Firm allotment in the context of an Indian IPO refers to the reservation of a specific number of shares for identified categories of investors on a guaranteed or committed basis — such as employees, shareholders of the promoter group, or participants in the Pre-IPO placement — where allocation is not subject to the proportionate allotment process applied to oversubscribed public categories. In SEBI regulations, firm allotment is distinguished from reservation on competitive basis — in a firm allotment, the allottee is guaranteed to receive the reserved shares regardless of overall subscription levels. Firm allotments are common in IPOs for employees (under the employee reservation portion, capped at 5% of the post-issue paid-up capital) and existing shareholders of unlisted group companies. All firm allotments are subject to lock-in periods and must be disclosed in the Red Herring Prospectus, ensuring transparency for all market participants about the composition of the post-IPO shareholder base.
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