Basis of Allocation or Basis of Allotment is a document which is published by the registrar of issue of an IPO to the stock exchanges and the IPO investors. This document has information about the final price determined for an IPO, information about issue subscription/bidding, and demand and share allocation ratio of an IPO.
The information related to IPO is categorized through the number of shares applied. For each category, detailed bidding information is in this document that includes the number of application received, ratio of the allotment, total number of share, and number of shares allocated.
Ratio of the allotment is a crucial factor for IPO’s that are oversubscribed multiple times as it tells how many applicants shall get single lot of shares. For instance, ratio 1:6 means only one out of six applicant will receive one lot of shares. Ratio value ‘FIRM’ that all the applicants will be eligible to receive a certain number of share.