Initial Public Offering (IPO) is a process through which private companies offer fresh shares to public investors for raising funds. When shares are issued for the first time by any private company then it is known as Initial Public Offering (IPO) and when additional shares are issued by a public company post-Initial Public Offering it is called a follow-on public offering.
Initial Public Offering is a sign that a company is matured, fully grown with goodwill in the market to raise funds from the public. The funds raised from the public can be utilized for various reasons like expansion, diversification, product development, repaying high-cost loans, etc.
Any company ie. New, young, old after an IPO has to get publicly listed company on a recognized stock exchange and can go public.
IPO brings changes in the ownership structure of the company where investors who are allotted shares in IPO become the partial owners of the company.
Post Initial Public Offering, the company’s shares are traded in an open market.
Read more: Upcoming IPO in India 2021 – Fintoo Blog
How to check IPO allotment?
Before anyone could start subscribing to an IPO, you need to have the following,
- Demat account: It is necessary for buying shares
- Trading account: It is necessary if there is an intention to sell shares in the secondary market.
Once the above basic accounts are opened then it is a very simple process to apply for IPO as follows,
Initiate Application:
One can apply for an Initial Public offering online or offline. In the offline method, one can fill up the form and submit the physical copy to a broker or IPO banker.
In an online application, one can log in directly to the interface provided by the broker. In an online application, most of the data is pulled from Trading and Demat accounts thus it reduces the process and makes it simpler for an investor, hence it is preferred over offline application.
Allotment:
Allotment happens as per rules prescribed by the Securities and Exchange Board of India (SEBI). Allocation is categorized namely, Retail Investors, qualified institutional buyers, and Non-institutional investors. Allotment rules are different for each category. If the shares requested by investors are less than or equal to the number of shares offered then there is full allotment however if the shares requested by investors are more than the number of shares offered then partial allotment takes place. There can also be no allotment of shares to investors due to various reasons.
Approval:
The allotment of shares takes about 7 days to complete the process and then the registrar of the IPO confirms the allotment to the successful bidders. When a company announces Initial Public Offering it also announces a tentative IPO allotment date. A date when IPO allotment status is disclosed to the public. Nowadays, IPO allotment status gets updated online too. Then to know the status of your bid visits the registrar site.
Below are the ways to check IPO allotment status:
On Exchanges website:
BSE and NSE has provided a facility for the investor to verify IPO allotment status as follows,
www.bseindia.com under section investor services – Application status check – Select Issue name – Enter application number and PAN number (As entered in the application form) – On submission of valid information system will provide the details in a particular format.
The Investor can check his application status/ information on the website up to one week before the public issue closing date.
On NSE, there is one-time registration by providing the PAN details which will enable a user to view the details of the bids entered against the registered PAN number.
On Registrar’s website:
An investor can check allotment status by entering the PAN number or the IPO allocation number on the website of the IPO registrar.
Registrar of the IPO publishes a document which shows the basis of allotment ie. Detailed information on the number of applications received and how the allotments are done.
Registrar of an Initial Public Offering is a financial institution registered with stock exchanges and SEBI. Each IPO has a designed Registrar who keeps the records of the issue and ownership of the company shares.
The allotment of shares to investors, process refund, and transfer allocated shares to investors Demat account.
- Depository Participant or broker will intimate you through email.
- One can also check on third-party sites that deal with IPO.
Also read: Daily Market Analysis – 17th May 2021 (IPO) – Fintoo Blog
What is IPO allotment status?
Allotment status shows the number of shares applied and allocated to the investor in an IPO. In case of oversubscription of IPO, shares are allocated through a lottery.
Allotted – It means full shares applied are being allotted.
Partially allotted – It means lesser share has been allotted than what you have applied, for eg. If investors have applied for 10 lots of XYZ IPO then only 6 lots have been allotted and 4 lots are not allotted.
Non-allotment – It means no shares have been allotted to the investor. This may happen due to the following reasons,
- Your application was not selected in the lucky draw or
- The issue price is more than your bid or
- Due to an error in PAN number or DEMAT account number mentioned or
- If multiple applications have been submitted under the same PAN.
In case of no-allotment or partial allotment, investors will get a refund of the application money before the UPI mandate expiry date as per the IPO timelines. On application for IPO, the bank blocks the amount in your account equals to bid size and which gets debited from an account after final allotment. Depending on application status, the bank will initiate a full or partial refund which generally takes one or two days to receive the refund in your account.
The good performance of some recent IPOs has increased retail investor’s interest in public offerings. Post-IPO the shares of the company get listed on the exchange then the investor has a choice to hold the shares or sell them depending on the risk tolerance, investment horizon, and liquidity needs.
The current pandemic situation has a huge impact on the overall trading activities. The performances of the companies have hampered in almost all industries and sectors due to which several companies are not planning to come out with an IPO these days. So, the IPO performance at present has mixed reviews and at the same time, the pharma and IT sectors have performed very well.
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