Steps to Avoid Risk of Allotment Failure due to Low Applications:

Introduction:
When a company issues securities, there is always a risk of not receiving enough applications to reach the minimum threshold required for allotment. If the company receives applications for an amount less than 90 percent of the issue size, then the allotment cannot be made, and the application money received must be returned to the applicants. To avoid this risk, companies take certain steps.

Step 1: Market Research
The first step companies take to avoid the risk of allotment failure is to conduct market research to determine the demand for their securities. This includes analyzing market trends, investor sentiment, and competitor offerings. By understanding the market, companies can better determine the size and pricing of their issue to ensure they receive enough applications for successful allotment.

Step 2: Pre-Issue Marketing
Companies also engage in pre-issue marketing to create awareness and generate interest in their securities. This includes advertising, roadshows, and other promotional activities to attract potential investors. The goal is to create a buzz around the issue and generate enough demand to reach the minimum required threshold.

Step 3: Book Building Process
Another step companies take to avoid allotment failure is the book building process. This is a mechanism used to determine the demand for securities by allowing investors to bid for the securities at various prices. The bids are then compiled to determine the optimum price and the number of securities to be issued. This process helps to ensure that the issue is priced appropriately, and there is enough demand to reach the minimum threshold required for allotment.

Step 4: Anchor Investors
Companies also approach anchor investors to secure their commitment to purchase a significant portion of the securities issued. Anchor investors are institutional investors that have a strong reputation and can influence other investors to invest in the issue. By securing anchor investors, companies can ensure that there is enough demand for the issue to reach the minimum required threshold.

Conclusion:
In conclusion, companies take several steps to avoid the risk of allotment failure due to low applications. These steps include market research, pre-issue marketing, book building process, and securing anchor investors. By taking these steps, companies can ensure a successful issue and avoid the need to return application money to disappointed investors.

Ans: (1).. As per LAW, If a COMPANY has received for applications an amount LESS than 90 PERCENT of the issue size, than ALLOTMENT cannot be made and application money must be RETURNED to the applicants. This condition is called UNDERSUBSCRIPTION of of SHARES. (2)..TO Avoid the risk of UNDERSUBSCRIPTION, Companies enters into an agreement with an UNDER-WRITER to the effect that he will take up SHARES or DEBENTURES offered by it to the PUBLIC but not subscribed for in FULLY by the PUBLIC. (3)..Such an AGREEMENT may become NECESSARY when a COMPANY issues SHARES or DEBENTURES for the FIRST TIME to the public, or subsequently when it is in need of WORKING CAPITAL.