Part of the guide: How an IPO works in India: the process from filing to listing, step by step
IPOHow to read an IPO price band and lot size, with an example
What a price band and a lot size mean, how the minimum amount for one bid is worked out, and what the issue price is. Arithmetic with illustrative numbers, with no view on any offer.
Two numbers in an IPO announcement decide what a single bid looks like: the price band and the lot size.
The price band
A price band is a range, such as ₹190 to ₹200 per share. Bids can be placed anywhere within it. After the bidding closes, the company and its managers fix one issue price within the band, and everyone who is allotted shares pays that price. The floor price is the lower end, the cap price the upper end.
The lot size
The lot size is the smallest number of shares you can bid for, for example 75 shares. Bids are in multiples of it: one lot, two lots, and so on.
The arithmetic (illustrative)
For a hypothetical offer with a price band of ₹190 to ₹200 and a lot size of 75:
| Amount | |
|---|---|
| Minimum bid at the cap price | 75 × ₹200 = ₹15,000 |
| Minimum bid at the floor price | 75 × ₹190 = ₹14,250 |
| Two lots at the cap price | 150 × ₹200 = ₹30,000 |
The amount that is blocked in your account is worked out at the cap price, so it is enough whichever price is finally fixed. If the issue price turns out lower than the cap, the difference is released. If you are not allotted shares, the whole blocked amount is released.
What the price band does not tell you
It does not say whether the price is high or low. The band is the range the company and its managers chose, and the offer document explains the basis. This site does not comment on whether any band is fair.
Where to find the numbers
In the red herring prospectus and in the issue announcement on the exchanges. The full path from filing to listing is in how an IPO works in India.