IPO Employee Quota Explained: ₹5 Lakh Bid, ₹2 Lakh Allotment and Employee Discount

If you work for a company that is going public, or for its parent or one of its subsidiaries, the IPO may include an employee quota: a pool of shares only staff can bid for, often at a discount to the price everyone else pays. The rules are more detailed than most HR emails explain. There are two rupee limits, not one. The discount has a ceiling. And you can bid in more than one category without being treated as a duplicate applicant.

This guide sets out the rules as they stand in SEBI's ICDR Regulations, 2018 (consolidated text amended up to 21 March 2026), with worked examples.

Who counts as an "employee"

SEBI defines the term in Regulation 2(1)(o) of the ICDR Regulations, and each RHP repeats it, often adding a few conditions of its own. In general an eligible employee is:

• a permanent employee, working in India or abroad, of the issuer, its promoter or a subsidiary; or
• a director of the issuer, whole-time or not.

Three groups are excluded: the promoters, members of the promoter group, and any director who directly or indirectly (including through relatives or a company) holds more than 10% of the issuer's shares.

RHPs usually add a date test and often a status test as well. Jio Platforms' RHP (dated 14 October 2026), for example, covers permanent employees of the company, its promoter Reliance Industries and its subsidiaries as of the date the RHP is filed, and it explicitly excludes employees serving their notice period. Contract staff, consultants and interns generally fall outside "permanent employee", so check the definitions page of the RHP before bidding.

The two limits: ₹5 lakh and ₹2 lakh

This is the part most people get wrong. Regulation 33(2)(a) and Regulation 49(3) together work like this:

In practice:

• If the employee portion is oversubscribed, every bid is counted as if it were no more than ₹2 lakh, and allotment is proportionate on that capped figure. Bidding ₹5 lakh gives you no edge over someone who bid ₹2 lakh.
• If it is undersubscribed, everyone's bid is first met up to ₹2 lakh. The leftover shares are then shared proportionately among employees who bid above ₹2 lakh, until each reaches what they bid or ₹5 lakh, whichever comes first.

Jio's RHP spells this out exactly: bids up to ₹5,00,000 net of the employee discount, initial allotment capped at ₹2,00,000, and the unsubscribed balance shared among those who bid more.

Worked example (illustrative numbers)

Take an issue price of ₹500, an employee discount of ₹50 and a lot of 30 shares. An employee pays ₹450 a share, or ₹13,500 a lot.

• Priya bids 37 lots (1,110 shares × ₹450 = ₹4,99,500).
• Arjun bids 14 lots (420 shares × ₹450 = ₹1,89,000).

Case 1: the portion is three times oversubscribed. Priya's bid is treated as ₹2 lakh, which is 14 lots (₹1,89,000), the most that fits under ₹2 lakh. So she and Arjun are in the same position, and each receives roughly a third of their counted bid (subject to lot rounding).

Case 2: the portion is only 60% subscribed. Both are first allotted in full up to the ₹2 lakh mark: 14 lots each. Priya bid more than ₹2 lakh, so she also shares the leftover shares with other employees who bid above ₹2 lakh. If enough are left, she can get her full 37 lots.

The employee discount

Regulation 30 allows employees in the reserved portion to be offered shares at up to 10% below the price at which the net offer is made to other investors, excluding anchor investors. The discount must be stated in rupees in the offer document, not as a percentage. Many RHPs leave the figure blank at first, and it is announced with the price band.

A real example: Hyundai Motor India's October 2024 IPO had a price band of ₹1,865 to ₹1,960 and offered employees a discount of ₹186 a share. At the upper end that is about 9.5%, just inside the 10% ceiling. For Jio Platforms, the RHP reserves up to ₹500 crore for eligible employees and leaves the discount to be announced, capped at 10% of the issue price.

Two things to keep in mind:

• When an employee bids at the cut-off price, the amount blocked is the cap price minus the discount, not the full cap price.
• The discount is a known gain only at the issue price. The listing price is set by the market, and it can wipe out the discount or more.

Bidding in more than one category

Regulation 33(2)(c) bars people who bid in a reserved category from also bidding in the net offer, but it makes an exception for employees and for retail individual shareholders. RHPs apply this directly. Jio's RHP says an eligible employee may also bid in the retail or non-institutional portion, and in the RIL shareholder portion if they qualify, without the bids being treated as multiple bids.

So one employee who also holds the parent's shares could, in an issue structured like Jio's, place:

Each application has its own UPI mandate and is allotted separately. The rules for duplicate PANs across family accounts are different. See our guide to multiple applications.

How to apply

1. Check eligibility against the RHP definition: employer entity, permanent status, the cut-off date, and any notice-period exclusion.
2. Choose the "Employee" category in your broker app or bank ASBA screen. Some issuers also run an internal process. Follow whatever the RHP and your HR team specify.
3. Bid at cut-off if you want certainty of a valid bid. Employees are allowed to, under the RHP terms.
4. Use UPI if your bid is within ₹5 lakh. Under SEBI's UPI framework, individual applications of up to ₹5,00,000 can use UPI. Jio's RHP confirms employees can bid through UPI. Above that amount, use net-banking ASBA.
5. Approve the mandate before the cut-off time on the closing day.

If an application fails or the money stays blocked, our guides on rejection reasons and refunds that have not arrived cover the next steps.

What happens to unused employee shares

Under Regulation 33(2)(d), unsubscribed shares in one reserved category can move to another reserved category first. Anything still left goes to the net offer. In Jio's case, unused employee shares go first to the RIL shareholder portion and then to the retail and non-institutional portions in a 70:30 ratio.

Common mistakes

• Treating ₹5 lakh as a guaranteed allotment. Unless the quota is undersubscribed, nothing above ₹2 lakh counts.
• Calculating on the gross price. The limits are net of the discount, so ₹5 lakh buys more shares than at the full price.
• Assuming any group company qualifies. Only the issuer, its promoter and its subsidiaries count, and only as the RHP defines them.
• Applying during your notice period where the RHP excludes it.
• Skipping the retail bid. If you are eligible, a separate retail application is a second, independent chance.

Quick checklist

• Read the "Eligible Employee" definition and the cut-off date in the RHP.
• Note the employee discount in rupees from the price band announcement.
• Bid up to ₹5 lakh (net of discount), but expect a ₹2 lakh cap if the portion is oversubscribed.
• Consider separate retail and shareholder bids if you are eligible.
• Check allotment through the registrar: here is how.

Disclaimer: This article is for educational purposes only and is not investment advice. Read the RHP and consult a SEBI-registered adviser before investing.