Issue Price of a Share in IPO - Complete Guide

The issue price of a share is the price at which a company offers its shares to investors for the first time in the primary market, such as through an IPO, FPO, or rights issue.

Below is a complete and detailed explanation:

1. Meaning of Issue Price

The issue price is the final price per share at which investors are allotted shares in a public issue.

• It is the price paid by investors to the company
• Applies only in the primary market
• Once shares are listed, market price may be higher or lower

Example:
If the issue price is ₹150, investors pay ₹150 per share to get allotted shares.

2. Where Issue Price Is Used

Issue price is applicable in:

• IPO (Initial Public Offering)
• FPO (Follow-on Public Offer)
• Rights Issue
• Private placement

3. How Issue Price Is Decided

(a) Fixed Price Issue

• Company fixes a single price
• Issue price is known in advance

(b) Book-Building Issue

• Company provides a price band
• Investors bid within the band
• Final cut-off price becomes the issue price

4. Who Decides the Issue Price

• Company’s management
• Merchant bankers / lead managers
• Based on:
• Company’s financials
• Industry valuation
• Market conditions
• Investor demand
• Approved by SEBI

5. Issue Price vs Face Value

👉 Issue price can be higher, equal to, or lower than face value.

6. Types of Issue Price

1. At Par

Issue price = Face value
Example: ₹10 face value, issue price ₹10

2. At Premium

Issue price > Face value
Example: Face value ₹10, issue price ₹150

3. At Discount

Issue price < Face value
(Rare and subject to regulations)

7. Issue Price vs Market Price

8. Importance of Issue Price

For Investors

• Determines investment cost
• Affects listing gains or losses

For Company

• Impacts capital raised
• Influences market perception

9. Example of Issue Price in IPO

• Price band: ₹100–₹120
• Cut-off price: ₹115
• Issue price = ₹115
• All investors are allotted shares at ₹115

10. Advantages of Proper Issue Pricing

• Fair valuation
• Strong investor confidence
• Better listing performance

11. In Simple Words

Issue price is the final price at which a company sells its shares to investors in a public issue before listing on the stock exchange.