Workings of Share Distribution in Initial Public Offerings (IPOs)
September 6, 2025
The primary market is buzzing with activity, as robust participation from market participants drives high demand for Initial Public Offerings (IPOs) this year. This increased interest has been evident in recent offerings, such as those from NSDL and Anthem Biosciences, which have seen oversubscriptions of over 40 times and 60 times respectively.
In the world of IPOs, the process of allotment varies depending on the level of demand. Let's delve into the two main cases: Case A and Case B.
Case A occurs when the number of eligible retail applicants is less than or equal to the number of lots on offer to retail investors. In this scenario, all eligible applicants are allotted at least one lot. The remaining shares are proportionately distributed among the applicants.
On the other hand, Case B arises when the number of eligible retail applicants exceeds the number of lots on offer. In such situations, the number of allotted shares for an applicant is determined by multiplying the ratio (lots on offer divided by the total number of eligible retail applicants) with the number of lots applied for.
It is important to note that IPOs are typically book-built offers, where the company does not set a fixed issue price but a price band. The price band is decided in consultation with investment banks and must have a minimum premium of 5% and a maximum of 20% over the floor price. Interested investors can bid for shares at any price within the price band.
Once the bidding window closes, the lead managers can analyze the bids and arrive at the cut-off price, the highest price at which all shares on offer would be subscribed. Only retail investors (with application size up to ₹2 lakh) are eligible to bid at the cut-off price directly, while other categories must either guess the cut-off price or bid at the cap price.
In Case B, applicants are segregated into buckets based on the number of lots applied for. The ratio of lots on offer divided by the total number of eligible retail applicants is calculated to determine how many applicants will get allotment by draw of lots. However, it is important to note that in the case of oversubscription, allottees are not necessarily identified by a draw of lots, but through a mathematical process.
The basis of allotment for retail investors in a mainboard issue is determined through mathematical processes, as outlined by SEBI regulations. The minimum allotment for retail and non-institutional categories cannot be short of one lot.
The role of Lead Manager in a Book-built Offer for an IPO is typically held by a financial institution or corporate services company appointed to manage the IPO process. For instance, Gretex Corporate Services Ltd. was the Lead Manager for the LGT Business Connextions Ltd. IPO, Corpwis Advisors Private Limited for the Studio LSD IPO, Interactive Financial Services Limited for the Anlon Healthcare IPO, and Arihant Capital Markets Ltd. for the VMS TMT IPO in 2025. For the specific IPOs of NSDL and Anthem Biosciences in 2025, there is no publicly available data from the search results identifying their Lead Managers.
In conclusion, the allotment process for IPOs in 2025 is a well-structured system designed to ensure fair distribution of shares based on demand. As the market continues to thrive, it will be interesting to see how these processes evolve in the future.
Read also:
- Understanding Hemorrhagic Gastroenteritis: Key Facts
- Stopping Osteoporosis Treatment: Timeline Considerations
- Trump's Policies: Tariffs, AI, Surveillance, and Possible Martial Law
- Expanded Community Health Involvement by CK Birla Hospitals, Jaipur, Maintained Through Consistent Outreach Programs Across Rajasthan
){kind=link}