Dream Folks: Basis of

Allottment and Basis of Price

Non-institutional bidders: Individual investors, NRIs, companies, trusts etc who bid for
more than Rs 2 lakh are known as Non-institutional bidders. They need not to register with
SEBI like RIIs. Non-institutional bidders have an allocation of 15% of shares of the total issue
size in Book Build IPO's.
Non-institutional bidders (NII)
An Investor who can bid for the value of more than Rs 200000
Individual investors who bid for more than Rs 2 lakhs are known as Non-institutional bidders or NII. Eligible NRIs,
HUFs, companies, corporate bodies, scientific institutions, societies and trusts who apply for than Rs 2 lakhs of IPO
shares also falls under NII category. They need not to register with SEBI like RII's. Non-institutional bidders have an
allocation of 15% of shares of the total issue size in Book Build IPO's.
•Resident Indian individuals, NRIs, HUFs, Companies, Corporate Bodies, Scientific Institutions, Societies, and
Trusts who apply for more than Rs 2 lakhs of IPO shares fall under the NII category.
•Not less than 15% of the Offer is reserved for the NII category.
•A high Net-worth Individual (HNI) who applies for over Rs 2 Lakhs in an IPO falls under this category.
•Non-institutional bidders are permitted to withdraw their bids until the day of allotment.
•NIIs are not eligible to bid at the cut-off price.
•NII need not register with SEBI.
•NII Sub-categories
NII category has two subcategories:
1.sNII (bids below Rs 10L)
The Small NII category is for NII investors who bid for shares between Rs 2 lakhs to Rs 10 lakhs. The 1/3 of NII category shares
are reserved for the Small NII sub-category. This subcategory is also known as Small HNI (sHNI).
2.bNII (bids above Rs 10L)
The Big NII category is for NII investors who bid for shares worth more than Rs 10 Lakhs. The 2/3 of NII category shares are
reserved for the Big NII subcategory. This subcategory is also known as Big HNI (bHNI).
•sNII Allotment Basis
•If IPO doesn't get over-subscribed in the sNII sub-category, full allotment to all applicants in the sNII category.
•If IPO is oversubscribed in the sNII sub-category, the allotment to each investor shall not be less than the minimum
application size (~Rs 2 Lakhs), subject to the availability of Equity Shares in the sNII Portion.
•This is similar to allotment in the RII category but instead of 1 lot, the sNII investor gets shares worth of minimum
application size which is just above Rs 2 lakhs.
•Example: if the IPO subscribed 2 times (application-wise) in the sNII sub-category, 1 out of 2 applicants will get the
minimum sHNI application (worth around Rs 2 Lakhs) irrespective of how many shares they applied for.
•bNII Allotment Basis
•If IPO doesn't get over-subscribed in the bNII sub-category, full allotment to all applicants in the bNII category.
•If IPO is oversubscribed in the bNII sub-category, the allotment to each investor shall not be less than the minimum
sNII application size (~Rs 2 Lakhs), subject to the availability of Equity Shares in the bNII Portion.
•This is similar to allotment in the RII category but instead of 1 lot, the bNII investor gets shares worth of minimum
application size which is just around Rs 2 lakhs.
Value of Right Shares
• Let’s say an investor owns 100 shares of ABC Ltd. and the shares are trading at
Rs10 each. The company announces a rights issue in the ratio of 2 for 5, i.e., each
investor holding 5 shares will be eligible to buy 2 new shares. The company
announces a discounted price of, for example, Rs.6 per share. It means that for
every 5 shares (at Rs.10 each) held by an existing shareholder, the company will
offer 2 shares at a discounted price of Rs.6.
• Investor’s Portfolio Value (before rights issue) = 100 shares x Rs.10 = Rs. 1,000
• Number of right shares to be received = (100 x 2/5) = 40
• Price paid to buy rights shares = 40 shares x Rs.6 = Rs. 240
• Total number of shares after exercising rights issue = 100 + 40 = 140
• Revised Value of the portfolio after exercising rights issue = Rs. 1,000 + Rs.240 =
Rs.1,240
• Should be price per share post-rights issue = Rs.1,240 / 140 = Rs.8.86