How HNIs Can Apply for IPO & Share Allotment Process

📈 Introduction

High Net-Worth Individuals (HNIs) looking to invest ₹2 lakh or more in an Initial Public Offering (IPO) must apply under the Non-Institutional Investor (NII) category. But how exactly can HNIs apply for an IPO? What are the rules for allotment? This comprehensive guide explains how small and large HNIs can apply for IPOs, what reservation quotas exist, and how the allotment process works in oversubscribed issues.  

🧐 Who Qualifies as an HNI Investor?

There are three primary IPO investor categories:

• Retail Individual Investors (RIIs)
• Non-Institutional Investors (NIIs) / HNIs
• Qualified Institutional Buyers (QIBs)

HNIs or NIIs are individuals or entities applying for IPO shares worth more than ₹2 lakh. This includes:

• Indian residents
• NRIs
• HUFs
• Corporates
• Trusts
• Foreign Portfolio Investors (FPIs)

Registration with SEBI is not mandatory for NIIs.

🧾 Classification of HNI Investors: Small vs Big HNIs

To make IPO allotment more inclusive, SEBI introduced two HNI sub-categories:

📊 Reservation Quota for HNI Category

SEBI mandates a minimum 15% reservation of the IPO issue size for the NII category. Within this:

• 1/3rd (5%) is reserved for Small HNIs
• 2/3rd (10%) is reserved for Big HNIs

This ensures better allotment opportunities for both moderate and large-scale investors.

📝 How Can HNIs Apply for an IPO?

HNIs can apply via:

1. UPI – For applications up to ₹5 lakh
2. ASBA (Applications Supported by Blocked Amount) – Recommended for most HNIs

✅ Steps to Apply via ASBA (Net Banking)

1. Login to your net banking portal.
2. Navigate to the IPO/ASBA section.
3. Select the IPO you wish to apply for.
4. Choose ‘Non-Institutional Investor (HNI)’ as the category.
5. Enter the bid quantity and price (note: HNIs cannot bid at the cut-off price).
6. Submit the form to block funds in your account.
7. Funds are debited only if shares are allotted.

⚠️ HNI IPO Application Rules

• Minimum application amount must be over ₹2 lakh.
• Cut-off price bidding is not allowed for HNIs.
• Modifications and withdrawals are not permitted post submission.
• No lock-in: HNIs can sell shares on listing day.
• Cut-off timing: 4 PM on the IPO closing date.
• Cannot apply in both Retail and NII categories.

📤 HNI IPO Allotment Process Explained

The HNI category often sees heavy oversubscription, especially when funding is involved. Allotment is based on:

• Proportionate basis (for those who apply more than oversubscription times)
• Lottery system (for those applying below oversubscription rate)

🎯 Formula:

(Lots Applied / NII Oversubscription) × 1 Lot

📌 Example:

If an IPO is subscribed 100x in the HNI category and you apply for 100 lots, you are likely to get 1 lot.

📌 In case of partial subscription:

• Applicants below the oversubscription ratio enter a lottery-based allotment.
• For example, if someone applies for 300 lots in a 200x oversubscribed issue, they may receive 1.5 lots (on proportionate basis).

📌 Example:

Let’s say:

• The NII category is subscribed 200x
• You applied for 200 lots
  • You receive 1 lot
• You applied for less than 200 lots
  • Lottery-based allotment is used

SEBI’s allocation strategy ensures fair distribution among high-value investors.

💼 Key Benefits for HNIs Investing in IPOs

• Invest over ₹2 lakh in one go
• Higher chances of allotment vs retail
• No lock-in on listing day
• Earn interest on blocked funds
• NRIs can apply as HNIs too

📌 Conclusion

For HNIs, applying in an IPO opens up significant investment opportunities, but understanding the process is crucial. From ASBA-based application to a mix of proportional and lottery-based allotment, this guide ensures you're IPO-ready.  

🙋 Frequently Asked Questions (FAQs)

🔹 1. What is the minimum amount required to apply in the HNI category of an IPO?

To qualify as a High Net-Worth Individual (HNI) in an IPO, you must apply for shares worth more than ₹2 lakh in a single application.

🔹 2. Can HNIs apply for IPOs using UPI?

Yes, HNI investors can use UPI to apply for IPOs if the total bid amount does not exceed ₹5 lakh. For applications above ₹5 lakh, ASBA through net banking is recommended.

🔹 3. What is the difference between Small HNI and Big HNI in IPOs?

• Small HNI (sNII): Applies for ₹2 lakh to ₹10 lakh.
• Big HNI (bNII): Applies for more than ₹10 lakh.

SEBI has reserved 1/3rd of HNI quota for small HNIs and 2/3rd for big HNIs.

🔹 4. Are HNIs allowed to bid at the cut-off price in an IPO?

No, HNI bidders are not permitted to apply at the cut-off price. They must select a price within the price band of the IPO.

🔹 5. How are IPO shares allotted to HNIs if the issue is oversubscribed?

If oversubscribed, allotment is done either on a proportionate basis (if lots applied are equal to or more than oversubscription ratio) or via lottery (for those applying below the oversubscription level).

🔹 6. Is SEBI registration necessary for HNI IPO applicants?

No, SEBI registration is not mandatory for HNIs or Non-Institutional Investors (NIIs) applying in an IPO.

🔹 7. Can an individual apply under both Retail and HNI categories?

No. IPO applicants cannot apply in both the Retail and NII categories in the same IPO. Such multiple applications may be rejected.

🔹 8. Do HNIs earn interest on blocked funds?

Yes, until the allotment is finalized and the amount is debited, HNIs continue to earn interest on their blocked IPO bid amount.

🔹 9. When can HNIs sell their IPO shares?

HNIs can sell their allotted IPO shares on the listing day itself, as there is no lock-in period for them.

🔹 10. What happens if the HNI IPO application is unsuccessful?

If the application is not allotted any shares, the blocked amount is released, and no debit occurs. Funds are unblocked in your bank account within a few days.