The process of IPO allotment is used to distribute the shares of any issuing company to the investors who applied for them previously during the initial public offering. There are multiple steps included in the process, starting from the application and bid validation to the final allotment.
What Is IPO Allotment?
Investors seek an IPO investment via online platforms or brokerages, specifying the share amount and the bid price. Later, the registrar handles the process of allotment, validation, and categorisation of applications, and finally makes allotment decisions. Additionally, the allotment of shares is decided on the basis of the demand and is carried out through pro rata systems or lottery. The basis of allotment is further made public once the subscription period ends.
Importance Of IPO Allotment
IPO allotment is a process of distributing the shares of an issuing company to the investors. It is crucial due to the following reasons:
- Fair and even share distribution, particularly in a situation where the IPOs are oversubscribed.
- The allotment process is transparent, as it is monitored by the registrar and the stock exchange.
- It helps companies raise capital for future growth, targets, and operations through the allocation of shares to a diverse range of investors.
- Meets all the compliance needs along with SEBI guidelines.
IPO Allotment: Step-By-Step Process
The general IPO allotment process is performed following the steps given below:
- Application:
Firstly, investors submit their applications for the share market IPO through online platforms or brokerages.
- Subscription:
The IPOs are open for a certain time period. During this period, investors submit their bids.
- Verification & closure:
Once the subscription period comes to an end, the registrar cross-checks and verifies the bids, rejecting the duplicate or invalid ones.
- Categorisation & allocation:
Firstly, the investors get categorised, and then the shares are allotted according to the SEBI guidelines.
- Finalising allotment:
When the IPO is undersubscribed, all the applicants receive the shares requested by them. However, when oversubscribed, share allotment is performed through lottery or pro-rata systems.
- Share credits:
All the shares allocated to the investors get credited to the investors’ demat accounts within a few working days post the IPO closure.
- Refund:
Investors who did not receive a lot of the shares must receive the amounts of their subscription.
What Happens After IPO Allotment?
Once the allotment of IPO shares is done, you can check the status and IPO updates accordingly. The basis of the allotment document is later released by the registrar. It contains crucial details that you can examine. Shares get credited to the accounts of the investors, and the refund is processed to the individuals who have not received any allotment. Finally, the listings take place once these procedures are fulfilled. Investors must confirm the allocation of shares and also check if the shares are credited to their accounts. In case there are no shares allotted to you, you can expect your refund within a few days.
Conclusion:
Allotment of shares to the investors is affected by the number of applications the issuing company receives, the demand in the investor category and the size of the issue. However, an investor can boost their chances by forwarding shares application via multiple demat accounts, keeping an IPO watch and making a bid at the highest price possible. Moreover, ensure to mention all the details correctly when applying and prefer UPI payments for quick processing and approval.
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