Types of Investors in IPO – What is the difference between RII, NII, QIB & Anchor Investors?
Investors in IPO
As we have discussed various terms which one comes across during an IPO process.
Today, I thought of making you all understand the types of investors involved in the IPO process.
Once an IPO gets announced, you have already heard that there are many types in which investors can invest.
Various slots for different types of investors are also available for the IPO subscription.
A reserved quota of shares – out of the total number of shares that the corporation wishes to list – exists for each type.
The year 2021 has so many successful IPO launches and similar momentum we can see for 2022.
As per SEBI guidelines, there are basically four types of investors who can apply for shares during an IPO process.
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Types of Investors
|Types of Investors in IPO||Short Name|
|Qualified Institutional Investors or Qualified Institutional Buyers||QII or QIB|
|Non-Institutional Bidders or High Net Worth Individuals||NII or HNI|
|Retail Individual Investors||RII|
Let’s discuss, these types of investors in brief to understand.
Qualified Institutional Investors (QIIs’/ QIBs’)
QIBs are those investors who are registered with SEBI.
Before the start of the IPO process, underwriters offer large chunks of shares to QIIs at a lucrative price to meet their targeted capital.
As per SEBI, companies cannot allocate more than 50% shares to QIBs and also mandate a lock-in period of 90 days to ensure minimum volatility.
Anchor investors are those QIB/QII investors who apply for over 10 crore issues of shares.
As the name applies it is applicable to those investors who are required to buy shares at a fixed price to make others investors confident and to create the demand for the IPO in the market. However, this fixed price is set separately only for anchor investors.
Non-Institutional Bidders (NII) or High Net Worth Individuals
These are investors who are not required to register with SEBI for applying for shares.
Individual Investors who invest for over 2lakh are categorized as HNIs’ investors.
Similarly, if institutions apply for subscriptions over 2lakh then refer to NIIs. And regardless of IPO performance, these investors are always allotted the shares.
Retail Individual Investors (RII)
Retail investors could be individuals,
NRIs or HUFs and are generally nonprofessional investors who apply for shares under the book building process up to 2 Lac only.
Their buying capacity is quite low as compare to institutional investors and end up paying high commission or fees for trading but this fee gets eliminated,
if they invest via online route but due to less market knowledge these investors opt for the route of the brokerage firm. However, No less than 35% of shares are reserved for the retail investor’s category.