What It Means
RII stands for Retail Individual Investor, the SEBI category for anyone applying to an IPO with ₹2 lakh or less. It's the default bucket most first-time IPO applicants fall into, and it comes with a specific reservation and a specific allotment rule that the bigger categories don't get.
How It Works
A mainboard IPO reserves at least 35% of the issue for this category at the time of writing (check the current figure, since SEBI reviews it periodically). If retail demand doesn't exceed that reserved pool, every applicant simply gets what they asked for. If it does, the shares get handed out through a computerised lottery instead of by who applied for more. Every valid application gets exactly one entry into that draw, and a winning entry gets exactly one lot, regardless of how many lots it originally asked for.
Warning
It's easy to assume applying for more lots, or the full ₹2 lakh, improves your odds in this category. In an oversubscribed draw it doesn't: one valid application is one entry either way.