How IPO Allotment Works in India: The Complete Process

An Initial Public Offering (IPO) is the single most exciting event in a company’s life. It is the moment the company transitions from a private entity to a public one—opening its engine to millions of outside investors.

In first-principles terms, an IPO is a Primary Energy Injection. The company is selling new shares to raise capital (energy) for growth.

But if you’ve ever applied for a “hot” IPO in India, you know the frustration: you apply for ₹15,000 worth of shares, and you get nothing. Your money is returned, and the shares go to someone else.

It feels like a rigged system. It isn’t. It is a highly regulated, mathematical “lottery” designed to ensure fairness when Demand exceeds Supply. Let’s break down exactly how it works.

The Core Concept: The Book Building Process

When a company goes public, they don’t just pick a price out of thin air. They set a Price Band (e.g., ₹500 to ₹510).

Investors then “bid” for the shares. This is called the Book Building process. If everyone bids at the highest price (₹510), that becomes the final price.

First Principle: The final IPO price is the highest equilibrium point where the company can raise the maximum amount of money.

The Problem: Oversubscription (Demand > Supply)

Imagine a company is selling 1 Crore shares. But 5 Crore people want to buy them. This IPO is “5x Oversubscribed.”

How does the company decide who gets the shares?
What is SEBI? (C1 Pillar Sebi Explained) has created strict rules to prevent big players from bullying small retail investors out of the market.

1. The Retail Quota

Every IPO must reserve a specific percentage (usually 35%) of the shares for “Retail Investors”—people like you and me who are investing less than ₹2 Lakhs.

2. The Lottery Mechanism

In India, the goal is to give shares to the maximum number of unique individuals.

Instead of giving 1,000 shares to one guy, SEBI mandates that the company must try to give a minimum “Lot Size” (C1 Spoke Glossary) to as many people as possible.

If the retail portion is oversubscribed (say 10x), the exchange runs a computer-generated Random Lottery. If your name is picked, you get one “Lot.” If your name isn’t picked, you get nothing.

Crucial Advice: Applying for 10 lots from one account does not increase your chances in an oversubscribed IPO. You will still only get a maximum of 1 lot if you win the lottery. To increase your odds, apply for 1 lot from the accounts of different family members.

The Timeline: T to Listing Day

The process follows a strict chronological sequence:

1. Bidding (T to T+3): You place your bid through your UPI app or bank (ASBA). Your money is “blocked” in your bank account, but not yet debited.
2. Allotment (T+4): The computer runs the lottery. You receive a notification if you have been allotted shares.
3. Refunds/Unblocking (T+5): If you didn’t get the shares, the block on your money is removed.
4. Credit of Shares (T+6): If you won, the shares are deposited into your How to Open a Demat Account Account (C1 Pillar Demat Account Guide).
5. Listing Day (T+7): The shares start trading on the How BSE and NSE Work and How BSE and NSE Work (C1 Pillar Bse Nse Explained). This is the first time you can sell them.

The “Smart Friend” Advice

Don’t chase IPOs just because there is “hype.” Many IPOs list at a “discount” (the price drops on Day 1), and you lose money instantly.

Only apply for an IPO if you have done your Fundamental Analysis and believe the company is worth more than the price they are asking for. A “listing gain” is a nice bonus, but long-term ownership of a great business is where the real wealth is built.

Now that you know how shares enter your account through an IPO, let’s look at how they move when you buy them in the regular market.

Move to C1 Spoke: T+1 Settlement Explained: How and When Your Shares are Credited to understand the speed of modern Indian trading.

Frequently Asked Questions