BOOK BUILDING PROCESS CHAPTER I OVERVIEW AND EXECUTIVE SUMMARY

Definition

1.1

Book Building is basically a capital issuance process used in Initial Public

Offer (IPO) which aids price and demand discovery. It is a process used for marketing a public offer of equity shares of a company. It is a mechanism where during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The process aims at tapping both wholesale and retail investors. The offer/ issue price is then determined after the bid closing date based on certain evaluation criteria.

Overview and Executive Summary

1.2

The Initial Public Offering (IPO) market in India has undergone a major

change. There has been a transition from the times of under priced issues in the Controller of Capital Issues (CCI) days where getting allotment was akin to winning a lottery .Then came the era of free pricing when a number of overpriced issues hit the market but all through the conventional fixed priced issue route. Then in 1998, Securities and Exchange Board of India (SEBI)allowed issuers of equity shares of Rs 250 million and above to have an option to make an issue through the Book Building process. This was to facilitate the institutional investors comprising foreign financial investors, mutual funds and domestic institutions to participate in the IPOs of companies.

1.3

Book Building refers to the collection of bids from investors which. is based

on an indicative floor price, the issue price being fixed after the bid closing date. The principal intermediaries involved in a book building process are the Company, Book Running Lead Manager {BRLM), Co-Book Running Lead Manager (CBRLM) and syndicate members who are intermediaries registered w1th SEBI and are eligible to

BOOK BUILDING PROCESS act as underwriters. Syndicate members are typically appointed by the BRLM. The BRLM along with the syndicate helps the issuer company to market the IPO and get an optimum price for its offering.

1.4

The Book Building process is undertaken basica1ly to determine investor

appetite for a share at a particular price. It IS undertaken before making a public offer and it helps determine the issue price/number of shares to be issued. The book building process begins with the BRLM getting a feel of the possible pricing from institutional investors. Based on this feedback, the issuer company and BRLM fix a floor price or a minimum price for the issue. The investors are informed of the floor price and they bid for the equity shares at appropriate prices at or above the floor price.

1.5

The bidding is akin to an open auction. The bidding period is kept open for at

least five working days. The advertisement announcing the bidding contains the floor price, date of the opening of the offer and the closing date. An issue document is prepared for guidance of investors which contains the names of syndicate members who are entitled to receive the bids. All bids have to be electronically received and the bidding centers, are electronically connected to maintain transparency and ensure online entry of all bids received. All investors-have to place their bids only through the Syndicate Members' who have the right to vet the bids. The SEBI guidelines also prescribe the minimum number of bidding centers depending on the registered office of the issuer company. The bids can be revised by the bidder before the issue- closes. To maintain transparency in 'the bidding process, at the end of every bidding session, the demand of the issue is shown in graph form on the terminals. .

1.6

Once the company gets the various bids from the investor, it plots the bids at

various prices and the quantity of shares at these prices. It along with the BRLM then decides the final price at which it is willing to issue the stock. Generally, the number of shares are fixed, the issue size gets frozen based on the price per share discovered through book building process. As per the extant SEBI guidelines, a company going

BOOK BUILDING PROCESS public has to offer a minimum of 25% of issued post issue capital to the public. However, by a recent amendment companies making issuances in certain sectors like software, telecom, media etc., can dilute a minimum of 10% of the issued post issue capital subject to certain additional conditions like minimum issue size of Rs 500m and issuance of 20,00,000 shares. SEBI guidelines currently allow issuers the choice between a 90% scheme and 75% scheme for book built IPO's. Under the 90% scheme, 90% of the issue can be offered through book building process while only 10% of the issue has to be offered via fixed price portion. Under the 75% scheme the percentages are 75 and 25 respectively. Aft the Companies Amendment Bill came into effect in 200I, SEBI is now contemplating a 100% Book building scheme where the whole issue can be done through book building process.

1.7

Both retail investors and wholesale investors participate in the Book Building

issue. A retail investor in book building process is an investor who has to bid for a minimum of 100 equity shares or such other minimum number as decided by the company and in multiples of I equity share thereafter subject to a maximum of 1000 equity shares. In case of wholesale bidders, the bid has to be for a minimum of 1000 equity shares and in multiples of 50 equity shares thereafter. In case of oversubscription in the retail category, allocation will be made on a proportionate basis and in consultation with the stock exchange. The balance book-built portion shall be available to wholesale bidders and the company in consultation with the allocation committee has the discretion to allocate to any of the investors, who have bid, at or above the issue price in wholesale bidder category.

1.8

While bidding for the equity shares of the company in a book- built portion,

each bidder shall with the submission of the bid-cum-application form, draw a cheque /demand draft/stock invest for the maximum amount of this bid in favor of escrow account of the escrow collection bank.

1.9

However, the syndicate member(s) at their discretion may waive such

requirement of payment at the time of submission of the bid form. For wholesale

BOOK BUILDING PROCESS bidders where such payment at the time of bidding is waived at the discretion of the syndicate member, the issue price would be paid, favoring the escrow bank account within 4 days of communication by the BRLM of the list of bidders who have been allocated equity shares to the syndicate members.

1.10

Through still a new concept, book building is a good concept and represents a

capital market, which is in the process of maturing.

BOOK BUILDING PROCESS CHAPTER 2 PROCESS OF BOOK-BUILDING

The Process

2.1

The basic process of Book-Building is as follows: The issuer who is planning a IPO nominates a lead merchant as a book runner. The issuer specifies the number of securities to be issued and the price band for orders. The issuer also appoints syndicate members with whom orders can be placed by the investors. Investors place their order with a syndicate member who inputs the orders into the Electronic book. This process is called bidding and is similar to open auction. A book should remain open for a minimum of five days. Bids cannot be entered less than the floor price. Bids can be revised by the bidder before the issue closes. On the close of the book building period the book runner evaluates the bids on the basis of the evaluation criteria which may include : Price Aggression Investor quality Earliness of bids etc.

The book runner and the company conclude the final price at which it is willing to issue the stock and allocation of securities. Generally, the number of shares are fixed, the issue size gets frozen based on the price per share discovered through the book building process. Allocation of securities is made to successful bidders. Book Building is a good concept and represents a capital market which is in the process of maturing.

