IPO investors generally have questions such as “No shares allotted to me in IPO, why?”, “I haven’t got any allotment in multiple applications” “why I am not getting allotment in any of the IPOs?”. Thus, it is clear that the lucky people get the allotment in highly subscribed IPOs. Sometimes there are some IPOs in which even people who applied only through a single application get the allotment while some apply in multiple numbers but still do not get allotment. This shows that the process is automated and the lucky person is getting the allotment.
IPO investments can be thrilling. It has the potential to generate significant capital gains on listing or over the years. However, popular IPOs are frequently oversubscribed, indicating that demand for their shares vastly exceeds supply. Some applicants who submit a single application get allotments, whereas others who submit several applications do not receive the allotment. This indicates that the process is automated and is more like a lucky draw. So, is there a strategy to increase the IPO allotment chances? Well, YES, read along to know some strategies to increase your IPO allotment chances.
What is IPO? :-
An initial public offering is a process through which a private company raises funds by issuing fresh shares to the public. When a private company issues shares for the first time it is known as an initial public offering. The process is known as follow-on public offering if a public company issues additional shares after an initial public offering. The fresh equity issued by a company during an IPO is bought by investors, which makes them partial owners of the company. The funds raised through an IPO can either be used for expansion or by existing owners and shareholders to book partial profit on their investment. The shares issued as part of an IPO can be traded in the secondary market after listing.
Issuance to IPO allotment, the journey involves several steps. When the finalisation is complete, the issuer releases IPO allotment status where investors can check the allocation against their names.
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How to invest in an IPO? :-
IPOs attract attention from a wide variety of investors. Investors ranging from small retail investors to large financial institutions buy shares through IPOs. However, not all IPOs give instant returns as some stocks list below the issue price.
- If you are convinced to invest after reading the draft prospectus, arrange the funds for the You are not allowed to bid for a single share as shares are allotted in lots in an IPO. Investors are informed about the lot sizes in advance. For instance, a company announces a price band of Rs100-110 per share and a minimum lot size of 100 for its IPO
- It takes around a week for the registrar of the IPO to allot shares to successful investors. When the demand is more than the supply, then the allotment is decided through a lottery system.
- The first step is to determine if a company is worth investing in. Read a company’s draft prospectus, which is available on the website of the Securities and Exchange Board of India, to know about the company’s business plan and financial metrics.
- One needs to have a demat-cum-trading account to invest in an IPO. Having a trading account is not compulsory, but without it, you would not be able to sell the allotted shares in the secondary market.
- The first step is to determine if a company is worth investing in. Read a company’s draft prospectus, which is available on the website of the Securities and Exchange Board of India, to know about the company’s business plan and financial metrics.
How to Increase Chances of Getting IPO Allotment? :-
Presently we as whole expertise the allocation framework works, and presently, it’s a chance to get to the fundamentals and adhere to these basic guidelines allowed underneath to expand your opportunities of IPO allotment. No mantra can guarantee Allotment, yet this will expand your possibilities.
IPO investors often wonder why am I not being allotted any shares in an IPO? or inspite of applying for an IPO through multiple applications, why is the end result negative?. Well, it is certainly clear that in highly popular IPOs, luck plays a big role in who gets shares. Sometimes, even those who apply just once get shares allotted, while others who apply multiple times may not get any. This suggests that the allotment process is automated, and luck plays a significant part in determining who gets shares.
IPO Allotment Tips –
- Utilize Multiple Demat Accounts
It can be very helpful and increment the odds of getting an Allotment for IPO. So what you can do is apply for IPO in different Demat accounts. Notwithstanding, there is a trick; the records ought to have an alternate Pan number from the ones you are applying.
- It would help if you Avoided the Last Moment Rush
Checking out the membership quantities of QIB and NII is a savvy move; however, holding up till the last second can end up being rushed where you can stall out between web issues, bank server-related issues, or whatever other issues which will bomb you for applying for IPO.
- Purchase Parent Company Shares
This stunt is accessible, assuming the kid organization is getting ready for IPO. So what you can do is purchase the portions of the parent organization that can be pretty much as low as a single share before the IPO designation process has started.
