When applications received exceed shares offered — three treatments and the pro-rate mechanism.
What is Over subscription?
Over subscription occurs when the number of shares applied for is more than the number of shares offered. SEBI requires minimum 90% subscription for an issue to proceed; excess applications must be dealt with in one of three ways:
- Reject excess applications & refund — entire money refunded for rejected.
- Pro-rata allotment — proportional allotment to all applicants; excess application money adjusted towards allotment (and any further excess towards calls); balance refunded.
- Combination — some applications rejected, others allotted pro-rata.
How Pro-rate works
If 1,20,000 shares are applied for and 1,00,000 are offered, ratio = 6 : 5. For every 6 shares applied, the applicant gets 5. Excess application money on the 1 share unallotted is adjusted towards allotment due (not refunded immediately).
Companies Act, Sec. 39 — minimum subscription must be received within 30 days; otherwise the entire application money is refunded.
Swathika B is an MBA graduate in Finance & Business Analytics , the founder of The Commerce Lab. With a strong academic foundation in B.Com BFSI and hands-on experience in financial analysis, data analytics, and business studies, she created this platform to make Commerce and Accountancy simple, practical, and exam-ready for students across India.