Understand the distinctions between High Net Worth Individuals (HNIs) and retail investors in Initial Public Offerings (IPOs), including eligibility, application process, and regulatory norms.
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Initial Public Offerings (IPOs) allow companies to offer their shares to the public for the first time, and investors are categorised based on the value of their applications. Among these categories, High Net Worth Individuals (HNIs) and Retail Investors represent two distinct participant groups within the IPO framework.
Both High Net Worth Individuals (HNIs) and Retail Investors can apply in the same IPO. However, they do so under different application limits and allocation norms as defined by SEBI regulations. These rules establish clear distinctions in how each category participates in bidding and receives allotments.
Understanding the separate criteria for HNIs and retail investors provides clarity on how IPO participation is structured in the Indian market.
In IPOs, investors are categorised based on their bid value and participation structure, which helps determine how shares are allotted across different investor groups.
Retail investors apply for shares worth up to ₹2 lakhs in an IPO. This category is designed to facilitate broader access for individual market participants.
HNIs apply for shares exceeding ₹2 lakhs in an IPO and fall under the Non-Institutional Investor (NII) segment. They operate with different bidding thresholds and allocation mechanisms compared to retail applicants.
These classifications follow SEBI’s public issue regulations.
In an IPO, shares are allocated across categories such as Qualified Institutional Buyers (QIBs), Retail Investors, and Non-Institutional Investors (including HNIs), based on SEBI-defined participation rules and bid amounts.
| Category | Application Amount | Allocation Mechanism |
|---|---|---|
Retail Investors |
Up to ₹2 Lakhs |
A defined portion of the issue is reserved for this category, typically around 35% of the offer size |
High Net Worth Individuals (HNIs) |
Above ₹2 Lakhs up to ₹10 Crores |
Shares are allotted from the portion earmarked for the Non-Institutional Investor (NII) segment |
Qualified Institutional Buyers (QIBs) |
Above ₹10 Crores |
Around 50% of the IPO shares are reserved for institutional investors |
Yes, both High Net Worth Individuals (HNIs) and Retail Investors can apply for the same IPO, but each must do so under the category that corresponds to their bid size as defined by SEBI
SEBI differentiates applications based on investment value to ensure that allotment and participation rules remain clear for each investor segment.
Categories are determined purely by the bid amount submitted in the IPO application
The same PAN cannot be used to submit applications under both Retail and HNI categories
Multiple applications from a single PAN across different categories may be rejected during verification
Retail and HNI quotas are separate, and allotment procedures vary based on demand in each segment
While both categories participate in the same public issue, their eligibility criteria, investment thresholds, and allotment methods remain independently defined.
Although both categories participate through the same IPO platform, the application requirements differ based on the investment amount placed under each segment.
Can apply through ASBA-enabled bank accounts or online platforms offered by brokers
Bid value remains capped at up to ₹2 Lakhs
Application funds remain blocked in the bank account until allotment confirmation
Applications are placed under the Non-Institutional Investor (NII) category with a minimum amount above ₹2 Lakhs
Funding may be arranged through ASBA or margin-based financing offered by intermediaries
Allotment follows a proportionate method if the NII category receives more bids than available shares
These distinct mechanisms ensure each investor category participates within its respective framework set under IPO regulations.
Participation in IPOs follows structured rules laid out by the Securities and Exchange Board of India (SEBI), ensuring consistency in how different investor groups apply and receive allotment.
Key regulatory criteria include:
The application value for retail investors remain within the ₹2 Lakh limit
HNI bids are required to exceed ₹2 Lakhs and are placed under the Non-Institutional category
All IPO applications must be submitted through the ASBA mechanism, where funds remain blocked until allotment results
A single PAN cannot be used for multiple applications across categories in the same IPO
These regulatory distinctions maintain order in the subscription process and support category-wise allotment as per IPO guidelines.
Participation in an IPO differs based on the investment category and the structure of the bid. Several considerations are relevant while determining the type and value of the application.
Retail investors align their bids within the ₹2 Lakh limit, while HNIs commit higher amounts that may carry greater exposure based on market demand and subscription levels.
Investors participate under the retail or NII category depending on the investment amount, and allotment mechanisms vary accordingly.
Reviewing company performance, financial disclosures such as the draft prospectus, and current equity market sentiment contributes to the decision-making process.
These factors outline how application choices align with the rules and expectations set for each investor segment.
Though both groups invest in IPOs, there are differences in the amount they bid, the way allotment is decided, and how their applications are categorised.
The table below outlines some of the key distinctions:
| Feature | Retail Investors | High Net Worth Individuals (HNIs) |
|---|---|---|
Application Limit |
Up to ₹2 Lakhs |
Above ₹2 Lakhs to ₹10 Crores |
Allocation Proportion |
Commonly around 35% of public issue |
Included within the portion reserved for NIIs and QIBs |
Allotment Method |
Based on a lottery when demand exceeds supply |
Proportionate allotment when oversubscribed |
Risk Exposure |
Investment size tends to be smaller |
Investment size tends to be larger |
Eligible Applicants |
Individual retail participants |
Individuals as well as eligible non-institutional entities |
Retail investors and High Net Worth Individuals (HNIs) can both participate in the same IPO, but each falls under a separate category defined by SEBI regulations. Differences in application amounts, allotment methods, and reserved quotas determine how each segment engages with a public issue. Recognising these structural distinctions provides a clearer view of how IPO participation works across investor types.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
No. The application amount automatically determines your category, and dual applications are not permitted.
HNIs apply for a minimum of ₹2 Lakhs and up to ₹10 Crores in IPOs.
Retail shares are allotted via lottery, while HNIs receive shares proportionally based on demand.
Yes, corporate and institutional investors applying within the specified limits fall under the HNI or QIB categories.
Yes, the amount is refunded within stipulated timeframes by the registrar or broker.
HNIs apply under the Non-Institutional Investor (NII) category, where bids often involve larger amounts. In oversubscribed IPOs, allotment in this segment is done proportionately, which may result in receiving fewer shares than applied for. Additionally, funds may remain blocked for a short duration until allotment is finalised.
No. An investor can submit only one application linked to a single PAN. The investment amount automatically places the bid into the appropriate category, such as retail or HNI. Multiple applications under different categories using the same PAN may be rejected during verification.