Key Steps in the Allotment Process

1. Setting a price band : The issuer sets a price band (with the cap price at least 5% above the floor, up to a maximum 20% premium). Investors place bids within this band during the bidding window. Once the window closes, the cut-off price is finalized—it's the highest price at which the entire issue is fully subscribed.
2. Determining Eligibility: Only bids at or above the cut-off price qualify for allotment. Retail investors (those applying for up to ₹2 lakh worth of shares) have an edge. They can bid directly at the cut-off price. Non-retail investors (like high-net-worth individuals or institutions) must either guess the cut-off or bid at the cap price. In practice, due to high demand, the cap price often becomes the effective cut-off.
3. Basis of Allotment: This is decided by the registrar (e.g.KFintech) and approved by the stock exchanges. It varies by investor category (retail, non-institutional, qualified institutional buyers), issue type (IPO or Follow-on Public Offer), and board (mainboard or SME). Shares are allocated proportionally or via lottery, ensuring a minimum of one lot per eligible applicant where possible.
4. Methods of Allotment for Retail Investors : The process differs based on oversubscription levels:
   1. Case A (Lower Oversubscription): If the number of eligible retail applicants is less than or equal to the number of lots available (typically 35% of the issue reserved for retail), everyone gets at least one lot first. The remaining shares are then distributed proportionately. Example: For 1 crore total shares (35 lakh for retail, assuming 1 lot = 100 shares, so 35,000 lots), if there are fewer applicants, all get one lot, and extras are allotted via a ratio (e.g., 0.125 means 1 additional share for every 8 bids).
   2. Case B (Higher Oversubscription): If applicants exceed available lots, they are grouped into "buckets" based on the number of lots bid for (1 lot, 2 lots, up to 16 lots). A draw of lots is then conducted within each bucket using a ratio (available lots divided by applicants in the bucket). Example: For 1.75 lakh lots and 2 lakh applicants, the ratio might be 0.875—meaning 87.5% of applicants in a bucket get allotted (e.g., 8,750 out of 10,000 in the 1-lot bucket).
5. Handling Oversubscription and Undersubscription : Oversubscription: It leads to proportionate allotment or lotteries, with retail and non-institutional investors guaranteed a minimum of one lot if eligible. Unallotted applicants get refunds. Undersubscription: Rare and not deeply covered, but it would mean all eligible bids are fully allotted without proration or lotteries.
6. Post-Allotment: Shares list on exchanges (e.g., BSE/NSE) after allotment, with trading starting soon after.