How IPO allotment works in India: retail quota, lottery and basis of allotment

Allotment is the step after the bid. The company does not choose your name. A retail application up to ₹2,00,000 goes into the retail quota. If that quota cannot give every valid applicant one minimum lot, a draw of lots decides who gets that lot. The registrar writes the basis of allotment, and the designated stock exchange approves it.

This is the second note in the IPO series. The application guide covers the form. This page covers the quotas, the lottery, and the days after the close. The sample later is an illustration, not a live issue. A grey market premium is an unofficial price, and this page does not print one. Dates and bands for real issues are on the IPO calendar.

Who is reserved a share of a book-built IPO?

The split depends on which eligibility rule the company uses. Regulation 6(1) is the profitability route. Regulation 6(2) is the route for a company that does not meet that test and must use book building.

On the profitability route, at least 35% of the net public offer is for retail, at least 15% is for non-institutional investors, and not more than 50% is for qualified institutional buyers. A qualified institutional buyer is a mutual fund, a bank, an insurer, or another institution in SEBI’s list. A non-institutional investor is everyone who is not retail and not one of those institutions.

On the compulsory book-built route, at least 75% must go to institutions, or the company refunds the subscription money. Not more than 15% goes to non-institutional investors, and not more than 10% goes to retail. A fixed-price issue is different again: at least 50% starts with retail. The offer document prints the split for that issue. There is no discretion inside a category.

A company can also reserve shares for employees, and for shareholders of a listed promoter or a listed subsidiary. A listed company can reserve shares for its retail individual shareholders, allotted in proportion to the bid. The offer document states the size. In the employee reservation the bid cannot exceed ₹5,00,000. The first allotment there is capped at ₹2,00,000. More is allotted only if that reservation is not fully taken, and the total still cannot exceed the bid cap.

The non-institutional quota on a main-board book-built issue is itself split. Regulation 32(3A), as SEBI’s October 2026 consultation paper describes the main-board rule, keeps 1/3 for applications above ₹2,00,000 and up to ₹10,00,000. That is the small non-institutional bucket. The other 2/3 is for applications above ₹10,00,000. People often call a bid in either bucket an HNI application. The January 2022 amendment, notified on 14 January 2022, is what put this split and the draw of lots into the rulebook.

How do lots, the cut-off price and one PAN work?

The lot size is the smallest bundle of shares you can bid for. The company sets it so the smallest application falls between ₹10,000 and ₹15,000. Further bids are whole lots. You cannot ask for half a lot.

Cut-off means you will take the shares at whatever price is discovered inside the band. A retail investor can choose it. So can an employee, or a retail shareholder, in a reservation. A qualified institutional buyer or a non-institutional investor who ticks cut-off is rejected. The bank still blocks the amount at the top of the band. Cut-off does not lift the retail cap.

One person sends one form. Up to 3 prices on that form are still one bid. A second form can be rejected. The registrar matches PAN numbers. Two bids with the same PAN can both be treated as a multiple bid and rejected. The same DP ID and client ID can be treated the same way. A duplicate PAN is not resolved by keeping the larger bid. It can knock out both.

Only one application is allowed from one bank account in a public issue. A family member who bids uses their own PAN, their own demat account and their own bank account. That is a separate applicant. A relative’s UPI ID on your form is a third-party application, and it is not valid for allotment.

What happens when retail demand is higher than the quota?

Oversubscription means valid bids in a category ask for more shares than that category has. Retail allotment then tries to give one minimum lot to as many people as the quota allows.

SEBI’s general information document sets the steps. Divide the retail shares by the minimum lot. That is the most retail applicants who can each receive one lot. If valid retail applicants exceed that number, a draw of lots picks the names. SEBI’s February 2025 investor note calls the same step a lottery. Each successful name gets the minimum lot, not a stack of lots.

If valid retail applicants are fewer than that maximum, everyone gets one lot. Shares still left are allotted in proportion to the extra shares people bid for. A bigger bid can receive more of what is left, after every valid applicant already has one lot. If retail demand is within the quota, valid bids are allotted in full. Nothing is drawn.

