Investing in an IPO (Initial Public Offering) has become an attractive way for retail investors in India to gain access to new and potentially profitable companies. IPOs allow companies to raise capital by selling shares to the public for the first time. However, the IPO allotment process can sometimes be confusing for first-time investors. How do you apply? What happens when the IPO closes? And, how can you check IPO allotment status?
In this article, we will walk you through the IPO allotment process, step by step, and also show you how to check your IPO allotment status once the allocation is done. Additionally, we’ll guide you on how to track upcoming IPOs and make use of a share trading app to stay updated.
What is an IPO?
An IPO is when a private company decides to go public by offering its shares to the public for the first time. The company uses the funds raised from the IPO to expand its business, pay off debts, or pursue other corporate objectives. For investors, IPOs can provide an opportunity to buy shares in a promising company early on.
However, applying for an IPO doesn’t guarantee that you’ll get an allotment. IPO shares are typically oversubscribed, meaning the number of applications far exceeds the number of shares available. The IPO allotment process helps determine how the available shares will be distributed among investors.
Step-by-Step Guide to the IPO Allotment Process
Understanding the IPO allotment process is essential for every investor. Here’s how it works:
- Apply for the IPO
Before applying, ensure that you have the following:
- Demat Account: A demat account holds the shares electronically once allotted.
- Trading Account: A trading account allows you to buy and sell stocks on the stock exchange.
You can apply for an IPO through your share trading app, bank, or a broker. When applying, you’ll need to fill in the application form, providing details like:
- The number of shares you want to buy.
- The price band (if it’s a book-building IPO).
- PAN details for verification.
You can apply either online (via your share trading app) or offline through a bank branch, depending on your broker.
- Subscription Period
The IPO will have a subscription period, typically lasting 3-5 days, during which investors can submit applications. The subscription period allows brokers, banks, and individuals to apply for shares.
During this period, the demand for the IPO is gathered. If the demand exceeds the number of shares on offer (which is common in popular IPOs), the issue is considered oversubscribed. This is where the IPO allotment process comes into play.
- Oversubscription and Allotment Criteria
When the IPO is oversubscribed, a portion of the investors will not receive an allotment. In such cases, the IPO shares are allocated using one of two methods:
- Pro-rata Allocation: If the IPO is oversubscribed but not excessively, shares may be allocated in proportion to the number of shares applied for.
- Lottery System: In cases of high oversubscription, shares are allocated through a lottery system.
The number of shares allotted depends on the demand, your application size, and the number of available shares.
- IPO Allotment and Refund Process
Once the allotment process is completed, the IPO registrar will announce the IPO allotment results. Here’s what happens next:
- Successful Allotment: If you’re allotted shares, they will be credited to your demat account. You will receive a notification from your broker or the registrar.
- Unsuccessful Allotment: If you are not allotted shares, the amount you applied for will be refunded to your linked bank account, typically within 3-4 working days.
It’s important to note that the IPO allotment status can vary depending on the category of investor (retail, non-institutional, or qualified institutional buyers) and the level of oversubscription.
- Check IPO Allotment Status
Once the allotment is announced, many investors are eager to know whether they’ve been allotted shares or not. To check your IPO allotment status, follow these steps:
- Registrar’s Website: Every IPO is managed by a registrar. Visit the registrar’s official website and enter your PAN number or Application Number to check the allotment status.
- Stock Exchange Website: Both the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) publish the allotment status for IPOs. You can visit their IPO page and follow the instructions to check the status.
- Share Trading App: If you’ve applied via a share trading app, such as m.Stock by Mirae Asset, Zerodha, ICICI Direct, or HDFC Securities, you can easily track the IPO allotment status. Most apps will notify you once the allotment results are declared, and some platforms even allow you to directly check the status from within the app.
- Listing of IPO Shares
After the shares are allotted and credited to your Demat account, the company’s shares are listed on the stock exchange. This is the listing date when you can start trading those shares. The listing price of the shares may fluctuate depending on market conditions and demand.
How to Track Upcoming IPOs?
If you’re interested in applying for future IPOs, it’s important to keep track of upcoming IPOs. Here are some ways to stay updated:
- Follow IPO Calendars: Various financial news websites and stock exchanges publish IPO calendars that list upcoming IPOs along with their subscription dates, issue price, and other important details.
- Share Trading Apps: Most brokers and trading platforms like Zerodha, Groww, m.Stock by Mirae Asset or Upstox feature IPO sections where you can see upcoming IPOs, apply directly, and get alerts on new launches.
- Broker Alerts: If you’ve registered with a stockbroker, you can receive email or SMS notifications about upcoming IPOs, giving you the opportunity to plan your application.
Tips to Improve Your Chances of IPO Allotment
While there’s no guaranteed way to secure an IPO allotment, here are some strategies that could improve your chances:
- Apply Early: IPOs often close early if they are oversubscribed. Apply as soon as the IPO opens to increase your chances.
- Apply for Maximum Shares: You can apply for the maximum number of shares allowed in your category. However, applying for more shares doesn’t necessarily guarantee allotment, especially in oversubscribed issues.
- Use Multiple Demat Accounts: If you have multiple Demat accounts, you can apply through each account, thereby increasing your chances of allotment. But ensure you follow all legal guidelines while doing so.
- Understand the Company’s Valuation: Don’t just apply because the IPO is trending. Ensure you research the company, its business model, financials, and the IPO price band to make an informed decision.
Conclusion
The IPO allotment process can seem intimidating for new investors, but with the right approach, it’s a straightforward process. From applying for the IPO to checking your IPO allotment status, every step counts toward building your investment portfolio.
Remember, an IPO is a unique investment opportunity, but it also comes with risks. Make sure to evaluate each upcoming IPO carefully before investing. Using a share trading app can make the process more efficient, helping you apply for IPOs, track your status, and stay informed about the latest market developments.
Good luck with your IPO investments, and always stay informed!
