₹25,000 - ₹25 Cr
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Overview
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In summary
Allotment of shares is the formal process through which a company issues new shares to eligible investors, giving them legal ownership and shareholder rights. It plays a vital role in helping companies raise capital while enabling investors to participate in the company's growth.
- Allotment of shares meaning: It is the process of issuing new shares to investors, granting ownership rights such as voting rights, dividend eligibility, and a stake in the company.
- The four primary types of share allotment are IPO allotment, private placement, rights issue, and bonus issue, with private placements requiring at least two shareholders.
- The share allotment process is governed by the Companies Act, 2013, and companies must file Form PAS-3 with the Registrar of Companies (RoC) within 30 days of allotment under Section 39.
- Once shares are allotted, shareholders become entitled to ownership benefits, including voting rights, dividend distributions (when declared), and participation in corporate actions.
- Listed shares received through an IPO or other allotment methods can be pledged as collateral to obtain a Loan Against Securities, allowing investors to access funds without selling their investments.
If you hold eligible listed shares, check your Loan Against Securities eligibility with Bajaj Finance by entering your mobile number and verifying it through OTP to view your pre-approved offer.
What are the different types of share allotment?
The allotment of shares can be broadly classified into five main types, each designed for a specific purpose and category of investors. The table below explains the types of allotment of shares, who receives them, and whether the allotted shares are generally eligible for a Loan Against Securities (LAS).
| Types of allotment of shares | Definition | Who receives the shares? | LAS eligibility |
|---|---|---|---|
| Public allotment (IPO) | Shares are offered to the general public through a prospectus during an Initial Public Offering (IPO). | General public | ✓ Listed shares are generally eligible for LAS. |
| Private placement | Shares are offered to a select group of investors (up to 200 investors in a financial year under Section 42 of the Companies Act, 2013). | Institutional investors and High Net-worth Individuals (HNIs) | ✓ Eligible once the shares are listed, where applicable. |
| Rights issue | Existing shareholders are offered additional shares, often at a 10%–30% discount to the prevailing market price. | Existing shareholders | ✓ Eligible if the shares are listed. |
| Bonus issue | Free additional shares are issued to existing shareholders by capitalising the company's reserves. | Existing shareholders | ✓ Listed bonus shares are generally eligible for LAS. |
| Preferential allotment / ESOP | Shares are issued to promoters, employees, or strategic investors under specific terms and regulatory conditions. | Promoters, employees, or strategic investors | Subject to applicable lock-in requirements and lender eligibility; verify before pledging. |
Understanding the different types of share allotment can help you assess your investment options and determine whether your listed shares may be used as collateral for a Loan Against Securities with Bajaj Finance.
Share allotment process
How to Secure a Rs. 2 Crore Loan Against Securities Instantly
The share allotment process follows a structured framework designed to ensure fairness, transparency, and regulatory compliance. Companies must adhere to prescribed legal procedures before issuing shares to investors. The following steps explain how shares are allotted:
- Offer to subscribe: The company invites investors to subscribe to its shares by issuing a prospectus, offer document, or offer letter. This document provides details about the company, the number of shares offered, pricing, eligibility conditions, and application procedures, enabling investors to make informed investment decisions.
- Application submission: Interested investors submit share application forms along with the required application amount within the specified subscription period. Applications may be submitted through authorised channels, online platforms, or designated intermediaries, depending on the type of issue.
- Scrutiny of applications: After the subscription period closes, the company reviews all applications to verify eligibility, completeness of information, payment status, and compliance with regulatory requirements. Invalid or incomplete applications may be rejected during this stage.
- Allotment of shares: Once the verification process is completed, shares are allotted to eligible applicants according to the applicable allotment rules. Investors receive confirmation of allotment, and the shares are credited to their demat accounts or reflected in their ownership records.
Filing with the Registrar of Companies (RoC): Following allotment, the company is required to file the return of allotment with the Registrar of Companies (RoC) within the prescribed timeline, ensuring compliance with statutory and regulatory obligations.
Selecting fundamentally strong shares during the allotment process can support long-term wealth creation. Additionally, eligible listed shares may also serve as collateral for financial facilities such as a Loan Against Shares (LAS), providing access to liquidity without requiring investors to sell their holdings.
Your investment portfolio can do more than just grow over time. It can also help you access liquidity when needed without disturbing your long-term financial strategy. Apply now
Allotment of shares under company law
How to apply for Bajaj Finance loan against shares
The allotment of shares is governed by the Companies Act, 2013, in India. Companies must adhere to the following legal requirements to ensure compliance:
- Board resolution: The board of directors must pass a resolution approving the allotment of shares.
- Offer letter: For private placements, the company must issue an offer letter to potential investors.
- Filing of return of allotment: The company must file Form PAS-3 (Return of Allotment) with the Registrar of Companies within 30 days of the allotment.
- Adherence to SEBI regulations: Listed companies must comply with the Securities and Exchange Board of India (SEBI) guidelines for the allotment of shares.
- Stamp duty payment: The company must pay the necessary stamp duty on the share certificates issued.
By following these legal steps, companies can ensure transparency and protect the interests of their shareholders.
Which shares are eligible for a loan against securities after allotment?
Features & Benefits for Bajaj Finance loan against shares
Loan Against Securities from Bajaj Finance is generally available against eligible listed shares that meet the lender's approval criteria after the allotment of shares is completed. Once shares are allotted and credited to your demat account, you can check whether they qualify for a loan against shares by considering the following:
- Shares should be listed on the BSE or NSE.
- Shares must be included in the Bajaj Finance approved securities list, with the eligible loan amount determined by the applicable Loan-to-Value (LTV) ratio.
- Shares should be free from any existing lien, pledge, or legal restriction.
