Book Building

Prepared by:-Yashika Vashistha

Under Guidance:- Mukta Rohatgi

The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors.

ISSUE PRICE

IS DETERMINED AFTER

After Bid is

PROCESS

CompanyAppoint

Merchant Banker as Book Runner

Issue a Draft Prospectus

Draft Prospectus Filled with Concerned

authority (SEBI)

Book Runner appoint

syndicate member and

register Intermediate

Price Discovery begin through

Bidding Process

At close of Bidding, book

runner and company decide allocation and

allotment.

How do Investor Bid??

The Issuer set a

Base Price(floor price)

Band

Within which the investor is allowed to bid for shares

Raises 89 croreWith Price band

between

70 and 75

Suppose

Company XYZ wants to issue 100 shares through book building. They demand is as follows.

The issue price will be that level at which all the shares get subscribed. So, the shares are being subscribed to between Rs 60 & Rs 70.

Subscribed (No. of shares)

Price (Rs)

50 100

65 90

80 80

95 70

105 60

Type Of Book Building

100% of the Net Offer to the Public

75% of the Net Offer to the Public

100% Net Offer To Public

TOTAL PUBLIC ISSUE(i.e.net offer to the public)

Not less than 25% of the net offer to the public shall be

available for allocation

Allocation to retail individualinvestors (who participated in

the bidding process) who applies

or bids for securities of or for avalue of not more than

Rs.50,000/-.

Allocation tonon-institutional

investors who participated in

the biddingprocess.

Allocation toqualified institutional

buyerswho participated

in the biddingprocess.

Not less than 25% ofthe net offer to the

public shall be availablefor allocation

Not less than 50% of the net offer to the

public shall be available for allocation

TOTAL PUBLIC ISSUE(i.e.net offer to the public)

BOOK BUILDINGMETHOD

FIXED PRICE

METHOD

75% Net Offer To Public

BOOK BUILDINGMETHOD

75% of the public issue can be offered to

institutional investors as well as non institutionalinvestors who had participated

in the bidding process

Not less than 25% of the netoffer to the public shall be available for allocation to

Non-Qualified Institutional Buyers.

FIXED PRICEMETHOD

25% of the net offer to the public can be offered at the price determined through book building, shall be

reserved for allocation to retail individual investors who had not participated in the bidding process.

Not more than 50% of thenet offer to the public shall

be available to QualifiedInstitutional Buyers.

The option of Book Building shall be available to all corporate which are

otherwise eligible to make an issue of capital to public.

In case of 100% & 75% book building option , the portions shall be separately

identified as placement and net offer to public.

Securities offered to the public are separately identified as net offer to public.

Underwriting shall be mandatory to the extent of net offer to the public, by

the syndicate member or the book runners.

The lead merchant banker shall prepare and file the offer document with the

SEBI . The offer document will include total size and price band within which

securities are being offered for subscription.

The bid will be accepted for a minimum period of 5 days.

Issue of capital shall be Rs.25 crores and above.

In case of an under subscription in an issue, the shortfall shall have to be made

good by the Book Runner's to the issue.

Trading shall commence within 6 days of close of the issue, otherwise interest

@15% shall be paid to investor.

TIME FRAMEFOR ISSUE OF

SECURITIES

LET, T = CLOSE DAY OF THE OFFER

T+1 DAYS = PRICE DETERMINATION

T+2 DAYS = ALLOCATION LIST IS FINALISED

T+3 DAYS = ALLOCATION LIST ELECTRONICALLY SENT TO THE

COMPANY

T+4 DAYS = BANKERS TO CONFIRM CLEARANCE OF FUNDS,

STOCK EXCHANGE TO ISSUE TRADING PERMISSION.

T+5 DAYS= NSDL/CDL TO CREDIT THE INVESTORS ACCOUNT

WITH THE NUMBER OF SHARE ALLOTED.

T+6 DAYS =TRADING TO BEGIN AT THE STOCK EXCHANGE`

Investor can not bid below floor price.

Book building Process some times leads to underpriced or

overprice of securities.

Book Building Eliminate unreasonable issue price by Promoters.

The Book Runner Lead Manager (i.e. merchant banker) and the

syndicate members who are the intermediaries are both eligible

to act as underwriters.

Book Building help investor to fair play in the market.