Chittorgarh.com Logo
Loading...

Does splitting funds in two HNI IPO applications increase allotment chances?

Zerodha (Trade with the best stock broker)

Invest brokerage-free Equity Delivery and Direct Mutual Funds (truly no brokerage). Pay flat Rs 20 per trade for Intra-day and F&O. Open Instant Account and start trading today.

Splitting the funds into two HNI IPO applications in an IPO does increase the chance of getting 2 lots but it also increases the chance of getting 0 lots. You could choose this strategy if you like the higher chance of getting 1 lot rather than increased chances of getting 2 lots.

Below is a calculation posted by our IPO forum member IPOLogic to support the above view:

Example 1

  • IPO Oversubscription (Expected): 100 times
  • Available Funds for 120 Lots
  1. You split the money in 2 accounts with 60 lots each. So, individual oversubscription factor = 60/100 = 0.6
    Chances of getting 0 lot: = (1-0.6) * (1-0.6) = 0.16 = 16%
    ii. Chances of getting 1 lot: = (0.6) * (1-0.6) + (1 - 0.6) * (0.6) = 0.48 = 48%
    iii Chances of getting 2 lot: = (0.6) * (0.6) = 0.36 = 36%
    iv Chances of getting at least 1 lot = 1 - 16% = 84%
  2. You don't split the money. So, individual oversubscription factor = 120/100 = 1.2 lot
    You will 100% chance of getting 1.2 lot
    ii chances of getting at least 1 lot = 100%

Example 2

  • IPO Oversubscription (Expected): 100 times
  • Available Funds for 30 Lots
  1. You split the money in 2 accounts with 15 lots each. So, individual oversubscription factor = 15/100 = 0.15
    chances of getting 0 lot: = (1-0.15) * (1-0.15) = 0.7225 = 72.25%
    ii. chances of getting 1 lot: = (0.15) * (1-0.15) + (1 - 0.15) * (0.15) = 0.255 = 25.50%
    iii chances of getting 2 lot: = (0.15) * (0.15) = 0.0225 = 2.25%
    iv chances of getting at least 1 lot = 1 - 72.25% = 27.75%

You don't split the money. So, individual oversubscription factor = 30/100 = 0.3 lot
i. chances of getting 0 lot: = (1 - 0.30) = 70 %
ii. chances of getting 1 lot: = 0.30 = 30%
iii chances of getting 2 lot: = 0%
iv chances of getting at least 1 lot = 1 - 70% = 30%

So, if you want some chance to have 2 lots, then it increases your chance of getting 0 lots.

Thus, it will decrease the chance of getting at least 1 lot too.


2 Comments

2. Chandan Sikdar   I Like It. | Report Abuse |   Link | Dec 3, 2021 1:51:57 PM Reply
I understand that the chance of getting an allotment is purely by lottery in case the number of lots applied is less than the number of times oversubscribed. It does not depend on the number of lots actually applied. I am not able to understand the logic of calculation in example 2. It seems there is something to do with the number of lots applied. Could you please give more details on how the lottery is done - is there any weight attached based on number of lots applied?
1. Savan   I Like It. | Report Abuse |   Link | Aug 28, 2021 10:41:12 AM Reply
If I want to split amout for 2 application,

can I do both application with same PAN? or I need 2 different PAN?