What is IPO Cut-Off Price?
The cut-off price in an IPO is the final issue price at which shares are allotted to investors after the book-building process is complete. When you select the cut-off price option while applying for an IPO, you are essentially telling the exchange that you are willing to pay whatever final price the company decides within the announced price band. You do not specify a fixed price — instead you agree in advance to accept the discovered price.
How is the Cut-Off Price Determined?
After the IPO subscription period closes, the company and its lead managers analyze all bids received across the price band. The cut-off price is set at the level where the IPO is fully subscribed — meaning where total demand meets or exceeds total supply. All investors who bid at or above this price receive allotment consideration. Investors who bid below the cut-off price have their applications automatically rejected.
Cut-Off Price vs Specific Price Bidding — What is the Difference?
When you bid at a specific price within the price band — say ₹190 in an IPO with a band of ₹180 to ₹200 — your application is valid only if the final cut-off price is ₹190 or below. If the cut-off is set at ₹200, your application gets rejected even though you applied within the price band. Choosing the cut-off price option eliminates this risk entirely because your bid is automatically matched to whatever the final price turns out to be.
Why Should Retail Investors Always Choose Cut-Off Price?
For retail individual investors, SEBI explicitly allows and recommends the cut-off price option because it ensures your application remains valid regardless of where the final price is set within the band. The difference between the floor and cap price is usually small — often just ₹10 to ₹20 — so bidding at cut-off gives you the best allotment chances without any meaningful extra cost.
Bidding at a specific lower price in an attempt to save a few rupees is a common mistake that results in application rejection if the final price is set higher. The marginal saving is never worth the risk of losing your allotment chance entirely.
Is Cut-Off Price Available for All Investor Categories?
The cut-off price option is available only for retail individual investors and eligible employees applying under the employee reservation category. HNI and QIB investors must bid at a specific price within the price band and cannot use the cut-off price option. This is one of the few advantages retail investors have in the IPO process.
What Happens to the Extra Amount if Cut-Off Price is Lower Than Cap Price?
When you apply at cut-off price, your bank blocks the amount calculated at the cap price — the highest possible price in the band. If the final cut-off price is set lower than the cap price, the difference is automatically unblocked and returned to your account after allotment. You only pay the final allotted price, not the cap price.
Conclusion
Choosing the cut-off price is always the right decision for retail IPO investors. It maximizes your allotment eligibility, eliminates the risk of application rejection due to price mismatch, and costs you nothing extra since any overpaid amount is refunded automatically. Track all upcoming IPOs with complete price band and cut-off price details on IPOView before you apply.