BAJAJ BROKING
March 01, 2025
6 mins read
Non-Institutional Investors (NIIs) are individuals or entities that invest in financial markets but are not classified as institutional investors. They typically have significant resources and invest larger sums than retail investors. NIIs include high-net-worth individuals, family offices, and private investment groups. They often have access to exclusive investment opportunities, such as private equity or venture capital, and can make substantial market moves.
NII stands for Non-Institutional Investor. This term is used to describe investors who apply for shares worth more than ₹2 lakhs in an Initial Public Offering (IPO). Non-Institutional Investors can be individuals or entities, including high-net-worth individuals (HNIs), family offices, corporate bodies, and trusts. NIIs are classified into two categories: small NII (sNII), who invest between ₹2 lakhs and ₹10 lakhs, and big NII (bNII), who invest more than ₹10 lakhs. Unlike institutional investors, NIIs are not required to register with SEBI, but they must have a demat account to participate in the IPO process and apply for the shares offered.
Small NII (sNII)
Small Non-Institutional Investors (sNII) are individuals or entities that apply for shares worth more than ₹2 lakhs but less than ₹10 lakhs in an Initial Public Offering (IPO). Typically, one-third of the shares reserved for Non-Institutional Investors are allocated to sNIIs.
Big NII (bNII)
Big Non-Institutional Investors (bNII) are individuals or entities that apply for shares worth more than ₹10 lakhs in an IPO. These investors often include high-net-worth individuals, private equity groups, or large corporate entities. They typically receive two-thirds of reserved shares.
Non-Institutional Investors (NIIs) include a variety of individuals and entities. For example, Mr. Sharma, a high-net-worth individual, qualifies as an NII due to his investments in stocks, real estate, and private equity. Another example is the “ABC Family Trust,” which pools resources from family members to invest in start-ups, IPOs, and real estate ventures. Additionally, private investment groups and certain corporate bodies with substantial capital but not classified as institutional investors are considered NIIs. These investors often have access to exclusive opportunities, engage in large-scale transactions, and can significantly influence markets with their investment decisions, strategies, involvement, goals, expertise, and long-term vision.
Non-Institutional Investors (NIIs) include individuals and entities applying for shares worth more than ₹2 lakhs in an IPO. Here are the key categories under the NII classification:
Resident Indian Individuals
Non-Resident Indian (NRI) Individuals
Hindu Undivided Families (HUFs)
Resident Indian Companies
Corporate Bodies
Societies
Scientific Institutions
Trusts
These investors can very easily participate in IPOs without the need for SEBI registration, provided they already possess a valid and active demat account.
Non-Institutional Investors (NIIs) follow key rules when investing in IPOs:
No SEBI registration is required.
Minimum 15% IPO reservation mandated.
No bid withdrawals or reductions allowed.
Must manually specify the bid price, with no cut-off bidding permitted during the process.
Unlike Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs) don’t need prior SEBI registration to participate in IPOs. They only require a valid demat account, enabling easier access to public issues without additional regulatory procedures, formal registration steps, or documentation requirements whatsoever.
SEBI mandates a minimum allocation of 15% of the total IPO issue size to Non-Institutional Investors (NIIs). This ensures fair participation for larger investors. The NII portion is further divided into two categories: one-third for Small NIIs (sNIIs) and two-thirds for Big NIIs (bNIIs). While companies can allocate more than 15%, they cannot go below this threshold. This allocation structure promotes balanced participation across investor segments, encouraging diverse investment activity. NIIs must apply for a minimum of ₹2 lakhs, ensuring only substantial investors participate in this category, clearly distinguishing them from retail investors with lower application sizes and smaller bids.
Non-Institutional Investors (NIIs) cannot withdraw or reduce their IPO bids once placed. However, they can revise bids upward until the subscription period ends. This rule ensures bid stability, prevents sudden fluctuations, and maintains fairness throughout the entire IPO application process.
