Retail Individual Investors (RII): IPO Allotment Rules
Introduction
Retail Individual Investors (RII) form one of the most important categories in an IPO. SEBI has defined specific rules for retail participation to ensure fairness, equal opportunity, and broad public access to IPOs.
Understanding RII allotment rules helps retail investors know how shares are distributed, why allotment is uncertain, and what factors influence outcomes.
Who Is a Retail Individual Investor (RII)?
An applicant is classified as a Retail Individual Investor if:
- The total application amount does not exceed ₹2,00,000
- The application is made in an individual capacity
- The investor applies using a valid PAN
If the application amount exceeds ₹2,00,000, the bid is not considered retail, even if only one lot is applied for.
Reservation for Retail Investors
SEBI mandates that:
- At least 35% of the IPO issue size is reserved for RIIs (in most mainboard IPOs)
- This portion is exclusively for retail applicants
- Retail and non-retail categories do not overlap
This ensures retail investors compete only among themselves, not with institutional investors.
Minimum Application and Lot Size
Retail investors:
- Must apply for at least one lot
- Can apply for multiple lots, provided the total value stays within ₹2,00,000
- Must apply in lot sizes only, not individual shares
The lot size and price band determine the maximum number of lots a retail investor can apply for.
Allotment Method for RIIs
The RII category follows a lot-based allotment system.
Case 1: RII Category Is Undersubscribed
When total retail demand is less than or equal to available retail shares:
- Every valid retail applicant receives full allotment
- No lottery is required
Case 2: RII Category Is Oversubscribed
When the number of valid retail applications exceeds the number of available retail lots:
- Allotment is done using a computerized lottery
- Each valid applicant has an equal probability
- Not every applicant receives allotment
Applying for more lots does not increase the chance of receiving allotment in such cases.
One Lot Preference Rule
SEBI requires that as many retail applicants as possible receive at least one lot.
In heavily oversubscribed IPOs, allotment is restricted to one lot per successful applicant.
Cut-Off Price Rule for Retail Investors
Retail investors are allowed to apply at the cut-off price.
Applying at cut-off ensures price eligibility but does not guarantee allotment.
Role of PAN and Application Validity
Retail allotment considers only valid applications.
- Multiple applications using the same PAN
- Incorrect bank or ASBA details
- Application exceeding the retail limit
- Missing mandatory information
Only one application per PAN is permitted in the retail category.
Key Takeaway
Retail IPO allotment follows strict SEBI-defined rules designed to ensure fairness and equal opportunity.
No strategy can guarantee allotment. Only the final basis of allotment released by the registrar determines who receives shares.