IPO Reservation Structure: How IPO Shares Are Split Between QIB, NII and Retail

This division is called the reservation structure or quota system.

As a retail investor, this matters to you directly. The size of the retail portion determines how many shares are actually available for people like you. A smaller retail quota means more competition among retail applicants, which lowers your allotment chances. A larger retail quota means more shares to go around.

Understanding how this split works, and why it changes from one IPO to another, helps you set realistic expectations before you apply.

What Does "Reservation" Mean in an IPO?

Reservation means a fixed percentage of the total shares on offer is set aside exclusively for a particular category of investor.

If 35% is reserved for retail investors, only retail applicants compete for those shares. QIBs and HNIs cannot take from the retail portion, even if their categories are undersubscribed.

Each category has its own pool. Allotment within each pool follows its own rules. The pools do not mix freely, though there are limited spillover provisions when a category is undersubscribed (more on that below).

The Three Main Investor Categories

Every book-built Mainboard IPO in India divides its shares across three main categories:

1. QIB - Qualified Institutional Buyers

QIBs are large, SEBI-registered financial institutions. This includes mutual funds, scheduled commercial banks, insurance companies, foreign portfolio investors (FPIs), Alternative Investment Funds (AIFs), and pension funds with a minimum corpus of Rs 25 crore.

Individual investors cannot apply in the QIB category. You need to be a registered institution to qualify.

QIBs apply for large amounts and their participation is seen as a signal of institutional confidence in the IPO. A heavily subscribed QIB portion is generally considered a positive indicator by the market.

2. NII / HNI - Non-Institutional Investors

NII stands for Non-Institutional Investor. These are often called HNI (High Net Worth Individual) investors.

Any individual investor applying for shares worth more than Rs 2 lakh falls in this category automatically. Companies, HUFs (Hindu Undivided Families), trusts, and corporate bodies also apply under NII.

Since 2021, SEBI has further divided the NII category into two sub-pools:

• sNII (Small NII): Applications between Rs 2 lakh and Rs 10 lakh. One-third of the NII quota is reserved for this group, which works out to 5% of the total issue.
• bNII (Big NII): Applications above Rs 10 lakh. Two-thirds of the NII quota goes here, which is 10% of the total issue.

This split was introduced so that very large HNI bids do not crowd out smaller HNI applicants when the NII category is heavily oversubscribed.

3. RII - Retail Individual Investors

RII or Retail Individual Investor is the category most people reading this belong to.

Any individual investor applying for shares worth up to Rs 2 lakh in a single IPO is a retail investor. This includes resident Indians, NRIs applying on a non-repatriation basis, and HUFs where the total application is below Rs 2 lakh.

If your total application value crosses Rs 2 lakh, you automatically move to the NII category.

Standard Reservation Split - Regular Mainboard IPO

For a standard Mainboard IPO from a company that meets SEBI's profitability eligibility criteria (Regulation 6(1) of SEBI ICDR Regulations), the split is:

When the Split Changes: The 75% QIB Rule for Loss-Making Companies

Not every company that files for a Mainboard IPO meets SEBI's standard profitability conditions. A company that does not have a consistent profitable track record can still come out with a Mainboard IPO, but under a stricter set of rules designed to protect retail investors from higher-risk issuers.

Under Regulation 6(2) of SEBI ICDR Regulations, companies that do not meet the standard eligibility conditions must follow a different reservation structure:

The retail quota drops from 35% to 10%. The QIB quota goes up from 50% to 75%.

There is also a stricter condition: if the QIB portion is not subscribed at least once (1x), the entire IPO must be cancelled and all subscription money refunded to applicants. This rule does not apply to standard IPOs.

The reason for this structure is investor protection. A loss-making or early-stage company carries more risk. SEBI limits retail exposure to 10% and ensures that at least 75% of the issue is evaluated by experienced institutional investors before any substantial retail capital is at risk.

Zomato's IPO in 2021 is a well-known example of this route. Zomato was loss-making at the time of its IPO and went through this QIB route.

Using the same 1,00,000 share example under the 75% QIB rule:

Retail investors now compete for only 10,000 shares instead of 35,000. The same number of applicants chasing far fewer shares means allotment odds drop sharply.

Anchor Investors: A Slice of the QIB Portion

Within the QIB quota, up to 60% can be allocated to anchor investors before the IPO opens to the public.

Anchor investors are a special subset of QIBs. They commit to buying a fixed number of shares at the IPO price one day before the subscription opens. Their minimum application size is Rs 10 crore.

In a standard Mainboard IPO where QIB gets 50% of the net offer, up to 30% of the total issue (60% of the QIB's 50%) can go to anchor investors.