Unlike retail investors, Non-Institutional Investors (NIIs) cannot bid at the cut-off price in IPOs. They must manually specify their bid price within the given price range, ensuring transparent, price-aware participation in the IPO application process without exceptions, adjustments, or flexibility.
In IPOs, NIIs receive share allotments based on subscription levels. If undersubscribed, full allotment is given. If oversubscribed, shares are allocated in minimum application lots, ensuring fairness across small (sNII) and big (bNII) investors, following SEBI's prescribed rules and regulations.
The allocation process for Small Non-Institutional Investors (sNIIs) in an IPO depends on subscription levels. If the sNII portion is not oversubscribed, all eligible applicants receive full allotment. However, if oversubscribed, shares are allotted in minimum application sizes of ₹2 lakhs or slightly more, regardless of the number of shares applied for. SEBI mandates that one-third of the total NII reservation be allocated to sNIIs, ensuring fair access to smaller high-value investors. This structured approach promotes equitable distribution and prevents disproportionate allotments, maintaining transparency and fairness in the IPO process, even during instances of high demand, oversubscription, and intense competition.
The allocation process for Big Non-Institutional Investors (bNIIs) follows SEBI guidelines. If the bNII portion is not oversubscribed, all eligible applicants receive full allotment. However, if oversubscribed, shares are distributed in minimum application sizes of ₹2 lakhs or more, regardless of the bid size. SEBI mandates that two-thirds of the total NII reservation be allocated to bNIIs, ensuring equitable distribution among larger investors. This process prevents disproportionate allotments and maintains fairness in share allocation. Even though bNIIs apply with bids exceeding ₹10 lakhs, the allotment in oversubscribed scenarios remains subject to the minimum application size rule for consistency and fairness.
Understanding the role and significance of Non-Institutional Investors (NIIs) in IPOs is crucial for those looking to invest beyond the retail category. NIIs, whether classified as small (sNII) or big (bNII), play a vital part in the stock market, contributing substantial capital that supports a company’s public offering. While NIIs enjoy the flexibility of investing larger sums, they must also navigate certain restrictions, such as the inability to withdraw or lower bids and the requirement to specify a price instead of bidding at the cut-off. By grasping these nuances, potential investors can make informed decisions and strategically participate in public issues.
SEBI’s rules, like the minimum 15% reservation for NIIs, ensure that this investor class has a fair share of the IPO pie. However, oversubscription is common, making allotment less predictable. For individuals unsure about applying as NIIs, considering the retail category might be a practical alternative to enhance allotment chances. A well-thought-out investment plan, combined with a clear understanding of these rules, can significantly improve one’s IPO investment experience, helping investors confidently navigate the primary market and seize beneficial opportunities.
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This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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A Non-Institutional Investor (NII) is an investor who applies for shares worth more than ₹2 lakhs in an IPO. NIIs include individuals, HUFs, NRIs, companies, and trusts. They don’t need SEBI registration but must adhere to specific IPO bidding regulations.
Non-Institutional Investors (NIIs) are individuals or entities investing large sums without institutional backing, while Institutional Investors are regulated entities like mutual funds and banks. NIIs lack SEBI registration requirements but must follow IPO rules, including restrictions on bid withdrawals and price-based bidding.
Yes, retail investors can become Non-Institutional Investors (NIIs) by applying for shares exceeding ₹2 lakhs in an IPO. Once the investment threshold is crossed, they must follow NII-specific regulations, like restricted bid withdrawal and the manual entry of bid prices.
Non-Institutional Investors (NIIs) contribute significant capital to IPOs, enhancing market participation. SEBI mandates a minimum 15% allocation for NIIs, split into sNII and bNII segments. NIIs bring market depth and support pricing dynamics with their larger, more strategic investments.
Yes, Non-Institutional Investors (NIIs) must follow SEBI rules, including a minimum ₹2 lakh application size, no bid withdrawals, manual price bidding, and eligibility for at least 15% IPO allocation. NIIs are categorized into sNII and bNII based on their investment size.
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