Differential pricing in the context of Indian IPOs refers to the practice of offering shares at different prices to different categories of investors within the same public issue. SEBI permits companies to offer a discount of up to ₹35 per share to retail individual investors and eligible employees relative to the price paid by QIBs and non-institutional investors in the same IPO. This retail discount is designed to encourage broader retail participation in IPOs and compensate smaller investors for the higher proportional application costs they bear. In the debt market, differential pricing can also refer to the practice of pricing bond tranches differently based on the size of the investment — offering better yields to large institutional investors than to retail applicants in NCD (Non-Convertible Debenture) public issues. Differential pricing ensures that all categories of investors are incentivised to participate while reflecting the different risk appetites and investment scales of institutional versus retail participants.
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