Book Building vs Fixed Price IPO: Price Discovery, Cut-Off and Allotment
Book built IPOs find their price from bids within a band. Fixed price IPOs set one price upfront. This guide covers cut-off, blocked amounts and how allotment differs.
Every Indian IPO is priced in one of two ways. In a fixed price issue, the company states one price before the issue opens, and everyone applies at that price. In a book built issue, the company announces a price band, investors bid within it, and the final price is set only after bidding closes. Almost every mainboard IPO today is book built. On the SME platforms, both methods are in use. The method changes how you bid, what amount is blocked, and how the shares are shared out.
The rules below come from SEBI's ICDR Regulations, 2018 (consolidated text amended up to 21 March 2026).
Book building: how the price is discovered
The price band
For mainboard IPOs, Regulation 29 says the top of the band (the cap) may be no more than 120% of the bottom (the floor). Since January 2022 it must also be at least 105% of the floor, so a ₹100 floor allows a cap anywhere from ₹105 to ₹120. The SME chapter has the same 120% ceiling. The band has to be announced at least two working days before the issue opens, and the advertisement must show key financial ratios at both ends of the band.
Who bids how
| Investor | Can bid at "cut-off"? | Can lower or withdraw a bid? |
|---|---|---|
| Retail individual (up to ₹2 lakh) | Yes | Yes, until the issue closes |
| Employees and eligible shareholders in reserved portions (within limits) | Yes, under most RHPs | Yes, until the issue closes |
| Non-institutional (above ₹2 lakh) | No, must state a price | No |
| QIBs | No, must state a price | No |
The cut-off option for retail investors comes from Schedule XIII of the ICDR Regulations. The ban on withdrawing or lowering QIB and NII bids is in the same schedule. RHPs such as Jio Platforms' (14 October 2026) list both rules in their definitions.
How the final price is set
When bidding closes, the company and its lead managers look at demand at each price and fix the issue price, usually at the cap when demand is strong. Every bid at or above the final price is eligible for allotment. Bids below it are dropped.
Fixed price: one price, no discovery
In a fixed price issue the offer document carries a single price. You choose only how many lots to apply for. There is no band to read, no cut-off box and no risk of bidding too low. There is also no price discovery: the company and its lead manager decide what the shares are worth, and demand during the issue affects only how many applicants get shares, not the price.
Worked example: what gets blocked and debited
The numbers below are illustrative.
Book built issue: band ₹95 to ₹100, lot of 150 shares.
| Your bid | Amount blocked | Final price ₹98: outcome |
|---|---|---|
| 1 lot at cut-off | ₹15,000 (cap × 150) | Eligible. If allotted, ₹14,700 is debited and ₹300 released. |
| 1 lot at ₹99 | ₹14,850 | Eligible. If allotted, ₹14,700 is debited and ₹150 released. |
| 1 lot at ₹96 | ₹14,400 | Not eligible, because the bid is below ₹98. The full amount is released. |
Fixed price issue: price ₹100, lot of 150 shares. The amount blocked is ₹15,000, and the same ₹15,000 is debited if you are allotted.
That is why retail investors in book built issues almost always tick cut-off. It guarantees the bid is valid whatever price is fixed. The cost is that slightly more money is blocked until allotment.
How allotment differs
Mainboard IPOs (book built under Regulation 6(1))
Regulation 32(1) sets out the net offer:
- at least 35% to retail individual investors;
- at least 15% to non-institutional investors, one-third of it for bids of ₹2 lakh to ₹10 lakh and two-thirds for bids above ₹10 lakh;
- up to 50% to QIBs, with up to 60% of that portion able to go to anchor investors.
Inside the retail portion, Regulation 49(4) sets the method. Each successful applicant gets at least one minimum lot. When the category is oversubscribed, a draw of lots decides who gets that one lot. See how IPO allotment works for the full calculation.
Mainboard fixed price issues
Regulation 32(4) gives at least 50% of the net offer to retail individual investors. The rest goes to other individuals and to institutions and corporates. If retail is entitled to more than 50% on a proportionate basis, it gets the higher share.
