Public Issue and Book-Building

Made ByGargi Pandey Sanjana Pandya Vishal Salve Zibran Sayyed Tanvi Shah Maitri Sheth 126 127 134 136 149 154

Introduction of IPO
An initial public offering is the first sale of stock by a company to the public. A company can raise money by issuing either debt or equity. IPO is when unlisted company makes a fresh issue of securities or both for the first time to the public. Thus, it paves the way for listing and trading of issuers securities.

Advantages of IPO
Access to capital Increased employee commitment and recruiting power Complements product marketing Expands business relationships Facilitates merger and acquisition activity

Provides flexibility in financing

R E S P O N S I B I L I T Y

Sharing Corporate Control and Financial Gain

Managing for Shareholders Value Sharing Strategic Information

Who gets money in IPO?

The money paid by investors for an IPO goes directly to the company. However, in the offer for sale of shares in the course of disinvestment, the money goes to the government. Once the permission to trade these shares are granted to shareholders, the profit or loss incurred on the transactions accrues to the shareholders. The future profits made by a company are also distributed among shareholders as dividend.

Book-building
Book building is essentially a process used by companies raising capital through public offerings- both (IPOs) or (FPOs)to aid price & demand discovery. It is a mechanism where , during the period for which the book for the offer is open. The bids are collected from investors at various prices, which are within priceband specified by the issuer. The process is directed towards both the institutional as well as the retail investors, the issue price is determined after the bid closure based on the demand generated in the process.

D E F I N I T I O N

SEBI Guidelines, 1995 defines book building as a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built up by and the price for such securities is assessed for the determined of the quantum of such securities to be issued by means of notice, circular, advertisement, document or information memoranda or offer document.

The process of Bookbuilding

1. The issuer who is planning an offer nominates lead merchant banker(s) as book runners. 2. The issuer specifies the no of securities to be issued and price band for bids. 3. The issuer also appoints syndicate members with whom orders are to be placed by the investors. 4. The syndicate members input the orders into and electronic book. This process id called bidding and is similar to open auction. 5. The book normally remains open for a period of 5 days. 6. Bids have to be entered within the specified price band. 7. Bids can be revised by the bidders before the book closes. 8. On the close of the book-building period, the book runners evaluate the bids on the basis of demand at various price levels. 9. The book runners and the Issuer decide the final price at which the securities shall be issued.

G U I D E L I N E S

Rules governing Book building are covered in chapter XI of the securities and exchange board of India (Disclosure and investor protection)Guidelines 2000.
Book building was recognized by SEBI in India after having the recommendations of the committee under the

C O N C L U S I O N

Thus, we would like to conclude by saying that IPO is when a company issues common stock or shares to the public for the first time. IPO has many advantages too. Book building is a very essential process in order to raise capital of a company through IPOs. It is a process which is now practiced and adopted worldwide. Book building is also practiced at BSE, NSE and other security