What is Allotment of shares

An announcement of IPO by renowned companies creates an excitement amongst the investors. IPO or Initial Public Offerings is a process of offering shares of a private company to the public in a new stock issuance that helps company raise capital from public investors. Companies announce their decision to go public when they need to raise capital for operations or expansion and are confident about their future performance. When the IPO is finally announced in the market, the company generally, keeps the bidding window open for 3days. Within these days the investors apply for shares of that company. Once the applications are submitted within that period, the IPO allotment process takes place which depends on the response the IPO got from the investors. Various factors affect the allotment process. When an investor thinks of investing in IPO, they also want to know about how the allocation of shares takes place. Perhaps, they previously attempted to participate in an IPO and didn’t receive an allocation of shares and wants to know why. The allocation of shares happens according to the rules laid down by the Securities and Exchange Board of India (SEBI). There are three categories according to which the allocation is reserved.