An IPO issue has a price range within which an investor can place his/her bid. IPOs issues generally have something called as price band and cut-off price, both of which are unique.
The cut-off price is the price that is decided by the book-running lead managers of the IPO in consultation with the company. In a book-building issue, the cut-off price is the price that is anywhere between the price band and the price above the floor price.
As per the SEBI regulations, only retail investors and investors under the employee reservation category are allowed to bid at the cut-off price in an IPO. QIBs and NIIs are not entitled to bid at the cut-off price. Furthermore, the eligible investors have to opt for the cut-off price at the time of application to ensure allotment of shares based on their demand and whether the IPO is oversubscribed or undersubscribed.
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