Book Building of

Equity Shares
 INVESTMENT IN
SECURITIES

1.IPO (Initial Public Offer)

2.Through Direct market purchase.

(BSE, NSE)

“IPO is when a privately owned company issues

shares of stock to be sold to the general public.”
 IPO and Book Building

 IPO before BookBuilding

 Buying of shares on fixed price.

 IPO after BookBuilding

 Share prices between a specified price band

 Price band in the book building process refers to

the band within which the investors can bid. The
spread between the floor and the cap of the
price band is not be more than 20%
 What Is Book Building

 Book building refers to the collection of bids from

investors, based on a floor price, which is
indicated before the opening of the bidding
process. the issue price is fixed after the bid
closing date.

 Book building is a technique used for marketing

a public offer of equity shares of a company.
Types Of Book Building
75% Book Building
Difference between shares through book
building and normal public issue?

Features Fixed Price process Book Building process

Price at which securities will be

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

Demand for the

Demand for the securities
securities offered is
Demand offered can be known
known only after the
everyday as the book is built.
closure of the issue
10 % advance payment is required
100 % advance payment to be made by the QIBs along with
is required to be made by the application, while other
Payment
the investors at the time categories of investors have to pay
of application. 100 % advance along with the
application.
Types of investors

 The retail individual investor (RII)----- 35%

 Non-institutional investor (NII)----- 15%
 Qualified Institutional Buyers (QIBs)-----50%

RII is an investor who applies for stocks for a value of not

more than Rs 100,000.

NIIs are commonly referred to as high net-worth

individuals.

QIBs are institutional investors who posses the expertise

and the financial muscle to invest in the securities
market.
Division of shares in100% Book Building
BOOK BUILDING PROCESS
 Why Book Building?

This process will help to discover the

demand and the price of the shares.
also, the costs of public issue are
much reduced and the time taken
for completion of the entire process
is much less than the in the normal
public issue.
 Example

The price discovery is a function of demand at various prices. The

highest price at which the issuer is able
to issue the desired number of shares is the price at which the book
cuts off i.e. Rs. 22 in the above
example. The issuer, in consultation with the BRLM, will finalize the
issue price at or below such cut off
price i.e. at or below Rs. 22. All bids at or above this issue price and
cut-off bids are valid bids and are
considered for allocation in the respective categories.
BSE’s book building system

 BSE offers a book building platform through the Book

Building software that runs on the BSE Private network.
 This system is one of the largest electronic book building
networks in the world, spanning over 350 Indian cities
through over 7000 Trader Work Stations via leased lines,
VSATs and Campus software is operated by book-runners
of the issue and by the syndicate members , for
electronically placing the bids on line real-time for the
entire bidding period.
 In order to provide transparency, the system provides
visual graphs displaying price v/s quantity on the BSE
website as well as all BSE terminals.
Limitations of Book- Building System

 In the case of the potential investors, the companies can

adjust the attributes of the offer according to the
preferences of the potential investors.
 The issuer company should be fundamentally strong and
well known to the investors.
 The book-building system works very efficiently in
matured market conditions.
 In such circumstances, the investors are aware of the
various parameters affecting the market price of the
securities.
 There is a possibility of price rigging on listing as
promoters may try to bail out syndicate members
SEBI Guidelines
 A company going public has to offer its minimum 25 per
cent of issued post-issue equity to the public and maximum
of 75 per cent post issue equity can remain with the
promoters
 Companies making an issue of over Rs.200 crores need
offer only a minimum of 10 per cent of post issue equity.
Out of the total public issue size, 90 per cent of the issue
can be offered through book building process while only 10
per cent of the issue can be offered via fixed price portion.
 Out of the book building portion, a minimum of 10 per cent
of the issue size has to be reserved for retail bidders while
75 per cent of the issue can be offered to wholesale
bidders.