Applying for an IPO: ASBA, UPI and allotment

Knowing what an IPO is and knowing how to apply for one are two different skills, and the second is full of small, specific mechanics that trip up first-timers. Where does the money go? Why does it get 'blocked' rather than taken? What's a lot? Why did your friend who applied for the same IPO get shares while you didn't, even though you applied earlier? This chapter is the practical companion to the last one — the nuts and bolts of submitting a bid in the Indian system and understanding what comes back.

ASBA: your money stays in your own account

The foundation of how Indians apply for IPOs is a system called ASBA — Application Supported by Blocked Amount. The name is ugly but the idea is genuinely investor-friendly, and it's worth understanding because it's why an IPO application feels different from any other payment you make.

When you apply for an IPO under ASBA, your money is not debited from your bank account. Instead, the exact amount of your bid is blocked — frozen in place, still sitting in your own account, still earning you whatever interest the account pays, but unavailable for you to spend. It's only actually debited if and when you're allotted shares. If you get no allotment, the block is simply released and the money was never gone. If you get a partial allotment, only the cost of the shares you actually received is debited and the rest is unblocked.

The UPI mandate: how blocking happens for retail

For retail investors applying through a broker app, the blocking is now handled through a UPI mandate — and this is the single step most first-timers fumble. When you submit your IPO bid, you provide a UPI ID. Shortly after, a mandate request lands in your UPI app (GPay, PhonePe, your bank's app, whichever your UPI ID is linked to). You must open that app and approve the mandate by entering your UPI PIN.

Approving the mandate is what authorises your bank to block the bid amount. It is not a payment — you are not sending money anywhere — you are giving permission for the funds to be frozen until allotment. Crucially, if you don't approve the mandate before the cut-off, your application is invalid and won't be considered at all, no matter how carefully you filled in the bid. Every IPO season, people place a bid, forget the mandate step, and are baffled when nothing happens.

Lots, the band and how much you're committing

You don't bid for an arbitrary number of shares in an IPO. Shares are sold in fixed bundles called lots, and a retail application must be for at least one lot and can be for several, up to the retail investment ceiling. The company sets the lot size so that one lot costs roughly a standardised minimum amount.

Because the price isn't final during book building, the amount blocked is calculated at the top of the price band (the cap). This guarantees the block covers the most you could possibly owe. If the final cut-off price ends up lower than the cap, the difference is unblocked after allotment.

Oversubscription and the lottery

Here's where many first-timers feel cheated, so it's worth being precise. When a popular IPO attracts far more applications than the shares reserved for retail, it is oversubscribed. If retail is subscribed, say, five times over, there are five times as many applicants wanting shares as there are shares to give. SEBI's rule for resolving this in the retail category is a lottery.

• Allotment is not first-come-first-served — the moment you applied within the window makes no difference whatsoever.
• It is not proportional in the way you might hope — in a heavily oversubscribed issue you can't be given a fraction of a lot, so applicants either get one full lot or nothing, decided by a computerised draw.
• Applying for more lots does not improve your odds in the retail draw the way people assume — past a point, the lottery is run per application, so many small bids can be a better strategy than one large one (within the rules and your means).

After you apply: the timeline

Once the IPO closes, a short, well-defined sequence runs before the shares ever trade. India has compressed this timeline dramatically in recent years — what once took weeks now takes a few days — but the steps are the same:

1. 1Bidding closes — the offer window shuts and no more applications are accepted.
2. 2Basis of allotment — the registrar runs the allotment (including the lottery where needed) and finalises who gets what.
3. 3Allotment and unblocking — successful applicants have the cost debited and shares credited to their demat; unsuccessful applicants have their blocked funds released.
4. 4Listing — the shares begin trading on NSE and/or BSE, and the price the market sets becomes visible for the first time.

The discipline applying teaches

The mechanics of ASBA and the UPI mandate quietly enforce something healthy: you can only bid what's genuinely in your bank account to be blocked. There's no leverage, no borrowing your way into a hyped issue at the retail level — the block is real money you must actually have. That constraint protects you. Combine it with the lottery, which means you simply cannot guarantee an allotment no matter how badly you want one, and the system gently discourages the all-in, must-get-this-IPO mentality that does the most damage. Apply with money you have, for businesses you've actually evaluated, and treat a non-allotment as the system saying 'not this time', not as a loss.