Different types of Investors in an IPO
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There are Different kinds of Investors based on several parameters set by SEBI (Securities and Exchange Board of India). First, let’s understand what is an IPO or a fresh issue. Initial Public Offering (IPO) is the way an organization issue fresh shares to public by listing itself on the exchanges. IPO is often offered to raise money. As an Investor in IPO, a person can buy a percentage of the company in the form of shares before they trade on stock exchanges. However, in case of an IPO, an investor will have to buy shares directly from the companies.

As an Investors, a person can apply for shares in one of the following categories:

Type of Investor
% reserved in Offer
Eligibility Criteria
Allotment criteria
Retail Individual Investor (RII)
Not less than 35% of the Offer
NRI or HUF or Individuals who apply for less than ₹2 lakhs
If over-subscribed, then based on lottery.
If not, then full allotment to all applicants
Non-institutional Investors (NII)
Not less than 15% of the Offer
Eligible NRIs, HUFs, High Net-worth Individuals (HNIs), companies, corporate bodies, scientific institutions, and trusts, who apply for more than ₹2 lakhs
If over-subscribed, then on proportionate basis.
If not, then full allotment to all applicants
Qualified Institutional Investors/Bidder (QII/QIB)
Not more than 50% of the offer
Public financial institutions, commercial banks, mutual funds and Foreign Portfolio Investors among others
If over-subscribed, then on proportionate basis.
If not, then full allotment to all applicants
Anchor Investor
Up to 60% of QII/QIB is reserved for anchor investor
Qualified institutional bidder (QIB) making an application for a value of at least ₹10 crores through the book-building process.
Pre-allotted and agreed by both the parties i.e. Investor and the company concerned


Let’s dive into details of each types of investors in an IPO.

  1. Retail Individual Investor (RII)
    • Retail Investor category allows bid at cut-off price.
    • Applicants under this category are permitted to withdraw their bids until the day of allotment.
    • To increase the chances of allotment, always apply at cut-off price in this category.
    • If IPO gets oversubscribed, apply only 1 lot per IPO application.
    • To maximize the allotment, it is advisable to apply through multiple accounts on your family members name.
    • Example for allotment in case of oversubscription
      The allotment to each investor shall not be less than the minimum Bid Lot subject to availability of Equity Shares in the Retail Portion. Say investor X applied for 15 lots, investor Y applied for 1 lot and investor Z applied for 7 lots in an IPO. If IPO is subscribed 5 times in RII Category, then the allotment will be done through lottery and only 1 out of 5 applicants will get 1 lot allocated. It doesn’t matter how many shares they have applied.
  1. Non-institutional bidders (NII)
    • It is not necessary for NII to register with SEBI.
    • Minimum 15% of the Offer is reserved for NII category by law.
    • Non-institutional bidders are permitted to withdraw their bids until the day of allotment.
    • High Net-worth Individual (HNI) are those retail investors who applies for over ₹2 Lakhs in an IPO.
    • Usually, NII quota get extremely high over-subscription because of its small allocated size and large  participation of investors. Moreover, many individual investors go for IPO Funding route to apply in this category. They apply for 100s of crore rupees worth of shares under this category.
    • It is interesting to note that NIIs are not eligible to bid at cut-off price.
  2. Qualified Institutional Bidders (QIBs)
    • SEBI registration is required for institutions to apply under this category.
    • Public financial institutions, commercial banks, mutual funds and Foreign Portfolio Investors(FPI) can apply in QIB category.
    • QIBs have a huge share of pie reserved for them i.e. 50% of the Offer Size.
    • QIBs are representatives of small investors who invest through mutual funds, ULIP schemes of insurance companies and pension schemes.
    • As per SEBI guidelines, QIBs are prohibited to withdraw their bids after the close of the IPO application window.
    • QIBs are not eligible to bid at cut-off price.
  3. Anchor Investor
    • An anchor investor, in a public issue, is essentially a QIB who makes an application for more than or equal to ₹10 crores through the book-building process. An anchor investor can attract investors to public offers before they hit the market to boost their confidence.
    • Up to 60% of the QIB Category can be allocated to Anchor Investors.
    • Offer Price for Anchor Investor is decided exclusively as an agreement between both the parties.
    • No merchant banker, promoter or their relatives can apply for shares under the anchor investor category. In offers of size less than ₹250 crores, there can be a maximum of 15 anchor investors, but in those over ₹250 crores, SEBI recently removed the cap on the number of anchor investors.
    • Anchor investors are not eligible to bid at cut-off price.

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