Definition
Retail Individual Investor (RII)
An RII is an individual investor applying for up to ₹2 lakh in an IPO, who gets a reserved quota and can bid at the cut-off price.
SEBI reserves at least 35% of the net offer for retail individual investors in a book-built IPO (or 10% where the company does not meet profitability norms). Retail investors apply through ASBA via UPI for the smaller end of the market.
When the retail portion is oversubscribed, allotment is done by lottery: each applicant is treated in terms of minimum lots, so applying for many lots does not improve the odds of getting at least one. This 'maximum allottees' design is meant to spread shares widely among small investors.
Related terms
- Non-Institutional Investor (NII)An NII, often called an HNI, is an investor who applies for more than ₹2 lakh worth of shares in an IPO and falls outside the retail and QIB categories.
- Cut-off PriceThe cut-off price is the final price discovered in a book-built IPO; retail investors can bid 'at cut-off' to accept whatever that price turns out to be.
- Basis of AllotmentThe basis of allotment is the formula, approved by the exchange, that decides how shares are distributed among applicants when an IPO is oversubscribed.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.