IPO investor categories: retail, HNI, QIB, and the reserved tranches
The investor categories in an Indian initial public offering are the buckets into which the Securities and Exchange Board of India sorts every applicant, each with its own reserved share of the issue and its own allotment rule. The three public categories of a book-built mainboard IPO are the retail individual investor applying up to Rs 2,00,000, the non-institutional investor or high-net-worth individual applying above that, and the qualified institutional buyer. Three more reserved portions sit alongside them: the anchor-investor carve-out inside the QIB tranche, the employee reservation, and the shareholder reservation. Regulation 6 and Schedule XIII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 fix the percentages.
The category an applicant lands in is decided by one number: the application value at the cut-off price . Cross the Rs 2,00,000 line and the application moves out of retail into the non-institutional book, where the cut-off-price option disappears, the bid can no longer be reduced or cancelled, and above Rs 5,00,000 the UPI ASBA payment rail stops working and bank ASBA takes over. The reservation percentages also flex with the issuer’s profitability: a company that has not earned an operating profit in each of the preceding three years must place 75 per cent with QIBs and only 10 per cent with retail.
This article defines each category, states its reservation under the ICDR, and explains how allotment runs inside it: lottery for retail and for the small-NII sub-bucket, pro-rata for big NII, and merchant-banker discretion for QIBs. It is the conceptual hub for the operational guides on applying in the HNI category on Zerodha , the small-HNI versus big-HNI split , and the allotment mechanics in IPO oversubscription allotment .
The three public categories at a glance
For a profitable issuer making a book-built offer, Regulation 6(1) of the ICDR sets the net-offer split as follows.
| Category | Application size | Reservation (net offer) | Allotment method |
|---|---|---|---|
| Retail individual investor (RII) | Up to Rs 2,00,000 | Not less than 35 per cent | Lottery when oversubscribed; one minimum lot or nil |
| Non-institutional investor (NII / HNI) | Above Rs 2,00,000 | Not less than 15 per cent | Split into small NII and big NII; lottery and pro-rata |
| Qualified institutional buyer (QIB) | No upper limit | Up to 50 per cent | Discretionary, decided by the book-running lead manager |
The percentages are floors and ceilings rather than fixed points: retail is “not less than 35 per cent,” NII “not less than 15 per cent,” and QIB “not more than 50 per cent.” The word “net offer” matters, because the employee and shareholder reservations are excluded from it. When a category is undersubscribed, the unallotted shares spill to the other categories in the order the red herring prospectus specifies, a mechanic covered in IPO oversubscription allotment .
Retail individual investor
A retail individual investor (RII) is an individual, including a non-resident Indian and a HUF applying through the karta, whose total application across all bids in the issue does not exceed Rs 2,00,000 at the cut-off price. Regulation 2(1)(vv) of the ICDR carries the definition. The Rs 2 lakh ceiling has been the retail threshold since SEBI raised it from Rs 1 lakh in 2010, and it is the single most consequential number in the Indian IPO market because it draws the line between lottery allotment and the harder economics of the HNI book.
Retail gets not less than 35 per cent of the net offer in a profitable issue. Its defining privilege is the cut-off price bid: a retail applicant can tick the cut-off box and agree to pay whatever final price the book building process settles on, without naming a price inside the price band . Retail is also the only category that may reduce or cancel a bid while the issue is open. When the retail tranche is oversubscribed, SEBI mandates a computerised draw of lots on the count of applications, not the value bid, so a one-lot application and a thirteen-lot application carry the same probability of winning a single lot. That mechanic is the reason a retail investor’s optimal strategy in a heavily oversubscribed issue is to apply for the minimum lot. The basis of allotment document published on the registrar’s portal shows the exact ratio.
Non-institutional investor (HNI)
A non-institutional investor (NII), known in market usage as a high-net-worth individual (HNI), is any applicant whose application exceeds Rs 2,00,000 and who is not a QIB. The category catches individuals, HUFs, corporates , trusts, societies, FPIs below the QIB definition, NRIs , and eligible institutional bodies that are not QIBs. NII gets not less than 15 per cent of the net offer.
