Non-Institutional Investor
Also written NII · Non-institutional investor (NII) · Non-institutional buyer · NIB · HNI category
The residual public-issue category for applicants who are neither retail individual investors nor qualified institutional buyers — in practice anyone bidding for more than Rs 2 lakh without being a QIB.
In plain language
A public issue sorts its applicants into three boxes, and the third one is defined by subtraction. A retail individual investor applies or bids for a value of not more than Rs 2 lakh. A qualified institutional buyer is one of the named institutions — a public financial institution, a scheduled commercial bank, a SEBI-registered mutual fund, AIF, VCF or FVCI, a registered FPI other than individuals, corporate bodies and family offices, a multilateral or bilateral development financial institution, a state industrial development corporation, an IRDAI-registered insurer, a provident or pension fund with a minimum corpus of Rs 25 crore, the National Investment Fund, insurance funds of the armed forces or the Department of Posts, or a systemically important NBFC.
Everyone else is a non-institutional investor. The workbook's definition is exactly that: investors who do not fall within the definition of the above two categories.
In practice this is the wealthy individual, the family office, the corporate treasury and the trust — the money that is large but not licensed.
How it works
How much of the issue they get. It depends on which eligibility route the issuer used:
| Allocation in the net offer | Reg 6(1) — profitability route | Reg 6(2) — QIB route |
|---|---|---|
| Individual investors / retail | not less than 35% | not more than 10% |
| Non-institutional investors | not less than 15% | not more than 15% |
| Qualified institutional buyers | not more than 50%, of which 5% to mutual funds | not less than 75%, of which 5% to mutual funds |
In either case, an unsubscribed portion in the retail or the NII category may be allocated to applicants in any other category, and mutual funds remain eligible for the balance QIB portion over and above their 5%.
The category is itself split in two. Within the NII portion:
- one-third is reserved for applicants with an application size of more than Rs 2 lakh and up to Rs 10 lakh;
- two-thirds is reserved for applicants with an application size of more than Rs 10 lakh.
An unsubscribed portion in either sub-category may be allocated to the other.
How the allotment is computed. After closure the bids are aggregated by category. Allotment to each non-institutional buyer shall not be less than Rs 2,00,000, subject to availability of shares in the category, and the remaining available shares are allotted on a proportionate basis. The mirror rule for retail is a minimum of one bid lot.
How they must pay. In all public issues the issuer accepts bids using ASBA only. In a rights issue, where not more than one payment option is given, ASBA must be provided — and in the case of qualified institutional buyers and non-institutional investors the issuer shall accept bids using the ASBA facility only.
A worked example
An IPO under the profitability route raises Rs 1,500 crore with the statutory minimum going to non-institutional investors:
NII portion = 15% × Rs 1,500 crore = Rs 225 crore
small NII (> Rs 2 lakh, up to Rs 10 lakh) = 1/3 × 225 = Rs 75 crore
large NII (> Rs 10 lakh) = 2/3 × 225 = Rs 150 crore
Two applicants, both "HNIs" in ordinary speech, land in different queues:
| Applicant | Bid value | Sub-category | Competing for |
|---|---|---|---|
| A doctor in Pune | Rs 6,00,000 | small NII | Rs 75 crore |
| A family office in Chennai | Rs 40,00,000 | large NII | Rs 150 crore |
Suppose the small-NII bucket is subscribed 28 times and the large-NII bucket 9 times. The doctor's proportionate entitlement is Rs 6,00,000 ÷ 28 ≈ Rs 21,430, which is below the Rs 2,00,000 minimum allotment — so she goes into a lottery for a Rs 2,00,000 allotment rather than receiving a sliver. The family office's entitlement is Rs 40,00,000 ÷ 9 ≈ Rs 4,44,000, comfortably above the floor, and it is allotted proportionately.
