Basis of allotment

After the IPO is closed, investors eagerly await share allotment if they have applied for it. However, subscribing to an IPO does not guarantee the allotment of shares. The basis of allotment in an IPO is subject to certain conditions. Let’s understand ‘basis of allotment’ here.

The term ‘basis of allotment’ refers to the process or the terms of allotment as specified under the prospectus for the IPO and in line with the provisions of The Companies Act, 2013 and SEBI. The bids under each category of investors are pooled together after the IPO is closed. If the IPO is oversubscribed, the ratio of oversubscription is calculated for each category of investors. The shares are then allotted on a proportionate basis for all categories of investors except the QIBs. The allotment is subject to the minimum lot size of the IPO and the balance shares, if any, are further allotted on a proportionate basis. In the case of the QIB category investors, allotment is subject to the discretion of the lead manager of the Issue along with the company.