Employee Quota IPO Allotment Explained
Overview
Some IPOs in India offer a special reservation known as the Employee Quota.
This quota allows eligible employees of the issuing company to apply for shares in the IPO under a reserved category, separate from retail, NII, and QIB categories.
What Is the Employee Quota?
The employee quota is a portion of the IPO reserved exclusively for eligible employees.
- Current employees of the issuing company
- In some cases, employees of subsidiaries or group companies
Eligibility details are defined in the Red Herring Prospectus (RHP).
Why Do Companies Offer an Employee Quota?
- Encourage employee ownership
- Reward employees for contribution to company growth
- Align employee interests with long-term company performance
- Improve participation from internal stakeholders
Offering an employee quota is optional and varies by IPO.
Who Is Eligible Under the Employee Quota?
Eligibility typically requires that an applicant:
- Is an employee of the issuing company
- Appears on the company’s employee records
- Applies under the designated employee category
- Meets the minimum and maximum application criteria
Former employees are usually not eligible unless explicitly stated.
Application Limits and Discounts
- Higher maximum application limit than retail in some IPOs
- Possible discount on the issue price
- Same minimum lot size as other categories
Exact limits and discounts are specified in the IPO prospectus.
How Allotment Works in Employee Quota
Allotment depends on demand within the employee category.
If Employee Quota Is Undersubscribed
- All valid employee applications receive full allotment
- Unsubscribed shares may be transferred to other categories
If Employee Quota Is Oversubscribed
- Allotment is done as per SEBI rules
- Typically follows a proportionate method
- No special preference beyond eligibility
Multiple Category Applications
- Employees must apply only under the employee category if eligible
- Applying simultaneously in retail or shareholder quota is not allowed
- Multiple applications may result in rejection
Refunds and ASBA
- Funds are blocked using ASBA
- Non-allotted or partially allotted funds are unblocked automatically
- Refunds are processed after final allotment
Key Takeaways
- Employee quota is a reserved IPO category for eligible employees
- Discounts may apply but allotment is not guaranteed
- Oversubscription affects allotment
- Final allotment is determined by the registrar
- Always refer to the IPO prospectus for exact rules