Applying for an IPO in HNI Category: Process and Key Rules

There is more to applying for an IPO in the HNI category than placing a bid above INR 2 lakhs. The Non-Institutional Investor (NII) category operates under a specific regulatory framework with its own sub-categories, payment rules, and an allotment process that changed significantly in April 2022. This guide explains how the category works and walks you through each step of the application process.

What is HNI in IPO?

In the context of an IPO, HNI stands for High Net Worth Individual. Under SEBI's ICDR Regulations 2018, investors who apply for amounts above INR 2 lakhs are formally classified under the Non-Institutional Investor (NII) category. This covers applications by resident individuals, Hindu Undivided Families (HUFs), NRIs, and other non-institutional applicants. A minimum of 15% of the total issue size in a book-built IPO is reserved for the NII category.

Three things to know:

• HNI and NII are used interchangeably; NII is the regulatory term under SEBI's ICDR Regulations.
• Applications at or below INR 2 lakhs are classified under the Retail Individual Investor (RII) category, not the NII category.
• The NII quota of at least 15% of the net offer to the public is ring-fenced separately from the retail and QIB (Qualified Institutional Buyer) pools.

Sub-Categories: S-HNI vs B-HNI

The NII category is split into two sub-categories to ensure smaller high-value applicants are not crowded out by very large bids:

• S-HNI (Small NII): Applications above INR 2 lakhs and up to INR 10 lakhs. Holds one-third of the NII quota, approximately 5% of the total issue.
• B-HNI (Big NII): Applications above INR 10 lakhs. Holds two-thirds of the NII quota, approximately 10% of the total issue.

In oversubscribed issues, both sub-categories use a draw-of-lots allotment system, with each selected applicant receiving a minimum allotment.

Types of IPO Investor Categories

SEBI classifies IPO applicants into three investor categories under the ICDR Regulations. Each carries distinct eligibility thresholds, allocation quotas, and allotment methods. The table below summarises the key differences:

	Retail (RII)	HNI / NII	QIB
Issue quota	At least 35%	At least 15%	Maximum 50%
Min. application	Up to INR 2 lakhs	Above INR 2 lakhs	No minimum; SEBI-registered entities only
Allotment basis	Lottery (computerised draw)	Draw of lots (post-April 2022)	Proportionate to bids

Retail Individual Investor (RII)

The retail category covers applications up to INR 2 lakhs by resident individuals, HUFs and NRIs. At least 35% of the total issue is reserved for retail investors. The allotment of specified securities to each retail individual investor is not less than the minimum bid lot, subject to the availability of shares in retail individual investor category, and the remaining available shares, if any, are allotted on a proportionate basis.

Non-Institutional Investor / HNI (NII)

The NII category covers applications above INR 2 lakhs by individuals, HUFs, NRIs, and other non-institutional applicants. At least 15% of the issue is reserved for this category, divided since April 2022 between S-HNI (up to INR 10 lakhs) and B-HNI (above INR 10 lakhs), each with a separate allocation pool and allotment process.

Qualified Institutional Buyer (QIB)

QIBs include mutual funds, commercial banks, foreign portfolio investors, and insurance companies. At least 50% of the total issue in a book-built IPO is reserved for this category. QIBs cannot bid at the cut-off price and cannot withdraw their bids once the IPO subscription window closes.

How to Apply for IPO in the HNI Category?

HNIs can apply for an IPO either online or offline.

Online process:

Step 1: Log in and Select the IPO

Log in to your broker's trading platform or bank's net banking portal. Navigate to the IPO section and select the relevant issue, and choose the price band and quantity as per lot size. Before proceeding, review issue dates and minimum application amount to confirm eligibility and the appropriate sub-category.

Step 2: Choose HNI Category and Place Your Bid

Select the Non-Institutional Investor (NII) category on the application form. Enter a bid amount exceeding INR 2 lakhs for S-HNI or above INR 10 lakhs for B-HNI. Specify a bid price within the price band. HNI applicants cannot bid at the cut-off price.

Step 3: Authorise Payment via UPI or ASBA

For applications up to INR 5 lakhs, a UPI mandate can block the required funds in the bank account. For amounts above INR 5 lakhs, ASBA (Applications Supported by Blocked Amount) through net banking is required. Under both methods, funds are blocked rather than debited and remain so until allotment is confirmed.

