An individual investor having subscription to securities in an IPO of less than Rs. 2,00,000 is called as a Retail Individual Investor. The present networth of the investor is not important. The only consideration for determining if the investor is a retail investor is, at the time of subscription or bidding for securities, the investor should not be bidding for more than Rs. 2,00,000 worth of securities.
This category of Retail Investors are given special benefits like a minimum 35% of the net offer to public is compulsorily allotted to retail investors when the public issue is through Voluntary Book Building process. In cases of Compulsory Book Building Issues, such offer is limited to a minimum of 10%. Although if the public issue is not through the Book Building Issue (i.e. Fixed Price issue), then minimum 50% is to be offered to retail investors.
The retail investors further have the advantage to bid at cut off price, which means that they can bid at any price within the price band. Even if the price bid is lower than the price discovered, the bid will remain valid for the purpose of allotment. Sometime, a discount to the IPO price is also offered to retail investors, as a goodwill gesture or incentive to invest. This discount is announced along with the price band to the IPO and can be an absolute amount or be expressed as a percentage, which is not offered to other investors (institutional or high net worth investors).
Generally an HUF (Hindu Undivided Family) also falls under the definition of retail individual investor.