Investing in Initial Public Offerings (IPOs) is an exciting way to become part of a company’s growth story. However, with IPOs gaining immense popularity in India, securing an allotment can often be tough. Let’s uncover effective strategies to improve your chances of success.
Strategies to Boost Your IPO Allotment Chances
Apply for a Single Lot
Applying for a single lot is probably one of the simplest yet most effective ways to increase the chances of getting an IPO allotment. It is SEBI, which enables an equal chance for all retail investors who apply for an amount of up to Rs 2,00,000, regardless of the number of lots applied in an oversubscribed IPO, where the demand is higher than the supply. Applying for a single lot decreases your chances of being rejected while maximising your odds of getting an allotment. Research the lot size mentioned in the IPO brochure and keep an eye on the subscription levels so that you can make a good and informed decision.
Leverage Multiple Demat Accounts
It is completely within the legal boundaries and strategic use of multiple demat accounts to apply for an IPO in order to increase the chances of receiving an allotment. As long as each account has a different and unique PAN, you can apply through accounts belonging to your family members or really close friends. The more applications you submit, the better your chances of getting at least one allotment. But remember to follow all guidelines properly in order not to be disqualified, such as having each application linked to a different name and PAN.
Select the Cut-Off Price
When applying for an IPO, selecting the cut-off price is a smart strategy to enhance your allotment chances. The cut-off price is the final price at which shares are issued, decided after the book-building process. By opting for the cut-off price, you show flexibility and willingness to accept the final price, which increases your chances of being allotted shares in a highly sought-after IPO. This strategy is particularly beneficial in oversubscribed offerings, where the final price is often closer to the upper end of the price band, ensuring you don’t miss out on allotment due to a lower bid.
Apply Early, Not Last Minute
Deferring the last minute to apply for an initial public offering may result in server overloads, technical glitches, or altogether missing the deadline due to heavy traffic. To avoid all these, one should always apply early in the IPO window, say on the first or second day. Applying early, on the other hand, not only makes sure your application is processed smoothly but also reduces the risk of technical rejections that might dog an application as demand spikes toward the end of the application period. Remind and do use the pre-apply features offered by brokers.
Avoid Technical Rejections
The applications for IPO are mostly rejected due to a technical glitch, like wrong personal details or inadequate funds in the bank-linked account. Therefore, one should double-check everything before he/she submits his/her application. The Demat account number, PAN, bank details, and other personal information should be accurate and updated. Also, ensure that your linked bank account has enough funds to cover the application amount. Lack of funds or discrepancies in the information can lead to automatic rejection, which is avoidable with careful attention.
Invest in the Parent Company
A lesser-known strategy to improve your IPO allotment chances is by investing in the shares of the parent company if it’s already listed. Some companies allocate a portion of shares in an IPO specifically to existing shareholders as a way to reward loyalty. Although this is not a guaranteed method, buying shares in the parent company could provide an edge in securing allotment for its subsidiary’s IPO. It’s worth considering if you’re looking to invest in the IPO of a subsidiary, as the parent company may prioritize existing shareholders.
Open Accounts with Multiple Brokers
Opening accounts with multiple brokers can significantly increase your chances of securing an IPO allotment. Different brokers have different allocation capacities for IPO shares, and applying through multiple brokers ensures you’re not solely relying on one platform. This diversification increases your exposure to more allotment opportunities. When selecting brokers, it’s important to research their past performance and reputation to ensure they can deliver on your IPO application goals effectively.
Engage Regularly with IPOs
Persistence is key when applying for IPOs. Even if you are unsuccessful in getting an allotment in your initial attempts, consistently applying for IPOs will increase your understanding of the process and improve your chances over time. Regular engagement also keeps you updated on upcoming IPOs, ensuring you’re in a better position to capitalize on new opportunities as they arise. Staying informed and committed can lead to eventual success, even if it takes a few tries.
Conclusion
Securing an IPO allotment can be tough, but using strategies like applying for a single lot, using multiple Demat accounts, selecting the cut-off price, and applying early can boost your chances. Stay patient and persistent, and over time, you’ll improve your odds of success in the IPO market.
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