What is the Limit for a Retail Investor When Investing in an IPO?

It's extremely important to know how a retail investor is defined when investing in an IPO. This is important because, retail investors are sometimes offered a discount in an IPO. For example the recent IPO of Shemaroo offered retail investors a price discount of 5 per cent in the IPO offer.

So how is a retail investor defined?

A retail investor is defined as one who invests less than Rs 2 lakh in the Initial Public Offering. Now any amount invested in excess of Rs 2 lakh is considered as an investment by a High Networth Individual.

Therefore, to qualify as a retail investor you should invest a sum of Rs less than Rs 2 lakh, as you also get a discount in the IPO.

In case you desire to invest more than this sum, the ideal way would be to invest in your spouse or relative's name.

Until a few years ago a retail investor was defined as an investor investing less than Rs 1 lakh. However, that amount was considered very small and the new limit has been fixed at Rs 2 lakh and above.

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