High Net Worth Individual (HNI)
In SEBI's IPO framework, a High Net Worth Individual (HNI) — formally termed a Non-Institutional Investor (NII) — is an individual or entity (other than QIBs or retail investors) applying for securities worth more than ₹2 lakh in a public offer; beyond IPOs, HNIs typically hold investable assets above ₹5 crore and may access PMS, AIFs, and structured products.
The HNI or NII category in IPO applications covers a broad range of participants: individuals applying for amounts above ₹2 lakh (the retail threshold), corporates, trusts, and Hindu Undivided Families (HUFs). In a standard book-built IPO, 15% of the issue is reserved for NIIs. Within this 15%, SEBI introduced a sub-categorisation in 2021: one-third of the NII portion (5% of total issue) is reserved for bids between ₹2 lakh and ₹10 lakh (sNII — small NII), and two-thirds (10% of total issue) for bids above ₹10 lakh (bNII — big NII).
A key feature of the HNI segment in popular IPOs has been the use of margin funding — borrowing from brokers or banks to fund large IPO applications. Because IPO allotment is proportional to subscription in the NII category, a higher application amount increases the probability of allotment in oversubscribed issues. Brokers offered margin funding at interest rates of 10–18% per annum for the short subscription period, and applicants calculated whether the listing gain expectation exceeded the funding cost. SEBI introduced mandatory lot-based proportionate allotment for the sNII sub-category in the 2021 reforms to reduce the advantage of mega-applications funded by margin.
Outside the IPO context, the term HNI is used broadly in the wealth management industry to denote investors with investable assets above ₹5 crore (sometimes ₹2 crore in smaller wealth management firms). HNIs qualify for Portfolio Management Services (PMS), which requires a minimum investment of ₹50 lakh under SEBI regulations, and Category III Alternative Investment Funds (AIFs), where minimum commitments are ₹1 crore. These products offer bespoke investment strategies, direct equity portfolios, and access to structured products not available to retail investors.
For HNIs with assets above ₹10 crore or more, the Ultra HNI (UHNI) designation is used informally, with access to Category I and Category II AIFs (venture capital, private equity, real estate, credit strategies), family office structures, and offshore investment vehicles through the Liberalised Remittance Scheme. The financial product ecosystem for this segment is significantly more complex and less standardised than for retail investors.
Tax optimisation is a significant consideration for HNIs. Higher surcharges on income above ₹5 crore (25%) and ₹10 crore (37%) under the old tax regime made tax-efficient structuring through HUFs, family trusts, and investment companies common wealth management strategies. The 2023 Union Budget's changes to the surcharge and the long-term capital gains framework have shifted some of these incentives.