Investors can apply for shares in one of the following categories:
Retail Individual Investor (RII)
Resident Indian Individuals, NRIs and HUFs who apply for less than Rs 2 lakhs in an IPO under RII category.
Not less than 35% of the Offer is reserved for RII category.
NRI or HUF who appling in an IPO with less than Rs 2,00,000 can apply in RII category.
RII category allows bid at cut-off price.
Allotment Basis
- If IPO doesn’t get over-subscribed in RII Category, full allotment to all applicants.
- If IPO is oversubscribed in this category – The allotment to each investor shall not be less than the minimum Bid Lot, subject to availability of Equity Shares in the Retail Portion. For example, if the IPO subscribed 2 times in retail 1 out of 2 applicants will get 1 lot irrespective of how many shares they applied for.
- Say investor A applied for Rs 2 lakhs (15 lots), investor B applied for 1 lot and investor C applied for Rs 1 lakh (7 lots) in an IPO at cut-off price. If IPO subscribed 3 times in RII Category, the allotment will be done through lottery and only 1 of 3 applicants will get 1 lot allocated. It doesn’t matter how many shares they have applied.
Retail and non-institutional bidders a re permitted to withdraw their bids until the day of allotment.
Point to note
- Always apply at cut-off price in this category.
- If IPO oversubscribe, apply only 1 lot per IPO application.
- To maximize the allotment, apply though multiple accounts on your family members name.
Non-institutional bidders (NII)
- Resident Indian individuals, Eligible NRIs, HUFs, companies, corporate bodies, scientific institutions, societies and trusts who apply for than Rs 2 lakhs of IPO shares falls under NII category.
- NII need not to register with SEBI.
- Not less than 15% of the Offer is reserved for NII category.
- High Net-worth Individual (HNI) who applies for over Rs 2 Lakhs in an IPO falls under this category.
- Allotment Basis – Proportionate. For example, if IPO is subscribed 100 times in NII category, investors who applied for 100 shares will get 1 share.
- NII quota get very high over-subscription as its size is small and many individual investors take IPO Funding to apply in this category. Many of these investors apply for 100’s of crore rupees worth of shares under this category.
- Non-institutional bidders are permitted to withdraw their bids until the day of allotment.
- NII’s are not eligible to bid at cut-off price.
Qualified Institutional Bidders (QIB’s)
- Public financial institutions, commercial banks, mutual funds and Foreign Portfolio Investors ect can apply in QIB category. SEBI registration is required for institutions to apply under this category.
- 50% of the Offer Size is reserved for QIB’s
- Allotment Basis – Proportionate.
- QIBs are mostly representatives of small investors who invest through mutual funds, ULIP schemes of insurance companies and pension schemes.
- QIB’s are prohibited by SEBI guidelines to withdraw their bids after the close of the IPOs.
- QIB’s are not eligible to bid at cut-off price.
Anchor Investor
- An anchor investor in a public issue refers to a qualified institutional buyer (QIB) making an application for a value of Rs 10 crores or more 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;
- Anchor Investor Offer Price is decided separately.
- Anchor investor’s has different Anchor Investor Bid/Offer Period.
- The minimum application size for each anchor investor should be Rs 10 crores. No merchant banker, promoter or their relatives can apply for shares under the anchor investor category. In offers of size less than Rs 250 crores, there can be a maximum of 15 anchor investors, but in those over Rs 250 crores, SEBI recently removed the cap on the number of anchor investors.
- Anchor investor’s are not eligible to bid at cut-off price.