With several upcoming IPOs lining up in India in 2025, investors are gearing up to participate in these new market opportunities. However, before the shares are listed on an exchange, every application undergoes a step, known as IPO allotment.
It decides how shares are distributed among investors, especially when an IPO is oversubscribed, based on investors’ categories, quotas, and eligibility. Knowing what is IPO allotment and how the process unfolds helps investors understand why some get their shares while others don’t.
This blog aims to deliver a clear understanding of what is IPO allotment, the IPO allotment process, why it matters, and how is IPO allotment done.
What Is IPO Allotment?
IPO allotment is the process of distributing shares to the investors who applied for IPOs, based on their category, quota, and other legal rules, after the subscription.
In most cases, IPOs are oversubscribed, so investors might not get the number of shares they applied for.
Why Allotment Is a Critical Step
Let’s understand it based on its impact on the company, investors, and the market.
- For the issuing company: A successful allotment process decides the company’s health and market reputation. It ensures effective capital formation, improves credibility, market stability, and reservation of employee stock.
- For the investors: The allotment process is a decisive moment for an investor’s participation in an IPO, which directly impacts their probable returns and ownership. It allows investors to invest in new sectors, which helps in reducing the risk of underperformance by other sectors.
- For the market: The IPO allotment process maintains the uprightness and accountability of the capital market. Since the process is regulated by SEBI, it maintains market stability and efficiency, preventing manipulation and improving fairness in trades.
When & Who Handles Allotment
When does it happen?
- The IPO allotment status is announced usually within 3-4 days after the IPO subscription period ends.
- An investor may check their status on the registrar website or through the broking platform they applied for.
Who handles it?
- Lead manager: They compile the applications from brokers and submit them to the RTA for the allotment process to begin.
- Registrar to the Issue (RTA): The RTA is the financial institution that handles the allotment, such as managing records, processing refunds, and coordinating with the exchange and banks to credit the shares to the demat accounts of the successful applicants.
- Stock exchanges: The RTA and the stock exchange, like the BSE or NSE, work together to finalise the allotment based on the rules set for each investor category.
Categories & Quotas in IPO Allotment
The IPO share allotment depends on the investors’ categories, each having a specific allocation quota determined by SEBI.
| Categories | Description | Quota |
| Qualified Institutional Buyers (QIBs) | These comprise large financial institutions such as mutual funds, foreign institutional investors (FIIs), scheduled commercial banks, etc. | For bookbuilding IPOs, 50% of the net issue is usually reserved for QIBs. |
| Anchor Investors | This is a sub-category of QIBs, who apply for shares worth ₹10 crore or more, and has a different IPO timelines compared to other investors categories. | About 60% of the QIBs portion is reserved for anchor investors. |
| Non-institutional Investors | This includes high-net-worth individuals (HNIs), corporations, and trusts that apply for shares worth ₹2 lakh or more, and do not require SEBI registration. | At least 15% of the total issue is reserved for NIIs, in a book-building IPO. |
| Retail Individual Investors | This includes individual investors, NRIs, and Hindu Undivided Families (HUFs) who may apply for shares up to worth ₹2 lakh. | At least 35% of the total offer is reserved for RIIs, in a book-building IPO. |
| Employees Reservation | The issuing company may reserve up to 5% of the post-issue paid-up capital for its employees, offered at a discounted price. | Employees may apply for shares up to ₹5 lakh |
How Allotment Works (Process)
Let’s check out how the IPO allotment process works, under the following circumstances.
1. Undersubscription vs Oversubscription
- Undersubscription: When the ‘total shares applied for’ is less than the ‘total shares offered’, the IPO is marked as undersubscribed. In this case, all valid applicants receive the shares they might have applied for.
- Oversubscription: This is when total shares applied exceeds the net shares offered. In this case, shares are allotted depending on the investor categories, using either a lottery or pro-rata system.
2. Lottery / Balloting for Retail Investors
- When an IPO is oversubscribed, retail investors are allocated shares through a lottery system. The lottery ensures a fair distribution within the retail category, which is often reserved for a minimum of 35% of the shares.
- It is a computer-generated process that randomly allocates shares to the retail investors, and not everyone will get shares in an oversubscribed IPO.
3. Pro Rata / Proportional Allotment for Institutions
- The institutional investors, such as QIBs and HNIs, are allotted shares through pro-rata allotment, in case of oversubscription.
- The allocation for institutions is not subject to the same lottery as retail investors, as they are typically allocated a larger portion of the IPO, such as 50% for QIBs.