- ESOP shares and IPO shares under a mandatory lock-in period are generally not eligible until the lock-in expires.
Enter your mobile number and verify it with OTP to check your pre-approved Loan Against Securities offer from Bajaj Finance.
Allotment of shares vs transfer of shares
Eligibility criteria for Bajaj Finance loan against shares
While the terms "allotment of shares" and "transfer of shares" are often used interchangeably, they refer to entirely different processes. Below is a comparison to clarify their distinctions:
| Aspect | Allotment of Shares | Transfer of Shares |
|---|---|---|
| Definition | Issuance of new shares by the company to investors. | Transfer of ownership of existing shares from one person to another. |
| Initiated by | The company. | The shareholder who owns the shares. |
| Purpose | To raise capital for the company. | To change ownership of existing shares. |
| Legal requirements | Governed by the Companies Act, 2013. | Requires execution of a share transfer deed. |
Understanding these differences is crucial for investors, especially those exploring options like Loan Against Shares, where the ownership of shares remains with the investor while they access liquidity.
Instead of selling shares during a temporary cash requirement, many investors prefer leveraging their portfolio to access funds while remaining invested in the market. Apply now
Compare lenders for loan against pledge of shares
A loan against pledge of shares should be chosen by comparing key factors such as interest rates, eligible securities, Loan-to-Value (LTV) ratio, disbursal speed, and customer service. Once the allotment of shares is complete and your shares are credited to your demat account, these factors can help you select the most suitable Loan Against Securities provider.
| Parameter | What to check | Why it matters |
|---|---|---|
| Interest rate | Compare annual interest rates across lenders (typically 8%–15% p.a. for Loan Against Securities). | Lower interest rates reduce the overall cost of borrowing. |
| Approved securities list | Check whether your allotted shares are included in the Bajaj Finance approved list of eligible securities. | A wider approved list offers greater borrowing flexibility. |
| Loan-to-Value (LTV) ratio | Compare the maximum LTV offered. For listed equities, LTV is generally up to 50% as per applicable regulatory guidelines. | A higher LTV allows you to borrow a larger amount against the same share value. |
| Disbursal speed | Review the turnaround time from pledge creation to loan disbursal. | Faster processing provides quicker access to funds when needed. |
| Customer service ratings | Consider app ratings, customer reviews, and complaint resolution standards. | Better service improves the borrowing experience throughout the loan tenure. |
Bajaj Finance offers a Loan Against Securities on an approved list of listed equities and mutual funds. Enter your mobile number and verify it with OTP to check your eligibility and pre-approved offer.
Conclusion
The allotment of shares is a cornerstone of corporate finance, enabling companies to raise capital while offering investors ownership opportunities. Whether you are an entrepreneur, an investor, or a salaried professional, understanding the intricacies of share allotment can help you make informed financial decisions.
Unlock the power of your investments with a Loan Against Shares. Access liquidity without selling your shares and stay invested in your future. Apply now
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What is allotment of shares meaning in company law?
The allotment of shares under company law refers to the process by which a company issues its shares to individuals or entities, granting them ownership rights. It involves the allocation of shares to applicants who have agreed to purchase them, either through a public offering, private placement, or rights issue.
What are the different types of allotment of shares?
The key types of share allotment include:
Public allotment: Shares are offered to the public through an Initial Public Offering (IPO).
Private placement: Shares are offered to a select group of investors.
Bonus issue: Additional shares are issued to existing shareholders as a reward.
Rights issue: Shares are offered to existing shareholders at a discounted price.
What is the process of allotment of shares in an IPO?
The process of share allotment in an Initial Public Offering (IPO) typically involves the following steps:
Investors submit applications for shares during the IPO period.
The company evaluates the applications based on demand and eligibility.
Shares are allotted to applicants based on the availability and the subscription level of the IPO.
Successful applicants receive share certificates, while refunds are issued to unsuccessful applicants.
What is the difference between allotment and transfer of shares?
The allotment of shares refers to the issuance of new shares by the company to investors, while the transfer of shares involves the change of ownership of existing shares from one person to another. Allotment is initiated by the company, whereas transfer is initiated by the shareholder.
What rights does an investor get after allotment of shares?
After the allotment of shares, an investor gains several rights, including:
Voting rights: The ability to participate in company decisions.
Dividend entitlement: The right to receive a share of the company’s profits.
Ownership: A stake in the company’s equity.
Investors can retain these rights while accessing liquidity through a Loan Against Shares, ensuring their long-term financial goals are not disrupted.
Can I get a loan against shares received through allotment?
Yes, you can obtain a loan against shares received through allotment of shares if they are listed and included in the Bajaj Finance approved list. Enter your mobile number and verify with OTP to check your Loan Against Securities eligibility.
What is preferential allotment of shares?
Allotment of shares through preferential allotment means issuing shares to a selected group of investors at a predetermined price under Section 62(1)(c) of the Companies Act, 2013, subject to regulatory requirements.
How long does the share allotment process take in India?
The share allotment process in India is generally completed within 6 working days of IPO closure as per SEBI norms, while companies must complete RoC filing within 30 days of the allotment of shares under the Companies Act, 2013.
What does allotment of shares mean for a new investor?
Share allotment means you receive ownership rights in a company. As a shareholder, you may gain voting rights and become eligible for dividends, subject to the company’s terms and applicable laws.
What is Form PAS-3 and what happens if it is filed late?
Form PAS-3 is the return of allotment filed with the RoC through the MCA within 30 days under Section 39(4) of the Companies Act, 2013. Late filing may attract a ₹1,000-per-day penalty, capped at ₹1 lakh.
What is preferential allotment of shares?
Preferential allotment is the issue of shares to selected investors rather than the public. It is governed by Section 62(1)(c) of the Companies Act, 2013, and the supporting special resolution generally remains valid for 12 months.
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