IPO Learning Guide
How IPO Allotment Works in India – Complete Process Explained (2026)
IPO allotment is the process through which shares are distributed to investors after the IPO bidding period closes. When demand exceeds supply (oversubscription), allotment follows structured rules defined by stock exchanges and SEBI regulations.
Investors tracking IPO demand through subscription ratios and IPO GMP often want to understand how shares are actually allocated. This guide explains the complete allotment mechanism for Retail, HNI, and QIB categories.
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IPO Allotment Timeline
- IPO Opens for subscription
- IPO Closes after bidding period
- Basis of Allotment finalised
- Shares credited to Demat accounts
- Refunds initiated for non-allottees
- Listing on stock exchange
You can track upcoming IPO timelines via the IPO Calendar.
IPO Allotment Categories
IPO shares are divided into structured categories:
- Retail Individual Investors (RII)
- High Net-worth Individuals (HNI / NII)
- Qualified Institutional Buyers (QIB)
- Anchor Investors (in certain IPOs)
How Retail IPO Allotment Works
In the retail category, allotment is often done through a lottery system when the IPO is oversubscribed. The goal is to ensure equitable distribution among individual investors.
If an IPO is subscribed 10x in retail, only a fraction of applicants will receive one lot. Preference is typically given to ensuring maximum investors receive at least one lot.
How HNI (NII) Allotment Works
HNI allotment is proportional rather than lottery-based. Shares are allocated in proportion to the number of shares applied for.
If HNI subscription is 5x, applicants may receive approximately 1/5th of their requested quantity.
How QIB Allotment Works
QIB allotment is entirely proportionate. Institutional investors receive allocations based on their application size relative to total institutional demand.
What is Basis of Allotment?
Basis of Allotment is the final allocation document approved by the stock exchange. It defines how shares were distributed across categories.
Refund Process in IPO
If shares are not allotted, blocked funds in ASBA are released back to the investor’s bank account. Refunds typically happen before listing.
Common IPO Allotment Scenarios
- Undersubscribed IPO – full allotment
- Moderately oversubscribed – partial allotment
- Highly oversubscribed – lottery (retail)
Advanced Insights: Probability in Oversubscribed IPOs
Retail allotment probability can be estimated by dividing total retail lots available by total retail applications. However, the actual allocation depends on valid bids and category rules.
IPO Allotment Probability Calculation Logic
You can estimate retail allotment probability using a simple formula:
Example:
- Retail Lots: 15,000
- Applications: 1,50,000
- Probability ≈ 10%
This estimation assumes uniform lot distribution and valid applications. Actual allotment may vary depending on category adjustments.
SME IPO Allotment Differences
SME IPOs often have larger lot sizes and lower liquidity. Allotment may still follow structured distribution but can be impacted by smaller investor pools.
Detailed Retail Lottery Example (With Math)
Suppose an IPO has 10,00,000 shares reserved for retail investors, and the lot size is 50 shares. This means 20,000 retail lots are available.
If 2,00,000 valid retail applications are received, the IPO is oversubscribed 10x in the retail category.
Since only 20,000 lots are available but 2,00,000 applicants applied, the probability of receiving one lot becomes approximately:
In such cases, allotment is conducted through a computerized lottery system approved by the stock exchange.
Allotment vs GMP vs Listing – What’s the Difference?
IPO allotment, Grey Market Premium (GMP), and listing gains are often confused but represent different stages of an IPO lifecycle.
- Allotment: Distribution of shares after IPO closes.
- GMP: Unofficial premium indicating perceived demand before listing.
- Listing: First day of trading on stock exchange.
GMP reflects sentiment, allotment reflects allocation rules, and listing reflects real market pricing based on supply-demand.
Real Oversubscription Case Scenario
In many popular IPOs, retail subscription can exceed 30x or even 50x. In such scenarios, only a small percentage of applicants receive one minimum lot.
- Retail category uses lottery-based allocation
- HNI category follows proportionate allocation
- QIB category uses full proportionate distribution
Highly oversubscribed IPOs significantly reduce retail allotment probability despite strong market sentiment.
Step-by-Step ASBA Process Explained
ASBA (Application Supported by Blocked Amount) is the mechanism used for IPO applications in India.
- Investor applies for IPO through bank or broker.
- Application amount is blocked in bank account.
- If shares are allotted, amount is debited.
- If not allotted, blocked amount is released.
This system ensures investor funds remain secure until final allotment confirmation.
How to Check IPO Allotment Status
Investors can check allotment status through the official registrar website or stock exchange portals after the allotment date.
- Visit registrar website
- Select IPO name
- Enter PAN / Application number
- View allotment result
You can also monitor IPO timelines via the IPO Calendar.
Frequently Asked Questions (FAQs)
How is IPO allotment decided?
Allotment is determined based on category subscription and exchange-approved allocation rules.
Is IPO allotment random?
In retail oversubscription cases, allotment may be through a computerized lottery system.
When is IPO allotment date?
Typically 2–3 working days after IPO closure.