What is the minimum and maximum for investing in an IPO?
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- Updated On:11-Apr-2022
- Replies:1
Short Answer
The minimum and a maximum number of shares are defined in Lots in an IPO. The minimum number of Lots that a retail investor can apply in the Retail Segment (RII) is 1 Lot and the maximum number of Lots that can be applied should be less than 2 Lakh Rupees. On the other hand, if one wants to apply for more than 2 Lakh rupees then they can apply in the NII (Non-Institutional Investor) category where the minimum amount for investment is 2 lakhs and the maximum amount is not capped.
Detailed Answer
What is an IPO?
An IPO stands for Initial Public Offering where a Private company gets Public but selling some of its shares to the investors in return for their money. An IPO is also a method where a company gets itself listed on the Stock Exchanges like NSE (National Stock Exchange) & BSE (Bombay Stock Exchange).
IPO’s are categorized into three categories, that are QIB (Qualified Institutional Buyers), NII (Non-Institutional Investors)& RII (Retail Individual Investor). As a retail investor, only the RII & NII category is available while applying for an IPO hence let's discuss them.
Minimum & Maximum amount for an IPO
Investing in IPOs is different than buying shares from the secondary market. One can buy a minimum of 1 share and a maximum of any number of shares in the secondary market but while applying for an IPO the number of shares that can be applied is pre-defined as Lots.
1 Lot consists of a particular number of shares that is decided by the company hence one has to buy Lots of shares and not individual shares in an IPO.
The minimum & maximum amount required for investing in the RII & NII category is different hence let look at them in detail:
RII- The Retail Individual Investor
This category is the most common category in which people apply for shares. SEBI (Securities and Exchange Board of India) has provided certain guidelines of the Lot size that every company has to follow. The lot size of an IPO has to be between 12000 and 15000 hence any company that comes up with an IPO has to keep their number of shares for a total amount of less than or equal to 15000.
For example, the price of 1 share of company “X” is 600 hence the lot size can be 25 shares. Now in the Retail category, the minimum Lots that can be bought is 1 or 25 shares and the maximum amount of lots that can be bought should be less than 2 Lakh.
Hence the Minimum amount of investment for the RII category is 15000 and the maximum number of lots that can be applied under the RII category is 2,00,000/15000=13. So, the maximum amount of shares that can be applied for is 13 Lots or 325 shares of company “X”
NII- The Non-Institutional Investor
This category is similar to the Retail category but the only difference is that the minimum amount of shares that have to be applied for should be worth 2 lakh or 14 Lots of company “X” and the maximum limit is not capped for the NII category.
Maximum & Minimum Amount of IPO
To apply for an IPO under the RII (Retail Individual Investor) category the minimum number of lots that can be applied is 1 of up to 15000 and the maximum number of Lots that can be applied under this category is 14 or 2 lakh whichever is higher. The maximum amount of bids that can be placed in the RII category is 2,00,000. In the NII category, the minimum amount of investment is 2 Lakh and the maximum amount is uncapped.
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