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All you need to know about IPO allotment process

The minimum bid lot is defined based on the minimum application amount.

ETMarkets.com|
Updated: Dec 10, 2019, 09.52 PM IST
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This year many IPOs, including IRCTC, Ujjivan Small Finance Bank, CSB Bank, got subscribed multiple times.
The primary market is looking rejuvenated with some of the recently concluded initial public offerings getting bumper demand. While Ujjivan Small Finance Bank received nearly 166 times subscription, others such as CSB Bank and IRCTC were subscribed 87 times and 112 times, respectively.

As a result, many investors did not get any shares of these companies. In IPOs, share allotment is done as per Sebi norms.

The regulator’s share allotment rules state that the minimum bid lot is defined based on the minimum application amount, which cannot exceed or fall below Rs 10,000-Rs 15,000 (earlier it was Rs 5,000-Rs 7,000).

Retail investors can be allotted at least one lot. Bids that are at or above the issue price only qualify for share allotment. Shares left thereafter are allotted on the basis of a draw of lots.

From an idea to its listing: How the Ujjivan Small Finance Bank IPO story unfolded

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​RBI green flag: October 7, 2015

10 Dec, 2019
Ujjivan received in-principle approval from the Reserve Bank of India on October 7, 2015 to set up a small finance bank. Ujjivan planned to start operations in the first quarter of the next calendar year, as reported by Mint on 29 September.RBI’s licensing agreement mandated the bank to get listed as well within three years of operation with the deadline expiring in January, 2020. Under the licensing norms, promoter Ujjivan Financial Services’ stake in the lender will fall to 40 per cent by January, 2022, 30 per cent by January, 2027 and eventually to 15 per cent by January, 2032. The company is diluting about 11 per cent (94.4% to 83.32%) through the IPO and plans to use other instruments to offload another 3-5 per cent in next six months, indicating that it expects a post-issue valuation higher than that of the holding company’s.
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This year many IPOs, including IRCTC, Ujjivan Small Finance Bank, CSB Bank, got subscribed multiple times, and many retail investors were left disappointed as they didn’t get share allotment.

Sebi guidelines say in case of oversubscription in the retail category, the maximum number of retail investors who can be allotted the minimum bid lot is computed by dividing the total number of equity shares available for allotment to retail institutional investors (RII) by the minimum bid lot, after technical rejection.

For example in case of CSB Bank, the minimum bid lot was 75 equity shares.

The quota reserved for retail investors in the issue was 18 per cent, or 21,00,906 shares, but it was subscribed 44.53 times, or 9,35,51,025 shares.

There were 9,57,193 retail applications for the issue, but since retail investors in any IPO could not get less than one bid lot (75 shares in this case), only 28,012 shareholders (21,00,906 shares/one lot of 75 shares) could get share allotment. A total of 21,00,900 shares were, thus, allotted to all retail bidders and the 6 remaining shares were allotted based on a draw of lots.

The IPO received bids for over 100 crore shares against the total issue size of 1.15 crore shares.

On the other hand, if the demand of shares is lower than the number of shares available in the retail category, then every investor will get full allotment, irrespective for their application size.

The other two types of investors in an IPO – qualified institutional buyers (QIBs) and non-institutional investors (NIIs) – are allotted shares on a proportionate basis.
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