Applying for an Initial Public Offering (IPO) is a straightforward process, but an application can sometimes be rejected because of incorrect details, payment issues, technical problems, or failure to meet the applicable requirements. Understanding the common reasons for IPO application rejection can help investors avoid mistakes and improve the chances of having their application considered valid.
If your IPO application has been rejected, it is important to identify the reason before applying for another IPO.
What Does IPO Application Rejected Mean?
An IPO application rejection means that the submitted application was not considered valid for allotment. This can happen during the application process or during validation before the allotment is finalised.
A rejected application is different from not receiving an allotment. If an IPO is heavily oversubscribed, a valid application may still receive no shares. In contrast, a rejected application is not considered for allotment because it failed to meet one or more requirements.
Common Reasons for IPO Application Rejection
1. Incorrect PAN Details
PAN is an important identifier in the IPO application process. Entering an incorrect PAN or providing details that do not match the applicant's records can result in rejection.
Always verify your PAN before submitting an application and make sure it matches the details linked to your demat account.
2. Incorrect Demat Account Details
IPO shares are credited electronically to the investor's demat account. If the demat account details provided in the application are incorrect, the application may not be processed successfully.
Check your demat account number and depository details carefully before submitting the application.
3. Duplicate IPO Applications
Submitting multiple applications for the same IPO using the same PAN can result in applications being treated as duplicates.
Having multiple demat accounts does not necessarily allow an investor to submit multiple valid applications under the same PAN. Investors should generally submit one valid application per eligible investor and follow the issue-specific requirements.
4. UPI Mandate Not Approved
For applications using the UPI mechanism, the investor may need to approve a UPI mandate within the specified timeline.
If the mandate is not approved, expires, or is not processed successfully, the IPO application may not be considered valid.
Therefore, after submitting an IPO application, check your UPI app and approve the mandate within the required deadline.
5. Insufficient Funds in the Bank Account
An IPO application generally requires sufficient funds to be blocked in the linked bank account.
If adequate funds are not available when the mandate is processed, the payment or blocking request may fail. This can affect the validity of the application.
Make sure your bank account has sufficient funds before applying.
6. Third-Party Bank Account or UPI
Using another person's bank account or UPI ID for an IPO application can lead to rejection where third-party payment is not permitted.
The bank account and UPI details should generally belong to the applicant as required under the applicable IPO process.
SEBI's investor guidance states that applications using third-party UPI IDs or third-party bank accounts are not considered for allocation in the relevant ASBA/UPI process.
7. Incorrect Bid Details
An application can also face problems if the investor enters incorrect bid information, such as the number of lots, bid price, or other required details.
Before submitting the application, carefully review the IPO's price band, lot size, minimum investment, and investor-category requirements.
8. Application Submitted After the Deadline
IPO applications must be submitted within the specified application period. Applications submitted after the closing time may not be accepted.
Similarly, UPI mandates or other required steps may have separate deadlines. Investors should therefore avoid waiting until the last minute.
9. Technical or Processing Issues
Occasionally, technical problems involving the broker, bank, UPI application, or payment system can interfere with the IPO application process.
If you experience an error, save the application reference number or transaction details and contact the relevant intermediary promptly.
What to Do If Your IPO Application Is Rejected?
If your IPO application is rejected, start by identifying the reason.
Step 1: Check the Application Status
Check the IPO application status through your broker, registrar, bank, or the relevant platform used to submit the application.
Step 2: Identify the Rejection Reason
Look for information about PAN mismatch, UPI mandate failure, payment issues, duplicate applications, or incorrect application details.
Step 3: Contact the Relevant Intermediary
If the reason is unclear, contact your broker, bank, or registrar with your application number and transaction details.
Step 4: Check Your Bank Account
If funds were blocked for the IPO, check whether the amount has been released after rejection or non-allotment. The timing can depend on the bank and application process.
Step 5: Avoid Repeating the Same Mistake
Before applying for another IPO, verify your PAN, demat account, bank account, UPI details, bid quantity, and application deadline.
How to Avoid IPO Application Rejection
You can reduce the risk of rejection by following a few simple steps:
Use your correct PAN details.
Ensure your demat account is active.
Use your own eligible bank account and UPI ID.
Maintain sufficient funds.
Approve the UPI mandate on time.
Avoid duplicate applications.
Check the IPO lot size and price band.
Submit your application before the deadline.
Review all details before final submission.
Keep your application and payment reference details.
IPO Rejected vs IPO Not Allotted
These two terms are often confused.
IPO rejected: The application was considered invalid and was not included for allotment.
IPO not allotted: The application was valid, but the investor did not receive shares because of the allotment process, such as oversubscription.
For example, if an IPO receives significantly more valid applications than the number of shares available for retail investors, some valid applicants may receive no allotment. This does not mean their applications were rejected.
Conclusion
An IPO application can be rejected because of incorrect PAN or demat details, duplicate applications, UPI mandate failures, insufficient funds, third-party payment details, incorrect bid information, or missed deadlines.
To minimise the chances of rejection, carefully verify your application details, use an eligible bank account and UPI ID, maintain sufficient funds, and complete all required steps within the specified timeline.
Most importantly, remember that a valid IPO application does not guarantee allotment. Even when an application is successfully accepted, shares may not be allotted if demand exceeds the number of shares available.
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