How IPO Listing Price is Decided?

In 2025, October’s IPO tally outclassed the past records by raising ₹46,000 Cr, through 14 IPOs. This rush was led by two major IPOs, Tata Capital and LG Electronics, while Lenskart Solutions is lined up for its debut on 31 October 2025.

But what actually drives this huge fundraising? One of the drivers is IPO listing price, which is the final price set for the shares after the bidding period ends.

This IPO drive is more than investors’ sentiment and market demand, but it also highlights how effective IPO pricing influences the overall IPO performance.

Read further to know IPO listing price determination, factors affecting IPO listing price, and more!

What is IPO Listing Price?

The IPO listing price is the final price of the IPO shares, decided after the bidding period ends, at which it is traded on a stock exchange. It is determined in association with the stock exchange, the issuing company, and the underwriter, through a pre-opening session, from 9:00 am to 9:45 am, which matches buy and sell orders to find an equilibrium price. It may differ from the initial ‘issue price’ decided before the listing, depending on the market demand and sentiment.

It helps in ascertaining the public valuation of the shares and sets the starting price for further trading. The variance between the listing price and the issue price indicates whether the IPO was well-received by the market, which is used to calculate IPO listing gains.   

Factors Influencing Listing Price

The listing price is influenced by factors that reflect market sentiment and the perceived value of the company:

• Investor Demand and Sentiment: If the demand for the shares is high, it reflects strong investor confidence, and the listing price is likely to be higher than the issue price.
• Company-driven Factors: When a private company goes public, investors thoroughly review a company’s financial reports. Therefore, the financial performance, growth potential, and competitive advantage drive investors’ interest and, thus, the listing price.
• Market and Economic Conditions: The performance of the stock market and the economic conditions may significantly impact an IPO’s success and its listing price.
• Grey Market Premium (GMP): It is an unofficial indicator of the expected listing price before the shares are officially traded. 

Price Discovery Mechanisms

The process of price discovery in IPOs is deciding the final price of the IPO shares to be traded on stock exchanges, which is done either by bookbuilding or the fixed price method:

• Bookbuilding Method: In the case of a bookbuilding IPO, the company and its underwriters set a price band, such as ₹147 to ₹152 per share, within which investors place their bids for shares. The final issue price is determined after the bidding period ends, based on the demand at various price levels.

If the demand for the shares is high, then the final issue price is likely to be higher than the initial price.

For example, Shreeji Global FMCG IPO price band is ₹120 to ₹125 per share. The final price to be determined on 12 November 2025, when it is scheduled to list on NSE SME.

• Fixed Price Method: In the case of the fixed price method, the company and underwriters pre-determine a fixed price for the shares before the IPO opens for subscription. 

For example, Greenleaf Envirotech IPO was a fixed price issue at ₹136 per share.

Role of Underwriters in Pricing

The underwriters’ role in IPO includes advising on the issue price, financial and market analysis, and measuring investors’ demand based on the roadshow.

• Financial and market analysis: The underwriters or lead managers assess the company’s financials, its competitive position, and future growth opportunities to determine a fair valuation of the IPO shares, while also considering industry trends and macroeconomic factors.
• Demand assessment: They are responsible for conducting roadshows and marketing campaigns to ascertain investors’ interest. The feedback from these activities helps in refining the price range and ensuring the IPO is well perceived by the market.
• Pricing strategy: Based on the analysis and investor feedback, the underwriters  help to set the final offer price in association with the stock exchange. This stage can be sensitive, as the underwriters may slightly underprice the stock to ensure a successful sale and strong initial performance.
• Book-building management: They manage the entire book-building process, where investors place bids for shares within the price band. The lead manager collects the bid applications to measure the demand and set the final price. Next, they allocate the shares based on demand and level of subscription.

Real-World Examples

• LG Electronics India Ltd (2025): The LG Electronics IPO in 2025 highlighted how strong market sentiment can drive significant listing gains. After setting its offer price at ₹1,140 per share through the book-building process, the stock listed at ₹1,710, at 50% premium. 

This performance reflected investors’ confidence in the company’s brand strength and the demand for consumer electronics.

• Zomato (2021): The Zomato IPO in India followed a similar pattern. The IPO price was fixed at ₹76 per share after the bidding, and the stock opened at ₹116 on its debut, which is about 53% higher.

The listing highlighted how investor appetite, sector growth, and market sentiment influence the IPO listing price..

Investor Strategies

• Listing Gains Strategy: Some investors apply for IPO shares with a goal of selling them immediately on the listing day to book quick profits, that is, listing gains, if the stock lists at a premium.
• Long-Term Investment Strategy: Other investors conduct thorough research of the company’s fundamentals and growth potential, while planning to hold the shares for a long term, regardless of initial listing performance.
• Monitoring Demand: The astute investors monitor the IPO’s subscription status and Grey Market Premium (GMP) to measure probable listing performance and decide their course of action accordingly.
• Bidding at the Cut-off Price: In book-built IPOs, retail investors can bid at the cut-off price, which is the upper band price, to maximise their chances of allotment, as shares are often allotted at this price when the demand is high. 

Market Comparisons

Here’s a quick market comparison between the US, UK and India.

Market	Features	Impact on listing price
US IPO market	The US IPO process has limited pre-issue research and strict communication rules, which create information gaps between the issuers and the investors.	This leads to underpricing of shares and sharp first-day price ‘pops’, which leaves potential gains unrealised for the company.
UK IPO market	In the UK, the IPO system promotes transparency through early-look meetings and analyst research, which is shared before the final price is set.	This helps to measure the investors’ demand more accurately, and result in stable listing prices.
Indian IPO market	The Indian IPO market benefits from strong domestic investors’ participation and regulations by SEBI.	Listing gains are derived due to strong retail investor demand, oversubscription, and positive domestic sentiment.

Conclusion

The IPO listing price reflects how the market values a company when it offers its shares to the public. It is influenced by investors’ demand, company fundamentals, and market sentiment.

A balanced price ensures a fair value for both the issuers and the investors, as high prices may raise the risk of weak performance, while low prices leave capital on the table. An effective IPO pricing, supported by the underwriters’ insights and bidding data, plays a key role in shaping an IPO’s success and market reception.

FAQ‘s