By ipomarket.in Editorial Team · Last reviewed: 2026-08-13
Disclaimer: This article is for informational purposes only and does not constitute investment advice. IPO investments are subject to market risks. Please read the offer document carefully and consult a SEBI-registered investment advisor before investing.
Many Non-Resident Indians (NRIs) want to participate in Indian IPOs, but the rules are not as simple as opening a demat account and applying. Two layers of regulation sit on top of every application: sectoral Foreign Direct Investment (FDI) caps that decide how much foreign money a sector can absorb, and NRI-specific shareholding ceilings that apply per company. This explainer walks through both, and what they mean when you sit down to apply.
What are sectoral FDI limits?
FDI stands for Foreign Direct Investment, money that overseas investors put into Indian businesses. To balance capital inflows with strategic and policy concerns, the Government of India sets a maximum percentage of foreign ownership sector by sector. This is the sectoral FDI cap.
Some sectors are wide open, others are gated, and a few are shut entirely. According to the government's FDI policy updates for 2025-26:
- Telecom: 100% FDI is permitted under the automatic route (no prior government approval needed).
- Defence: up to 74% is allowed through the automatic route, raised from the earlier 49%, for companies seeking new industrial licences. Investment beyond that threshold requires government approval.
- Insurance: the cap was raised from 74% to 100%, subject to the condition that the full premium income is reinvested in India.
These caps apply to the aggregate of all foreign investment, which includes FDI, Foreign Portfolio Investors (FPIs) and, in some interpretations, NRI holdings depending on how the money enters. The exact figures and conditions can change with each policy revision, so treat any single number as a snapshot rather than a permanent rule.
How NRI participation differs from FPI
NRIs are not treated the same as FPIs. There is a separate ceiling for non-resident Indians and Overseas Citizens of India (OCIs) on the secondary market:
- Each individual NRI or OCI cannot hold more than 5% of the total paid-up equity capital of any single listed company.
- Collectively, all NRIs and OCIs together cannot hold more than 10% of that company's paid-up capital.
- This 10% aggregate ceiling can be raised up to 24% if the company's general body passes a special resolution to that effect.
So even when a sector allows high foreign ownership overall, the NRI slice within it has its own limit. This is important because these caps are monitored on an ongoing basis, and once a company nears its ceiling, further non-resident buying can be restricted.
The IPO participation process for NRIs
Here is where the practical answer lies. NRIs can apply to Indian IPOs, generally as retail investors, but with conditions:
- The company must permit it. NRI participation is subject to the issuing company allowing non-residents to subscribe. This is disclosed in the offer document.
- Check the RHP. NRIs should read the Red Herring Prospectus to confirm whether SEBI and the company have permitted NRI subscription for that specific issue. If you are unsure what this document is or how to read it, see our guide on what a DRHP is and how to read it.
- Primary market bypasses PIS at application stage. IPO subscriptions do not require a Portfolio Investment Scheme (PIS) account to apply. However, shares allotted may need to sit in the correct account, and selling them later can involve PIS or the applicable repatriation framework, depending on how you invested.
Because the process runs through ASBA (Application Supported by Blocked Amount), the mechanics of applying resemble those for resident investors, though the account type and category selection differ. Our walkthrough on how to apply for an IPO online in 2026 explains the general flow.
Sectors and companies where NRIs may not be able to invest
A few areas are broadly off-limits to foreign capital, and by extension typically to NRI participation through the foreign-investment route:
- Atomic energy
- Lottery and gambling businesses
- Certain railway infrastructure segments
Banking and defence carry their own conditions and, in cases, require government approval rather than the automatic route.
Beyond sectors, there are company-specific restrictions. Some listed companies are closed to fresh NRI investment because they have already hit their NRI ceiling or because of a policy decision. RBI and SEBI maintain lists reflecting these limits, and brokers usually flag if a company is restricted. The live position for many companies can be tracked through the depositories' foreign-investment monitoring dashboards, which we discuss below.
GIFT City: the 100% NRI exception
One recent liberalisation stands out. In June 2024, SEBI amended its FPI Regulations to allow increased participation, up to 100%, by NRIs, OCIs and Resident Indian individuals in the corpus of FPIs based in International Financial Services Centres (IFSCs) in India, most notably GIFT City in Gujarat.
In practical terms, this makes it easier for NRIs to route investments through IFSC-based FPI structures rather than being constrained by the older limits. That said, sector-wise caps within GIFT City structures are not fully detailed in the public material we reviewed, and earlier restrictions on NRI capital in some alternative investment fund structures had been reported. If you are considering this route, verify the current terms with the fund and your advisor.
Compliance and monitoring
Foreign investment ceilings are watched closely. The depositories and exchanges run monitoring systems that track how much room is left before a company hits its FDI or NRI cap. When a stock approaches its threshold, it can be placed on a caution or ban list, halting further non-resident purchases.
For an IPO applicant, this matters most at the point of application and allotment. If a company's NRI or overall foreign limit is already tight, or if the RHP does not extend the offer to NRIs, an application can be rejected on eligibility grounds rather than on the usual allotment lottery. To understand how shares are distributed once you are eligible, see our explainer on the IPO allotment process.
What this means in practice
If you are an NRI eyeing an upcoming issue, the sequence is straightforward: confirm the RHP permits NRI subscription, confirm you are using the correct account category, and be aware that individual and aggregate caps can affect both the application and any later sale. None of this is investment advice; it is simply the eligibility groundwork that sits before any decision about whether an IPO suits your goals.
FAQ
Can NRIs apply to every Indian IPO?
No. NRI participation depends on the issuing company permitting it, which is disclosed in the Red Herring Prospectus. Some issues do not extend subscription to non-residents, so the RHP is the document to check first.
What is the maximum an NRI can hold in a single company?
An individual NRI or OCI cannot hold more than 5% of a company's paid-up equity capital, and all NRIs and OCIs together cannot exceed 10%. That aggregate ceiling can be raised up to 24% if the company passes a special resolution.
Do NRIs need a PIS account to apply to an IPO?
Based on available information, IPO subscriptions bypass the PIS requirement at the application stage. However, selling allotted shares later may involve PIS or the applicable repatriation framework. Confirm the current requirement with your bank or broker, as this is an area to verify.
How does GIFT City change things for NRIs?
Since a June 2024 SEBI amendment, NRIs, OCIs and resident Indians can hold up to 100% in the corpus of FPIs based in IFSCs such as GIFT City. This offers an alternative route with more headroom than the older NRI limits, though sector-specific conditions should be verified.
Which sectors are closed to NRI investment?
Atomic energy, and lottery and gambling businesses are generally prohibited for foreign capital. Certain railway infrastructure, banking and defence segments carry additional conditions or require government approval. Company-specific restrictions also exist where an NRI ceiling has been reached.
Last reviewed: 2026-08-13. Rules on FDI caps and NRI limits change with policy revisions; always confirm the current position from the RHP, RBI, SEBI or your broker before acting.