How to Improve Your Chances of IPO Allotment

Initial Public Offerings (IPOs) allow investors to own business stock at their public market debut. Some IPOs receive so much investor demand that securing an allotment becomes exceptionally difficult when subscriptions exceed the available supply. Several strategic approaches exist that help investors increase their likelihood of receiving IPO shares. This article explores strategies to help retail investors improve their chances of successful IPO allotments, leading to enhanced investment experiences.

Understanding the IPO Allotment Process

The Securities and Exchange Board of India (SEBI) regulates the IPO share distribution process, which uses a computerized lottery system to allocate shares to retail investors in oversubscribed IPOs. An automated lottery system determines share distribution methods for retail investors in oversubscribed initial public offering situations. This systematic process eliminates human interaction, ensuring allotment transparency and system integrity.

SEBI has specific guidelines to ensure fairness, including:

• Each retail investor can invest up to INR 2 lakh per IPO per SEBI guidelines.
• The allocation process functions based on minimum units instead of conducting proportional distribution when subscription exceeds demand.
• An oversubscribed IPO will lead to insufficient share distribution to all applicants because the lottery system determines which investors reach through.

After gaining this baseline understanding, different strategies to improve IPO allotment opportunities will be examined.

1. Apply Through Multiple Demat Accounts

Family members wanting higher IPO allotment success rates should apply through separate Demat accounts using different names. Each individual can file only one initial public offering application per SEBI rules. IPO allotment success increases when investors use more than one Demat account, which belongs to family members, including spouses, parents, or fully grown children, to submit applications.

Every IPO application needs a different PAN number to comply with regulatory requirements. Submitting multiple IPO applications under the same PAN will result in rejection.

2. Opt for the Cut-Off Price

During an IPO application, retailers must decide between specifying their bid price and accepting the final “cut-off” price assigned by the company. After analyzing market demand, the cut-off price determines what investors must pay for share allotments. Retail investors who select the IPO cut-off price demonstrate their intent to support the company’s pricing decisions, enhancing their opportunity for share allocation.

In such cases, investors who submit bids lower than the final issue price may face rejection of their applications. The choice of cut-off price provides maximum benefits during IPOs that receive numerous oversubscriptions.

3. Ensure Sufficient Funds and Accurate Application Details

Your application will be rejected if you do not keep enough money in the bank account linked with the ASBA system. The Application Supported by Blocked Amount (ASBA) process blocks your account funds until shares obtain allotment status. The application process is canceled when funds are insufficient.

When applying for an initial public offering (IPO), offering precise and comparable PAN data and details of demat accounts and banks is essential. Small mistakes in your submission will most likely result in your application being denied. Carefully examine all information points before submitting your IPO application because any error could lead to disqualification.

4. To apply for an IPO, use the ASBA Facility

The Application Supported by Blocked Amount (ASBA) represents a facility from SEBI that enables investors to execute IPO applications without establishing an immediate fund transfer. The investor’s bank account blocks the funds during the application stages until the share allotment is completed for either investment or refund. The blocking system of funds through the ASBA facility protects investors against untimely fund movements, ensuring a straightforward application process and a swift refund in case of application rejection. Through their net banking platform, most banks enable IPO applications under the ASBA facility, which enhances the application process efficiency and reliability. Investors should use ASBA for their IPO applications to avoid excess fund transfers that cause delays.

5.  Avoid Large Applications in Oversubscribed IPOs

Retail investors should never submit significant request quantities when an IPO warrants substantial excess demand. Moving forward, the allocation process follows a random selection procedure to maximize the participation rate of investors in cases where the IPO demands exceed supply. IPO participants who submit multiple lot applications in oversubscribed initial public offerings may not get better results due to the system, which aims to distribute at least one lot among many potential investors.

To enhance your chances of receiving an allotment in IPO applications, you should submit requests for one lot each from different Demat accounts owned by your family members.

6. Stay Informed About IPO Details and Deadlines

It is important to monitor IPO particulars like subscription opening and closing dates, price bands, and allotment time periods. Submitting your application on time and at an appropriate cost increases your chances of success in an allotment.

To track an IPO’s underprints, it is vital to scan the financial newspapers, stock exchanges, and brokerage firm reports. Some examples include places where one can set an alert on any good investment platform or subscribe to receive brokerage alerts.

7. Go Through Various Investment, Trading Companies and Financial Institutions

Subscribing to an IPO through various stockbrokers and banks can sometimes enhance the probability of receiving an allotment. Some brokers can be closer to the IPO registrars, thus enhancing the chances of successful processing. Reducing dependency on specific brokers can help avoid potential technical issues during IPO applications.

8. Observe Anchor Investor Participation

Before a public offering of IPO shares begins, institutions known as anchor investors receive pre-allocated stock. Investor participation is a significant indicator of firm confidence since it demonstrates conviction in the company’s potential. The heavy involvement of well-known anchor investors in an IPO indicates a positive outlook for the future stock listing. The analysis of anchor investor participation enables investors to make decisions with proper information.

9. Understand the Grey Market Premium (GMP) but Be Cautious

Activity on the Grey Market (GMP) confirms the pre-public demand for initial public offerings (IPOs). High GMP signals intense investor interest, yet investors should act cautiously since the unregulated grey market operates speculatively. Single reliance on GMP leads to wrong investment choices.

10. Check Allotment Status and Plan Next Steps

After submitting their applications, investors need to observe their allotted shares through the registrar’s website and stock exchange portals. Investors who receive allotments should base their ownership or disposal decisions on current market conditions. When shares are not allotted, the release of funds blocked under ASBA becomes possible, and investors can shift these funds toward different investment possibilities.

11. Diversify Your Investment Approach

Investors should avoid depending exclusively on Initial Public Offerings (IPOs) for their profits. Investors who distribute their funds across stocks, mutual funds, and other asset types achieve greater return stability. Diversification protects investments from various risks by establishing consistent growth through time.

Conclusion

Success in allotment depends on intelligent planning methods, market trend perception, and precise best practice application. Investors who apply with multiple family Demat accounts at cut-off prices while providing accurate information through ASBA enhance their chances of successful allotment. Financial growth improves by following expert advice, monitoring anchor investor activity, and maintaining a diversified investment portfolio.

• Author: Religare Broking
• Last Updated: February 21, 2025