Shareholder Quota IPO Allotment Explained
Overview
Some IPOs in India offer a special reservation known as the Shareholder Quota.
This quota allows existing shareholders of a specified listed company to apply for shares in an IPO under a reserved category, separate from the general retail pool.
What Is the Shareholder Quota?
The shareholder quota is a reserved portion of an IPO allocated exclusively to shareholders of a specific eligible company.
- Parent company
- Group company
- Listed promoter entity
Only investors who hold shares of the eligible company as of the record date can apply under this quota.
Why Do Companies Offer a Shareholder Quota?
- Reward existing shareholders
- Encourage long-term holding
- Improve participation from loyal investors
- Broaden the investor base for the IPO
The shareholder quota is optional and is not present in every IPO.
Who Is Eligible for Shareholder Quota?
To apply under the shareholder quota, an investor must:
- Hold shares of the eligible company
- Hold shares in a demat account
- Own the shares before the record date
- Apply under the correct shareholder category
In most cases, even one share is sufficient unless specified otherwise in the prospectus.
Shareholder Quota vs Retail Category
Although shareholder quota applicants are usually retail investors, the two categories are different.
- Shareholder quota has a separate reservation
- Retail category competes within the general retail pool
- An investor can usually apply only in one category
An investor cannot apply simultaneously in both retail and shareholder quota for the same IPO.
How Allotment Works in Shareholder Quota
The allotment process depends on demand within the shareholder quota itself.
If Shareholder Quota Is Undersubscribed
- All valid applicants receive full allotment
- Unused shares may be transferred to other categories
If Shareholder Quota Is Oversubscribed
- Allotment is done as per SEBI rules
- Proportionate or lottery-based allotment may be applied
- Each eligible applicant has an equal chance if applications exceed available lots
The exact method is defined in the basis of allotment document.
Application Limits in Shareholder Quota
- Maximum application value usually aligns with retail limit (₹2,00,000)
- Minimum application is generally one lot
- Price and lot rules are the same as retail category
Limits may vary depending on the IPO prospectus.
Incorrect Applications and Rejections
- Shares not held on the record date
- Incorrect category selection
- PAN or demat mismatch
- Multiple applications submitted
Rejected applications do not participate in allotment.
Refunds and ASBA
- Funds are blocked using ASBA
- Non-allotted funds are unblocked automatically
- Refunds are processed after allotment finalization
Key Takeaways
- Shareholder quota is a reserved IPO category
- Eligibility depends on shareholding as of the record date
- Allotment is not guaranteed
- Oversubscription reduces chances
- Final allotment is determined by the registrar