IPO Allotment Process: How It Actually Works

Almost every Indian who has applied for an IPO has asked the same question on basis-of-allotment day. Why did my brother-in-law get one lot when I applied for the same issue and got nothing?

It feels unfair because both of you followed exactly the same steps. The frustrating part is that the rejection does not mean your application was wrong — in a hot IPO, it often only means there were more valid applicants than one-lot seats.

The full answer is not luck in the casual sense. It is a SEBI-defined process that most retail investors have never had explained without jargon. Once you understand it, the way your family applies for IPOs changes the next morning.

What allotment actually is

When you apply for an IPO (an Initial Public Offering, when a company sells its shares to the public for the first time), you are not buying shares. You are placing a bid that says, "I am willing to take this many lots at the cut-off price, and here is the money in my bank that should be blocked against it."

The cut-off price is just a checkbox: it means you accept whatever final price the exchanges set inside the announced price band, so your bid does not get rejected for being too low. ASBA — Application Supported by Blocked Amount — is the locking part. Think of it as a drawer inside your own bank account that the bank locks shut on the issue closing day. The money is reserved, but it has not left the drawer yet.

Across India, lakhs of other retail investors do the same thing during the three to four days the issue stays open. In a popular IPO, the total demand for retail shares usually exceeds the shares reserved for retail by several times.

Allotment is the step where the registrar — a SEBI-licensed company that runs the back office of the IPO — takes all those valid bids, applies SEBI's category-by-category rules, runs a computer program and decides exactly which applicants get how many shares. The unbought portion of your money is unblocked, and the allotted shares are credited to your demat account before listing.

The registrar is most often KFin Technologies or MUFG Intime India (formerly Link Intime), though other SEBI-licensed registrars exist — always check the RHP (Red Herring Prospectus, the detailed offer document a company files before its IPO) or the exchange page for the specific IPO. Its job is the same as a returning officer at an election. Count the votes, apply the rule book, publish the result.

The allotment timeline, day by day

The visible part of the modern IPO calendar is short. Since SEBI's 2023 circular cut the listing timeline from T+6 to T+3, the whole stretch from issue close to listing day runs in three working days for mainboard equity IPOs.

1. T+0

   Issue closes at 5 PM

   Last bids are accepted by the broker or bank. ASBA has already blocked your application amount in your bank. The exchanges, NSE and BSE, hand over the consolidated bid book to the registrar by the end of the day.

2. T+1

   Basis of allotment finalised

   The registrar reconciles bids against demat accounts and PANs. Duplicate-PAN applications and bids where the bank did not successfully block the money are thrown out. Only valid bids enter the allotment pool. For retail, the SEBI one-lot-first rule plus the computerised draw runs here. The status page goes live on the registrar's site by the end of the day.

3. T+2

   Refunds unblocked, shares credited to demat

   The registrar sends unblock instructions for the rejected and unalloted portion, so your bank lifts the ASBA hold and the money becomes spendable again. Successful applicants are debited only for the allotted lots, and those shares are credited to the demat account.

4. T+3

   Listing day

   The stock opens on NSE and BSE in a pre-open call auction window, and from that minute the price is set by the open market, not the company.

If you have applied through Zerodha, Groww or Upstox, the broker app pushes a notification on basis-of-allotment day with the result. The same evening the bank SMS will confirm whether your blocked money has been released or partly debited.

The whole process is governed by SEBI's ICDR Regulations and a separate basis-of-allotment framework. The exchanges audit every IPO allotment after the fact, and registrars who get it wrong face penalties. For any specific IPO, the issue's own timetable in the RHP is the source of truth — use it instead of "usually six days" rules of thumb that no longer hold.

How each category gets allotted

An Indian IPO does not run one big lottery for everyone. SEBI splits the issue into three buckets, and each bucket has its own allotment rule. Knowing which rule applies to you is the difference between guessing and understanding.

In many profitable mainboard book-built IPOs, the split is 50 percent QIB, 15 percent NII, 35 percent retail. But the split is not universal — for some issues (typically loss-making companies that need institutional underwriting), SEBI rules force a 75 / 15 / 10 split that leaves only 10 percent for retail. Always check the Issue Structure section of the RHP for the exact reservation, because that single number sets the size of the retail bucket and therefore everyone's odds.

QIB. Qualified Institutional Buyers — mutual funds, insurance companies, sovereign funds — are allotted on a proportionate basis (you get a share in proportion to the size of your valid bid). If QIB demand is three times the QIB reservation, each institution gets roughly one-third of what it bid for.

