The Securities and Exchange Board of India (SEBI) has clearly defined different categories of investors who can participate in an Initial Public Offer (IPO). The categorisation ensures enough representation of each investor category in an IPO, as reservations are made for each of them. These guidelines also preserve market dynamics and aim to promote a fair and transparent IPO allotment process. So, let’s review the various types of IPO investors and the members of each investor category. But first, let’s revise what is an IPO for anyone who’s new.
As per SEBI, an IPO or Initial Public Offering is an offer of securities (shares) by an unlisted issuer (unlisted company) to the public for subscription. Companies use this method to raise money from the public and become listed companies in the process. When companies become listed, their shares are publicly available to be traded in the stock market daily. Once allocations are made, IPO investors are free to sell their shares at their market value and earn profits.
Let’s review the types/categories of IPO investors as mandated by SEBI. Each category has its weightage of reservations in an IPO listing, which ensures all investors get a fair shot at getting share allocations in an IPO.
|
Investor Type |
Maximum IPO Reservation |
|
Qualified Institutional Buyers (QIBs) |
50% |
|
Non-Institutional Investors (NIIs) |
15% |
|
Retail Individual Investors (RIIs) |
35% |
These are the different types of IPO investors that every interested investor should be aware of before subscribing to an IPO. Based on the type or category of investor, each of them has its own rules and regulations they need to follow. So, with this improved understanding of IPOs and their investor types, have a great experience investing in the latest IPOs only on Sharekhan.
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