BOOK BUILDING PROCESS Detailed Steps In Book-Building

a) Approvals required

* *

Shareholders' approval to the Public Issue under section 81 (IA) Board of Directors resolution - for Public Issue - appointment of BR.L.M(s) and other members of syndicate team - appointment to the Registrar to the Issue - appoint a committee to take all decisions for the issue

RBI approval for issue of shares to NRls, OCBs and Fils

b) The Issue Management Team

Syndicate team to the issue - Book Running Lead Manager (BRLM) - Co-Book Running Lead Manager (CBRLM) - Lead manager(s)/ Co-Lead Manager(s)/ Co- Managers - Syndicate Members

Brokers to the issue (they must accept cheques upfront) - who are registered with BSE/NSE - to accept only retail

* * * * *

Registrar to the issue Legal Advisor to the Company Legal Advisor to the Syndicate Team Auditor to the Company Bankers to the issue Escrow collection bankers (For the Book Built portion, in case the

syndicate members insist on upfront payment and for bids through brokers) - bankers for fixed price offer

BOOK BUILDING PROCESS c) Red Herring Prospectus

The BRLM conducts due diligence on the issuer during the preparation of a Red Herring Prospectus. - Meetings with the Company & its management - Discussions with legal advisors & auditors of the Company - Site visit - Detailed study of the approvals received by the Company during the course of business.

* *

The Red Herring Prospectus is filed with SEBI SEBI reverts with observations on the Red Herring Prospectus (in 21 days) during which period the Red Herring Prospectus is a public document.

The observations of SEBI and any material developments are- updated in the Red Herring Prospectus.

The Red Herring Prospectus is filed with RoC prior to opening the issue and on the basis of this RoC filed document, bids are solicited

d) Procedure for bidding

Syndicate Members to circulate Red Herring Prospectus, after ROC filing to the prospective investors both wholesale and retail

Company and BRLM declare bid opening and closing date through newspaper ads (statutory ad). As per SEBI Guidelines, bids have to be open for a minimum of 5 days.

Investors to register bids in the prescribed format through. Syndicate Members or their authorised agents. Investors can also register their bids with brokers to the issue provided the entire money is taken upfront and put in escrow account.. Syndicate members will have the discretion to take money upfront.

BOOK BUILDING PROCESS e) Offer structure

.Book built portion . Institutional - 60% of the Issue Non Institutional- Wholesale- 15% of the issue

- Non-institutional Retail -15% of the issue (defined as 10 market lots) * Fixed price offer - Retail- 1O% of the offer (defined as 10 market lots

f) Electronic Connectivity and Registration.

BSE/NSE offers a screen based facility for registering bids This facility shall be linked to the terminals of Syndicate Members for registering bids * hence requirement of Syndicate Members and BRLMs is a terminal(s) with BSE/NSE connectivity. * no interconnectivity between any member of the Syndicate team book built issues till date have used NSE/BSE platform.

- Syndicate Members will be required to enter details of the Investor and the system will generate a Unique Transaction Identification Code (UTIC) and a Transaction Registration Slip confirming the registration of the bid. - Bids registered with Syndicate Members will be electronically transmitted to BSE/NSE mainframe on-line and available to the BRLM on-line.

g) Bidding process

* *

Investor to bid in only ONE Bid form (maximum 3 bids at various prices) Revision of bids to be done only in the Bid Revision form (any number of

times) through the Syndicate Member with whom the first bid was registered..

BOOK BUILDING PROCESS h) Price discovery

* * * * *

Book is built at various price levels Company, BRLM to finalise the cut-off price and allocation BRLM to Intimate the Syndicate Members of the allocation and price Syndicate Members to collect subscription amount from successful bidders Securities are allotted within 15 days of offer closing date (the pay-in date)

i) Underwriting arrangement

Company to sign underwriting agreement with the BRLM. This has to be done after price discovery and on the basis of demand received In the book built portion.

BRLM to enter Into underwriting agreement with the Syndicate Members, If required

For the Company, in case of any shortfall, the BRLM will be liable for making good the shortfall in payment .

In case there is no underwriting agreement with the Syndicate Members, the risk of default after allocation will be on the BRLM/ Co-BRLM - this could be offset by insisting on collection of full money upfront by Syndicate Members. - however, this will dissuade Institutional Investors, especially since they may revise bids - hence this could be insisted upon only in case of bids by Individual/ retail investors.

BOOK BUILDING PROCESS j) RoC filling

After signing of the underwriting agreement, and finalising the price, the Prospectus is finalised and filed with RoC.

Statutory advertisement to be released with price and a table indicating amount payable by investors, as in a normal Public Issue.

Fixed price offer date for opening and closing of the issue to be announced

k) Fixed price offer

* * *

The fixed price offer Is-open only to retail investors Application forms and Prospectus with the issue price are made available The procedure is similar to a plain -vanilla Public Issue

I) Other Relevant Issues

Bidding centres - 4 metropolitan cities - All Stock Exchange centres In the region of the Companys registered office - For companies registered at New Delhi the centers are Delhi, Mumbai, Kolkata, Chennai, Kanpur, Jaipur, Ludhiana Additionally, CMC may consider Ahemedabad, Hyderabad, Bangalore,

Pune. * Syndicate team - BRLM - Lead Managers - Co-Lead Managers/ Co-Managers viz. - Syndicate Members - Brokers who are registered with BSE/NSE at bidding centres.

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BOOK BUILDING PROCESS m) Marketing Strategy.

* *

Co-ordinated corporate & issue campaign & PR campaign Focus on institutional investors for 600% of the issue - one-to-one meetings with the Institutional Investors - presentations to them by the Company and the BRLM & Co-BR.LM - analysts' and press meet - follow-up with the prospective investors to gauge appetite - assist investors in the bidding process - Meetings with high net worth individuals (HNIs)

Retail investors - appoint brokers who will accept bids to increase reach - Incentivise the broker channels with suitable brokerage. - press and broker conference

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BOOK BUILDING PROCESS CHAPTER 3 Guidelines for Book Building

3.1

An issuer company proposing to issue capital through book building shall comply with the following :

(A)

75% Book Building Process (11.2). In an issue of securities to the public through a prospectus the option for 75% book building shall be available to the issuer company subject to the following:

(i)

The option of book building shall be available to all body corporate which are other wise eligible to make an issue of capital to the public.

