What is meaning of Oversubscribed IPO?
An IPO i.e Initial public offering is said to be oversubscribed when the number of applications is higher than the shares available for allotment. Normally, over-subscription occurs when the number of shares supplied through a company is not enough to meet the demand.
Let’s take a look at what happens if the IPO is oversubscribed?
Today’s New IPO Listing – How to Choose Best IPO for Investment?
Face Value in IPO – How to Calculate Face Value or Nominal or Par value?
Lot Size in IPO – How to Calculate Lot Size? | Can I Modify IPO Lot Size?
Book Built Issue IPO – Process | Steps | Types | Pros & Cons
Price Band in IPO – How is the Price Band of an IPO Decided?
Undersubscribed IPO – What Happens if the IPO is Undersubscribed?
When Can I Sell IPO Shares? Can I Buy & Sell an IPO in the Same Day?
IPO Applying Time – Cut Off Time for Online IPO Application
How Many Lots Can We Buy in IPO to increase the chances of an allotment?
Oversubscribed IPO: What happens if the IPO is oversubscribed?
FAQs – When Can I Sell IPO Shares? Can I Buy & Sell an IPO in the Same Day?
What happens if the IPO is Oversubscribed?
Let’s take an example, a fixed number of shares offered in an IPO are 5,000 shares.
At 20 times over-subscription means investors’ demand is about 2 Lakh shares.
If the demand exceeds the supply, the issuing company can charge a higher price resulting in more capital raised for the issuer.
In this condition, underwriters can use the greenshoe option.
Normally, the greenshoe option allows underwriters to issue 15% more shares than officially planned.
Let’s take a look at how companies allot shares in this scenario.
How to Get IPO Allotment?
The allotment of shares is done by predefined rules laid down through the SEBI.
There are few types of investors in the IPO,
for example, QIB i.e. Qualified Institutional Buyers,
NII i.e. non-institutional investors and RII i.e. Retail individual investors.
Investors are offered a specific number of shares in an IPO, which is determined by the company.
The process of allocating shares is different for every investor type.
While approximately 50% of shares are allocated to qualified institutional investors, approximately 35% of the shares are allotted to retail investors.
Most Oversubscribed IPO in India
|Paras Defence and Space Technologies Limited’s||2021||273.05|
|Happiest Minds Technologies||2020||111|
|Salasar Techno Engineering||2017||273|
|FCS Software Solutions||2005||176|
|MAS Financial Services||2017||128|
|Dixon Technologies Ltd||2017||117|
|Happiest Minds Technologies||2020||151|
|Chemcon Speciality Chemicals||2020||149|
The Bottom Line
Good IPO is very often oversubscribed, which means there is a high demand for that particular company’s shares.
This also exposes you to the fact that you could miss out on getting any shares and taking profit of listing gains made on an opening day in the stock exchanges.