Buying an IPO? Here’s How To Increase Chances Of Receiving Share Allocation

Are you planning to dive into the initial public offering (IPO) scene and want to be the lucky one with a share allotment? Well, it is said that share allotment in IPO has divine intervention and you cannot just sit and hope for the miracle to happen.  While it is true that it is like a lottery you can still take care of some simple things to increase your chances of getting allotment in an IPO investment. Yes, there is no foolproof method to do that you need to get some basics right. Take some steps which can feed the algorithm with the best information regarding your candidature but make sure to remain within the legal boundaries and not to cross any ethical limit. Here’s how you can improve your chances of getting an IPO allotment:

1. Avoid lengthy applications: This is the first step. Make sure you don’t have a large-sized application. When there is an oversubscription of an IPO, the focus is on ensuring that all applicants get allotment from at least one lot. After that, they go for additional allotments hence filing 10 applications, and not one, cannot guarantee any advantage. However, the strategy of lengthy applications may work for large IPOs which can get full subscriptions in the retail portion.

Also Read: Investing in Stocks vs Mutual Funds: A Tale of Risk and Reward

2. Use more apps for Demat accounts: Multiple demat accounts tend to get rejected, so stay away from them. Alternatively, place one lot under each family member's name. Since, in the event of an oversubscription everyone will be eligible to receive at least one lot. Thereby, you will have a higher chance of receiving an allotment. Remember not to use multiple demat accounts.

3. Be an early bird, and avoid last-minute rush: Generally, brokers do not accept retail applications after midday, even though the exchanges accept IPO bids until 5 PM on the last day. The broker counter won’t even accept your application, let alone upload it if you send it post midday. Try to invest during the first two days of any three-day IPO. Applications submitted on the last day may lose out in case a technical issue happens.

4. Apply in the shareholder quota: Applying for the shareholder quota offers you a better chance of allotment as there is less competition. It is an easy and wise method to increase your IPO allotment chance. Another option is purchasing parent company shares. Even one share is enough. By doing so, you can automatically join the shareholder quota and increase your chances of receiving an allotment.

 5. Go through the complete process: You need to understand the process thoroughly and complete it. Normally ASBA and UPI are the IPO mandates these days which means the mandate request needs to be approved by you. Many times subscribers forget to follow up after applying for the IPO and give approval to the mandate request without which the IPO application generally gets rejected.

6. Verify every detail: It is a mundane process but check every detail to the last full stop. Get them verified to avoid any conflict. Carefully fill out the IPO form. Check every detail viz., name, demat account number, category etc., as many times IPO applications got rejected due to basic errors.

7. Bid Price: Check the price band of the IPO. If the band is Rs 180-200 and you bid at 190 while the actual price comes in at 195 then you will lose your chance for share allotment. If the IPO is creating a lot of buzz then go for the upper limit or the ceiling price.

These steps will make sure that you have done the best you can and hope that the IPO gods will smile on you.