IPO Price Band and Cut-off Price: How Final Price Is Set
IPO price band and cut-off price explained: SEBI's 120% band rule, how book building sets the final price, who can bid at cut-off and what gets blocked.
In this article
An IPO price band is the range, from a floor price to a cap price, within which you can bid in a book-built issue. The cut-off price is the single final price the company and its lead managers fix after bidding closes, based on the demand they see. As a retail investor you can simply tick "cut-off" to accept that final price; your bank blocks money at the cap, and anything above the final price is released after allotment.
The rules below are as of October 2026 under SEBI's ICDR Regulations for mainboard IPOs. This guide is educational and does not recommend any IPO.
Fixed price vs book building
| Feature | Fixed-price issue | Book-built issue |
|---|---|---|
| Price known before bidding | Yes, one price | No, only a band |
| How the final price is set | Set in advance by the company | After bidding, based on demand in the book |
| Can retail bid at cut-off | Not needed | Yes |
| Demand shown during the issue | Usually at close | Category-wise bids updated through the day |
| Common for | Some small issues | Almost all mainboard IPOs |
Almost every mainboard IPO in India uses book building, which is why the price band and cut-off matter.
SEBI rules on the price band
- Width: the cap price must be less than or equal to 120% of the floor price. Since SEBI's 2022 amendments, the cap is also required to be at least 105% of the floor, so the band cannot be too narrow. Check the current ICDR text if you need the exact wording.
- Announcement: the price band must be announced at least two working days before the issue opens, through a pre-issue advertisement and the exchanges.
- Floor and face value: the issue price cannot be below the face value of the share.
- Revision: a company can revise the band during the issue, within the 120% rule. If it does, the issue period is extended (by at least three working days under the rules), and the revision is publicly announced.
The red herring prospectus (RHP) leaves the price blank; the band appears in the price band advertisement, and the final price appears in the prospectus filed after bidding. Our guide to reading the IPO offer document shows where to find each one.
How the final price is decided
During the issue, bids are collected in an electronic "book" on NSE and BSE. Each bid records the number of shares and the price. Retail bids at cut-off are treated as bids at every price in the band, including the cap, because the bidder has agreed to pay whatever is fixed.
After bidding closes, the company and the book-running lead managers (BRLMs) look at the demand at each price, especially from qualified institutional buyers, and fix the issue price. It is a judgement, not a mechanical auction: they may weigh the quality and stability of institutional demand, not only the highest price at which the issue is covered. In practice, popular issues are almost always priced at the cap.
Worked example: reading a demand book (illustrative)
Suppose a hypothetical issue offers 1 crore shares in a price band of ₹270 to ₹285. The cap is 285 ÷ 270 = 105.6% of the floor, inside the 120% limit. Bids received:
| Price | New bids at this price | Cumulative demand at or above this price | Times covered |
|---|---|---|---|
| ₹285 (incl. all cut-off bids) | 2.6 crore shares | 2.6 crore | 2.6× |
| ₹283 | 0.3 crore | 2.9 crore | 2.9× |
| ₹280 | 0.4 crore | 3.3 crore | 3.3× |
| ₹275 | 0.2 crore | 3.5 crore | 3.5× |
| ₹270 | 0.1 crore | 3.6 crore | 3.6× |
Demand at the cap (2.6 crore shares) is already 2.6 times the 1 crore shares offered, so the company can fix the price at ₹285 and still be fully covered. A bidder who entered ₹280 is below that final price, so that bid is not valid. Cut-off bids count at ₹285, so they are always valid.
If, instead, only 0.8 crore shares were demanded at ₹285 but 1.2 crore at or above ₹280, the company might fix the price at ₹280, the highest price at which the issue is fully covered.
Who can bid at cut-off
| Category | Bid at cut-off? | What you enter |
|---|---|---|
| Retail individual investor (up to ₹2 lakh) | Yes | Tick cut-off |
| Employee reservation | Yes, within the applicable limit | Tick cut-off |
| Shareholder reservation (up to ₹2 lakh) | Yes | Tick cut-off |
| sHNI and bHNI (NII) | No | A price, usually the cap |
| QIB and anchor investors | No | A price |
Retail limits are measured at the cap price, which matters when you work out your maximum lots. See IPO categories: retail, sHNI and bHNI for the lot calculations.
What gets blocked and what you pay
Your bank blocks money at the cap price for every share you apply for. After allotment you pay only for allotted shares at the final price.
Example (illustrative): lot size 52 shares, band ₹270 to ₹285. A retail investor bids for 13 lots at cut-off.
- Shares: 13 × 52 = 676
- Blocked: 676 × ₹285 = ₹1,92,660
- If the final price is ₹280 and all 676 shares were allotted: payable 676 × ₹280 = ₹1,89,280, and ₹1,92,660 − ₹1,89,280 = ₹3,380 is released.
- If, as is common in oversubscribed issues, only 1 lot is allotted: payable 52 × ₹280 = ₹14,560, released ₹1,92,660 − ₹14,560 = ₹1,78,100.
- If nothing is allotted, the full ₹1,92,660 is released by T+2 under the T+3 timeline.
Some issues offer a fixed rupee discount per share to employees or retail investors. The discount is applied to the final price and is shown in the RHP and the bidding app. For the step-by-step bidding process, see how to apply for an IPO online.
When to quote a price instead of cut-off
A retail investor may prefer to bid at a specific price only if they do not want to pay above that level. The trade-off is clear: if the final price ends up higher, the bid is rejected. Most retail investors choose cut-off because the band is narrow and popular issues price at the cap.
The price band is not a valuation verdict
A price band tells you what the company is asking, not what the business is worth. Compare the price to earnings, peers and growth disclosed in the RHP. Grey market premium figures are unofficial and change fast. You can follow price bands and subscription for current issues on our live IPO dashboard, and if you hold shares after listing, our CAGR calculator shows your annualised return.
Key takeaways
- The price band runs from the floor to the cap; the cap can be at most 120% of the floor, and the band is announced at least two working days before opening.
- The final (cut-off) price is fixed by the company and lead managers after bidding, based on the demand book; strong issues price at the cap.
- Retail, employee and shareholder-quota bidders can tick cut-off; NII and QIB bidders must quote a price.
- Money is blocked at the cap; you pay only for allotted shares at the final price.
- A bid at a fixed price below the final price is rejected.
- A band revision extends the issue and must be publicly announced.
Frequently asked questions
What is the price band in an IPO?
It is the range within which investors can bid in a book-built IPO. The lower end is the floor price and the upper end is the cap price, and SEBI rules say the cap cannot be more than 120% of the floor.
What does cut-off price mean in an IPO?
The cut-off price is the final issue price fixed by the company and its lead managers after bidding closes. A retail investor who ticks cut-off agrees to buy at that final price, whatever it is within the band.
Who can bid at the cut-off price?
Retail individual investors and eligible bidders in the employee and shareholder reservations can bid at cut-off. Non-institutional and qualified institutional bidders must quote a specific price.
Why is the final IPO price usually the upper end of the band?
When demand is strong at the top of the band, the company and lead managers usually fix the price there. If demand is weak, they can fix it lower within the band.
What happens if I bid below the final price?
Your bid is rejected because it is below the issue price. Retail investors can avoid this by ticking cut-off instead of entering a specific price.
Is extra money refunded if the final price is lower than the cap?
Yes. The amount is blocked at the cap price. If the final price is lower, only the amount for allotted shares at the final price is debited, and the rest is unblocked.
This article is for general education and is not personalised financial, tax or legal advice. Rates and rules are as of 22 Oct 2026; confirm current terms with your lender, AMC or a qualified adviser.
