IPO Basis of Allotment: Who Gets Shares When an Issue Is Oversubscribed

Every few weeks a hot issue closes and the same scene plays out on WhatsApp groups: one friend got a lot, three didn’t, and someone who applied for the maximum amount is furious that a college kid with a single lot beat him to it. None of it is luck in the casual sense. The IPO basis of allotment is a written formula, set out in SEBI’s rules, and once you see how it works the outcomes stop looking random. They look predictable, and occasionally a bit unforgiving.

We’ll go category by category, use SEBI’s own worked illustrations, and then run a made-up issue through the same arithmetic so you can see what changes when retail demand is light versus when it’s ten times the shares on offer.

Who decides the basis of allotment

It isn’t the company alone, and it isn’t only the registrar. Regulation 49(5) of the SEBI ICDR Regulations, 2018 (amended up to March 21, 2026) says the authorised employees of the designated stock exchange, together with the lead managers and the registrar to the issue, must ensure the basis of allotment is finalised “in a fair and proper manner” under the procedure in Schedule XIV of those regulations. The registrar does the heavy data work: matching bids, rejecting invalid ones, running the numbers. The exchange is in the room to keep it honest.

There are also a couple of hard floors before anyone gets shares. Under Regulation 49(1), an issuer can’t make an allotment at all if the number of prospective allottees is less than one thousand. And under Regulation 45, a fresh issue needs minimum subscription of at least 90% of the offer; that condition doesn’t apply to an offer for sale. Miss it and the money goes back.

First, the pie gets cut into categories

Allotment happens inside buckets, never across the whole book at once. For a typical mainboard book-built issue made under Regulation 6(1), Regulation 32(1) fixes the split of the net offer:

• Retail individual investors (RIIs): not less than 35%.
• Non-institutional investors (NIIs): not less than 15%.
• Qualified institutional buyers (QIBs): not more than 50%, with 5% of that QIB portion set aside for mutual funds.

Companies that come in under Regulation 6(2), the route for issuers that don’t meet the Regulation 6(1) tests on net tangible assets, operating profit and net worth, flip this around: RIIs get not more than 10%, NIIs not more than 15% and QIBs not less than 75%. That’s worth checking in the offer document, because a 10% retail bucket in a popular issue fills very fast.

A few more knobs sit inside these buckets. Regulation 32(3) lets the issuer give up to 60% of the QIB portion to anchor investors. Since 2022, Regulation 32(3A) splits the NII bucket in two: one-third is reserved for applications above ₹2 lakh and up to ₹10 lakh, and two-thirds for applications above ₹10 lakh. Unsubscribed shares in one NII sub-category can move to the other, and unsubscribed retail or NII shares can be allocated to other categories.

And the definition that decides which bucket you’re in: a retail individual investor, under Regulation 2(1)(vv), is an individual who bids for a value of not more than ₹2 lakh. Bid ₹2,05,000 and you’re an NII, with different allotment rules.

Lot size: the unit everything is counted in

Regulation 47(2) makes the issuer fix a minimum application size that falls in a value range of ₹10,000 to ₹15,000, and applications come in multiples of that. SEBI’s Part B illustration in Schedule XIV takes a price of ₹900 and shows the lot could be anywhere from 12 shares (₹10,800) to 16 shares (₹14,400). The issuer, with its lead manager, picks one.

Why should you care? Because retail allotment in a crowded issue is decided in lots, not rupees. Your 13 lots and your neighbour’s single lot carry the same weight in the draw. More on that below.

In an oversubscribed retail book, applying for the maximum doesn’t buy you a better ticket in the draw. It buys you a bigger cheque that gets blocked and then mostly released.

Retail allotment: minimum lot first, then the leftovers

Regulation 49(4) is the heart of retail allotment. Each retail investor gets not less than the minimum bid lot, subject to there being enough shares in the retail category, and whatever is left after that is allotted on a proportionate basis. SEBI’s General Information Document for investing in public offers spells out the mechanics. Retail bids at or above the final offer price are grouped. The shares available for retail are divided by the minimum lot to get the maximum number of retail investors who can each receive one lot. Then there are two possibilities.

Case 1: enough shares for everyone to get a lot

If the number of valid retail applicants is equal to or less than that maximum, every applicant gets one lot. The shares still left over are shared out in proportion to what each person asked for beyond their first lot.

SEBI’s Example A in Schedule XIV shows this. One crore shares are on offer at ₹600, of which 35 lakh are for retail. The lot is 20 shares. One lakh retail investors apply and the retail book is subscribed 4 times, so retail demand is 1.4 crore shares. Giving everyone one lot uses 20 lakh shares. That leaves 15 lakh shares to spread over the remaining demand of 1.2 crore shares, a ratio of 0.125, or one extra share for every eight asked for beyond the first lot.

So the bigger application does get more here. A, who asked for 320, walks away with 58. E, who asked for one lot, gets exactly one lot. Rounding is to the nearest whole share, which is why C’s 12.5 becomes 13.

Case 2: more applicants than lots

This is the common situation in a hot issue. If valid retail applicants outnumber the lots available, the investors who get the one lot are chosen by draw of lots. Nobody gets more than one lot, and many get nothing.

SEBI’s Example B keeps the same 35 lakh retail shares and 20-share lot but has two lakh retail applicants, with the retail book subscribed 9.37 times. At 20 shares each, 35 lakh shares cover 1,75,000 people. The other 25,000 get nothing. And here’s the part people miss: the 1,75,000 winners are spread across every lot-size group in the same ratio. In SEBI’s table, 10,000 people who applied for one lot see 8,750 selected. The 10,000 who applied for 16 lots? Also 8,750. That’s 87.5% in both rows.

