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How to improve Allotment chances: 15 Tips for investing in IPO

Increasing your chances of IPO

In recent past, mainboard IPO has become a money making machine for regular investors, in which the shares of company floating the IPO generally trades at premium. The premium offering leads to a good return for individual investors for ex. Tata technologies IPO, which debut the bourses at 140% premium. Retail investors typically receive 35% of the issue size, but in select cases, SEBI may reserve 10% of the quota for retail investors and 75% for qualified institutional buyers. While there is no sure way to secure an allotment, the following approaches may help an investor improve their chances of getting an IPO allocation:

Bid at a Cut-Off Price

Often, companies floating an IPO use a book-building procedure to find the best stock price. The company calculates a price range within which investors can bid for the IPO issue. Most investors apply through a cut-off price, meaning they are willing to pay whatever price the company decides after the book-building process. In most cases, the upper price band is selected for IPO issuance, but if the decided price is less, then the extra amount is reimbursed back to the investor.

Approve the mandate request

First-time investors who apply for an IPO through brokers believe the task is complete upon applying. After applying for an IPO, investors receive a mandate request. They must approve the mandate so that the amount is blocked by the bank for the IPO. In the event that the mandate is not accepted, the application stands half-filled and the IPO application is cancelled. Thus, an investor must make sure that the mandate is accepted in due course.

Research and Due Diligence

Before investing in an IPO, thoroughly research the company going public. Understand its business model, financial health, competitive landscape, and growth prospects. Analyze the industry trends and the company's position within it. This information will not only help you make an informed investment decision but also demonstrate your genuine interest in the IPO.

Apply for a Higher Amount:

While there's no certainty that applying for a higher amount will guarantee an allotment, it might increase your chances. Many IPOs allocate shares on a proportionate basis, so applying for a larger number of shares may improve your odds.

Apply from Multiple Demat Accounts and PAN Cards:

Consider using multiple Demat accounts and PAN cards within your family to apply for the same IPO. However, be cautious and adhere to the regulatory guidelines.

 Apply for IPOs with Less Hype:

Popular IPOs often receive overwhelming demand, making it challenging to secure an allotment. Consider applying for IPOs that are relatively less hyped or not well-known. These IPOs may have lower demand, increasing your chances of getting allotted.

Use the UPI Mechanism:

IPO applications are now processed through the Unified Payments Interface (UPI). Ensure that your UPI ID is linked to your Demat account and is active. This streamlined process might improve your chances of a successful application.

Regularly Monitor IPO News and Updates:

Stay updated on IPO news and announcements. Follow financial news portals, official company announcements, and regulatory filings. Timely information can help you prepare for upcoming IPOs and make informed decisions.

Apply in the Retail Category:

Many IPOs have a separate category for retail investors with a cap on the investment amount. Applying in the retail category might increase your chances of allotment, as a certain percentage of shares are reserved for retail investors.

Participate in Pre-IPO Placements or Anchor Investors:

Some companies offer shares to institutional investors before the IPO, known as pre-IPO placements or anchor investments. If you have access to such opportunities through your broker, participating in these placements might increase your chances of getting allotted shares at discounted prices.

Understand the Grey Market Premium:

The grey market is an unofficial market where shares are traded before the official listing. The premium or discount in the grey market can provide insights into the demand for the IPO. While it's not a guaranteed indicator, a positive grey market premium might suggest higher chances of allotment.

Diversify Your IPO Applications:

Rather than concentrating on a single IPO, diversify your applications across multiple IPOs. This strategy spreads the risk and increases the likelihood of getting allotted shares in at least one of the IPOs you apply for.

Stay Informed About Regulatory Changes:

Regulations regarding IPOs and allotments may change, so stay informed about any updates from regulatory bodies. Adhering to the latest guidelines ensures that you don't miss out on any new opportunities or face unexpected hurdles.

 Monitor IPO Subscription Levels:

Keeps a close eye on the subscription levels during the IPO bidding period. Higher subscription levels might indicate strong demand, potentially lowering your chances of allotment. Conversely, lower subscription levels may suggest a less competitive scenario.

Avoid Last-Minute Rush:

Submit your IPO application well before the closing time. Last-minute rushes might lead to technical glitches or delays in processing your application, which could impact your chances of allotment.

Navigating the IPO process successfully requires a mix of comprehensive study, strategic planning, and keeping current on market conditions. While applying these tactics might enhance your chances, it's critical to understand the hazards associated with stock market investing. Diversification, continual learning, and a disciplined approach to investing are important long-term financial success elements.

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