The IPO allotment process involves distributing shares to investors who applied in an Initial Public Offering. Registrars process applications, finalize allotments based on demand and subscription level and then allocate shares proportionally or through a lottery system among oversubscribed applicants.
Content:
- IPO Allotment Meaning
- What is IPO Allotment Process?
- What Is Oversubscription?
- IPO Allotment Time
- How To Check Allotment Of IPO?
- What is IPO Allotment Process?- Quick Summary
- IPO Allotment Process – FAQs
IPO Allotment Meaning
IPO allotment refers to the process of distributing a company’s shares to investors during its Initial Public Offering. Depending on the number of applicants and available shares, it’s done proportionally or via lottery, determining who gets to buy shares in the newly public company.
In an IPO, a company offers its shares to the public for the first time. Investors apply, hoping to purchase these shares. The allotment process determines who gets these shares.
If demand exceeds supply, a lottery system may be used for fair distribution. Otherwise, shares are allotted proportionally based on the number of shares applied for and available.
For example: Suppose a company’s IPO receives more applications than available shares. If you applied for 100 shares, you might receive fewer, based on allotment rules. In high-demand cases, a lottery could decide whether you get any shares.
What is IPO Allotment Process?
The IPO Allotment Process is when a company going public allocates its shares to applicants. Based on demand, it either distributes shares proportionally or, in case of oversubscription, uses a lottery system. Investors may get full, partial, or no allotment depending on subscription levels.
- Application Submission: Investors express their interest in an IPO by applying for a specific number of shares. This step involves filling out an application form and indicating the number of shares they wish to purchase.
- Oversubscription Assessment: The registrars assess whether the total applications exceed the number of available shares. If the demand surpasses supply, the IPO is considered oversubscribed, indicating high investor interest.
- Allotment Method: In an IPO that isn’t oversubscribed, shares are typically distributed proportionally among all applicants. In contrast, for oversubscribed IPOs, a lottery system might be employed to ensure a fair allocation process.
- Share Allocation: Based on the allotment method, investors may receive the full number of shares they applied for, a partial allocation, or none at all, depending on the level of oversubscription and the allotment method used.
- Refunds: Applicants who do not receive any shares or receive fewer than they applied for are entitled to refunds. The unallocated or partially allocated funds are returned to the investors.
- Confirmation: After the allotment process is complete, investors are informed about the status of their application. They are notified whether they have been allocated shares and, if so, the number of shares they have received.
What Is Oversubscription?
Oversubscription in an IPO happens when more shares are requested by investors than are available. This high demand can result in a lottery for allocation or proportional distribution among applicants, reflecting significant investor interest in the company’s public offering.
IPO Allotment Time
IPO allotment time is the period between the closing of the IPO subscription process and the finalization of share allocation. Typically spanning a few days, this window allows registrars to process applications, determine oversubscription, and finalize share distribution to applicants.
How To Check Allotment Of IPO?
To check the allotment of an IPO, visit the website of the IPO’s registrar. Enter your application number or PAN details. You can also check through stock exchange websites like BSE or NSE, using your application number and other required details.
What is IPO Allotment Process?- Quick Summary
- The IPO allotment process assigns shares to investors based on their applications. Registrars assess demand and subscriptions, then distribute shares either proportionally or via lottery in cases of oversubscription.
- During an IPO, a company allocates shares to applicants. If oversubscribed, a lottery may decide on share distribution. Investors receive full, partial, or no shares based on overall subscription levels.
- Oversubscription in an IPO occurs when investor demand exceeds available shares. High interest leads to either a lottery-based allocation or proportional distribution among applicants, indicating strong market enthusiasm for the company’s public offering.
- IPO allotment time is the phase post-subscription closure where registrars process applications, assess oversubscription and allocate shares to applicants. This critical period usually lasts a few days before finalizing share distribution.
- To check IPO allotment, visit the registrar’s website and enter your application or PAN number. Alternatively, use stock exchange websites like BSE or NSE with your application details to find your allotment status.
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IPO Allotment Process – FAQs
In an IPO allotment, shares are assigned to applicants after the subscription ends. Depending on demand, shares are either proportionally distributed or allocated through a lottery system if the offering is oversubscribed.
IPO allotment rules include proportional distribution of shares among applicants or, if oversubscribed, a lottery system for equitable allocation. Regulatory guidelines ensure fairness, especially for retail investors, in this process.
After IPO shares are allotted, they are credited to investors’ Demat accounts. The company then gets listed on stock exchanges, and trading commences, allowing shareholders to buy or sell their allotted shares.
If an IPO is not allocated to an applicant, the blocked amount in their bank account gets unblocked and released. They receive no shares and can use their funds for other investments or purposes.
Yes, you can sell IPO shares on the listing day. Once the shares are credited to your Demat account and the company is listed on the stock exchange, you’re free to sell them.
Money is not deducted before IPO allotment. Instead, it’s blocked in your account through ASBA (Applications Supported by Blocked Amount) until allotment. If allotted, the amount is deducted; otherwise, it’s unblocked and remains in your account.
