IPO Allotment Process Explained: How Shares Are Distributed to Retail Investors

Why oversubscription happens

In a mainboard IPO, the company offers a fixed number of shares. When investor demand exceeds that supply, the issue is said to be oversubscribed. Oversubscription is the rule rather than the exception in popular issues — high-profile mainboard IPOs over the past decade have routinely been subscribed 20x, 50x, even 200x in aggregate.

The reasons are straightforward: a finite number of shares, attractive listing-day pricing patterns historically, easy application via UPI mandates, broad retail awareness driven by social media, and active institutional interest from mutual funds and FPIs. When demand is many times supply, allotment becomes a rationing exercise governed by SEBI rules.

Importantly, subscription numbers are reported separately for each category. The headline "subscribed 80 times" figure can mask very different demand across categories — for example, QIB at 200x, NII at 60x and retail at 4x. The category-wise breakdown is what determines actual allotment outcomes.

The three allotment categories

SEBI mandates that book-built mainboard IPOs reserve a fixed percentage of the offering for each investor category:

• Retail Individual Investor (RII) — 35%: Individuals applying up to ₹2,00,000. Allotment is by lottery in oversubscribed cases. Each application carries equal probability regardless of lot count.
• Non-Institutional Investor (NII / HNI) — 15%: Individuals and entities applying above ₹2,00,000. Since April 2022, this is split into two sub-buckets: small HNI (₹2-10 lakh, lottery-based, two-thirds of NII) and big HNI (above ₹10 lakh, proportionate allotment, one-third of NII).
• Qualified Institutional Buyer (QIB) — 50%: Mutual funds, FPIs, banks, insurance companies, pension funds, and similar institutional investors. Up to 60% of the QIB portion can be allocated to anchor investors one day before the issue opens.
• Employee reservation — up to 5%: Optional. If the company offers it, employees may receive an additional discount of up to 10% on the issue price. The employee bucket uses lottery-based allotment if oversubscribed.

For book-built issues that fail to meet QIB minimum subscription (75% of the QIB portion), the entire issue is withdrawn — even if retail demand is overwhelming. This is one of the structural safeguards SEBI has built into the system.

The retail lottery system: SEBI's October 2012 reform

Before October 2012, retail allotment in oversubscribed IPOs was done on a proportionate basis — each retail applicant received a fraction of what they applied for. This penalised small retail applicants, who often ended up with single-share allotments that they could not sell efficiently because of brokerage minimums and settlement frictions.

SEBI fundamentally restructured retail allotment with effect from October 2012. The new rule mandates that in any oversubscribed retail category, the minimum allotment must be one lot — and every successful applicant receives at least one lot. If the number of lots in the retail bucket exceeds the number of applications, every applicant receives one lot and any remaining shares are distributed proportionately. If oversubscription is such that not every applicant can receive one lot, a computerised lottery determines the winners.

The implication is profound for retail strategy: applying for multiple lots in a heavily oversubscribed retail category does not increase your chance of allotment. Each application is treated as one entry. A retail applicant who bids for one lot (say ₹15,000) and one who bids for the maximum 14 lots (say ₹2,00,000) have the same probability of winning the lottery in a 50x-oversubscribed retail category — but the larger applicant has ₹1.85 lakh more blocked for the duration of the issue.

Maximum one-lot guarantee

The 2012 reform ensures that in mathematical terms, no retail application receives less than one full lot. This eliminates the earlier problem of receiving a useless 1-2 share allotment. It also means that in moderately oversubscribed retail categories (say 1.5x), every applicant gets one lot and the remaining shares are distributed pro-rata as additional lots.

Mathematically: if the retail bucket holds N lots and there are A applications, then if A ≤ N, every applicant gets one lot and the surplus N - A is distributed proportionately as additional lots. If A > N, only N applicants are randomly selected to receive one lot each, and the remaining A - N applicants receive nothing.

How bidding ranges affect allotment

The price band determines the range of valid bid prices, but retail allotment outcomes depend mainly on whether your bid is eligible — meaning your bid price equals or exceeds the final discovered cut-off price.

Most retail investors bid at "cut-off," which is functionally equivalent to bidding at the cap price of the band. A cut-off bid is always considered eligible. Bidding at the floor price of the band is risky because if the final cut-off is set at the cap (which it usually is in oversubscribed issues), your bid will not be considered eligible at all and you will receive no allotment.

For HNIs, however, choosing the price tactically can occasionally matter — bidding at the cap is the safest choice; bidding below the discovered price disqualifies the application.

The ASBA process

ASBA, which stands for Application Supported by Blocked Amount, is the SEBI-mandated framework for IPO applications. Under ASBA, the bid amount is blockedin the applicant's bank account but not debited until allotment. Earlier, applicants had to write cheques or transfer money out, which created significant float for issuers and friction for investors who had to chase refunds. ASBA eliminated those problems.

ASBA works through Self-Certified Syndicate Banks (SCSBs) — banks authorised by SEBI to handle IPO blocking. When you submit an IPO bid, your application carries instructions to your SCSB to block the bid amount. The bank places a hold on those funds — they remain in your account, continue to earn interest (in savings accounts), but cannot be used or withdrawn until the block is released.

