Book Building

Book building is an electronic mechanism for collection of orders through the IPO infrastructure of the
Exchanges. The members who are eligible for using the IPO system or who are entitled to enter the bids
are decided by the BRLMs to the issue. (These stock brokers selected by the BRLMs for accepting bids are
called syndicate members). The bid data collected through the book building process is provided by the
stock exchanges to the Book Running Lead Managers who in-turn forwards the same to the Registrars and
Transfer Agent concerned. The physical applications are collected by the Registrars from the banks where
the applications and cheques are deposited. The applications are processed by the Registrars and a
meeting of the Book Running Lead Managers, Registrars and the Issuer Company is held to decide the basis
of allotment. The minutes of this meeting which inter alia contain details regarding how the basis has been
drawn, total subscription received for the issue, technical rejections, total number of shares to be
considered for allotment etc., is submitted to the stock exchanges. To determine the successful allotees,
the draw of lots is conducted by the Designated Stock Exchange (draw of lots are done by a SEBI approved
Public Representative on the Board of the Designated Stock Exchange) and the basis of allotment is
finalised. As such, the stock exchanges do not process or scrutinise the physical application forms or the
unique details of the applicants such as addresses, PAN number etc., during the IPO process and hence will
not be in a position to ascertain multiple or fictitious applications. On completion of the basis of allotment,
the Registrars for the IPO carries out the allotment process by making allotment in accordance with the
basis of allotment and then uploading the file containing the details of allotment to the depository which in
turn credits the shares to the applicants' beneficiary accounts. The Issuer company will then submit a
certificate from a practicing Chartered Accountant or a Company Secretary confirming that the allotment
has been done by the Registrars as per the basis approved by the stock exchange. After the completion of
the credit of shares, the depositories issue a certificate indicating that the shares as detailed by the
Registrars have been credited to the beneficiary accounts to the Issuer which is in turn submitted to the
stock exchanges by the Book Running Lead Manager / Issuer company. A confirmation of the dispatch of
refund orders is submitted to the stock exchanges by the Registrars. 6.3. Stages in a Book Built Issue The
various stages in the book built issue can be broadly described as under: ? In a Book Built Issue, the
applicant submits his IPO application along with the cheque / DD to the syndicate member / sub syndicate
member for entering bids in the Bid Book. ? It is mandatory for the applicant to indicate his demat account
particulars in the application form. Thus it is mandatory for an IPO applicant to have a demat account while
making application in an IPO. Further, for the purpose of refund of application money, the bank details of
the applicant are downloaded by the RTI from the depository system and therefore it is mandatory for the
demat account holder / IPO applicant to indicate his bank details in the depository account. Therefore,
opening of bank account and Demat account can be considered as the first stage in making application in
book built issue. ? Upon receipt of IPO application along with the Cheque / DD, the syndicate / sub
syndicate member verifies the same and thereafter the syndicate / sub syndicate member enters the bid in
the BSE / NSE system and forwards the physical applications along with the cheques / DDs to the collecting
bank. ? The collecting bank separates the cheques / DDs from the application forms and sends the cheques
/ DDs for collection and simultaneously forwards the IPO application to the registrar to issue for
preparation of application master. ? Upon realization of cheques, Banker to the issue (i.e. Collecting Bank)
submits the details of the cheques realized along with bank serial number which forms the basis for the RTI
to reject application where cheques have not been realized. ? The master database is prepared by
Registrar to an Issue for the purpose of working out the basis of allotment after weeding out invalid and
multiple applications as per applicable criteria. ? The Registrar to an Issue, the Post Issue Lead Manager,
representative of stock exchange and an official of the issuer company in a meeting decide the basis of
allotment and finalise the ratio of allotment. ? Based on the approved basis of allotment, registrar to an
issue makes allotment to eligible investors and through a process of corporate action, electronic allotment
is made to the demat account of the allottee through depository. ? Concurrently, the Confirmation of
Allotment Note (CAN) is dispatched along with the refund order or refund details (in case of direct credit to
the bank account).