You apply for an IPO, the money gets blocked, the issue closes, and then comes the big question: Will I get the shares? For many first-time investors, this part feels confusing. Some people apply for one lot and get shares. Others apply and get nothing, even when they follow the process correctly.

That is why understanding IPO allotment rules matters. In India, SEBI sets the framework for allotment, and the registrar finalises the basis of allotment in consultation with the designated stock exchange.

This article explains how IPO allotment works, why some investors receive shares while others do not, and what beginners should look for before applying.

What Are IPO Allotment Rules?

IPO allotment rules govern the distribution of shares to investors after an IPO closes. These rules become important when the number of shares applied for exceeds the number of shares available. In simple terms, allotment rules answer one question: how are limited IPO shares divided fairly among applicants?

A common misunderstanding is that SEBI personally decides which investor gets shares. That is not how it works. SEBI sets the legal framework, but the actual basis of allotment is worked out by the registrar to the issue, along with the designated stock exchange, such as BSE or NSE. Actual basis-of-allotment documents published after IPOs clearly state that the allotment was finalised in consultation with the designated stock exchange.

For a regular mainboard book-built IPO under the standard route, the net issue is generally divided category-wise as follows:

Retail Individual Investors (RII): at least 35%
Non-Institutional Investors (NII): at least 15%
Qualified Institutional Buyers (QIB): up to 50%

In some cases, under a different regulatory route, the issue structure changes, with retail getting up to 10%, NII up to 15%, and QIB at least 75%. That is why beginners should not assume every IPO has the same category split.

Basis of Allotment Meaning: What Does It Actually Refer To?

The basis of allotment meaning is simple: it is the official method used to decide how shares are allocated among valid applicants in each category.

This document or notice explains:

how many valid applications were received
how many shares were available in each category
whether allotment was done proportionately or by draw of lots
how many applicants got shares and how many did not

So when investors check the “basis of allotment,” they are really checking the final logic used to distribute shares after the IPO closes.

Why IPO Allotment Feels Random to Beginners

IPO allotment usually feels random because most investors only see one thing: the subscription number. If an IPO is subscribed to 20 times, people assume everyone gets 1 out of 20 of what they applied for. That is not how retail allotment usually works. In the retail category, the process often starts with the minimum lot, not a straight-line percentage on every application.

If there are not enough retail lots to allot one lot to every valid retail applicant, the system moves to a draw of lots. That is why even a perfectly valid application at the cut-off price may still get no shares. It is not unfair; it is simply how the rules handle oversubscription.

How IPO Allotment Works Step by Step

1) Investors apply in different categories

When an IPO opens, investors apply under categories such as retail, non-institutional, and QIB. These categories matter because allotment is done within each category, not from one common bucket for all investors. In a regular mainboard IPO, the category reservation is built into the issue structure itself.

2) The registrar checks valid and invalid applications

Once the issue closes, the registrar reviews all applications. Applications can be rejected for technical reasons such as duplicate PAN, incorrect demat details, or other bid-related errors. That is why basis-of-allotment documents often mention that retail and NII allotment is calculated after rejections.

3) The final issue price is fixed

In a book-built IPO, investors apply within a price band. Retail investors often bid at the cut-off price, which means they agree to pay the final issue price discovered within the band. Allotment ads commonly state that retail applicants considered for allotment are those who bid at the cut-off price or at the final offer price.

4) Demand is matched against shares available in each category

The registrar then checks category-wise demand. If a category receives fewer valid bids than the number of shares available, valid applicants may receive full allotments. If demand exceeds the number of shares available, category-specific allotment rules come into play.

5) Retail allotment is often based on the minimum lot first

This is the most important part for beginners. In retail, if demand is high, the system first calculates how many investors can be allotted at least one minimum bid lot. If the number of valid retail applicants exceeds the number of available retail lots, the successful allottees are selected through a draw of lots. BSE’s issue guidance describes this method clearly.

6) NII and QIB allotment are generally proportionate

In the NII and QIB categories, allotment is generally done on a proportionate basis. IPO allotment tables show ratio-based distribution in these categories. For QIBs, 5% of the net QIB portion is available for mutual funds, and the remaining QIB shares are allotted proportionately to eligible QIB bidders, including mutual funds.

7) The basis of allotment is finalised and published

After the calculations are complete, the basis of allotment is finalised in consultation with the designated stock exchange. Then the company records the allotment, successful applicants receive shares in their demat accounts, and blocked funds are released for unsuccessful applicants. This sequence appears in actual basis-of-allotment notices.

IPO Allotment Rules Explained with a Simple Example

Let us take a simple retail example.

Suppose an IPO has:

Retail shares available: 1,200,000
Lot size: 60 shares

This means the IPO can allot a maximum of:

1,200,000 ÷ 60 = 20,000 retail lots

Now assume:

100,000 valid retail investors apply
Each investor applies for 1 lot
All applications are valid and at the cut-off price

In this case, only 20,000 investors can receive 1 lot, because only 20,000 lots are available. The other 80,000 investors will not get shares. Since there are more applicants than available lots, the allotment is done by drawing lots among valid applications. This is why retail allotment in a heavily subscribed IPO can feel like a lottery.

