The primary market is looking rejuvenated with some of the recently concluded initial public offerings getting bumper demand. While Ujjivan Small Finance Bank received nearly 166 times subscription, others such as CSB Bank and IRCTC were subscribed 87 times and 112 times, respectively.

As a result, many investors did not get any shares of these companies. In IPOs, share allotment is done as per Sebi norms.
The regulator’s share allotment rules state that the minimum bid lot is defined based on the minimum application amount, which cannot exceed or fall below Rs 10,000-Rs 15,000 (earlier it was Rs 5,000-Rs 7,000).

Retail investors can be allotted at least one lot. Bids that are at or above the issue price only qualify for share allotment. Shares left thereafter are allotted on the basis of a draw of lots.

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This year many IPOs, including IRCTC, Ujjivan Small Finance Bank, CSB Bank, got subscribed multiple times, and many retail investors were left disappointed as they didn’t get share allotment.

Sebi guidelines say in case of oversubscription in the retail category, the maximum number of retail investors who can be allotted the minimum bid lot is computed by dividing the total number of equity shares available for allotment to retail institutional investors (RII) by the minimum bid lot, after technical rejection.

For example in case of CSB Bank, the minimum bid lot was 75 equity shares.

The quota reserved for retail investors in the issue was 18 per cent, or 21,00,906 shares, but it was subscribed 44.53 times, or 9,35,51,025 shares.

There were 9,57,193 retail applications for the issue, but since retail investors in any IPO could not get less than one bid lot (75 shares in this case), only 28,012 shareholders (21,00,906 shares/one lot of 75 shares) could get share allotment. A total of 21,00,900 shares were, thus, allotted to all retail bidders and the 6 remaining shares were allotted based on a draw of lots.

The IPO received bids for over 100 crore shares against the total issue size of 1.15 crore shares.
On the other hand, if the demand of shares is lower than the number of shares available in the retail category, then every investor will get full allotment, irrespective for their application size.

The other two types of investors in an IPO – qualified institutional buyers (QIBs) and non-institutional investors (NIIs) – are allotted shares on a proportionate basis.