IPO Allotment Process Explained: SEBI Rules, Lottery System & Categories
Learn exactly how SEBI determines IPO allotment — the lottery for retail investors, proportional allotment for HNI/QIB, and why your application may get rejected.
IPO Allotment Process: How SEBI Decides Who Gets Shares
Getting IPO allotment is a matter of rules, math, and sometimes luck. Here's exactly how it works.
Three Investor Categories
SEBI divides IPO applicants into three buckets, each with a reserved quota:
| Category | Who | Quota |
|---|---|---|
| QIB (Qualified Institutional Buyers) | Mutual funds, FIIs, insurance companies | Up to 50% |
| NII/HNI (Non-Institutional Investors) | Individuals applying above ₹2 lakh | 15% |
| RII (Retail Individual Investors) | Individuals applying up to ₹2 lakh | 35% |
Retail Allotment — The Lottery System
If the retail portion is oversubscribed:
- SEBI first ensures at least 1 lot is reserved per applicant
- If applicants > available lots, a computerized lottery decides who gets 1 lot
- The remaining lots (if any) are distributed proportionally
Example: If 10 lakh retail applicants apply and only 5 lakh lots are available, roughly 50% of applicants get 1 lot each via lottery.
This is why applying for more lots doesn't help if oversubscription is high — you still only get 1 lot maximum in the lottery.
HNI/NII Allotment — Proportional System
For HNI investors (above ₹2 lakh):
- Allotment is proportional to the amount applied
- No lottery — bigger application = more shares (proportionally)
- Subject to minimum allotment of 1 lot
QIB Allotment — Discretionary
QIBs are allocated proportionally. The company and BRLM have discretion within each sub-category (anchor investors, mutual funds, etc.).
Grounds for Application Rejection
Your application can be rejected even if you're in the lottery if:
- Multiple applications from same PAN
- Wrong or mismatched demat account details
- Third-party bank account used for ASBA
- Application amount below minimum lot value
- Inactive demat account
- Name/PAN mismatch with depository records
How to Maximize Allotment Chances (Legally)
- Apply from multiple family members' accounts — each member (parent, spouse, sibling) with their own PAN can apply separately
- Apply at cutoff price — removes risk of bid being rejected due to price band revision
- Use ASBA via UPI — reliable and fast
- Double-check demat details — wrong DP ID is a common rejection reason
Allotment Timeline
- T+0: Issue closes
- T+1: Basis of allotment finalized with stock exchange
- T+2: Shares credited / funds unblocked
- T+3: Listing and trading begins
Key Takeaway
Retail allotment is a lottery when oversubscribed — applying more lots doesn't help. The best strategy is applying from multiple valid family accounts. Always apply at cutoff price and verify your demat details before submitting.
Frequently Asked Questions
How is retail IPO allotment decided?
If oversubscribed, retail allotment is done by lottery. Each valid applicant gets either 1 lot or nothing — the minimum application lot is the standard unit.
What is the minimum lot size for retail IPO?
SEBI mandates the minimum application amount to be between ₹10,000 and ₹15,000. The exact lot size varies by IPO.
How do I improve my IPO allotment chances?
Apply from multiple family members' demat accounts (each with a separate PAN). Never submit multiple applications from the same PAN.
Comments