An initial public offering, or IPO, is how a privately held company sells shares to the public for the first time. One of the characteristics of every IPO is the lot size—the smallest quantity of shares an investor can bid for at once.
Why IPO Lot Size Matters
- Standardization: Lot size will ensure that all applicants bid for a minimum of a fixed quantity, thus allotment becomes more orderly and fair.
- Fair Allotments: SEBI prescribes lot sizes so that even most investors will get at least one lot, even if the issue is subscribed more than once.
Minimum vs. Maximum Lot Size
- Minimum lot size: The Fewest number of shares you need to buy. For instance, if the lot size is 50 shares and the company’s minimum requirement is three lots, you need to apply for a minimum of 150 shares.
- Maximum lot size: Limits the number of shares any one bidder can bid for (e.g., ten lots or 500 shares), so that no single bidder tries to corner the issue.
How Lot Size Is Decided
- Share price: Higher share prices often come with larger lot sizes to keep the minimum investment around a target range.
- Total shares on offer: Balances the company’s funding needs against demand.
- Regulatory guidance: SEBI provides broad thresholds to protect retail investors.
- Market conditions: Sentiment and liquidity influence what’s considered an accessible minimum.
Typically, issuers aim for a retail minimum investment of around ₹14,000–₹15,000 per lot, so if the per‑share price is ₹100, a lot size of 148 shares would set the minimum at ₹14,800.
Calculating Your Minimum Investment
Multiply the lot size by the issue price per share:
Minimum investment = Lot size × Issue price
For instance, at ₹100 per share and 148 shares per lot, you’d need at least ₹14,800 to apply.
Knowing how lot size functions assists you in making investment plans and enables you to apply the minimum application amount when a new IPO is made available.
Disclaimer:
The information presented in this article is for general informational purposes only. It does not constitute financial, investment, or professional advice. Commodity prices and market conditions can change rapidly; before making any investment or trading decisions, you should conduct your own due diligence and consult with a qualified financial advisor or other professional. The author and publisher assume no responsibility for losses or damages resulting from any actions taken based on the content of this post.
