Hi friends, and welcome to this podcast by Angel One!
Chaliye dekhte hain what is the difference between RII, NII, QIB and anchor investors.
Kyun? Aapko laga ki acronyms sirf millennials aur gen z logon se aa jate hai kya? Sirf LOL aur ROFL aur YOLO aur FOMO jaise hi short forms hote hain? Ji nahi. The stock market loves short forms and acronyms! RII, NII and QIB are some abbreviations linked specifically to IPOs, which in itself is a short form for the Initial Public Offering of any given company - yaani ke the first time it offers its shares for sale to the general public.
Yeh categories IPOs mein prioritisation aur allotment ke liye banaya gaya hai just like flight boarding ke samey business class passengers, seniors or pregnant women ko priority diya jata hai.
The categorisation was introduced by SEBI.
RII is the short form for retail individual investor
NII is the abbreviation for non institutional investor
QIB is the acronym for qualified institutional bidder
Anchor investor toh already full form hi hai
These four categories were primarily created so that all types of investors and the maximum number of investors get a chance to participate in any IPO. Koi bhi IPO ke pehle public ko bahut excitement rehta hai. Log IPO mein share lene ke liye itna excited rehte hai kyunki it is seen as a lucrative earning opportunity. Sach bolu toh earning potential har IPO mein alag hai; investors ko thoda bahut soch samaj ke invest karna chahiye. Aaj ke discussion ke liye safe to say that IPO ke liye zyaada tar demand exceeds supply. Maximum investors ko chance dene ke liye hi SEBI ne yeh 4 categories introduce kiye hain. Every category compulsorily gets a certain percentage of the IPO.
Let's start by understanding the RII category.
Retail individual investors or RIIs have nothing less than 35 percent of the total shares offered to them. These investors are not permitted to buy shares worth more than Rs 200,000. Yeh limit rakha gaya hai taki zyaada public ko invest karne ka opportunity rahega this way. Resident Indians, non resident indians and HUFs may go ahead and apply in this category.
35 percent of total shares allot karne ke baad bhi, IPO can be oversubscribed and there will not be sufficient shares to sell to all applicants for the IPO. Aise situation mein agar IPO is oversubscribed by two times, toh 1 out of every 2 investors gets the allotment. The same goes for oversubscribed by three times, four times and so on. The applications are selected by lottery draw.
Investors purchasing their IPO shares under the RII category may buy shares at the cut-off price. This is the price decided by the company based on demand for the IPO. Jab investors cut-off price mein IPO ke liye apply karte hai, they need to bid with a very high price, or the highest price. End mein agar a lower price is decided upon, toh RII ko balance amount vapas mil jata hai.
RII can pull out their bid up till the very day of the allotment
Non institutional investors, or NIIs are allotted nothing less than 15 percent of the IPO. Once again, investors in this category may apply for stock worth more than Rs 200,000. Resident indian individuals including HNI, NRIs who qualify and HUFs may apply in this category as may companies, trusts, scientific institutions and societies.
The 15 percent allotment often falls very short for this category as there is usually quite a bit of demand. Oversubscription ke samey allotment proportionate rehta hai. Agar IPO is oversubscribed 10 times, investors who applied for say 100 shares will get 10 shares.
NII can pull out their application up till the very day of the allotment
As you might have noticed a lot of the rules for RII are also applicable to NII. Important difference yeh hai ki NII cannot bid at cut-off price.
Qualified institutional bidders (jisse QIBs bhi bola jata hai) are the big investors, jaise ki banks, mutual funds aur dusre financial institutions. Inko 50 percent of the total offer mil jata hai. Any investor applying under this category must possess a SEBI registration.
These investors are not allowed to bid at cut-off price. They are also not allowed to withdraw their bids once the IPO has closed. SEBI ke rules ke hisaab se yeh QIB investors ke liye prohibited hai. Unlike the prior two categories they cannot wait until just prior to allotment to withdraw.
Anchor investors are QIBs jo 10 crore ya 10 crore se zyaada amount invest kar rahe hai. Up to 60 percent of QIBs may be anchor investors. Anchor investors ke liye alag offer period rehta hai aur alag offer price bhi set kiya jata hai.
As you can imagine anchor investors create some buzz around any IPO prior to it actually hitting the market. Hero log hai yeh.
Kai rules rehte hai jaise ki merchant banks of the company, aur promoters ke blood relatives… yeh log anchor investor nahi ban sakte hai.
Chahe IPO mein invest karna chahte ho ya existing stocks khareedna chahte ho, you can kickstart your investment journey with Angel One. The Angel One app is free for download. Aap apne stock market knowledge ko bada sakte ho with free access to blogs, videos and other podcasts. Trading account toh kafi jaldi ban sakta hai within 1 to 2 working days.
It is true ke IPO creates a lot of excitement in the market, lekin do not follow the herd. Research kar ke khud judge kar lo - kya yeh investment mein earnings ki potential hai ya nahi? Milte hain next podcast par.
Until then, goodbye from angel broking, and happy investing!