How IPO Is Allotted? Know How Shares Are Distributed in IPOs

When a company decides to go public and offer its shares in the primary market, potential investors submit their applications, hoping to receive shares. However, many investors, especially beginners, often wonder how IPO is allotted and what factors determine whether they receive the shares they applied for. This comprehensive guide aims to explain the IPO allotment process in India, the rules that govern it, and how you can check whether you have been allotted shares in an IPO you applied for.

Understanding the IPO Share Allotment Process

Initial Public Offerings, or IPOs, are a process through which private companies offer their shares to the public for the first time. The IPO allotment process involves distributing available shares among the applicants who have bid for them during the subscription period. This process follows Securities and Exchange Board of India (SEBI) rules to ensure fairness and transparency.

When a company launches an IPO, it divides the total number of shares offered into different categories for various investor groups. Typically, these categories include:

• Qualified Institutional Buyers (QIBs) – Includes commercial banks, mutual fund houses, public financial institutions, and foreign portfolio investors.
• Non-Institutional Investors (NIIs) – Individuals or institutions investing more than ₹2 lakh.
• Retail Individual Investors (RIIs) – Individuals applying for shares worth up to ₹2 lakh.

Each category has a specific percentage allocation of the total shares being offered. Around 50% of the shares are allotted to QIBs, 15% to NIIs, and 35% to RIIs.

The method of share allocation differs for each category of investors. For retail investors, if the number of applications received is less than or equal to the shares available, all applicants receive full allotment. However, in most popular IPOs, the applications received far exceed the available shares, leading to what is known as oversubscription.

IPO Allotment Criteria and Regulations

On what basis IPO is allotted depends on the investor category and the subscription status of the IPO. 

• If an IPO is undersubscribed in each investor category, meaning that it has received fewer bids than the shares offered, all investors with valid applications will receive full allotment. An IPO must receive at least a 90% subscription to succeed.
• If the IPO is oversubscribed in one category and undersubscribed in the other one, the oversubscribed portion can be adjusted with the unsubscribed part, except for the QIB category.
• If an IPO is oversubscribed, retail investors are allocated shares through a lottery system. This means not all applicants will receive shares. The computer system randomly selects applications until all available shares in the retail category are exhausted. NIIs and institutional investors are allocated IPO shares based on a pro rata basis. This means if the segment is oversubscribed two times, each applicant might receive half of the shares they applied for.

The cut-off price also plays a crucial role in the allotment process. In a book-building IPO, if you bid at or above the final cut-off price determined at the end of the bidding period, you become eligible for allotment. Applications below the cut-off price are rejected and receive no allotment.

You must always stay informed about upcoming IPO opportunities and make sure you understand the company fundamentals before investing. 

Top Upcoming IPOs to Watch (23rd–27th June 2025)

1. Kalpataru Ltd IPO
2. HDB Financial Services Ltd IPO
3. Globe Civil Projects Ltd IPO
4. Ellenbarrie Industrial Gases Ltd IPO
5. Suntech Infra Solutions Ltd IPO

Step-by-Step Procedure for IPO Share Allotment

Understanding how shares are allotted in IPO requires knowledge of the step-by-step procedure. Here is a simplified explanation of the process:

1. Subscription: The investors are given around 3-5 days to submit their applications, including the number of shares they wish to buy.
2. Verification: The registrar verifies all applications for completeness and validity, removing duplicate or invalid applications.
3. Categorisation: Valid applications are sorted into their respective categories (QIB, NII, and Retail).
4. Determination of Allotment Method: Based on the subscription levels in each category, the registrar decides the appropriate allotment method.
5. Allotment of Shares: For the retail category, if oversubscribed, a computerised lottery system is employed. For other categories, proportional allocation is usually followed.
6. Credit to Demat Accounts: After the finalisation of allotment, shares are added to the demat accounts of successful applicants, usually by the listing date. If no shares were allocated, the application amount is refunded to the investor’s bank account.

How to Verify Your IPO Allotment Status?

After applying for an IPO, you naturally want to know whether you have been allotted shares. There are several ways to check your IPO allotment status:

• Through the Registrar’s Website: Every IPO appoints a registrar who handles the allotment process. You can visit the registrar’s website and check your application status by entering your PAN, application number, or DP ID.
• Via the Stock Exchange Websites: Both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) provide IPO allotment status information on their websites. You can use your application number and PAN to check the status.
• Through Your Broker or Trading Platform: Most online trading platforms now provide IPO allotment status information directly in their apps or websites.
• IPO Allotment Status Aggregator Websites: Several financial websites aggregate IPO allotment information from multiple sources.

Conclusion

Understanding how IPO is allotted helps you set realistic expectations when applying for shares in a public offering. The process follows transparent rules established by SEBI to ensure fairness across all investor categories. 

Looking to participate in the next big initial public offering? Begin by opening an online demat account with Torus Digital today.

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