SME IPOs
SME issues follow Chapter IX, which works on lots rather than rupee bands:
- Minimum application: two lots, and the value must be above ₹2 lakh. This rule was tightened on 8 March 2025.
- Book built SME issues: at least 35% to individual investors applying for the minimum application size, at least 15% to NIIs, and up to 50% to QIBs.
- Fixed price SME issues: at least 50% to individual investors applying for the minimum application size.
- Underwriting: every SME IPO must be 100% underwritten, and the lead managers must underwrite at least 15% themselves.
- Minimum allottees: at least 200, against 1,000 for a mainboard issue.
Because the minimum application is set at two lots and above ₹2 lakh, small SME investors are really choosing one ticket size, and the draw is over who gets that minimum application. Our SME vs mainboard guide explains the wider differences.
Why an SME issuer might choose one method over the other
SEBI lets SME issuers pick either method. The trade-offs that usually decide it:
- Fixed price is simpler and cheaper. There is no bidding book to manage and no price band to defend. For a small issue where the lead manager and market maker already have a view on value, one price is easiest to explain to applicants.
- Book building needs institutional demand. Price discovery depends on QIBs and anchor investors showing up. Many small issues expect little institutional interest, so the band would discover very little.
- Book building can capture strong demand. When an issuer expects heavy demand, a band lets it finalise at the top rather than leave that value on the table. That pushes larger SME issues towards book building.
Before you apply, check the issue type on the NSE Emerge or BSE SME issue page or on the cover of the offer document. Do not assume. The market maker guide covers what happens after an SME stock lists.
Price band revisions: book built issues only
A company can revise its band during bidding. Schedule XIII lets the floor move up or down by up to 20% of the original floor, and the cap is then reset within the 120% rule. Under Regulation 46(2), any revision must extend the bidding period by at least three working days, and the total period cannot exceed ten working days. What that means for your bid is covered in our guide to undersubscribed and withdrawn IPOs.
Common mistakes
- Bidding below the cap to "save money". If the final price is higher, the bid is simply rejected.
- NIIs trying to use cut-off. It is not available to them. They must enter a price.
- Expecting an SME fixed price issue to allow one lot. The minimum is two lots and above ₹2 lakh.
- Reading the fixed price as a fair-value signal. It reflects what the issuer and lead manager decided, not what the market discovered.
- Withdrawing as an NII on the last day. Only retail and eligible reserved-category bids can be withdrawn.
Quick checklist
- Find the issue type ("Book Built Issue" or "Fixed Price Issue") on the RHP or prospectus cover.
- Book built: note the band and lot, tick cut-off if you are retail, and keep the cap amount in your account.
- Fixed price: confirm the minimum application, especially on SME platforms.
- Know your category's allotment method before you set expectations.
- After allotment, check status with the registrar: step-by-step here.
Disclaimer: This article is for educational purposes only and is not investment advice. Read the RHP and consult a SEBI-registered adviser before investing.
Written by IPOSathi Research
IPOSathi Research compiles IPO data from offer documents, exchanges and registrars. Articles are for education, not investment advice.
Frequently Asked Questions
What is the difference between a book built and a fixed price IPO?+
In a book built IPO, investors bid within a price band and the final price is set after bidding closes. In a fixed price IPO, one price is stated in advance and investors choose only how many lots to apply for.
Who can bid at the cut-off price?+
Retail individual investors, and usually employees and eligible shareholders bidding within their reserved-portion limits. Non-institutional investors and QIBs must bid at a specific price.
What happens if I bid below the final issue price?+
Your bid is not considered for allotment and the blocked amount is released. That is why retail investors usually choose cut-off, which blocks the cap price but is always valid.
How wide can an IPO price band be?+
For mainboard IPOs, the cap can be no more than 120% of the floor and, since January 2022, no less than 105% of it, under Regulation 29 of SEBI's ICDR Regulations.
Are SME IPOs fixed price or book built?+
Either. SEBI's SME rules allow both, so check the issue type on the offer document cover or the exchange issue page. In both cases the minimum application is two lots and must be above ₹2 lakh.
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