Initial Public Offering or IPO allows a private company to raise funds by offering its shares to the public for the first time. Most investors, whether beginners or experienced, know the basics of IPOs, but not everyone understands all its details. Two key concepts that often confuse people are Fixed Price Issues and Book-Building Issues. In this blog, we’ll explain the types of IPO and IPO application process, helping investors evaluate opportunities better and make the right investment decisions.
IPO is when a private company sells its shares to the public for the first time, becoming a publicly traded company. It allows businesses to raise funds for expansion, debt repayment or growth.
For investors, an IPO offers an opportunity to invest early in a company’s growth story. Evaluating an IPO involves reviewing the company’s financial performance, management quality, industry trends and market sentiment.
Two different types of IPO, such as Fixed Price Issue and Book Building Issue, also shape the IPO application process and pricing.
As mentioned, there are primarily two types of IPO which are fixed price Issues and book building issues. Let’s understand each in detail:
In Fixed Price Issue, the company sets the issue price before going public with the help of underwriters, based on financial performance, industry trends and market outlook.
Investors know the exact price they will pay if they receive an IPO allotment ensuring transparency and simplicity. However, the fixed price may not reflect true market demand, leading to shares being underpriced or overpriced.
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In a Book Building Issue, the company gives a price band instead of a fixed price. Investors place bids within this range (for example, ₹75–₹80). Investors place bids within this range and the final price is decided after the bidding closes, based on overall demand. SEBI introduced book building in India in 1995 to make the IPO process more efficient.
Here are some pros and cons of the book building issue.
Finds the right price through investor demand.
Shows how much trust investors have in the company.
Fair pricing, not controlled only by the company.
More costly than fixed price IPOs.
Slower process since price is decided after bidding.
Mostly suitable for big IPOs, not small ones.
Here are some pros and cons of the fixed price issue.
Easy for beginners to understand and apply.
Investors know the price in advance.
Faster and simpler than book building.
Lower cost of issue compared to book building.
Works well for small IPO sizes.
High chance of overpricing or underpricing.
Doesn’t show real demand before allotment.
Less interest from big institutional investors.
Risk of heavy price swings after listing.
Company may raise less money if shares are undervalued.
For retail investors, the IPO application process is straightforward:
Here’s a quick comparison between fixed price vs book building.
| Criteria | Fixed Price Issue | Book Building Issue |
|---|---|---|
| Price | Pre-decided and fixed | Book-built issues have a price range. |
| Demand Transparency | Known only after the issue closes | Demand visible during bidding process |
| Allotment Price | Fixed and predetermined | Discovered after bids are collected |
| Retail Investor Appeal | Easier to understand and participate | Slightly complex but more market-driven |
| Risk of Mispricing | Higher, as price may not reflect the true demand | Lower, as final price reflects investor bids |
| Suitability in IPOs | Commonly adopted by Mainboard IPO companies. | Usually adopted by SME IPO companies. |
Understanding the different types of IPOs like fixed price and book building, helps investors make informed decisions. Fixed Price offers simplicity, while Book Building enables better price discovery. With ASBA, the IPO application process remains secure and transparent. Careful research, realistic expectations and a good grasp of how IPO allotment works help investors align opportunities with their financial goals.
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Monarch Networth Capital Limited (‘MNCL’) | CIN No.: L64990GJ1993PLC120014
Unit No. 803-804A, 8th Floor, X-Change Plaza, Block No. 53, Zone 5, Road-5E, Gift City, Gandhinagar - 382050, Gujarat
Ahmedabad
“Monarch House”, Opp Prahladbhai Patel garden, Near Ishwar Bhuvan, Commerce Six Roads, Navrangpura, Ahmedabad - 380009
Mumbai
Monarch Networth Capital Limited, G Block, Laxmi Tower, B Wing, 4th Floor, Bandra Kurla Complex, Bandra East, Mumbai - 400051.
Email for Grievance: grievances@mnclgroup.com
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Mechanism for addressing grievances and information about SCORES.
Mechanism for addressing grievances and information about SCORES.
Monarch Networth Capital Limited (‘MNCL’) | CIN No.: L64990GJ1993PLC120014
(As per LODR Regulations and Companies Act, 2013)
Contact information of the designated officials of the listed entity who are responsible for assisting and handling investor grievances : Mr. Nitesh Tanwar
Monarch Networth Capital Limited
Unit No. 803-804A, 8th Floor, X-Change Plaza, Block No. 53, Zone 5, Road-5E, Gift City, Gandhinagar - 382050, Gujarat
Ahmedabad
“Monarch House”, Opp Prahladbhai Patel garden, Near Ishwar Bhuvan, Commerce Six Roads, Navrangpura, Ahmedabad – 380009
Mumbai
Monarch Networth Capital Limited, G Block, Laxmi Tower, B Wing, 4th Floor, Bandra Kurla Complex, Bandra East, Mumbai - 400051.
Phone: 022 - 66476400 / 66476405
Email: cs@mnclgroup.com
Email for Grievance: cs@mnclgroup.com
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