An IPO investor is a person or organization that purchases shares offered in an initial public offering of a company. Investors make this purchase with the expectation of making a profit. The process of buying IPO shares is very different from buying shares on the stock market. The company allots the shares within 7 days after the IPO closes.
IPO Investor Category
Each type of IPO investor has its own rules for IPO application, reserve ratio, and share allocation mechanism. Let us understand the types of IPO investors in detail.
1. Retail Individual Investors (RII)
Retail Individual Investors (RII) are individual investors applying in IPOs. For SME IPOs, they are simply referred to as Individual Investors.
Key Features: Mainboard vs SME (Post 1 July 2025)
- Terminology: Mainboard - RII, SME - Individual Investor
- Minimum Application Size: Mainboard - 1 lot, SME - 2 lots
- Investment Limit: Up to Rs 2 lakhs (Mainboard), Max 2 lots (SME)
- Reservation (Book-Building): Minimum 35% reserved
- Reservation (Fixed Price): Minimum 50% reserved
- Allotment if oversubscribed: Proportionate distribution
- Bidding at Cut-off Price: Allowed (Mainboard), Not allowed (SME)
- Lock-in: No lock-in
Retail Reservation Rules in IPO
Each IPO has a reserved quota for retail investors:
- Book Building IPO (Profitability Route): Minimum 35% reserved
- Book Building IPO (QIB Route): Not more than 10% reserved
- Fixed Price IPO: Minimum 50% allocated to retail investors
Allotment Basis
If the IPO is oversubscribed, allocation is done by lottery. Example: 3 applicants, IPO subscribed 3x, only 1 lot allotted per applicant.
Tips for Retail Investors
- Apply at cut-off price
- If oversubscribed, apply for only 1 lot
- Use multiple family accounts to maximize allocation
2. Non-Institutional Investors (NII)
The NII category is meant for Indian resident individuals, NRIs, HUFs, companies, corporations, academic institutions, societies, and trusts. Investors in this category are often High Net-Worth Individuals (HNI).
NII Subcategory
- Small NII (sNII): Mainboard - Rs 2 to 10 lakhs, SME - 3 lots up to Rs 10 lakhs
- Large NII (bNII): Mainboard - Above Rs 10 lakhs, SME - Application exceeding Rs 10 lakhs
NII Reservation Rules
- Book Building IPO (Profitability Route): At least 15% reserved for NII
- Book Building IPO (QIB Route): Not more than 15% reserved for NII
- Fixed Price IPO: Remaining portion allocated after retail allocation
3. Qualified Institutional Buyer (QIB)
QIBs include mutual funds, banks, financial institutions, and foreign portfolio investors. They invest large amounts in IPOs and cannot withdraw bids once placed.
QIB Quota in IPO:
- Book Building IPO (Profitability Route): Not more than 50%
- Book Building IPO (QIB Route): Not less than 75%
- Fixed Price IPO: Remaining after retail allocation
4. Eligible Employees
Companies may reserve up to 5% of post-issue capital for employees. Employees may get discounts (usually up to 10%) on IPO price.
5. Eligible Shareholders
Shareholders of the parent company may have reserved quotas. Rules vary per IPO. Bids under this category are also eligible for other categories like retail and employee.
6. Anchor Investors
Anchor investors are financial institutions allocated shares before IPO opens to the public. Minimum investment: Rs 10 Cr (Mainboard), Rs 2 Cr (SME). Lock-in: 30-90 days.
Comparison of IPO Investors in India
| Investor Type | Meaning | Investment Limits | Quota | Lock-in Period |
|---|---|---|---|---|
| Retail | Individuals, NRI, HUF | Mainboard: Rs 2 lakh, SME: 2 lots | 35%-50% | No lock-in |
| NII/HNI | Individuals, Companies, HUF, Trusts | Mainboard: > Rs 2 lakh, SME: 3 lots+ | 10%-15% | No lock-in |
| QIB | Mutual Funds, Banks, FPIs | No minimum | 50%-75% | No lock-in |
| Anchor | Institutional investors allocated before IPO opens | Rs 10 Cr (Mainboard), Rs 2 Cr (SME) | Max 60% of QIB quota | 30-90 days |
For detailed IPO updates and subscription status, check our Dev Accelerator IPO, Karbonsteel Engineering IPO, Current Infraprojects IPO, and Anondita Medicare IPO pages.
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