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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Securities Market Segments

A retail investor bids in a book-built IPO with a price band of Rs 190-200. The investor bids for 70 shares at the cut-off price. Allotment happens at the final issue price of Rs 196. What amount is finally retained by the company from this investor if all 70 shares are allotted?

The amount retained is Rs 13,720. A cut-off bidder pays the final discovered issue price, which is Rs 196 per share, so 70 shares cost Rs 13,720. Although Rs 14,000 is blocked at the upper band, the extra amount is unblocked after allotment.

  1. ARs 13,300
  2. BRs 13,720Correct
  3. CRs 14,000
  4. DRs 13,160

Explanation

A cut-off bid means the investor agrees to pay the final price determined. The final price is Rs 196, so 70 x 196 = Rs 13,720. Rs 14,000 is the amount blocked at the upper band (70 x 200), and the excess is released. Rs 13,300 uses the lower band.

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