What is IPO Lot Size?

An IPO (initial public offering) is where a private company offers shares to the public for the very first time and transforms into a publicly traded entity in the process. IPO lot size is the minimum number of shares that an investor can buy in one transaction. Thus, it functions as a measurement unit for applying for shares, and you can submit applications in multiples of the lot size. 

The company issuing the IPO determines the lot size, and it may vary. You cannot apply for any arbitrary number of shares and have to make the minimum investment, i.e. at least one lot (set by the company issuing the IPO). The lot size is determined by several factors, like the total number of shares offered, share price, regulatory requirements, etc. Knowing the lot size and IPO price will also help you calculate the minimum amount you need to apply. 

Why IPO Lot Size Matters

At the time of allotment of shares, there has to be a standardised mechanism in place. The IPO issue process uses the lot size concept to standardise the minimum allotment size. SEBI regulations aim to ensure equitable allotments so that as many investors as possible receive at least one lot.

Minimum vs. Maximum Lot Size

The minimum lot size in IPOs is the smallest number of shares that you can buy as an investor. It is specified in the IPO document and is determined by the issuing company. For instance, if the lot size is 50 shares and the minimum requirement stands at three lots, then you should purchase at least 150 shares to participate in the IPO. 

The maximum lot size is the highest number that you can purchase. The former ensures that only serious investors take part in the IPO, while the latter prevents any one investor from monopolising all the shares. So, going by the above example, the maximum lot size can be ten lots, meaning that you can buy a maximum of 500 shares. 

How is Lot Size Decided in an IPO

The lot size, as mentioned, is determined by the company issuing the IPO and the regulatory authorities. Some of the factors influencing the decision include: 

• Share price (higher prices are usually associated with bigger lot sizes, since the minimum investment per lot becomes higher)
• Total shares offered (depending on the funding requirements of the entity)
• Regulatory aspects (guidance offered by SEBI on fixing IPO lot sizes and other thresholds)
• Market circumstances and sentiments, share demand, and overall liquidity 
• Investor participation (the aim is to make the IPO more accessible to a broader range of investors)

The base minimum lot size is mostly set around a fixed range, such as ₹14,000 to ₹15,000 for retail/individual investors. SEBI regulations ensure that most investors get at least one lot, and if the IPO is oversubscribed (more bids than the shares available), the issuer may calculate the oversubscription ratio accordingly. Shares may thus be allotted proportionally or via a lottery. 

How to Calculate Minimum Investment in an IPO

Calculating the IPO minimum investment is a hassle-free process. You will have to work out the lot size and the issue price per share. Multiplying the two will give you the minimum amount needed to participate in the IPO. So, if the issue price is ₹100 per share and the lot size is 148 shares, then you will have to invest at least ₹14,800. 

Example of Lot Size from Recent IPOs

Minimum lot sizes have varied considerably throughout recent IPOs in India. For instance, Travenues Technology (Ixigo) came with a lot size of 214 shares. On the other hand, Bajaj Housing Finance had the same lot size too. 

Scoda Tubes Limited had a lot size of 100 shares, whereas Accretion Pharmaceuticals Limited had a lot size of 1,200 shares. N R Vandana Tex Industries Limited had a lot size of 3,000 shares, while the figure stood at 142 shares for Prostarm Info Systems Ltd.