Allotment
Allotment is the process by which shares are formally distributed to successful IPO applicants after the subscription period closes, based on SEBI-prescribed rules for each investor category and the degree of oversubscription.
Allotment was the penultimate step in the IPO process, bridging the subscription period and the listing day. After the book-building window closed, the registrar to the IPO — a SEBI-registered intermediary appointed by the company — tallied all valid applications across categories, determined the final issue price (the cut-off price), rejected invalid applications (those with insufficient ASBA block, mismatched signatures, or duplicate applications), and allocated shares according to SEBI-prescribed rules.
For retail investors in an oversubscribed issue, SEBI's rules specified that allotment be done by draw of lots, with each valid applicant eligible for one lot. If the total subscription in the retail category was, say, 8x, the allotment system would randomly select approximately one in eight applicants and credit each with one lot of shares. Those not selected in the draw received a full refund of the blocked ASBA amount. In lightly oversubscribed issues (say 1.5x), each applicant might receive one lot outright, with the residual shares distributed through a second draw.
The ASBA (Application Supported by Blocked Amount) mechanism, made mandatory by SEBI for all IPO applicants, ensured that funds were blocked — not debited — from the applicant's bank account during the subscription period. Amounts were debited only upon allotment, and unblocked immediately upon non-allotment. This meant unsuccessful applicants faced no opportunity cost on their funds beyond the few days of blocked funds. UPI-based ASBA, introduced later, enabled direct blocking through UPI mandate approvals on mobile apps, eliminating the need for net banking login for many retail investors.
The timeline from subscription close to allotment and listing was standardised by SEBI. Allotment status was typically available on the registrar's website or through BSE/NSE within six business days of IPO closure. SEBI later tightened the listing timeline from T+6 (six days after IPO closure) to T+3 in December 2023, substantially reducing the time investors' funds remained blocked post-subscription and improving overall market efficiency.
Checking allotment status was done through the registrar's website (such as Kfintech, Link Intime, or Bigshare Services) by entering the PAN number, application number, or DP/client ID. Investors were also notified via SMS and email linked to their demat account. Shares allotted appeared in the demat account on the day prior to listing, allowing investors to see their holdings before the opening bell on listing day.