NII. Non-Institutional Investors, anyone bidding above ₹2 lakh, are split into two sub-buckets after SEBI's 2022 reform: bids of ₹2 to ₹10 lakh (the sNII sub-bucket) and bids above ₹10 lakh (the bNII sub-bucket). Each sub-bucket has its own SEBI rule; the exact allotment mechanism for an oversubscribed sub-bucket is set out in the RHP for that issue, and you should read it for the IPO you are applying to instead of trusting any one-line summary.

Retail. Retail is the only category that uses the one-lot-first plus lottery model. Every valid retail applicant is treated as a single ticket holder, regardless of whether they applied for one lot or thirteen.

The retail rule exists because SEBI wants the small investor to have at least the same chance as a neighbour with twice the capital. A proportionate retail rule would mean the person bidding thirteen lots gets thirteen times the shares of the person bidding one. The one-lot-first rule deliberately flattens that.

It also explains why "applying for the maximum" is one of the most common and most pointless habits in Indian IPO investing. The rule book was written specifically to make that strategy not work.

The lottery math and what subscription numbers mean

The first thing to ask, before any maths, is the question SEBI's rule book asks: are there enough one-lot seats for every valid retail applicant?

Take the number of shares reserved for retail and divide by the lot size — that is the number of one-lot seats. Then look at the number of valid retail applications, not the subscription multiple. Compare the two.

Path A — enough seats for everyone. If valid applicants are fewer than the available one-lot seats, the registrar gives one lot to every valid applicant first. The shares left over are then divided proportionate to bid size, so a person who bid for three lots may walk away with two or three. Everyone wins something.

Path B — not enough seats. When valid applicants outnumber available lots, the one-lot-first rule forces a tougher cut. The registrar's computer runs a random draw to decide which applicants get the one lot, and the rest get zero. Whether you bid for one lot or thirteen, the result is one or zero.

Most retail investors only see Path B because most popular IPOs are oversubscribed several times in retail.

The shortcut you will hear most often is: retail allotment odds = 1 divided by the retail subscription multiple. Two times oversubscribed, one-in-two odds. Five times, one in five. Twenty times, one in twenty.

Treat this as a rough shortcut, not an exact answer. The subscription multiple is measured in shares bid, not in number of applicants — so if many people are bidding multiple lots, the inverse can understate or distort actual one-lot odds. The exact odds depend on the number of valid retail applicants and the number of one-lot seats available, both of which appear in the basis-of-allotment document published after the issue.

A real example: the Bajaj Housing Finance IPO in September 2024 was oversubscribed roughly 7 times in retail. By the shortcut, that meant about one in seven valid retail applicants got one lot, and applying for thirteen lots gave no improvement to that probability.

What actually improves your odds

Once the one-lot-first rule is understood, the question for a retail investor changes. It is no longer "how do I bid more?". It is "how many independent retail tickets does my household legally have?".

One lot per PAN, across every adult in the family. Each unique PAN is a separate retail applicant in SEBI's eyes. A household with four adults, each holding a PAN, a demat account and a bank account, has four tickets in the lottery instead of one.

Use one valid one-lot application per unique PAN. With four adult PANs that means four applications — not more — and the capital you would have locked in a single oversized bid largely stays unblocked in your bank.

The maths is gentler than "four PANs, four times the chance". If one PAN's chance of allotment is p, then n independent family PANs give a probability of at least one allotment of 1 − (1 − p)ⁿ. That is close to n times p only when p is small — it is never a literal four-fold jump for four PANs.

Four PANs lift the household's chance from about 14 percent to about 46 percent — a real, worthwhile jump, but roughly three times, not four. The smaller p is (the more heavily oversubscribed the IPO), the closer the gain gets to a clean multiple.

Multiple applications from one PAN do not work. If you apply for the same IPO twice from your own PAN, both applications are automatically rejected at the validation stage. SEBI's reconciliation specifically catches this and treats it as a process violation.

Stick to cut-off price. Retail investors get the choice of bidding at any price in the band or ticking "cut-off". A bid below the final cut-off price is invalid and gets thrown out of the allotment pool entirely. Cut-off keeps you in the pool no matter where the final price lands.

Apply through ASBA, not third-party schemes. Some loan-against-IPO products and grey-market exit deals offered by unregistered intermediaries are at best inefficient and at worst illegal. ASBA through your own bank or registered broker is the only retail route SEBI allows, and it keeps your money in your own bank until allotment day.

Check the registrar site, not the rumour mill. The official allotment status is on the registrar's website, with mirrors on NSE, BSE and broker apps like Zerodha Console and Groww. WhatsApp screenshots floating around on T+2 are usually wrong, often deliberately so.

So should you even apply?

The allotment rules only matter once you have decided an IPO is worth the application. That decision deserves more thought than the lottery does. Run this short check before you block a single rupee.