A few easy steps may change the odds in your favor, yet retail investors often lose out on exciting initial public offerings.
We all know how much excitement IPOs in India generate. When a reputable firm posts a job opening, everyone applies at once, even your neighbor and coworkers. However, since demand is so much higher than supply, many retail investors wind up with nothing on allocation day. There are a few wise actions you may do to increase your chances, even if there is not a secret formula to ensure shares.
Remain in the retail sector.
You are considered a retail investor if your investment is less than ₹2 lakh. Your chances are often greater than in the high-net-worth person (HNI) category since this pool has its own quota. Therefore, for allocation purposes at least, stay inside this limit rather than attempting to go huge.
Make use of family demat accounts
Here’s a quick hack: use many family members’ accounts. Every distinct PAN associated with a demat account is eligible to apply independently. Therefore, you boost the likelihood that at least one minimum-lot application will be accepted if you, your spouse, and your parents each submit one. Attempting to submit more than one application from the same PAN will result in their rejection.
Choose the cut-off price at all times
Select the “cut-off” pricing option while completing your IPO application. This indicates that you are prepared to spend the most within the issue’s pricing range. Your application could not even be taken into consideration if you do not and the problem is resolved at the top end.
Make it tiny yet broad
Retail allocations often occur via lottery on a per-lot basis rather than by the quantity of shares you apply for. This implies that a single application for a single lot has the same probability as a big one. Therefore, distributing your funds over many minimal applications across accounts is preferable than investing all of your funds in a single large application.
Have money in your account at all times
Remember the fundamentals: IPO applications use the ASBA system, which prevents funds from being sent to your bank account until they are allocated. Your application will not be considered if you do not have enough money or forgot to approve the UPI requirement. Always check this step twice.
The bottom line
IPO allocation is similar to purchasing a lottery ticket in that you can play smarter but not control the draw. Do not worry if you do not get any shares. If the initial public offering (IPO) is too expensive, it may be advantageous to skip out. Applying solely to businesses that have strong foundations rather than just following the fad is the true winner.
Frequently Asked Questions
1. Does submitting more share applications improve the likelihood of allocation?
Not in the retail sector. The lottery determines the allocations for each application, thus applying for many lots or just one does not alter the chances. It is more efficient to use many tiny apps across accounts.
2. Can I use more than one demat account in my name to file for an IPO?
No. There can only be one legitimate application per PAN. We will reject multiple applications under the same PAN.
3. What happens if the IPO does not provide me shares?
Your blocked funds will be returned to your bank account, often within a few days, if you are not allocated.