SEBI & IPO Rules/SEBI Rules for Retail IPO Investors

SEBI Rules for Retail IPO Investors

Overview

SEBI has laid down specific rules to protect and regulate Retail Individual Investors (RII) participating in IPOs in India.

These rules aim to ensure fair allotment, transparent processes, and protection of small investors.

Who Is a Retail IPO Investor?

As per SEBI regulations, a Retail Individual Investor is an applicant who applies for IPO shares with a total application value not exceeding ₹2,00,000.

Retail investors are treated as a separate category from NIIs and QIBs for allotment purposes.

Retail IPO Reservation

In Mainboard IPOs, SEBI generally reserves a portion of the issue specifically for retail investors.

  • Retail investors usually receive around 35% of the net issue
  • This ensures meaningful participation by individual investors
  • Reservation percentages may vary in SME IPOs as per exchange rules

How Retail Investors Apply for IPOs

  • Retail investors must apply using the ASBA mechanism
  • Funds remain blocked in the bank account until allotment
  • Applications can be submitted via brokers or UPI-linked platforms

Application Limits and PAN Rules

  • Maximum application value allowed is ₹2,00,000
  • Multiple applications using the same PAN are not permitted
  • Inconsistent PAN, bank, or UPI details may lead to rejection

Retail IPO Allotment Rules

SEBI defines different allotment outcomes depending on the subscription level of the retail category.

If the Retail Category Is Undersubscribed

  • All valid retail applications receive full allotment
  • Applicants receive shares equal to the number of lots applied for
  • No lottery or proportionate reduction is required

If the Retail Category Is Oversubscribed

  • Retail allotment is done through a computerized lottery system
  • Each valid retail applicant has an equal chance of allotment
  • Only one minimum lot is allotted per PAN in most cases
  • Applying for more lots does not increase allotment probability

Minimum Allotment Requirement

SEBI mandates that if a retail investor receives an allotment, it must be at least one minimum lot.

If proportionate entitlement is less than one lot, allotment is decided only through the lottery process.

Rights and Protections for Retail Investors

  • Equal treatment of all retail applications
  • No preference based on bid timing or bid size
  • Transparent basis of allotment approved by stock exchanges
  • Funds remain protected through ASBA until allotment

After Allotment

  • Shares are credited to the demat account before listing
  • Unsuccessful or partial application funds are unblocked automatically
  • No manual refund process is required for ASBA applications

Key Takeaways

  • Retail investors can apply up to ₹2,00,000 per IPO
  • Allotment is lot-based and often decided by lottery
  • Bid size beyond one lot does not improve allotment chances
  • SEBI rules focus on fairness and investor protection
  • Final allotment depends on actual subscription data