Retail Individual Investor Quota in an IPO: The 35% Rule, Lot Sizes and Allotment Odds

Every big IPO comes with the same morning-after ritual. The retail book closes at 40 or 60 times, lakhs of people refresh the registrar’s page on allotment day, and most of them see “not allotted”. It feels random. It mostly is, by design. The retail individual investor quota in an IPO is built so that as many small investors as possible get something, and once demand runs past a certain point, the only fair way to decide who gets that something is a lottery.

We’ll go through the rules exactly as SEBI writes them: who counts as retail, how big the retail slice is, how lot sizes are fixed, and how allotment works when the book is undersubscribed, lightly oversubscribed and heavily oversubscribed. Then we’ll run the numbers on a hypothetical issue so you can see your own odds before you bid.

Who Counts as a Retail Individual Investor

The definition is short. Under Regulation 2(1)(vv) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, the ICDR rules, a retail individual investor is an individual who applies or bids for a value of not more than ₹2 lakh. That’s it. Your income, your portfolio size and your trading history don’t matter. The bid value does.

Cross ₹2 lakh by even one rupee and you’re no longer retail. SEBI’s FAQs on the ICDR Regulations spell this out for UPI bids: individuals can bid up to ₹5 lakh through UPI, but the retail limit stays at ₹2 lakh, so an application above ₹2 lakh and up to ₹5 lakh is treated as a non-institutional investor (NII) bid. If you’re thinking of moving up, our guide on applying in the HNI category covers how that bucket works.

Being retail does come with a few privileges that other categories don’t get, according to the same SEBI FAQ:

• Cut-off bidding. Only retail individual investors can tick “cut-off” and agree to pay whatever final price is discovered within the band. Cut-off bids always stay valid, while a price bid below the final price can be rejected.
• Withdrawal till close. Retail investors can withdraw bids until the issue closes.
• Possible discount. An issuer may allot shares to retail individual investors at a discount of up to 10% to the price offered to other categories. Not every issue offers one, so check the red herring prospectus.

The 35% Rule and the Other Retail Quota Splits

How much of an IPO is set aside for retail depends on which eligibility route the company used to come to market. Regulation 32 of the ICDR rules sets out the split of the net offer:

The 35% figure is the one most people mean when they talk about the retail quota. It’s a floor, not a ceiling. And it’s 35% of the net offer to the public, not of the whole company. The 6(2) route is the opposite story. Companies that don’t meet those track-record tests can still list, but the regulator caps retail at 10% and pushes at least 75% towards institutions.

Two more details from Regulation 32 matter in practice. First, if the retail or NII portion of a 6(1) issue goes unsubscribed, that leftover can be given to applicants in another category. A weak retail book doesn’t kill the issue. Second, the NII bucket itself is now split: one third for applications above ₹2 lakh and up to ₹10 lakh, two thirds for applications above ₹10 lakh.

The retail quota is a promise about breadth, not size. SEBI’s rules try to give as many small investors as possible one lot each before anyone gets a second.

How Lot Sizes Are Fixed

The lot isn’t picked at random either. Regulation 47(2) says the issuer must set a minimum application size, in number of shares, that falls within a minimum application value of ₹10,000 to ₹15,000. Bids then come in multiples of that lot. The value is measured at the issue price, not the amount you pay at application.

So the lot size moves with the price band. A ₹100 share might come in lots of 140 or 150. A ₹1,000 share might come in lots of 14 or 15. You can work through more cases in our IPO lot size calculation guide. For retail investors the useful number is the maximum number of lots you can bid for while staying under ₹2 lakh, and that’s simple division.

How Allotment Works in the Retail Quota

Here’s the core rule. Regulation 49(4) says the allotment to each retail individual investor shall not be less than the minimum bid lot, subject to availability of shares in the retail category, and any remaining shares are allotted on a proportionate basis. Everyone gets one lot first, if there are enough lots to go around. Only then does the extra get shared out.

That leads to three very different situations.

1. The retail book is undersubscribed

If retail investors bid for fewer shares than the quota, everyone gets everything they applied for. The unsubscribed balance can be allotted to other categories under the Regulation 32 proviso. This is the only case where bidding for more lots straightforwardly gets you more shares.

2. Oversubscribed, but there are enough lots for everyone

Schedule XIV of the ICDR rules works through this with an example. An issue of 1 crore shares at ₹600 has 35 lakh shares in the retail category. One lakh retail investors apply, the retail book is subscribed 4 times (so 140 lakh shares are bid for), and the lot is 20 shares.

Step one: each of the one lakh applicants gets 20 shares. That uses 20 lakh shares and leaves 15 lakh. Step two: those 15 lakh shares are shared out in proportion to what each person bid beyond the first lot, and the total beyond-first-lot demand is 120 lakh shares. So everyone gets 15/120, or 12.5%, of their extra bid. In SEBI’s table, investor A bid 320 shares and gets 20 + 38 (12.5% of the extra 300, rounded). Investor D bid 60 and gets 20 + 5. Investor E bid a single lot of 20 and gets exactly 20.

Here bigger bids do earn more shares, but only a slice of the extra.

