How To Increase IPO Allotment Chance?

A most common complaint of Investor after IPOs allotment

 

OTHERS GOT IPO ALLOTMENT BUT I DIDN’T?

WHAT AM I DOING WRONG?

 HOW CAN I INCREASE IPOs ALLOTMENT CHANCES?

 

Recent public offers are attracting massive subscriptions, as a result, many investors did not get any IPO allotment. It is becoming harder for investors to get allotments. We get many queries regarding the IPO allotment process.

Why is IPO not allotted to me?

How to get a Confirmed IPO Allotment?

How is IPO allotted to me? 

and many more like this. So we have put together this guide. Hopefully, this process will help to increase IPO allotment chances.

First of all, we need to understand the IPO allotment process in detail. After that, we can take steps to improve allotment chances.

How shares are allotted in IPO?

The share allotment rules all retail individual investor (RII) applications to be treated equally. The minimum bid lot is defined based on the minimum application amount, which cannot exceed Rs 15,000 or fall below Rs 10,000 (earlier it was Rs 5,000-Rs 7,000).

IPO Under Subscribed: If the demand is less than the number of shares available in the retail category. Every investor will get a full allotment.

IPO Over Subscribed: If IPO got subscribed multiple times, then the retail investors will get one lot or nothing. Investors are selected on the basis of the lottery system.

Maximum RII Allottees = (Total number of shares available for RIIs)/Minimum bid lot

Practically speaking, in the case of over-subscription, investors can only hope to get a single lot if they are lucky.

Check our page of IPO FAQ.

How to increase IPO allotment chances?

Now we all know the logic behind allotment. It’s time to follow some steps to increase IPO allotment chances. Here are five simple tips to increase IPO allotment chances:

No benefit for big application

SEBI’s current allotment process treats all retail applications (less than INR 200,000) equally. There is no advantage of making a big application in case of over-subscription. Big applications only make sense in large IPOs or under-subscribed IPOs.

Apply with multiple Demat Account

In the case of over-subscription, large applications are ineffective. It’s advisable to apply multiple applications from different Demat Accounts.

Note: Demat Accounts must be linked to different PAN accounts. In simple words, you can’t make more than one application using the same Pan Card.

If you apply IPO with five Demat Accounts then the Probability of successful allotment increases to five times, in comparison to if you make one application of five lots.

It is best to ask friends and family members to open Demat Accounts and apply in upcoming IPOs. Opening new Demat Accounts is very easy nowadays click here to open Demat and Trading Accounts for free.

Always choose cut-off Price

This is a tricky part as investors are often confused between the bid price and cut-off price.” Cut-off price” means the investor is ready to pay whatever price is decided by the company at the end of the book-building process. While making the application at Cut off, the investor is required to pay the amount at the highest price band. The excess amount, in case the price discovered, is lower, is refunded.

As an example, the price band of IRCTC IPO is INR 315-320 per share. As IRCTC is oversubscribed, bids below INR320 per share will not be considered in the allotment. Thus, retail investors should place their bids at either cut-off or maximum price to increase IPO allotment chances.

Check subscription status

This is one of the most important steps in increasing IPO allotment chances. Before placing bids check the subscription levels on the 1^st and 2^nd days in HNI, QIB, and Retail Categories. If the response is good then apply. If the issue size is large and the issue is under-subscribed, you can avoid or apply for a large quantity (If you choose its good IPO. Click to Review of IPOs).

If the issue is under-subscribed then check whether you have to apply for it or you can directly buy from the open market, when the issue is listed.

Avoid last moment rush

Many investors rely on the subscription levels in HNI, QIB, and retail categories before placing their bids. If the response is good then they are placing their bids on the last day. This may be quite a smart way to figure out the response to an issue. Sometimes it could turn out to be a disaster if your bank’s internet banking is down or any other issues that don’t allow you to apply for IPOs.

This trick might help you to in an adverse situation like the above. Check the subscription levels in HNI, QIB, and RII on the 1^st and 2^nd days. If the response is good then apply on the 2^nd day after the market hours.

Avoid technical rejections

IPO applications may be rejected on technical grounds without the investor knowing about the errors. Starting 1 January 2016, all IPO applications are mandatorily through ASBA (Application Supported by Blocked Amount) mechanism and most investors apply through net banking which minimizes potential errors of spelling mistakes, name mismatch, inaccurate cheque details, etc. However, applications are still rejected on technical grounds and something as simple as different names in the bank account and PAN may result in a lost opportunity.

The better way to avoid rejection is to apply IPOs through ASBA. Know more about how to apply through ASBA.

Buy parent or holding company shares

The above tips will be applicable on all IPOs but this tip is not applicable on all IPOs. Although this tip is an excellent one where it is applicable. Having at least one share of the parent company in the Demat Account will make the investor eligible to apply through the Shareholder Category.

Of course, it applies only in the cases where the parent of the IPO company is already listed and there is a reservation for shareholders in the parent company. In the recently concluded IPO of Ujjivan Bank, the retail category was subscribed 48 times while the shareholder category was subscribed only 4 times. Needless to say, the chances of allotment are much better in the shareholder category. You can place a bid in both retail and shareholder categories. Have more chance of allotment!

Now the coming opportunity is in Reliance JIO, where JIO is the subsidiary of Reliance and Reliance is already registered in the stock exchange.

HOW APPLY IPO USING UPI, ASBA, NETBANKIG ETC..?

How to apply IPO using Bhim UPI app or any UPI app?

How to apply IPO Using KOTAK Bank (ASBA)?

How to apply IPO Using SBI Bank (ASBA)?

Apply IPO using Upstox mobile app.

How to apply IPO using Bhim UPI app in Upstox?

These are simple and effective steps that increase your IPO allotment chances. Check our page of IPO allotment status for the latest updates.

I have a lot of other things that also need to be considered and those are something that I will cover in my next post.

Happy investing!