Book Building vs Fixed Price: IPO Pricing Methods Explained
- Share.Market
- 8 min read
- 02 Sep 2026
Highlights:
- The book building method uses a SEBI-capped price band; the final price of a book-built IPO is discovered from bids. A fixed price issue announces the offer price before opening.
- On the Indian mainboard, book building is the default. SEBI data for 2010–Nov 2021 show 301 of 305 issues were book-built; fixed-price IPOs are now mostly smaller SME offerings.
- Standard book-built allocation (Regulation 6(1)): not more than 50% to QIBs, at least 35% to retail, at least 15% to NIIs. Compulsory book-built issues (Regulation 6(2)) reserve at least 75% for QIBs.
- In a fixed price issue, at least 50% of the net offer is initially available to retail individual investors.
- Demand in a book-built IPO is visible live on BSE and NSE. Demand in a fixed price IPO is known only after closure.
- Both methods use ASBA / UPI-ASBA. In a book-built issue, the blocked amount is typically calculated at the cap of the band.
Introduction
When Indian companies raise capital through an IPO, SEBI allows two IPO pricing methods: the book-building method and a fixed price issue. The choice decides how the offer price is set, which investor category gets how many shares, and when you can see demand.
For practical purposes, almost every mainboard IPO you will apply to is a book-built IPO. Fixed-price IPOs still exist, but they raise a sliver of the money and are concentrated in smaller SME offerings.
How Dominant is Book Building in India?
SEBI introduced book-building guidelines in 1995 so issuers could discover the offer price from demand, instead of printing one number in the prospectus. Before that, Indian IPOs were fixed-price issues. Book building is now the default on the mainboard: SEBI’s review of issues from 2010 to November 2021 found 301 of 305 were book-built, and only four used a fixed price. Fixed-price issues that still appear are typically smaller SME offerings on BSE SME or NSE Emerge, not large mainboard floats. So “book building vs fixed price” is less a toss-up than a split between price-discovery IPOs and simpler, smaller offers.
What is the Book Building Method in an IPO?
Book building is SEBI’s price-discovery process. The issuer and BRLM set a floor and cap in the RHP; investors bid inside that band. After bidding closes, they fix the cut-off (final issue) price from the book.
Price-band rules
- Cap cannot exceed 120% of the floor (max 20% spread).
- Cap must be at least 105% of the floor (min 5% spread).
- If the band is revised while the issue is open, bidding is extended by three working days, subject to the overall bidding-period cap.
So ₹100–₹110 is allowed; ₹100–₹125 is not.
On the mainboard, retail investors (applications up to ₹2 lakh) can bid at cut-off and accept the final price. QIBs and NIIs must quote a specific price; a bid below cut-off is invalid.
During the usual three-day window, category-wise demand is published live on BSE and NSE. That live book is the practical difference versus a fixed-price IPO.
Applications use ASBA / UPI-ASBA: the amount is blocked, not debited. In a book-built IPO, the block is typically calculated at the cap; excess is unblocked after allotment.
Two Book-Built Allocation Structures
A book-built IPO does not always use 50% / 35% / 15%. SEBI ties allocation to the listing route.
Regulation 6(1) — profitability route
Issuers that meet the financial tests (including net tangible assets of at least ₹3 crore, average operating profit of at least ₹15 crore in at least three out of the preceding five years, and net worth of at least ₹1 crore) may use book building or a fixed-price issue.
Standard net-offer split in a book-built 6(1) issue:
| Category | Share of net offer |
| QIBs | Not more than 50% |
| Retail (RIIs) | Not less than 35% |
| NIIs | Not less than 15% |
Up to 60% of the QIB portion may go to anchors before the public window. 5% of the net QIB portion (excluding the anchor investor portion) is earmarked for mutual funds. The NII portion is split: one-third sNII (above ₹2 lakh to ₹10 lakh) and two-thirds bNII (above ₹10 lakh).
2. Compulsory book building — Regulation 6(2)
Issuers that miss the 6(1) tests can list on the mainboard only through book building, and must allot at least 75% of the net offer to QIBs. Retail gets not more than 10%; NIIs not more than 15%. If the QIB minimum is missed, the issue fails, and money is refunded. This is why “35% retail” is not true of every book-built IPO.
If retail or NII is undersubscribed, leftover shares can spill to other categories. Unsubscribed QIB shares generally cannot be moved to retail.
What is a Fixed-Price Issue in IPO?
In a fixed-price issue, the offer price is printed in the prospectus before applications open. There is no price band, no bidding, and no cut-off. You apply at that price or stay out.
