How To Get Allotment In IPO
18 January, 2024
In the fast-paced world of investment, one of the most sought-after opportunities is getting allotted shares in an Initial Public Offering (IPO). The allure of investing in a promising company during its early stages is undeniable. But with the soaring demand for IPOs, securing an allotment has become increasingly challenging. If you've ever wondered, "how to get an IPO allotment?" – you're not alone.
We'll explore effective strategies, insights and practical tips in this guide to improve your chances of getting allotted IPO shares. Whether you're an experienced investor refining your approach or a newcomer navigating the IPO landscape, read on to discover the key steps to increase your chances of IPO allotment.
Methods to increase chances of IPO allotment
Imagine being excited about a new IPO as an investor. However, your excitement quickly turns to disappointment as you find you didn't secure the shares you had hoped for.
If you're wondering how to get an IPO allotted successfully, follow these strategies:
Avoid big applications
In the share allotment process overseen by the SEBI (Securities and Exchange Board of India), retail applications under ₹2,00,000 are treated on an equal footing.
In scenarios where IPOs are oversubscribed, submitting a sizable application doesn't necessarily offer an advantage. Opting for minimum bids across multiple accounts is a wiser approach for oversubscribed IPOs. This approach allows you to invest extra funds in various IPOs and ensures your eligibility in cases of oversubscription.
For instance, even if you submit a substantial application of ₹1 lakh, it might not secure consideration if an oversubscription occurs. Sizeable applications are handy for large IPOs where the retail segment is more likely to remain undersubscribed.
Make multiple submissions using different Demat Accounts
To enhance your chances of IPO allotment, consider applying through multiple accounts for the same IPO. Instead of placing a maximum bid in a single account, opt for distributing your applications across various accounts. This strategy proves most impactful during IPOs with high demand and substantial subscription rates. By employing this method, you can significantly elevate your likelihood of being allotted shares in the IPO.
While opening multiple Demat Accounts and submitting several applications might seem complex, it's pretty straightforward. Although you can only use a single PAN number for all applications, you can still apply through different accounts. This is when enlisting the participation of family and friends becomes advantageous – by motivating them to submit applications on your behalf through their accounts.
As a result, you can harness the power of multiple Demat Accounts to substantially increase your chances of securing at least one allocation.
Opt for a cut-off price or higher price band bidding
Investors often mistake the bid price for the cut-off price. The 'cut-off price' reflects an investor's acceptance of the final company price established through the book-building process. By choosing this option, you're bidding at the highest price band.
Firms set a price range for bids during the book-building process. To clarify, the cut-off price agrees with the post-process price. When applying at the cut-off price, you're bidding at the highest point. If the price ends up lower, any extra amount paid is returned. Choosing it is essentially bidding at the peak.
To boost IPO chances, bid at the cut-off price. For instance, if the range is ₹600 - ₹650, the cut-off is ₹650. Bidding here enhances allocation. An oversubscribed IPO implies all bids are cut-off, and quoting lower eliminates allocation chances.
So, it's essential to grasp the nuances of IPO investing, including how to bid for an IPO, to make informed decisions and optimise your investment strategy.
Timely IPO subscription matters
To maximise your chances of a successful IPO subscription, it's advisable to apply on the initial or second day rather than waiting until the last moment. A late application can lead to potential issues. These could include unresponsive bank accounts due to high demand from High-Net-Worth Individuals (HNIs) and Qualified Institutional Buyers (QIBs), and other technical glitches.
Many investors monitor HNI and QIB subscription levels to inform their decisions. However, applying on the final day might expose you to challenges, risking missed investment opportunities. Secure your chances by avoiding last-minute applications.
Prevent errors in your IPO application
When completing IPO application forms, it's crucial not to hurry. You must accurately provide information such as the amount, name, DP account number, bank details, etc. Opting for the Application Supported by Blocked Amount (ASBA) method is the safest route for IPO application. Mistakes and inaccuracies in IPO forms have resulted in application rejections. To avoid such setbacks, it's imperative to carefully fill out IPO forms, double-checking all details for accuracy.
Enhance IPO strategy with parent company shares
While the previously mentioned techniques are versatile for various IPOs, this specific tactic may not be universally applicable. Nonetheless, when it does apply, it can be highly effective. Simply possessing a single share of the parent company in your Demat Account renders you eligible for participation in the IPO under the 'shareholder' category.
This strategy comes into play when the parent company of the IPO candidate is already listed on the stock exchange and reserves a portion for its shareholders. This arrangement significantly improves the likelihood of allocation within the shareholder category.
Furthermore, investors can bid in retail and shareholder categories, enhancing their chances of successful allocation.
Conclusion
In your journey to secure IPO allotments, leveraging these strategies can significantly enhance your success. Equipped with insights on how to get an IPO allotted and how to bid for an IPO, you're better prepared for the allocation game.
Make wise investment choices by opening a Demat Account with HDFC Bank now! Exploring the path to successful IPO participation? Begin by clicking here to initiate the Demat Account opening process with HDFC Bank today.
*Terms and conditions apply. This is an information communication from HDFC Bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks, read all the related documents carefully before investing.
