Let’s begin by reviewing the results of a few initial public offerings, or IPOs, that were made in 2020.
- Rossari Biotech IPO:– The first public offering was Rossari Biotech, which was listed at a premium of 74.58 percent. The IPO listing price was INR 742 as compared to the issue price of INR 425 per share. Oversubscription occurred 79.37 times.
- Happiest Minds Technologies – This public issue received 150.98 more subscriptions than expected. Compared to the INR 166 issue price, it had a listing price of INR 371 per share. Consequently, within ten days, investors generated a profit of 123.49 percent (the time taken from IPO open date to the listing date).
- Chemcon Specialty Chemicals Ltd. was listed at a premium of 72% for its public issue. The listing price was INR 584.80, as contrary to the issue price of INR 340 per share. There were 149 times oversubscriptions for the issue.
You must be aware of How profitable an IPO could be by this point. However, if you carefully review the subscription status, you’ll notice that practically every new IPO is oversubscribed, which means the subscribers’ chances of receiving an allocation are shared among them.
So, is there a way to increase the chances of getting an IPO allotment? The response is “Yes,” Continue reading the article to learn how to improve your chances of getting an IPO allocation.
Five Tips to Increase Your Chances of Getting an IPO Allotment
Here are five tried-and-true strategies to improve your chances of getting an IPO allocation:
Just Submit One Application
Many investors think their chances of getting an IPO allotment rise if they apply with several Demat and bank accounts. This is not the case, though. Your Permanent Account Number must be entered when applying for an IPO, otherwise the registrar will obtain it from the bank or Depository Participant automatically (DP). Your PAN is connected to all of your stock market investments, including IPOs. Therefore, if you submit more than one application, they will all be summarily dismissed.
Reduce Large Amounts if You’re a Small-Sale Investor
Investors frequently think their chances of getting an IPO allotment will increase if they bid for more shares, or lots. This, however, is really a myth. In each IPO, retail individual investors can typically apply for up to INR 2 lakh. However, if the IPO is oversubscribed, your application will be selected at random, and larger lots do not necessarily increase your chances of being selected. You might apply for more lots in a sideways manner to boost your chances of getting an IPO allocation. The next advice goes into more depth about this.
Using Multiple Demat Accounts
Increase Your Chances of Getting an IPO Allotment by Using Multiple Demat Accounts
You may have been confused by the topic heading because it conflicts with point number 1 (Just Submit one application). There is one option to apply for more lots without getting turned down, though. To bid on several lots in an IPO, you may use the Demat accounts of your friends’ and relatives’ loved ones. Your chances of receiving an IPO allotment will be significantly higher than those of regular investors if you apply for one lot from numerous Demat accounts.
The cut-off price
Never submit a bid that is lower than the cut-off price.
Companies frequently use a book-building procedure to estimate the stock’s fair market value. Investors are required to bid within the parameters they specify. The price at the very top of the range is referred to as the “cut-off price.” Therefore, if an IPO’s price range is 100 to 120, 120 is the cutoff price. You must bid at the cut-off price if you want to improve your chances of getting an IPO allotment. If the initial public offering (IPO) is oversubscribed, then everyone has bid at the cutoff price. Therefore, your prospects of getting an IPO allotment are zero if you quote a lower price.
Follow the Shareholder Path
You may have an advantage in obtaining one or more lots if you invest in an IPO whose parent business is already traded on the stock exchange. You may apply for one or more lots under the shareholder category if you are currently an investor in the parent or holding company. In actuality, the shareholder portion may continue to be undersubscribed even when the retail portion is frequently overcrowded. The shareholders of the parent or holding business will therefore have a stronger probability of receiving an IPO allocation.
You may confidently conclude that purchasing shares through an IPO allotment is the quickest way to increase your investment based on the IPO listing data for 2020. The majority of the companies that will be listed in 2020 and 2021 will have produced returns that defy gravity in the shortest amount of time. What are you still holding out for?