What do you mean by IPO?Homeknowledge centerWhat do you mean by IPO?

There are four possible reasons why investors don't receive an IPO allotment as explained in the following.

IPO Oversubscription and Computerised Lottery

When a company launches its IPO, it shows the price gap and the number of shares it plans to issue through this offer. For example, a company wants to raise a capital of Rs.10 crore and launches an IPO for the issue of 10 lakh shares with a price range of Rs100-101. In an ideal case, the company gets applications for all 10 lakhs shares and allots them to investors. However, in the real world, the scenario is not the same.
For example, if the company gets 1 crore applications, it can be said that the company's IPO was subscribed 10 times the original issue size of 10 lakh shares.
From now the company cannot allot shares to every applicant.

Computerized Lottery

If the company gets more applications than it is offered, it holds a computerized lottery where each applicant gets the same opportunity to receive an allotment. In the above example, since the company has gained 10 times the offered shares, not each investor will be allotted shares.
It is one of the most normal reasons investors do not receive an IPO allotment, especially in IPOs of companies in demand.

Invalid Application

Each IPO application is scanned by the Registrar of the IPO for completeness and correctness of the information. There are so many reasons for rejecting the allotment that investors are not informed about too. Some normal reasons are:

• The company receiving various IPO applications using the same PAN number. In an IPO, you can submit only one application per person (per PAN no.). Hence, if the company gets different applications under the same PAN, they are rejected.
• Wrong or invalid information filled on the IPO application form.
• Mismatch in the name on the PAN card or in the bank account, etc.

If the Registrar of the IPO deems an invalid application, then it is rejected and the investor does not get any kind of allotment.

Bid Price is lower than the Issue Price

In a book building IPO, when you have to submit the application, you have to choose the price at which you want to apply from within the given price limit. So, in the following example, you can apply at any price between Rs.100 and Rs.101. When the company collects all the applications, it determines the final issue price based on the bid price which is offered by investors. If the Issue Price is more than your bid price, then an investor does not get an allotment. In the above example, if you submit the application with a bid Price of Rs.100.5 and the company declares the issue Price at Rs.100.8, then your application will not qualify for allotment.

Try to avoid big applications

SEBI's allotment process treats all the retail applications (less than Rs200000) equally. There is no such point to make a big application in case of over-subscription. For the oversubscribed IPOs, one might go for minimum bids with different accounts. This will help to invest spare money in various IPOs as well.

Apply via more than one account for the same IPO

Do not apply with the maximum bid in one single account but you can apply through various accounts for the IPO. One should apply via various IPOs accounts for highly subscribed IPOs. Applying through various accounts can definitely increase the chances of IPO allotment.

Bid at cut off price/higher price band

Investors are generally confused between the bid price and cut-off price. Cut-off price means the investor wants to pay whatever price is decided by the company after the book-building process is ended. Once the application is made at Cut off, the investor must bid at the highest price band. In case the price is lower, the excess amount is refunded.
The Rs.1039.61 crore IPO of C.E. Info Systems (MapmyIndia), consists totally of an offer for sale (OFS) of Rs.1039.61 crore. As per the combined bid details put out by the BSE at the end of Day-3, MapmyIndia IPO was subscribed 154.71X total, with huge demand coming from the HNI segment followed by the QIB segment and a decent amount of contribution from retail too.

Try to avoid last moment subscriptions

If you have already taken the decision that you are going to apply for the IPO, then go for it on the very 1st day or the 2nd day. If the investor applies on the last day of trading, it might cause some problems like the bank account is not responding due to HNI and QIB high subscription or any other technical problem. It is to take care that the investor does not miss the chance to invest in the IPO.

Fill your details properly

Do not have a rush in filling out the IPO forms. The investor had to fill in the details properly like the amount, name, DP id, bank details, etc. Printed forms are also available in the market so one should go with them as well. The most secured path to apply for the IPO is through ASBA. One can go with ASBA through their bank but the investor has to check the details before applying it. It definitely avoid technical rejection.

Buy parent or holding company shares

The above trick will be applicable on every IPOs but this technique does not apply to all the IPOs. Although this trick is a brilliant one wherever it is applied. Having at least one share of the parent company in the investors demat account will make him entitled to apply through the Shareholder Category.
Although, it is only applicable in the cases where the parent of the IPO Company is already listed on the stock exchange and there is a reservation for shareholders in that parent company. Thus, it is quite sure that the chances of allotment are huge in the shareholder category. Moreover, one can place a bid in both retail as well as shareholder categories. Thus, this will automatically increase the probability of allotment.

Hope you are familiar with what is an IPO, what are the main reasons for not receiving an IPO allotment, and how to avoid the chances of IPO allotment.
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