Now suppose the small-NII bucket is only 0.6 times subscribed, leaving Rs 30 crore unsubscribed. That amount may be allocated to the large NII sub-category — the split is a reservation, not a wall. Had the whole NII category fallen short, the unsubscribed portion could go to any other category.
One more rupee detail. A bid of exactly Rs 2,00,000 is retail; Rs 2,00,001 is non-institutional. One rupee moves an applicant between a category with a minimum bid lot entitlement and one with a Rs 2 lakh minimum allotment.
Why NISM asks about it
Chapter 4, section 4.1 (16) Basis of Allocation and (17) Categories of Investor defines the three buckets, and Chapter 5, section 5.5 (Issuance Conditions and Procedures) carries Regulation 32 with the allocation percentages and the one-third / two-thirds NII split.
Expect a numerical allocation question — an issue size and a route, asking for the rupee amount available to each category — and expect the Rs 2 lakh boundary between retail and non-institutional to be tested as a definition. The one-third / two-thirds sub-split at Rs 10 lakh is newer and is exactly the kind of detail examiners like.
Common exam traps
- NII is a residual definition. Learn RII (up to Rs 2 lakh) and the QIB list; everything left over is non-institutional. There is no positive test.
- Rs 2 lakh is the retail ceiling, and it is "not more than". Exactly Rs 2,00,000 is retail; a rupee more is NII.
- The one-third / two-thirds split is at Rs 10 lakh, not at Rs 2 lakh, and the smaller bucket is the one-third.
- Reg 6(1) says "not less than 15%" for NIIs; Reg 6(2) says "not more than 15%". Same number, opposite direction — and the retail figures (not less than 35% versus not more than 10%) differ completely.
- The minimum allotment to each NII is Rs 2,00,000, not one bid lot. The bid-lot minimum is the retail rule.
- A corporate body or a family office registered as an FPI is expressly excluded from the QIB definition — so it applies as an NII, not as a QIB.
- In a rights issue, QIBs and NIIs may bid only through ASBA. The relaxation, where it exists, is for other applicants.
Check yourself
1.Which of the following is a Qualified Institutional Buyer?
- a)All of the above
- b)A SEBI registered mutual fund or venture capital fund
- c)A SEBI registered foreign portfolio investor other than individuals, corporate bodies and family offices
- d)A scheduled commercial bank
Show the answer
Answer: (a) All of the above
All three appear in the definition.
Qualified Institutional Buyers (QIBs) means (a) a public financial institution; (b) a scheduled commercial bank; (c) a mutual fund, venture capital fund, alternative investment fund and foreign venture capital investor registered with SEBI; (d) a foreign portfolio investor registered with SEBI, other than individuals, corporate bodies, and family offices; (e) a multilateral and bilateral development financial institution; (f) a state industrial development corporation; (g) an insurance company registered with the Insurance Regulatory and Development Authority of India (IRDAI); (h) a provident fund with minimum corpus of Rs. 25 crores; (i) a pension fund with minimum corpus of Rs. 25 crores; (i) National Investment Fund; (k) insurance funds set up and managed by army, navy or air force of the Union of India; (l) insurance funds set up and managed by the Department of Posts, India (m) systemically important non-banking financial companies.
Note the qualification inside limb (d). An FPI is a QIB other than individuals, corporate bodies, and family offices — so not every FPI qualifies.
And the Rs. 25 crore corpus applies to both provident funds and pension funds.
Why the category matters. A QIP is an issue to Qualified Institutional Buyers only, an anchor investor must be a qualified institutional buyer above the size threshold, and QIBs face a bidding restriction: the qualified institutional buyers and the non-institutional investors shall neither withdraw nor lower the size of their bids at any stage.
Anyone outside both the QIB list and the retail limit is an NII: investors who do not fall within the definition of the above two categories are categorized as "Non-Institutional Investors".
2.Under the ASBA facility, investors may apply using their bank account in:
- a)Both public issues and rights issues
- b)Public issues only
- c)Rights issues only
- d)Preferential issues only
Show the answer
Answer: (a) Both public issues and rights issues
Application Supported by Blocked Amount (ASBA) means an application for subscribing to a public issue or rights issue, along with an authorisation to self-certified syndicate bank to block the application money in a bank account.
