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IPO – Investors Categories in India

Nowadays, the talk of the town is whether you have been allocated the IPO or not. Initial Public Offerings (IPOs) have become a hot topic of conversation among investors, and for a good reason. IPOs present a unique opportunity for individuals and institutions to invest in the early stages of a company’s journey into the stock market. In India, IPOs are categorized to cater to various types of investors. Each category has its unique characteristics and allotment methods. In this article, we’ll explore the different categories in which IPOs can be applied by investors in India.

Retail Individual Investor (RII)

The Retail Individual Investor category is designed for Resident Indian Individuals, Non-Resident Indians (NRIs), and Hindu Undfivided Families (HUFs) who apply for less than Rs 2 lakhs in an IPO. Notably, at least 35% of the IPO offer is reserved for the RII category. Retail investors can bid at the cut-off price.

Allotment Basis for RII Category:

  • In case the IPO is not oversubscribed in the RII category, full allotment is made to all applicants.
  • If oversubscribed, a lottery system is used, ensuring that at least one lot is allocated to each applicant, regardless of the number of lots applied for.

Read in Detail: How IPOs are Alloted? 

Note: Applying at the cut-off price in this category is recommended for the best chances of allotment. It’s also advised to apply for only one lot per IPO application and consider multiple accounts for family members to maximize allotment.

Non-Institutional Bidders (NII)

The Non-Institutional Bidders category encompasses Resident Indian Individuals, NRIs, HUFs, Companies, Corporate Bodies, Scientific Institutions, Societies, and Trusts who apply for more than Rs 2 lakhs worth of IPO shares. High Net-worth Individuals (HNIs) who invest more than Rs 2 lakhs also fall under the NII category. Investors in this category are not allowed to bid at the cut-off price.

Allotment Basis for NII Category:

– Full allotment is made to all applicants in the NII category if the IPO is not oversubscribed.

– If oversubscribed, allotment is based on the availability of Equity Shares in the NII Portion.

Small and Big NII Subcategories

The NII category has two subcategories: Small NII (sNII or sHNI) for investors bidding between Rs 2 lakhs to Rs 10 lakhs and Big NII (bNII or bHNI) for those investing more than Rs 10 lakhs. In both subcategories, if the IPO is not oversubscribed, full allotment is made to all applicants. If oversubscribed, the allotment is based on the availability of shares in the respective portion, similar to the RII category.

Qualified Institutional Bidders (QIBs)

QIBs include public financial institutions, commercial banks, mutual funds, and Foreign Portfolio Investors. These institutions must be registered with SEBI to apply in the QIB category. A substantial 50% of the IPO offer is reserved for QIBs. Allotment is proportionate to the bid amount. QIBs are not eligible to bid at the cut-off price and cannot withdraw their bids once placed.

Anchor Investors

Anchor Investors are QIBs that apply for Rs 10 crores or more in an IPO. They invest through the book-building process before the IPO hits the market to boost investor confidence. Up to 60% of the QIB category can be allocated to Anchor Investors. The Anchor Investor Offer Price is determined separately, and their bid/offer period differs from other categories.

Recent Listing: Nexus Select Trust IPO

Investor Category Shares Offered Percentage
Anchor Investor 14,39,99,850 43.7%
QIB 10,10,52,450 30.7%
Other Shares 8,42,10,600 25.6%
Total Shares 32,92,62,900 100.0%

In conclusion, Indian IPOs offer a variety of categories to cater to the diverse needs and preferences of investors. Understanding these categories is crucial for making informed investment decisions. Whether you are a retail investor, high-net-worth individual, or institutional buyer, there is an IPO category tailored to your investment goals.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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