For allotment purposes, investors in a book building issue are divided into three categories - Retail Individual Investors (RIIs), Non Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs). A retail investor is one whose application for shares does not exceed Rs 1 lakh in value. NIIs are investors whose bid values amount to over Rs 1 lakh each and QIBs consist of mutual funds, financial institutions, scheduled commercial banks, insurance companies, provident funds, state industrial development corporations, etc. According to SEBI guidelines, each of these categories must be allocated a certain percentage of the total issue. The total amount allotted to RII must be at least 35 per cent of the total issue and at least 15 per cent must be given to NIIs. QIB must be allotted no more than 50 per cent of the issue.

In case an issue is over-subscribed, the company could decide to use the green shoe option (an option to retain a portion of the oversubscription amount by allotting more shares than initially offered). The excess shares are allotted on a pro-rata basis across different categories of investors. If, on the other hand, there is any under-subscription in any of the categories, any over-subscription in another category can be allotted shares from the under-subscribed category. The method of allotment is at the discretion of the company and its lead managers.

Lastly, the company must get a minimum subscription of 90 per cent of the issue amount in order to be eligible to list its shares. If it does not, the company will have to return all the moneys and cancel the IPO.