IPO Investors
An IPO investor is a person or organization that buys shares offered in a company's initial public offering. Investors make this purchase with the expectation of making a profit.
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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 allot 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.
Retail Individual Investors (RII) are essentially individual investors applying in IPOs.
Initially, the rules for RIIs were the same for both Mainboard and SME IPOs. However, with effect from 1st July 2025, SEBI revised the framework. Now, the concept of “RII” applies only to Mainboard IPOs, while in SME IPOs they are simply referred to as Individual Investors with different application rules.
|
Feature |
Mainboard IPOs (RII) |
SME IPOs (Individual Investors) |
|---|---|---|
|
Terminology |
Called Retail Individual Investors (RIIs) |
Called individual investors who applies for minimum application size (RII concept not used as minimum application size exceeds Rs. 2 lakhs) |
|
Minimum Application Size |
1 lot |
2 lots |
|
Investment Limit |
Up to Rs 2 lakhs |
Maximum 2 lots |
|
Reservation (Book-Building) |
Minimum 35% reserved |
Minimum 35% reserved (same as mainboard) |
|
Reservation (Fixed Price) |
Minimum 50% reserved |
Minimum 50% reserved (same as mainboard) |
|
Allotment (if oversubscribed) |
Minimum one lot (subject to availability); and any remaining shares are distributed proportionately. |
Proportionate |
|
Bidding at Cut-off Price |
Allowed |
Not allowed |
|
No lock-in; can sell on listing |
No lock-in; can sell on listing (same as mainboard) |
Each IPO has a reserved quota (number of shares) for IPO individual investors. The reservation depends on several factors, including the type of issue (see below):
|
Issue Type |
RII Reservation Rule |
|---|---|
|
Book Building IPO ( Profitability Route ) |
Minimum 35% of the book is reserved for retail investors. |
|
Book Building IPO ( QIB Route ) |
Not more than 10% is reserved for retail investors. |
|
Fixed Price IPO |
Minimum 50% of the net offer is allocated to retail investors. |
Example
A retail investor can invest maximum up to Rs 2 lakhs in an IPO. A retail individual investor could choose the NII category for an IPO application of more than Rs 2 lakhs.
There is no lock-in period for retail investors in an IPO. Retail investors can sell their IPO shares as soon as they are listed for trading on the exchange(s).
The Non-Institutional Investor (NII) category is meant for Indian resident individuals, NRIs, HUFs, companies, corporations, academic institutions, societies, and trusts.
Unlike QIB bidders, investors in the NII category do not require SEBI registration.
Any individual investor applying in the NII category is referred to as a High Net-Worth Individual (HNI). Non-institutional investors include HNI, HUF, LLP, Private Limited Company, Limited Company, Trusts, and others.
The NII category is further divided into two subcategories:
|
NII Subcategory |
Mainboard IPOs |
SME IPOs |
|---|---|---|
|
Small NII (sNII / sHNI) |
Rs 2 lakhs to Rs 10 lakhs |
3 lots and above, up to the lot value where the application does not exceed Rs 10 lakhs |
|
Large NII (bNII / bHNI) |
More than Rs 10 lakhs |
Such number of lots that the total application value exceeds Rs 10 lakhs |
The allotment process for NII (HNI) investors in IPOs is the same for both Mainboard IPOs and SME IPOs.
Example: If the sNII portion is subscribed 2x (by applications), then 1 out of 2 applicants will receive the minimum application (Rs.2 lakhs in mainboard / 3 lots in SME), regardless of how many shares they applied for.
Even though the bNII entry threshold is Rs 10 lakhs+, in oversubscription cases the allotment can still be limited to the minimum NII bid lot.
