Eligibility to Apply for an IPO: Investor Criteria, Documents and Categories

An Initial Public Offering (IPO) refers to the process through which a company offers its shares to the public for the first time to raise capital. IPO participation in India is governed by regulations issued by the Securities and Exchange Board of India (SEBI), stock exchanges, and applicable provisions under the Companies Act.

Eligibility norms apply to both the issuing company and investors applying for shares. These norms set the disclosure and compliance requirements that apply before an issue can proceed.

IPO eligibility depends on the investor category and the applicable SEBI rules. For IPO eligibility criteria, applicants are grouped based on factors such as bid value and investor status. 

Retail Individual Investors (RIIs)

For Main Board IPOs, Retail Individual Investors (RIIs) generally refer to individual applicants whose bid amount is within the applicable retail limit of ₹2 lakh. The applicable reservation and allocation provisions are governed by the SEBI ICDR Regulations and disclosed in the offer document. The RII category does not apply to SME IPOs opening for subscription from 1 July 2025. For such SME IPOs, the RII category was replaced by the Individual Investor category. Under the revised framework, an Individual Investor applies for two lots, with the minimum application size exceeding ₹2 lakh.

Qualified Institutional Buyers (QIBs)

Qualified Institutional Buyers (QIBs) are institutional investors that meet the definition prescribed under the SEBI ICDR Regulations. The category includes specified institutional entities subject to the applicable regulatory requirements. The allocation available to QIBs depends on the issue structure and the applicable SEBI regulations and is disclosed in the offer document.

Non-Institutional Investors (NIIs)

For Main Board IPOs, Non-Institutional Investors (NIIs) generally comprise applicants other than Retail Individual Investors and QIBs who meet the applicable bid and category requirements. The applicable NII sub-categories, bid limits and allocation provisions are specified in the offer document and are subject to the SEBI ICDR Regulations.

Non-Resident Indians (NRIs) and Foreign Investors

Eligible Non-Resident Indians (NRIs) may apply in public issues subject to applicable SEBI regulations, foreign-exchange regulations and the requirements specified in the offer document. The applicable application and payment mechanism depends on the investor's status and the rules governing the particular issue.

Foreign Portfolio Investors (FPIs)

Eligible Foreign Portfolio Investors (FPIs) may participate in public issues subject to the applicable SEBI regulations, investment limits and other regulatory requirements. Their participation and allocation are governed by the applicable investor-category provisions and the terms of the issue.

Applicants must meet the requirements applicable to their investor category and the particular public issue. These may include:

• A valid Permanent Account Number (PAN) and applicable KYC details

• A valid demat account for holding securities in electronic form

• An eligible bank account or payment mechanism for the application

• Compliance with the bidding, payment and application requirements specified in the offer document
   

ASBA (Application Supported by Blocked Amount) is a mechanism under which the application amount is blocked in the investor's bank account for the IPO application. The amount corresponding to allotted securities is debited after the allotment process, while the remaining blocked amount is released.

UPI is also available as a payment mechanism for eligible IPO applications under the applicable framework. The specific payment mechanism and requirements depend on the investor category and issue.

Minimum application amounts and lot sizes depend on the applicable investor category, issue type and terms of the particular IPO. The relevant details are disclosed in the offer document

In addition to investor eligibility, companies proposing an IPO must satisfy issuer-side regulatory requirements set by SEBI and the stock exchanges. These include:

• Compliance with the Companies Act and SEBI ICDR Regulations

• Preparation and disclosure of financial information in accordance with applicable offer-document requirements

• Disclosure of material risks and related party transactions

• Compliance with applicable eligibility and disqualification conditions, including insolvency, winding-up, and specified regulatory requirements

• Meeting SEBI ICDR eligibility criteria covering net tangible assets, operating profit, net worth, and alternative routes
   

Source: SEBI (ICDR) Regulations, 2018, and NSE requirements for eligibility and listing of public issues. 

An issuer seeking to list its securities through an IPO must comply with applicable SEBI regulations and stock exchange requirements. These may include requirements relating to:

• Eligibility for listing

• Promoter and management-related disclosures and requirements

• Regulatory and compliance requirements

• Investor grievance redressal mechanisms

• Disclosures required in the offer document
   

SEBI examines the draft offer document and may issue observations or seek clarifications before the issuer proceeds with the subsequent stages of the IPO process. The stock exchange also considers the issuer's application against its applicable listing requirements.

SEBI observations on an offer document should not be interpreted as an endorsement of the IPO or its investment merits.

The minimum application amount for an IPO depends on the issue price, bid lot and applicable investor category.

• Retail Individual Investors (RIIs): Retail investors generally apply for a minimum of one bid lot. The application amount must fall within the applicable limit prescribed for the retail category.

• Non-Institutional Investors (NIIs): NII applications are above the applicable retail-category threshold. The NII category is further divided into sub-categories based on the application size, as specified under the applicable SEBI regulations.

• Qualified Institutional Buyers (QIBs): QIB applications are governed by the applicable IPO rules and the terms disclosed in the offer document. The applicable allocation and bidding requirements depend on the issue and regulatory framework.
   

The applicable bid lot, price band, minimum application amount and category-specific requirements are disclosed in the IPO's offer documents and may vary from one issue to another.

IPO applications may be rejected on technical grounds, including:

• Incorrect or incomplete application details, such as PAN, DP ID, Client ID or bank account details

• Mismatch or absence of corresponding PAN, DP ID or Client ID records

• Issues with the ASBA bank account or UPI-linked bank account, including use of a third-party account where applicable

• Multiple applications that are treated as duplicate applications under the applicable issue rules

• Incorrect bid quantity or a bid price outside the applicable price band

• Insufficient funds in the ASBA account to block the application amount, where applicable

SME IPOs are listed on NSE EMERGE and BSE SME. While SME public issues may have investor categories such as RIIs, NIIs and QIBs, the applicable application, minimum investment and allocation requirements can differ from those for mainboard IPOs.

•  Investor categories and requirements: SME IPOs may include categories such as RIIs, NIIs and QIBs, subject to the applicable regulatory and issue-specific requirements. The application and allocation framework can differ from that of mainboard IPOs

• Lot sizes and application requirements: SME IPO lot sizes and minimum application requirements are specified in the relevant offer document and can differ from those applicable to mainboard IPOs.

• Issuer eligibility: The eligibility criteria for SME listing differ from those applicable to mainboard listings. These may include requirements relating to post-issue paid-up capital, track record and financial parameters, depending on the applicable exchange and regulations.

Investor eligibility is determined by the applicable SEBI regulations and the requirements of the particular public issue, while ASBA, UPI and physical application forms represent different application or payment mechanisms.

Eligibility to apply for an IPO in India is governed by regulatory norms applicable to both issuing companies and investors. These include requirements under SEBI's ICDR Regulations, applicable investor and application requirements, and the terms and conditions disclosed in the relevant offer document.