(ii)(a) The book building facility should be available as an alternative to, and to the extent of the percentage of the issue which can be reserved for firm allotment as per these guidelines.

(ii)(b) The issuer company shall have an option of either reserving the securities for firm allotment or issuing the securities through bookbuilding process.

(iii)

The issue of securities through book-building process shall be separately identified/indicated as placement portion category in the prospectus.

(iv)(a) The securities available to the public shall be separately identified as net offer to the public.

(iv)(b) The requirement of minimum 25% of the securities to be offered to the public shall also be applicable.

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BOOK BUILDING PROCESS (v) In case the book-building option is availed of, underwriting shall be mandatory to the extent of the net offer to the public . (vi) The draft prospectus containing all the information except the information regarding the price at which the securities are offered shall be filed with the Board.

(vii)

One of the Lead Merchant Banker to the issue shall be nominated by the user company as the Book runner and his name shall be mentioned in the prospectus.

(viii)(a)The copy of the draft prospectus filed with the Board may be circulated by the Book Runner to the institutional buyers who are eligible for firm allotment and to the intermediaries eligible to act as underwriters inviting offers for subscribing to the securities.

(viii)(b)The draft prospectus to be circulated shall indicate the price band within which the securities are being offered for subscription.

(ix)

The book Runner on receipt of the offers shall maintain a record of the names and number of securities ordered and the price at which the intuitional buyer or underwriter is willing to subscribe to securities under the placement portion.

(x)

The underwriter(s) shall aggregate the offers so received for subscribing to the issue out of the placement portion.

(xi)(a) The underwriter(s) shall aggregate the offers so received for subscribing to the issue and intimate to the Book runner the aggregate amount of orders received by him.

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BOOK BUILDING PROCESS (xi)(b) The intuitional investor shall also forward its orders, if any, to the book runner. (xii) On receipt of the information, the Book Runner and the issuer company shall determine the price at which the securities shall be offered to the public.

(xiii)

The issue price for the placement portion and offer to the public shall be the same.

(xiv)

On determining the price of the underwriter shall enter into an underwriting agreement with the issuer indicating the number of securities as well as the price at which the underwriters shall subscribe to the securities. Provided that the Book Runner shall have an option of requiring the underwriters to the net offer to the public pay in advance all monies required to be paid in respect of their underwriting commitment.

(xv)

On determination of the issue price within two days, thereafter the prospectus shall be filed with the Registrar of Company.

(xvi)

The issuer company shall open two different accounts for collection of application moneys, one for the private placement portion and the other for the public subscription.

(xvii) One day prior to the opening of the issue to the public, Book Runners shall collect from the institutional buyers and the underwriters the application forms along with the application moneys to the extent of the securities proposed to be allotted to them/ subscribed by them.

(xviii)(a) Allotments for the private placement portion shall be made on the second day from the closure of the issue.

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BOOK BUILDING PROCESS

(xviii)(b) However, to ensure that the securities allotted under placement portion and public portion are pari passu in all respects, the issuer company may have one date of allotment which shall be the deemed date of allotment for the issue of securities through book building process.

(xix)

In case the Book Runner has exercised the option of requiring the underwriter to the net offer to the public to pay in advance all moneys required to be paid in respect of their underwriting commitment by the eleventh day of the closure of the issue the shares allotted as per the private allotment category shall be eligible to be listed.

(xx)(a) Allotment of securities under the public category shall be made as per the guidelines.

(xx)(b) Allotment of securities under the public category shall be eligible to be listed.

(xxi)(a) In case of under subscription in the net offer to the public spillover to the extent of under subscription shall be permitted from the placement portion to the net offer to the public portion subject to the condition that preference shall be given to the individual investors.

(xxi)(b) In case of under subscription of the placement portion spillover shall be permitted from the net offer to the public to the placement portion.

(xxii) The issuer company may pay interest on the application moneys till the date of allotment provided that payment of interest is uniformly given to all the applicants.

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BOOK BUILDING PROCESS (xxiii)(a) The Book Runner and other intermediaries associated with the book building process shall maintain records of the book building process.

(xxiii)(b) The Board shall have the right to inspect such records.

(B)

100% Book Building Process (11.3) In an issue of securities to the public through a prospectus option Book Building shall be available to any issuer company subject to the following:

(i)

Issue of capital shall be Rs 25 crores and above.

(ii)

Reservation or firm allotment to the extent of percentage specified in these guidelines shall not be made to categories other than the categories mentioned in sub-clause (iii) below.

(iii)

Book Building shall be for the portion other than the promoters contribution and the allocation made to:

(a)

Permanent employees of the issuer company and in the case of a new company the permanent employees of the promoting companies.

(b)

Shareholders of the promoting companies in the case of a new company and shareholders of group companies in the case of an existing company either on a competitive basis or on a firm allotment basis.

(iv)

The issuer company shall appoint an eligible Merchant Banker(s) as book runner(s) and their name(s) shall be mentioned in the draft prospectus.

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BOOK BUILDING PROCESS (v) The lead Merchant Banker shall act as the Lead Book Runner and the other eligible Merchant Banker(s), so appointed by the Issuer, shall be termed as Co-Book Runner(s)

(vi)

The primary responsibility of building the book shall be that of the Lead Book Runner.

(vii)

The Book Runner(s) may appoint those intermediaries who are registered with the Board and who are permitted to carry on activity as an Underwriter as syndicate members.

(viii)

The draft prospectus containing all the disclosures as laid down in Chapter VI except that of price and number of securities to be offered to the public shall be filed by the Lead Merchant Banker with the Board provided that the total size of the issue shall be mentioned in the draft prospectus.

(ix)(a) In case of appointment of more than one lead Merchant Banker or Book Runner for Book Building, the rights, obligations and responsibilities of each should be delineated.

(ix)(b) 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 and the same shall be incorporated in the inters allocation of responsibility given in Schedule II.

(x)(a) The Board within 21 days of the receipt of the draft prospectus may suggest modifications to it.

