What is NII in IPO? (Non-Institutional Investor Explained)

In the context of an Initial Public Offering (IPO), NII stands for Non-Institutional Investor. This is a specific investor category defined by the Securities and Exchange Board of India (SEBI) for the purpose of allocating shares in book-built IPOs. Any investor who applies for IPO shares worth more than ₹2,00,000 and does not qualify as a Qualified Institutional Buyer (QIB) is categorized as an NII.

These investors typically include High Net-worth Individuals (HNIs), Hindu Undivided Families (HUFs), corporate bodies, Non-Resident Indians (NRIs), and Trusts. The NII category is critical to the IPO ecosystem as it allows sophisticated and wealthy investors to participate actively in the market without being classified as institutional buyers.

SEBI’s Allocation Norms for NII

According to SEBI regulations, a minimum of 15% of the total IPO issue size is reserved for NIIs in book-built issues. This category receives priority over the retail investor category (which gets 35%) in terms of allocation structure and rules.

This allocation is made on a proportional basis, meaning investors get shares in proportion to their applied amount if the IPO is oversubscribed. This is unlike the lottery system followed in the Retail Individual Investor (RII) category.

Key Characteristics of NII Category

Feature	Details
Investment Limit	Minimum bid amount: ₹2,00,001 or more
Investor Type	Includes HNIs, HUFs, corporates, NRIs, and trusts
Upper Cap	No maximum cap on investment
Allotment Process	Shares are allotted proportionally, based on oversubscription
UPI Support	Not allowed (due to ₹2L UPI limit)
Funds Blocked Via	ASBA (Applications Supported by Blocked Amount) only
Purpose	Offers a dedicated route for large investors who aren't QIBs

 

Why NII Category Exists in IPOs

The NII category was introduced to accommodate wealthy and sophisticated investors who often bring strategic value to an IPO. These investors are more informed than retail investors and are capable of assessing the risk-return profile of IPOs with greater precision.

Unlike QIBs, NIIs do not require prior approval or allocation from the issuer. Also, since allotment is done on a proportional basis and not a lottery, serious investors who apply larger sums are rewarded accordingly.

NII Sub-Categories Introduced by SEBI

To improve fairness, SEBI has further subdivided the NII category into two parts since 2022:

• sNII (Small NII) – Investors bidding between ₹2 lakh and ₹10 lakh
• bNII (Big NII) – Investors bidding above ₹10 lakh

This division ensures that smaller high-value investors are not crowded out by ultra-rich applicants who apply in huge quantities.

Example of NII Application in IPO

Let’s assume you want to apply for shares in an IPO priced at ₹500 per share. To apply under the NII category:

• You must place a bid for at least ₹2,00,001 worth of shares.
• ₹2,00,001 ÷ ₹500 = Minimum 401 shares
• You must block funds via ASBA through your net banking or broker platform.
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Allotment Process in NII Category

The NII allotment process is different from retail investors. Here’s how it works:

• Suppose the IPO receives bids for 100 times more shares than offered in the NII category.
• If you apply for 10,000 shares, you will receive only 1% of your application, i.e., approximately 100 shares.
• Allotment is proportionate to the demand and size of application, which gives a higher chance of getting shares compared to the lottery system in RII.
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Advantages of Applying as an NII

• Higher Allocation Probability: If the IPO is oversubscribed, your allotment is proportional—not left to chance.
• Flexibility in Bid Size: No upper cap allows you to bid based on your financial strength.
• Fairer Distribution: Sub-category split ensures fair competition between smaller and bigger NIIs.
• Strategic Opportunity: Some HNIs leverage grey market trends and premium to decide their bids strategically.
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Risks Involved for NIIs

While the NII category has advantages, it also comes with risks:

• Large Fund Lock-In: Huge sums are blocked for 6–7 days with no guarantee of listing gains.
• Market Volatility: Even strong IPOs may underperform after listing, leading to capital loss.
• Proportional Allotment: In highly subscribed IPOs, you may receive a very small allotment despite large applications.
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What is HNI in IPO? (High Net-worth Individual)

In the IPO (Initial Public Offering) investment landscape, HNI stands for High Net-worth Individual. These are individual investors who apply for IPO shares exceeding ₹2 lakhs, and are therefore grouped under the broader NII (Non-Institutional Investor) category. While all HNIs are technically NIIs, not all NIIs are HNIs, because the NII category also includes entities like NRIs, trusts, corporates, and other large non-institutional applicants.

 

SEBI's Subdivision within NII: sNII vs. bNII

To ensure fairer allotment and better distribution of shares, SEBI (Securities and Exchange Board of India) has subdivided the NII category into two key parts:

1. sNII (Small Non-Institutional Investor):
• Applies for IPO shares between ₹2 lakhs and ₹10 lakhs
• Includes most individual HNIs who want moderate exposure
• Benefits from reserved allotment in this subcategory
• 
  bNII (Big Non-Institutional Investor):
• Applies for IPO shares above ₹10 lakhs
• Typically includes ultra-HNIs, family offices, and private wealth investors
• Competes in a separate segment for allocation

This structure prevents smaller HNIs from being crowded out by those investing massive amounts, promoting a more balanced allocation strategy.

Why Do HNIs Invest in IPOs?

