What is the difference between Floor Price and Cut-Off Price for a Book Building Issue?

asked Sunday, October 21, 2007

Company coming up with Book Building Public Issue decided a price band for the issue. The price band usually contains an upper level and a lower level.

Floor Price is the minimum price (lower level) at which bids can be made for an IPO.

Investors can bid for the Book Build IPO at any price in the price band decided by the company. In Book Build process retail investors have an addition option to choose "Cut-Off" price for bidding.

Cut-off price means the investor is ready to pay whatever price is decided by the company at the end of the book building process. Retail investor has to pay the highest price while placing the bid at Cut-Off price. If company decides the final price lower then the highest price asked for IPO, the remaining amount is return to the retail investor.

answered Sunday, October 21, 2007

5 Comments

5. Jenish

| Link|Dec 11, 2020 1:10:25 PMReply

Can I apply ofs from my two different demate account from same pan no

4. Manish Madhav

| Link|Aug 23, 2020 8:07:26 AMReply

Is there a reason/advantage for opting cap price instead of cut-off price? In the example of Comment#3, The people who opted for cut-off price got the shares at 27 and the people who opted cap price (28) got the shares at 28. They could have opted for cut-off price it self. So, is there an advantage by opting for the cap price?

3. Indranil

| Link|Mar 18, 2011 4:04:51 PMReply

The price band of recent PFS ipo is 26 to 28
In the Nse site I see a fig of 1689.475 lac application at price of RS 28(upper band)
Also a fig of 273.635 Lac application at cut off
What is the difference betwwen the two

3.1. Saurabh

| Link|Mar 3, 2020 4:03:23 PM

It means that if a company decide to put the price of IPO at 27 then the subscription made at Cut-off will receive share at 27 while people who have place bid for 28 they will get share at 28

2. balakrishnan.p

| Link|Apr 17, 2015 12:45:10 PMReply

theree is face value is 10 but the price band is different, what is the different between this two in below example.......

Issue opens: Tuesday, April 21, 2015
Issue closes: Thursday, April 23, 2015
Price Band: INR 63 – INR 65
Bid Lot: 225 Equity Shares & in multiples thereafter
Face Value: Rs.10/-
Listing: BSE & NSE
Cheque in Favour of:

1. BASHA TALARI

| Link|Mar 14, 2014 1:59:31 AMReply

HI Friends,

I am just adding some explanation for the above answer with example.

In Book building process company will decide the price band i.e. maximum price and minimum price(Floor price).
For example SBI Coming up for IPO, decided price band as Minimum 10 and maximum is 100. in this case Investor has the opportunity to bid and he/she quoted or expressed his willingness to buy share @ 10 (Floor Price) and 100 is maximum price.

Cut-off price : Example

In this case company will decide the price of the share and investor buy the share at whatever the price decided by the company is called as cut-off price.

Example: SBI decided to issue it''s shares @ 250/- and investor doesn''t have option for Bid and ready to pay whatever the price decided by the company i.e.250 is called as cut-off price.

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What is the difference between Floor Price and Cut-Off Price for a Book Building Issue?

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