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Non-institutional investors play an important role in India’s capital markets, particularly in public issues such as IPOs. They bridge the gap between retail investors and large financial institutions, contributing significantly to demand, liquidity and price discovery during fund-raising activities. Understanding who they are and how they operate helps investors interpret IPO subscription data more accurately. This blog explains the meaning of NIIs, their importance, regulatory rules, key differences and a simple example.
Non-institutional investors are individuals or entities that invest large amounts in public issues but do not qualify as institutional investors. In an IPO, they bid for shares above the retail investor limit. In India, a retail investor can apply for shares worth up to ₹2 lakh. Anyone applying for more than this amount falls under the NII category.
NIIs include high-value participants such as wealthy individuals, trusts and private companies. They do not manage public funds like institutional investors but have the capacity to invest substantial amounts.
NIIs hold a dedicated quota in IPOs, typically around 15 percent of the issue size. Their participation influences several aspects of market activity.
High NII participation often reflects confidence in a company’s prospects. Oversubscription in this category attracts attention from both analysts and retail investors.
NIIs usually place large bids at various price points. This helps in determining the final issue price during book building.
Their sizable investments add depth and liquidity to the market. They balance the influence of institutional investors and help create more competitive bidding.
Active NII involvement increases interest in new issues, often inspiring retail investors to participate.
The NII category includes a broad range of non-institutional participants who invest more than ₹2 lakh in an IPO.
Common participants include:
High net worth individuals (HNIs)
Companies and private limited firms
Hindu Undivided Families (HUFs)
Trusts
Societies
Partnership firms
Eligible NRIs investing above the retail threshold
These participants apply under the NII quota through the book-building process and cannot withdraw or revise bids easily once placed.
NIIs are regulated by SEBI, which sets clear rules for their participation in public issues.
To qualify as an NII applicant, the investment must exceed ₹2 lakh.
Allotment for NIIs follows a proportionate basis. Unlike retail investors, NIIs do not receive shares through a lottery. Their allotment depends on the size of their bid and the overall subscription.
Once the bidding window closes, NIIs cannot withdraw their applications. This ensures greater stability in the subscription numbers.
NIIs must maintain adequate funds in their bank accounts. Brokers often require a substantial upfront margin to ensure payment capability.
SEBI requires that a fixed percentage of IPO shares be reserved for NIIs. If their quota remains unsubscribed, it may be reallocated within other categories.
Although both terms are often used interchangeably in IPO discussions, they represent different concepts.
|
Basis |
HNI |
NII |
|---|---|---|
|
Meaning |
An individual with high personal wealth |
Any applicant investing more than ₹2 lakh in an IPO |
|
Category |
Wealth classification |
IPO bidding category |
|
Eligible Participants |
Individuals only |
Individuals, companies, HUFs, trusts etc. |
|
Requirement |
Based on personal net worth |
Based on IPO application amount |
Most HNIs apply under the NII category due to their large investments, which is why the terms often overlap in practice.
Consider an IPO where the retail limit is ₹2 lakh.
Ravi applies for shares worth ₹1.5 lakh. He is classified as a retail investor.
Priya applies for shares worth ₹5 lakh. She falls under the NII category because her application exceeds the retail limit.
A private company invests ₹50 lakh in the same IPO. It also applies under the NII category.
Assume the NII quota is oversubscribed by three times. This means every applicant will receive shares proportionately based on the size of their bid. Priya and the company may not receive their full requested amount but will be allotted shares according to proportional rules.
Non-institutional investors form a crucial segment of the Indian IPO market. Their large investments support price discovery, bring liquidity into public issues and serve as an indicator of market confidence. Regulated by SEBI, NIIs include a wide range of participants who bid for shares above the retail limit. Understanding how NIIs operate helps investors interpret subscription patterns and assess overall demand during public offerings.
NII stands for Non-Institutional Investor. It refers to individuals or entities that apply for shares worth more than ₹2 lakh in an IPO.
Anyone applying for more than ₹2 lakh in an IPO qualifies as an NII. This includes HNIs, HUFs, companies, trusts, partnership firms and eligible NRIs.
Retail investors apply for shares worth up to ₹2 lakh, while NIIs invest above this limit. Retail investors receive allotment through a lottery process, whereas NIIs receive allotment proportionately.
No separate SEBI registration is required to apply as an NII. However, applicants must follow SEBI’s IPO rules, maintain sufficient funds and meet all documentation requirements.
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