HNIs are typically experienced market participants who invest strategically in IPOs with specific goals in mind:

• Listing Gains: Many IPOs debut at a premium on the stock exchange, offering a quick return opportunity. HNIs often analyze grey market premiums (GMPs) before applying.
• Higher Allotment Probability: Unlike the retail category where allotment is based on lottery, HNIs get proportional allotment. Applying a higher amount generally results in a better share of allotment.
• Diversification: For wealthier individuals, IPOs offer another asset class beyond equity mutual funds, FDs, or direct stock investments.
• Leverage (Funding Route): Many HNIs use IPO funding from NBFCs to apply for large quantities without blocking their own full capital.
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Example of HNI Application in an IPO

Suppose an HNI wants to apply in an IPO where each share is priced at ₹500.

• Minimum for NII: ₹2,00,001 → They must apply for at least 401 shares (₹2,00,500)
• If applying for ₹9 lakhs worth: falls under sNII
• If applying for ₹20 lakhs: falls under bNII

In case of oversubscription, if an HNI applies for 10,000 shares and the category is oversubscribed 100 times, they may get around 100 shares depending on final bids.

 

Key Characteristics of HNIs in IPOs

Feature	Details
Minimum Investment	₹2,00,001
Subcategory	sNII (₹2L–₹10L) or bNII (Above ₹10L)
Investor Type	Individual (not institution)
Allotment Basis	Proportional to application size
UPI Not Allowed	HNIs must use ASBA only
Fund Blocking	Funds remain blocked via net banking till allotment/refund
Risk	Higher exposure to loss if IPO underperforms

 

Risks and Considerations for HNIs

While applying in IPOs can yield strong returns, HNIs must also be aware of the risks:

• High capital lock-in: Large amounts stay blocked without guaranteed returns
• Overhype risk: Some IPOs underperform despite high grey market interest
• Listing-day volatility: Shares may open below issue price
• Limited refund flexibility: If using IPO funding, interest cost can eat into profits

Difference Between NII and HNI in IPO

Feature	NII	HNI
Full Form	Non-Institutional Investor	High Net-worth Individual
Applies to	Individuals, Corporates, HUFs, NRIs, Trusts	Individual Investors only
Minimum Bid Amount	Above ₹2 lakhs	Above ₹2 lakhs
Category Split	sNII & bNII	Falls into sNII or bNII depending on bid
Quota Reserved	15% in IPO	Part of NII quota
Allotment Process	Proportional	Proportional
Risk	Higher capital lock-in	Higher, especially if bid amount is very high

Summary:

• HNI is a part of NII
• HNI refers specifically to individuals, while NII is a broader category
• HNIs are often aggressive bidders in hot IPOs
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How to Apply as NII or HNI in an IPO

Applying in the NII/HNI category requires a higher amount and a slightly different approach than retail investors. Here's a step-by-step process:

1. Ensure Minimum Investment

Your bid amount must be more than ₹2,00,000 to qualify under this category.

2. Choose the Application Method

• Net Banking (ASBA): Log in to your bank account with ASBA facility
• Broker Platform: Zerodha, Groww, Upstox, etc. allow HNI bids via Console or IPO tab

3. Fill Application Details

Select IPO

• Choose Non-Institutional Category
• Enter desired quantity and bid price
• Block funds (100% margin required upfront)

4. Submit Application

Once submitted, your funds will be blocked until allotment. Allotment depends on the level of oversubscription.

5. Check Allotment

If allotted, shares will be credited to your demat account on the listing date. If not, funds will be unblocked.

Allotment Rules in NII/HNI Category

Unlike Retail (RII), where allotment is via lottery, in the NII/HNI category:

• Shares are allotted proportionally based on the bid size
• Higher bids get higher proportion of shares

Example:

• If IPO is oversubscribed 50x in NII
• And you bid for 50,000 shares
• You may receive approx. 1,000 shares
• Risks & Benefits of Applying as HNI/NII

Benefits:

• Better chance of allotment in oversubscribed IPOs
• Proportional allotment system
• Opportunity for larger gains

Risks:

• Requires large capital
• Lock-in of funds until allotment/refund
• Losses if IPO lists below issue price
• Real-Life Example: NII & HNI Subscription Trends

Let’s take a look at recent IPOs:

Tata Technologies IPO:

• NII oversubscription: 62x
• Strong HNI interest due to brand value and growth story

Mamaearth IPO:

NII oversubscription: 28x

HNIs showed interest despite muted QIB participation

Conclusion

The NII and HNI categories in IPOs provide a strong investment avenue for those willing to invest more than ₹2 lakhs. With proportional allotment, these categories offer better chances of share allocation but also carry higher risk due to large capital exposure. Understanding the differences and applying strategically can help you maximize IPO gains while mitigating risks.

Frequently Asked Questions (FAQs)

1. Is HNI and NII same in IPO?

Not exactly. All HNIs are NIIs, but NIIs also include corporates and NRIs. HNIs are individual investors with bids above ₹2 lakhs.

2. What is the minimum amount to apply as HNI in IPO?

Above ₹2,00,000.

3. Can NRIs apply as HNI?

Yes, if they bid above ₹2 lakhs. But they will be classified as NIIs.

4. Is allotment guaranteed in HNI category?

No. It's proportional, but allotment depends on the level of oversubscription.

5. Is UPI allowed in HNI applications?

No. Since UPI has a transaction limit of ₹2 lakhs, HNIs must use ASBA or broker platforms.

6. Can I apply in both retail and HNI category?

No. One PAN can be used to apply only in one category per IPO.