Anchor allocation serves two purposes. It gives the company guaranteed demand before retail and NII bidding begins. It also signals to the broader market that serious institutional money has already committed at the issue price, which builds confidence among retail applicants.

SEBI does impose a lock-in on anchor investors to prevent them from immediately dumping shares post-listing. 50% of their shares are locked in for 30 days, and the remaining 50% for 90 days.

How SME IPOs Are Different

SME IPOs follow a different structure from Mainboard IPOs in several ways. They list on NSE Emerge or BSE SME platforms and are governed by Chapter IX of the SEBI ICDR Regulations.

Book-built SME IPOs have a retail-equivalent category

Unlike what was previously written, book-built SME IPOs do have an individual investor category similar to the retail category in Mainboard IPOs. The reservation structure for a book-built SME IPO is:

The "Individual Investors" category in SME IPOs is the retail-equivalent. From 1 July 2025, SEBI renamed and restructured this category under updated ICDR rules.

What changed from 1 July 2025

SEBI revised the SME IPO investor categories with effect from 1 July 2025:

• The minimum application size for Individual Investors in SME IPOs is now 2 lots (minimum Rs 2 lakh). This replaced the earlier Rs 1 lakh minimum.
• Applications of 3 lots and above are classified under the NII category, not Individual Investors.
• The NII category in SME IPOs is further split the same way as Mainboard IPOs: one-third for sNII (3 lots to Rs 10 lakh) and two-thirds for bNII (above Rs 10 lakh).

So while SME IPOs do have an individual investor category, the entry point is much higher than Mainboard IPOs. A minimum of 2 lots at Rs 2 lakh per lot means at least Rs 2 lakh to participate, compared to roughly Rs 14,000 to Rs 15,000 for a Mainboard IPO.

Fixed-price SME IPOs

For fixed-price SME IPOs, the structure is different: 50% of the net offer goes to retail individual investors and 50% to other investors. This is the split that should not be confused with the book-built SME structure above.

Market Maker portion

SME IPOs also set aside a small portion of shares (typically around 5% of the issue size) for a designated market maker. This is carved out before calculating the net offer. The market maker provides ongoing buy and sell quotes for the stock after listing to ensure basic liquidity. This portion is not available to regular investors.

You can view all current SME IPOs on IPO Rise SME IPOs and Mainboard IPOs on IPO Rise Mainboard IPOs.

What Happens When a Category is Undersubscribed?

If the retail category does not receive enough applications to fill its full 35% quota, the unsubscribed portion can spill over to the NII and QIB categories.

The same applies to the NII category.

However, the QIB category is a one-way street. If QIB is undersubscribed, that portion cannot be transferred to retail or NII investors. It simply remains unfilled.

In a standard IPO, an undersubscribed QIB portion is a red flag. In a 75% QIB route IPO, it triggers a full cancellation of the issue.

Frequently Asked Questions

Q1. What is the reservation structure in a Mainboard IPO?

Ans: In a standard Mainboard IPO in India, shares are divided as follows: up to 50% for QIB (Qualified Institutional Buyers), at least 15% for NII (Non-Institutional Investors or HNIs), and at least 35% for Retail Individual Investors (RII). This split is mandated by SEBI under Regulation 6(1) of the ICDR Regulations.

Q2. Why do some IPOs give 75% to QIB and only 10% to retail?

Ans: Companies that do not meet SEBI's standard profitability eligibility criteria must follow the QIB route under Regulation 6(2) of SEBI ICDR Regulations. Under this route, at least 75% of the net offer goes to QIBs and retail investors get a maximum of 10%. This is a SEBI safeguard to limit retail exposure to higher-risk, loss-making, or early-stage companies.

Q3. Who are anchor investors in an IPO?

Ans: Anchor investors are large institutional investors (a subset of QIBs) who commit to buying IPO shares at the issue price one day before the IPO opens to the public. Their minimum application size is Rs 10 crore. Up to 60% of the QIB portion can be allocated to anchor investors. Their shares are subject to a lock-in of 30 to 90 days after listing.

Q4. Can retail investors apply in an SME IPO?

Ans: Book-built SME IPOs do have an individual investor category, which is the retail-equivalent. However, the minimum application size is 2 lots (at least Rs 2 lakh) as per SEBI rules effective 1 July 2025. Applications of 3 lots and above fall under the NII category. The entry barrier is significantly higher than Mainboard IPOs, making SME IPOs accessible only to investors with higher capital.

Q5. What happens if the QIB portion of an IPO is not fully subscribed?

Ans: In a standard Mainboard IPO, an undersubscribed QIB portion cannot be transferred to retail or NII investors. It remains unfilled. In an IPO using the 75% QIB route (for loss-making companies), if the QIB portion is not subscribed at least once, SEBI requires the entire issue to be cancelled and all subscription money refunded to applicants.