When an Initial Public Offering (IPO) closes with high demand, determining how shares are distributed becomes critical. This is managed through the basis of allotment, which is a structured framework used by the IPO registrar to allocate shares equitably across various investor categories.
Understanding this process clarifies how oversubscription triggers lottery systems, outlines the administrative journey from application to account credit, and explains why even a technically flawless application may not always result in a successful share allotment.
Key Takeaways
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The basis of allotment explains how IPO shares are distributed after the bidding period ends.
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It is finalised after valid applications, subscription levels, and investor categories are reviewed.
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Investors can check IPO allotment status through the registrar, stock exchange, or broker platform.
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Not receiving shares does not always mean an application error; it can simply mean demand was much higher than supply.
What Is Basis of Allotment?
When a company is closing an IPO, the registrar of the IPO uses a basis of allotment to decide how IPO shares are distributed among applicants. Once the IPO closes, the registrar reviews all bids and determines the subscription levels, and prepares an unbiased list of shareholders, as per the rules mentioned in IPO documents and available market regulations.
So, if a company going public issues 1 million shares, but receives 5 million applications, the IPO is considered oversubscribed. In that case, the basis of allotment decides how the 10 lakh shares will be distributed.
Read More About: What Is IPO?
Why Is Basis of Allotment Important in an IPO?
The basis of allotment serves as the rulebook that brings order to what could otherwise be a chaotic scramble for shares. Without it, investors might get a confused or biased idea about the distribution. To prevent that, this basis:
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Sets up a fair way to distribute shares when everyone's chasing more than is available.
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Lets investors see exactly how things played out category by category.
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Clears up a lot of the confusion that tends to follow once IPO results drop.
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Spells out whether you missed out because of oversubscription, a slip-up in your application, or something else entirely.
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Keeps things transparent between the issuer, the registrar, the stock exchanges, and you as an investor.
How Does the Basis of Allotment Process Work?
Once the IPO bidding window shuts, every application that came in now gets collected and put through a thorough check. Here's roughly how it typically goes:
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The registrar goes through every single IPO application that's come in.
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Any invalid or duplicate entries get weeded out along the way.
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What's left gets sorted into groups based on investor category.
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For a book-built IPO, the final issue price gets locked in.
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Shares then get allotted depending on how much demand there was in each category versus how many shares were actually available. However, the rules change if the retail category is oversubscribed. Instead of distributing shares proportionally based on how much you bid, a computerised lottery system takes over.
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Each investor's allotment status gets updated so they can check where they stand.
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Successful applicants see their shares land directly in their demat accounts.
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Anyone who didn't get an allotment has their blocked funds released back to them.
The SEBI Mandate: According to SEBI, the allotment framework must be designed to benefit the maximum number of unique applicants. Therefore, the goal is to give at least one minimum lot to as many individual investors as possible. Because of this, bidding for more shares does not give you an advantage in an oversubscribed retail segment. For instance, whether an investor bids for 1 lot or 13 lots, they have the exact same odds in the lottery, and winners will receive exactly one minimum lot.
Note: Under the ASBA process, your IPO application money never actually leaves your bank account. It just stays blocked until the allotment is finalized. Get allotted shares, and only that exact amount gets debited. Miss out, and the bank simply releases the hold, no questions asked.
Factors That Affect Basis of Allotment
Whether you actually get shares in an IPO depends on a mix of factors, and how the issue gets subscribed across different categories plays a big role in how it all shakes out. Some common factors consider:
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How oversubscribed the issue is: The more demand there is, the tougher your odds get.
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Which investor categories you fall into: Retail investors, Non-Institutional Investors, and Qualified Institutional Buyers all play by different allocation rules.
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Lot size: You can't apply for just one share; IPOs work in lots, so this shapes how allotment gets divided up.
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Your bid price: In a book-built issue, if you bid below the final issue price, you're out of the running for allotment.