Demand is not shown during the window. Subscription figures appear only after the issue closes.
SEBI’s rule: at least 50% of the net offer is initially available to retail investors. The rest goes to other applicants (individuals above the retail limit, companies and institutions). There is no mandatory QIB quota of the book-built kind.
Only issuers eligible under Regulation 6(1) may use a fixed-price issue. A 6(2) issuer must use book building.
Payment is still ASBA / UPI-ASBA: the amount is blocked and debited only for allotted shares. “Pay the full cash up front” is outdated for current Indian public issues.
Book Building vs Fixed Price IPO: Key Differences
The core distinctions between these methods shape investor experience and pricing outcomes:
| Feature | Book building method (book built IPO) | Fixed price issue (fixed price IPO) |
| Price discovery | Bids inside a price band; cut-off set after the book closes | Offer price announced in the prospectus before opening |
| Offer document | Red herring prospectus first; final price in the prospectus filed with RoC | Prospectus already carries the issue price |
| Price-band rule | Cap between 105% and 120% of floor | Not applicable |
| Demand visibility | Live on BSE and NSE during bidding | Known only after closure |
| Who can use it | 6(1) issuers (optional) and 6(2) issuers (mandatory) | Only 6(1) issuers |
| Standard allocation (6(1)) | ≤50% QIB / ≥35% retail / ≥15% NII | ≥50% retail initially; balance to other investors |
| Compulsory QIB route (6(2)) | ≥75% QIB / ≤15% NII / ≤10% retail | Not permitted |
| Retail cut-off bid | Allowed for mainboard RIIs (≤ ₹2 lakh). Not allowed for NII/QIB. Not allowed in SME IPOs from 1 July 2025 | No bidding |
| Where it is used in India | Almost all mainboard IPOs and most larger SME IPOs | Mainly smaller SME issues; <1% of capital raised in 2024–26 |
| Payment | Amount blocked via ASBA / UPI-ASBA, usually at cap | Amount blocked via ASBA / UPI-ASBA at the fixed price |
Mainboard vs SME
Mainboard book built IPO
- Retail = application up to ₹2 lakh; cut-off allowed.
- Typical public window: 3 working days (extendable if the band is revised).
- Listing on T+3 working days after closure.
- Heavy oversubscription in retail is usually a computerised lottery for the minimum lot.
SME IPOs (from 1 July 2025)
- The old “retail individual investor” label was replaced by an “individual investor” category.
- Minimum application is 2 lots and above ₹2 lakh.
- Cut-off bidding is not available to any category.
- Downward modification/cancellation of bids is restricted.
- Many smaller SME offerings still use a fixed price issue because the process is simpler; larger SME issues increasingly use book building.
Always read the RHP or prospectus for that issue. Category names and lot rules on SME platforms are not the same as a NSE/BSE mainboard book-built IPO.
Choosing Your IPO Path
Use the pricing method as a process checklist, not a quality score.
- Check whether the issue is book-built or fixed price, and whether it is 6(1) or 6(2); that single line tells you your retail odds.
- In a book-built IPO, decide between cut-off and a specific bid before the window opens. On the mainboard, cut-off is the default retail choice.
- Watch QIB and anchor demand on day one; that is the cleanest public signal the book building method gives you.
- In a fixed price issue, ignore the missing live tape and underwrite the printed price against fundamentals, because you will not get a mid-issue demand check.
- Apply only through ASBA / UPI-ASBA. Confirm the blocked amount (cap of the band versus the fixed price) so you are not surprised by the hold on your account.
FAQs
Book building uses a price band and bidding-based price discovery, while a fixed-price issue announces the offer price in advance. Demand information also becomes available at different stages under the two methods.
Investors bid within a specified price band, and the final issue price is determined after the bidding process. In a standard book-built IPO, up to 50% of the net offer may be allocated to QIBs, at least 35% to retail investors and at least 15% to NIIs.
The issuer announces the offer price in advance. At least 50% of the net offer is available for allotment to Retail Individual Investors, and demand is known after the issue closes.
Book building offers market-driven price discovery and demand visibility during bidding. A fixed price provides price certainty. Both require upfront blocking; the choice depends on preference.
It depends on the route. Regulation 6(1): ≤50% QIB, ≥35% retail, ≥15% NII. Regulation 6(2): ≥75% QIB, ≤15% NII, ≤10% retail. Anchors can take up to 60% of the QIB portion. Retail oversubscription is generally a lottery for the minimum lot.
