Difference Between RII, NII, QIB and Anchor Investor in IPO

Whenever you subscribe to an IPO, you must have come across different categories of investors, such as RIIs, NIIs, QIBs, Anchor investors, etc. Understanding these categories of investors is important to understanding how IPO allotment works and which category is suitable for you.

In today’s blog post, we will give you an overview of the difference between RII, NII, QIB, and Anchor investors of IPO.

What is RII (Retail Individual Investor)?

Retail individual investors are those individual investors who invest in IPO by using their personal funds up to a specific limit of 2 Lakh INR. These individuals are generally salaried individuals, business owners, or students who wish to invest in an IPO but have a limited amount of capital. These investors play a key role in the capital market by increasing liquidity and investment activities. The number of retail participants has increased significantly in the past few years.

• Investment Limit: Retail individual investors are only allowed to invest up to INR 2 Lakh into an IPO.
• Reservation: A minimum of 35% of the total issue size of an IPO is set aside for Retail Individual Investors.
• Basis of Allotment: In case the IPO is oversubscribed, the allotment is based on the lottery system.
• Cut-Off Price: Retail individual investors can bid at the cut-off price.

What is NII (Non-Institutional Investor)?

Non-individual investor is a category of investor that includes individuals, companies, trusts, etc. They generally invest an amount larger than that of retail investors, but they are not classified as non-individual investors. Non-institutional investors invest more than 2 Lakh in an IPO; therefore, they are often known as High-networth individuals. This category of non-individual investors generally receives a separate allocation in the IPO issue size.

• Investment Amount: Non-institutional investors will have to apply for more than INR 2 Lakh if they wish to invest in this category.
• Reservation: A minimum of 15% of the total IPO issue size is to be kept in reserve for this category.
• Cut Off Price: Unlike retail individual investors, non-individual investors are not able to bid at the cut-off pricing.
• Sub-category: The NIIs are also divided into subcategories as Small NIIs investing from 2 Lakhs to 10 Lakhs, whereas Big NIIs need to bid for more than 10 Lakhs INR.

What is QIB (Qualified Institutional Buyer)?

Qualified institutional buyers are a category of large institutional investors who have a large amount of capital and have experience in investing in the financial market. Qualified Institutional Buyers are generally included organisations such as mutual funds, banks, insurance companies, foreign institutional investors and pension funds. In IPO issue size allocation, they have been allotted a separate allocation based on their knowledge, financial expertise and investment amount. They play a major role in maintaining the liquidity in the capital market. This category of investors is regulated by regulators such as the SEBI, etc.

• Reservation: Qualified Institutional Buyers are generally allotted a quota of half of the total issue size.
• Eligibility: Only SEBI-registered institutions are eligible to apply in this category.
• Allotment: They have a guaranteed share in oversubscribed IPOs.
• Withdrawal of Bid: QIBs are not allowed to withdraw their bids once the IPO is closed.

Who is an Anchor Investor?

An anchor investor is considered a large institutional investor who invests in an IPO before the IPO is made available for public subscription. The key reason why anchor investors are important is that they create confidence in IPO among other investors. These investors are usually Qualified Institutional Buyers, such as mutual funds, insurance companies, etc. They generally allot shares a day in advance before the IPO is opened for subscription for the general public. They typically need to go through a lock-in period as they cannot sell the allotted shares immediately after listing.

• Minimum Investment: Anchor investors are required to invest a minimum of 10 Crore INR in an IPO.
• Reservation: Anchor investors can reserve a maximum upto 60% of the QIB share.
• CutOff Price: Anchor investors cannot bid at the cutoff price.

Read Also: Difference Between Mainboard IPO and SME IPO

Difference between RII, NII, QIB, and Anchor Investor

The key difference between RII, NII, QIB, and anchor investor is as follows:

Particulars	RII	NII	QIB	Anchor Investor
Common Name	Retail Individual Investor	Non-Institutional Investor	Qualified Institutional Buyers	Anchor Investor
Overview	RII are the individual investors.	These are high-value investors who invest more than retail investors.	They are called large institutional investors.	These are institutional investors who invest in IPO before their public issue date.
Investment Limit	RIIs can invest a maximum of upto INR 2 Lakhs.	They need to invest more than 2 Lakhs.	There is no fixed upper investment limit.	Anchor investors are required to invest a minimum of 10 Crore INR.
Risk Appetite	They have a moderate risk profile.	Their risk appetite is higher than the RIIs.	They have professionally managed risk.	They manage their risk through professionals.
Lock-in Period	They do not have any lock-in period.	There is no lock-in after IPO listing.	Lock-ins are subject to regulations.	A mandatory lock-in period for the anchor investors.
IPO Reservation	RIIs have an IPO reservation of 35%.	NIIs have a reservation of atleast 15%.	QIBs have a reservation of atleast 50% of the issue size.	The reservation for the anchor investor is equal to the QIB quota.
Examples	RIIs include salaried individuals and small investors.	It includes HNIs and wealthy investors.	This generally includes mutual fund companies, pension funds, insurance funds, etc.	Large domestic and foreign institutions consist of an anchor investor.

Conclusion

On a concluding note, RIIs, NIIs, QIBs and anchor investors consist of different categories of IPO investors. These investors are categorised based on their investment size and participation. Each of these investors plays an important role in the success of an IPO. Understanding these categories of investors helps you in analysing IPO subscription figures in a better manner. High participation of QIBs and anchor investors shows a positive momentum for the IPO. However, only the subscription figures do not always guarantee a successful IPO; along with this, there are other factors which one should consider, such as the company’s fundamentals, etc. Apply for IPOs directly through Pocketful and enjoy zero brokerage on delivery trades along with a seamless investing experience. And it is advisable to consult your investment advisor before making any investment in an IPO.

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