IPO Lot Size: Definition, Types and the Calculation Process

IPO lot size represents the number of shares of a company that you can buy in a bundle or lot when it goes public from private. As of FY26, 80 IPOs have already been issued in India, and investors have subscribed to these using various lot sizes.

However, depending on the share price and other factors, the minimum number of shares that investors can buy in one lot might differ.

As an investor, if you are interested in an IPO, read this blog to learn in detail.

Decoding the Meaning of IPO Lot Size

Unlike the shares in the secondary market, when a company issues the Initial Public Offering (IPO), you cannot buy a single share of it. You can subscribe to an IPO from the primary market, and depending on the IPO, you must buy multiple shares bundled together in a lot.

Even when you are buying shares in a lot, you typically cannot choose a random number of shares in it. Your IPO application must be equal to the fixed lot that the company sets and that the SEBI approves.

Suppose you are subscribing to the IPO of a certain company, and its one lot contains 50 shares. That means when you subscribe to one lot, you are subscribing for 50 shares, and if you want 100 shares, you must choose 2 lots and subscribe.

However, IPO-issuing companies might set a minimum and a maximum lot size, and investors cannot purchase lots below or above those sizes, respectively.

Depending on share prices, lot sizes might vary. For example, you might find an IPO with 15 shares in a lot. There might be IPOs that contain even 100 shares or more in a single lot.

Types of IPO Lot Sizes to Subscribe

As an individual investor in India, typically your minimum investment amount in a mainboard IPO ranges between INR 14,000 and INR 15,000. However, after learning what is lot size in IPO and the typical minimum investment, you must learn its types to stay informed:

1. Minimum IPO Lot Size

   As the name suggests, a minimum lot size defines the least amount of lots that an investor must purchase to subscribe to the IPO. IPO issuers might do this so that only serious investors participate in an IPO. Suppose an IPO requires a minimum of 2 lots containing 100 shares each. Thus, by purchasing 2 lots, i.e. 200 shares, you can participate in the IPO.

2. Maximum Lot Size

   For a fair share allocation among investors, IPO-issuing companies set an upper limit on the lot size that an investor can buy. For example, if a company issues 100 shares per lot with a maximum of 5 lots per investor, you can buy 500 shares of that IPO using your Demat account. Thus, it prevents a single investor from monopolising on company shares.

How Companies Calculate the Lot Size in an IPO?

After getting the idea of the IPO lot size meaning, you might be curious about how companies calculate it. Before that, let us take a look at the determining factors for IPO lot sizes:

1. Price per Share

   An IPO issuer and its underwriters typically consider market conditions, demand for their shares among investors, industry trends, and more. IPO-issuers consider a price per share to offer in an IPO. If the determined share prices are high, companies issue bigger lot sizes.

2. Market Conditions

   To determine the minimum and maximum lot sizes, IPO-issuing companies typically assess further factors. They include market conditions, trading liquidity, etc. For example, in a volatile market, a share in an IPO worth INR 180 might have a lot size of 80 shares. However, in a stable market, it might be 72 shares at INR 200 each to maintain liquidity.

3. Regulatory Needs

   When issuing IPOs, the companies also abide by the guidelines of regulatory bodies like the SEBI. For example, the SEBI states that most of the investors must get 1 lot allocated. In case of oversubscription, companies typically allocate shares via a lottery system. Thus, depending on such guidelines, companies determine the lot sizes initially.

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An Example of IPO Lot Size Calculation

As an investor, if you are interested in IPOs, you must take a look at the following example for clarity about the IPO lot size:

Suppose a company, going public, issues 10,000 shares in its IPO. Here, each of the lots contains 100 shares, and the minimum lot size is 1. This means if you participate in it, you must buy 100 shares.

Here is how a company typically calculate the lot size:

Total issued lot = Total count of issued shares/ minimum lot size (In this case, 100 shares in a lot)

Lots issued = 10,000/100 = 100 lots

Now, if we assume the maximum lot size is 5 lots, as an investor, you can buy up to 500 shares.

How Much Value of Shares Can You Apply in an IPO?

Primarily, the value of shares that you can apply in an IPO depends on its lot size and the cut-off price. However, there are certain limits that the SEBI sets depending on the investor types:

1. Retail Investors

   As a retail or individual investor, you can participate in an IPO in the primary market. As per the SEBI, you can invest up to INR 2 lakh in a single IPO. However, for SME IPOs, the share valuation is much higher, typically ranging between INR 1 lakh and INR 2 lakh.

2. Non-Institutional Investors

   Non-Institutional Investors or NIIs are a separate investor category in an IPO. Such an entity can apply for a much higher valuation of shares. It is typically beyond INR 2 lakh.

3. Qualified Institutional Buyers

   Foreign investors, mutual funds, insurance companies, etc., are the QIBs in IPOs. As per the regulatory norms, their limit is set to 75% of the total IPO issue size.

Example of Recent IPO Lot Sizes

A glimpse from the recent mainboard IPOs in the primary market in India might further enhance your idea about how lot sizes work:

Conclusion

IPO lot size comes into play when a company is going public and issues a certain number of shares bundled in a lot for investors. Depending on the share prices, and to give most of the investors a fair chance to participate, companies might set a minimum and a maximum lot size. However, depending on investor types, there are limits to investing in such lots.

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FAQs on IPO Lot Size

1. How is the IPO lot size determined in India?

IPO issuers consider multiple factors before determining the IPO lot size. They include price per share, market condition, regulatory norms, etc.

2. Can I apply for more than one lot in an IPO?

Yes, you can apply for more than one lot in an IPO. However, you must note the maximum lot size of an IPO issuing company, as you cannot invest in lots more than the set limit.

3. Does IPO lot size impact my chances of allotment?

Subscribing to multiple lots does not necessarily increase your allotment chances, especially if it’s an oversubscribed one.

4. Can retail investors apply for fractional lots in an IPO?

No, as a retail or individual investor, you must buy a whole lot to participate in an IPO.