Here are some effective tips that can increase your chances of getting an IPO allotment as a retail investor
After the recent strong listings of several initial public offerings (IPOs), it has become a popular investment avenue for retail investors in India, offering a chance to participate in the early stages of a company’s public journey and bit short-term returns. However, the excitement of IPOs often comes with the challenge of securing an allotment due to high demand and limited shares. Here are some effective tips that can increase your chances of getting an IPO allotment as a retail investor:
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1. Apply Through Multiple Demat Accounts
One of the most effective ways to increase your chances of getting an IPO allotment is by applying through multiple Demat accounts. However, it’s important to note that SEBI (Securities and Exchange Board of India) allows only one application per PAN (Permanent Account Number). Hence, you can use Demat accounts of family members to apply separately, which diversifies your chances without violating any regulations.
2. Opt for Cut-off Price
When applying for an IPO, you can either bid at the cut-off price or specify a lower price within the price band. Choosing the cut-off price indicates that you’re willing to pay the final issue price determined after the book-building process. This increases your chances of allotment because your application won’t be rejected due to a lower bid price.
3. Avoid Large Applications
Retail investors often assume that applying for the maximum permissible lot will increase their chances of allotment. However, IPOs are usually oversubscribed, and the allotment is done through a lottery system for retail investors. In such cases, applying for a single lot might work better, as smaller applications are often prioritized over larger ones.
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4. Apply Early
Although the allotment process doesn’t prioritize early applications, applying on the first or second day of the IPO can help avoid technical glitches or last-minute rush issues. This ensures that your application is successfully submitted and considered for the allotment process.
5. Check Your Bank Balance
Ensure that your bank account linked to the Demat account has sufficient funds to cover the application amount. An insufficient balance can lead to the rejection of your application. Additionally, some banks have a daily transaction limit, so it’s crucial to ensure that the amount you’re applying for is within this limit.
6. Use ASBA (Application Supported by Blocked Amount)
Applying through the ASBA facility is mandatory for IPOs in India. It allows the application money to remain in your account until the shares are allotted, reducing the risk of loss. Ensure that you use ASBA to avoid unnecessary complications.
7. Stay Informed About the Company
Before applying, do thorough research about the company and its prospects. While this doesn’t directly impact your chances of allotment, it helps in making an informed decision, ensuring that you’re applying for a fundamentally strong company, which might increase the value of the shares post-listing.
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8. Avoid Last-Day Applications
Although the allotment process is not first-come-first-serve, avoiding last-day applications is advisable. The last day sees the highest number of applications, increasing the chances of technical issues. Applying earlier ensures that your application goes through smoothly.
9. Participate in Shareholder Quota (if applicable)
If the company whose IPO you’re applying for is a subsidiary of another listed company in which you already hold shares, you might be eligible to apply under the shareholder quota. This quota is separate from the retail quota and can offer better chances of allotment.
10. Stay Updated on IPO News
Lastly, staying informed about upcoming IPOs, their demand, and market conditions can help you make better decisions. Subscribing to financial news portals or alerts can give you timely information, allowing you to prepare your application strategy accordingly.
Conclusion
Securing an IPO allotment requires a mix of strategy, timely application, and a bit of luck. By following these tips, you can improve your chances of getting an allotment and potentially benefiting from the post-listing gains.
