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Most people who apply for a popular IPO in India don’t get shares. That’s not a bug in the system, it’s exactly how the system is designed to work, and once you understand the mechanics, the disappointment makes a lot more sense. When a big IPO opens, we see thousands of applications come in. The volume is real. And the reality is that most of those applicants, especially in the retail category, walk away empty-handed when the IPO is heavily subscribed. Let me explain why.
The Three Investor Categories
Every mainboard IPO in India divides its shares across three investor buckets. These are defined by SEBI.
The first is QIB, Qualified Institutional Buyers. This includes mutual funds, insurance companies, foreign institutional investors, and similar large institutional players. They get at least 50% of the issue size in most cases. The allotment here is proportional, if you bid for more, you get more (subject to subscription levels).
The second is NII or Non-Institutional Investors, often called HNI (High Networth Individuals). This is for applications above ₹2 lakhs. They get 15% of the issue. Allotment for this category became lottery-based for oversubscribed issues after SEBI’s 2022 changes, split into sNII (₹2L to ₹10L) and bNII (above ₹10L) sub-categories.
The third is RII, Retail Individual Investors. Anyone applying for up to ₹2 lakhs worth of shares falls here. This category gets 35% of the issue. And this is where the lottery system that frustrates most people lives.
How the Retail Lottery Works
In the retail category, SEBI has a specific rule: every eligible applicant must receive at least one lot if allotment is possible. The minimum lot size varies by IPO but is typically set so that one lot costs somewhere between ₹10,000 and ₹15,000.
Here is the key part. If the total number of retail applicants is less than or equal to the number of lots available, everyone gets at least one lot. No lottery needed. But when more people apply than there are lots available, which happens with almost every popular IPO, the registrar runs a computerised lottery. Each applicant gets exactly one chance, regardless of how many lots they applied for. If you applied for 14 lots and your name comes up in the lottery, you get 1 lot. If it doesn’t come up, you get nothing.
This is why applying for the maximum number of lots does not improve your probability in an oversubscribed retail category. The lottery is per-applicant, not per-lot-applied.
What Oversubscription Actually Means
When you read that an IPO was subscribed 50 times or 80 times in the retail category, here is what that means in practical terms. Say the retail category had 1 lakh lots available. At 50x subscription, there were applications totalling 50 lakh lots. But since every applicant applied for at least 1 lot and the system treats each applicant as one entry in the lottery, your probability of getting allotment is roughly 1 in 50, or about 2%.
At 100x subscription, it is 1%. At 200x (which happens with very hot IPOs), it is 0.5%. These are not great odds. And applying from 10 different demat accounts does not help, because SEBI specifically blocks this.
Why Multiple Demat Accounts Don’t Work
I see this question constantly. People ask whether applying through their spouse’s account or opening a second demat helps. The answer is yes, if those are genuinely different PAN numbers, a spouse who is a different individual, a parent, an adult child. Each PAN is one entry. That is all that SEBI permits.
What does not work is applying from multiple demat accounts linked to the same PAN. The registrar checks PAN at the time of allotment. Duplicate applications from the same PAN are identified and rejected, all of them, including the first one. You don’t just lose the extras; you can lose your entire application. So trying to game it this way is not just futile, it is counterproductive.
The Basis of Allotment Document
After every IPO closes and allotment happens, the registrar publishes a document called the basis of allotment. This is filed with the stock exchanges and is also available on the registrar’s website. It is one of the more honest documents in the IPO process.
The basis of allotment tells you how many applicants applied for 1 lot, how many for 2 lots, and so on. It tells you how many lots were available for retail. It shows the allotment ratio, for example, 1 lot allotted to every 47th applicant, or similar. Reading this document even once will immediately make clear why the retail lottery is the way it is.
You can find it on the NSE or BSE website under the IPO filings section, or on registrar websites like KFintech or Link Intime. It is published a day or two before listing.
The HNI Category and What Changed in 2022
Before 2022, the HNI/NII category used proportional allotment, you bid more money, you got more shares. This created a perverse incentive where wealthy investors or those taking loans would bid massive amounts to crowd out others. SEBI changed the rules.
Now the NII category is split. The sNII sub-category (applications between ₹2 lakh and ₹10 lakh) gets one-third of the NII quota. The bNII sub-category (applications above ₹10 lakh) gets two-thirds. And within each sub-category, allotment is now lottery-based for oversubscribed IPOs, one lot minimum per allottee, similar to retail. This was a meaningful reform. It reduced the advantage that came from simply throwing more borrowed money at an application.
What Happens to Your Money While the IPO is Open
When you apply for an IPO through the UPI-based ASBA mechanism, your money is not debited from your account. It is blocked, a lien is placed on the amount. You still earn any applicable interest on that amount (if it is in a savings account or similar). The money is only actually debited if you get allotment. If you don’t, the block is released, typically within two to three days after allotment.
This is actually a well-designed system. You are not lending money to the company for seven days without recourse. The block mechanism means your funds remain yours until the outcome is known.
So Should You Even Bother Applying?
That depends on why you are applying. If you are applying to a company you genuinely want to own, you have read the DRHP, you understand what they do, you think the price is fair, then yes, apply. The money is blocked, not gone, and you lose nothing if you don’t get allotment.
If you are applying purely for listing gains, understand that this is a lottery in two senses: you might not get shares at all, and even if you do, the listing price is uncertain. I have written separately about how to think about listing gains versus long-term holding, the data is not as clean as people assume.
The allotment process is not rigged against retail investors in some conspiratorial sense. It is a consequence of the supply-demand math when a large number of small investors chase a fixed number of shares. The system tries to give everyone a fair shot, one lot, one lottery entry, and that is actually more equitable than the old proportional system that rewarded only those who could throw the most money at an application.
Understanding this does not change your odds much, but it does help you make better decisions about which IPOs to apply for and why. And it saves you from the completely wasted effort of opening extra demat accounts hoping to beat the system.
Frequently Asked Questions
Why did I not get IPO allotment even though I applied on day one?
The timing of your application within the IPO window does not affect allotment. The lottery is run after the IPO closes, using all eligible applications received during the subscription period. Applying on day one versus day three makes no difference to your probability.
Can applying from multiple demat accounts increase my chances?
Only if they are different PAN numbers belonging to different individuals. Multiple applications from the same PAN are rejected, including the original application. Each PAN gets exactly one valid entry in the lottery.
What is the basis of allotment document?
It is a document published by the registrar after allotment is complete. It shows the breakdown of applications received by lot size, the total lots available, and the allotment ratio. It is filed with NSE and BSE and available on the registrar’s website. Reading it once will make the entire allotment process very concrete.
Practical takeaway: Apply for IPOs of companies you genuinely want to own at the offered price. The allotment is a lottery you cannot meaningfully rig, so make sure the underlying investment makes sense even if you have to buy from the market after listing.
This post is for educational purposes only. It is not financial advice. Mohit Mehra is not a SEBI registered investment advisor. Please consult a qualified financial advisor before making investment decisions.