Have you ever wonder why you aren't getting any allotments in IPOs?

Here's how IPOs are allotted.

A thread🧵

Once all the bids are collected & the IPO closes, it is the responsibility of the Registrar and Transfer agent (RTA) to finalize the allotment of shares. The RTA follows the rules laid down by SEBI in "General Information Document for Investing in Public Offers."

In the Retail category, if there is oversubscription (aka the demand for the allotment of shares is more than the actual number of shares reserved for this particular category), then allotment happens via the draw of lots method. Let us try to understand this using an example.

Assume a company offers 1000 shares via IPO, 10% earmarked for retail category, i.e. 100 shares. After the bidding window, RTA collates all the information. The lot size is 5 shares. Retail can bid between 1 to 5 lots.

The company receives various bids across different lot sizes; here is the breakup. A total of 2850 shares applied, which means the retail category is oversubscribed by 28.5X (2850/100).