How to apply for an IPO and check allotment?

The companies, which approach the exchanges with the objective of raising capital, utilise the net proceeds for expansion, repayment of debts, or other corporate purposes. But before applying for an IPO, an investor should assess his or her category as investor.

The first category is that of retail investors where individuals can invest up to Rs 2 lakh. Second are non-institutional investors who wish to apply for amount greater than Rs 2 lakh. These include high networth individuals, Non-Resident Indians, Hindu Undivided Families, companies, trusts, scientific institutions, and societies.

Third are qualified institutional buyers or QIBs that encompass commercial banks, mutual fund houses, and foreign portfolio investors. A limit of 50 per cent of the bid is reserved for QIBs. They are not allowed to bid at cut off the price and cannot withdraw their offers after the closing of the IPO. Fourth are anchor investors who are QIBs and wish to invest Rs 10 crore or more through the book-building process.

Investors can apply for the minimum bid, through online as well as offline method, specified in the company’s red herring prospectus. While investors need to fill an application form in the offline mode and submit it to their respective banker or broker; online IPO gives investors freedom to upload data through demat account or via a trading interface.

A demat account allows investors to trade financial securities in a digital format. Then, investors can bid for a particular issue when it is open for subscription. Once they select their preferred lot size, the amount gets blocked through a process called ASBA -- application supported by blocked amount -- from investors’ bank account. This amount does not get debited instantly. 

Once the shares are allotted by the company, which usually takes up to 10 days, the blocked amount is debited depending on the number of shares allotted to an investor. However, once the issue gets oversubscribed, that is, the demand for the issue is higher than available shares; the allotment is done through proportional basis or lottery system.

Now, let us understand how to check the share allotment. Investors can check their allotment status on the BSE website or through their online brokerage platform. In order to check the allotment status on the BSE website, investors have to select their respective issue name and enter an application or PAN card number. Once allotted, investors can buy more or sell those shares after the company gets listed in the secondary market.