6 ways of increasing your chance of getting an IPO Allotment

Dear Reader,

Over the past, year IPOs have become the talk of the town and everyone has been investing in them. Most people feel that IPOs are a good way to make quick money in the short term through listing gains. But getting an IPO allotment is no joke especially if there is a lot of demand for the IPO. Today we will discuss some interesting points to keep in mind while applying for an IPO.

Do note that there is no guarantee of these methods as they simply help to improve the chances of allotment.

 1) Apply through ASBA

Since 1 January 2016, all IPO applications are mandatorily done through ASBA (Application Supported by Blocked Amount) mechanism.

ASBA is the best way to apply for an IPO. UPI is another option but sometimes due to high demand, you may face some technical issues. Another benefit of applying through ASBA is that you will get an email from NSE/BSE at the end of the day so you can be sure that your application is submitted successfully.

2) Apply at Cut-off Price                                                                                                                                                                                                                                                       Apply at the cut-off (highest) price of the IPO price band.

There is usually a price band from which one price has to be chosen. The bidder should either select the cut-off price option or enter the price band’s maximum price.

When IPO gets oversubscribed then the highest price will be used as the cutoff price. 

For example, the price band of Lodha Developers IPO is Rs 483 - 486 per share. If Lodha is oversubscribed, bids below INR 486 per share will not be considered in the allotment. Hence retail investors like yourself should bit at the cut-off price or the maximum price to increase your allotment chances.

3) Apply for Minimum Bid Lot

Only apply for 1 lot. As per rules if an IPO gets oversubscribed then retail investors can only get a maximum of 1 lot. So there is no advantage to applying for more than one lot from 1 account. 

SEBI’s current allotment process treats all retail applications (less than INR 2 Lakh) equally. There is no advantage of making a big application in case of over-subscription. Big applications only make sense in large IPOs or under-subscribed IPO.

4) Bid through Multiple Demat accounts

Applying for 5 lots from one Demat account has a lesser probability of allotment than applying for a single lot from 5 different Demat accounts. Thus, if you want to increase your chances of getting an IPO, then bid from multiple Demat accounts. You can apply from your family’s Demat accounts to get a higher chance of allotment.

An example to understand better:

-1 single lot from your Demat account.

-1 single lot from your mother’s Demat account.

-1 single lot from your father’s Demat account.

-1 single lot from your friend/girlfriend or wife’s Demat account.

You can have multiple bids. Keep in mind, Demat Accounts should not be linked to different Pan numbers. In simple words, you can’t make more than one application using the same Pan Card.

5) Verify All the Details

While applying for an IPO, enter your details carefully. Double-check your entered information.

• Enter your name as per pan card/bank account.

• Check your Demat account number.

• Check the category you are applying in like individual, employee, shareholder, HNI, etc.

Your application may get rejected because of the wrong information.

6) Buy a Share of the Parent/Holding Company

If the company launching the IPO is a subsidiary of any listed company then there is a high chance that there will be a shareholder quota to apply for the IPO of that company. Buy 1 share of the parent company and apply for IPO in shareholder quota.

Shareholder quota will have fewer applications compared to retail investor quota.

Some other myth busters

• IPO does not work on a first come first serve basis, it’s a computer lottery-based system, you can apply on the 2nd and 3rd day and still have the same chance.
• Grey Market Premium can change very fast, so it should not be the deciding point to apply for IPO
• If an IPO is listed for 3 to 5 days, there will be no priority given to people applied on Day 1. Applicants on any day will be treated the same. Many people use this advantage and watch carefully how the IPO gets subscribed till the last day and decide based on that.

Another tip:  If you are investing more than Rs.2 Lakh, you fall under HNI (High Net-worth Individual) category. If you decide to invest more than Rs.2 Lakhs and if the RII category is over-subscribed compared to HNI, then investing in the HNI category can be considered.

These are simple yet effective strategies through which you can increase your chance of getting an IPO allotment. 

If you would like assistance in applying for IPOs and selecting the right ones, do feel free to get in touch with us.

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