Strategies to Boost Your Chances of Securing an IPO Subscription

Securing a successful IPO (Initial Public Offering) subscription is a key goal for many investors. Here are strategies and insights, based on SEBI guidelines and practical tips, to improve your chances of getting an allotment in an over-subscribed IPO.

Maximizing Your Subscriptions with Multiple Demat Accounts

Applying from various demat accounts significantly enhances your chances of getting a share allotment in an IPO. Share subscriptions can be split across different accounts, such as your personal demat account, your parents' and siblings' accounts. The more accounts you apply from, the higher your overall chance of being selected if the IPO is over-subscribed.

SEBI Guidelines Since October 2012

According to the Securities and Exchange Board of India (SEBI), during over-subscription, shares are allotted on a proportionate basis. If an IPO is over-subscribed, the allotment of shares will follow a lottery system. This means that if you apply for amounts such as ?100,000, ?150,000, or ?200,000, the shares will be allocated based on the proportion of your application relative to the total subscriptions. This ensures fairness and removes the necessity for big applications as the basis of allotment is the same for all applicants.

Selective Subscriptions and Allocation Strategies

To increase your chances of getting an allotment, consider the following steps:

Applying in Multiple Accounts

One of the most effective strategies is to apply for the IPO from more than one demat account. By distributing your subscription across different accounts, you increase the overall number of chances to get allotted shares. This approach also spreads the risk, as different accounts may get selected based on the lottery system.

Minimum Bids and No Spreading Big Applications

Instead of applying a large sum in a single account, it is advisable to go for minimum bid amounts in multiple accounts. This ensures you have more chances to get allotted shares. Additionally, following this strategy aligns with SEBI's guidelines, which state that no allotment will be made if the subscription is for an amount less than the minimum bid lot size.

Selecting Cutoff Price or Higher Price Band

When the IPO is over-subscribed, the cutoff price determines the lower end of the successful application range. It is recommended to go for the cutoff price or a higher price band to ensure a better chance of getting an allocation. This approach leverages the lottery system to your advantage and maximizes your participation in the allocation process.

Conclusion

Securing an IPO subscription can be a challenging task, especially in an over-subscribed scenario. By following the above-mentioned strategies, including applying from multiple demat accounts, going for minimum bids, and selecting higher price bands, you can enhance your chances of being allotted shares in the IPO. Always stay informed about SEBI guidelines and make strategic decisions to improve your investment outcomes.

Refer to the latest guidelines and regulations from SEBI to ensure compliance and optimize your investment strategy.