Step 4: Track Allotment Status

Under SEBI’s T+3 framework, the allotment process is completed shortly after the IPO closes, with the shares scheduled to list within three working days of the issue closing. Track the allotment status on the BSE or NSE IPO allotment portal, or through the IPO registrar's website, using a PAN number or application reference number.

Offline Process:

HNI investors can also apply for an IPO offline through a SEBI-registered stockbroker authorised to accept IPO applications.

Step 1: Complete a physical bid-cum-application form with your PAN, demat account details, bid quantity, price and payment information.

Step 2: The broker submits the bid through the stock exchange's electronic bidding system. For individual applications up to INR 5 lakhs, funds are blocked through a UPI mandate, while applications above INR 5 lakhs use ASBA through a Self-Certified Syndicate Bank (SCSB).

Step 3: Obtain an application acknowledgement and confirm that the required funds have been blocked.

Under SEBI's T+3 framework, shares are scheduled to list within three working days of the IPO closing. Investors can check their allotment status through the IPO registrar's website or the relevant stock exchange portal.

Benefits and Risks of Applying as HNI

Applying in the HNI category involves a higher capital commitment alongside a specific set of structural considerations.

Benefits of Applying in the HNI Category

• A dedicated allocation pool: at least 15% of the IPO issue is reserved for the NII category, separate from the retail pool.
• The S-HNI and B-HNI split means smaller high-value applicants are not competing against very large institutional-scale bids for the same pool.
• Under ASBA, funds are blocked in the bank account rather than debited, allowing them to continue earning interest until allotment is confirmed.
• Bids can be revised upward while the IPO subscription window remains open, subject to available funds in the bank account.

Risks and Things to Consider

• Funds are blocked for the full duration of the subscription period, which can limit access to capital for other uses during that window.
• In oversubscribed issues, allotment is by draw of lots for both S-HNI and B-HNI. A larger application does not improve the probability of being selected.
• Applications cannot be withdrawn or reduced once submitted. Only upward revisions are permitted while the subscription window is open.
• If funding the application through a short-term loan, the interest cost is a real expense regardless of whether allotment is confirmed.

IPO Applications as Part of an HNI's Overall Investment Strategy

An IPO application in the HNI category is a single investment decision within a broader portfolio. The same evaluation framework that applies to any large investment applies here:

• Does the application size match the portfolio's risk budget?
• How does concentration in a single issuer sit alongside existing holdings?
• What are the liquidity implications of blocked funds during the subscription period?

A wealth manager from Waterfield Advisors can help situate IPO participation within the broader investment framework, helping ensure individual applications remain consistent with the overall portfolio strategy rather than being evaluated in isolation. Speak to one today.

Frequently Asked Questions

What is HNI in IPO?

In the IPO context, HNI refers to a High Net Worth Individual applying under the Non-Institutional Investor (NII) category under SEBI's ICDR Regulations. This covers applications above INR 2 lakhs by individuals, HUFs, NRIs, and non-institutional applicants. At least 15% of a book-built issue is reserved for the NII category.

What is the minimum amount to apply in the HNI category?

Any application exceeding INR 2 lakhs qualifies under the NII or HNI category. Applications at or below INR 2 lakhs are treated as retail. For B-HNI classification, the application must exceed INR 10 lakhs. These thresholds are defined under SEBI's ICDR Regulations and are not discretionary.

How do I apply for an IPO in the HNI category via UPI or ASBA?

For applications up to INR 5 lakhs, a UPI mandate blocks the required funds in the bank account. For amounts above INR 5 lakhs, ASBA through net banking is mandatory. Under both methods, funds are blocked without being debited. The blocked amount is released if allotment is not confirmed.

What is the difference between S-HNI and B-HNI?

S-HNI (Small NII) covers applications above INR 2 lakhs and up to INR 10 lakhs, holding one-third of the NII quota. B-HNI (Big NII) covers applications above INR 10 lakhs, holding two-thirds of the NII quota. In oversubscribed issues, both sub-categories use a draw-of-lots allotment system.

Can I apply under both retail and HNI categories in the same IPO?

No, SEBI allows only one application per PAN per IPO. Submitting applications under different categories using the same PAN, even through different brokers, will result in all applications being rejected. Each investor may apply under one category only in a single IPO.