New “Basis of Allotment” Explained with CARE IPO

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

CARE IPO, which closed on December 11th, got oversubscribed by 34.11 times. After a very long time an IPO has seen such a good response from all the categories of investors. There was a huge appetite for its shares from Qualified Institutional Investors (QIBs) and Non-Institutional Investors (NII) categories, which saw oversubscription to the tune of 43.31 times and 110.24 times respectively.

Retail investors were a little cautious but some of them got interested to apply for it. This category got oversubscribed by 6.11 times. CARE has now become the third rating agency to get listed after CRISIL and ICRA.

CARE IPO – Explaining Basis of Allotment to Retail Individual Bidders

CARE IPO had total 71,99,700 equity shares on offer in the IPO, at an issue price of Rs. 750 per share. 35% of the offer was available for allocation to the retail individual bidders in accordance with the SEBI Regulations, which makes it 25,19,895 equity shares.

As many of you must be aware, when the investors apply for a company’s shares in an IPO, there is a bid ‘lot’ system. With CARE IPO, the bid lot size was in multiples of 20 shares and the retail investors had the option to apply for a maximum of 13 lots (260 shares) and a minimum of 1 lot (20 shares). So, the minimum investment in the CARE IPO was Rs. 15,000 and Rs. 1,95,000 as the maximum.

In August this year, SEBI announced certain new measures regarding “Basis of Allotment”. Some of the important measures are:

* Every retail participant gets a minimum bid lot irrespective of his application size. This is subject to availability of shares.
* The minimum application size band in an IPO has been increased from Rs. 5,000-7,000 earlier to Rs. 10,000-15,000 now.
* Issuers are now allowed to furnish the price band five working days prior to issue opening date as against the erstwhile two working days.

So, this new system of allotment, which got used in the CARE IPO also, has left many of the retail investors disappointed, including me.

Retail investors have been allotted only 20 shares irrespective of their application size i.e. whether they applied for 20 shares or 260 shares or any number of shares in between, they got only 20 shares allotted. That too, in the ratio of 101:256 i.e. only 101 applicants got these 20 shares out of 256 applicants.

Actually, a total of 3,19,350 retail individual applicants applied for it, in varying number of bid lots i.e. between 1 to 13 bid lots and only 1,25,994 applicants got the shares allotted in the ratio of 101:256.

Allocation to Retail Individual Bidders (after technical rejection)

As you can check the Basis of Allotment in the table above, there were 2,45,680 applicants who applied for 20 shares with each of their applications. Out of these 2,45,680 applicants, 96,929 applicants have been allotted 20 shares each or total of 19,38,580 shares.

2,45,680 * 101/256 = 96,929 * 20 shares = 19,38,580


15,853 * 101/256 = 6,255 * 20 shares = 1,25,100
9,199 * 101/256 = 3,629 * 20 shares = 72,580

and so on.

If you want to check the manual of CARE allotment, you can do so from this link.

I was disappointed as out of my family members’ 4 applications, we got allotted only 20 shares. There have been many investors like me who are disappointed. But, the disappointment in the allotment is primarily due to non-awareness of the new system.

If the new system is analysed deeply, it is not that bad after all. I think the idea is to encourage and favour the small retail investors and also to discourage HNIs to take the retail category route to apply for higher number of shares.

At the same time, it creates uncertainty in the minds of the retail investors whether to apply for an IPO or not, as you never know whether you will fall in those 1,25,994 successful applicants or not.

With the new system in place, the retail investors will have to change their strategy to get maximum number of shares allotted in some popular IPOs like CARE i.e. they should now apply for minimum bid lots in popular IPOs and increase the number of applications using demat accounts of their family members.

36 thoughts on “New “Basis of Allotment” Explained with CARE IPO”

  1. How to book listing gains after one finally gets some allocation in family members’ account? Do we need to make trading account for each of them? Or do we need to transfer the allocated lot to the dmat acc of the holder of the trading account? If so – a) is it possible to transfer before listing? b) what would be the tax implication for this preparatory transfer? A gift? c) whosr fund and whose income would it be, when profit is booked?
    In short I am trying to understand the idea of trying to enhance allocation chance by using ‘family members’ acc’ specifically. Also does it apply only when one is trying to stay invested for more than a year – so that tax implication doesnt matter?

    1. Hi Sameer,
      1. As it is very difficult to transfer shares from one account to another before listing and book listing gains immediately, it is better to have trading accounts of all the family members.
      2. Tax will have to be paid by the individual whose trading account gets used to sell these shares. Taxation is little complicated, so it is better to consult your tax advisor regarding the same.

