The IPO Subscription status reflects the extent to which investors, including institutions, retail investors, and high-net-worth individuals, subscribe to the shares of a company about to go public in the Indian Stock Market via its IPO.
Think of it this way: you own a fruit processing company, and you have gotten so big that you decide to list it on the Indian Stock Market through an IPO(Initial Public Offering).
A day will be fixed for your IPO, where you will list how much your shares will go for.
However, before you list, a whole lot of activities are carried out, one of which is a declaration of your company's share price band.
The price brand is a tentative price range your shares might go for after it has been evaluated by recognised bodies.
Upon the declaration, interested investors would subscribe to buy a certain amount of your company's shares, equipped with the knowledge of your price band before the official day of your IPO.
The extent to which investors subscribe in relation to the amount of shares you have allocated (which is a fraction of your overall shares) is termed the IPO subscription status.
The process described in the above illustration is simple, but hopefully helps explain a complex concept.
In this article, we cover;
1. What is IPO subscription status?
2. How companies spread subscription data across the three classes of investors?
3. What these classes of investors are?
4. And why investors even bother to check the IPO subscription status of a company?
why investors check it?
The IPO subscription status ranks among the most watched signals by investors, and for several reasons. Primarily, the IPO subscription reflects investor confidence in a company.
If an IPO is heavily subscribed, it means that demand for the stock exceeds the number of shares offered. Conversely, if the IPO is under-subscribed, demand for the shares is underwhelming, either not matching what is offered or less.
Based on the analysis in the introduction, the more people who subscribe to your fruit processing company, the easier it is to assume that it is a signal of potential high demand for its shares.
In short:
- High subscription = strong demand and optimism.
- Low subscription = weak demand or cautious sentiment.
Other salient reasons include:
Demand & Sentiment Indicator
A high subscription rate is often a signal that the potential listing rate would be high. However, this is not always the case, and for many reasons, including the fact that IPO subscription status reflects a small part of the actual capital market. In essence, only a fraction of potential investors ever participate. Most wait till the day of your IPO to purchase shares.
Also, the type of investors would determine the authenticity of the demand. Hence, respected institutions, high-net-worth individuals, and retail investors with a track record of correct speculations or simply newcomers or less impressive players.
Pricing & Valuation Check
One of the first market signals of the true valuation of a company going public is the IPO subscription status. Again, this can be deceptive as well. Until the company lists, one cannot be truly sure how valuable a company really is to investors.
Decision-Making Tool to Subscribe
Institutions, high net-worth individuals, and retail investors looking to subscribe to a company’s IPO before opening day with hopes of making a profit often have nothing but the trend of the company’s subscription status. As demands increase for a company’s subscription, the easier it is to hop on the bandwagon.
How subscription data is divided
We established in the introduction that companies offer a subscription to their share. This is usually 3 days open period for subscription.
Again, back to the opening analogy. How do you share the subscription data(which is the total number of shares you allocate to investors for this purpose) of your company among investors?
To answer this, let us look at the three classes of investors that exist first. Each one is explained below.
QIB(Qualified Institutional Buyers) -
This class of investors includes the biggest institutions, including mutual funds, banks, and insurance companies, that purchase equities of companies in the capital market.
NII(Non-Institutional Investors) -
This class of investors is high-net-worth individuals and corporations, notorious for aggressive purchase of companies’ equities on the capital market
Retail Investors-
These classes represent individual investors. Their strength is in their numbers, and often they purchase via stock brokers.
Now, below is a table that shows how you might potentially share your company subscription data among these classes of investors.
Investor Category | Shares Offered | Shares Subscribed | Subscription (x times) |
| QIB | 50,00,000 | 3,00,00,000 | 6.0x |
| NII | 25,00,000 | 1,00,00,000 | 4.0x |
| Retail | 25,00,000 | 75,00,000 | 3.0x |
Total | 1,00,00,000 | 4,75,00,000 | 4.75x overall |
How to read the table below?
Note the following-
FAQs: What is IPO Subscription Status
1. What does a 10x IPO subscription mean?
A 10x subscription means that investors demand ten times the shares a company offers at the subscription level.
2. Does high subscription guarantee listing gains?
A high subscription does not guarantee listing gains. Many investors mistakenly believe that a high subscription equals sure-shot listing gains, often to their own dismay.
3. Where can I check IPO subscription status?
You can check ipo subscription status at NSE, BSE and also at our ipo subscription status hub page.
Important Resources:
1. Mutual fund learning platform- Learn basics of mutual funds here.
2. Sip calculator- To calculate how a small sum if invested with discipline can yield good returns over time.
3. You can't invest if you don't have money-learn here practical ways to get rid of debt.
4. Track all the live and upcoming IPOs at our IPO calendar which is udpated regularly.
5. Track grey market premium of all the IPOs at our IPO GMP today hub page which is updated regularly.
