Apply for IPO over and over again and still not get allotted?
IPO Allocation: Nowadays, the trend of investing money in IPOs is increasing rapidly. Especially retail investors are getting more attracted and once the IPO is launched, their expectations rise even more. But there are some people who apply for IPO again and again but don’t get the allotment… then the question arises whether there is something wrong. If this has happened to you too, tell us some of the reasons behind it…
What is an initial public offering?
When a company offers its shares to the public for the first time, it is called an IPO. The company raises funds through IPO and spends them on the development of the company. In return, people who buy into an IPO get a stake in the company. The shares allotted in an IPO are usually listed on stock exchanges like BSE or NSE. Where people can buy and sell these shares conveniently.
The IPO allocation system is different
Actually, investors want to understand the IPO allotment process in detail. Because the IPO of a good company is always oversubscribed, i.e. the requests from investors are many times larger than the shares available in the IPO, the shares are not allotted to everyone. There are many reasons behind this, let us know…
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How much is the reservation for whom?
- Retail Investors- As per SEBI rules, a retail investor can bid a maximum of Rs 2 lakh in the Mainboard IPO. NRI or HUF falls under this category. 35% of the IPO shares are reserved for this category. Withdrawal of bid can be done till the day of allotment. In case of oversubscription, the lowest bid lot will be allotted.
- Non-Institutional Investor INI- Non-institutional investors get space in the IPO in two tranches. Small NII and Big NII Small NII are eligible to invest less than Rs 10 lakh, while Big NII can invest more than Rs 10 lakh.
- Qualified Institutional Buyers (QIB)- These are non-institutional investors who are registered with SEBI. They can invest Rs 10 lakh or more in IPOs. Foreign portfolio investors, public financial institutions and mutual funds can apply under this category. For this category of investors, it is mandatory for companies to reserve at least 50% of the shares in the IPO. To invest in an IPO, these investors must first register with SEBI.
- Anchor investor- Anchor investors are qualified institutional buyers who are offered shares in an IPO just before the IPO opens for subscription. They can invest up to Rs 10 crore in an IPO.
- Employees- If employees of the company whose IPO has been launched want to invest in the IPO, then they have a separate share in it. Employees of any company can apply for the IPO of their company.
If the number of shares offered in an IPO is equal to the number of applications received, then almost all investors are allotted shares in the IPO. But when the IPO is oversubscribed, the allotment becomes a bit complicated. In such a situation, there is something to the allotment process.
IPO Allocation Rules
Before investing in an IPO, we need to understand the IPO allocation rules. Whenever a good company opens an initial public offering (IPO), it often gets oversubscribed. Oversubscribed means that many times more investors have applied for that IPO. For this reason, shares are not allocated to all investors.
- The lottery is also used to allocate shares. Many investors also bid on behalf of their relatives. In such a situation, the chance of being awarded shares increases.
- Apply for as many lots as possible for the IPO which is in high demand. A retail investor can stake up to Rs 2 lakh in a motherboard initial public offering (IPO).
- At the same time, one should also apply for IPO from a Demat account opened through different PAN cards. In such a situation, the chances of allotment of IPO remain.