Example / Walkthrough Calculation
Oversubscription of the retail portion:
- Total shares offered to retail investors are 10,00,000 shares, and if 20,000 retail investors apply, with at least 1 lot of 100 shares, the subscription exceeds 10,00,000 shares, totalling to demand for 20,00,000 shares.
- So, here a lottery system is used, since the maximum number of applicants that can be allotted shares is only 10,000 (1,000,000 / 100). The registrar conducts a random, computer-generated lottery among all 20,000 applicants.
- The random 10,000 winners of the lottery will each receive the minimum allotment of 1 lot (100 shares), and the rest will not receive any shares.
Oversubscription of the NII portion:
- Shares reserved for NII: 750,000 shares
- Total shares applied for by NIIs: 1,500,000 shares (oversubscribed by 2 times)
Step 1: Calculation of allotment ratio
It is calculated to ascertain the proportion of allotment.
Allotment ratio = Total shares offered/Total shares applied.
In our case, 750,000/15,00,000 = 0.5 or 50%
Step 2: Calculation of individual allotment
So, if an NII applied for 10,000 shares, they shall receive 10,000 x 0.5 = 5,000 shares.
Step 3: Processing refunds
After the allotment is done, the excess application money is refunded to the investors.
Timeline & Legal Deadlines
| Day | Action | Legal Deadline |
| T | IPO window closes | It is the last day for investors to submit their bids. |
| T+1 | Finalisation of allotment basis | The registrar must finalise the allotment of shares to the applicants, by 6 PM on the next business day after the issue closes. |
| T+2 | Initiation of refunds/unblocking | On this day, the refunds are initiated to the unsuccessful applicants. |
| T+3 | Credit of share and listing | On this day, the shares are credited to the demat accounts of successful applicants’ and the company stocks are listed on the exchange. |
How to Check Allotment Status
Through the registrar’s website:
- Find the official website of the IPO’s registrar, for example, Linkintime, Bigshare, Kfintech, etc.
- Next, find the ‘IPO Allotment Status’ section.
- Select the IPO name.
- Enter the PAN number, application number, or DP/Client ID.
- Click ‘Submit’ to view the status.
Through the stock exchange websites:
On the BSE website:
- Go to the BSE IPO status page.
- Select ‘Equity’ as the issue type.
- Choose the IPO from the ‘Issue Name’
- Enter the PAN number or application number.
- Click ‘Search’ to view the status.
On the NSE website:
- Visit the NSE IPO Application status page.
- Select the IPO from the ‘Company Name’ in the dropdown menu.
- Enter the application number.
- Click ‘Get Data’ or ‘Search’ to view the status.
Why Investors Are Not Allotted Shares
Some investors are likely not to receive shares in case of oversubscription. Let’s look into it!
- Oversubscription plus lottery system: In case of oversubscription of the retail portion, the lottery system is utilised to fairly distribute the shares among the investors, so in this case, some investors are left out and only the winners receive the shares.
- Invalid or duplicate applications: If an investor submits more than one application, which is illegal, or makes any mistakes while sending the application, the application gets rejected.
- Improper bidding price: The issuing company sets a price band for the IPO within which the investors bid their price, and the final price is set based on the demand. So, if the investors bid quite below the final price, their application automatically gets rejected.
Strategies to Improve Allotment Chances
- Apply through multiple demat accounts, each linked to a unique PAN.
- Apply early at a cut-off price, which indicates the investors are willing to pay the highest price.
- Investors may target less hyped IPOs of lesser-known companies.
Bottom Line
IPO allotment is a significant stage as it finalises how shares are distributed among investors after the subscription closes. Understanding the IPO allotment process, from categories to lottery and pro-rata systems, helps investors to make informed decisions, manage expectations, and plan better for future IPO opportunities.
FAQs
The IPO allotment process includes collecting applications, verifying bids, finalising the allotment ratio, processing refunds, and crediting shares to the demat accounts of the investors.
When shares are oversubscribed, the allotment depends on the investor category. Retail investors are selected through a lottery, while institutional investors get shares on a pro-rata basis.
An investor may check their IPO allotment on the registrar’s website or through the stockbroker’s platform by entering PAN, application number, or DP/Client ID.
An investor might not receive shares if the IPO was oversubscribed and their name didn’t come up in the lottery, or if the application had errors or price mismatches.
A lottery randomly selects investors for allotment for retail categories. While pro-rata allotment distributes shares proportionally based on the number of shares applied.
In India, the allotment is finalised within three working days after the IPO closes, followed by refunds on day two and share credit and listing by day three.
Yes, an investor may apply through multiple demat accounts linked to unique PANs, bid at the cut-off price, and consider applying for less-hyped IPOs to increase allotment chances.
