How To Improve Your Chances of IPO Allotment

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In an era of oversubscribed Initial Public Offerings, it is commonplace to not get share allotment against your IPO application/s. In this article, we shall discuss some simple tips that can help you raise your chances of IPO allotment.

Initial Public Offerings (IPOs) have a way of generating a sense of intrigue and excitement in the market. Almost every month, there are a few IPOs that grab the attention of the markets, the media, and, most importantly, the investors. As easy as it is to apply for an IPO, particularly through online IPO applications, there is no assurance of getting an allotment.

We live in an age where IPOs are almost always oversubscribed (that is, the number of shares applied for exceeds the number of shares available for allotment). It is, therefore, extremely common to not get share allotment in several instances. In this article, we shall delve into some easy yet effective tips that can help you enhance your chances of IPO allotment.

Ways to Enhance Your Chances of IPO Allotment

There are many easy measures that you can take to raise your chances of IPO allotment. From meticulously filling your IPO application forms to applying through family members’ demat accounts, some simple IPO allotment tips can be extremely handy. Here are seven IPO allotment tips for your next application.

  • Apply for the shares in an IPO at the cut-off price: In book-building issues, you get an option to choose the bid price for your IPO application. Although you can choose any price from the price band offered by the issuing company, it is advisable to enter the cut-off price as your bid price. Doing so can increase your likelihood of getting IPO allotment since there would be minimal chances of your application being rejected due to a low bid price.
  • Do not apply for an IPO through multiple demat accounts: IPO applications made through multiple demat accounts that have been opened in the name of the same individual are liable to get rejected. Therefore, you must only submit one IPO application through one demat account.
  • Bid for multiple lots but refrain from large applications: You can bid for multiple lots of shares in an IPO application. In the event of an IPO being oversubscribed, you are likely to get allotted at least one lot of shares (unless the oversubscription is substantial). Since all retail applications for IPOs are considered similarly irrespective of the amount, there is no point in making large applications and locking in a significant amount as application money.
  • Become a shareholder of the issuing company's parent company (if any): An effective way to increase your chances of IPO allotment is to purchase the shares of the parent company of the issuing company (if there is a parent company in place and listed on a stock exchange). Once you become a shareholder of the company, you can apply for IPO allotment through the shareholder quota.
  • Do not procrastinate your IPO application: When it comes to IPO applications, it is always prudent to be early. You must not procrastinate the submission of your IPO application till the last hour or last day of the issue being open. Whether you are applying for an IPO directly through an online platform or through a registered stock broker, you may encounter any number of technological and logistical hurdles, particularly on the last day, which could hinder your IPO application.
  • Submit applications in the names of family members (including minors): You can submit separate IPO applications in the names of different family members as long as they have functional demat accounts. It is worth noting here that IPO applications can also be submitted through the demat account of a minor. Therefore, you can apply for IPO allotment in your name as well as in the names of various family members. Furthermore, Hindu Undivided Families (HUFs) with an operational demat account can also submit an IPO application.
  • Fill your IPO application form with utmost diligence: It is pivotal to fill out your IPO application form with utmost care. Once you have entered all the pertinent details, it is advisable to verify ecag detail, including bid price, the number of lots applied for, bank particulars, etc. After the submission of your IPO application, you must check whether the submission has been successful and the relevant amount has been blocked in your linked bank account through Application Supported by Blocked Amount (ASBA).

To sum it up

By following some or all of the aforementioned steps, you can significantly raise your chances of IPO allotment. Even if an IPO ends up being oversubscribed, you may get allotted one lot of shares (depending on whether your application gets selected in the lottery). Should you not get IPO allotment, you can wait for the shares to be listed on a stock exchange. Thereafter, you can purchase the shares in the quantum and at the time you desire.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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