An IPO offers investors the chance to invest in a company before it’s listed on the stock market, but the process can be confusing, especially for beginners, with the IPO share allotment being a crucial step. This blog will explain how shares are allotted in an IPO, what factors affect allotment, and how to increase your chances of getting shares.

What Is IPO Share Allotment?

An IPO involves a company selling its shares to the public for the first time, with investors applying through bids. However, the available shares are often limited, leading to IPO share allotment, where the company decides how many shares each investor will receive based on demand and available shares.

How are Shares Allotted in an IPO?

There are two main categories of investors in an IPO: retail investors and institutional investors. Retail investors are individuals like you and me. Institutional investors include large companies, mutual funds, and banks.

Retail investors typically receive shares through a lottery system if an IPO is oversubscribed, where more people apply for shares than are available. Lucky investors receive shares. If the IPO is not oversubscribed, all investors receive the number of shares they applied for, without the need for a lottery.

Factors That Affect IPO Share Allotment

Several factors affect how shares are allotted in IPO. These include:

1. Demand for the IPO: High IPO demand can lead to oversubscription, making it difficult for individual investors to obtain shares.
2. Investor Category: Institutional investors often receive a larger share of the total allotment.
3. Bid Price: The bid process in IPOs allows investors to bid within a price range.
4. Oversubscription: Oversubscription can occur when demand exceeds supply, requiring a random draw or lottery system to decide who gets the shares.

Increasing Your Chances of Allotment

While the process of how shares are allotted in an IPO depends on many factors, there are some things you can do to increase your chances of getting shares:

1. Bid at the Upper End of the Price Range: If you want to increase your chances, bid at the higher end of the price range. This shows that you are willing to pay more, which can improve your chances.
2. Avoid Oversubscribed IPOs: Look for less hyped IPOs for better chances of allotment.
3. Opening a Demat Account with Multiple Applications: Open a Demat Account with Multiple Applications: Apply through multiple accounts, asking family members to apply for the same IPO. This strategy improves the chances of getting shares through different applications.

How To Check IPO Share Allotment Status

After applying for an IPO, it’s important to keep track of your application status. You can check the IPO allotment status through the registrar’s website or the stock exchange where the IPO was listed. You will need your application number or PAN (Permanent Account Number) to do this. If you have been allotted shares, they will be credited to your Demat account. This usually happens a few days after the allotment process is completed.

Using Trading Platforms for IPOs

In today’s digital age, using a reliable F&O trading app can make the IPO application process much smoother. Many of these platforms allow you to apply for IPOs directly. They offer features like tracking the status of your application and easy payment methods. It is important to choose the best trading platform in India that suits your needs for smooth IPO participation and stock trading later.

What Happens If You Don’t Get Shares?

If you don’t receive shares in the IPO allotment, don’t worry. The money you used to apply will be refunded to your account. Usually, this happens within a few days of the allotment result. You can then look for other investment opportunities or participate in future IPOs.

You can also buy shares of the company once they are listed on the stock market. However, keep in mind that the price of the shares may go up or down once the company is listed.

Conclusion

Understanding how shares are allotted in an IPO is important for any investor who wants to participate in this exciting process. While the allotment depends on many factors, like demand and investor category, you can take steps to improve your chances. Using a reliable F&O trading app or the best trading platform in India can help you stay updated and make the process easier. Opening a Demat account is the first step towards participating in an IPO. With the right strategies, you can improve your chances of getting shares and benefit from future opportunities in the stock market.