Contents
Definition
SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 (ICDR 2018) classifies all investors bidding in a book-built IPO or FPO into three categories. Qualified Institutional Buyer (QIB): Defined in Regulation 2(1)(ss) — includes SEBI-registered mutual funds, FPIs, scheduled commercial banks, insurance companies, pension/provident funds, SEBI-registered venture capital funds, and NBFCs notified by RBI. Non-Institutional Investor (NII): All investors other than QIBs and retail investors bidding for amounts exceeding ₹2 lakh. Typically HNIs, corporates, family offices, and trusts. Also called High Net-Worth Individual (HNI) category in market usage. Retail Individual Investor (RII): Individual investors (resident, NRI on non-repatriation basis) whose aggregate application across all series does not exceed ₹2 lakh. Defined in Regulation 2(1)(vv).
How the categories are structured
Quota allocation for a standard book-built IPO (net offer to public):
- QIB: Up to 50% of net offer; of this, 60% (i.e., 30% of net offer) can be allocated to anchor investors one day before subscription. Remaining 40% of QIB portion is allocated to non-anchor QIBs on proportionate basis.
- NII: Minimum 15% of net offer. Post-SEBI amendment (effective 2022), the NII quota is split: one-third (≈5% of net offer) for bids ₹2 lakh–₹10 lakh (sNII — small NII), two-thirds (≈10% of net offer) for bids >₹10 lakh (bNII — big NII). Allotment to each sub-category uses draw-of-lots at a minimum lot level if oversubscribed.
- RII: Minimum 35% of net offer. If oversubscribed, allotment is by draw of lots at minimum application lot; every eligible applicant has an equal chance regardless of application size (above minimum). Maximum application ₹2 lakh.
If any category is under-subscribed, the unsubscribed portion is available to other over-subscribed categories per waterfall rules in ICDR 2018.
What investors should look at
Factual framework for understanding IPO subscription data:
- Subscription ratio by category: QIB subscription indicates institutional demand; high QIB subscription (>10x) often correlates with stronger anchor and grey-market interest. NII and RII ratios reflect retail and HNI sentiment.
- Allotment probability (RII): In heavily oversubscribed IPOs, RII allotment probability = 1 application / total applications × 1 lot. Multiple applications beyond ₹2 lakh still count as one lot draw for individuals.
- sNII vs bNII split (post-2022): The SEBI NII sub-division (2022) was introduced to improve allotment access for smaller HNI applicants (₹2L–₹10L), who previously competed with very large HNI cheques on a pure proportionate basis.
- NRI participation: NRIs can apply in RII category (up to ₹2 lakh on non-repatriation basis) or NII category for higher amounts; FPIs participate as QIBs.
- Refund timing: Unallotted amounts are unblocked from UPI-linked bank accounts (ASBA mechanism) within T+6 of allotment date.
Worked example
In the Zomato IPO (July 2021, pre-NII split amendment), the ₹9,375 crore issue was subscribed 38x overall: QIB portion subscribed 51x, NII portion 33x, RII portion 7x. An RII applicant for 1 lot (14 shares at ₹76 = ₹1,064) had approximately 1-in-7 allotment probability given ~7x retail oversubscription. Post-2022, in a comparable IPO, a sNII applicant (₹2L–₹10L) would participate in the one-third sNII sub-quota by draw of lots, rather than competing on a proportionate basis with ₹50L+ HNI applications. This structural change improved per-applicant allotment odds in the sNII band.
See also
- Anchor Investor — Pre-IPO QIB Allocation
- IPO Allotment Process
- ASBA — Application Supported by Blocked Amount
- IPO Dashboard
- Zomato Ltd
Primary source
SEBI (ICDR) Regulations 2018, Regulations 2(1)(ss), 2(1)(vv), Chapter V; SEBI circular on NII sub-categorisation (SEBI/HO/CFD/DIL1/CIR/P/2022/62, 28 Apr 2022). MintByte content is for informational purposes only and does not constitute investment advice. MintByte is registered with AMFI as ARN-314872 and with APMI as APRN-01658.