How Oversubscription Impacts IPO Allotment

Introduction

Oversubscription plays a central role in determining how IPO shares are allotted to applicants.

When demand for shares exceeds supply, allotment becomes competitive and is governed by predefined rules.

An IPO is said to be oversubscribed when the total number of shares or lots applied for exceeds the total number available for allotment.

Oversubscription can occur across different investor categories and at varying intensity levels.

As oversubscription increases, the probability of receiving allotment decreases for individual applicants.

This is because more valid applications compete for the same fixed number of shares.

In the retail category, allotment is usually made on a lot basis.

If the number of retail applications exceeds available lots, lottery-based allotment is used to ensure fair distribution.

In highly oversubscribed IPOs, not every applicant has a chance of allotment.

When applications far exceed available lots, even single-lot applicants face significantly reduced chances.

In some cases, although an IPO is oversubscribed in total, the number of applications may still be lower than available lots.

In such scenarios, every valid applicant can receive at least one lot.

Oversubscription impacts cut-off and price-based applications differently.

Cut-off applications are generally considered first, and if they exhaust available shares, price bids may receive partial or no allotment.

In certain oversubscription situations, especially outside the retail category, allotment may be proportionate.

Applicants may receive fewer shares than applied for based on demand-to-supply ratios.

Applying for multiple lots does not always improve chances during oversubscription.

In lottery-based allotments, multiple-lot applications may be treated no differently than single-lot applications.

Only valid applications are counted when determining oversubscription levels.

High oversubscription indicates strong demand but does not ensure allotment for any individual applicant.

Final outcomes depend on allotment rules, category limits, and randomization.

Oversubscription is a demand indicator, not a certainty of allotment, and should be interpreted only for educational and informational purposes.