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BOOK BUILDING PROCESS (x)(b) The Lead Merchant Banker shall be responsible for ensuring that the modifications/ final observations made by the Board are incorporated in the prospectus.

(xi)(a) The issuer company shall after receiving the final observations if any on the offer document from the Board make an advertisement in an English national daily with wide circulation, one Hindi National newspaper and a Regional language newspaper with wide circulation at the place where the registered office of the Issuer company is situated.

(xi)(b) The advertisement so issued shall contain the salient features of the final offer document as specified in Form 2A of the Companies Act along with the application form.

(xii)

The issuer company shall compulsorily offer an additional 10% of the issue size offered to the public through the prospectus.

(xiii)

The pre-issue obligations and disclosure requirements as specified in Chapter V and VI respectively of these Guidelines, shall be applicable to issue of securities through book building unless stated otherwise in this Chapter.

(xiv)

The Book Runner(s) and the issuer company shall determine the price issue based on the bids received through the syndicate members

(xv)

On determination of the price, the number of securities to be offered shall be determined (issue size divided by the price which has been determined).

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BOOK BUILDING PROCESS (xvi) Once the final price (cut-off price) is determined all those bidders whose bids have been found to be successful (i.e. at and above the final price or cut-off price) shall become entitle for allotment of securities.

(xvii) No incentive, whether in cash or kind, shall be paid to the investors who have become entitled for allotment of securities.

(xviii) On determination of the entitlement under sub-clause (xvi), the information regarding the same (i.e. the number of securities which the investor becomes entitled) shall be intimated immediately to the investors.

(xix)

The final prospectus containing all disclosures as per these Guidelines including the price and the number of securities proposed to be issued shall be filed with the Registrar of Companies.

(xx)

Arrangement shall be made by the issuer for collection of the applications by appointing mandatory collection centers as per these guidelines.

(xxi)

The investors who had not participated in the bidding process or have not received intimation of entitlement of securities may also make an application.

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BOOK BUILDING PROCESS Additional Disclosures (11.3.2)

3.2

Apart from meeting the disclosure requirements as specified in these guidelines, the following disclosures shall be suitably made:

(i)

The particulars of syndicate members along with the details of registrars, bankers to the issue, etc.

(ii)(a) The following statement shall be given under the basis for issue price : The issue price has been determined by the Issuer in consultation with the Book Runner(s), on the basis of assessment of market demand for the offered securities by way of Book-building.

(ii)(b) The following accounting ratios shall be given under the basis for issue price for each of the accounting periods for which the financial information is given:

1.

EPS, pre-issue, for the last three years (as adjusted for charges in capital)

2.

P/E, pre-issue and comparison thereof with industry P/E where available (giving the source from which industry P/E has been taken).

3. 4. 5.

Average return on net-worth in the last three years. Net-Asset value per share based on last balance sheet. The accounting ratios disclosed in the offer document shall be calculated after giving effect to the consequent increase of capital on account of compulsory conversions outstanding, as well as on the assumption that the options outstanding, if any, to subscribe for additional capital shall be exercised.

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BOOK BUILDING PROCESS Underwriting (11.3.3)

(i)

The entire offer other than to the categories referred to in clause 11.3(iii) above shall be fully underwritten by the syndicate members/ Book Runner(s)

(ii)(a) The syndicate members shall enter into an underwriting agreement with the Book Runner(s) indicating the number of securities which they would subscribe at the predetermined price.

(ii)(b) The Book Runner shall in turn enter into an underwriting agreement with the Issuer Company.

(iii)

In the event of the syndicate members not fulfilling their underwriting obligations the Book Runner(s) shall be responsible for bringing in the amount devolved.

(iv)

There shall not be any under subscription in the category reserved for persons applying upto 10 tradable lots as the Underwriters shall bring in the amount devolved subject to the fulfillment of the minimum shareholders criterion.

Procedure for Bidding (11.3.4)

3.3

The method and process of bidding shall be subject to the following:

(i)

Bid shall be open for at least 5 days.

(ii)

The advertisement mentioned at clause 11.3.1 (xi) shall also contain the following:

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BOOK BUILDING PROCESS (a) the date of opening and closing of the bidding (not less than 5 days). (b) The names and addresses of the syndicate members as well as the bidding terminals for accepting the bids. (c) The method and process of bidding.

(iii)

Bidding shall be permitted only if an electronically linked transparent facility is used.

(iv)

The syndicate members shall be present at the bidding centers so that at least one electronically linked computer terminal at all the bidding centers is available for the purpose of bidding.

(v)(a) The number of bidding centers shall not be less than the number of mandatory collection centers specified in these guidelines.

(v)(b) The same norms as applicable for collection centers shall be applicable for the bidding centers also.

(v)

Individual as well as institutional investors shall place their bids only through the syndicate members who shall have the right to vet the bids.

(vi)

The investors shall have the right to revise their bids.

(vii)

Bidding Form

(a)

There shall be standard bidding form to ensure uniformity in bidding and accuracy.

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BOOK BUILDING PROCESS (b) The bidding form shall contain information about the investor, the price and the number of securities that the investor wishes to bid. (c) The bidding form before being issued to the bidder shall be serially numbered at the bidding centers and date and time stamped. (d) The serial number may be system generated or stamped with an automatic numbering machine. (e) The bidding form shall be issued in duplicate signed by the investor and countersigned by the syndicate member, with one form for the investor and the other for the syndicate member(s)/ Book Runner(s).

(viii)

At the end of each day of the bidding period the demand shall be shown graphically on the terminals for information of the syndicate members as well as the investors.

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BOOK BUILDING PROCESS Allocation/ Allotment Procedure (11.3.5)

(i)

At least 15 % of the issue size shall be reserved for allocation to individual investors applying upto 10 tradable lots through the syndicate member.

(ii)

10% of the issue size offered to the public through the prospectus shall be reserved for allocation to individual investors who had not participated in the bidding process or have not received an intimation for entitlement of securities under clause 11.3 (xix).

(iii)

Allotment to investors under sub-clauses (i) and (ii) of this clause, shall be made on the basis of the proportionate allotment system as specified in Schedule XVIII.

(iv)

In case of under subscription in the category referred to in clause (ii) of this clause, the Issuer company has the option to allocate it to whichever category it deems fit or let the under subscribed portion lapse.

