When the application process for an IPO is done, one of two things usually happen:
- When the application process for an IPO is done, one of two things usually happen:
- Total number of bids is more than shares offered by the firm.
Case 1: Total number of bids is more than shares offered by the firm.
If this were to happen (and it’s not all that often that it does), the registrar will have no need to intervene. Every applicant with a valid bid will get the lot that they requested. No one is bound to walk away without any shares.
Case 2: Total Number Of Bids ≥ Shares Offered By Firm
This case is more likely to happen and requires a bit of planning from the registrar to decide how the allotment actually takes place. Thankfully, there is a mandate issued by India’s market regulator, SEBI (Securities and Exchange board of India) which stipulates that at least one lot must be given to every applicant. Keeping this in mind, let’s work with an example to understand the allotment process in greater detail.
Let’s assume that Company A offers 7,00,000 shares as a part of it’s IPO and the minimum lot size is 70. As per the SEBI mandate, the maximum number of investors who are bound to get at least one lot is: 10,000(7,00,000 ÷ 70). Consequently, 10,000 investors will definitely receive at least one lot.
Depending on the margin by which the IPO is oversubscribed, the allotment procedure varies. They are dealt with in the following manner:
- Small Margin: If the IPO is oversubscribed by only a small margin, the minimum lot (70 in the example above) will be distributed among all applicants. The remaining shares will be allocated proportionally to those investors who had submitted more than one bid.
- Large Margin: For situations where the shares are oversubscribed by many moltiplied of the original amount (like Reliance’s IPO in 1977), the registrar resorts to allotment via a lucky draw. In such situations, investors whose bids don’t make it during the draw will not be allotted any shares.
In case you applied to an IPO and missed out on receiving any shares, one of two things could have happened:
Your bid was deemed invalid (incorrect PAN/Demat account number)
Your name didn’t come up in the lucky draw
Conclusion
The IPO status is an indication of the collective trust that the company manages to command in the stock market. In recent times, an IPO is a huge event that attracts significant media coverage and interest from both retail investors as well as large financial institutions that are looking to buck the latest trend. Once the allotment procedure is done, the shares are then listed on the exchange within days which then opens it up to trading. Companies do share their IPO calendars to let you know about the upcoming IPO events.
Invest wise with
Expert advice
Enter Mobile No.
GET STARTED
Open a free Demat A/C
By continuing, I accept the Terms & Conditions and agree to receive updates on Whatsapp
Check out our attractive brokerage plans
Related Articles
How to improve your chances of IPO Allotment?
What Is IPO Grey Market?
What is Primary Listing?
Who is a Syndicate Member?
How to buy and sell bonds in India?
How To Apply For an IPO offline?
How to borrow shares from a broker?
What Is a Hot IPO?
What is ASBA?
What is FPO?
How You Can Analyse IPO
How to Apply for IPO using UPI ID
Importance of Investing in Pre-IPO Companies
What is Shelf Prospectus?
Initial Public Offering Meaning and Definition
As someone who is interested in the stock markets, you must have, on several occasions, come across the term: Initial Public Offering (IPO). You could have then wondered: What is IPO and what are its types? Read on to know about the crucial aspects of IPO.
Related Blog Post
There are many of us who dream about earning money by investing in stocks. While there are some who invest in Mutual funds or trading, there are others who prefer investing in an IPO or Initial Public Offering. Gaining profits from IPOs is not as easy as it sounds but with a planned strategy and some helpful tips, one can invest money in IPOs and also be assured that they have some killer returns. There are a number of well known companies that have experienced amazing gains the very first day of their IPO but they sure did disappoint their investors in the long run.
Investment in stock can get you great returns in the market but it comes some bit of risk. Having a successful Investing career is contingent on your research and experience as a Investor, your timelines and a little bit of luck. If you are interested in learning about how you can trade stocks on there are a few basics you need to familiarize yourself with starting with how to select the right stocks for your trading strategy. Read on to know more about how to select the best stocks for trading and the factors you need to consider.
Mutual funds have a tumultuous timeline and it may be hard to catch every shrink and swell. Mutual funds investment that have delivered substantial results may not work in the present. And since we need clear indicators of this trend, learning how to smartly analyse Mutual fund is a great skill to hone.While mutual fund recommendations will be spouted by your fund manager, you need to know and track where your money is going.
The very first thing that comes to the minds of people when we talk about investments is investing in stock markets. It is true that share markets are exciting and the news about people gaining wealth and becoming rich overnight are quite common. Bonds, though are considered by many as a good investment option, do not carry the same appeal. The lingo itself sounds arcane to a normal person and many consider these boring; that holds true during the days of exciting bull markets.
So, you have taken your first step in investing in the markets and wish to make it big, real quick. However, this journey is fraught with a number of risks and newcomers who trade while sidelining good stock market experts risk bringing their journey to an abrupt end.
Login Your Account
Register here
