What does undersubscription mean?

Undersubscription means that the number of applications received is less than the number of shares offered in an IPO. Undersubscription indicates the demand for the shares is less than the supply.

For example, a company offers 10 lakh shares but has received applications for only 5 lakh shares. In this case, it is called an under-subscription.

If an issue is not fully subscribed, the company has the following options:

• Extending the deadline for closing the issue. An issue may remain open for up to 10 days.
• If the issue is a partial or full offer for sale (OFS), the size of the OFS issue may be reduced and the issue successfully closed.
• The company may also withdraw the IPO.