Tips to Increase Your Chances of IPO Allotment in India

Participating in a new IPO can be an exciting opportunity for investors looking to enter the market early. However, with the growing popularity of IPOs, the chances of getting an allotment have become increasingly competitive. If you’re serious about increasing your odds, it’s essential to understand the process and apply some tried-and-true strategies. This guide will help you navigate the IPO allotment process with practical tips that you can easily implement to improve your chances.

Understanding the Basics: What is a Demat Account?

Before diving into the tips, it’s crucial to understand what a demat account is and why it’s essential for participating in an IPO. A Demat account, short for a Dematerialised account, must hold shares electronically. This account simplifies buying, selling, and managing shares without dealing with physical certificates. Without a demat account, you cannot participate in a new IPO. Ensure your account is active and linked to your trading account to ensure a smooth application process.

Apply Through Multiple Applications Using Family Accounts

One practical strategy to increase your chances of getting an IPO allotment is to apply through multiple Demat accounts under different family members’ names. The IPO allotment process is based on a lottery system, meaning submitting more applications increases your chances. However, ensure each application is made at the minimum lot size to maximise the number of applications within your budget.

Opt for the Minimum Bid Lot Size

When applying for a new IPO, you can choose to apply for one or multiple lots of shares. Many investors believe that applying for multiple lots will increase their chances of getting an allotment. 

However, IPO allotments are often pro-rata, and applying for the minimum lot size can sometimes increase your chances. This strategy works because the allotment system ensures that as many investors as possible receive at least one lot.

Avoid Last-Minute Applications

Timing is another crucial factor in the IPO allotment process. Many investors tend to submit their applications on the last day, which can lead to delays or technical glitches. To avoid this, apply early, within the first two days of the IPO opening. This ensures that your application is processed smoothly without any last-minute rush.

Ensure Sufficient Funds in Your Bank Account

Your IPO application will only be considered if sufficient funds are in your bank account to cover the bid amount. The application money is blocked in your account through the ASBA (Application Supported by Blocked Amount) process until the allotment is finalised. You need more funds to ensure your application is accepted. To avoid this, double-check your account balance before submitting your application.

Avoid Technical Rejections by Double-Checking Details

These errors could include incorrect PAN details, mismatched bank details, or an inactive Demat account. To avoid these issues, carefully fill out the application form and double-check all the details before submission. Even a small mistake can result in your application being rejected.

Utilise the ASBA Facility Effectively

The ASBA facility allows investors to apply for an IPO without having the bid amount debited immediately from their account. Instead, the amount is blocked until the shares are allotted. Using the ASBA facility through your bank’s net banking service ensures your funds are correctly blocked, and your application is properly processed. Make sure to opt for this facility to avoid unnecessary delays or complications.

Opt for the Shareholder or Employee Quota if Eligible

Some IPOs offer a special quota for existing shareholders or employees of the company. If you are eligible under these categories, applying through these reserved quotas can increase your chances of allotment. These quotas often have fewer applicants, so the competition is lower than the general category.

Monitor IPO Allotment Status and Refunds

The IPO registrar, usually a third-party firm, will publish the allotment status on its website. Monitoring this can help you stay informed about whether you have received an allotment. If you haven’t, the blocked funds will be refunded to your account. It’s important to monitor this process to ensure there are no discrepancies.

Apply in the Retail Investor Category

The IPO allotment process in India is divided into different categories, including Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs), and Retail Individual Investors (RIIs). If your investment size is within the retail investor category (typically up to ₹2 lakhs), apply under this category to improve your chances. The allotment in the retail category is often done on a lottery basis. With fewer applicants than the NII category, your chances of getting an allotment could be higher.

Conclusion

Securing an allotment in a new IPO in India requires more than luck. By understanding a demat account and following the practical tips outlined in this guide, you can significantly improve your chances of getting an allotment. Remember, careful planning and attention to detail are key to increasing your chances in this competitive process.