(v)

(a)

For the class of investors other than those mentioned at clauses

(i) and (ii) of this clause, the allocation shall be determined by the Boor Runner(s) based on prior commitment, investor quality, price aggression, earliness of bids, etc.

(b)

The minimum shareholders criterion shall not be applicable to

this category.

(vi)

Allotment shall be made not later than 15 days from the closure of the issue failing which interest at the rate of 15% shall be paid to the investors.

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BOOK BUILDING PROCESS

(vii)

Schedule XX may be referred to for Clarificatory Examples for issue size and allocation has been specified in Schedule XX.

(viii)

Model Time Frame for Book Building is specified in Schedule XXI.

(ix)

(a)

The offer shall remain open for subscription from the public for

a period of at least 3 working days after completing all the requirements of advertisement and dispatch of issue material to all the stock exchanges.

(b)

During the time when the offer is open, the investors who have

received an intimation of entitlement of securities under the clause (xviii) shall submit the application forms along with the application moneys.

(c)

The other individual investors who had not participated in the bidding process or have not received intimation of entitlement of securities under clause (xviii) may also make an application.

Maintenance of Books and Records( 11.3.6)

(i)

A final book of demand showing the result of the allocation process shall be maintained by the book runner(s).

(ii)

The Book Runner(s) and other intermediaries in the Book Building process associated shall maintain records of the book building prices.

(iii)

The Board shall have the right to inspect the records, books and documents relating to the Book Building process and such person shall extend full co-operation.

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BOOK BUILDING PROCESS Important SEBI Guidelines and Stock Exchange Guidelines

(a)

Eligibility Criteria

The minimum size for a book-built issue should be Rs 25 mn. and in the case of 10% dilution would be Rs 50 nm. QIBs mean institutions that have been mentioned in the section 4A of the Companies Act, Mutual Funds, Banks, FIIs, registered VCs, bilateral & multilateral development institutions.

(b)

Three Critical Regulatory Issues.

Corporate Governance requires recasting of Board of Directors before listing One half non-executive Directors One-third independent Directors (in case Chairman is non-executive) or one-half independent Directors (in case Chairman is executive)

Best to implement ESOP plan pre-IPO Post listing, listed price becomes benchmark price

Full dividend to be paid on IPO shares Articles to be amended in case the current articles do not give this power to the Board of Directors.

(c)

Other Regulatory Requirements.

Key SEBI and Listing requirements Minimum post-issue equity capital requirement for listing at BSE and NSE is Rs 100 mn and post-issue networth requirement of Rs 200 mn for BSE alone. Minimum post-issue capital requirement of Rs 50 mn for knowledge based industries; minimum issue size of Rs 500 mn.

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BOOK BUILDING PROCESS At least 25% of the emerging equity must be offered to the public except in the case of knowledge based sectors where the level of dilution can be 10% Under 10% dilution minimum offer size of Rs 500 mn and minimum 2 million shares offered Minimum offer size under 10% dilution is being reviewed and could go upto Rs 1.5 bn. Minimum 5 shareholders per Rs 0.1 mn of paid up capital offered to the public Promoters contribution (20% of the post issue capital) shall be locked in for a period of three years from the date of filing the draft prospectus The balance of the entire pre-issue capital shall be locked in for one year from the date of allotment in the IPO

(d)

Salient features of Indian Book Building Guidelines

Book Building facility available for issue size greater than Rs 250 m Both retail and wholesale investors participate in the bidding process Electronic bidding Number of bidding centers to be minimum of 4 Metro and regional Stock Exchange centers NSE/BSE has developed customized software to meet the issue process through electronic bidding mode.

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BOOK BUILDING PROCESS Schedule XX Clarificatory Examples

(i) In case of an issuer making an initial public offer:

Suppose the post issue

capital is Rs 100 crores. As per the extant guidelines the promoters contribution shall not be less than 20% of the post issue capital subject to the condition that at least 25% of the post issue capital shall be offered to the public. In case, the promoters bring in only the minimum specified contribution, then Rs 20 crores shall be allocated to the promoters. In such a scenario, Book Building facility may be for Rs 80 crores, which is the issue size offered to the public through the prospectus.

Allocation in such a scenario shall be as follows:

Allocation for individual investors applying upto 10 tradable lots through the syndicate members shall be at least 15% of the post-issue capital (Rs 100 crores) i.e. at least Rs 15 crores.

Allocation to Institutional investors as well as other investors applying through the syndicate members shall be Rs 65 crores (Rs 80 crores Rs 15 crores)

Allocation to individual investors applying not through the syndicate members but during the time when the issue is open would be 10% of the issue size offered to the the public through the prospectus (Rs 80 crores) i.e. Rs 8 crores.

Due to allocation to individual investors applying not through the syndicate members the post issue capital would increase to Rs 108 crores and therefore the promoters need to bring in extra capital of Rs 2.4 crores to ensure that their post issue holding (Rs 20 crores + Rs 2.4 crores = Rs 22.4 crores) does not fall below the minimum specified percentage (20% of Rs 110.4 crores i.e. Rs 108 crores + Rs 2.4 crores).

28

BOOK BUILDING PROCESS Allocation to individual investors would therefore total at least Rs 23 crores (Rs 15 crores + Rs 8 crores).

Similarly, the consumption can be worked out for varying levels of promoters contribution. The point that needs to be understood is that in case of a company going in for an initial public offer and availing the facility of Book Building, the allocation to the individual investors applying through the syndicate members shall be with reference to the post issue capital, while the allocation to individual investors applying not through the syndicate members shall be with reference to the issue size offered to the public through the prospectus.

(ii) The allocation process for a listed company. Suppose a listed company with a capital of Rs 50 crores makes a further issue of capital to the public of Rs 50 crores. As per the guidelines, the promoters has to participate to the extent of 20% of the proposed issue or ensure that his post-issue holding not fall below 20% of the expanded capital. In case the promoters participate to the extent of 20% of the proposed issue, then the promoters contribution shall be Rs 10 crores. The amount available for Book-Building, in such a case, shall be Rs 40 crores, which is the issue size offered to the public through the prospectus.

