What is the three bid system in an IPO?

When you open an IPO application form for the first time, one thing often catches your eye, those three separate rows for bidding. It looks a bit technical at first glance, almost as if you’re expected to crunch numbers like an analyst. But the reality is much simpler, and getting the three bid system in an IPO explained properly can actually make your application strategy far more confident.

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In most book built IPOs, retail investors are allowed to place up to three different bids. Think of it as giving yourself three attempts instead of just one. Each bid can be at a different price within the announced range, and you can choose how many lots you want in each. It’s a bit like having three chances to align your expectations with the market’s mood.

Now, why does this matter? Because these IPO bidding options for retail investors give you room to think and adjust, instead of locking yourself into a single guess. Some people like to place a cautious bid at the lower end of the band, one in the middle for balance, and a more confident one at the upper limit. Others skip the lower prices entirely and focus only on the stronger bids. There’s no rigid rule; it depends on your own risk appetite and how strongly you feel about the company.

The important part is understanding how the three bid structure works in public issues at the back end. Even though you can enter three different bids, the system eventually picks only your highest valid bid during allotment. If the company decides a cut-off price and your lower bids fall below it, those bids are ignored automatically. You’re still considered based on your strongest bid, so nothing is lost.

Interestingly, despite having this flexibility, many retail investors now simply choose the “cut-off” option, because it saves the effort of guessing the right price. But the three bid system remains extremely useful if you like having finer control over your application, especially in volatile or unpredictable issues.

In the end, the beauty of this system is that it supports beginners and expert investors alike. You can play it safe, you can take a chance, or you can do a little of both. It’s a small but thoughtful feature that lets every applicant shape their bid in a way that feels comfortable, without making the process complicated or overwhelming.