Why IPOs have categories
An IPO does not simply sell shares to whoever bids first or most. SEBI’s rules reserve fixed shares of the issue for different kinds of investors. That protects small investors from being crowded out by large ones, and gives institutions a place to bid in size.
Which category you are in decides how much of the issue you compete for, how shares are allotted, and what you can do with your bid. You do not pick a category on a form. It follows from who you are and how much you bid, and your broker’s app applies it for you.
The categories also make an IPO easier to read. Because each one reports its own subscription, you can see whether institutions, wealthy investors or small investors are driving the demand.
The three main categories
| Category | Who | Bid size |
|---|---|---|
| Retail (RII) | Individuals and HUFs | Up to ₹2 lakh |
| Non-institutional (NII or HNI) | Individuals, HUFs, companies, trusts and others | Above ₹2 lakh |
| Qualified institutional buyers (QIB) | Mutual funds, banks, insurers, pension funds, foreign portfolio investors | Any size |
The ₹2 lakh limit is the total bid amount at the price you bid, or at the cap price if you bid at cut-off. If two lots take you over ₹2 lakh, the bid is no longer a retail bid.
How the issue is split
The split depends on whether the company meets SEBI’s profitability track record:
| Category | Profitable company (Regulation 6(1)) | Other companies (Regulation 6(2)) |
|---|---|---|
| Retail | At least 35% | At most 10% |
| NII | At least 15% | At most 15% |
| QIB | At most 50% | At least 75% |
Most IPOs follow the first column. Companies that are loss-making or new often use the second, which leaves much less for retail investors. The RHP cover page states which applies.
Inside the NII category
For issues opening on or after 1 April 2022, the NII portion is split in two. One-third is reserved for bids above ₹2 lakh up to ₹10 lakh, called small NII or sNII. Two-thirds is reserved for bids above ₹10 lakh, called big NII or bNII.
Within each part, every winner gets at least the minimum NII application, the smallest number of lots worth over ₹2 lakh. When there are more applicants than such blocks, winners are picked by draw. Before 2022, NII shares went only in proportion to bid size, so the largest bids won.
Inside the QIB category
Up to 60% of the QIB portion can go to anchor investors, who bid one working day before the issue opens. Their shares are locked in: half for 30 days and half for 90 days.
A small part of the rest of the QIB portion is set aside for mutual funds. QIBs are allotted in proportion to the size of their bids.
A worked example
Take a ₹1,000 crore IPO by a profitable company, using the minimum and maximum shares above:
- Retail. At least ₹350 crore.
- NII. At least ₹150 crore, split into about ₹50 crore for small NII and ₹100 crore for big NII.
- QIB. Up to ₹500 crore, of which up to ₹300 crore can go to anchor investors.
Now suppose retail bids total ₹7,000 crore. Retail is then 20 times subscribed, so roughly 1 in 20 retail applicants wins a lot. If small NII is 60 times subscribed, its odds are far worse. These are illustrative numbers and our calculations.
Special quotas
Some IPOs reserve a further share for specific groups. These come on top of the main categories:
- Employee quota: for eligible employees, sometimes at a discount to the issue price.
- Shareholder quota: for shareholders of a listed parent or promoter company on a record date.
- Policyholder quota: for policyholders, used in some insurance company IPOs.
The RHP states who qualifies, the bid limit and any discount. Being eligible for a quota can raise your chances, because you compete in a smaller pool.
What each category can and cannot do
| Rule | Retail, employee, shareholder | NII and QIB |
|---|---|---|
| Bid at cut-off | Yes | No, must bid at a price |
| Cancel or lower a bid | Yes, until 5 pm on the closing day | No, cannot withdraw or lower |
| Allotment when oversubscribed | Lottery for one lot | NII: draw for the minimum application; QIB: in proportion |
Choosing your category
For most individual investors, the choice is between one retail application and one small NII application. Each has a different trade-off.
A retail application needs only one lot, about ₹15,000 in a mainboard IPO. In an oversubscribed issue it gives you a lottery chance at one lot. You can bid at cut-off and cancel until the closing day.
A small NII application needs more than ₹2 lakh blocked. If you win the draw, you get the minimum NII application, worth just over ₹2 lakh. But NII odds are often worse than retail odds in popular IPOs, you must bid at a price, and you cannot cancel.
If several family members each have their own PAN and demat account, separate retail applications usually give better combined odds than one larger NII bid. Compare the category subscription figures before deciding.
Categories in SME IPOs
SME IPOs on BSE SME and NSE Emerge also reserve shares by category, but the amounts are larger. Individual investors apply for the minimum application, usually two lots worth over ₹2 lakh, and winners are picked by draw.
A market maker portion is also set aside, so that someone keeps buying and selling quotes going after listing. Our SME vs mainboard guide explains how SME issues differ.
Reading subscription by category
During bidding, the exchanges publish subscription by category every few hours. Each figure tells you something different.
QIB subscription shows how much institutions want the shares. It often jumps on the last day, because institutions tend to bid late. NII subscription shows demand from larger investors, and can swing with market mood. Retail subscription shows demand from small investors, and decides your lottery odds.
Each IPO page on this site shows category-wise subscription from NSE, updated during market hours.
Common mistakes to avoid
- Crossing ₹2 lakh by accident. A bid just over ₹2 lakh moves to the NII category, where you cannot use cut-off or cancel.
- Looking only at total subscription. Your odds depend on your own category’s figure.
- Bidding in NII without the price. NII bids must name a price. A bid below the final price is rejected.
- Missing a quota you qualify for. Check the RHP for employee or shareholder quotas.
- Several applications from one PAN. Only one counts in the main categories.
What to do next
Each IPO page on this site shows the category split from the RHP and live subscription by category during bidding. See open and upcoming IPOs, learn how IPO shares are allotted, or read how to apply for an IPO.
Sources: SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR), Regulations 6 and 32 on eligibility and allocation in book built issues; Outcome of SEBI board meeting, 28 Dec 2021 (NII split for issues opening on or after 1 Apr 2022).
Frequently asked questions
What is the retail limit in an IPO?
₹2 lakh. An individual bidding up to ₹2 lakh in a mainboard IPO is a retail investor. Above ₹2 lakh, the bid goes into the NII category.
What is the difference between small NII and big NII?
Small NII is for bids above ₹2 lakh up to ₹10 lakh and gets one-third of the NII portion. Big NII is for bids above ₹10 lakh and gets two-thirds.
Can I apply as both retail and NII in the same IPO?
No. One PAN can make one application in the main categories. Separate quotas for employees or shareholders, where offered, may be open to you as well; the RHP says so.
Who counts as a QIB?
Institutions defined in SEBI's rules, such as mutual funds, banks, insurers, pension funds and registered foreign portfolio investors. Individuals cannot be QIBs.
Why is retail only 10% in some IPOs?
Companies that do not meet SEBI's profitability track record must give at least 75% of the issue to QIBs, and retail is capped at 10%.
Which category has the best chance of allotment?
It depends on the IPO. Compare each category's subscription. Retail and NII winners are picked by draw, so fewer times subscribed means better odds.