{"id":442,"date":"2020-05-07T09:44:35","date_gmt":"2020-05-07T09:44:35","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=442"},"modified":"2020-05-07T09:44:37","modified_gmt":"2020-05-07T09:44:37","slug":"ipo-oversubscription-does-it-lead-to-higher-listing-gains","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/ipo-oversubscription-does-it-lead-to-higher-listing-gains\/","title":{"rendered":"IPO Oversubscription: Does it lead to higher listing gains?"},"content":{"rendered":"<div style=\"margin-top: 0px; margin-bottom: 0px;\" class=\"sharethis-inline-share-buttons\" ><\/div>\n<p>When a company decides to raise capital by going public it issues shares for the very first time to the \u2018general public\u2019 which known by initial public offering (IPO). In doing so, it gives an offer in the form of IPO subscription to the buyer to buy soon-to-be-issued stocks. It is beneficial for the company (or seller) in many ways as the capital raised can be used to clear off debts, reinvest in the business, to expand or to improve infrastructure, however, it likes. Not just the seller but the buyer also <a href=\"https:\/\/www.invest19.com\/blog\/what-are-the-benefits-of-investing-in-ipo-stocks\/\"><strong>benefit from IPO<\/strong><\/a> in unearthing quality stocks that are yet to be listed. Sometimes demands beat the supply which leads to IPO subscription. For instance, if a company decides to issue IPO size of 30 lakh shares and there was a demand of 1 crore 50 lakh shares, then the IPO said to be oversubscribed by 5 times. The IPO oversubscription shows the interest of the general public in the company. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"counter-hierarchy counter-decimal ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list\"><li><a href=\"#Reasons_behind_IPO_Oversubscription\" title=\"Reasons behind IPO Oversubscription\">Reasons behind IPO Oversubscription<\/a><\/li><li><a href=\"#Relation_between_IPO_Oversubscription_and_Listing_Gains\" title=\"Relation between IPO Oversubscription and Listing Gains\">Relation between IPO Oversubscription and Listing Gains<\/a><\/li><li><a href=\"#Allotment_Procedure_under_IPO_Oversubscription\" title=\"Allotment Procedure under IPO Oversubscription\">Allotment Procedure under IPO Oversubscription<\/a><ul><li><a href=\"#Allotment_Process_for_Retail_Investors\" title=\"Allotment Process for Retail Investors \">Allotment Process for Retail Investors <\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">Reasons behind IPO Oversubscription<\/h2>\n\n\n\n<p>There are no standard reasons\nbehind the oversubscription of any particular IPO and it varies with\ncompany-to-company. In most cases, the reputation and strong brand name always\nhave been the major key factor behind any company\u2019s IPO oversubscription. IRCTC\nLtd, CSB Bank, HDFC Asset Management, Metropolis Healthcare, Amber Enterprises\netc., were some of the IPO stocks that were oversubscribed by multi-folds and\nenjoyed good listing on the stock exchanges. <\/p>\n\n\n\n<p>That leads us to a very important\nquestion: <em>Does IPO Oversubscription leads\nto higher listing gains?<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Relation between IPO Oversubscription and Listing Gains<\/h2>\n\n\n\n<p>Undoubtedly, popular IPOs lead to\nthe oversubscription ultimately to listing gains as the investors and traders\nwant to capitalize from the listing gains to make quick profits in investing in\nthat particular IPO. But, IPO oversubscription is not the only factor that\nleads to listing gains. There are other factors such as the IPO Pricing,\nongoing market conditions at that time etc. that contribute to the listing\ngains. <\/p>\n\n\n\n<p>As you know that the listing time\nin India is around 7 working days. During that time, the other things are done\nlike an allotment, statutory fillings etc. So, there is no established\nrelationship between IPO oversubscription and listing gains that point out that\nalong oversubscription leads to listing gains. &nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Allotment Procedure under IPO Oversubscription<\/h2>\n\n\n\n<p>If you\u2019ve been investing in IPOs\nthen you must\u2019ve encountered oversubscription situation at least once. Let\u2019s\nfind out how a company allow shares under such circumstances. <\/p>\n\n\n\n<p>As you know that allotment of IPO\nshares is generally done under the rules laid down by the Indian market regulator\nSEBI (Securities &amp; Exchange Board of India). In IPO, the allotment\npercentage is categorized as per the distinguished investors:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Retail Investors (less than Rs. 2 lakh)<\/li><li>Non-institutional Investors<\/li><li>Qualified Institutional Investors<\/li><li>Employee Category (In some cases)<\/li><\/ul>\n\n\n\n<p>The allotment is different from\neach category. For instance, the 50% allocation of shares is for qualified\ninstitutional investors meanwhile, the 35% allocation of shares is for retail\ninvestors. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Allotment Process for Retail Investors <\/h3>\n\n\n\n<p>Companies allot shares in lots (a\ngroup of shares) so when it comes to allocation in case of IPO oversubscription\nthen the total no. of shares available is divided by the minimum lot size. It\nhelps in finding out the no. of retail investors who will be allotted with\nshares. <\/p>\n\n\n\n<p>And of the IPO applications of\nbidders is more than the lots available, then no bidder is allotted with more\nthan one lot. It is to ensure that all investors get the fair and equal chance\nof being allotted IPO shares. In other words, if a bidder bid for just one lot\nwill be treated the same as the bidder who bid for 10 lots. <\/p>\n\n\n\n<p>Besides, in IPO oversubscription\nsituation, the chances of no. of retail investors surpass the no. of shares are\nvery high. In that case, the eligibility is determined by the draw of lots\nwhich is an automated and computerized process leaving no chances for errors. <\/p>\n<div class='epvc-post-count'><span class='epvc-eye'><\/span>  <span class=\"epvc-count\"> 7,829<\/span><\/div><div class=\"pld-like-dislike-wrap pld-template-1\">\n    <div class=\"pld-like-wrap  pld-common-wrap\">\n    <a href=\"javascript:void(0);\" class=\"pld-like-trigger pld-like-dislike-trigger \" title=\"\" data-post-id=\"442\" data-trigger-type=\"like\" data-restriction=\"ip\" data-ip-check=\"0\" data-user-check=\"1\">\n                        <i class=\"fas fa-thumbs-up\"><\/i>\n                    <\/a>\n    <span class=\"pld-like-count-wrap pld-count-wrap\">3    <\/span>\n<\/div><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>When a company decides to raise capital by going public it issues shares for the very first time to the \u2018general public\u2019 which known by [&hellip;] <span class=\"read-more-link\"><a class=\"read-more\" href=\"https:\/\/www.invest19.com\/blog\/ipo-oversubscription-does-it-lead-to-higher-listing-gains\/\">Read More<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":443,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[70,2],"tags":[111,112,113],"class_list":["post-442","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ipo","category-stock-market","tag-ipo-oversubscription","tag-listing-gains","tag-ipo-investing"],"_links":{"self":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/442","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/comments?post=442"}],"version-history":[{"count":1,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/442\/revisions"}],"predecessor-version":[{"id":444,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/442\/revisions\/444"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media\/443"}],"wp:attachment":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media?parent=442"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/categories?post=442"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/tags?post=442"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}