The short answer
The cut-off price is the final issue price fixed after bidding closes, within the price band. Retail investors, bidding up to ₹2,00,000, can tick "cut-off" to accept that final price. The amount at the top of the band is blocked; if the final price is lower, only the lower amount is debited and the rest is released.
The price band and the final price
Most mainboard IPOs are book-built. Instead of one fixed price, the company announces a price band, a floor and a cap, and investors bid at a price within it. After the issue closes, the company and its bankers look at the demand at each price and set the final issue price, also called the cut-off price. Shares are allotted only to bids at or above it.
When you tick the cut-off box in your application, you are not choosing a price. You are agreeing to buy at whatever final price is decided. To make sure you can pay for it, the full amount at the cap of the band is blocked in your bank account.
How the final price is decided
The price is discovered through book building. During the issue, the exchanges record how many shares are bid for at each price in the band. Institutional and non-institutional bids are made at specific prices, so they show the depth of demand at each level. Retail cut-off bids do not, because they accept any price within the band.
Many issues also have anchor investors, large institutions that are allotted shares one working day before the issue opens, at a price within the band. Their participation is public before you apply.
The final price is announced with the basis of allotment, the working day after the issue closes. It is the same for every allottee in a category, though an issue may offer a fixed rupee discount per share to retail investors or employees.
What gets blocked and what gets debited
Take an illustrative issue with a price band of ₹380 to ₹400 and a lot of 37 shares. A retail investor can bid for up to 13 lots, since 14 lots at the cap would cross ₹2,00,000. The table shows the amount blocked for a cut-off bid, and what is debited if one lot is allotted.
| Lots bid | Blocked at the cap | Debited for 1 lot at ₹400 | Debited for 1 lot at ₹390 |
|---|---|---|---|
| 1 | ₹14,800 | ₹14,800 | ₹14,430 |
| 7 | ₹1,03,600 | ₹14,800 | ₹14,430 |
| 13 | ₹1,92,400 | ₹14,800 | ₹14,430 |
- If the final price is set at ₹390 instead of the cap, you pay ₹370 less per lot and the rest of the block is released.
- A bid of ₹390 without the cut-off box is not considered at all if the final price is ₹400. That is the main reason to bid at cut-off.
- In practice, issues with strong demand are usually priced at the top of the band.
Who can bid at the cut-off price
The cut-off option exists so that small investors do not have to guess the final price. SEBI allows it only for retail individual investors, bidding up to ₹2,00,000, and for eligible employees and shareholders bidding in their reserved portions. Non-institutional investors (often called HNIs) and qualified institutional buyers must bid at a specific price and cannot use the cut-off option.
In a fixed-price issue, which is common among SME IPOs, there is only one price, so the question does not arise.
The cut-off price should not be confused with the listing price. The issue price is what you pay. On listing day the exchange runs a short pre-open session to discover the opening price from buy and sell orders, and that price can be well above or below the issue price. Bidding at cut-off says nothing about which way it will go.
Common mistakes with the price
- Bidding at the floor or mid-band to save a little. If the issue is priced at the cap, the bid is out of the allotment.
- Working out the number of lots at the floor price. A cut-off bid is valued at the cap, so the lots must fit within ₹2,00,000 at the cap price. Most apps enforce this.
- Not keeping enough balance for the amount at the cap. The mandate fails if the bank cannot block the full amount.
- Assuming a cut-off bid means a discount. Any employee or retail discount is announced in the offer document, and is separate.
How to bid at cut-off
While the issue is open you can modify or cancel your bid through the same app. A change may send a fresh UPI mandate, so check your UPI app and approve it. Once the issue closes, the bid is final and the block stays until the basis of allotment is complete.
- Open the IPO in your broker's app or your bank's ASBA section while the issue is open.
- Enter the number of lots, keeping the total at the cap within the retail limit.
- Tick the cut-off option. The app fills in the cap price for the block.
- Enter your UPI ID if you are applying through a broker, and approve the mandate in your UPI app by 5 pm on the closing day.
- After allotment, check the result on our IPO allotment status page. Open and upcoming issues are on the IPO tracker.
Frequently asked questions
Should I bid at the cut-off price in an IPO?
Usually, yes, as a retail investor. A bid below the final price is not considered for allotment, and a cut-off bid only debits the final price.
Can HNIs bid at the cut-off price?
No. Non-institutional and institutional investors must bid at a specific price. The cut-off option is for retail individual investors and eligible employee and shareholder quotas.
What happens if the final IPO price is lower than the cap?
You pay the final price for the shares allotted. The extra amount blocked at the cap is released along with the rest of the block.
Is the cut-off price the same as the listing price?
No. The cut-off price is the issue price you pay. The listing price is set by trading on the exchange on listing day and can be higher or lower.
Does bidding at cut-off increase IPO allotment chances?
Only by keeping your bid valid. In an oversubscribed retail category, allotment is a lottery of one minimum lot per valid application.