Minimum Subscription in an IPO: The 90% Rule and What Happens If It Fails

Most IPO chatter is about how many times a book got subscribed. 40x, 150x, the bigger the better. The quieter question sits at the other end of the scale: what if an issue barely fills? That is where the minimum subscription in an IPO comes in. It is a hard floor set by SEBI, and if a company doesn’t clear it, there is no listing and no allotment. Everyone gets their money back.

It rarely makes headlines in a hot market. But the rule shapes how issues are sized, how underwriting is arranged and what happens to your blocked funds if demand dries up. We’ll go through what the regulations actually say, run a few made-up numbers, and look at the places where an issue can fail even when the headline subscription looks fine.

What the minimum subscription in an IPO rule says

The rule for a main board IPO is Regulation 45 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, usually shortened to the ICDR Regulations. The version we checked is the one SEBI lists as last amended on March 21, 2026. Regulation 45(1) says the minimum subscription to be received in the issue shall be at least ninety per cent of the offer through the offer document, except in the case of an offer for sale of specified securities.

Two things in that sentence matter.

• The 90% is measured against the offer. Not against what the company hoped to raise in a good week, and not against the grey market buzz. If the prospectus offers 1 crore shares, valid demand has to reach at least 90 lakh.
• Offers for sale are carved out. An offer for sale, or OFS, is existing shareholders selling their own shares. Regulation 45 excludes it from the 90% test. The disclosure format in Schedule VI of the same regulations makes the practical reading explicit: the prospectus statement is that minimum subscription in the issue shall be 90% of the fresh issue portion.

There is also a proviso. The minimum subscription is subject to the allotment of the minimum number of specified securities prescribed under the Securities Contracts (Regulation) Rules, 1957. In plain terms, hitting 90% is necessary, but the issue also has to satisfy the separate listing-related allotment requirements.

The refund clock

Regulation 45(2) is short and blunt. If minimum subscription is not received, all application money shall be refunded forthwith, and in any case not later than four days from the closure of the issue.

For most investors today, “refund” really means “unblock”. SEBI’s FAQ on the ICDR Regulations (updated as of May 15, 2025) explains that with ASBA, which is mandatory in public and rights issues for retail investors, non-institutional investors and QIBs, no money moves from your account to an escrow account. The amount is blocked in your own account, and if shares are not allotted, it is unblocked. We have covered the mechanics separately in our piece on the IPO refund process under ASBA and UPI.

A failed IPO doesn’t cost the investor anything except time. The money was never really gone, just parked in their own account with a hold on it.

Example 1: a fresh issue that falls just short

All numbers in these examples are hypothetical, built only to show how the rule works.

Say a company offers 2 crore new shares at ₹100 each, a ₹200 crore fresh issue with no OFS. The 90% floor works out to 1.8 crore shares, or ₹180 crore of valid demand.

Demand stopped at 87.5%. The company cannot allot 1.75 crore shares and quietly call it done. Under Regulation 45(2), every applicant’s money has to be returned within four days of the issue closing. The fact that the issue was “almost there” counts for nothing.

Example 2: the headline number passes, the valid number doesn’t

This is the trap. The live subscription figures on exchange websites show bids received. Some of those bids won’t survive.

The Schedule VI disclosure language in the ICDR Regulations spells out the failure cases. If the issuer doesn’t get 90% of the offer on the closing date, or if the subscription level falls below 90% after closure because of withdrawal of applications, technical rejections, or because listing or trading permission isn’t obtained from the stock exchanges, the issuer has to refund the entire subscription amount.

Run it on the same hypothetical ₹200 crore issue:

On closing day the screen said 0.93x. After technically invalid bids were weeded out, valid demand was 88.5%. The issue fails. Anyone who saw “93% subscribed” and assumed allotment was coming would be surprised. That’s why a book that closes at 0.9x to 1x is genuinely uncertain until the basis of allotment is finalised.

Where the OFS changes the maths

Because Regulation 45 measures the 90% against the fresh issue and leaves the offer for sale out, a mixed issue has to be read in two parts. Take a hypothetical IPO with a ₹300 crore fresh issue and a ₹200 crore OFS, ₹500 crore in all. The minimum subscription test is 90% of ₹300 crore, which is ₹270 crore.

So a book that is 60% subscribed overall (₹300 crore of demand against ₹500 crore on offer) can still clear the regulatory floor, as long as at least ₹270 crore of that demand can be applied to the fresh issue. How unsubscribed portions are split between the fresh issue and the selling shareholders is set out in the offer document’s terms of the issue, and it is worth reading that section in any IPO where demand looks thin. A large OFS with modest fresh capital can list on weak demand. A large fresh issue cannot.

