Factors That Affect IPO Allotment Probability
Introduction
IPO allotment probability varies from issue to issue and from category to category.
Several factors influence how likely an applicant is to receive shares when an IPO is oversubscribed.
Level of Oversubscription
The most important factor affecting IPO allotment probability is the level of oversubscription.
As oversubscription increases, the number of applicants competing for the same shares also increases, reducing individual chances.
Investor Category
IPO shares are allotted separately across different investor categories such as Retail, NII, and QIB.
Allotment probability can differ significantly depending on the category in which the application is made.
Number of Applications vs Available Lots
In the retail category, the relationship between the number of applications and the available lots plays a crucial role.
If applications exceed available lots, not all applicants can receive allotment, often leading to lottery-based distribution.
Application Type: Cut-Off vs Price Bid
Cut-off price applications are generally considered before price-based applications.
When cut-off bids alone do not exhaust available shares, price bids may receive partial or proportionate allotment.
Lot Size and Minimum Application
IPO applications must be made in multiples of a predefined lot size.
In oversubscribed IPOs, allotment often starts with the minimum lot size, which affects how shares are distributed.
Number of Lots Applied For
Applying for more lots does not always increase allotment probability, especially in the retail category.
In lottery-based allotments, multiple-lot applications may have the same chance as single-lot applications.
Validity of Application
Only valid applications are considered for allotment.
- Correct PAN and demat account details
- Compliance with application rules
- No duplicate or multiple applications using the same PAN
Timing of Subscription Data
During live IPOs, subscription data changes continuously.
Probability estimates based on interim data are temporary and non-final.
Registrar’s Allotment Methodology
The final allotment is conducted strictly as per the registrar’s methodology and SEBI regulations.
This process may involve adjustments that cannot be predicted by probability estimates.
External and Technical Factors
- Application rejections or technical errors
- Bid cancellations or modifications
- Final verification of valid bids
Key Takeaways
- Higher oversubscription generally lowers allotment probability
- Retail and non-retail categories behave differently
- Cut-off bids usually receive priority
- Probability estimates are informational, not guarantees
Final Note
IPO allotment probability is influenced by multiple factors and should be used only for educational understanding, not as a basis for investment decisions.