How to increase the chances of IPO allotment?
The year 2021 was raining with IPOs as it was a rare sight for the Indian Stock Exchange to see so many IPOs get listed in a short span of time. The year saw 60 IPOs being listed including those of Zomato and One 97 Communication Pvt. Ltd. (Paytm).
IPO or Initial Public Offering means the company is going public ie the shares of the company are available for public investors. IPO allows the company to raise capital from public investors to fulfil their increasing capital needs which is seen or experienced during the growth and expansion of the company .For company to go public , company must meet the requirements by exchanges(NSE , BSE) and the securities and exchange commission to hold an IPO.
Since the IPOs were over-subscribed last year only a small number of people were allotted.With this turnover of 2021, were most investors couldn’t get an allotment, investors are now concerned about the chances of getting one. Here’s a list of things one can do to increase his/her chances of receiving an allotment.
Let’s have a look on how you can improve your chances of getting an allotment of IPO?
APPLY THROUGH MULTIPLE ACCOUNTS
To increase your chances of being allotted in your desired IPO, apply for it through multiple demat accounts. The chances of allotment will be higher if you have more accounts applying for the same IPO.
APPLY FOR IPO AS SOON AS IT COMES OUT
IPO Allotment works on first come first serve basis. Therefore to increase your chance of being allotted, make sure you apply for it as soon as it is out. The sooner you apply, higher are your chances of being on top of the waiting list , thus ensuring you get an allotment.
WHEN BIDDING FOR AN IPO, BID AT THE CUT-OFF PRICE
When bidding for an IPO , always try bidding at the cut-off price. Bidding at the cut-off price means you are willing to buy the share anywhere between the said range of the IPO. Bidding at the cut-off price while applying for an IPO shows the readiness of the investor to buy the IPO at any cost whichever the firm decides.
DO NOT WAIT TILL THE LAST MINUTE TO MAKE A DECISION
Many investors before submitting their application tend to wait to see how the subscription levels are doing on High Net worth Individual (HNI) and Qualified Institutional Buyers (QIB). Although sometimes maybe due to technical issues, investors may face issues while submitting their application. Since some banks close their sites for applications after 4pm, it is advisable to submit your IPO application as soon as possible.
BUY STOCKS OF THE PARENT COMPANY
If your demat account has at least one stock of the parent company, it verifies you as a shareholder which increases your chances of being allotted. Hence investing in the parent company is a smart strategy while applying for an IPO.
DO NOT FORGET TO APPROVE THE MANDATE REQUEST
Some investors in their haste to apply for IPO, tend to slip the approval of mandate request. Investors must remember that if mandate request is not approved by the investor through the banking app or website, the funds won’t be locked in the account resulting in your application not be considered.
ALWAYS RECHECK YOUR APPLICATION BEFORE APPLYING
Just like you double check before submitting any important document, make sure to double check your IPO application. Investors should make sure to double check their name, demat account number and other details while submitting. There have been many instances where applications have been rejected due to incorrect information.
Conclusion
Since IPOs get oversubscribed, it is always advisable to keep checking for IPOs which are undersubscribed. IPOs which have low subscription rates and are undervalued are also a good bid while applying for an IPO.
Since no one can predict how the IPO allotment procedure will move further, following the above mentioned guidelines, may increase your chances of being allotted.
