Definition of Differential Pricing

When a specific category is offered shares at a price different than the other categories, the act is called as differential pricing.

According to the DIP (Disclosure and Investor Protection) guidelines, if the firm allotment category has a price greater than the net offer to the public, only then the differential pricing policy is applicable.

Points to remember:

• A company can issue shares at differential pricing to only two categories, namely the retail investors and the employees.
• For retail individual investors, a maximum of 10% discount on the price offered to other categories is allowed.
• For employees, a maximum of 10% discount on the floor price can be offered.