Why does bidding for more lots not raise your odds?

In the heavy case above, the draw is of applicants. It does not put your name in once per lot. A successful applicant receives one minimum lot even if they bid for many. Adding lots up to the retail cap blocks more money. It does not buy a second ticket.

The mild case is the one people mix up with the lottery. Suppose the same pool of 1,000 lots meets only 800 valid retail applicants. Everyone gets one lot. 200 lots are left. If those applicants together bid 1,200 lots, the extra demand is 400 lots. A person who bid 3 lots asked for 2 extra lots and, on these made-up numbers, receives 1 extra lot. The person who bid one lot receives no extra. The bigger bid mattered only after everyone already had one lot.

Once the issue is so crowded that not everyone can have one lot, that second step never starts. The draw stops at one lot per successful name. A maximum retail bid does not improve the chance.

How are non-institutional and institution bids allotted?

Qualified institutional buyers are allotted in proportion to their bids. A larger institution bid receives a larger share of the institution quota, rounded as the basis describes. There is no retail-style lottery for them. Anchor investors are handled in the offer document. They are not in the retail draw.

Non-institutional bids used to be allotted only in proportion. SEBI changed that. The May 2025 primary-market FAQ says each retail investor and each non-institutional investor gets at least the minimum lot, subject to shares being available, and only the remainder is in proportion. The January 2025 board note says main-board non-institutional allotment is a draw of lots, the same idea as retail. The small bucket, above ₹2,00,000 and up to ₹10,00,000, and the big bucket, above ₹10,00,000, are drawn inside their own 1/3 and 2/3 shares of the quota. Extra lots in a bucket are not extra tickets. They matter only for shares left after those minimum lots.

Who finalises the basis of allotment, and when do shares list?

The basis of allotment is the table that shows, category by category, how many people applied and how many shares each group received. The registrar prepares it after rejections, with the company and the lead managers. BSE’s investor FAQ says the registrar then sends it to the stock exchange for approval. That exchange is the designated stock exchange for the issue. Your own yes or no is on the registrar’s site.

Circular SEBI/HO/CFD/TPD1/CIR/P/2023/140 of 9 August 2023 cut listing from six working days to three. It has been mandatory for issues opening on or after 1 December 2023. T is the closing day.

Shares are credited to the demat account before trading starts. If the company finds fewer than 1,000 prospective allottees, it cannot allot at all.

What if the blocked money is not released?

ASBA keeps the money in your own account. The bank blocks it. If you are allotted nothing, the block comes off. If you are allotted fewer shares than you bid for, only the allotted amount is debited and the rest is released. The same is true of a UPI mandate. Nothing moves to the company on the day you tap.

On this timetable the UPI release is due before 4 pm on T+2. If the amount is still blocked after allotment is final, ask the self-certified syndicate bank that holds the account. The May 2025 FAQ says you can ask that bank to release the funds. For a complaint about non-allotment, the registrar is the first desk. If you are not satisfied, the stock exchange is next, and then SEBI’s SCORES. A correct form that was rejected should get a reply within 15 days of the bank or intermediary. A late release is compensated from T+3.

How do you check whether you were allotted shares?

Three places are enough. A later note can walk through the screens.

• The registrar named on the offer document. Search with the PAN or the application number. SEBI’s investor note says the allotment intimation is posted there.
• The designated stock exchange publishes the basis of allotment. BSE and NSE both carry investor pages for a public issue.
• The demat account, once the credit is through. An empty account after T+3 means ask the registrar before you assume the draw failed. A rejected PAN looks the same as a lost draw until you read the reason.

Demand on the exchange, while the book is open, is not the basis of allotment.

What tax applies if you sell the shares?

Allotment itself is not a tax event. Tax starts when you sell. A sale on the listing day is short-term, because the shares have been held for not more than 12 months. Section 196 (this was Section 111A) taxes that listed-equity gain at 20%. Past 12 months, Section 198 (this was Section 112A) taxes the gain above ₹1,25,000 in the year at 12.5%. The capital gains guide and the capital gains calculator cover the sale. Tax on IPO listing gains gets its own guide.