And the workbook says it plainly: under ASBA facility, investors can apply in any public/ rights issues by using their bank account.
For public issues it is the only route: in case of all, public issues, the issuer shall accept bids using only ASBA facility in the manner specified by the Board.
For rights issues it is partly mandatory: in case of rights issues, where not more than one payment option is given, the issuer shall provide the facility of ASBA — and in case of qualified institutional buyers and non-institutional investors the issuer shall accept bids using ASBA facility only.
With eligibility conditions: a rights issue applicant may use ASBA only if the applicant is holding equity shares in dematerialised mode, has not renounced entitlement in part or in full, and is not a renouncee.
Option D is wrong because a preferential issue is a private placement — an issue of specified securities by a listed issuer to any select person or group of persons on a private placement basis — not a public application process.
The advantage of ASBA: his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalised, or the issue is withdrawn/failed.
And for retail applicants UPI now rides on top of it, introduced for applications in public issues by retail individual investors through intermediaries, cutting the time from closure to listing by upto 3 working days and enabling the T+3 timeline for public issues.
3.The Innovators Growth Platform is accessible only to institutional and non-institutional investors. True or false?
- a)True
- b)False — retail investors may also participate
- c)False — it is open only to qualified institutional buyers
- d)False — it is open only to foreign portfolio investors
Show the answer
Answer: (a) True
This market known as the 'Innovators Growth Platform (IGP)' is accessible only to institutional investors and non-institutional investors.
No retail participation — which is why option B is wrong; and option C is too narrow, since NIIs are admitted too.
What IGP is for: SEBI ICDR Regulations specifies provisions for specified categories of issuers to seek listing of their specified securities pursuant to an IPO or only for trading on a stock exchange of their specified securities without making a public offer.
Note the second route — listing for trading without making a public offer at all.
Who may list: an issuer which is intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products services or business platforms with substantial value addition.
And it must already have institutional backing: twenty-five per cent of the pre-issue capital of the issuer company for at least a period of one year, should have been held by Qualified Institutional Buyers, Innovators Growth Platform Investors, or specified regulated entities including Foreign Portfolio Investor and a pooled investment fund with minimum assets under management of one hundred and fifty million USD meeting registration, IOSCO and FATF conditions.
Promoter holdings are excluded: pre-issue capital held by promoters/promoter groups, even if they are registered as Innovators Growth Platform Investors, shall not be considered for the 25% pre-issue capital eligibility requirement.
An IGP Investor is any individual with total gross income of Rs. 50 lakhs annually and who has minimum liquid net worth of Rs. 5 crore, or any body corporate with net worth of Rs. 25 crore, or any family trust with net worth of Rs. 25 crore.
Plus a conduct test: none of the promoters or directors of the issuer company is a fugitive economic offender.
And an exit upwards: companies on IGP have the option of migrating to the main board of the stock exchange.
Where this is taught
Free preparation for NISM Series IXRelated terms
- Anchor investorA qualified institutional buyer allotted shares a day before a book-built issue opens — at least Rs 10 crore on the main board or Rs 2 crore on the SME exchange — under a discretionary, locked-in allocation.
- ASBAThe mandatory payment mechanism for public and rights issues, in which your bank blocks the application money in your own account and debits it only if you actually get an allotment.
- Primary marketThe market where an issuer sells securities to investors for the first time and receives the money itself — the "new issue market", as against the secondary market where investors trade among themselves.
- Qualified Institutional BuyersThe institutional investor category comprising domestic financial institutions, mutual funds, FPIs and similar entities.
- Retail investorAn investor putting up to Rs. Two lakh into a single public issue transaction. For tax-free secured redeemable non-convertible bonds the threshold is Rupees Ten lakhs, above which the investor is classified as a High…