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NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market

A research analyst notes that a company's IPO was priced at ₹250 per share through book building with a price band of ₹240 to ₹250. Which statement about the cut-off price option is correct?

Only retail individual investors, along with eligible employees, may bid at the cut-off price in a book-built IPO. Qualified institutional buyers, non-institutional investors and anchor investors must bid at specific prices within the band, so allowing any category is incorrect.

  1. AOnly retail individual investors may bid at the cut-off priceCorrect
  2. BOnly qualified institutional buyers may bid at the cut-off price
  3. COnly anchor investors may bid at the cut-off price
  4. DAny investor category may bid at the cut-off price

Explanation

In a book-built issue, the cut-off option lets the bidder accept whatever final price is discovered. It is available only to retail individual investors and eligible employees, not to QIBs, non-institutional investors or anchor investors. Hence only the retail option is correct among those listed.

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