How to Increase IPO Allotment Chances?

Nowadays, filing an IPO is increasingly popular for better Investment Opportunities. Everyone wants to earn more money by listing gains. But some investors are facing issues with bad IPO allotment. As a result, there are so many filing IPO, yet they will get 0 shares. 

Here, we’ll discuss how you can increase the IPO Allotment chances by performing some small steps and avoiding making mistakes while doing IPO allotment.  

What is IPO Allotment

The IPO allotment refers to the share allocation process in an IPO to people who have applied for shares in the IPO process. When a company issues shares in the form of an IPO, many will subscribe to shares; however, there are limited shares to float. 

If more investors apply for shares than there are shares issued, the company cannot fairly distribute the shares to all applicants and will instead randomly allot them.

Many new investors often ask how to get an IPO allotment, and the truth is, allotment will depend on the demand for shares, size of the issue, category, and luck of the lottery system.

How IPO shares are allotted?

IPO shares are distributed based on the total applications received and the demand for shares. When there are too many investors applying for shares and an insufficient allocation of shares, there needs to be a fair way for the company to give out shares. 

So SEBI rules support a very equitable way for small retail investors to receive shares via a lottery mechanism. 

Making all eligible applicants have an equal chance is a simple way of explaining and thinking about how IPO allotment works. 

If you want to know how to get IPO allotment, you must understand that the allotment depends on demand, the number of retail applicants, and company rules. So, even if you apply, allotment is not 100% guaranteed in all cases.

Key Rules Behind IPO Share Allotment

Some of the simplified rules that explain how IPO allotment works and what rules every investor should follow are described as follows: 

1. Allotment Is Not First-Come, First-Served

Usually, in an IPO, there are more applicants than shares available; thus, allocation is not made on a ‘first-come, first-served’ basis. 

Rather, the shares for retail investors are allocated either by means of a computerized lottery or by proportional allocation, in the event of oversubscription. 

2. Retail, HNI, and Other Categories Have Separate Quotas

Shares released in an IPO can be categorized as offering shares to retail investors, high-net-worth individuals (HNIs), and institutional investors etc. Different quotas and allotment rules apply to each category. Knowing your category can help.

3. Applies to One Lot Can Improve Your Odds

In a highly oversubscribed IPO, applying for multiple lots (let’s say 5 or 10 lots) does not increase your chance of getting shares proportionately. 

It merely captures more money in a blocked account for allocation. Instead, just applying for one individual lot should give you a fair chance of allocation in that category.

4. Use of Multiple Demat Accounts (With Different PANs)

A common suggestion is to apply through multiple Demat accounts, for instance, your account and your spouse's or parents' accounts, as long as the unique PAN of each account differs. 

This increases your chances since each application is considered separately. Note: If PANs are duplicated on the application, they will be rejected. 

5. Bidding at the Cut-Off Price or Higher Increases Chances

While applying for an IPO, you can choose a price within the price band or select the “cut-off price”. If you choose the cut-off option, it means you are ready to accept whatever final price the company decides. 

So, if you want to know how to increase IPO allotment chances, selecting the cut-off price is a simple and smart method.

6. Avoid Mistakes in Application That Lead to Rejection

There are reasons why your application can be rejected, including failure of the correct UPI mandate, not enough cash, incorrect Demat or PAN details, or multiple applications submitted under the same PAN. 

Checking that everything is correct makes your application valid and improves your chances of selection.

7. Understand That Luck Still Plays a Role

Although adhering to all the rules improves your chances, an allotment is not guaranteed. Because final continuous offerings are drawn randomly and oversubscriptions occur as often as many times they’re oversubscribed, expected allotments will not hold in some cases.

8. Checking Allotment & Keeping Track

You can check the status of the IPO allotment based on your PAN, application number, or Demat ID after the IPO closes and the allotment is determined through the registrar's website or the exchange portal. This is the final step in the reality of how an IPO allotment takes place.

Why Do IPOs Get Oversubscribed?

An Initial Public Offering (IPO) is oversubscribed when a company receives more shares than it has publicly available to offer to potential investors. 

In these situations, the IPO allotment process for retail investors or the general pubic is important because the company needs a fair method to determine who will get shares and who won't.

Principal causes of IPO Oversubscription.

