As you step into the world of public offers, you find a lot of myths surrounding it. One of the myths is that applying through the same account multiple times increases your allotment chance.
But in fact, submitting applications many times under the same name or PAN actually jeopardises the probability of allotment instead of making it strong.
The SEBI rules strictly discourage this practice from happening, providing equal chances in allotment. Here are four key points that investors should know while applying for an IPO:
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1) One PAN = one application
SEBI has stringent guidelines that should be remembered by the investors while applying for an IPO. The rules mention that only a single application on one Permanent Account Number (PAN) is permitted.
This implies that whenever an investor submits applications for an IPO more than once with the same PAN, all the applications will be automatically rejected, despite the investor bidding with different brokers, banks, or UPI IDs.
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By implementing this regulation, the SEBI seeks to avoid duplication while ensuring fair opportunity to each investor, irrespective of the number of accounts that he/she may have.
2) How the allotment actually works?
In the case of a retail IPO, allotment takes place through a computerised draw of lots carried out by the registrar. Each valid application, i.e., one lot, shall be considered a single entry in the draw.
What this implies is that the system takes into account one valid application for every PAN, irrespective of the investors filing the applications through one demat account or five.
Thus, there is no advantage in making multiple bids since it will be treated as a single bid only.
3) Multiple demat accounts with the same name:
The other common myth regarding bidding in IPO is applying with multiple demat accounts with the same name.
Investors tend to think that they can apply to different demat accounts with the same name.
But as the PAN is a requirement for every demat account, the SEBI system associates it. Hence, even if the investors are using several demat accounts, all of them lead back to a single PAN, registering only a single application valid.
4) What can improve your chance?
The only legitimate method to enhance allotment opportunities is to apply under various PAN accounts.
Investors can make their applications under multiple PAN accounts, including those of relatives like spouse, parents, and grown-up children. Every distinctive PAN is considered a distinct investor.
Investors are usually recommended to make use of the cut-off price in the retail category. This way, the bid will hold good irrespective of the final decided issue price.
