Fixed Price IPO

A fixed price IPO is a type of initial public offering where the company sets a single, predetermined price for its shares before the subscription period begins. Investors apply at this fixed price, unlike book-built IPOs where a price band is announced and the final price is discovered through bidding.

What Is a Fixed Price IPO?

In a fixed price IPO, the company and its investment bankers decide the issue price in advance based on the company’s valuation and financial performance. This price is disclosed in the offer document, and all investors apply at this exact price.

There is no price discovery during the subscription period. If demand is higher than supply, the IPO is oversubscribed and allotment follows SEBI rules. If demand is lower, the IPO may fail.

How Fixed Price IPOs Work

1. Company files offer document with SEBI disclosing the fixed issue price
2. Subscription opens; investors apply for a fixed number of shares at the stated price
3. Application money is blocked or paid at subscription
4. After the subscription period, allotment is done based on demand
5. Refunds are processed and shares are credited before listing

Fixed Price vs Book Building

| Feature | Fixed Price | Book Building |
|———|————-|————–|
| Price discovery | Pre-set by company | Through investor bids |
| Price band | No; single price | Yes; floor and cap price |
| Retail flexibility | Apply at stated price | Can use cut-off price |
| Common for | SME IPOs, smaller companies | Mainboard large IPOs |
| Risk | May be over or underpriced | Market-driven |

Why Fixed Price Is Used

Fixed price method is simpler and less expensive to execute. It suits smaller companies doing SME IPOs on NSE Emerge or BSE SME platforms where the book building infrastructure is unnecessary for the scale of the offering.

Practical Example

A small manufacturing company launches a fixed price IPO at Rs 75 per share. An investor applies for 2,000 shares, paying Rs 1.5 lakh. The IPO is oversubscribed 3x. Allotment is proportional, so the investor receives 667 shares and Rs 1,00,050 is refunded. On listing day, the stock opens at Rs 90, a 20% listing gain.

Key Takeaways

– Fixed price IPO has a single predetermined price for all investors; no bidding or price band
– Simpler and used mostly for SME IPOs and smaller mainboard issues
– Oversubscription leads to proportional or lottery-based allotment depending on category
– Risk of mispricing: if set too high, demand suffers; if set too low, promoters leave money on the table
– All investors pay the same price, unlike book-built IPOs where institutional and retail investors may bid at different levels