Two ways to price an issue
Fixed price. The company announces one price. You apply at that price or not at all. Simple, and now uncommon for larger issues.
Book building. The company announces a range, and investors bid within it. The final price is discovered from the bids. Almost all mainboard IPOs use this.
The price band
A range with a floor and a cap, for example ₹280 to ₹295, where the cap is typically within a limited percentage of the floor under the applicable rules.
During the bidding period, investors place bids at any price within the band. At the end, the company and bankers examine the book and set the cut-off price — the final issue price.
Bids at or above the final price are eligible for allotment. Bids below it are rejected entirely.
Band ₹280–₹295. Bidding closes and the price is set at ₹292.
- Bid at ₹295 → eligible. You pay ₹292, not ₹295. The difference is refunded or unblocked.
- Bid at ₹292 → eligible.
- Bid at ₹285 → rejected. You get nothing, and your money is released.
The cut-off option
Retail individual investors in mainboard IPOs may tick "cut-off price". This means: I accept whatever the final price turns out to be, anywhere in the band.
You are blocked for the upper end of the band, and if the final price comes in lower, the excess is unblocked or refunded.
Why it exists: retail investors have no way to guess where the book will settle. Bidding ₹285 in the example above would have meant missing out entirely, for no benefit.
Lot size
You cannot apply for an arbitrary number of shares. The RHP specifies a lot size, and applications must be in whole multiples of it.
For mainboard IPOs, SEBI requires the minimum application value for retail investors to fall in a narrow band — broadly ₹10,000 to ₹15,000 — so the lot size is worked backwards from the share price.
Price band up to ₹295. To land near ₹14,750, the lot size is set at 50 shares.
- 1 lot = 50 shares ≈ ₹14,750
- 2 lots = 100 shares ≈ ₹29,500
- and so on, in whole lots only
You cannot apply for 60 shares, or 75. Only 50, 100, 150…
Retail applications are capped at ₹2 lakh. Above that you are bidding in the non-institutional category, which has different allotment rules.
The bidding window
An issue is typically open for three working days. Bids can be placed on any of those days, up to the published cut-off times, which tighten on the final day.
Live subscription figures are published by the exchanges through the day, category by category. They tell you how demand is building — but a heavily subscribed issue is a statement about demand, not about the business.
Revising a bid
In mainboard issues, a retail bid may generally be revised upward during the bidding period. As noted above, SME rules now restrict downward revision and cancellation. The RHP and your broker's IPO screen state the applicable rules for the specific issue.
Anchor investors
Large institutions are allotted shares one day before the issue opens, at a price fixed in advance, with a lock-in period. This is covered in the next lesson — but note that the anchor book, published before you bid, tells you which institutions were willing to commit and at what price.
Key takeaways
- Book building discovers the price from bids within a band, rather than fixing it in advance.
- Bids below the final price are rejected entirely; bids above it pay the final price.
- Cut-off is the standard retail choice in mainboard IPOs — and is not available in SME issues under the 2025 rules.
- Applications must be in whole lots; mainboard retail lots are sized around ₹10,000–₹15,000.
- Retail applications are capped at ₹2 lakh; SME minimums are far higher.
Check your understanding
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