The non-institutional investor category is reserved for a certain percentage of the total shares offered in an IPO. This is based on the issue type. The following are the limits for non-institutional investors:
|
Issue Type |
NII Reservation Rule |
|---|---|
|
Book Building IPO ( Profitability Route ) |
At least 15% is reserved for NII. 10% are reserved for bNII 5% for the sNII subcategory. |
|
Book Building IPO ( QIB Route ) |
Not more than 15% is reserved for NIIs. |
|
Fixed Price IPO |
After allocating at least 50% to retail investors, the remaining portion will be allocated to other individuals, companies, NIIs and QIBs. |
There is no lock-in period for HNI and NII; they can freely sell their allocated IPO shares on the day of listing .
|
Parameter |
Non-Institutional Investor (NII / HNI) |
Retail Investor (RII) |
|---|---|---|
|
Meaning |
Any investor (excluding QIB) applying above the retail limit. • Mainboard IPOs: More than Rs 2 lakhs. • SME IPOs: 3 lots and above. |
Any individual investor applying within the retail limit. • Mainboard IPOs: Up to Rs 2 lakhs. • SME IPOs: 2 lots. |
|
Investment Limits |
• Mainboard: Minimum Rs 2 lakhs. • SME: Minimum 3 lots. |
• Mainboard: Maximum Rs 2 lakhs. • SME: only 2 lots |
|
Reserved Quota |
|
|
|
Apply at Cut-off Price |
No |
Mainboard: Yes SME: No |
|
Withdrawal of Bid |
Modification possible while issue is open. Cannot withdraw once submitted. |
Permitted to withdraw while issue is open. |
|
Lock-in Period |
No lock-in period. |
No lock-in period. |
|
Allotment (if oversubscribed) |
Minimum bid lot applicable to NII , subject to availability and balance, if any, on a proportionate basis |
Minimum bid lot applicable to RII , subject to availability and balance, if any, on a proportionate basis |
Qualified institutional buyers include
QIB stands for a qualified institutional buyer registered with SEBI to invest in IPOs in the QIB category.
Most QIBs represent small investors who invest through mutual funds, ULIP schemes of insurance companies and pension schemes. QIB invests in large amounts in IPOs.
QIBs cannot withdraw their bids once made. For this reason, QIBs invest in an IPO on the last day of the subscription period.
Qualified institutional buyers include investors like LIC, Nippon India Mutual Fund, Goldman Sachs, Kuber India Fund, Elara India Opportunities Fund, BNP Paribas Arbitrage and etc.
Following are the QIB limits for IPO:
|
Issue Type |
QIB Portion in IPO |
|---|---|
|
Book Building IPO ( Profitability Route ) |
Not more than 50% |
|
Book Building IPO ( QIB Route ) |
Not less than 75% |
|
Fixed Price IPO |
After allocating at least 50% to retail investors, the remainder will be allocated to other individuals, companies, NIIs, and QIBs. |
There is no holding or lock-up period for IPO shares issued under the QIB category. QIB investors can sell them as soon as trading in the IPO shares begins on the stock exchanges .
However, there is a lock-in period for QIB investors who qualify as anchor investors .
The difference between institutional and Non-Institutional Investors.
|
Qualified Institutional Buyers (QIB) |
Non-Institutional Investor (NII/HNI) |
|
|---|---|---|
|
Meaning |
QIBs are institutional buyers registered with SEBI. These include mutual funds, banks, FIIs and other financial institutions. |
Non-Institutional Investors (NIIs) are investors (other than QIBs) who apply for more than Rs 2 lakhs in a Mainboard IPO or for a minimum of 3 lots in an SME IPO. High Net-Worth Individuals (HNIs) form a part of the NII category |
|
Minimum Investment |
No minimum limits |
Mainboard IPO: Rs 2 lakh for Small NII and Rs 10 lakh for the Big NII category. SME IPO: Small NII - Minimum 3 lots; Big NII - Such number of lots that the application value exceeds Rs 10 lakhs. |
|
Reserved Quota |
|
|
|
Apply at the Cut-off price |
No |
No |
|
Withdrawal of Bid |
Not possible |
Not possible. |
|
Price Modification |
Possible but in upward direction only. |
Possible but in upward direction only. |
|
Lock-in Period |
No lock-in period. |
No lock-in period. |
|
Allotment (if over-subscribed) |
Proportionate |
Minimum bid lot applicable to NII, subject to availability of shares in NII category and balance, if any, on a proportionate basis. |
The issuing company may reserve a portion of the public offering exclusively for its eligible employees . The eligibility criteria are explained in the prospectus document.
In most cases, the following employees are eligible to apply under the reserved employee category:
The IPO prospectus document details the employee reservation quota and the discount (if any) offered to employees.
