What is HNI Category in IPO and How to Apply

HNIs remain a key contributor to the IPO market in India. The category successfully raised ₹ 21,000 crores from May 2024 to May 2025. 

Unlike retail investors who can invest only up to ₹ 2 lakh, HNI investors invest larger amounts, which provides them access to greater opportunities and proportionate allotment benefits. In this article, you’ll learn about the HNI category in an IPO- its eligibility criteria, application process, and allotment method-along with the benefits, risks, and tax implications.

What is an HNI Category in an IPO?

The HNI (High Net Worth Individual) category in an IPO is a sub segment of NII those investors whose applicable size of investment is more than ₹2 lakh. The HNIs can invest more money in comparison to the retail investor.

HNIs come under the Non-Institutional Investors (NIIs) category. This category includes a wide variety- individuals, Hindu Undivided Families (HUFs), companies, and trusts, all looking to invest more than ₹ 2 lakh in an IPO. 

The allotment for HNI applications is done on an allotment basis, meaning instead of a lottery system, the HNI applicants are allotted shares in proportion to their investment size.

In short, HNIs help add size to the IPO.

Eligibility Criteria of HNI Investor

To qualify for the HNI category in an IPO, an investor should meet the following criteria:
Investment Amount: The minimum investment amount must be more than ₹ 2 lakh

Investor Type: Individuals, Hindu Undivided Families (HUFs), NRIs, or companies can apply under the HNI category.

PAN Requirement: The investor must have a valid Permanent Account Number (PAN).

Demat Account: A demat account is required to hold the shares digitally.

Bank Account: It is mandatory to have the ASBA (Application Supported by Blocked Amount) facility in your bank account to apply for the IPO under HNI category.

How to Apply for an IPO under the HNI Category

An investor can take the following steps to apply for an IPO under the HNI Category: 

Step 1: Choose the IPO

You check the upcoming IPOs on different websites or on your broker’s portal and from the different options, you finalise on which IPO you will apply.

Step 2: Log In To Your Account

The next step is to log in to your brokerage account, which will be used for the application. On your broker’s portal, there will be an IPO section containing the list of upcoming IPOs.

Step 3: Choose The Category

After selecting the IPO from the list, click on the investor type and choose the HNI category.

Step 4: Enter Your Bid

Enter the price within the band you wish to apply for the IPO. Also, enter the number of lots in your application.

Step 5: Block Funds

After entering the bidding details, lock the funds in your account via ASBA or UPI mandate. These funds remain blocked until allotment is done.

Step 6: Submit Application

After carefully reviewing the details, click on the ‘submit’ button. You will receive a payment mandate, and after approving it, your application will be submitted successfully.

Important Documents Required for HNI in IPO

The following important documents are required to apply for the HNI category in IPO:

• PAN Card: The investor must have a valid Permanent Account Number.
• Demat Details: An active demat account to hold the shares in digital form.
• Bank Details: Linked with the demat account and supports the ASBA facility.
• CML(Client Master List): is a document issued by the Depository Participant(DP) containing essential details of your demat account, which are needed when applying for an IPO

Allotment Process for HNI Applicants

The IPO allotment process differs for retail investors and HNIs. The retail investors are allotted shares on a lottery basis which is just a random lucky draw. On the other hand, allotment for HNI applications is done on a proportionate basis.

In the proportionate basis method, the allotment can be done for the following two cases:

• Equal Subscription: When the number of reserved shares equals the total number of shares applied for, all applicants receive full allotment as per their applications. In an IPO, if there were a reservation of 10,000 shares for HNIs and 10,000 applications were received, each applicant would get all the shares they applied for.
• Oversubscription: When there are more applications than the number reserved for HNI, they are allotted shares in the proportion of their bid quantity. If 20,000 shares were reserved for the HNI category and bids for 40,000 shares were received, then the investor will only be allotted 50% of his bid shares.

Since allotment for HNI applications is done on the proportion of investment size, it makes the process more transparent.

SEBI Regulations for HNI Category in IPO

The Securities Exchange Board of India (SEBI) is the market regulator working to improve transparency and ethical practices. It  has made the following regulations for the HNI category:

Reservation: 15% of the total IPO size has to be reserved for the NII(HNI) category.

• sNII: sNII(Small Non Institutional Investors) make investments between ₹ 2 lakh and ₹ 10 lakh. Out of the 15% reservation, one-third portion, 5% of the total issue size is reserved for them.
• bNII: bNII(Big Non Institutional Investors)  make investments above ₹ 10 lakh. Out of the 15% reservation, two-thirds, 10% of the total issue size are reserved for them.

