What is Cut-off Price in IPO Application?
Learn what cut-off price means in an IPO application, how it works, who can use it, and whether applying at cut-off improves allotment chances.
IPOFins Team
Finance Research & Data • June 2026
What is Cut-off Price in IPO?
When applying for an IPO, you can either enter a specific bid price or choose Cut-off Price. Cut-off means: "I agree to buy the shares at whatever final issue price is discovered during the book-building process."
Simple Example
If the IPO price band is ₹95 to ₹100:
- Cut-off selected — You are willing to pay the final issue price, whether it becomes ₹95, ₹98, or ₹100
- Bid at ₹95 only — Your application may become invalid if the final issue price is fixed at ₹100
Who Can Use Cut-off?
Only Retail Individual Investors (RII) are allowed to apply at cut-off price. QIBs and NIIs/HNIs must specify an exact bid price.
Does Cut-off Improve Allotment Chances?
Yes, indirectly. Applying at cut-off ensures your bid remains valid even if the final issue price is fixed at the upper end of the price band. It does not increase allotment probability in an oversubscribed IPO, but it prevents rejection due to pricing.
Example Comparison
| Investor | Bid | Result |
|---|---|---|
| Investor A | Cut-off | Valid (accepted at ₹100) |
| Investor B | ₹95 only | Invalid / Rejected (issue price was ₹100) |
When Should You Use Cut-off?
Recommended (most retail investors):
- You are applying in the retail category
- You want the highest chance of a valid application
- You don't have a strong view on pricing
Avoid if:
- You believe the IPO is overpriced above a certain level
- You want strict control over the maximum price you are willing to pay
Frequently Asked Questions
What happens if I choose cut-off?
Your application remains valid at the final issue price discovered through book building. Your bank blocks the maximum amount (upper price band × lot size).
Will cut-off guarantee allotment?
No. Allotment depends on subscription demand and lottery rules in the retail category.
Can HNIs apply at cut-off?
No. The cut-off option is available only to retail individual investors.
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