How to increase the chances of IPO allotment?
In search of an IPO allotment in 2022!
Without a doubt, 2022 will be a blockbuster year for the Indian stock market,
with plenty of initial public offerings (IPOs) waiting to be listed. 2021 was a
wonderful year for investors in India, with almost 60 initial public offerings.
The future looks even brighter, as the market for initial public offerings
(IPOs) and investor’s enthusiasm is quite promising.
Despite the large number of upcoming IPOs,
many people are still concerned about IPO allotment. Almost every initial
public offering (IPO) in 2021 received a higher number of subscriptions than
expected. However, only a small number of people were able to get on the IPO's
allotment list. You already know that there are a few things you can do to
improve your chances of receiving an IPO allotment. These factors are outlined
below to assist you with IPO allotment. Let's go explore!
Let's
look at how you can improve your chances of getting an allotment of IPO?
Avoid
big applications
Big applications should be avoided. SEBI's
current allocation procedure considers all retail applications equally. That
means that even if you submit a large application worth a lakh rupee, you may
not get any benefit if the offering is oversubscribed. Large
applications are excellent for large IPOs where there is a reasonable chance
that the retail segment will remain unsubscribed.
Apply
for the IPO as soon as you can
For the bidding process, all IPOs are
available for three days. If you plan to bid, do so within the first two days
of its availability, if feasible one day. Bidding as soon as possible increases
your chances of receiving an allocation. It's fine to play it cautious, but if
you've done your homework and have a good understanding of the company and the
IPO, it's always better to bid early to escape the rush. Many investors play it
safe and bid on the IPO's final day. This may cause you to miss your allotment,
resulting in the loss of an investment opportunity.
Bid
at the cut-off price
Assume an initial public offering (IPO) has
been issued with a price range of $150 to $155 per share. If you bid at the
cut-off price, it means you're willing to buy at any price between Rs 150 and
Rs 155 for the share. As a result, when filling out the IPO application form,
it's a good idea to use a cut-off price. . To be clear, a "cut-off
price" is an investor's readiness to pay whatever price the firm decides
at the end of the book-building process. The investor must then bid at the
highest price range after applying Cutoff. If the price is lower than
anticipated, the difference is refunded.
Don't
make a hasty decision at the last minute
Before putting your builds on the last day,
several investors look at subscription levels in the High Net worth Individual
[HNI] and Qualified Institutional Buyer [QIB] categories. Some investors are
waiting to see how the HNI and QIB categories buy IPOs. However, if there is a
technical problem, you may have difficulty submitting your application.
Furthermore, because most banks do not accept applications after 4 p.m.,
submitting an IPO application may be too late.
Purchase
stock of the parent company
Buying at least one share of the parent or
holding company in your demat account is a smart strategy to make your IPO a
good deal. This will verify that you are eligible to apply for the position as
a shareholder.
It's
important to remember to approve the mandate request
This is a common mistake made by new
investors, especially those eager to get their feet wet in the IPO market. They
apply for the IPO offered by the brokers and consider the job done. You will,
however, receive a mandate request when applying for the IPO. You must approve
this request through the banking app or website. The funds will not be locked
in your account if the mandate is not approved, and you will not be considered
for the IPO allotment.
Make
sure you double-check everything
When filling out the IPO form, like with
other formal applications and submissions, you must undertake due diligence.
Remember to double-check your name, demat account number, application category,
and other information on the form. IPO applications have been rejected in a
number of instances due to basic errors and incorrect information.
Conclusion
When an IPO is oversubscribed, allotments
are allocated by a lottery system. As a result, keeping an eye out for under subscribed IPOs is a good idea. You might also look into undervalued IPO
allotments with low subscription rates. While no one can predict the IPO
allotment procedure, following the guidelines above can help you improve your
chances of receiving an IPO allotment.