How to improve your chances of IPO Allotment?

As the IPO season picks up steam and nearly Rs.20,000 crore worth of IPOs are likely to be listed in the first quarter of 2021, how do you improve your chances of getting an IPO allotment.

Can I put in multiple applications for the IPO in my name? This is a standard fallacy. Remember, you are only allowed to put one application per PAN number per IPO. If you put multiple applications, they will be treated as invalid applications and all of them will be rejected.

Can I apply on behalf of all my family members?

In fact, that is a good idea. You can put applications in your own name, in the name of your spouse, your adult children, parents and other family members. As long as the applicants and PAN numbers are unique, they are valid and not treated as multiple applications.

What is the total allocation that retail investors get?

Normally, the retail allocation is 35% of the issue size. However, in select cases, SEBI permits the issuing company to reserve just 10% of the quota for retail investors and 75% can be allocated to the qualified institutional buyers. Ideally, your chances of getting allotment in IPOs are much lower if the allocation is just 10%. Nazara Technologies is an example.

Should I bid at lower end of price range or upper end?

Just bid at cut-off. For example, if the price band for a stock Rs.553 to Rs.556, where do you bid at? Suppose you bid at Rs.555 and the discovered price is Rs.556, then your application is rejected outright. It is better to bid at cut-off, where IPO application is deemed to be made at cut-off.

What is the minimum lot in IPO applications and how many lots to apply?

Normally a minimum lot is value of up to Rs.15,000 and you find IPOs having minimum lots of value between Rs.13,500 and Rs.15,000 on an average. The IPO defines maximum lots as Rs.2 lakhs in value. If you can apply for more lots, it is advisable to apply for more lots.

SEBI has focused on maximum allotment, then why I am not often getting allotments?

SEBI stipulates that if there is oversubscription, then the minimum lot size must be allotted to as many shareholders as possible. So, if you have applied for 1 lot of the IPO and the IPO is oversubscribed 2 times, then you have a very good chance of getting an allotment of shares in that IPO.

Then why is it I did not get any allotment in Burger King IPO?

Let me give you an example. If the price of an IPO is Rs.280 and minimum lot size is 50 shares then that is the minimum lot that will be allotted to any investor. If there are 25 lakh shares on offer, then the IPO can be allocated to maximum of (25 lakh / 50) = 50,000 investors. Now, if there are 95,000 investors in retail category, then the 50,000 eligible investors is decided by draw of lots. If you are unlucky, you may get zero allotment. In the case of Burger King, the retail portion was subscribed 68 times, so your chances of allotment are very low.

Do HNIs and QIBs also get allotments like retail investors?

No, in the case of HNIs and QIBs, the allotment of shares is done on a proportionate basis and there is no concept of minimum lot in such cases.

Do IPO allotment stand a better chance if applied on Day 2 and Day 3?

There is no such rule. However, if you wait out the first two days, you get a good hang of the likely oversubscription. You can take a call accordingly. Allotment is a 2-stage process. Firstly, the attempt is that all applicants get allotment of at least minimum lot. The second is to do balance allotments by lottery system

What are your tips for getting IPO allotment?

Here are some basic tips. Put in applications in the names of multiple family members, apply at the cut off price, put bids for as many lots as you can and ensure that all the details you fill up the IPO form are correct. That can substantially increase chances of IPO allotment. Of course, you can also wait out the first day to apply for the IPO.