What It Means
NII stands for Non-Institutional Investor, the SEBI category for IPO applicants who put in more than ₹2 lakh. There's no upper limit. Anyone applying above the retail cap, whether an individual, an HUF, or a company, falls into this bucket by default.
How It Works
Unlike retail, which gets a lottery when an issue is oversubscribed, NII shares are allotted proportionately: the more oversubscribed the category, the smaller the fraction of your bid you actually get, but everyone in the category gets something rather than an all-or-nothing draw.
At the time of writing, SEBI splits the NII category into two buckets. Small NII (sNII) covers applications from ₹2 lakh up to ₹10 lakh, and Big NII (bNII) covers anything above ₹10 lakh, each with its own share of the NII quota and its own proportionate allotment run within that bucket. This split exists so a handful of very large bids in the bNII bucket can't quietly crowd out smaller NII applicants.
Example
Say the sNII bucket of an IPO gets subscribed 8 times over. An investor who applied for ₹5 lakh worth of shares doesn't walk away with nothing: they get roughly 1/8th of what they applied for, worked out through the exchange's proportionate rounding rules, credited to their demat account. Compare that to the retail category, where an oversubscribed pool means most applicants get zero and a few get a full lot.
Warning
Don't assume NII allotment works like retail's one-application-one-entry lottery. It doesn't: a bigger bid in the NII category genuinely gets you a bigger (if scaled-down) allotment, which is the opposite of how retail's draw works.