Applying for an IPO (Initial Public Offering) often doesn't result in allotment. Let's understand how IPO allotment works and why it can be difficult to secure shares.
IPO Allotment: If you repeatedly apply for IPOs (Initial Public Offerings) but consistently miss out, you might be making some small but crucial mistakes. This article explains how IPO allotment works, why allotments are often unsuccessful, and how to improve your chances.
What is an IPO?
An IPO, or Initial Public Offering, is a process where a company issues its shares to the public for the first time to raise capital. These shares are offered to investors to fund the company's operations.
Difference between Shares and IPOs?
- An IPO occurs when a company first issues its shares to the market.
- A share is a unit of ownership that can be bought or sold in the market.
- A company initially issues shares through an IPO in the Primary Market; these shares are then traded in the Secondary Market, such as the NSE/BSE.
Why Don't I Get IPO Allotment?
The biggest reason: Oversubscription
When the demand for a company's IPO significantly exceeds the number of shares offered, it's called oversubscription.
Example
If a company offers 29 shares and 10 people apply — but all demand more than one share — the allotment is done through a lottery. Some might get one share, while others might get none.
How Does Allotment Work?
- The IPO allotment process is based on a lottery system.
- It is fully computerized and bias-free.
- Shares are allocated among registered investors through a random draw.
5 Common Reasons for Not Getting IPO Allotment
- Oversubscription – Too many applicants.
- Wrong Bidding – Bidding below the cut-off price.
- Duplicate PAN or multiple applications – Violation of regulations.
- Insufficient funds – Insufficient balance in the account.
- Technical errors – Technical glitches in the bank or app.
How to Improve Your Chances of Allotment?
- Bid at the cut-off price.
- Submit a single application – Avoid using multiple PANs.
- Maintain sufficient funds in your bank account.
- Ensure timely UPI approval.
- Don't expect high allotment chances in oversubscribed IPOs.
