What is the IPO Allotment Process? A Complete Guide for Investors
An Initial Public Offering (IPO) is a major milestone for any company. It marks the company’s shift from private ownership to public trading by offering its shares to the general public. For investors, an IPO is an opportunity to become early shareholders in a company with growth potential.
However, applying for an IPO does not guarantee that you will receive shares. The path from applying to actually owning shares goes through an important step: the IPO allotment process.
The allotment process determines how shares are distributed among investors who applied during the IPO subscription period. Since IPOs are often oversubscribed, shares must be allocated in a fair, transparent, and regulated manner.
This article explains what IPO allotment is, how it works, the rules involved, investor categories, treatment of oversubscriptions, timelines, and how you can check your allotment status.
What is IPO Allotment?
IPO allotment is the process through which shares are allocated to investors who submitted valid applications during the IPO window. After the subscription period closes, the company—through its appointed registrar—reviews all applications and decides how many shares each investor will receive.
The goal is to ensure fair and regulated distribution based on demand and category-wise reservations.
Role of the Registrar:
A registrar is an independent agency appointed by the company to handle the technical and administrative side of the allotment. Their key responsibilities include:
- Validating IPO applications
- Categorizing bids based on investor types
- Checking bid prices and eligibility
- Handling oversubscription via lottery or pro-rata
- Publishing the Basis of Allotment (BOA)
- Ensuring shares are credited to investors’ Demat accounts
- Processing refunds for unallotted shares
Registrars ensure the process is transparent and compliant with SEBI guidelines.
IPO Application Categories:
IPO allotment happens category-wise. In India, investors are typically grouped into:
Retail Investors (RI):
- Individuals applying up to ₹2 lakh
- Allotment is often done through a lottery if oversubscribed
Non-Institutional Investors (NII / HNI):
- High-net-worth individuals, trusts, and entities investing above the retail limit
- Allotment generally proportional (pro-rata)
Qualified Institutional Buyers (QIB):
- Mutual funds, foreign investors, insurance companies, banks, etc.
- Typically receive the largest reserved portion of shares
Category-based reservation ensures balanced participation across investor types.
Step-by-Step IPO Allotment Process:
Application and Subscription:
- Investors apply via ASBA (bank account blocking mechanism) or brokerage apps.
- The amount is blocked, not deducted.
- Investors choose the number of shares and bid price within the price band.
Closing of Subscription Period:
- Once the IPO window closes, the registrar compiles all bids.
- Total demand by category is computed.
Validation of Applications:
- Applications with errors, invalid PANs, or duplicates are rejected.
- Only bids at or above the cut-off price qualify.
Determining Subscription Status:
Three scenarios:
- Undersubscribed: All valid applicants receive full allotment.
- Fully subscribed: Allotment equals shares applied for.
- Oversubscribed: A fair allocation process (lottery or pro-rata) is applied.
Allotment Method During Oversubscription:
A. Lottery-Based Allotment (Retail Category): If more investors apply than available lots:
- A computerized random lottery picks successful applicants.
- Ensures fairness and eliminates human bias.
B. Pro-Rata Allotment (NII and QIB): Shares are allotted proportionally.
Example:
If you apply for 100 shares but only 50% are available, you receive 50 shares.
Basis of Allotment (BOA):
- Registrar publishes the detailed method of allocation.
- This report includes subscription levels, category-wise allotment, and rules applied.
- Available on registrar and stock exchange websites.
Share Credit & Refunds:
- Allotted shares are credited to investors’ Demat accounts.
- Refunds for unallotted shares (or partial allotment) are processed within a few days.
- The blocked ASBA amount is released automatically.
Important Rules and Guidelines in IPO Allotment:
Key regulatory norms (SEBI guidelines):
- Duplicate or invalid PAN applications are rejected.
- Only cut-off and valid price bids qualify.
- Lot size rules must be followed—applications must be in multiples of the minimum lot.
- Category-based reservations must be maintained.
- Transparent publication of the Basis of Allotment is mandatory.
- Unsubscribed shares in certain categories may be reallocated according to rules.
Handling Oversubscription: Practical Example:
- shares
- QIB: 5,00,000 shares
If retail investors apply for 7,00,000 shares (2× oversubscription):
Allotment happens via lottery, and only about 50% of retail applicants may receive shares.
IPO Allotment Timelines:
Typical timeline after IPO closes:
- Day 1–3: Registrar finalizes applications
- Day 3–5: Allotment completed
- Within 7 days: Basis of Allotment published
- Within 7 days: Refunds processed
- Before listing day: Shares credited to Demat accounts
Investors are also notified via SMS, email, or their broker’s app.
How to Check IPO Allotment Status?
You can check allotment status through:
- NSE/BSE official websites (using PAN or application number)
- Registrar portals like KFintech or Link Intime
- Broker apps such as Zerodha, Groww, Upstox
- SMS or email notifications
Why Understanding IPO Allotment Matters?
- Helps set realistic expectations
- Assists in planning IPO bidding strategy
- Ensures investors track allotment and refunds correctly
- Improves transparency and confidence in public markets
Conclusion:
The IPO allotment process is a critical step that determines which investors receive shares when a company goes public. With clear rules, defined categories, and strict regulatory oversight, the process aims to maintain fairness and trust in the market.
Whether allotment happens via lottery or pro-rata, understanding how it works helps investors make informed decisions and manage expectations effectively.
IPO investing becomes much simpler and more rewarding when you clearly understand how allotment happens and how to track your status.
Note: The views expressed in this article/blog are personal and meant purely for educational and awareness purposes. This content is not intended as investment advice or a product recommendation.
