How to increase the chances of IPO allotment | Motilal Oswal

Is There Any Way of Increasing Your Chances at Getting an IPO Allotment

The year 2022 promises an array of IPOs to invest in, and there’s no dearth of allotments waiting to happen. No doubt, this will be a super year for the Indian Stock Market as IPOs abound and investors rush to get a fair share. In 2021, with some 60 odd IPOs getting listed, investors rushed to diversify their portfolios. In terms of IPO allotment, the market is enthusiastic this year and investor sentiment is impatient to grab the best company stocks. 

How an IPO Works

An IPO, or Initial Public Offering is made when a private company goes public with its shares. Companies get started as private firms with a few shareholders like the founders and their relatives and friends. Venture capitalists and a gamut of financers may also be original stockholders in a private company. However, when a company has reached a substantial stage in its growth, and has affirmed itself in the industry it belongs to, it applies to get listed and offer its shares to the general public. When this occurs, any individual can become an investor in the company and bid for a particular amount of shares in the company. Nonetheless, although you may want a certain amount of shares allotted to you, you may not get the IPO allotment you bidded for, getting less than you expected, or even getting no allotment. 

You may find an upcoming IPO among several that are due in 2022, but how do you ensure allotment? This remains a question for a huge chunk of excited investors. If you look at history, not too far back, in 2021, nearly every IPO that was offered was oversubscribed by a massive degree. Nevertheless, there are specific ways that you can focus on to increase your chances of getting the allotment you want. 

How to Increase Chances of Allotment

The fact of any upcoming IPO may thrill you as an investor, but it's not a good feeling you get when you don’t get an allotment you expect, or worse still, no allotment at all. Hence, you should know how to better your chances of IPO allotment by going through methods mentioned below:

  • Early Application - When an IPO is offered, you get a period of three days to apply for it. It's a good idea to bid for allotment within the first couple of days, instead of doing so at the last minute. If it is possible, bid for allotment within a day of its offering. This means, you should have researched and done your homework about the company in question well in advance to be sure that you want a part of its shareholding. 
  • Avoid Confusion - In the IPO application process, many investors get confused between the terms used. If you want to be sure of IPO allotment, you should think with a clear mind, and know these terms in advance. For instance, there is always a lack of clarity between the ‘cut price’ and the ‘bid price’. The ‘cut price’ represents an investor’s readiness to pay any price that companies decide on at the completion of the book-building procedure. Once the ‘cut price’ is applied, the investor is required to bid in the highest range of prices. If a lower than expected price is present, any extra amount gets reimbursed, so investors should buy at the ‘cut price’. 
  • Avoid Mistakes - Filling in application forms for IPOs should not be done in a hurry. Often, errors are made while filing forms, and these are grounds for rejection, or you having to refill forms. 
  • Parent-Company Shares - In case the IPO offered is of a company that has a parent-company, you should first invest a few stocks of the parent. This increases your IPO allotment chances in the company of which the IPO is offered. 

Open a Demat Account

With Motilal Oswal, a key player in the broker business, you can invest in any upcoming IPO, and a whole lot of other instruments. All you need to do is open a Demat account and get on your way to a realm of gains and good returns. 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account | Upcoming IPO | LIC IPO

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