There are two types of IPOs, and the issue price is determined based on the type of the IPO.

Fixed-price offering

In a fixed-price IPO, the price of the issue is decided by the company itself. The company, with the help of its underwriters, estimates the financial aspects of the company while deciding the issue price. Once the order is printed, the price is made public, and the floor is open for investors to buy the securities.

Book building offering

In a book-building IPO, the price of the issue is decided as the investors bid for the shares of the company. The company publishes the price band in the order document, wherein the upper limit is known as the cap price and the lower limit is known as the floor price. The investors bid for prices according to the price band.