Once a retail book crosses that point, your odds depend on the number of applicants, not on the size of your bid.

NII allotment works the same way, just with a bigger minimum

Since 2022, Regulation 49(4A) gives non-institutional investors a similar deal: each NII gets not less than the minimum application size, subject to availability in the NII category, and the rest is allotted proportionately. The minimum NII application is the smallest number of lots worth more than ₹2 lakh.

Schedule XIV’s Part A1 uses ₹600 a share and a 20-share lot, so the minimum NII application is 340 shares (17 lots, ₹2,04,000). In Example A, the ₹2-10 lakh sub-category has 5 lakh shares, 500 applicants and 4 times subscription, so demand is 20 lakh shares. Everyone gets 340 shares first, using 1.7 lakh shares. The remaining 3.3 lakh shares are shared over the remaining 18.3 lakh shares of demand. An investor who applied for 1,000 shares ends up with 340 plus 119, so 459 shares.

Example B is the hot-issue version. Same 5 lakh shares, but 50,000 applicants and 89.17 times subscription in that sub-category. SEBI’s illustration says 1,471 applicants get the minimum 340 shares and the other 48,529 get nothing. That’s roughly 2.9 in a hundred. In the row of 2,500 people who applied for exactly 17 lots, 74 are picked by lottery. For the over-₹10 lakh sub-category, SEBI says the same method applies.

NII allotment used to be purely proportionate, so the biggest cheque took the biggest share. Now the first slice in each NII sub-category goes out one minimum application at a time.

QIBs and anchors: proportionate, not a lottery

For everyone other than retail investors, NIIs and anchors, Regulation 49(3) keeps it proportionate within each category, rounded to the nearest whole share, with the minimum allotment equal to the minimum application size. In practice that mostly means QIBs. The General Information Document describes the order: mutual funds are first allotted their reserved 5% of the QIB category, then all QIBs who bid at or above the offer price share the rest proportionately, and mutual funds that didn’t get their full ask in round one can take part in that second round. Anchor allocation is discretionary, decided by the issuer with the book-running lead managers within the limits in Schedule XIII.

There’s one small piece of flexibility for rounding. Regulation 49(2) bars allotment beyond the shares offered, except that in an oversubscribed issue up to 1% of the net offer to the public can be allotted extra so that allotments come out in minimum lots. Small rounding shows up in SEBI’s own NII illustration too: 5 lakh divided by 340 is about 1,470.6, and the example puts the number of winners at 1,471.

A made-up issue, start to finish

Let’s run a hypothetical company, Narmada Agro Foods, through the rules. Every number in this section is invented for illustration.

Narmada prices its issue at ₹450 with a lot of 33 shares, so one lot costs ₹14,850, inside the ₹10,000-15,000 band. The net offer is 1 crore shares under Regulation 6(1), so at the minimum category floors the split looks like this:

The largest retail bid is 13 lots: 429 shares, or ₹1,93,050. A 14th lot would take it to ₹2,07,900, over ₹2 lakh, and that bid would sit in the NII small-ticket bucket instead. Fourteen lots is also exactly where the NII minimum starts.

Scenario one: retail demand is modest. Say 70,000 valid retail applicants bid for 52.5 lakh shares in total, 1.5 times the retail portion. One lot each uses 23.1 lakh shares. That leaves 11.9 lakh shares for 29.4 lakh shares of extra demand, a ratio of about 0.405.

Scenario two: the issue is hot. Now 4 lakh valid retail applicants show up. 35 lakh shares divided by 33 gives a maximum of 1,06,060 retail allottees, with 20 shares left over. The chance of getting a lot drops to about 26.5%, and it is the same 26.5% whether you put in ₹14,850 or ₹1,93,050. Someone with 13 lots who wins still gets one lot, 33 shares, and the rest of the blocked amount is released.

That gap between the two scenarios is the whole story of retail allotment. Below the line where every applicant can get one lot, size matters. Above it, headcount matters.

What this means when you apply

• Bid at a price that counts. Only bids at or above the final offer price are grouped for allotment. Retail investors are allowed to bid at the cut-off price, which we explain in our note on the IPO cut-off price.
• Watch the subscription maths, not the headlines. Divide the retail portion by the lot size to find how many people can get a lot, then compare it with the number of retail applications. The retail subscription multiple alone doesn’t tell you this, because it counts shares, not people.
• Know your category’s rules. A ₹2.1 lakh bid is an NII bid, and the odds there can be very different.
• Read the offer document. Whether the issue is under 6(1) or 6(2), the lot size, any employee or shareholder reservation and the anchor portion are all disclosed there.
• Plan for the unblock. If you don’t get shares, the blocked money is released. Our piece on the IPO refund process under ASBA covers how that works.

For the bigger picture on choosing and evaluating issues, start with our guide to IPO investing in India.

IPO basis of allotment: the short version

The basis of allotment is a two-step process inside fixed buckets. Retail investors and NIIs get the minimum unit first, by lottery if there aren’t enough to go around, and only then is anything left shared out by size. QIBs are allotted proportionately. The exchange, lead managers and registrar sign off on the result together. Once you know the retail portion, the lot size and the applicant count, you can work out your own odds before the registrar does.

Disclaimer: This article is for educational purposes only and is not investment advice or a recommendation to buy or sell any security. Investing in IPOs carries risk. Please read the offer document and do your own research or consult a SEBI-registered investment adviser before making investment decisions.