Under the regulations, the employee reservation quota for an IPO offering may not exceed 5% of the company's post-issue paid-up capital.
In mainboard IPOs, employees can typically apply up to Rs 2 lakhs under the retail category, and from Rs 2 lakhs to Rs 5 lakhs under the NII category. In SME IPOs, the minimum application size is usually 2/3 lots. The maximum application limit for employees is generally Rs 5 lakhs. However, to avail the employee discount (if any), the investment amount should not exceed Rs 2 lakhs.
The exact eligibility, lot size, and employee reservation (if any) should always be verified from the IPO offer document, as it may vary across issues.
Example: SBI Card IPO Employee Quota Explained
An IPO issue benefits the employees of the issuing company in the following ways.
There is no lock-in period for shares purchased under the employee reserved category. Like retail investors , employees can sell their shares as soon as the IPO is listed on the stock exchange(s).
The IPO employee discount is a discount on the share price offered to eligible employees of the issuing company . To qualify for this discount, the employee must apply for the IPO under the employee reservation quota. The definition of eligible employees, the amount of the discount, and the rules vary by IPO and are explained in the RHP document.
Some IPOs have a special reservation quota for eligible shareholders of the parent company. The IPO Prospectus Document contains detailed information on eligibility, bid limits, allocation criteria and other shareholder reservation rules.
In most cases, individuals and HUF shareholders holding the share on a given day are eligible for the shareholder reserve quota.
Read SBI Cards IPO Shareholders Application for more details.
Note: Bids under the shareholder reserve category are subject to the rules set by the issuing company. These are explained in the IPO prospectus document. These may vary depending on the IPO.
A shareholder can invest up to the total shares offered in the shareholder reserved category. Some companies provide a discount on share prices for IPO applications up to Rs 2 lakh.
There is no lock-in period for shares purchased under the shareholder category. Like retail investors , shareholders can sell their shares as soon as the IPO is listed on the stock exchange(s).
Anchor investors are financial institutions that are allocated shares at a fixed price before the IPO is opened to the public. An IPO anchor investor must invest at least Rs 10 crore in a mainboard IPO and at least Rs 2 crore in a SME IPO . They have a lock-in period of 30 to 90 days from the date of allotment .
Shares purchased by anchor investors in the reserved anchor category are subject to a lock-in period of 30 days for 50% of the shares and 90 days for the remaining 50% of the shares from the allotment date .
The IPO offering for anchor investors begins and ends one day prior to the opening of the IPO to the public. Anchor investors have only one day to submit their bids. Allocation for anchor investors will also take place on the same day in the evening
|
Investor Type |
Retail |
NII/HNI |
QIB |
Anchor |
|---|---|---|---|---|
|
Meaning |
Individuals, NRI and HUF who invest up to Rs 2 lakhs in mainboard IPO and 2 lots in SME IPO. |
Individuals, NRI, HUF, Companies, Corporate Bodies, and Trusts who apply for more than Rs 2 lakhs in mainboard IPO and 3 lots and more in SME IPO. |
Public financial institutions, banks, mutual funds and Foreign Portfolio Investors who invest money on behalf of their clients. |
Public financial institutions, banks, mutual funds and Foreign Portfolio Investors who invest money on behalf of their clients. |
|
Investment Limits |
Mainboard IPO: Up to Rs 2 lakh SME IPO: Only 2 lots |
Mainboard IPO: Up to Rs 2 lakh SME IPO: Only 3 lots |
No Minimum. Maximum up to the available QIB quota . |
Minimum of Rs 10 Cr ( Mainboard IPO ) and Rs 2 Cr ( SME IPO ). Maximum up to the available Anchor quota. |
|
Quota |
100% Book-building IPO - Not less than 35% Compulsory book-built Issue - Not more than 10% Fixed Price Issue - 50% of Net Issue |
100% Book-building IPO - not less than 15% QIB Route Issue - Not more than 15% (10% for investment more than Rs 10 lakhs and 5% for investments less than Rs 10 lakhs) Fixed Issue IPO - 50% of Net Issue (shares with QIB) |
100% book build issue - Not more than 50% Compulsory book-built issue ( QIB Route Issue) - At least 75% of the offer Fixed Issue - 50% of Net Issue (shares with NII) |
Maximum 60% of the QIB quota and 30% of the total issue size in book building IPOs. |
|
No lock-in period. |
No lock-in period. |
No lock-in period. |
30-days: 50% 90-days: 50% |
|
|
Withdrawal of Bid |
Permitted to withdraw the bids while the issue is still open. |
Not possible. Modification is possible if they want to upsize their bids. |
Not possible. Modification is possible if they want to upsize their bids. |
Not possible. |
|
Apply at the Cut-off price |
Mainboard: Yes SME IPO: No |
No |
No |
NA |
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Resident Indian Individuals, NRIs, HUFs, companies, corporations, academic institutions, societies, trusts, public financial institutions, banks, mutual funds and foreign portfolio investors can invest in IPOs.
