Search for an answer or browse help topics to create a ticket
View all categories

Why was the OFS allotment not received even though the request was placed before the cut-off?

The Offer For Sale(OFS) allotment is decided by the exchanges and not the broker. The cut-off price is based on the bids placed by the general, i.e., non-retail category, and the allotment price can be higher depending on demand for OFS.

Day 1 of the OFS is reserved for the non-retail category (bids above ₹2 lakhs or corporate entity). Based on these non-retail/general bids, the cut-off price for allocation is determined.

Assuming the floor price of an OFS issue is ₹100 and based on the general bids, the cut-off is determined to be ₹110. On Day 2, only retail bids at or above ₹110 are considered. If 1000 shares are reserved for retail allotment and the retail demand is for 1500 shares in the following structure:

  1. Mr A gets 400 shares at ₹110
  2. Mr B gets 500 shares at ₹111
  3. Mr C gets 600 shares at ₹112

Depending on the basis of allotment opted for by the company, the following allotment scenarios are possible:

  • Price priority (multiple prices) basis: There are two ways retail investors may be allocated shares under the price-priority method:
  1. At the cut-off price, irrespective of the bid price entered by the investor - Mr B and Mr C get 600 shares and 400 shares each at ₹110. Mr A gets nothing.
  2. At the bid price entered by the investor - Mr C gets 600 shares at ₹112. Mr B gets 400 shares at ₹111. Mr A gets nothing.
  • Proportionate basis at a single clearing price: Retail investors are allocated shares on a proportionate basis at the cut-off price. Mr C, Mr B and Mr A get shares at Rs. 110 in the ratio of 6:5:4. In other words, Mr C gets 400 shares, Mr B gets 333 shares and Mr A gets 267 shares at ₹110.

In both methods of allocation, bids below the cut-off price are not considered, and the allotment price stands reduced to the extent of the discount offered to the retail category (if any). See allocation methodologies for OFS issues from BSE ( PDF ).