IPO Learning Guide
IPO allotment is the process through which shares are distributed to investors after the IPO bidding period closes. When demand exceeds supply (oversubscription), allotment follows structured rules defined by stock exchanges and SEBI regulations.
Investors tracking IPO demand through subscription ratios and IPO GMP often want to understand how shares are actually allocated. This guide explains the complete allotment mechanism for Retail, HNI, and QIB categories.
Also available in हिंदी and मराठी.
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You can track upcoming IPO timelines via the IPO Calendar.
IPO shares are divided into structured categories:
In the retail category, allotment is often done through a lottery system when the IPO is oversubscribed. The goal is to ensure equitable distribution among individual investors.
If an IPO is subscribed 10x in retail, only a fraction of applicants will receive one lot. Preference is typically given to ensuring maximum investors receive at least one lot.
HNI allotment is proportional rather than lottery-based. Shares are allocated in proportion to the number of shares applied for.
If HNI subscription is 5x, applicants may receive approximately 1/5th of their requested quantity.
QIB allotment is entirely proportionate. Institutional investors receive allocations based on their application size relative to total institutional demand.
Basis of Allotment is the final allocation document approved by the stock exchange. It defines how shares were distributed across categories.
If shares are not allotted, blocked funds in ASBA are released back to the investor’s bank account. Refunds typically happen before listing.
Retail allotment probability can be estimated by dividing total retail lots available by total retail applications. However, the actual allocation depends on valid bids and category rules.
You can estimate retail allotment probability using a simple formula:
Example:
This estimation assumes uniform lot distribution and valid applications. Actual allotment may vary depending on category adjustments.
SME IPOs often have larger lot sizes and lower liquidity. Allotment may still follow structured distribution but can be impacted by smaller investor pools.
Suppose an IPO has 10,00,000 shares reserved for retail investors, and the lot size is 50 shares. This means 20,000 retail lots are available.
If 2,00,000 valid retail applications are received, the IPO is oversubscribed 10x in the retail category.
Since only 20,000 lots are available but 2,00,000 applicants applied, the probability of receiving one lot becomes approximately:
In such cases, allotment is conducted through a computerized lottery system approved by the stock exchange.
IPO allotment, Grey Market Premium (GMP), and listing gains are often confused but represent different stages of an IPO lifecycle.
GMP reflects sentiment, allotment reflects allocation rules, and listing reflects real market pricing based on supply-demand.
In many popular IPOs, retail subscription can exceed 30x or even 50x. In such scenarios, only a small percentage of applicants receive one minimum lot.
Highly oversubscribed IPOs significantly reduce retail allotment probability despite strong market sentiment.
ASBA (Application Supported by Blocked Amount) is the mechanism used for IPO applications in India.
This system ensures investor funds remain secure until final allotment confirmation.
Investors can check allotment status through the official registrar website or stock exchange portals after the allotment date.
You can also monitor IPO timelines via the IPO Calendar.
Allotment is determined based on category subscription and exchange-approved allocation rules.
In retail oversubscription cases, allotment may be through a computerized lottery system.
Typically 2–3 working days after IPO closure.
To understand how allotment connects with subscription, GMP, and category demand, explore:
