Every IPO announcement comes with three numbers that decide how much money you need and how you must bid: the price band, the lot size and the option to bid at the cut-off price. Beginners often mix them up, block the wrong amount, or discover on the last day that their bid was invalid.
This guide explains each term in plain language, shows you the exact formulas, and works through numerical examples for both mainboard and SME IPOs.
Key Takeaways
- Bids must be in whole lots — there is no such thing as half a lot in an IPO.
- Under SEBI's framework, the cap of a price band cannot exceed 120% of the floor price.
- For mainboard IPOs, the minimum application value is set within a ₹10,000–₹15,000 range.
- Retail investors can bid up to ₹2,00,000 in one application; only retail (and employees) can use the cut-off option.
- SME IPOs use much larger lots, and most require at least two lots, so the entry ticket is often ₹2 lakh or more.
What Is a Lot Size in an IPO?
A lot is a fixed bundle of shares that the company defines for its IPO. The lot size is the number of shares in that bundle. When you apply, you tell your bank or broker how many lots you want, not how many individual shares.
For example, if an IPO has a lot size of 100 shares, your valid bid quantities are 100, 200, 300 and so on. Allotment is also made in lots: if you are allotted anything at all in the retail category, it is a whole number of lots, never a fraction.
What Is the Price Band in an IPO?
In a book-built IPO, the company does not fix one price in advance. It announces a price band — a floor price (the lowest price you can bid) and a cap price (the highest). Investors bid within that band, and the final issue price is discovered at the end of the bidding window based on demand.
Three rules about price bands are worth remembering:
- The 20% rule. SEBI's disclosure framework requires the cap price to be no more than 120% of the floor price. A band of ₹100–₹120 is the widest allowed at that floor.
- Advance notice. The band is normally announced a couple of working days before the issue opens, so investors can plan the money they need.
- Revisions extend the window. If the band is revised during the issue, the bidding period is extended, usually by at least three working days, subject to an overall limit of ten working days.
Some issues are fixed-price instead, where the band collapses into one number (you will see this as, for instance, "₹196" with no range). Fixed-price issues are more common on SME platforms.
How to Calculate the Minimum Investment
Because retail bids are normally blocked at the top of the band, the practical minimum you need is:
Worked example (mainboard, illustrative): Price band ₹140–₹148, lot size 100 shares.
- One lot at the cap price = 100 × ₹148 = ₹14,800
- One lot at the floor price = 100 × ₹140 = ₹14,000
- You should keep at least ₹14,800 available, because your bid is usually placed at the cap or at cut-off.
What Is the Cut-Off Price?
The cut-off price is not a separate price — it is a bidding option. When a retail investor ticks "cut-off", they are saying: "I will pay whatever the final issue price turns out to be, anywhere within the band." Their bid is treated as being at the cap for the purpose of blocking money.
Suppose the band is ₹140–₹148 and you bid 1 lot of 100 shares at cut-off:
- ₹14,800 is blocked in your account (or under your UPI mandate).
- If the final price is fixed at ₹146, your cost is ₹14,600 if you are allotted the lot.
- The remaining ₹200 is released after the allotment process.
How Many Lots Can a Retail Investor Apply For?
A retail individual investor (RII) is defined by the amount bid: the total application value must not exceed ₹2,00,000. To find the maximum lots:
Using the same example (lot = 100 shares, cap = ₹148, so one lot = ₹14,800):
| Lots bid | Shares | Amount at cap | Category |
|---|---|---|---|
| 1 | 100 | ₹14,800 | Retail |
| 5 | 500 | ₹74,000 | Retail |
| 10 | 1,000 | ₹1,48,000 | Retail |
| 13 (maximum) | 1,300 | ₹1,92,400 | Retail |
| 14 | 1,400 | ₹2,07,200 | Exceeds ₹2 lakh → HNI category |
Bidding more lots does not improve your chance in the retail lottery, because when the category is oversubscribed each valid applicant typically receives at most one lot. That is covered in detail in our guide to how IPO allotment works.
How Is the Lot Size Decided?
The company and its lead managers choose the lot size, but regulation shapes the outcome. For mainboard IPOs, SEBI's framework expects the minimum application value to fall between ₹10,000 and ₹15,000 at the issue price. That is why almost every mainboard IPO shows a one-lot cost of roughly ₹14,000–₹15,000 — a company with a ₹500 price uses a lot of about 20–30 shares, while a company with a ₹50 price uses about 200–300.
This also explains why lot sizes look strange (37 shares, 178 shares, 101 shares): they are back-calculated from the price to land inside the permitted value range.
SME IPO Lot Sizes: Why They Look So Different
SME IPOs list on the BSE SME and NSE Emerge platforms and follow their own norms. Lot values are much larger, and in practice most SME issues require a minimum of two lots per application.
| Feature | Mainboard IPO | SME IPO |
|---|---|---|
| Value of one lot | About ₹14,000–₹15,000 | Often ₹1 lakh or more |
| Typical minimum lots | 1 | 2 |
| Typical minimum investment | About ₹15,000 | Often ₹2 lakh or more |
| Example lot size | 100 shares at ₹148 | 1,200 shares at ₹100 |
Worked example (SME, illustrative): Lot size 1,200 shares, cap ₹100. One lot = ₹1,20,000; the minimum application of two lots = ₹2,40,000. Because that exceeds the ₹2 lakh retail ceiling, an application like this may be classed in the non-institutional category rather than retail — always confirm the category rules in the offer document. Our Mainboard vs SME IPO guide covers the wider differences, including liquidity and risk disclosure.
Common Mistakes With Lot Size and Price Band
- Keeping only the floor-price amount available. The block is usually at the cap or cut-off, so a shortfall can make the application fail.
- Bidding below the cap by choice and losing eligibility. If the final price is above your bid, the bid is not allotted.
- Assuming more lots means a better chance. In an oversubscribed retail category the lottery is applied per application, not per lot.
- Ignoring the SME two-lot minimum. Many first-time SME applicants only budget for one lot.
- Confusing lot size with issue size. Issue size is the total money raised; lot size is your bid unit.
Before applying, cross-check the numbers on the company's page on IPOBee, the exchange website, and the final offer document — and read our step-by-step guide on applying for an IPO via UPI so the mandate and the amount match.
Frequently Asked Questions
Sources & Further Reading
- SEBI — General Information Document for Investing in Public Offers (price band, minimum bid lot, cut-off price, retail limit)
- NSE India — live IPO and issue information
- BSE India — public issues and IPO details
Rules and limits in India's IPO market are revised from time to time. This article was last reviewed on September 19, 2026; confirm the current position on sebi.gov.in and in the offer document of the specific issue before relying on any number here.