  2. Hello Mr Shiv Kukreja:
    Excellent explanation on the allotment methodology .. some thing I did not find in other blogs/explanations. Now I am very clear , thanks to you. I have two questions:
    1) Where does one get info on applications received by bid lots (similar to the CARE table that you have used in your example. I tried BSE/NSE websites bit w/o luck.
    2) If after allotting one lot for every application shares (in Retail) are left unallotted how will these be alloted?
    3) This new allotment method is as per SEBI circular in 2012. Where can I get a copy of this circular (I tried SEBI but again w/o luck). I would like to know where I can get a copy of this circular.

    Thanks a lot in advance. And BTW, I like all your blogs and analyses which are all superb.

    1. Thanks Pandri!
      1. The table above is “Basis of Allotment” issued by CARE & its Registrar. This is issued by every company as they finalize the allotment of shares.
      2. After allotting one lot to each successful applicant, I think shares are allotted to those applicants first who apply for high no. of shares.
      3. When I wrote this article, I probably had the SEBI circular. But, I am not able to find it now. I’ll try to search for it and share it if I get it.

  3. HELLO…






  4. dear sir,
    i am having 3 dmat and trading account in 3 different broking agencies. can i apply in ipo via all different 3 accounts and whether my application will be accepted or rejected , pls clarify sir.

    1. it will be rejected ….only one application will be elgible for ipo bidding.they will reject on the basis of pan no

  5. dear sir
    how you come to know the ratio of 101/256….
    total no of share reserved for Retail investor:2519895
    totoal no of application received:319350
    as per your suggestion it would :2519895/(319350*20) that will be some thing else ratio come
    please explain

  6. Respected Sir,
    What is mean by minimum bit. Can you please explain with respect to l&t IPO.
    For l&T price range is 705-710.

    I have applied for 710 price 140 shares. (20 per lot).
    is this approach right. or what is the best approach to get minimum shares atleast.

  7. I have been suggested investors who subscribe to minimum lot have a better chance of subscription than investors who opt for higher/maximum lots.
    With the calculation above, I understand all investors have equal probability irrespective of lots they opt for.

    Are there any scenarios where minimum lot investors have better chance.
    (P.S: I im interested in an upcoming IPO thats expected to be hugely. I am in a dilemnato opt for minimum or higher lot subscription)

  8. If at all minimum lot is allotted to retail investors in case of over-subscription, everyone does not get the minimum lot due to unavailability of shares. Then how the selection of bidders is done as to who all will get the minimum lot. Is it random or first cum first?

  9. Hello Shiv Sir,
    Could you pls explain , how did you arrive at the ratio 101:256 in the above example

    1. Hi Raghav,
      101:256 = No. of shares reserved for the Retail Investors / (No. of Retail applications received * 20 shares to be allotted to each successful applicant)

  10. Today after applying for full lot in both Alkem and Dr Path Lab I came across this post.I was away from IPO activity for 4 Years.Basis of allotment has changed. Disappointed but it’s my fault.

  11. Hi,
    Quick question – Based on what are the 1,25,994 successful applicants out of 3,19,350 retail individual applicants selected?

  12. Dear sir
    This information help me to understand better while applying in good ipo…. Now will open dmat for all my family members…. Now any way to get my parents pan card cause both are not hv their birth certificate…. Any options for them

  13. On the basis of the new rule i applied for the min and in another account for 2 lots for the ipo, but i must say i am disappointed neither i got the min nor i got allotted under the 2 lots bid…Earlier with a max lot bid i was pretty sure that i would be allotted some shares > min lot, this new rule does not even assure an allotment on min bid or only a min lot allotment on max lot bid…

  14. This rule will be used for all IPO. What Shiv is trying to say is for not so popular IPO where IPO is under subscribed, those who are applying full lots will get full allotment. So now number of applicant is more important unlike earlier when no of applicant in maximum lot size was important.

    I applied from 3 account for minimum lot and got allotment in one account only that is 20 shares but I am happy as I applied for 45000 and got shares worth 15000.

  15. They need to change the rule or they will see the retail participation because this situation is equally undesirable for people who don’t care much for 15 or 20 shares and for those won’t get anything at all.

    This kind of situation is only useful for the very very small investor who will see any difference in their portfolio with 15 or 20 shares of any IPO.

    1. For unpopular IPOs, they have a different method of allotment, in which the investors with high investments will get higher no. of shares allotted. But definitely there is a scope for improvement in this new system. I dont have high hopes though.

      1. I don’t get this, won’t this new type of allotment be used for every share on offer? On whose discretion is it to decide how they are going to allot shares?

  16. Great work. I was lucky as I applied for 40 and got 20. Few of my friends applied for 200 and got only 20, some got none.

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