Different Categories of IPO Investors

Investment in the share market or trading shares are good ways to use one’s surplus savings to create wealth. More and more people are becoming part of share trading worldwide. But, Initial Public Offering (IPO) investment has a separate fan base. Investors are attracted to IPOs due to the notion that IPOs can bring a high return on investment.

If you are one of those IPO lovers, you must have noticed that IPOs are offered in different slots. These slots are meant for different categories of investors. Have you ever wondered whom do these different categories of investors represent? Allow us to introduce you to the different types of IPO investors and provide basic details about them.

Retail Individual Investors (RII)

A retail individual investor is a non-professional market participant (most probably, you!) who buys and sells securities at the personal level. These individuals trade with a very small amount as compared to the other categories of investors. Almost all primary markets put an upper limit on investment one RII is allowed to do in one IPO.

The primary motto of RII is to create wealth or generate an extra stream of income through the share market.

Qualified Institutional Buyers (QIB)

Qualified Institutional Buyers (QIB) include sophisticated investors like public financial institutions, commercial banks, mutual funds, foreign portfolio investors, etc.

As QIBs have a large pool of money to invest, they are considered one of the crucial investors in an initial public offering of a company. And, they have to follow separate rules and regulations as compared to the individual investors. In many circumstances, QIBs are offered the shares even before a public announcement of IPOs.

While retail investors can sell their allotted IPO shares on the day of listing on the secondary market itself, QIBs are bound to lock-in periods to avoid excessive volatility in the market during the initial phase. Moreover, QIBs are not allowed to bid on cut-off prices like other categories of investors.

Non-Institutional Bidders (NIB)

The non-Institutional Bidders category is open to all retail category of investors who wants to invest more than the limit set for retail investors. These are also called high net-worth investors. Unlike the QIBs, non-institutional bidders are not required to be registered with the apex securities exchange of the country.

Foreign Institutional Investors (FII)

You won’t find a reserved slot for this category of investors in every initial public offering. This is because there are different sets of rules for willing foreign investors. So, the category is allotted a slot only when the industry is allowed to take foreign investment as capital.

Foreign institutional investors include all the investors who are citizens of another country and wish to invest in an IPO.