Bidding in IPO - Complete Guide

IPO bidding is the process through which investors apply for shares in an Initial Public Offering (IPO) by submitting bids at specific prices and quantities during the IPO subscription period.

Below is a complete and clear explanation:

1. Meaning of IPO Bidding

IPO bidding refers to placing an application for IPO shares by specifying:

• Number of shares (lots)
• Price within the given price band (or at cut-off)

IPO bidding helps determine the final issue price of the shares through demand from investors.

2. Types of IPOs Based on Pricing

1. Fixed Price Issue

• Company fixes a single price
• Investors apply at that price only
• No price discovery through bidding

2. Book Building Issue (Most Common)

• Company provides a price band (e.g., ₹100–₹110)
• Investors place bids within this range
• Final price is discovered based on demand

3. IPO Bidding Process (Step-by-Step)

1. Company announces IPO details
2. IPO opens for bidding (usually 3 days)
3. Investors place bids via brokers/online platforms
4. Bids are collected and demand is analyzed
5. Final issue price (cut-off price) is decided
6. Shares are allotted
7. Shares are listed on stock exchange

4. Bid Categories in IPO

IPO bids are divided into categories:

1. Retail Individual Investors (RII)

• Investment up to ₹2 lakh
• Can apply at cut-off price
• Shares allotted by lottery if oversubscribed

2. Qualified Institutional Buyers (QIBs)

• Mutual funds, FIIs, banks
• Cannot bid at cut-off
• Allocation based on proportionate basis

3. Non-Institutional Investors (NII / HNI)

• Investment above ₹2 lakh
• No cut-off option
• Proportionate allotment

5. What Is Cut-Off Price?

• Final price decided after IPO closes
• Retail investors can select “cut-off”
• Means investor agrees to buy at final price

👉 Safest option for retail investors

6. How Many Bids Can One Place?

• Up to 3 bids per IPO application
• Different prices but same quantity
• Only one bid is considered finally

7. IPO Bidding Lot Size

• Shares are applied in lots
• Example:
• Lot size = 50 shares
• Minimum application = 50 shares
• Maximum retail application = ₹2 lakh

8. Subscription Status During Bidding

Investors can track:

• Overall subscription
• Category-wise subscription (RII, QIB, NII)
• High subscription = high demand

9. ASBA in IPO Bidding

• IPO bids are made through ASBA
• Money is blocked, not deducted
• Deducted only if shares are allotted
• Unblocked if not allotted

10. Advantages of IPO Bidding

• Transparent price discovery
• Equal opportunity for investors
• Retail protection via cut-off option
• Funds blocked safely via ASBA

11. Risks in IPO Bidding

• Oversubscription may lead to no allotment
• Listing price may be lower than issue price
• Hype-driven demand can mislead investors

12. Example of IPO Bidding

Price band: ₹100–₹110
Lot size: 100 shares

• Retail investor bids at cut-off
• Final price fixed at ₹108
• Amount blocked = ₹10,800
• Shares allotted or amount released

13. IPO Bidding vs IPO Allotment

14. In Simple Words

IPO bidding is the process of applying for IPO shares by choosing the price and quantity during the IPO subscription period to help determine the final issue price.Bottom of Form