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CS Professional · Strategic Management and Corporate Finance · Raising of Funds from Equity and Procedural Aspects - Public Funding

Sundaram Textiles Ltd runs a book-built IPO with a price band of Rs 180-190 per share. It receives bids for the following number of shares at the cut-off or stated prices, cumulatively at or above each price: Rs 190: 40 lakh; Rs 185: 70 lakh; Rs 180: 110 lakh. The issue size is 50 lakh shares. At which price is the issue fully subscribed, so that it can be priced at the highest such price?

The issue prices at Rs 185. Cumulative demand at Rs 190 is only 40 lakh shares, short of the 50 lakh offered, while at Rs 185 it is 70 lakh, which covers the issue. Rs 185 is therefore the highest price at which the issue is fully subscribed.

  1. ARs 180
  2. BRs 185Correct
  3. CRs 190
  4. DRs 200

Explanation

Demand is read cumulatively from the top price downward. At Rs 190, demand is 40 lakh, below 50 lakh. At Rs 185, demand is 70 lakh, which covers 50 lakh. So Rs 185 is the highest price clearing the issue. Rs 180 also clears but is lower, and Rs 200 is outside the band.

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