UPI mandate route for retail

Since 2019, retail IPO applications flow primarily through the UPI mandate route, which combines ASBA and UPI:

1. The investor selects lots and bid price (or cut-off) in the broker app or online IPO platform.
2. The investor enters their UPI Virtual Payment Address (e.g. yourname@upi).
3. The IPO platform forwards the bid to the exchange and triggers a UPI mandate request to the investor's UPI app.
4. The investor opens the UPI app (Google Pay, PhonePe, BHIM, Paytm, the bank's own UPI app) and approves the mandate within the deadline — typically by 5:00 PM the next working day after submission.
5. On approval, the bid amount is blocked in the underlying bank account. The bid is now confirmed in the exchange order book.

A common cause of rejection is failing to approve the UPI mandate within the deadline. Set a reminder immediately after submitting the bid. Brokers typically also send push notifications and SMS reminders before expiry.

Refund and unblock timeline

Under the SEBI T+3 listing timeline that took effect for all mainboard IPOs from late 2023, the post-bidding sequence is compressed:

• Issue closure: Day T (e.g. Friday).
• Basis of allotment finalised: Approximately T+1 working day.
• Unblocking of non-allotted funds:By T+1 to T+2 working days. The bank releases the blocked amount in the applicant's account automatically.
• Credit of allotted shares to demat: By T+2 working days.
• Listing on NSE and BSE: T+3 working days.

Because the funds were never debited, there is no "refund" in the traditional sense — the bank simply lifts the hold and the money becomes spendable again. If you applied through a savings account, the blocked amount continues to earn interest at the savings rate during the block period.

Partial allotment scenarios

Partial allotment in the retail category is uncommon but possible in specific situations:

• Retail subscribed less than 1x: Every applicant gets the full quantity they bid for, no lottery is needed. This is rare for high-profile IPOs.
• Retail subscribed between 1x and (1 + spillover) x: Every applicant gets one lot, and the surplus is distributed pro-rata as additional lots above one. So if you applied for 5 lots and the proportionate factor is 1.4x, you would get 1 lot (guaranteed) plus an additional approximately 0.4 lots which rounds based on lot-size rules.
• Retail heavily oversubscribed: Lottery picks winners; each winner gets exactly one lot. Non-winners receive no shares.
• HNI big bucket (above ₹10 lakh): Proportionate allotment based on the oversubscription factor. If 10x oversubscribed, each applicant gets 1/10th of their applied quantity, rounded to nearest lot.

How to check allotment status

Allotment status is published by the registrar on or around the basis-of-allotment date. India's three major IPO registrars are:

• Link Intime India: linkintime.co.in — handles a large share of mainboard IPOs.
• KFin Technologies (formerly Karvy Fintech): kfintech.com — handles many large issues.
• Bigshare Services: bigshareonline.com — common for SME issues and select mainboard IPOs.

The registrar for any specific IPO is named in the RHP and on the IPO information page. Once allotment is finalised, you can check status using:

• The application number from your bid acknowledgement.
• Your PAN.
• Your demat client ID and DP ID.

The same information is also accessible on the BSE website (Investor Services > Status of Issue Application) for any mainboard IPO. Many brokers send push notifications when allotment results are out.

What happens to your money if not allotted

If you are not allotted any shares, your bank automatically releases the block on the bid amount within the T+1 to T+2 window. You do not need to file any request. The money was never debited; it was only held. Once unblocked, the funds are immediately available for any other use.

For investors who used a savings account for the application, the blocked amount earned regular savings interest during the block period. There is no opportunity loss beyond the few days the money was unavailable for spending.

One PAN, one application: SEBI's anti-duplication rule

A common historical practice was for retail investors to submit multiple applications under different demat accounts in the family to increase total chances. Under current SEBI rules, every IPO application is uniquely identified by the applicant's PAN. The registrar runs a de-duplication exercise across all applications: if the same PAN appears in multiple applications, all of them are rejected.

However, separate family members with their own PANs (spouse, parents, adult children) can each apply legitimately from their own demat and bank accounts. This is fully compliant — what is not allowed is multiple applications under the same PAN, or applications under PANs that do not genuinely belong to the underlying applicant. Submitting fraudulent applications can lead to penalties and is detected by the registrar's automated checks.

Strategy implications for retail

Drawing the practical takeaways from the rules:

• For oversubscribed mainboard IPOs, applying for one lot maximises return on blocked capital — extra lots do not increase allotment probability.
• Always bid at cut-off unless you have a specific reason to bid below the cap.
• Family members with their own PANs and accounts can each apply once, multiplying household chances legitimately.
• Approve the UPI mandate within the deadline — failure to do so is the most common cause of bid rejection.
• For SME issues, the structure differs significantly. See our dedicated guide at SME IPO in India.

Build the foundation

Allotment is only one piece of the IPO process. For the full mechanics from DRHP to listing, see our step-by-step guide on how IPOs work in India. For a primer covering the basics, see IPO guide for India. And before applying, ensure you have set up the underlying accounts via our how to open a demat account guide.