Book Building

12 December 2019
• An IPO can be launched in two ways:

– Fixed Price Method, in which the issuing company

is allowed to price the shares as it wishes

– Book Building Method, a system through which

the investors are allowed to price the shares.

12 December 2019
 Book building
• It refers to “the process of capturing, recording,
and generating investors’ demand for shares at a
desired price during an Initial Public Offering
(IPO).”
– Capturing –the information
– Recording – making entries in the Order Book
– Generating investors’ demand for securities – how
much they need
– At their willing price – quoting their own prices

12 December 2019
 Characteristics of BB
• Tendering Process:
– inviting subscriptions through a tendering process.
– investors are required to place their bids
• for the number of shares and
• the price at which they are willing to invest
• Price Band:
– The range of price (the highest and the lowest price)
Floor Price:
– the minimum price
Cap/Ceiling Price:
– the maximum price: both set by the lead manager
– bid at any price higher than the floor price.
12 December 2019
• Bid:
– the investor fills up a bid-cum-application form
– place a bid with the authorized Syndicate
Members.

• Allotment:
– the lead manager decides the price of the
Securities and
– proceeds to allot shares to investors

12 December 2019
• Participants:
– Issuing Company
– Book Running Lead Manager
– Syndicate Members
– All investors, including:
• Retail Individual Investors
• High Net worth Individual Investors,
• Qualified Institutional Investors

12 December 2019
 Book Building Structure

12 December 2019
 Issuing Company

Lead Manager

Syndicate Members

Investors

Retail Investors HNI Investors QIIs/QIBs

12 December 2019
 1. Nominate Book Runner (BRLM)
- Book Running Lead Manager
2. Form Syndicate Members
- consisting of CBs, MFOs, ICs

3. Submit Draft Offer Document To SEBI

- Past history of the Co,
- Size of the Issue
- Purpose of the Issue
- Price Band

4. Circulate Offer Document

5. Ask For Bids
12 December 2019
6. Collect & Forward To Book Runner

7. Run the Book

8. Determine the Issue Price

9. Securities Issued And Listed

10. Trading Commences on Exchanges

12 December 2019
 Difference
between
Fixed Price Process
AND
Book Building Process

12 December 2019
 Differences:
Points of
Fixed Price process Book Building process
Differences

Price at which securities will be

offered/allotted is not known in
Price at which the securities are
advance to the investor.
Pricing offered/allotted is known in advance
to the investor.
Only an indicative price range is
known.

Demand for the securities offered is Demand for the securities offered
Demand known only after the closure of the can be known everyday as the
issue. book is built.

Payment if made at the time of

Payment subscription wherein refund is given Payment only after allocation
after allocation.
12 December 2019
 Book Building In India

12 December 2019
12 December 2019
12 December 2019
12 December 2019