Under an IPO, there are different categories of investors that can participate to subscribe for the shares or other securities of a company. The pricing offered to different investors can be different as per the company’s internal decisions and suggestions by underwriters.
When securities under a public issue are offered at different pricing to different categories of investors, it is known to have differential pricing. As per the guidelines of DIP (Disclosure and Investor Protection), differential pricing policies are applicable only in case the allotment is at a price higher than the net public offer.
Differential pricing rules are applicable only to retail investor category and employees. For retail investors, the differential pricing can be a maximum of 10% discount on the price that is offered to other categories of investors. The maximum discount under differential pricing allowed for employees is to the extent of10% discount on the floor price.
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