How to improve Allotment chances: Best Tips for investing in IPO

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 In recent past, mainboard IPO has become a money making machine for regular investors, in which the shares of company floating the IPO generally trades at premium. The premium offering leads to a good return for individual investors for ex. Tata technologies IPO, which debut the bourses at 140% premium. Retail investors typically receive 35% of the issue size, but in select cases, SEBI may reserve 10% of the quota for retail investors and 75% for qualified institutional buyers. While there is no sure way to secure an allotment, the following approaches may help an investor improve their chances of getting an IPO allocation: 

Bid at a Cut-Off Price

Often, companies floating an IPO use a book-building procedure to find the best stock price. The company calculates a price range within which investors can bid for the IPO issue. Most investors apply through a cut-off price, meaning they are willing to pay whatever price the company decides after the book-building process. In most cases, the upper price band is selected for IPO issuance, but if the decided price is less, then the extra amount is reimbursed back to the investor.

Approve the mandate request

First-time investors who apply for an IPO through brokers believe the task is complete upon applying. After applying for an IPO, investors receive a mandate request. They must approve the mandate so that the amount is blocked by the bank for the IPO. In the event that the mandate is not accepted, the application stands half-filled and the IPO application is cancelled. Thus, an investor must make sure that the mandate is accepted in due course.

Research and Due Diligence

Before investing in an IPO, thoroughly research the company going public. Understand its business model, financial health, competitive landscape, and growth prospects. Analyze the industry trends and the company's position within it. This information will not only help you make an informed investment decision but also demonstrate your genuine interest in the IPO.

Apply for a Higher Amount:

While there's no certainty that applying for a higher amount will guarantee an allotment, it might increase your chances. Many IPOs allocate shares on a proportionate basis, so applying for a larger number of shares may improve your odds.

Regularly Monitor IPO News and Updates:

Stay updated on IPO news and announcements. Follow financial news portals, official company announcements, and regulatory filings. Timely information can help you prepare for upcoming IPOs and make informed decisions.

Apply in the Retail Category:

Many IPOs have a separate category for retail investors with a cap on the investment amount. Applying in the retail category might increase your chances of allotment, as a certain percentage of shares are reserved for retail investors.

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