Now take a QIB example: If the QIB category is subscribed to 10 times, and an investor in that category applies for shares worth ₹50 lakh, the allotment can broadly work on a proportionate basis, so the bidder may receive roughly one-tenth of the application value before final ratio adjustments and rounding. Broker education material uses similar examples to explain QIB allocation.

IPO Allotment Calculation: How Is It Broadly Done?

Many investors search for IPO allotment calculation because they want to estimate their chances before results are announced. While the final basis of allotment is determined officially by the registrar, the broad logic is easy to understand.

In the retail category:

First, calculate how many minimum lots are available.
Then compare that with the number of valid retail applicants.
If the number of applicants is higher than the number of available lots, allotment usually moves to a lottery system for one lot each.

In the NII and QIB categories:

Allotment is generally done proportionately.
If a category is subscribed 10 times, a bidder may broadly get around 1/10th of the shares applied for, subject to final allotment ratios and rounding rules.

So, IPO allotment calculation depends on:

the number of shares reserved in your category
the lot size
the number of valid applications
the level of oversubscription in that category

How to Think About IPO Allotment Chances

Investors often want to know their IPO allotment chances before they apply. The truth is that there is no guaranteed formula, but you can make a reasonable estimate.

Your chances depend mainly on:

how many lots are available in your category
how many valid applicants are competing for those lots
whether allotment in your category is lot-based or proportionate
whether you applied correctly and stayed eligible

For retail investors, once the issue is heavily oversubscribed, the process often becomes a one-lot lottery among valid applicants. In that situation, applying for more lots may not improve your practical chances as much as many people assume.

That is why checking category-wise subscription, not just total subscription, is so important.

Key Features of IPO Allotment Rules

Category-wise reservation

Retail, NII, and QIB investors each have separate allocation buckets. This prevents institutions from taking the entire issue and gives individual investors a reserved share in the normal mainboard IPOs.

Minimum lot matters

In retail IPO allotment, the lot size is not just a formality. It directly decides how many investors can get at least one lot.

Valid applications only are considered.

If your application is rejected for technical reasons, it is removed before the final allotment process begins.

Cut-off bidding is important for retail investors.

Retail applicants who choose a cut-off remain eligible even if the issue price is finalised at the upper end of the price band.

Lottery and proportionate allotment both exist.

Retail oversubscription often leads to a computerised draw of lots, while NII and QIB categories usually follow proportionate allocation.

Risks or Limitations of IPO Allotment Rules

A valid application still does not guarantee shares

This is the biggest disappointment for beginners. You can do everything correctly and still get no allotment if the IPO is heavily oversubscribed.

Bigger retail applications may not help as much as expected

If the retail category is oversubscribed enough to require one-lot distribution by draw, applying for many lots may not increase your practical chance the way you think.

Different IPO structures can lead to different outcomes

Not every IPO follows the same reservation pattern. Some issues have a different category mix under Regulation 6(2), and that changes retail chances.

Investors often misread subscription data.

A headline like “IPO subscribed 50 times” does not tell the full story. What matters more is the subscription in your category.

IPO Allotment Rules vs IPO Subscription Status

Point	IPO Allotment Rules	IPO Subscription Status
Meaning	Rules used to distribute shares after the issue closes	Number of times an IPO has been applied for during bidding
When it matters	After IPO closing	During and after the subscription period
What does it tell you	Who gets shares and how allotment is calculated	How much demand came in from each investor category
Why it matters	Helps you understand your real allotment chance	Helps you judge whether the issue is under-subscribed or over-subscribed

Subscription status tells how crowded an IPO is. Allotment rules tells that whatever happens because of that crowding. Beginners need to understand both, not just the subscription headline.

Common Mistakes Beginners Make

Assuming SEBI directly allocates the shares

SEBI sets the rules, but the registrar and stock exchange finalise the allotment basis.

Looking only at overall subscription numbers

Always check the category-wise numbers. A total subscription figure can hide the fact that retail demand may be much lower or much higher than NII demand.

Bidding below the cut-off without understanding the effect

If the final issue price is above your bid, your application may not be considered for allotment.

Sending duplicate applications

An individual identified by PAN is generally allowed only one IPO application per category, and

Duplicate or incorrect applications may be rejected.

Expecting guaranteed listing gains just because allotment is received

‘Allotment’ only means you received the shares. It does not guarantee that the stock will list at a profit or hold that price later.

This is an inference based on how IPO investing works; allotment rules deal with distribution, not post-listing returns.

Conclusion

IPO allotment is not random or based on favouritism. It follows a clear rule-based process, with SEBI setting the framework and the registrar finalising allotment with the designated stock exchange.

For retail investors, the key factors are the retail quota, lot size, number of valid applicants, and the level of oversubscription. Once you understand these, IPO allotment becomes much easier to follow. If you apply for IPOs regularly, knowing these rules can help you set better expectations and make more informed decisions.