How IPO allotment works

The investor groups

Each IPO sets aside a portion of shares for each group of investors. The groups are defined by SEBI’s rules (the ICDR Regulations) and the exact split is in the offer document.

• Retail individual investors (RII): individuals who apply for up to ₹2 lakh in total.
• Non-institutional investors (NII): individuals, companies, trusts and others who apply for more than ₹2 lakh. Since 2022 this group is divided in two: one third for applications above ₹2 lakh and up to ₹10 lakh (small NII, or sNII) and two thirds for applications above ₹10 lakh (big NII, or bNII).
• Qualified institutional buyers (QIB): mutual funds, insurers, banks, foreign portfolio investors and similar institutions. Part of the QIB portion may go to anchor investors before the issue opens.
• Employees: some companies keep a separate portion for their employees, with its own limits set out in the offer document. Shareholders of a listed parent company sometimes have a portion too.

Typical shares for a mainboard IPO

For most mainboard IPOs of companies with a record of profits, SEBI’s rules keep at least 35% for retail investors and at least 15% for NIIs, with not more than 50% for QIBs. Companies that do not meet the profit conditions follow a different split, with a larger QIB share and a smaller retail share. The offer document always states the split that applies.

When retail is oversubscribed: the lottery

If retail bids are for more shares than the retail portion, SEBI’s rules aim to give as many applicants as possible the minimum lot. The registrar first works out how many applicants can receive one lot. If there are more applicants than that, winners are chosen by a computerised lottery, and each winner gets one lot.

This means that, in an oversubscribed retail portion, applying for more lots does not raise the chance of getting a lot. Only the number of separate valid applications matters, and only one application per PAN is counted.

The small NII and big NII portions work in a similar way when oversubscribed: each successful applicant gets the minimum NII application size, chosen by lottery, and any shares left over are then shared out among the rest.

Paying for an IPO: UPI mandate and block

Individuals do not pay upfront. When applying through UPI, the bank sends a mandate request to the investor’s UPI app, and once accepted the amount is blocked in the bank account, not taken. On allotment, only the money for the shares allotted is debited, and the rest of the block is released. If nothing is allotted, the whole block is released.

Applications through net banking (ASBA) work the same way: the money stays in the account, blocked, until allotment.

The T+3 timeline

SEBI made the T+3 timeline compulsory from December 2023. T is the day the issue closes.

• T+1: allotment is finalised by the registrar.
• T+2: shares are credited to demat accounts and blocked money for unsuccessful bids is released.
• T+3: the shares are listed and start trading on the exchange.

Checking allotment

Allotment status can be checked on the registrar’s website or on the exchange website using the application number or PAN. niftyinvestor never asks for your PAN; our allotment page links to the official registrar and exchange pages.