1. Strong Company Reputation

In the case of the launching of the IPO of a well-known company with a good track record, investors have more trust. They feel that the company will expand and bring them good returns in the future.

2. Attractive Pricing

When the price of the IPO appears to be in a reasonable range or even lower than expected, additional investors flock in to apply. All people will aspire to get a good deal before the market price increases.

3. Market Buzz and Hype

Excitement arises because of positive news and media coverage, and recommendations of experts. When everybody is talking about an IPO, more individuals would like to be part of it.

4. Expected Listing Gains

Investors request IPOs in the hope of gaining profits relatively quickly. They apply in a multitude of cases, and they anticipate a sudden rise in share price on the opening up of trade.

5. Limited Shares Available

Firms usually issue a very small percentage of total shares to the general population. Oversubscription occurs automatically in cases where the demand is high and the supply is low.

Steps to Increase Chances of IPO Allotment

Getting IPO allotment sometimes feels like winning a lottery, especially in highly popular IPOs. But even in such cases, you can still work on certain smart steps that can improve your chances of IPO allotment.

 If you understand how to increase chances of IPO allotment and follow some smart tips, avoid common mistakes, and apply them proper way, your success probability can improve. 

So, with the right approach, you can increase the chances of getting shares in a popular IPO.

The following are tested measures that can help you increase your chances of securing shares during your next IPO application.

1. Choose a Single-Lot Application.

Request a single lot (minimal amount of shares) rather than several lot requests to have the highest probability. The retail investor IPO allotment process allows preference to small applications, and it is common to find that single-lot applicants receive a better allocation.

Your application to more lots places you in another category where you will have more competitors.

2. Use Multiple Demat Accounts

Apply in the same IPO by opening separate Demat accounts of your family members, such as your spouse, parents, or children.

All accounts are separate applications and increase your probability of receiving shares. Ensure that there are appropriate KYCs and distinct PANs on each account.

3. Select the Cut-Off Price

The cut-off price option should always be used when applying instead of using a lower price as the bid. This will guarantee that your application is put into consideration at any final price that is determined by the company. 

The cut-off price can be lower than what you offer, and this can cause your application to be rejected altogether.

4. Do NOT Make Last-Minute Applications.

Submit your IPO application as soon as possible and ideally on the opening day of the IPO. 

The rush at the last moment might lead to technical failures, server malfunctions, or failure to pay with UPI, and your application may be dismissed. 

5. Avoid Technical Rejections.

Make sure to verify every information, such as PAN number, bank account, Demat account number, and UPI ID, before handing in. 

A single error when inputting information will automatically cause your application to be rejected. Make sure you have enough cash in your bank account to cover the amount of application fee.

6. Make Investments in the Parent Company.

The IPOs of a few of them have a reserve of shares for existing shareholders of their parent company or group company. You can avail the reserved quota should you purchase shares of the parent company before an IPO. There is a lot less competition in this shareholder quota as compared to the retail category.

7. Multi-broker Open Accounts.

Keeping accounts with various brokers also provides you with backup options during high demand when one of your platforms goes down. 

The application processes and technical capabilities of different brokers can also be different. This plan guards against failure to utilize single platforms.

8. Connect with IPOs Regularly.

Keep on applying to more than one IPO rather than only popular ones to enhance the chances of success over the long term. 

Availability of participation on a regular basis will help you get acquainted with the process and also have a higher likelihood of getting an overall allotment. Rejected applications provide experience and learning for the future.

How to check your IPO allotment status?

Once the IPO application period is completed, the company takes approximately 7 days to determine shareholders. After allotment is done, you can easily see the status of your IPO by accessing the internet. 

All that you are required to have is your PAN number or Application number, or DP/Demat ID.

You may go to the official registrar site (such as KFintech or Link Intime) or visit the NSE/BSE site and enter your details, and you will get the information on whether you received the shares or not. 

This simple checking process also helps you understand how to get allotment in IPO, because it shows you how the results are declared and how the allotment status is displayed.

Conclusion

Getting IPO allotment fully depends on demand, rules, and sometimes luck. But when you apply smartly, follow the right steps, avoid errors, and apply through different family Demat accounts, your chances can improve.

Always apply at the cut-off price, and only choose good quality IPOs where the company has strong fundamentals. In the end, a smart investor is not the one who applies every time, but the one who applies with a proper strategy.

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