SME IPO Share Allotment Process

Published on Sunday, April 2, 2023 by InvestorGain| Modified on Sunday, May 31, 2026

4.5/ 5 by InvestorGain

Once a SME IPO is closed for subscription, the allotment process starts, wherein shares are credited/transferred to the investor’s demat account. SME IPO has two categories of investors; Retail investors and Non-retail (QIB and NIIs), and the allotment process to both work differently when the issue is oversubscribed. If an issue receives an exciting response from investors and receives a large subscription, some investors may get shares allotment while others may get no allotment. If you have ever applied for a SME IPO or looking to invest in the future, then you must know the SME IPO Allotment process under different categories. Let’s understand how does allotment process work, what is the basis of allotment and look at the reasons for no allotment.

What is SME IPO Allotment?

The process of transferring or allocating SME IPO shares to an applicant’s demat and trading account is known as SME IPO Allotment.

A SME IPO may be fully subscribed, or over-subscribed by investors given the SME’s growth potential, risks, fundamental performance, and other factors. In the case of a full subscription, all the applicants will get a full allotment of shares they have applied for. However, in the case of over-subscription, when the issuing entity receives more bids than the shares offered to RIIs and NIIs, the allotment process differs depending upon the margin by which the IPO is oversubscribed.

SME IPO Basis of Allotment

The basis of allotment is an important document that provides information about the total issue subscription details, applications rejected, and shares allocation ratio under different categories. The document presents allocation ratios for allotment to market makers, retail investors, non-retail investors, and underwriters.

Registrar publishes a basis of allotment by complying with the SEBI guidelines.

SME IPO Allotment Process

To carry forward a SME IPO for listing on the SME exchange, the first condition is that the issue must be subscribed to by a minimum of 50 applicants. If all the conditions are satisfied, the IPO allotment process starts after the IPO closure.

As per the SEBI’s guidelines, each applicant must be allotted to at least one trading lot. For instance, if a SME company issues 50,00,000 shares and the trading lot size is 1000 then the maximum number of allottees who will receive a minimum of 1 lot will be 50,00,000/1,000 = 5000. Consequently, a total of 5000 bidders will be allotted one lot at least.

Allotment to Individual Investors under New SEBI Guidelines

Under the revised SEBI framework for SME IPOs effective from July 2025, the earlier Retail Individual Investor (RII) category has been replaced with Individual Investor. Investors applying in this category must submit a bid for a minimum of 2 lots, with the total application amount exceeding ₹2 lakh.

Once the IPO subscription closes, the registrar verifies all applications based on PAN, demat account details, UPI/ASBA payment status, and bid validity.

Let’s understand how shares are allotted to Individual Investors in SME IPO?

Case 1: Undersubscription - Applications received < Lots reserved

If the number of valid Individual Investor applications is lower than or equal to the number of lots reserved in the category, all eligible applicants receive allotment.

Case 2: Oversubscription - Applications received > Lots reserved

If the SME IPO is oversubscribed, allotment is made through a computerized draw of lots. This process is conducted electronically in consultation with the stock exchange to ensure fairness and transparency.

Practical Example

Suppose an SME IPO has:

Lot size: 1,000 shares
Issue price: ₹120 per share
Minimum application: 2 lots = 2,000 shares
Application amount: ₹2,40,000

The company reserves 10,000 lots for Individual Investors.

Since each Individual Investor must apply for a minimum of 2 lots:

Maximum number of possible allottees = 5,000 investors (10,000 lots ÷ 2 lots)

Now assume the IPO receives 18,500 valid Individual Investor applications.

Because only 5,000 investors can be allotted while 18,500 investors applied, the registrar conducts a draw of lots.

Estimated allotment probability:

5,000 ÷ 18,500 = 27.0%

This means approximately 1 out of every 4 applicants may receive allotment.

Investors selected in the lottery receive 2 lots (2,000 shares), while the application funds of unsuccessful applicants are released or unblocked as per the IPO schedule.

This lottery-based allotment process is fully system-driven, with each valid application receiving an equal opportunity, ensuring there is no manual intervention or bias in allotment.

Allotment to Investors other than Retail Individual Investors

Other categories of investors include Non-institutional investors (NIIs) and Qualified Institutional Bidders (QIBs) whose bid for minimum 3 lots. If an issue is heavily subscribed, proportionate allotment will be done to the non-retail category of investors.

SME IPO Allotment Status

Post the IPO issue closure, the registrar announces shares allotment. Any bidder can check the SME IPO allotment status on the registrar’s website. IPO registrar is a financial institution registered with SEBI or Stock Exchange.

Applicants can go to the registrar’s website, and check the allotment status simply by providing details like company name, PAN Number, or IPO application number.

SME IPO Enquiry

Our experts can help you prepare for your SME IPO.

