What happens when an IPO is undersubscribed
An IPO is undersubscribed when bids are fewer than the shares on offer. For applicants that is usually good news about allotment, but it says something about demand.
For your application
If a category is subscribed less than 1 time, every valid application in it can be allotted in full. A retail applicant who bid at the cut-off price gets all the lots applied for.
Spill-over between categories
Unsubscribed shares in one category can generally be allotted to applicants in other categories that were oversubscribed, as the offer document allows. So a weak retail book with a strong QIB book can leave more shares for institutions.
Minimum subscription
An IPO must receive at least 90% of the fresh issue in valid bids. If it does not, the issue fails: all applications are refunded (blocked money is released) and no shares are allotted. Companies sometimes extend the bidding period or revise the price band to avoid that.
What it signals
Weak subscription often means a weak or negative listing, but not always. Look at which categories were undersubscribed: low QIB interest is usually a stronger warning than a soft retail book.
Related guides
- What is IPO subscription (times subscribed)?
- IPO categories explained: retail, HNI (NII) and QIB
- How IPO allotment works
More on subscription, allotment and refunds
- How to check IPO allotment status
- IPO money still blocked? What to do
- How to improve your chances of an IPO allotment
- Why IPO applications get rejected
- IPO shares not showing in your demat account
- Why big IPOs are easier to get
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Information, not investment advice. GMP is an unofficial grey-market indicator; figures come from public sources (InvestorGain) and may be late or wrong. Not registered with or affiliated to SEBI, the exchanges, the registrars or InvestorGain.