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- Staying away from Technical Rejections
While filling the IPO application structure, your application can be dismissed for little blunders, such as crisscrossing your name, the exactness of check subtleties, some spelling ruins, and many more such issues.
- Apply Single Lot
As referenced before, there is no advantage assuming you apply for IPO more than a solitary parcel, so on the off chance that you apply for a solitary part, it can expand your odds of getting dispensed for the IPO. Be that as it may, it very well may be diverse on account of the IPO is undersubscribed or on the other hand, assuming the size of IPO is huge where you can apply for IPO in numerous parcels however on the off chance that the size of an IPO is little, then, at that point, it is prudent to apply in a solitary part.
- Pick Cut-off cost during the IPO Application
So while applying for IPO through UPI or ASBA or presenting the IPO structure in a bank, you ought to consistently choose the removed value, which shows that when offers are allocated, you consent to address the greatest expense in the value band at which the IPO is advertised. In an oversubscription situation, the IPO structures with a bid for the lower band are dismissed, so consistently pick the removed cost to build the odds of IPO Allotment.
How to Get IPO Allotment? :-
Any promising IPO may excite you as an investor, but it’s not a good feeling when you don’t receive the allotment you expected. Or worse, if you don’t get the allotment at all. You should be aware of how to increase your chances of IPO allocation. Following are some tips and tricks to get IPO allotment.
We are here with some of the ideas which can increase the chances of IPO allotment.
- Avoid Large Applications
The allocation procedure of SEBI treats all retail applicants (less than Rs 200,000) equally. Therefore, even if you submit a substantial application of 1 lakh, you may not be eligible for consideration in the event of oversubscription. Large applications are excellent for large IPOs where it is reasonably guaranteed that the retail segment will remain unsubscribed. For oversubscribed IPOs, minimum bids with multiple accounts should be utilised. This will facilitate the investment of excess funds in many other IPOs.For the oversubscribed IPOs, one should go for minimum bids with multiple accounts. That will help to invest spare money in multiple IPOs as well.
- Apply via more than one account or multiple accounts for the same ipo
It is quite possible to improve your allotment prospects if you make multiple applications. You may open numerous demat accounts and submit an IPO application. Although this appears difficult, it is simple. While you can apply for an IPO through many applications, you can only use one PAN number. Thus, you must encourage family and friends to submit several applications for the same IPO on your behalf.
Do not apply with the maximum bid in just a single account but apply through multiple accounts for the IPO. One should apply via multiple IPOs accounts for highly subscribed IPOs. Applying through multiple accounts can definitely increase the chances of IPO allotment.
- Bid at Cut-Off Price
Frequently, companies use a book-building procedure to find the appropriate stock price. They establish a range, and investors must submit bids within that range. It’s a common problem that most investors mix up the bid and cut-off prices. The term ‘cut-off price’ indicates that the investor is willing to pay whatever price the company decides after the book-building process.
You must bid at the cut-off price to enhance your chances of receiving an IPO allocation. If the IPO is oversubscribed, it means that all bids were submitted at the cut-off price. Therefore, if you quote a lower price, there will be no chance of IPO allocation.
All the strategies mentioned above are relevant to all IPOs; however, this strategy does not apply to all IPOs. If you own at least one share of the parent company, then you are eligible to apply under the shareholder category.
Although, it applies only in the cases where the parent of the IPO company is already listed in the stock exchange and there is a reservation for shareholders in the parent company. Thus, it is obvious that the chances of allotment are much better in the shareholder category. Additionally, one can place a bid in both retail as well as shareholder categories. Thus, this increases the chance of allotment.
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- Avoid last moment subscription
If already decided that you are going to apply for the IPO, then go for it on the very first day or the second day. If the investor applies on the last day, it might cause few issues like the bank account is not responding due to HNI and QIB high subscription or any other technical issues.
Some investors take interest in observing how the QIB and HNI categories purchase IPOs. If you apply on the last day, there may be a few complications, such as the bank account not responding owing to strong demand from HNI and QIB investors or other technical issues. In addition, since the majority of banks do not accept applications after 4 p.m., it may be too late to file the IPO application. Therefore, do not risk it till the end, and apply sooner.
