What do you mean by Basis of allocation or basis of allotment?

The registrar of an IPO and the investors of IPO publishes a documents i.e. The Basis of Allotment, or Basis of Allocation. This document contains information on the final price for an IPO, information about issue subscription (bidding), and share allocation ratio.

The IPO information is categorized according to the number of shares an applicant has applied for. This document contains detailed bidding information for each category, including the number of valid applications received, the total share applied, the ratio of allotment, and the number of shares that were allocated to applicants.

The ratio of the allotment field is crucial for IPO's that have been oversubscribed multiple time. This field indicates how many applicants will be eligible to receive a single lot of shares from a given number of applicants. Ratio 1:8 is an example of how only one of eight applicants received one lot of shares. The ratio value of 'FIRM" means that all applicants are eligible for a certain share.