How IPO shares price is discovered in early price discovery session?

The price discovery session is an early trading session on the day of listing of IPO shares. The process is also known as 'call auction'.

This session is usually for an hour before the regular trading starts. The weighted average price in that session becomes the base on which the circuit filter is calculated when regular trading starts.

As per SEBI (the market regulator) there are no limits for price discovery in price discovery session. But the exchanges apply an operating range of 75% during the price discovery session. This is to ensure that a few random bids do not twist the process. If there is heavy demand at the upper end of the 75% operating range, BSE and NSE officials jointly decide to relax the ceiling. However, if demand is not as heavy, the 75 percent ceiling stays.