Allocation in such a scenario shall be as follows:

Allocation for individual investors applying upto 10 tradable lots through the syndicate members shall be at least 15% of the post-issue capital (Rs 50 crores) i.e. at least Rs 7.5 crores.

Allocation to Institutional investors as well as other investors applying through the syndicate members shall be Rs 32.5 crores (Rs 40 crores Rs 7.5 crores). Allocation would be determined by the Book Runner(s) in consultation with the Issuer as well as the syndicate members on the basis

29

BOOK BUILDING PROCESS of prior commitment, quality of investor, earliness of bid, price aggression etc.

Allocation to individual investors applying not through the syndicate members but during the time when the issue is open would be 10% of the issue size offered to the public through the prospectus (Rs 40 crores) i.e. Rs 4 crores.

Due to allocation to individual investors applying not through the syndicate members the capital issued through the present issue would increase to Rs 54 crores and therefore the promoters need to bring in extra capital of Rs 1.2 crores to ensure that their post issue holding (Rs 10 crores + Rs 1.2 crores = Rs 11.2 crores) does not fall below the minimum specified percentage (20% of Rs 55.2 crores i.e. Rs 54 crores + Rs 1.2 crores).

Allocation to individual investors would therefore total at least Rs 11.5 crores (Rs 7.5 crores + Rs 4 crores).

In case of a listed company going in for a further issue of capital and availing the facility of Book Building, the allocation to individual investors applying through the syndicate members shall be with reference to the proposed issue, while the allocation to individual investors applying not through the syndicate members shall be with reference to the issue size offered to the public through the prospectus.

(iii) The allocation process for an unlisted company going in for an offer for sale. Suppose an unlisted company with a capital of Rs 100 crores makes an offer for sale. As per the guidelines, the promoters shall ensure that their shareholding after disinvestments shall not be less than 20% of the total issued capital of the company subject to the condition that at least 25% of the total issued capital of the company

30

BOOK BUILDING PROCESS shall be offered to the public. In case the promoters shareholding after disinvestments remains at 20% of the total issues capital, then the promoters contribution shall be Rs 20 crores. The amount available for Book Building, in such a case, shall be Rs 80 crores, which is the issue size offered to the public through the prospectus.

Allocation in such a scenario shall be as follows:

Allocation for individual investors applying upto 10 tradable lots through the syndicate members shall be at least 15% of the post-issue capital (Rs 100 crores) i.e. at least Rs 15 crores.

Allocation to Institutional investors as well as other investors applying through the syndicate members shall be Rs 57 crores (Rs 80 crores Rs 15 crores Rs 8 crores). Allocation would be determined by the Book Runner(s) in consultation with the Issuer as well as the syndicate members on the basis of quality of investor, earliness of bid, price aggression etc.

Allocation to individual investors applying not through the syndicate members but during the time when the issue is open would be 10% of the issue size offered to the public through the prospectus (Rs 80 crores) i.e. Rs 8 crores.

Allocation to individual investors would therefore total at least Rs 23 crores (Rs 8 crores + Rs 15 crores).

In case of an unlisted company going in for sale and availing the facility of Book Building, the allocation to individual investors applying through the syndicate members shall be with reference to the post-issue capital, while the allocation to individual investors applying not through the syndicate members shall be with reference to the issue size offered to the public through the prospectus

31

BOOK BUILDING PROCESS CHAPTER 4 Book Building Model Time Frame

4.1

After, the final observation from SEBI has been received on the offer

document, the minimum number of application forms accompanied with Form 2A and offer document containing the final observations received from SEBI, without mentioning the final price, shall be dispatched to the members of the Stock

Exchanges. However, the issue opening and closing date shall be mentioned in the application form. A minimum of 200 application forms per active member of the Stock Exchange where the securities of the issuer company are proposed to be listed and 10,000 forms each to other Stock exchanges shall be dispatched. Further , minimum 1,000 offer documents, containing the final observations received from SEBI, to each Stock Exchange where the securities of the issuer company are proposed to be listed and minimum 200 offer document, containing the final observations received from SEBI, each to other Stock Exchanges would also have to be dispatched. These shall be dispatched subject to the condition that a minimum gap of 14 days is maintained between the receipt of these applications and the issue opening date.

4.2

After, the price has been determined on the basis of bidding the statutory

public advertisement containing, inter alia, the price as well as a table showing the number of securities and the amount payable by an investor, based on the price determined, shall be issued. The statutory advertisement may be issued before the ROC filing. There shall be a minimum gap of five days between the statutory public advertisement and the issue opening date. The statutory public advertisement shall be issued for a continuous period of three days in an English National daily with wide circulation, one Hindi National paper and a Regional language newspaper with daily circulation at the place where the registered office of the issuer company is situated.

32

BOOK BUILDING PROCESS Typical Time Line

In weeks Prepare Red Herring File Red Herring with SEBI SEBI review, receive SEBI observations Compliance with SEBI observations RoC filing Printing of Red Herring and Bid Forms Pre-marketing Collate pre-marketing feedback and decide floor price Management road shows Bidding period Pricing and allocation RoC filing Fixed Price Portion Listing and allotment X to X+4 X+4 X+7 X+8 X+8 X+10 X+11 X+12 X+12 X+12 X+14 X+15 X+16 X+20

33

BOOK BUILDING PROCESS Detailed Steps in a Book-Built IPO Weeks 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Stage 1 Stage 2

Collate Feedback Stage 3 Pre-issue marketing

File document with SEBI

SEBI review period & ROC

Stage

Stage 5 Pricing And Allotment

Stage 6 ROC Filing And Fixed Price

Stage 7

Roadshow & Bidding

Listing and Trading

Portion

CHAPTER 5

34

BOOK BUILDING PROCESS BSEs Book Building System.

BSE offers the Book Building services through the Book Building software that runs on the BSE Private network.

This system is one of the largest Electronic Book Building networks anywhere spanning over 350 Indian cities through 7000 Trader Work Stations via eased lines, VSATs and Campus LANS.

The software is operated through book-runners of the issue and by the syndicate member brokers. Through this book the syndicate member brokers on behalf of themselves or their clients place orders.

Bids are placed electronically through syndicate members and the information is collected on line real-time until the bid date ends.

