A Retail Individual Investor (RII) is an individual who applies for shares in an Indian IPO with a total bid value of up to Rs 2 lakh, counted together across all bids made under one Permanent Account Number (PAN) in that single issue.
Individuals asking what is retail individual investor in IPO will find that the category depends on the bid amount.
Hindu Undivided Families (HUFs) applying through the Karta and non resident Indians (NRIs) are also treated as retail up to the same limit.
Any applicant bidding above that amount, other than qualified institutional buyers (QIBs), is classed as a non institutional investor (NII).
The 35% reserved for retail bidders
In a standard book built mainboard IPO, at least 35% of the net offer is kept for the RIIs. The QIBs can receive up to 50% of the offer and the NIIs will get at least 15%.
When the retail portion is oversubscribed, the shares are allotted by lottery. Each successful applicant receives one lot, and the allotment is not proportionate to the number of shares applied for by the individual.
Take a hypothetical IPO in which retail investors apply for 10 crore shares against a retail quota of 1 crore shares. The retail subscription will then be 10 times, and roughly 1 in 10 applicants will receive a lot. The other applicants will receive no shares in that issue.
RII vs NII and the SME label
The category decides which quota an applicant competes in and how allotment is done, so a bid just above the retail limit moves the individual into NII.
Since April 2022, the NII category has been split into small NII (sNII), for bids from the retail limit up to Rs 10 lakh, and big NII (bNII), for bids above Rs 10 lakh. Allotment in the NII category is made on a proportionate basis within each sub-category, with a lottery used only where shares fall short of one lot per applicant.
In SME IPOs, the retail category is called Individual Investor and it covers applicants bidding for exactly 2 lots, with a minimum application size above the retail limit. A regulated electronic marketplace in Mumbai where buyers and sellers trade shares and other securities at publicly visible prices. Read the full meaning of NSE (National Stock Exchange) rules do not allow these bidders to cancel their bids or lower them.