. An investor needs either a PAN number, an application number, or a demat account number to verify the allocation status. On the day of the initial public offering allotment, the IPO allotment status will be posted online by the Registrar to the Issue. If investors have received the allocation, the page will show the total number of shares allocated; otherwise, the page will be blank.

 Steps to check the IPO allotment status

1. Log on to the registrar's website.

2. Select the IPO from the dropdown.

3. Enter your PAN number, application number, or DP Client ID.

4. Submit and check the allotment status.