IPO allotment

You apply for an IPO, the money gets blocked, and a few days later you get no shares. It can feel arbitrary. In a heavily oversubscribed retail IPO, it usually is a lottery, but the lottery has a clear reason.

There are more valid applicants than available lots.

That is the whole problem the allotment process is trying to solve.

Start with the retail quota

A mainboard IPO splits its offer among investor categories. Retail individual investors are one category. If you apply within the retail limit, your application competes only for the shares set aside for that category.

Shares are not allotted one at a time. They are allotted in lots. If one lot contains 30 shares, the registrar cannot give you five shares merely because demand is high.

When the number of valid retail applicants is small enough, each applicant can receive at least one lot. The remaining shares, if any, are allotted according to the approved basis of allotment.

When valid applicants outnumber the lots available, everyone cannot get even one lot. The registrar then uses a computerised draw to select the applicants who receive the minimum lot. The rest receive nothing.

This is why the result feels binary. One lot or zero is built into the maths.

Applying for more lots usually does not improve the retail lottery odds

Suppose the retail quota contains 1 lakh lots and 8 lakh valid applicants apply. At most 1 lakh applicants can receive the minimum lot. A draw is unavoidable.

If you applied for ten lots, you do not get ten entries in that draw. Your application is still one application. In this situation, applying for more than one lot does not improve the chance that your PAN is selected for the minimum allotment.

There is an important distinction here. The subscription figure reported by exchanges is based on shares bid for, not simply the number of people. A retail book subscribed 20 times does not always mean your exact chance is 1 in 20. Some applicants may have bid for several lots. Applicant count and available lots give the cleaner picture.

The final basis of allotment shows what actually happened.

One PAN means one valid application

Opening another demat account in your own name does not create another chance. The registrar checks applications by PAN. Multiple applications under the same PAN can be rejected as duplicates.

Applications by genuinely different people, such as a spouse or parent, are separate only because they have different PANs, bank accounts and demat accounts. Those people are making their own applications. They are not extra entries attached to yours.

Do not turn a simple IPO application into a duplicate-application problem.

What happens to the money

Under ASBA, the application amount is blocked in your bank account. It is not transferred to the company when you apply.

If you receive shares, the amount required for the allotment is debited. If you receive no shares, the block is released. If you receive fewer shares than you applied for, only the allotted amount is debited and the rest is released.

This mechanism matters because an unsuccessful application does not require a refund from the issuer. The money remained in your account, subject to the block.

The same thing happens when the whole issue fails to get enough bids. Nobody gets shares and every block is released. I have covered that case in what happens if an IPO is not fully subscribed.

Read the basis of allotment once

After the issue closes, the registrar and the stock exchange publish the basis of allotment. It records the demand in each category, the number of valid applications, and how allotment was made.

This document is more useful than social media screenshots of allotment status. It tells you whether the retail book had enough lots for every valid applicant and, if not, the ratio used in the draw.

The registrar named in the offer document handles the process. The issuer’s exchange filings and registrar website are the places to look.

The timeline is now T+3

SEBI reduced the public issue listing timeline from T+6 to T+3. The shorter cycle became mandatory for public issues opening on or after 1 December 2023. Here, T is the day the issue closes.

The detailed sequence happens quickly: reconciliation and finalisation follow the close, shares are credited or blocked funds are released, and trading begins on T+3. SEBI’s circular sets out the timeline here: https://www.sebi.gov.in/legal/circulars/aug-2023/reduction-of-timeline-for-listing-of-shares-in-public-issue-from-existing-t-6-days-to-t-3-days_75122.html

Any guide that still describes a T+6 or T+8 IPO cycle is out of date.

What allotment does not tell you

Getting shares does not mean the IPO was good. Missing shares does not mean you missed a good investment.

Allotment answers only one question: how a fixed pool of shares was divided among valid applicants. It says nothing about valuation, business quality or the price after listing. It also does not tell you where your money goes. For that, look at the OFS vs fresh issue split.

Read: Cut-off price

I would decide whether I want to own the company before applying. The allotment lottery comes after that decision, not before it.