Price Band, Lot Size, and Issue Structure
Understand how price bands, lot sizes, and issue structures work in IPOs to make informed investment decisions.
Fixed vs. Book Build
Fixed Price IPO: Company fixes a price per share before IPO opens.
Book Building IPO: Price band is given; final price discovered based on bids.
Most Indian IPOs use book building for fair market-driven pricing.
Price Band and Discovery
Price band indicates minimum and maximum share price during IPO.
Investors bid at any price within this band.
Final price fixed after bidding based on demand and market conditions.
Remembering Point
Price band = the playground range where buyers and sellers negotiate.
Lot Size and Issue Size
Lot size: minimum number of shares an investor must apply for in one lot.
Issue size: total number of shares offered in IPO.
Check Points
Investors can apply in multiples of lot size only. Larger issue size means more shares available for subscription.
Fresh Issue vs OFS
Fresh Issue: Company issues new shares to raise funds.
Offer for Sale (OFS): Existing shareholders sell their shares.
Warning
OFS doesn’t raise new funds for the company; evaluate it differently.
Key Terms Table
| Term | Meaning | Example |
|---|---|---|
| Price Band | Range of share prices | ₹100 - ₹110 per share |
| Lot Size | Minimum shares to apply | 100 shares per lot |
| Issue Size | Total shares offered | 1,000,000 shares |
| Fresh Issue | New shares issued | Company raises ₹100 cr. |
| OFS | Existing shares sold by owners | Promoter sells 10% shares |
Questions and Answers
Q: Can I bid below the price band?
A: No, bids outside the price band are rejected.
Q: What happens if the IPO is oversubscribed?
A: Shares are allotted proportionally or by lottery method.
Practice Questions
Why might a company choose book building over fixed price?
How does lot size impact retail investors’ participation?
Till Now Learnings
Price band helps price discovery via bidding.
Lot size sets minimum investment quantity.
Fresh issue raises capital; OFS redistributes existing shares.
References
SEBI ICDR Regulations
IPO FAQs on NSE
Investor Education by BSE