In order to maintain transparency, the software gives visual graphs displaying price v/s quantity on the terminal.

CHAPTER 6

35

BOOK BUILDING PROCESS Book Built Issue Structure

(a)

Issue structure I

(i)

Main Issue: Book Built 90% of the Offer 60% allocation to Institutional Investors on a discretionary basis 15% allocation to wholesale/ other investors on a proportionate basis for greater than 1000 shares 15% on a proportionate basis to individual investors bidding upto 1000 shares

(ii)

Fixed Price Issues : 10% of the Offer Only for individual investors on a proportionate basis as per normal public issue guidelines

(b)

Issue Structure II

(i)

Main Issue : Book Built 75% Offer 60% allocation to institutional investors on a discretionary basis 15% allocation to wholesale/ other investors on a proportionate basis for greater than 1000 shares.

(ii)

Fixed Price Issues : 10% of the Offer Only for individual investors on a proportionate basis as per normal public issue guidelines.

36

BOOK BUILDING PROCESS CHAPTER 7 Book Building in the International Markets

(a)

The international book building process:

Prior to the launch of the issue, the lead manager and the issuer agree on a price range to be communicated to the potential investors during the marketing and the book building process

For an initial public offering, an exact price range is used while for a secondary offering, a discount or premium to the existing market price is used

The price range determined is primarily based on -Company's projections -Valuations of similarly traded and comparable companies in the industry -Feedback from equity sales force -Market conditions -Company's expectations

Once the price range is determined, a preliminary prospectus called the 'red herring' is published and this document, along with equity research reports by syndicate members is used for marketing .

Institutional and retail investors take a decision to invest in the company based upon the information in the prospectus, research reports, information received from sales people, company's management and research analysts

The book runner and the syndicate members are in constant contact with the potential investors during the pre-marketing stage and road-shows to provide answers and information

37

BOOK BUILDING PROCESS * Once an investor decides to invest, he communicates to the salesman who in turn informs the syndicate that is responsible for the keeping track of the 'book of demand

Institutional investors can specify the number of shares they would like at different prices

Pricing and volume parameters specified by institutional investors help the book runner determine the final size and price of the offering

Retail investors must place their order at the issue price and have no influence over the setting of the final price

The size and price of an investor's order may be increased or decreased during the book building period

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BOOK BUILDING PROCESS CHAPTER 8 BOOK OF DEMAND

A Typical Book of Demand BOOK OF DEMAND

BOOK RUNNERS SYNDICATE MEMBERS

ORDERS GIVEN TO THE SALES TEAM OF THE SYNDICATE

INSTITUIONAL AND RETAIL INVESTORS

COMPANY RESEARCH ANALYST. ECONOMIC ANALYST PEOPLE

PROSPECTUS (RED HERRING) -ROAD SHOWS - RESEARCH REPORTS MATERIALS

39

BOOK BUILDING PROCESS * The book of demand is a database on a computer that holds the names of potential investors divided by region

After orders are received from the investors via the sales team, they are placed in the book

The book is transferred between the three time zones of the US, Europe and Asia during the book building phase so that orders can be placed 24 hours a day around the world

The order that an investor places is determined in size by either a certain number of shares or a particular value, usually denominated in US Dollars ( depending upon the currency of the offering)

The price at which the investor wishes to purchase the shares can either be set "at market", the value at which the shares are priced, or at a particular value

Thus if the offer range was set between USD 15 -18 and was priced at USD 17, investors would receive shares as follows:

An investor who placed an order "at market" would receive a number of shares based on either

* The dollar value of the order divided by USD 17 or * The number of shares indicated in the order multiplied by USD 17

An investor who placed an order at a particular price at or above USD 17 would receive shares at USD 17

An investor who placed an order at below the offer price of USD 17 would receive no allocation

40

BOOK BUILDING PROCESS * A computer analyses the book of demand in a number of ways

Total demand each day throughout the marketing period

Demand shown by geographical regions usually split between US, Europe & Asia

Demand divided by different price levels

Demand from other underwriters in the syndicate

The final offer price is influenced by the variety of factors

General equity markets conditions -US interest rate environment

Success of the marketing effort

Other competing offerings in the market

Quality & amount of investor interest, including geographical diversity

If the marketing effort is successful, sufficient "demand tension" will have been generated so that the offer is oversubscribed, meaning that the number of shares requested by investors is greater than the number of shares offered.

If the book runner and the other syndicate members are able to generate demand in excess of the supply of shares, investors anticipate difficulty in obtaining a full allocation of shares

The book runner can use this perception of "scarcity" by investors to help achieve a higher final price for the offering

41

BOOK BUILDING PROCESS * Through full knowledge of the size and the price sensitivity of demand in the "book", the book runner aims to set the offer price to raise the desired amount of funds for the issuer yet still leave investors wanting more shares than are allocated to them. Investors will then buy more shares in the aftermarket and support the price.

The final offer price is usually set at a discount to the fully distributed share price, which is the approximate price the Lead Manager believes the shares will trade at in the aftermarket

The Lead Manager outlines to the company, the book of demand generated during the road show, detailing how much demand exists at different prices, and makes a formal offer to buy a specific number of shares at a specific price.

If the price trades up strongly in the immediate aftermarket, the Lead Manager priced the transaction too low and did not obtain maximum proceeds for the company.

If the price declines, the transaction was priced too high and there will be not aftermarket buying at the issue price.

The optimum pricing results in a moderate appreciation of the share price in the aftermarket

The underwriting agreement, (also known as the purchase agreement) specifies the sale of a certain number of shares by the company to the Lead Manager at a discount to the offer price equal to the agreed fees for the transaction.

42

BOOK BUILDING PROCESS * At this point, the Lead Manager and the syndicate are exposed to an "underwriting risk" until the shares are allocated and traded the next day. At this point, the underwriters still have a settlement risk until settlement, which usually occurs five business days after allotment

The Lead Manager acts on behalf of the syndicate of underwriters, who have each given the Lead Manager the Power of Attorney to act on behalf and have agreed to underwrite a specific number of shares at the offer price

Once the terms of the offering have been agreed upon verbally between the Lead Manager (book runner) and the issuer, the book runner's syndicate department informs the sales force of the size and price of the transaction. The sales people, in turn, confirm with clients the number of shares allotted to them.

