A Guide to Calculating Price Bands and Risk Factors

Book-building issues always work on price bands. There are several changes that happen in an IPO but changes in price bands might scare you. So, let’s look into the details of the price band, its calculation and 

What is a Price Band?

The lower and higher limits of the stock price that the firm will sell its stock to IPO applicants fall within a price band. During the price discovery process of an IPO, the price band is utilised (IPO).

A corporation employs the services of one or more investment bankers to serve as underwriters when it intends to issue shares on the primary market. The underwriter evaluates several different components of the company to determine a range of prices that the security can trade for, including the growth expectations of the company, industry, and economy; the firm’s net worth; profits per share (EPS); and many other aspects. 

The price band is the range of prices that the issuer and underwriter agree upon.

How does a company set a price band?

In order for a company to determine how much money investors are ready to pay for a share of the company, determining the price range is a crucial stage.

The underwriter establishes a price band by sending a draught proposal with the price band to prospective buyers, including institutional investors, retail investors, and high-net-worth individuals (HNWI).

Investors may submit and modify their offers on the number of shares they are willing to purchase at a price that is within the band throughout the book’s open period. The underwriters assess the bids after the book is closed in order to “find” the IPO’s fair price.

Factors That Affect The Issue Price

The issue price in an IPO may be impacted by various things. Investment bankers and businesses should therefore consider them before finishing the same:

The following factors should be considered: 

  • Fundamental market trend 
  • Positive news about the company’s accomplishments 
  • Departmental and leadership structure of private companies
  •  Financial effectiveness of the company’s business model 
  • Quality of stocks
  • Stock Demand 
  • Future growth prospects of the company 
  • The current market rate of various companies’ stocks in the same industry

What should I do if the price band decreases?

You don’t need to take any action if you submitted an application for an IPO and the Price band is lowered. Only the necessary amount will be deducted from the blocked amount when you receive your allocation.

When bidding is underway, you can always withdraw your application if you decide you are no longer interested in the IPO.


The price band is a very important factor in an IPO. If there is a decrease in the price band, it suggests that nobody has applied for the IPO. It might have been due to a high range or decline in the company’s worth. 
Note-  A decrease in price band doesnt always mean taht nobody has applied. The price band may be revised based on various factors, including market conditions and the demand for the stock, which may be independent of the number of IPO applications received.