IPO Cut-Off Price Explained: Why Beginners Should Always Tick the Cut-Off Box

When an Indian company launches an Initial Public Offering (IPO), it rarely sets a single fixed price. Instead, it offers a price band—such as ₹475 to ₹500 per share. The lower number (₹475) is called the Floor Price, and the upper limit (₹500) is called the Cap Price.

Imagine a cinema premiering the biggest blockbuster of the year. Because seats are limited, the cinema sets a bidding price between ₹300 and ₹500 depending on final crowd demand. If 50,000 moviegoers bid at ₹500 and only 2,000 seats exist, the cinema announces the final clearing price is ₹500. If you had placed a bid at ₹400 to save ₹100, your ticket is thrown out of the box instantly—you do not even enter the lucky draw! However, checking Cut-Off price tells the ticket counter: Whatever final price is determined by demand, I agree to pay that maximum amount.