IPO Allotment Process & Timing All Important Details 2021

The initial public offer is a practice in which a private company makes the shares of the company available for buying to the general public. This offer is accessible for bid participants in the authorized banks and online. However, Let’s understand the IPO allotment process in detail.

IPO Allotment Process

If there is a minimum amount and also the lot size to be tendered by an investor of any one category it will never happen that all investors are allocated their shares in case of over subscription.

The reason is that when the IPO is released it comes to fixed size, which means that there are factors, such as the size of the IPO & the number of shares that are issued.

The firm always defines the quota allotted for each kind of investor in the draft Red Herring Prospectus (DRHP), including retailers, institutional buyers, Non-institutional buyers, employees & shareholders of parent company etc.

Over-subscription

The firm’s prospects are greater demand for its share and also the underwriter can modify the price of the issue in order to raise more cash compared to the anticipated issue size.

Even if the fund has received bids for three times the amount of shares it was intended for, the issue is said to have been oversubscribed by three times.

In instances when the public issue is raised, the firm can even increase the issue price and sell a greater number of stocks than initially expected.

When over-subscribing, the allocation of shares for each different kind of investor varies. thus this will be adjusted for each category of subscriber.

Originally published at https://profitmust.com on August 9, 2021.