Two operational differences separate the NII book from retail. First, an NII cannot bid at the cut-off price and must enter a price within the band manually. Second, an NII bid can only be revised upward; SEBI’s ICDR prohibits deleting or reducing it once placed, so a Rs 3 lakh bid can become Rs 4 lakh but never Rs 2.5 lakh, and it cannot be cancelled. The how to apply in the HNI category on Zerodha guide walks the Kite flow, and how to modify an HNI application covers the upward-only revision and the fresh mandate it triggers.
Since 1 April 2022, the NII category itself is split into two sub-buckets by application size, the reform detailed in small-HNI versus big-HNI :
- Small NII (sNII): applications of Rs 2,00,001 to Rs 10,00,000. It receives one-third of the NII reservation, which works out to 5 per cent of the net offer.
- Big NII (bNII): applications above Rs 10,00,000. It receives two-thirds of the NII reservation, 10 per cent of the net offer.
SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated 16 December 2021 introduced the split and applied draw-of-lots allotment with a minimum guaranteed lot, replacing the old pure-proportionate system that had let bidders inflate subscription multiples by borrowing to apply for vast quantities.
Qualified institutional buyer
A qualified institutional buyer (QIB) is an institution registered with or recognised by SEBI under Regulation 2(1)(ss) of the ICDR. The list is closed: mutual funds, venture capital funds, alternative investment funds, foreign portfolio investors (other than individuals, corporate bodies and family offices), public financial institutions, scheduled commercial banks, multilateral and bilateral development financial institutions, state industrial development corporations, insurance companies registered with IRDAI , provident funds and pension funds with a corpus of at least Rs 25 crore, the National Investment Fund, and insurance funds set up by the armed forces. An ordinary individual cannot apply as a QIB regardless of application size.
QIBs get up to 50 per cent of the net offer in a profitable issue, and at least 75 per cent in a loss-making issue routed under Regulation 6(2). Allotment in the QIB book is discretionary: there is no lottery and no pro-rata formula in the regulation. The book-running lead manager allocates to favoured institutional clients within the constraints that domestic mutual funds receive a minimum 5 per cent of the QIB portion (outside the anchor tranche) and that the anchor carve-out is settled separately. The discretion is among the most debated features of the Indian framework, since it gives the merchant banker latitude to reward relationship clients.
Anchor investor
An anchor investor is a QIB that commits to subscribe one working day before the issue opens to the public, on what the market calls anchor day. The anchor carve-out comes out of the QIB portion: up to 60 per cent of the QIB tranche may be allotted to anchors. Anchor allotment is at a price the issuer and merchant banker fix on anchor day, which may be at or above the eventual issue price, and the shares carry a lock-in (30 days on half the anchor allotment and 90 days on the other half, under the post-2021 rules). A single anchor must apply for at least Rs 10 crore in a mainboard issue. The anchor book is a demand signal: a heavily subscribed anchor round published the morning the issue opens tends to pull retail and NII interest in behind it. The anchor investor article covers the lock-in schedule and the minimum-investor-count rules.
Employee reservation
An issuer may carve out an employee reservation of up to 5 per cent of its post-issue paid-up share capital for eligible employees and directors, under Schedule XIII of the ICDR. This portion sits outside the net offer, so it does not eat into the retail, NII, or QIB tranches. The shares are frequently offered at a discount to the issue price (up to 10 per cent under the regulation), lowering the effective cost for staff. An individual employee’s application in this reserved portion is capped at Rs 5,00,000, though SEBI permits allotment up to Rs 2,00,000 more out of any unsubscribed employee portion. Employees may also apply separately in the retail or NII category as ordinary investors. The employee IPO reservation article details eligibility and the discount mechanics.
Shareholder reservation
A shareholder reservation lets an issuer set aside a portion of the offer for existing shareholders of a listed group or parent company, common when a subsidiary lists and the parent is already on the exchanges. It sits outside the net offer, like the employee portion. A shareholder applying up to Rs 2,00,000 in this reserved category is treated on a retail footing for allotment within the reserved bucket; above that the bid is handled like an NII bid. The shareholder quota does not bar the same investor from also bidding in the retail or NII category, so a holder of the parent can hold both a shareholder bid and a retail bid in the same issue.
