Allotment
Allotment is the process whereby those who apply for shares in an IPO are allotted them.
There are three categories:
Qualified Institutional Buyers: 50% of the issue. Out of this 50%, up to 5% has to be allocated to mutual funds.
Retail investors: 35% of the issue
High networth individuals and employees of the company: 15% of the issue
The bids are allotted to the different categories and the over-subscription (more shares applied for than shares available) in each category is determined.
Retail investors and high net worth individuals get allotments on a proportional basis.
Assuming you are a retail investor and have applied for 200 shares in the issue, and the issue is over-subscribed five times in the retail category, you qualify to get 40 shares (200 shares/5).
