This chapter relates to the price band and pricing of the equity shares to be issued and listed through the IPO. The Issue price is determined based on assessment of demand for equity shares through the book building process in consultation with the merchant banker. Basis for pricing section in DRHP also discloses the quantitative factors like EPS, P/E and other financial metrics of a company used in determining the pricing. 

As per Regulation 248 of SEBI ICDR Regulations (2018):

• Face value of equity shares is disclosed in the DRHP, offer document, advertisements and application forms.

As per Regulation 249 of SEBI ICDR Regulations (2018):

• Price of equity shares (Price band of IPO) is determined in consultation with the merchant banker through the book-building process as specified in Schedule XIII (relating to appointment of merchant bankers and other intermediaries in IPO).

As per Regulation 250 of SEBI ICDR Regulations (2018)

Price and Price Band

a.  Disclosure of price band of IPO in Offer Documents (RHP):

• For fixed price issues, the Issuer may mention a price or price band in the RHP.
• For book-built issues, the Issuer may specify a floor price or price band in the red herring prospectus.
• The final price is determined before filing the prospectus with the Registrar of Companies (ROC).

b.  The filed prospectus must contain only one final price and the final price must not be lower than the face value of the specified securities.

c.   Mandatory Disclosure Requirements regarding advertisement in newspaper:

• Announce the price band at least two working days before the Issue opens or before IPO open date.
• Publish the price band in the same newspapers where the pre-Issue advertisement was released.
• Alternatively, announce the price band together with the pre-issue advertisement (following the format in Part A of Schedule X, (Format of Pre Issue Advertisement).
• The announcement of the price band as above must include:
  • Relevant financial ratios for both upper and lower limits of the price band.
  • A statement directing investors to the “Basis of Issue Price” section in the RHP.

d.  Online disclosure requirements for such announcement of financial ratios:

• To be disclosed on the websites of SME exchange(s).
• To be pre-filled in application forms available on the SME exchange websites.

As per Regulation 251 of SEBI ICDR Regulations (2018):

• The Issuer may offer specified securities at different prices, subject to certain conditions as specified below:
   
• Conditions for Differential Pricing: Differential pricing means different price offered to different categories of investors. The below conditions shall be considered for differential pricing.

a) Individual Investors (Retail) who apply for the minimum application size, Shareholders, and Employees (under Regulation 254): May be offered securities at a price not lower than 10% of the net offer price for other categories (excluding anchor investors).

b) Uniform Minimum Application Lot Size: The price range for different categories must ensure that the minimum application lot size remains uniform for all applicants.

c) In case of Book-Built Issues: The price for anchor investors cannot be lower than the price offered to other applicants.

d) Discounts (if applicable): Any discount must be expressed in rupee terms in the offer document.