- Approve the Mandate Request
Typically, most investors who apply for the IPO through brokers believe the task is complete upon applying. Upon applying for an IPO, you will receive a mandate request. You must accept the request via the banking application or website. If the mandate is not accepted, your money will not be frozen, and you will not be considered for the IPO allocation. Thus, ensure that you accept this mandate and don’t miss out on the allocation opportunity.
Let us first understand the concept behind the IPO allotment process :-
IPO allotment refers to the process where shares of a newly issued company are allocated to investors who have applied for them during the Initial Public Offering (IPO) process. After the IPO subscription period closes, the allotment process begins, typically conducted by the registrar of the issue. The registrar verifies the applications, ensures compliance with regulations, and then allocates shares based on predetermined rules.
The IPO allotment process aims to distribute shares fairly among applicants. It often involves several criteria such as the size of the application, whether the investor applied for shares within the retail or institutional category, and sometimes even through a lottery system if demand exceeds supply. Once the shares are allotted, the registrar informs successful applicants through allotment letters or emails, detailing how many shares they have been allotted. Unsuccessful applicants receive refunds for the application money they had deposited.
Ways to boost your IPO allotment chances :-
- Big applications won’t help
Applications coming from the retail segment are treated equally; now, it doesn’t matter if the application is for a single lot or multiple lots. Thus an applicant who has applied for one lot (which is, say, of Rs. 15,000) and an applicant who has applied for 10 lots (which will be Rs. 1,50,000) will be treated equally during IPO allotment.
In case of oversubscription, only one slot will be allotted to applicants selected by a lucky draw, irrespective of their application size. In a nutshell, your application size doesn’t give you an advantage in case of oversubscription. However, your entire application will be entertained in case of an under subscription.
Thus, bidding on multiple lots in IPOs where the subscription rate is high may not reap you additional shares. Rather, your capital will be blocked for the intermediate period, and you will lose on opportunity cost.
You are better off applying for a single lot when the IPO is oversubscribed.
- Be an early bird, and avoid last-minute rush
Generally, brokers do not accept retail applications after midday, even though the exchanges accept IPO bids until 5 PM on the last day. The broker counter won’t even accept your application, let alone upload it if you send it post midday. Try to invest during the first two days of any three-day IPO. Applications submitted on the last day may lose out in case a technical issue happens.
- Don’t forget to approve the mandate request
Applying for an IPO can’t get any simpler; it hardly takes a couple of minutes when you do it through your broker. Still, the excitement of IPOs is so high that many times investors forget there’s a step more after submitting their application request. SEBI has made it mandatory for retail investors to apply for IPOs using UPI (in case your bank does not extend the UPI service, you may apply using the ASBA option).
Once you apply, there comes a mandate request on your UPI service provider that needs to be approved. If someone fails to approve the mandate request within the stipulated time, the application stands incomplete. The mandate is to take your approval for blocking funds in your account. Thus, make sure you approve the mandate received from your UPI service provider. You’ll also receive an SMS reminding you to approve your mandate request.
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- Verify your details before submitting
Defective applications are rejected without even being considered for allotment. On the page where personal details like PAN and name are to be filled, make sure the name you provide matches the name on the PAN card.
Ensure to bid at the cut-off price with the desired number of lots. Also, make sure you have enough funds in your linked bank account to approve the mandate request for the selected number of lots.
The application page will ask you for your application category. Categories are defined to provide discounts and quotas to different classes of applicants. For instance, the biggest IPO in India, LIC, has different discounts for retail, shareholders, and employees. The retail category has to be selected for retail investors like me and you; otherwise, applications will not be entertained.
- Go through the complete process
You need to understand the process thoroughly and complete it. Normally ASBA and UPI are the IPO mandates these days which means the mandate request needs to be approved by you. Many times subscribers forget to follow up after applying for the IPO and give approval to the mandate request without which the IPO application generally gets rejected.
Tricks to Maximise Chances of IPO Allotment :-
- 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).
- 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.
- 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.
- 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.
Why I did not get the allotment? :-
Let us now discuss some important reasons why you did not receive an allotment of IPO shares.
- Bids at a lower price
- Invalid completed applications
- Last moment application
- Mandate not approved
- Huge oversubscription