The allotment process in the Retail category is done on a Lottery basis hence the chances of allotment depend on doing the basics right. One should make sure that they have done the important things that will give them an upper hand over other bidders. The steps to follow that will ensure to maximize your chances of allotment are mentioned here in detail.
IPO-
An IPO or (Initial Public Offering) is a process where an unlisted company gets listed on the Stock Exchanges by selling some part of its shares to the common public and Institutions in exchange for the money offered by them.
Once the company announces the date of its Issue, Institutions, Retail Investors, and High Net Worth Individuals(HNI’s) bid for the required quantity of shares of the specific company. If the bids received are higher than the total number of the shares offered by the company then the company allots the shares on a Pro-rata basis to NII’s and for the retail Investors, the allotment is based on a Lottery or a random picking of individuals who will be allotted the shares.
To increase the chances of allotment in the Retail Category the following steps can be followed.
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Apply only 1 application under 1 PAN- One individual might have 2 or more Demat accounts with which one can place 2 different bids but that is not accepted. If one applies for multiple applications from different Demat accounts that are mapped under one PAN number then all the applications will be rejected.
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Apply for 1 Lot from 1 Demat account if IPO is Oversubscribed- Most of the good IPO’s are oversubscribed in the Retail category as well as the NII categories. In this case, the company allows only 1 Lot to one individual irrespective of the number of Lots applied. This is done to ensure that a maximum number of investors get access to an IPO. In case if an IPO is undersubscribed in the Retail segment then a person can apply for multiple Lots and will get 100% allotment but if an IPO gets oversubscribed, then even if a person applies for the maximum number of Lots, the Maximum number of Lots he/she will get if allotted is 1 Lot.
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Select the Cut-Off Price- Retail Investors have the liberty to choose the Cut-Off price. Cut-off price is the price at which the company decides to sell the shares in a “Book building issue” which is generally at the upper price band. By selecting the Cut-off price one will have greater chances of allotment than the people who have manually entered a lower bid than them.
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Apply from Family members Demat Account- Applying from various Demat accounts which is not under one PAN Number provides better odds in order to get the allotment. Instead of applying for 4 Lots from 1 account if one applies 1 Lot each from 4 different accounts then the chances of getting the allotment increases by 4 times.
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IPO’s are not allotted on the First-come-First-Serve basis- Many people assume that if they apply for an IPO at the very first moment it opens, then they will get the allotment but this is a wrong belief. Applying an IPO First or the Last does not have any impact on the allotment process. It is better to apply on the 2nd or 3rd day by looking at the subscription data and deciding the game plan going forward. If the IPO seems to be Undersubscribed then one can apply multiple lots from their account or else if the IPO looks to be oversubscribed then one can use multiple Demat accounts to apply for the same number of Lots.
By following these methods one can maximize the chances of getting allotment in any IPO. One should remember that the process of allotment is random and there is no secret formula for a guaranteed allotment but if one uses the above-mentioned methods then they will be ahead of a majority of the crowd.