Are you an SME company looking to raise funds and get listed on the stock market? We can help — contact us today to start your IPO journey with trusted professionals.

Enquire Now

Frequently Asked Questions

1. How to sell SME IPO shares?−

Applicants who have been successfully allotted SME shares can check the shares in their demat account. You can sell shares on or after the date of IPO shares listing on the SME exchange. Investors can sell shares simply by placing a sell order through their trading account on the designated exchange BSE or NSE SME. They can place either a market sell order (sell order at a market price) or a limit order (share sell order at the specified price).

2. Who does allotment of shares in an SME IPO?+

Likewise regular IPO, the registrar is responsible for the allotment of the shares in an SME IPO. Based on the subscription or total bidding received for a particular SME IPO, the registrar prepares a basis of allotment (BOA) for the allocation of shares to different categories of investors, processes refunds, and transfers shares to the investor’s demat account. Shares are allocated to investors based on the criteria set by regulators in the IPO prospectus.

3. What should be the minimum number of allottees in SME IPO?+

An SME IPO must be subscribed by atleast 50 applicants to comply with the BSE and NSE SME exchange listing norms for allotment. If a small and medium size company fails to attract investors to apply for the issue and number of applicant falls below 50 then the issue will be withdrawn.

4. How does SME IPO shares allotted to retail investors?+

Under the retail category, if the total number of SME IPO applications exceeds the shares offered, then allotment will be done through a computerized lottery draw process.

If the issue is oversubscribed by a small margin, then one lot will be allotted to each applicant and proportionate allotment will be done to remaining investors who’ve applied for more than one lot.

However, in case of oversubscription by a large margin, the registrar will first calculate the maximum number of retail investors for allotment. Investors will be selected through a lucky draw process without any partiality for allotment.

5. How to check SME IPO bidding details?+

You can check the SME IPO subscription details online across both the BSE SME and NSE SME exchange by following the below steps;

BSE SME IPO Subscription check

Visit the BSE SME website.
Go to Public Issue > public issue watch.
Click on the company name, you want to check to bid for.
On the top, tap on the BSE Bid Details to check the live subscription.

NSE SME IPO Subscription check

Head to the NSE Emerge web portal.
Go to “IPO Current Issues” under the Live Market tab.
Click on the View bid details-NSE respective to the IPO of your choice.

6. Why I did not get IPO shares allotment?+

There are multiple reasons behind rejection or no allotment such as follows;

If your bid is Invalid given that you have provided incorrect PAN number or Demat account number.
If multiple number of IPO orders have been submitted on a single PAN number.
Your application has not been selected in the lucky draw process.

7. How is allotment done in SME IPO?+

In an SME IPO, allotment is done by the registrar based on the criteria set and published in the RHP document. The IPO registrar prepares the basis of allotment showing the demand for the IPO and allocation ratio to different categories of investors in line with the applicable rules & regulations set by SEBI.

8. Are SME IPO shares allotted on first come first serve basis?+

No, allocations of shares to applicants in an IPO do not depend on a first come first serve basis rather it works on how the IPO gets investors' response. If an SME receives a full-subscription or under-subscription (Applications received are equal to or less than the shares offered), then all the investors will get a full allotment of shares they have bid for. Unlike it, in case of over-subscription (Application received exceeds the number of shares offered), then allotment to retail investors will be done on a computerized draw process.

9. When shares are allotted to SME IPOs?+

When an IPO opens for subscription, investors from different categories like RII and NII start applying for shares. Shares will be allotted within a week after the IPO issue closure.

10. Can I sell SME IPO shares on the listing day?+

Yes, you can sell allotted SME IPO shares on the listing day or afterwards.

An investor can sell shares of a listed SME company on the day when the securities get listed and traded on either the BSE or NSE SME exchange.

SME IPO shares are traded in lots only say 1 lot, 2 lot, etc. means you cannot sell a single SME share.

11. Is there any lock-in period for SME IPOs?+

Yes, as per market regular SEBI, 50% of the equity shares allotted in the Anchor Investor Portion shall be locked in for 90 days, and the rest 50% of the shares will have a lock-in period of 30 days from the date of allotment. The lock-in period is the minimum time frame an investor cannot sell their allotted shares. Once the lock-in period ends, they are free to sell shares on the exchange.

12. Are promoters holding locked in for SME IPO?+

Yes, for an SME company seeking to raise capital via the IPO route, promoters’ holdings upto 20% of the post-issue capital will be locked in for a period of 3 years.

13. What is the escrow account in IPO?+

Whenever a company decides to go public, the issuing company and syndicate members together open an escrow account with collection banks. Any applicants who wish to apply in the IPO submit applications to the syndicate members with payment of application money in favor of the escrow collection banks. The banks will keep the money till the designated date and afterward, all the funds will be transferred to the bankers to the issue.

⚖️

Compare Stock Brokers Side-by-Side

Popular Comparisons