How to Increase Chances of Getting Allotment, Shares in IPO: Five Tips
Oversubscribed IPOs mean investors are willing to invest in the shares of a company having promising business growth prospects and can give lucrative returns in the stock market. And in such cases, most of the IPO applicants including retail investors not get the allotment and become disappointed with the money returned to their account.
If you are one of them not getting the shares in IPOs, you need to read this article to know how to ensure IPO allotment. When an IPO is oversubscribed multiple times, the chances are very low, but if you follow the rules discussed below you will maximize your chances of getting an allotment and enjoy lucrative returns in the short term.
5 Tricks & Tips for IPO Allotment
1. Fill the Correct Details in the Form
The first criterion for rejecting IPO applications is incomplete or mismatched information provided in the form. So make sure while filling out the IPO application form to fill in all the details like your name, PAN & Demat Number etc. to become eligible.
2. Use Multiple Demat Accounts
You cannot apply multiple applications in an IPO using the same PAN number, if you do this, your first application could be also rejected. But you can open multiple demat accounts in the name of your family members and friends.
Yes, applying through multiple accounts increases the change of allotment significantly in case of an oversubscribed IPO. For example, if an IPO is oversubscribed 5 times, your chances of getting the allotment are 20%. But if you apply in the IPO using 5 family members' names, there is a high chance that you will get an allotment in any of the applications.
3. Always Bid at Cut-off Price
IPOs offered with the book-building process have price bands and you have to bid for either bid for upper band limit or opt for a cut-off price. If you bid at a lower bid price your application could be rejected or would be not eligible for the allotment.
4. Avoid Last Moment Subscription
Some investors wait for the subscription levels in HNI, QIB and retail categories before placing their bids. If investors found the good response, they also complete their bidding on the last day. But if you are going to apply it on the last day it might cause a few issues like your bank account or net banking not responding due to HNI and QIB high subscriptions.
5. Buy Shares of Parent Company
Yes, this trick could be also workable if the IPO issuing company's parent or holding company is already listed and giving a reservation to existing shareholders. If you have a few even a single share of a parenting company you would be eligible to apply for an IPO and sometimes IPOs are offered at a discounted price to existing shareholders.
Reason for Not Getting IPO Allotment:
- Your application was not considered valid i.e. invalid PAN No. or invalid demat account number or multiple applications submitted from the same name.
- Your name was not selected in the lucky draw for the allocation of shares (in case of a huge over-subscription).
Let me tell you one thing, in oversubscribed IPOs, it is not confirmed that you will get the allotment of shares. As there are different types of allotment criteria, few of them follow the lucky draw and few companies go through the Pro-rata basis to make sure every investor can assuredly get the same amount of share into their demat account.
In fact, the lucky draw is the most common reason and applied to 90% of the applicants for not getting shares. In all good IPOs, due to oversubscription the lucky draw process is followed and all investors don't get allotment or get full allotment.