Application Method: Depending on the amount of investment, HNIs can use the following methods-

• UPI: HNI applicants can use Unified Payments Interface(UPI) for applications up to ₹ 5 lakh.
• ASBA: For applications of more than ₹ 5 lakh, ASBA is mandatory.

Application Window: The HNI investors must submit their applications before 4 pm on the last bidding day.

Bidding Price: HNI investors can’t choose a cut-off price; they have to select a specific price within the IPO’s price band. 

These measures ensure fairness to all the market participants.

Differences Between RII and HNI

The following differences can be found when we compare RIIs and HNIs:

Feature	Retail Individual Investors (RIIs)	High Net-Worth Individual (HNIs)
Investment	The investment amount is limited to ₹2 lakh	Investments are made above ₹2 lakh
Category	Retail Investors	Non-Institutional Investors(NII)
Reservation	35% reservation	15% reservation
Allotment	Based on the lottery system	Proportionate to investment size
Cut-Off Price	Can apply at the cut-off price	Have to apply within the IPO’s price band

Understanding these differences is important so that the investor can decide in which category he should apply based on his investment size and the probability of allotment.

Advantages of Applying as HNI

When applying under the HNI category, an investor would have the following advantages:

1. Higher Allotment Potential: Compared to retail investors, HNIs are given allotment on a proportionate basis, so they are more likely to receive shares in the IPO. Even in the case of oversubscription, you may receive some shares based on your bid size.

2. Portfolio Diversification: IPOs help HNIs in diversifying their portfolio . They can invest in companies with high growth potential and/or across different asset classes such as equity, debt, commodities, etc. The investors can also explore new sectors and geographies.

3. Listing Gains: HNIs also enjoy the benefit of listing gains. They have more shares which increases their total profit. And on top of that, no lock-in period means the shares can be sold off on the day of listing.

4. Early Entry Advantage: HNIs have access to pre-IPO opportunities where they can invest in a company before its IPO is launched in the public market. 

Tax Implications for HNI Investors

Like retail investors, taxes are also levied on HNIs. When applying under the HNI category, one should consider the following taxes:

Short-Term Capital Gains(STCG): If the allotted shares are sold within a year, they are subjected to STCG tax. A STCG tax of 20% is applicable in such a case.

Long-Term Capital Gains(LTCG): No tax is applied up to gains of ₹ 1,25,000. When the gains exceed this number, LTCG tax of 12.5% is applicable

Dividend Income: is taxed as per the income slab of the particular HNIs.

Risks and Considerations

Despite their lucrative benefits, IPOs, when applied for under the HNI category, have the following risks:

1. Risk of Oversubscription: Popular IPOs of well-established companies often get oversubscribed. In case of oversubscription, HNIs will receive minimal or no allotment.

2. Blocked Capital: The bid amount is locked until the allotment; the investors may miss out on other market opportunities.

3. Liquidity: Newly listed shares may not be highly liquid, making it difficult for HNI investors to exit their position and enjoy the listing gains.

4. Market Volatility: An IPO’s performance is based on the market sentiment. Mixed sentiment may cause the pricing to get volatile, meaning uncertainty and possible losses for the investors.

Real-World Examples

We’ll now read about a real example from India’s IPO market to better understand the HNI category. The Zomato IPO was launched on July 14, 2021 with a total issue size of ₹ 9,375 crore. The price band was set between ₹72-₹76 per share.

The Zomato IPO received 2,751.27 crore bids for a total issue size of 71.92 crore equity shares, making it oversubscribed by 38 times. Out of the total, 640 crore bids were received against the quota of 19.43 crore shares for the HNI portion, making it oversubscribed by 32 times. That means for every 1 share to be allotted, a bid for 32 shares had to be made.

Finally, the shares were listed at ₹ 115, a premium of over 50%. Lucky investors who received the allotment, enjoyed the listing gains.

The following table can help you get a better understanding of the situation:

Category	Shares Reserved (in crore)	Bids Received (in crore)	Oversubscription (× times)
Qualified Institutional Buyers (QIBs)	38.88	2,013.78	51 times
Non-Institutional Investors (HNIs/NIIs)	19.43	640	32 times
Retail Individual Investors (RIIs)	12.96	97	7 times
Employees/Other	0.65	0.4	0.6 times
Total	71.92	≈2,751	38 times

Conclusion

The HNI category in IPOs allows investors better opportunities with proportionate allotment and higher exposure to growing companies. HNIs get the benefit of higher allotment, portfolio diversification, and earlier access to new opportunities. As exciting as it seems, one should also consider the possible risks associated with the HNI category. 

For an individual belonging to any investor category, understanding the market, its aspects, and having patience is the key to a successful investment journey.

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