What does cutoff price mean in an IPO application?

No image 5paisa Capital Ltd - 2 min read

Last Updated: 23rd December 2025 - 10:21 am

When applying for an IPO, the term cut off price often confuses many investors. Let’s look at the cutoff price in IPO meaning explained clearly and simply.

The cut off price is the final issue price at which shares are allotted to investors during a book built IPO. Before the IPO opens, the company sets a price range, for example, ₹100 to ₹110 per share. Investors place their bids within this range based on how much they’re willing to pay. Once the bidding closes, the company calculates demand and decides the final price where maximum subscriptions can be satisfied. That final price becomes the cut off price.

This is particularly crucial for retail investors. When you choose the "cut-off" option during the process of application, it indicates that you are willing to buy the shares at any price that is finally set by the issuer. It makes the procedure easier as there is no need to speculate on the exact price in advance. This is one of the most intelligent ways to secure the validity of your application no matter what price is ultimately selected.

The retail investor IPO cut-off price is a mechanism of ensuring fairness. While institutional or high-net-worth investors are allowed to submit their bids at various price levels, retail investors opting for the "cut-off" price are automatically included in the allotment at the price discovered. This method makes it more likely for you to get an allotment, particularly in the case of oversubscribed IPOs.

In essence, understanding the cut-off price concept in an IPO helps investors make informed choices. Instead of worrying about missing the right price point, you can confidently select the cut off option to stay in the race for allotment. It’s a small but crucial detail that makes IPO investing smoother and more efficient.

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Krishca Strapping Solutions Limited

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  • Date Range 23 Oct- 27 Oct’23
  • Price 23
  • IPO Size 200
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