vmware esxi - Increase RAM usage for IIS server

I am running a large scale ERP system on the following server configuration. The application is developed using AngularJS and ASP.NET 4.5

Dell PowerEdge R730 (Quad Core 2.7 Ghz, 32 GB RAM, 5 x 500 GB Hard disk, RAID5 configured)
Software: Host OS is VMWare ESXi 6.0
Two VMs run on VMWare ESXi .. one is Windows Server 2012 R2 with 16 GB memory allocated ... this contains IIS 8 server with my application code
Another VM is also Windows Server 2012 R2 with SQL Server 2012 and 16 GB memory allocated .... this just contains my application database.

You see, I separated the application server and database server for load balancing purposes.

My application contains a registration module where the load is expected to be very very high (around 10,000 visitors over 10 minutes)

To support this volume of requests, I have done the following in my IIS server
-> increase request queue in application pool length to 5000
-> enable output caching for aspx files
-> enable static and dynamic compression in IIS server
-> set virtual memory limit and private memory limit of each application pool to 0
-> Increase maximum worker process of each application pool to 6

I then used gatling to run load testing on my application. I injected 500 users at once into my registration module.

However, I see that only 40% / 45% of my RAM is being used. Each worker process is using only a maximum amount of 130 MB or so.

And gatling is reporting that around 20% of my requests are getting 403 error, and more than 60% of all HTTP requests have a response time greater than 20 seconds.

A single user makes 380 HTTP requests over a span of around 3 minutes. The total data transfer of a single user is 1.5 MB.
I have simulated 500 users like this.

Is there anything missing in my server tuning? I have already tuned my application code to minimize memory leaks, increase timeouts, and so on.