How to Maximise the Chances of IPO Allotment?
This year is the year of IPOs - Zomato, Nykaa, PayTM, Star Health Insurance and so many more. Investing in an IPO is exciting because it can deliver high profits to investors. However, the popularity of IPOs is also a drawback since it causes an IPO to be subscribed multiple times, reducing an investor’s chance of allotment.
You might have often heard people cribbing about not getting their IPO allotment and how to increase the chances of IPO allotment? For instance, the Zomato IPO was subscribed 38 times, implying that each share had 38 allotment applications. The more the number of applications, the lesser are the IPO allotment chances. This means there are high chances that you do not get any share subscription in an IPO because of an excessive number of applications.
However, if you want to ensure that you get the IPO allotment of the desired company, you can use these tricks to maximise your chance of IPO allotment.
Tricks to Maximise Chances of IPO Allotment
1. Use different Demat accounts: To increase your IPO allotment chances, apply for the IPO through different Demat Accounts. However, while you can submit more than one application in your name, you cannot use your PAN number more than once in an IPO. Hence, you ask your family members or close friends to apply for an IPO using their Demat Accounts. Different applications increase the probability of IPO allotment.
2. Do not make large bids: If you are applying for a popular IPO that can be oversubscribed, ensure you do not make large bids. SEBI treats all retail investors (less than ₹2 lakhs) equally. This means, in case of oversubscription, large bids will not be beneficial. Instead, using different applications with smaller bids can help improve your IPO allotment status.
3. Bid at the cut-off price: Another effective trick to enhance your IPO allotment chances is to bid for an IPO cut-off price. All IPOs have a price range. Therefore, it is best to bid for the highest price in the price range because it indicates that you are comfortable buying the shares at any price between this range.
4. Prepare for the IPO in advance: If you want to invest in an IPO, you have to conduct due diligence before and not wait until the last minute to make an investment decision.
For instance, some investors wait to check how the Qualified Institutional Buyers (QIB) and High Net-Worth Individual (HNI) buy the IPO shares before placing their bids. However, this strategy can backfire if there is any last-minute issue during IPO application submission. There could be a technical glitch, or you could miss the deadline for IPO submission. Hence, it is best to bid in advance to increase your IPO allotment status.
5. Apply within the first two days of IPO issue: As an investor, you might want to take your time and check the market response before applying for an IPO. However, this can reduce your IPO allotment chances as you might fail to submit your IPO application in time. Therefore, to improve your IPO allotment chances, aim to apply within the first two days of the IPO (usually three days long).
6. Complete all application formalities: Whether you are a new investor or a seasoned one, you should be careful about specific factors to complete your IPO application.
For instance, to be eligible to apply for an IPO, you have to approve the mandate request that you receive in your Demat account. If you do not accept the mandate request, the funds are not locked in your account, and your IPO allotment fails.
7. Verify details before applying: In the rush to apply for the IPO, do not forget to verify your details before submitting your form. Check if you have mentioned the right name, Demat account, PAN number, category of shares you are applying for, and other details. IPO allotment can fail because of incomplete or inaccurate IPO applications.
An IPO is an exciting and profitable opportunity for new and seasoned investors. However, to ensure you get the IPO allotment, you should apply diligently and use these above-mentioned smart tricks to improve your IPO allotment status. In addition, you can also engage with a professional broker to augment your IPO allotment.
Also Read: IPO Investment & Its Benefits
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Frequently Asked Questions
IPO allotment depends on the interest of the potential investors. If an IPO is oversubscribed, the IPO allotment is per the lottery system.
In India, you can sell IPO shares on the listing day itself. However, if you want to hold your shares, you can sell them on any trading day.
Retail individual investors can only apply for IPO shares worth Rs. 2 lakh. Retail investors collectively get 35% of the IPO share issue size.
You might fail to get an IPO allotment if your bid was invalid because of reasons such as invalid PAN number, multiple applications from the same PAN number, invalid Demat account number, etc. Moreover, if an IPO is oversubscribed, the IPO allotment is done through the lottery system, which means you may or may not get the shares.