What It Means
Cut-off Price is the checkbox on a retail IPO application that says, in effect, "whatever price this issue finally settles at, count me in." Book-built IPOs open with a price band, a floor and a cap, and instead of picking a number inside that range yourself, ticking cut-off price means your bid moves with the final price, whatever it turns out to be.
How It Works
Only retail investors (RII) applying up to ₹2 lakh get this option. NII applicants, bidding above ₹2 lakh, must name a specific price inside the band; cut-off simply isn't available to that category.
For a retail investor who names a specific price instead of ticking cut-off, there's a real risk: if the issue eventually prices above that number, the application gets rejected outright, before the allotment draw even runs. Ticking cut-off avoids this, since the bid is defined as "the final price," not a fixed number that could end up too low.
Example
Say an IPO's price band runs ₹440 to ₹465. One retail investor ticks cut-off price. Another bids a specific ₹450, treating it as a safe middle-ground number. The issue ultimately prices at ₹465, the top of the band. The cut-off investor's application stays valid at ₹465. The investor who specified ₹450 gets rejected, and the reason has nothing to do with the lottery; their own bid simply came in below the price the company settled on.
Warning
As a retail investor, naming your own price instead of ticking cut-off carries no upside. It can only get an application rejected before the draw runs, and it can never secure a better price than cut-off would.