A second floor: the QIB route under Regulation 6(2)

Companies that don’t meet the profitability and net worth tests in Regulation 6(1) can still list through Regulation 6(2). The catch, as the ICDR text puts it, is that the issue must be made through book building and the issuer must undertake to allot at least seventy five per cent of the net offer to qualified institutional buyers, and to refund the full subscription money if it fails to do so. SEBI’s FAQ describes this as Entry Norm II, commonly called the QIB route. We explain both routes in more detail in IPO eligibility norms under SEBI rules.

That creates a separate test that can sink an issue on its own.

Overall, the book is more than twice covered. Retail is 8x. But QIBs bid for only 70 lakh shares against the 75 lakh the company is bound to allot them. Excess retail and NII demand can’t fill that gap, because the undertaking is specifically about allotting to QIBs. Under the Regulation 6(2) undertaking, the company has to refund the full subscription money. A 2.1x headline, and nobody gets shares.

On a loss-making company’s IPO, the number to watch is not the overall subscription. It is whether institutions alone cover their 75%.

Underwriting: who steps in if bids fall short

Underwriting is the safety net, and the ICDR Regulations tie it directly to minimum subscription. Regulation 40(3) covers book-built issues on the main board. Among its conditions:

• If the issuer wants the issue underwritten to cover under-subscription, it must sign an underwriting agreement with the lead managers and syndicate members before filing the red herring prospectus, stating the maximum number of securities they will take up.
• Where the issue is required to be underwritten, the underwriting obligations should be at least to the extent of minimum subscription.
• For a Regulation 6(2) issue, at least 75% of the net offer that must be allotted to QIBs cannot be underwritten. In other words, the QIB test has to be passed by real institutional demand.
• If syndicate members fail to honour their commitments, the lead managers have to fulfil them.

SEBI’s FAQ separates hard underwriting, where the underwriter commits to buy its share before the issue opens and bears the higher risk, from soft underwriting, where the commitment kicks in only after the issue closes. If you want the longer version, our explainer on IPO underwriting in India walks through devolvement step by step.

SME IPOs play by a tighter rule

On the SME platforms, the safety net is mandatory and bigger. Regulation 260(1) of the ICDR Regulations says an SME IPO shall be underwritten for 100% of the offer and shall not be restricted up to the minimum subscription level. Regulation 260(2) adds that the lead managers must underwrite at least fifteen per cent of the issue size on their own account.

Take a hypothetical ₹40 crore SME issue. The lead managers alone must carry at least ₹6 crore of it (15% of ₹40 crore), and the full ₹40 crore must be underwritten. So weak public demand in a small issue is more likely to end with underwriters, rather than investors, picking up the slack.

The same 90% shows up in FPOs and rights issues

The rule isn’t unique to IPOs. Regulation 141 sets the same 90% minimum subscription, with the same offer-for-sale carve-out and the same four-day refund limit, for further public offers by listed companies. Regulation 86 applies a 90% floor to rights issues too, but with an exemption: it does not apply if the issue is not funding capital expenditure for a project and the promoters undertake to subscribe fully to their rights entitlement without renouncing it outside the promoter group (or to specific investors disclosed by the issuer).

One more condition: at least 1,000 allottees

Regulation 49(1) says the issuer shall not make an allotment in a public issue if the number of prospective allottees is less than one thousand. A tiny, concentrated book could, in theory, clear the money test and still fail this one. It is rare for a main board IPO, but it is another reason why minimum subscription is about more than one percentage.

What to check before you bid on a thin book

1. Split the issue. Note the fresh issue and OFS separately in the RHP. Work out 90% of the fresh issue; that is the regulatory floor.
2. Check the eligibility route. If the company listed under Regulation 6(2), track the QIB column, not the total.
3. Read the underwriting section. Is the issue underwritten, and up to what level?
4. Discount the closing-day number. A book at 0.9x to 1.1x can slip under the line after technical rejections.
5. Keep the funds free for a few days. If the issue fails, the blocked amount has to be released within four days of closure under Regulation 45(2).

For the broader picture of how to approach new issues, start with our guide to IPO investing in India.

The bottom line

Minimum subscription is a floor most IPOs clear without anyone noticing. It matters in the weak ones: a soft market, a pricey valuation, a company coming through the QIB route. In those cases the rule decides whether the shares list at all. Read the subscription data the way the registrar will, net of rejections, split by category and measured against the fresh issue, and a borderline IPO stops being a guessing game.

Disclaimer: This article is for education and information only. It is not investment advice or a recommendation to buy, sell or subscribe to any security. Rules can change; check the current SEBI regulations and the offer document, and consult a SEBI-registered adviser before investing.