Book building is the standard mechanism by which most Indian IPOs discover their price. The company announces a price band (e.g. ₹400–₹420), investors bid at any price within the band over a 3-day window, and the final issue price (the "cut-off") is set at the highest price at which the issue is fully subscribed.
How it works
- Anchor investors and QIBs signal early demand
- Retail and HNI investors bid during the public window via ASBA
- Investors can select "cut-off price" to accept whatever final price is set
- All successful bidders pay the same cut-off price regardless of bid price
Why it matters for unlisted shares
Book building determines the IPO price that pre-IPO investors compare against their entry price. Heavy oversubscription at the top of the band signals strong listing premium. Subscription concentrated at the lower end — or weak QIB interest — often precedes a flat or negative listing.
Example: An IPO with a ₹200–₹215 band saw 90% of bids at ₹215; cut-off was set at ₹215 and the stock listed at ₹280.