From Rediff Money

According to the book building process, three classes of investors can bid for the shares:
 Qualified Institutional Buyers: QIBs include mutual funds and Foreign Institutional Investors. At least 50% of the
shares are reserved for this category.
 Retail investors: Anyone who bids for shares under Rs 50,000 is a retail investor. At least 25% is reserved for this
category.
 The balance bids are offered to high net worth individuals and employees of the company.
The bids are first allotted to the different categories and the over-subscription (more shares applied for than shares
available) in each category is determined.
Retail investors and high net worth individuals get allotments on a proportional basis.
Assuming you are a retail investor and have applied for 200 shares in the issue, and the issue is over-subscribed five times
in the retail category, you qualify to get 40 shares (200 shares/5).
Sometimes, the over-subscription is huge or the issue is priced so high that you can't really bid for too many shares before
the Rs 50,000 limit is reached.
In such cases, allotments are made on the basis of a lottery.
Say, a retail investor has applied for five shares in an issue, and the retail category has been over-subscribed 10 times. The
investor is entitled to half a share.
Since that isn't possible, it may then be decided that every 1 in 2 retail investors will get allotment. The investors are then
selected by lottery and the issue allotted on a proportional basis.
That is why there is no way you can be sure of getting an allotment.

From SEBI
6. Categories of Investors

(a) Whether the investors are categorized? If yes, how the allotment is made to different

categories?

Investors are broadly classified under following categories‐:

(i) Retail individual Investor (RIIs)

(ii) Non‐Institutional Investors (NIIs)

(iii) Qualified Institutional Buyers (QIBs)

“Retail individual investor” means an investor who applies or bids for securities for a

value of not more than Rs. 1,00,000.

“Qualified Institutional Buyer” shall mean:

a) a public financial institution as defined in section 4A of the Companies Act, 1956;

b) a scheduled commercial bank;

c) a mutual fund registered with the Board;

d) a foreign institutional investor and sub‐account registered with SEBI, other than a sub
account which is a foreign corporate or foreign individual;

e) a multilateral and bilateral development financial institution;

f) a venture capital fund registered with SEBI;

g) a foreign venture capital investor registered with SEBI;

h) a state industrial development corporation;

i) an insurance company registered with the Insurance Regulatory

and Development Authority (IRDA);

j) a provident fund with minimum corpus of Rs. 25 crores;

k) a pension fund with minimum corpus of Rs. 25 crores);

l) National Investment Fund set up by resolution no. F. No. 2/3/2005‐DDII dated

November 23, 2005 of Government of India published in the Gazette of India.”

Investors who do not fall within the definition of the above two categories are categorized

as “Non‐Institutional Investors”

Allotment to various investor categories is provided in the guidelines and is detailed below:

In case of Book Built issue

1. In case an issuer company makes an issue of 100% of the net offer to public through

100% book building process—

(a) Not less than 35% of the net offer to the public shall be available for allocation to

retail individual investors;

(b) Not less than 15% of the net offer to the public shall be available for allocation to

non‐institutional investors i.e. investors other than retail individual investors and

Qualified Institutional Buyers;

(c) Not more than 50% of the net offer to the public shall be available for allocation

to Qualified Institutional Buyers:

2. In case of compulsory Book‐Built Issues at least 50% of net offer to public being
allotted to the Qualified Institutional Buyers (QIBs), failing which the full

subscription monies shall be refunded.

3. In case the book built issues are made pursuant to the requirement of mandatory

allocation of 60% to QIBs in terms of Rule 19(2)(b) of Securities Contract

(Regulation) Rules, 1957, the respective figures are 30% for RIIs and 10% for NIIs.

In case of fixed price issue

The proportionate allotment of securities to the different investor categories in an fixed

price issue is as described below:

1. A minimum 50% of the net offer of securities to the public shall initially be made

available for allotment to retail individual investors, as the case may be.

2. The balance net offer of securities to the public shall be made available for

allotment to:

a. Individual applicants other than retail individual investors, and

b. Other investors including corporate bodies/ institutions irrespective of the

number of securities applied for.