Archive · 6 Sep 2025
Decoding IPO Share Allotment Process for Investors
Imagine a company wants to sell shares to the public, called an IPO.
If lots of people want to buy, there aren't enough shares for everyone.
First, companies set a price range.
Investors then bid within this range.
The price is set to the highest price at which all shares can be sold.
For retail investors, if more people apply than shares available, shares are given out in a draw of lots to determine who gets how many.
There's math involved to make sure everyone gets a fair share based on how many shares they applied for.
Those who bid at the cut-off price are eligible for allotment.
IPOs often experience oversubscription, where demand exceeds the available shares.
Companies use a 'book building' process to determine the final share price.
Investors bid for shares within a price band set by the company.
Allotment varies based on investor type and the level of oversubscription.
When demand is high, a lottery determines the number of shares received
- Who
- Investors and companies issuing shares (issuers).
- What
- The process of how shares are allotted in an IPO when demand exceeds the available shares.
- When
- The article discusses the process for oversubscribed IPOs.
- Where
- The process applies to IPOs on the mainboard.
- Why
- To explain how shares are distributed fairly in oversubscribed IPOs.
- Cut-off Price
- Highest price at which all shares on offer are subscribed
- Retail Investor Application Size
- Up to ₹2 lakh
- Price Band
- Determined by the company and investment banks
- Book Building
- Process of lead managers receiving bids to build the 'book'