Summary of this article
While the investor interest in NSDL IPO was high, not all applicants were allotted shares.
There are many reasons for IPO applications getting rejected including oversubscription.
Sebi states that a public issue is undersubscribed if the bids are received for less than 90 per cent of the shares on offer.
The National Securities Depository’s (NSDL’s) initial public offering (IPO) has generated a significant amount of buzz on D-Street. The much anticipated public issue closed for bidding on August 1, 2025, and the share allotment status for the public issue was finalised on August 4. The IPO saw a significant amount of investor interest, as the issue was oversubscribed 41.01 times across categories with investors applying for 1,440.4 million shares compared to the 35.127 million shares offered for subscription.
While the investor interest in the public issue was high, not all applicants were allotted shares. While there are many reasons why an investor might not be allotted shares they have bid for, it is important to understand how the process of share allocation works. Here’s an explanation of how shares are allotted in IPOs
How Are Shares Allotted In IPOs
According to the Securities and Exchange Board of India's (Sebi’s) General Information Document for Investing in Public Offers, the allocation or allotment of shares is done in accordance with the market regulator’s Issue of Capital and Disclosure Requirements (ICDR) Regulations.
Once the bidding window for a public issue closes, the bids received from all investors which are made at or above the offer price are grouped together to determine the total demand under the category. The bids made at the issue price or higher than the issue price are grouped together and called ‘valid bids’. Once the bids are grouped together and added, the total demand or subscription for the public issue is known. After determining the demand, one of three situations can arise:
Under Subscription
Sebi states that a public issue is undersubscribed if the bids are received for less than 90 per cent of the shares on offer. If an IPO is undersubscribed, the issuer can unblock the entire subscription amount received within six working days of the offer closing date and repay the money to anchor investors. However if an issue is an offer-for-sale (OFS), the minimum subscription requirement may not be applicable.
90 Per Cent To Full Subscription
If a public issue is subscribed more than 90 per cent to 100 per cent or one time (s) by subscribers, applicants who have submitted valid bids are allotted shares in accordance with the exact number of lots they have bid for.
Oversubscription
A public issue is considered ‘oversubscribed’ when it receives applications for more shares than the number of shares which are offered for subscription. Let’s understand how shares are allotted in case of oversubscription for different investor categories:
Oversubscription In Retail Category (RII)
According to Sebi regulations, shares are allocated to the retail category on the basis of the concept of ‘Maximum RII Allottees’. The number of Maximum RII Allottees is determined by dividing the total number of shares set aside for the retail category by the lot size for the issue.
If the number of applications received in the retail category exceed the maximum number of retail investors who could get allotment, a computerised lottery is organised. Applicants who are allotted shares as a result of the lottery can only get a maximum of one lot of shares. In the NSDL IPO, the number of applications received was more than the maximum number of RII allottees.
On the other hand, if the number of applications from the retail category for an issue are less than the maximum number of retail allottees, each applicant who has submitted a valid bid gets at least one lot of shares. If some shares still remain after such an allocation, those shares are allocated on a pro-rata basis.
NII Category
Sebi regulations state that if the total demand in the non-institutional category is greater than the shares set aside for the NII category, the allotment is made on a proportionate basis as much as the minimum lot size for the NII category.
Why Are IPO Applications Rejected
Apart from sheer luck in the computerised lottery, there are several other reasons which can lead to an applicant’s bid for shares getting rejected. Here’s a look at some of the common reasons for why applications for IPOs are rejected:
Invalid or Incorrect Application
Applications are rejected if they are deemed invalid or incorrect. The registrar for the public issue can classify an application as invalid and reject it. There can be many reasons for an application being deemed invalid, some of the common reasons include incorrect information filled by the applicant or mismatches in Permanent Account Number (PAN) and bank details. Other reasons can include an investor filing two applications with the same PAN. Notably only one IPO application can be made for one PAN.
Low Bid Price
For book-building public issues, if an applicant places a bid at a price which is lower than the bid price, the application might be rejected. Once the company receives all the applications, it calculates the bid price or cut-off price. Notably the cut-off price can be equal to or less than the upper end of the price band. Thus, it is advisable to always bid at the upper end of the cut-off price.
Ultimately, there is no guaranteed way of securing allotment in an IPO. However, applicants can potentially improve their chances of securing allotment by bidding at the cut-off price, applying under the shareholder and the retail/NII quota if eligible, and filling out the application form correctly.
