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Market Intelligence › Basic Terminologies
The price band, the cut-off price and the discovery process
Published by The Retail Trader · AUG 05, 2026 · Market Basics
Not every IPO fixes its price the same way. In some issues the price is stated in advance, and in others it is formed from applications. The way you apply is different in the two as well.
In a fixed price issue the company names a single price and everyone applies at that price. Demand becomes known only after the issue closes.
In book building there is a price band, with a floor and a cap. Investors bid within the band, and the final price is set from those bids. This is called price discovery.
Retail gets an extra option called the cut-off:
• Cut-off means you are ready to take it at whatever the final price is.
• Because of it your bid is not rejected for being outside the price band.
• The application amount is blocked at the upper band, and the difference is released later.
• This is only for the retail category.
Do not treat the price band as a certificate of valuation. The band is set by the company and its bankers, not the market — the market's verdict shows up in the weeks after listing, not in the red herring prospectus.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no guaranteed-return claim, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.