Understanding IPO Allotment: Essential Tips and Strategies

If you apply for IPOs regularly but are concerned about not getting an allotment, you’ve come to the right place. This article consolidates all the tricks and important points related to IPO applications to help you maximize your chances of success.

Types of IPOs: Main Board and SME

Main Board IPOs

In the world of main board IPOs, you typically encounter three categories: Retail, HNI Small, and HNI Big.

• Retail Category: Ranges from ₹15,000 to below ₹2 lakh. This category often gets significantly oversubscribed, making it less beneficial to apply for more than the minimum lot.
• HNI Small: Applications worth ₹2 lakh.
• HNI Big: Applications starting from ₹10 lakh.

When investing, keep in mind the allotment probabilities. For instance, if the retail category is subscribed seven times, the HNI Small category may 30-35 times, while the HNI Big category could be subscribed 50 times. Therefore, applying HNI Small is often more advantageous than HNI Big.

Key Takeaways for Main Board IPOs

1. Allotment Chances: If you apply in the HNI Big category (50 times oversubscribed), you have a 1 in 10 chance of getting an allotment. In the HNI Small category (30 times), your chances increase to 1 in 30.
2. Avoid Small Applications: Many retail investors mistakenly invest in the small category. If everyone does this, it diminishes the chances of allotment.
3. Utilize Multiple Accounts: If you have several demat accounts, apply from different PANs. For example, with ₹12 lakh, apply in the retail category from nine names and use one application for HNI Big.

Common Mistakes to Avoid

1. Multiple Applications: Only one application is allowed per PAN. Submitting various applications can lead to rejection.
2. Third-Party Payments: While they are sometimes accepted, they significantly increase the risk of rejection. Always use your bank account when applying.
3. Last-Minute Applications: Apply early in the day to avoid delays that can cause your application to be rejected.
4. Blocked Funds: Ensure that the funds you are applying with are kept available, as they get blocked once you submit your application.

Understanding SME IPOs

In SME IPOs, there are only two categories: Retail and HNI. Here’s what you need to know:

• Basket System: Allotments are done in baskets (e.g., 1000 shares). If you get an allotment, you receive the entire basket.
• Proportional Allotment: If the retail category is oversubscribed, you’ll get a proportional allotment based on the total applications.

Strategies for SME IPOs

1. Multiple Applications: Similar to main board IPOs, use different names for each family member to maximize retail applications.
2. Understanding Allotment Odds: If an IPO is subscribed 100 times and you apply 70 times, you’ll receive a proportional allotment based on the total applications.
3. Investment Strategy: If you apply for a significant amount in a highly subscribed IPO, you can expect multiple allotments based on the total subscription.

Conclusion

Successfully navigating the IPO landscape requires understanding different categories and the associated probabilities of allotment. By avoiding common pitfalls, such as multiple applications and last-minute submissions, and by strategically using your resources, you can significantly improve your chances of securing an allotment.

If you don’t have a Demat account yet, check out the links in the description for free account openings and additional benefits. Happy investing!