How to Increase the Chances of an IPO Allotment
The common question amongst IPO investors is - how can I increase my chances of a successful IPO allotment?
Whether you are a first-time investor or an experienced one, the allotment process in the IPOs might leave you confused. As the recent public offers are attracting huge subscriptions, it is becoming tough for investors to get the IPO/Initial Public Offering allotments.
So, if you have the same query regarding your IPO allotment process, then this guide will help you understand everything in just a few simple steps.
But first, we need to understand the new allotment rules of an IPO before taking further steps in improving the allotment chances. While nobody can guarantee you an IPO allotment, these tips might help you take a step closer to your goal.
IPO Allotment – The New SEBI Rules
Before October 2012, SEBI (Securities and Exchange Board of India) had instructed the registrars to allot IPO shares in the retail category on an equal basis in case of oversubscription. This means, if you, as an investor, make an application of ₹1,00,000 or ₹1,50,000, you’ll be allotted a greater number of shares than anyone who makes a bid of fewer amounts.
However, this mandate naturally helped the bigger applicants. As a result, many HNI (high-net-worth individuals) investors channelled their money to the retail category for cornering their shares. And this did not go too well with SEBI.
As a result, in October 2012, SEBI employed a new IPO allotment process that mandated that all RII (retail individual investor) applications would be treated equally. According to this, applicants are now allotted shares of at least the minimum application size, subject to accessibility of total shares in the aggregate.
How to Increase the IPO Allotment Chances?
So, if you wish to increase your chances of an IPO allotment, there are a few ways to avoid the pitfalls. Also, by following these, you can optimise your allotment results.
1. Avoid Big Applications: The allotment process in SEBI treats every retail application equally (less than ₹2,00,000). So, there’s no point in making a bigger application in case of over-subscription. Big applications only make sense in the case of larger IPOs.
Also, the investors should go for minimum bids with multiple demat accounts. This can help you, the investor, to spare some money in multiple IPOs too.
2. Apply Via Multiple Demat Accounts: Do not use a single Demat account to apply for an IPO/Initial Public Offering with the maximum bid. Instead, try applying through multiple accounts for an IPO.
For example, an investor should apply with multiple Demat accounts for highly subscribed IPOs. This will increase the chances of an IPO allotment for the investors.
3. Bid at a Higher Price Band / Cut Off Price: As an investor, you might get confused between the cut-off price and the IPO stock price. The cut-off price refers to the price the investor is willing to pay the company decides at the end of the book-building procedure.
Once the application is prepared at cut-off, the investor should bid at the highest price band. Here, the excess amount, if the price is lower, is refunded.
4. Avoid Last Moment Subscriptions: If you have decided on a particular IPO stock price for the investment, go for it on the first day. If you do it on the last day, it might lead to a few issues cropping up unexpectedly, like your bank account not responding due to QIB and HNI subscription or other technical glitches. Applying early will ensure you do not miss out on the opportunity to invest in the IPO.
5. Fill the Application Details Properly: While filling the IPO forms, do not rush. Fill in the details correctly and make sure that you have written your name, amount, bank details, etc. You can also get printed forms as it will make the process easier and without any errors.
The best and the most secure way to apply for an IPO is through ASBA. This will avoid any further technical rejection.
6. Buy Parent Company Shares: If you can have at least one single share of the parent company in your Demat Account, it will make it easier for you to apply through the Shareholder category. However, this only applies when the parent company for listing the IPO is already on the stock exchange and a reservation for shareholders in the parent company.
Thus, it’s pretty obvious that your chances of an IPO allotment are better if you are in the shareholder category.
These are the most effective steps in increasing your chances of getting an allotment in an IPO allotment process.
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Frequently Asked Questions
- First, you can do that by visiting the registrar’s website. Then use your PAN no., DPID or your application number to check the status of your bid.
- You can also visit the BSE or NSE website the check the list.
- Your broker will also update you about the same on your email.
Anyone who is an adult and is capable enough to enter into a legal contract is eligible to invest in an IPO in India.
A Demat account is compulsory to invest in an IPO. On the other hand, you will need a trading account only if you wish to sell off your IPO shares in the secondary stock market in future.
IPO in the share market is a process by which a privately held organisation becomes a publicly-traded company by offering its stocks to the public for the first time.