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A group of lead managers( Merchant bankers) are hired by the company which is going for IPO. These lead managers after going through the company fundamentals, financial reports and the price of competitors will decide the suitable price for the IPO.
The stock exchanges or the Securities Exchange Board of India(SEBI) has no role directly or indirectly in deciding the price band. The only role of SEBI is to validate the decision of the managers.
This price band is decided after careful research of both the company and the market and also taking into consideration the company’s management view.