3. Heavily oversubscribed: not enough lots to go around

This is the one that matters for hot IPOs. SEBI’s second Schedule XIV example keeps the same 35 lakh retail shares and 20-share lot, but now two lakh retail investors apply and the category is subscribed 9.37 times. Divide 35 lakh shares by 20 and you get 1,75,000 lots. So 1,75,000 applicants get one lot each, and the remaining 25,000 get nothing.

Who gets in is decided by lottery, and the lottery is run separately at each bid size. In SEBI’s illustration, 10,000 investors applied for one lot and 8,750 of them are picked. Another 10,000 applied for 16 lots (320 shares), and again 8,750 are picked, each for just one lot. That’s 87.5% at every level. Bidding 16 lots instead of one didn’t improve the odds at all, and the winners at 16 lots still got 20 shares, the same as the winners at one lot.

Once retail demand runs past the number of available lots, your ₹1.9 lakh bid and your neighbour’s ₹14,000 bid have exactly the same chance, and the same prize.

A Worked Example: Your Odds in a Hypothetical ₹1,200 Crore IPO

Let’s run a made-up issue through these rules. All figures here are hypothetical and only illustrate the arithmetic.

• Issue size (net offer): ₹1,200 crore under Regulation 6(1)
• Upper end of price band: ₹300
• Lot size: 45 shares, so one lot costs ₹13,500 (inside the ₹10,000 to ₹15,000 range)

Step 1, the retail pool. ₹1,200 crore at ₹300 is 4 crore shares. The 35% retail floor gives 1.4 crore shares.

Step 2, maximum retail bid. Fourteen lots cost ₹1,89,000. Fifteen lots would cost ₹2,02,500, which is over ₹2 lakh and would push you into the NII category. So the retail maximum is 14 lots.

Step 3, how many lots exist. 1.4 crore shares divided by 45 is 3,11,111 full lots, with 5 shares left over.

Step 4, the odds. Suppose 12 lakh retail investors apply. Only 3,11,111 can get a lot, so each applicant has roughly a 25.9% chance. It doesn’t matter whether you applied for 1 lot or 14. The winner gets 45 shares either way, and nearly the entire retail pool goes out as single lots.

Step 5, the flip side. Suppose instead the retail book is bid for only 1 crore shares. That’s about 0.71 times the quota. Everyone gets their full application, and the unsubscribed 40 lakh shares can be allotted to other categories.

Notice what drives your odds in a hot issue: the number of applicants, not the amount of money in the book. A retail portion “subscribed 50 times” tells you about demand in rupees. Your chance depends on how many separate applications came in compared with the number of lots. For more on reading those subscription figures, see our explainer on IPO oversubscription.

There’s one more simple bit of probability. If three adults in a family each apply for one lot in their own name, the chance that at least one of them gets an allotment in our 25.9% scenario is 1 minus (0.741 × 0.741 × 0.741), which works out to about 59%. That’s why so many households spread single-lot bids across family members instead of putting one big bid in one name.

What Could Change for Very Large IPOs

The 35% floor has come under review for the biggest issues. In a consultation paper issued on July 31, 2025, SEBI proposed that for 6(1) IPOs above ₹5,000 crore, the retail allocation could be reduced from 35% to 25% in a graded manner, with the QIB share rising correspondingly. The paper’s reasoning was practical. Using data from over 280 IPOs since 2020, it put the average retail application at about ₹20,000, which meant a ₹5,000 crore IPO would need about 7 to 8 lakh applications just for the retail portion to be subscribed once.

A consultation paper is a proposal, not a rule. The consolidated ICDR Regulations on SEBI’s site, last amended on March 21, 2026, still show the 35% floor in Regulation 32(1). For any large issue, the red herring prospectus is the document that tells you the actual split, so read the “offer structure” section before bidding.

Practical Points Before You Bid in the Retail Quota

1. Check the issue route. A 6(2) issue gives retail at most 10%, which changes your odds sharply compared with a 35% book of the same size.
2. Work out the lots in the retail pool. Retail shares divided by lot size. Compare that with likely applications, not with subscription multiples.
3. In a hot issue, one lot is usually enough. If the book looks likely to be heavily oversubscribed, a bigger bid blocks more money without improving the chance of getting a lot.
4. Bid at cut-off. It keeps your bid valid if the final price lands at the top of the band.
5. Stay under ₹2 lakh at the upper band. Price your maximum lots at the top of the band, not the bottom, or you could end up in the NII bucket.
6. Look for a retail discount. Some issues offer one. It’s in the prospectus if it exists.

For the bigger picture on picking issues, reading prospectuses and judging listing-day behaviour, our guide to IPO investing in India pulls it together.

The retail quota won’t make a hot IPO easy to get. What it does guarantee is that small investors aren’t crowded out by large ones inside their own category. Once you see how the lottery treats a one-lot bid and a 14-lot bid the same, the strategy gets simpler: apply sensibly, keep your money free, and treat an allotment in a hot issue as a bonus rather than a plan.

Disclaimer: This article is for educational purposes only and is not investment advice. The ₹1,200 crore IPO, its price, lot size and applicant numbers are hypothetical and used only to explain the allotment arithmetic. IPO rules can change; always check the issue’s red herring prospectus and SEBI’s current regulations. Consult a SEBI-registered investment adviser before making investment decisions.