How profitability shifts the percentages
The headline 35:15:50 split applies to an issuer that has reported an operating profit and net worth meeting Regulation 6(1) for each of the three preceding full financial years. An issuer that fails that test must use the alternative route under Regulation 6(2), allotting not less than 75 per cent of the net offer to QIBs. If the 75 per cent QIB floor is not met, the issue fails and all blocked amounts are released. Under this route, retail drops to not more than 10 per cent and the NII portion stays at 15 per cent. Many recent technology and consumer issues that listed before turning profitable used the 6(2) route, which is why their retail tranches were visibly smaller.
| Issuer profile | Retail | NII | QIB |
|---|---|---|---|
| Profitable, Regulation 6(1) | Not less than 35 per cent | Not less than 15 per cent | Not more than 50 per cent |
| Loss-making, Regulation 6(2) | Not more than 10 per cent | Not less than 15 per cent | Not less than 75 per cent |
Categories in an SME IPO
An SME IPO listed on the NSE Emerge or BSE SME platform follows Chapter IX of the ICDR, not the mainboard split. The reservation is up to 50 per cent QIB, not less than 35 per cent retail, not less than 15 per cent NII, with a 5 per cent slice for the market maker. The retail-versus-NII line still sits at Rs 2,00,000, but SME lot values are far larger than mainboard lots, so a single minimum-lot application can itself approach or exceed the retail ceiling. The NII bifurcation into small and big sub-buckets does not apply to SME issues. The mainboard versus SME IPO comparison sets out the platform differences.
Why the category boundaries bite on Zerodha
A Zerodha client applying through Kite meets these category lines as hard system rules, not abstractions. Kite auto-categorises the application by amount: there is no HNI checkbox to tick. Cross Rs 2,00,000 and the cut-off-price option greys out and the bid becomes upward-only. Cross Rs 5,00,000 and the UPI mandate rail can no longer carry the blocked amount, because SEBI capped UPI ASBA at Rs 5 lakh per application from 1 May 2022; the application then has to go through the investor’s own bank’s net-banking ASBA, which Zerodha as a broker cannot process. That funding wall is the single most common reason a big-HNI application fails, covered in HNI IPO application failure reasons and in how to apply for an IPO without UPI on Kite .
See also
- SEBI ICDR Regulations 2018
- Securities and Exchange Board of India
- Retail individual investor
- Non-institutional investor
- Qualified institutional buyer
- Anchor investor
- Employee IPO reservation
- Small-HNI versus big-HNI in an IPO
- IPO oversubscription allotment
- Basis of allotment
- Book building
- Book-running lead manager
- Cut-off price
- IPO price band
- IPO lot size
- Mainboard IPO
- SME IPO
- Mainboard versus SME IPO
- Red herring prospectus
- Draft red herring prospectus
- IPO process in India
- ASBA
- UPI ASBA
- Bank ASBA via netbanking
- How to apply in the HNI category on Zerodha
- How to modify an HNI IPO application on Zerodha
- HNI IPO application failure reasons
- How to apply for an IPO without UPI on Kite
- NRI IPO application and rights issue
- Initial public offering
External references
- SEBI (ICDR) Regulations 2018
- SEBI: applying in an IPO through ASBA (investor portal)
- NSE: public issues
- BSE: public issues
- Zerodha support: applying for an IPO in the HNI category
References
- SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Regulation 6 (allocation), Regulation 2(1)(vv) (retail individual investor), Regulation 2(1)(ss) (qualified institutional buyer), and Schedule XIII (reservations).
- SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated 16 December 2021, Modifications to NII allotment methodology in book-built issues (effective 1 April 2022).
- SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2022/45 dated 30 March 2022, increase of UPI ASBA limit to Rs 5 lakh in public issues (effective 1 May 2022).
- SEBI (ICDR) Regulations 2018, Regulation 6(2), alternative QIB route for issuers not meeting the profitability condition.
- Zerodha support, applying for an IPO in the HNI category and HNI application modification (as accessed June 2026).