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Whether your application checks out: Something as small as a wrong PAN number, mismatched demat details, incorrect bank info, or a mandate issue can knock you out of eligibility.
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How many valid applicants there are: Especially in the retail category, the more valid applicants start competing, the tighter the competition gets.
Check Out: Upcoming IPO
Basis of Allotment in Oversubscribed IPOs
An IPO is considered oversubscribed when more shares are applied for than are available.
If you're a retail investor, this usually means there's no guarantee you'll get an allotment.
When the retail portion pulls in more valid applications than issued lots, allotment typically shifts to a computerised lottery system that acts as the basis of allotment. And applying for extra lots doesn't necessarily boost your odds of landing them, because the system usually allots at least one of them to as many eligible retail applicants as possible, within what's available.
Bigger investor categories work a bit differently, often getting allotted proportionately within their own group. That's exactly why two people investing in the same IPO but sitting in different categories can get completely different outcomes.
Example of Basis of Allotment in an IPO
Say a company sets aside 1,00,000 shares for retail investors, with a fixed lot size of 50 shares. That means 2,000 retail lots are available for sale.
Now imagine 10,000 valid retail investors show up, each applying for at least one lot. The clear problem is that only 2,000 lots exist, but 10,000 people are eligible for them. Since there's obviously not enough to go around, the registrar typically runs a lottery to pick 2,000 lucky applicants, each walking away with one lot of 50 shares.
The other 8,000 applicants simply don't get shares this time, and the money that was blocked in their accounts gets released back to them, following the usual IPO and bank timelines.
This example lays out exactly why even a perfectly valid IPO application can still miss out on allotment. When demand massively overwhelms what's actually available in the retail quota, a certain part of the eligible population will end up without shares.
Read More About: IPO Process in India
How to Check IPO Basis of Allotment Status
Once the registrar wraps up the allotment process, you can go check your allotment status. There are a few ways to do this:
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Check the IPO registrar's website.
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Check the BSE or NSE's IPO allotment/status page, if it's available there.
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Log in to your broker or trading app.
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Keep an eye on bank or UPI mandate updates.
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Watch for a demat account credit confirmation once shares are allotted.
To actually pull up your status, you'll usually need your PAN, application number, demat account number, or DP/client ID. What exactly you need can vary a bit depending on which registrar handled the IPO.
If you got allotted shares, they'll show up in your demat account before the stock even lists. If you didn't, your blocked application amount gets released back to you.
Common Reasons for Not Receiving an IPO Allotment
There can be a handful of reasons for missing out on IPO shares, but the most common stem from oversubscription. Other than that, you can also lose out lots if:
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Your bid came in below the final issue price.
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Your UPI mandate didn't get approved in time.
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There was an error in your PAN or demat details.
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You submitted multiple applications under the same PAN.
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Your bank account, demat account, or application details didn't quite match up.
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The category you applied under saw way more demand than there were shares to go around.
Even if you do all of these right, you've got a massive pool of perfectly valid retail applications all fighting over a limited number of lots. So there's still a real chance you walk away without an allotment.
Basis of Allotment vs IPO Allotment Status
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Basis of Allotment |
IPO Allotment Status |
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Method used to distribute IPO shares |
Result of an individual application |
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Explains how shares were allotted |
Shows whether you received shares |
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Applies to the whole IPO issue |
Applies to one investor/application |
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Registrar, issuer, exchanges, investors |
Individual applicants |
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Retail allotment through lottery |
“Allotted” or “Not allotted” |
Conclusion
The basis of allotment helps investors understand what happens after an IPO closes. It explains how shares are distributed, why oversubscription can reduce allotment chances, and why a valid application may still receive no shares. Before applying for an IPO, investors should check the lot size, price band, category limits, subscription trend, and application details carefully. Allotment is only one part of IPO investing; the company’s fundamentals, valuation, risks, and listing expectations matter just as much.
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