How IPO Allotment Probability Is Calculated (Conceptual)
Introduction
This document explains the conceptual approach used to estimate IPO allotment probability. It is intended purely for educational and analytical understanding and does not represent the actual allotment mechanism used by exchanges or registrars.
IPO allotment probability calculations are statistical estimates derived from publicly available subscription data and SEBI-defined allocation rules.
What Is IPO Allotment Probability?
IPO allotment probability refers to the estimated likelihood that a valid IPO application may receive at least one lot of shares, based on demand and available supply.
It is not an official figure and is never published by SEBI, NSE, BSE, or registrars.
Key Inputs Used in Conceptual Probability Estimation
A probability estimate is typically derived using a limited set of publicly observable inputs.
- Total Shares Offered – Number of shares allocated to a specific investor category
- Lot Size – Minimum number of shares per application lot
- Available Lots – Calculated as total shares divided by lot size
- Number of Valid Applications – Total bids at or above the cut-off price
- Category-wise Subscription Data – Demand levels published by stock exchanges during the IPO period
Basic Conceptual Formula (Retail Category)
In highly simplified terms, when the number of valid applications exceeds the number of available lots, a conceptual probability is often expressed as:
Estimated Probability ≈ Available Lots ÷ Number of Valid Applications
This reflects the lottery-based allotment principle used in oversubscribed retail IPOs.
Example: Super-Oversubscribed Retail IPO
Consider a retail IPO scenario with the following details:
- Available shares: 1,00,000
- Lot size: 10 shares
- Available lots: 10,000
- Valid retail applications: 20,000
Since applications exceed available lots, not every applicant can receive an allotment.
Conceptual probability ≈ 10,000 ÷ 20,000 = 50%
Case Where Every Applicant Gets at Least One Lot
If the number of valid applications is less than or equal to available lots, each applicant is conceptually expected to receive at least one lot.
In such cases, the estimated probability is treated as 100%, subject to valid bids and cut-off eligibility.
Impact of Cut-Off Price Applications
Only applications at or above the cut-off price are considered valid for allotment.
Applications below the cut-off price are excluded from probability calculations, which can materially change the estimated outcome.
Why Probability Is Only an Estimate
- Exact number of valid applications is not publicly disclosed in real time
- Duplicate or invalid applications are removed by registrars after issue closure
- Final allotment is executed using registrar-controlled systems, not probabilistic models
- Category-wise spillovers and rounding rules may apply
How Tools Estimate Probability
Analytical tools use assumptions and approximations based on subscription multiples, historical patterns, and SEBI allocation rules.
These tools do not influence allotment outcomes and cannot guarantee results.
Important Notice
This document and any probability figures discussed are provided strictly for informational, educational, and experimental purposes only. They do not represent actual allotment chances and should not be relied upon for investment decisions.