HOW TO INCREASE CHANCES OF IPO ALLOTMENT

INTRODUCTION

Most of us believe that getting allotment in an IPO happens by god’s grace. While that is true in the lottery system, since it is purely by chance, you can take some simple steps to improve your chances of getting allotment in an IPO. Let us understand here how to increase chances of IPO allotment. Frankly, there is no foolproof method of how to get confirm IPO allotment because there is always an element of chance involved.

However, as much as you can avoid rejections of the IPO application, you can make some basic tweaks such that your probability of getting an IPO allotment is much higher. Here is how to get more chances to getting IPO allotment. There is a thin line between the ethical and the unethical, so be very careful and be within the legal boundaries.

HOW TO IMPROVE CHANCES OF GETTING IPO ALLOTMENT?

Once you have finalized the IPO you want to invest in and readied the funds, the next step is to ensure that you stand a good chance of getting allotment. Let us clarify, that IPO allotment is still a game of chance, but as in any game of probability, you can legitimately improve your chances of getting IPO allotment. Here are some basic steps to take.

1) The first lesson is to avoid large sized applications. In the event of oversubscription, the priority is to ensure that all applicants get IPO allotment of at least one lot and then look at additional allotment. There is no special advantage in putting an application for 10 lots over 1 lot, so as well put in smaller lots. Large applications make sense only in large IPOs that are just about likely to get full subscription in retail portion.

2)  Use more demat account apps. Avoid multiple demat accounts as they are a ground for rejection. Instead, put one lot in the name of each of your family members, so that in the event of oversubscription, each is entitled to get at least one lot and you also stand a better chance in an allotment. Once again, don’t use duplicate demat accounts.

3) If you are applying in the retail quota, bid at cut-off rather than mentioning any price. That way, you don’t stand the risk of losing allotment just because the price bid by you is less than the discovered price. A cut off bid is like accepting the discovered price.

4) Avoid last minute rush hour for the IPO. There are several reasons. Firstly, while the exchanges accept the IPO bids till 5 PM on the last day, most brokers stop accepting retail applications after mid-day. If you send your application after that, it may not be uploaded or even accepted at the broker counter. In any 3 day IPO, make it a point to ideally invest in the first two days itself. Last day applications mean you also lose out in the event of a technical glitch.

5) A simple and smart way to enhance your allotment chance is to apply in the shareholder quota, where you stand a better chance and the competition is much lower. What you can do is to buy parent company shares, even a single share is good enough. By being a parent company shareholder, you automatically become part of the shareholder quota and improve your chances of getting the allotment in the IPO.

6) Understand the process and take the process to completion. For instance, today IPO mandates are normally ASBA and UPI mandates. That means, you need to approve the mandate request. Quite often, investors apply for the IPO but forget to follow up and approve the mandate request. Remember, that unless the request is accepted by you from the banking app or website, your IPO application is likely to be rejected. You will not be considered for the IPO allotment in such cases.

7) It may sound pedestrian and clerical but verification of details is always a must. It is best you get the details verified by another to avoid the maker/checker conflict. Make it a point to conduct due diligence when filling out the IPO form. Verify your name, demat account number, category you're applying for, and other details specified on the form multiple times. There have been several cases where IPO applications got rejected due /to basic errors. You can as well avoid such an eventuality.

8) There is a general belief that all oversubscribed IPOs are good and undersubscribed IPOs are bad. That is not true. There are undersubscribed outperformers and underperformers despite being oversubscribed. If an IPO is oversubscribed, the allotments work on a lottery system, so your chances are lower, the greater the subscription. Look at trends of which undersubscribed IPOs do well and prefer such IPOs on the last day. You stand a good chance.

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