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Want to apply for an IPO, must know that there are 4 types of IPO applicants or investors while bidding for an IPO. Check out which category belongs to you or in which category, you should apply for.
In the last few years, the primary market has witnessed an increasing number of IPOs coming every year to get listed on the stock exchange. Not just the frequency of IPO launches but also investors’ interest in IPO has increased. IPO is considered a lucrative investment opportunity because a company issues its shares for the first time to the public and that too at attractive prices.
For an IPO investor, there are 4 major categories to participate in an IPO. The list includes Retail Individual Investors (RII), Non-institutional investors (NII), Qualified Institutional Bidders (QIB), and Anchor investors. Check out the meaning, difference, and the minimum and maximum bidding amount for each type of IPO applicant.
Anyone who want to subscribe to an IPO can apply for an IPO as RII, or QIB, or NII, or Anchor investor. Every IPO issue has a category reservation for each type of investor.
Let’s dive in deeper to understand different types of investors in an IPO.
Most of us from the general public are retail investors. Technically speaking, an individual who places an IPO bid for a maximum of upto Rs 2 lakh belong to this category.
Whether you are a resident of India or a non-resident (NRI), who wants to invest less than or upto Rs 2 lakh in the IPO, should apply as a retail individual investor (RII).
All individuals (Resident or NRI), trusts, companies, institutions, or HUFs who subscribe to an IPO for more than Rs 2 lakh should apply as Non-institutional investors (NII).
NIIs are further divided into small HNI and Big HNI
Check out rules pertaining to the minimum shareholder quota for NIIs in any IPO.
Financial Institutions, Commercial Banks, Mutual Fund Houses, Foreign Portfolio Investors, or any other SEBI-registered institutions are called Qualified Institutional Investors. Such types of investors can bid for an IPO under the QIB category.
QIB bid for an IPO with a large amount and in IPO process, underwriters try to get the maximum subscription number from QIIs.
It is not a separate category IPO applicant as it is a subset of QIB. IPO bidders in the QIB category who bid for a large amount of above Rs 10 crore are called anchor investors. Thus, anchor investor is not a separate category of IPO applicant as they also apply as QIIs.
An IPO issuer company can allocate 60% of the QIB reservation to anchor investors. Company promoters, direct related parties to the company, and merchant bankers cannot participate in the IPO as anchor investors.
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Non-resident Indian or NRI can apply for an IPO in retail or NII category.
As an NRI, if you want to bid for upto Rs 2 lakh, you should subscribe to the IPO under retail category. However, if your bidding amount is above Rs 2 lakh, you should bid as non-institutional investor or high net-worth individual.
Anchor investors are qualified institutional investors (QIIs) who bid for an IPO above Rs 10 crore. Maximum 60% of QIB reservation quota can be offered to anchor investors. They can apply for an IPO one day before the IPO opening day.
Anchor investors cannot sell their shares before 30 days as their shares are locked for the period.
Yes, retail investors in an IPO can sell shares on the listing day. They are free to sell allotted shares anytime, once shares got listed on the exchange.
High net-worth individuals (HNIs) or non-institutional investors (NIIs) make a minimum investment of Rs 2 lakhs. Thus, they cannot purchase IPO using the UPI payment gateway because the maximum transaction limit in UPI is Rs 1 lakh.
HNIs can either participate in an IPO through net banking ASBA facility or by physically submitting the IPO application form. ASBA is the most common or preferred method while applying in an IPO under NIIs.
Steps to apply in IPO under NII/HNI category;
No, if an IPO receives good response and gets oversubscribed, then applying for more than 1 lot does not matter because maximum of 1 lot can be allotted to an investors against the shares applied.
Instead of bidding for more than single lot, investor should consider applying 1 lot from different Demat accounts to maximize the chances of allotment.
Retail investors, non-institutional investors (NIIs), and Qualified Institutional bidders (QIB) are the three major categories of investors in an IPO apply process. Here is the difference between QIB, NII, and RII:
QIB | NII | RII | |
Meaning | SEBI registered financial institutions, commercial banks, mutual fund asset management companies, etc. | High-net worth individuals, NRIs, HUFs, corporates, trusts, etc. who invests for above Rs 2 lakh in an IPO. | Individuals, NRIs, HUFs, etc. who subscribe to an IPO worth maximum of Rs 2 lakh. |
IPO investment amount | No limit | Minimum Investment: Above Rs 2 Lakh Maximum Investment: Upto Rs 10 Lakh |
Minimum Investment: 1 IPO Lot Maximum Investment: Upto Rs 2 Lakh |
Reservation | Not more than 50% | Not less than 15% | Not less than 35% |
Bid withdrawal | Not Allowed | Not Allowed | Retail applicants can cancel their IPO bid before the issue closing day. |
Lock-in | No lock-in for QIBs while Anchor investors who invests more than Rs 10 Cr in the QIB category, their investment is locked in for 30 days. | No lock-in on NII investment | No lock-in |