Is IPO allotment random?

IPO allotment is random in case of retail investors and non-institutional investors when the number of applicants exceeds the number of allottees to whom the minimum bid lot can be allotted.

The maximum number of allottees is derived by dividing the total number of shares reserved for the category (RII/NII) with the minimum lot size applicable to that category.

For example, the issue lot size is 25 and the number of shares offered to is 4 lakhs. Based on the lot size, the maximum number of investors to whom a lot can be allocated would be 16,000 (400,000/25). However, if 20,000 investors apply for the IPO, it is not possible to allocate minimum 25 shares to each investor; in this case, the allocation will be made at random using the computerized lottery system.

The allotment to QIBs happens on a proportionate basis.