In general, any of the individuals, groups, organizations or companies listed below can invest in an IPO:
The anchor investor can sell their shares only once the lock-in dates for their holdings expire. The anchor investor holdings are locked in as per below :
Once the lock-in period ends, the anchor investors are free to sell or hold their holdings as they desire. It is important to note that not all shares are available for selling after 30 days. The anchor investors can sell only 50 % of their holdings after 30 days and pending 50% can be sold after the end of 90 days lock-in.
An IPO investor is a person or organization that wishes to purchase shares of an issuer during the IPO process. Below are the main categories of IPO investors:
Retail investors in an IPO are individuals, NRIs, or HUFs who participate with smaller investments.
Common Features (Mainboard & SME IPOs):
Key Differences (after SEBI’s revised SME rules effective 1 July 2025):
A Non-Institutional Investor (NII) is an investor category in IPOs that includes resident Indians, NRIs, HUFs, companies, legal entities, academic institutions, and trusts.
Investors who do not fall into the QIB (Qualified Institutional Buyer) or Retail/Individual categories are treated as NIIs.
This category is also popularly known as High Networth Individual (HNI).
Qualified Institutional Buyers (QIBs) are large financial organizations that invest money on behalf of their clients. QIBs in India include:
A company can reserve a certain portion of the issue for its employees. Eligible employees can apply for an IPO through this reserved employee category. The portion of an IPO reserved for employees may not exceed 5% of the paid-up capital after the issue.
The following employees are eligible to apply for IPO under IPO employee category:
The IPO prospectus document contains information such as employee reservations, their limits, stock prices and discounts.
You can apply in the employee category by selecting the "Employee" investor type when completing the IPO application.
Steps to apply for an IPO in the employee category
Qualified institutional investors who apply for IPO shares under an anchor reservation quota are called anchor investors.
Anchor investors include foreign portfolio investors, mutual funds, insurance companies and venture investors authorized by SEBI to apply for an IPO.
The windows for anchor investors open and close one day prior to the opening of the IPO. The minimum amount for an application under the anchor quota is Rs. 10 crores in mainboard IPO and Rs. 2 crores in an SME IPO.
Anchor investors have a lock-in period of 30 days for 50% of the shares and 90 days for the remaining shares. This means that anchor investors cannot sell the shares allotted in an IPO until the lock-in period expires.
The issuing company and the merchant banker create a list of potential anchor investors from previous issues and begin discussions with them early. The anchor investors review the details of the company and consider how much they want to invest in the company.
An anchor investor is a SEBI-registered qualified institutional investor (QIB) who invests an amount of at least Rs 10 crore in a mainboard IPO and at least Rs 2 Crore in SME IPO.
A retail private investor cannot become an anchor investor.
Anyone can invest in IPOs in India as long as they have a PAN number, demat and bank account. However, there are a few exceptions:
List of people who cannot apply in an IPO:
The IPO prospectus contains more detailed information on who cannot apply for the respective IPO.
Almost anyone who has a PAN, demat and bank account in India can buy an IPO in India. These include:
An IPO investor is someone who invests in or buys shares in an initial public offering. For example, if you bought LIC shares while the LIC IPO bids were open and you received the allocation, you are an IPO investor.
To become an IPO investor, you need a bank account and a demat account with a broker.
You can apply for IPO shares online through your stock broker or through the net banking feature offered by your bank. Check with your stock broker or bank for the steps to apply for IPOs.
SME IPOs are open to all categories of investors, subject to SEBI and exchange regulations. The main participants are: