Investors investing in the stock market can buy shares directly. Apart from this, he can also invest in IPO. However, it is advisable to invest in IPO when the investor is allotted shares.
Let us tell you that before getting listed in the stock market, the company opens its IPO for investors.
In such a situation, a question arises in the minds of many people that why they do not get shares even after investing in IPO many times? Come, today let us tell you what is the process and rules of IPO allotment?
IPO Allotment Rules
Before investing in IPO, we should understand the rules of IPO allotment. Whenever a good company opens an IPO, it often gets oversubscribed.
Let us tell you that oversubscribed means that many times more investors have applied for that IPO. Because of this, shares are not allotted to all investors.
According to SEBI rules, a retail investor can bid only up to Rs 2 lakh in an IPO. However, for this the investor is required to have a minimum bid. Understand it this way, if the lot size of an IPO is 15 shares, then the investor will have to bid for at least 15 shares.
If the number of applications received in an IPO is equal to the number of shares offered, then shares are allotted to all the investors.
Whenever an IPO is oversubscribed, shares are allotted to retail investors. In such a case, the number of shares is calculated by dividing it by the number of equity shares available for allotment.
If investors place low bids, they may suffer losses, which means their chances of getting share allotment are reduced. For this reason, experts also advise that maximum bids should be placed in the IPO of a good company.
Allotment Process
Lucky draw is also used to allot shares. Many investors also bid in the names of their family members. In such a situation, the possibility of share allotment increases.
However, to invest in the share market or bid on IPO, it is mandatory to have a Demat Account. In this digital age, shares are now allotted through computerized draws.