Simultaneously, the underwriting agreement is signed between the Lead Manager and the issuer

Prior to the commencement of trading on the following day

The terms are released publicly to the market place

The offering is declared effective by SEC (if the offering is registered in the US)

The

underwriting

syndicate

is

terminated

(after

"all

sold"

commitments are made by the syndicate members) and the issue is then free to trade

43

BOOK BUILDING PROCESS * The outcome of a properly syndicated and well marketed offering is to arrive at an offering price that achieves the company's pricing objectives while employing an allocation methodology that ensures that investor appetite is not completely satisfied.

The Lead Manager (book runner) decides how many shares should be allocated to investors based on a variety of criteria Long term intentions -shares should be placed primarily with long term investors who will hold the stock

Aftermarket order -priority should be given to investors who have indicated an intention to buy in the after market since that will support the offering

Demonstrated interest in the offering

Early placement of an order during the book building phase

Limited price sensitivity regarding the final offer price

Aftermarket stabilisation

Stabilisation is achieved by a two way market and, when necessary , by the Lead Manager's buying the shares for the accounts of the underwriters

Typically, the Lead Manager will create a "short" position by allotting more shares (usually 15% of the total offering) than are available to be sold, forcing the Lead Manager to buy back shares in the secondary market and providing support for the share price

44

BOOK BUILDING PROCESS It is typical for the issuer to give the Lead Manager an "over allotment" ( or "greenshoe") option, allowing the Lead Manager to purchase additional shares from the company at the offer price for 30 days after the IPO. The over-allotment option allows the underwriters to cover a portion of the short position and minimise losses incurred if the share price rises after the IPO.

In the worst case situation in the aftermarket with no buyers than the Lead Manager, the number of shares offered for sale by investors who receive shares in the initial allotment would have to exceed the size of the greenshoe before the price would decline significantly below the offer price

45

BOOK BUILDING PROCESS CHAPTER 9 Case Studies and Historical Data

Example 1

Hughes Software Systems (HSS) was the first Indian company to make an issue r through the book building route. It issued 25% of its equity through an offer of 43,75,000 equity shares .HSS chose the 90:10 model of book building. The book built lPO opened for subscription on September 22 for a period of 6 days.

The price band for the book building process was set between Rs. 480 -630 per share.

Of the 43,75,000 equity shares, fresh issue of shares comprised about 5% of the total equity and the balance was divested by the existing promoters.

The issue was managed by Kotak Mahindra Capital Company and JM Morgan Stanley.

HSS is a software company operating in the communication software space. In 1997 the company entered the product business with the launch of its communication protocol stacks and in the next year set up a development centre in Bangalore for its internet and e-commerce application.

The issue was over subscribed over 26 times and was priced at the top end of the band i.e. Rs. 630 per share. It opened at a price of Rs. 1519 on the first day of trading.

46

BOOK BUILDING PROCESS

Historical Data

Scrip Code

532371 Name of Company

Hughes Tele.com India Ltd.

Book Running Lead Manager Type of Securities Type of Issue Issue Size Face Value (Rs.) Floor Price (Rs.) Tick Size Book Building Start Date Fixed Price Portion Start Date

Kotak Mahindra Capital Company Equity Shares 90:10 -Rs. 10.00 Rs. 12.00 Rs. 1 29 Aug 2000

Book Building Size (Rs.) Rs. 674.30 crs

Book Building End Date 05 Sep 2000 20 Sep 2000

Fixed Price Portion End 25 Sep 2000 Date Issue Price (Rs.) Listed Date Rs. 12.00 26 Oct 2000

47

BOOK BUILDING PROCESS Example 2

HCL Technologies Ltd (HCL) was second company to make an IPO through Book Building route. (i) HCL offer structure

Primary offer of 1,42,00,000 equity shares of Rs 4\- each First offer at par value different from Rs 10/First offer under the 10 % guideline for IT companies First time national level participation 237 brokers and 619 terminals

Total Offer of 1,42,00,000 shares

Book Built Tranche 1,27,80,000 shares

Fixed Price Tranche 14,20,000 shares

(ii) -

Transaction Highlights Demand arggregating over Rs 20,000 crs the largest in the history of the Indian Capital Markets

Successful implementation of national level electronic bidding Software developed by NSE and BSE

Bidding band varied in line with demand/ price assessment

HCL had fixed price band of Rs 450 580 per share. It was priced at the top end of the band i.e. Rs 580 per share. The issue was over subscribed 27 times and received demand of over Rs 20,000 crore, It was the first IPO which had electronic bidding software developed by both BSE and NSE. It received over 48

BOOK BUILDING PROCESS 36,000 applications from the retail investors. More than 275 brokers and over 500 terminals participated in the Book Building process.

Historical Data

Scrip Code

532281 Name of Company

HCL Technologies Ltd.

Book Running Lead Manager Type of Securities Type of Issue Issue Size Book Building Size (Rs.) Face Value (Rs.) Floor Price (Rs.) Tick Size Book Building Start Date Book Building End Date Fixed Price Portion Start Date Fixed Price Portion End Date Issue Price (Rs.) Listed Date

Kotak Mahindra Capital Company Equity Shares 90:10 -Rs. 741.20 crs Rs. 4.00 Rs. 580.00 -16 Nov 1999 24 Nov 1999 10 Dec 1999 14 Dec 1999 Rs. 580.00 11 Jan 2000

49

BOOK BUILDING PROCESS Historical Data - Book Building for a few companies

A) JET AIRWAYS(INDIA)LIMITED

Scrip Code

532617 Name of Company

JET AIRWAYS (INDIA) LIMITED

Book Running Lead Manager Type of Securities Type of Issue Issue Size Face Value (Rs.) Price Band (Rs.) Tick Size Book Building Start Date Fixed Price Portion Start Date

Deutsche Equities India Private Limited Equity -17266801 Rs. 10.00 Rs. 950.00 - 1125.00 Rs. 1 18 Feb 2005

Book Building Size (Rs.) --

Book Building End Date 24 Feb 2005 --

Fixed Price Portion End -Date Issue Price (Rs.) Listed Date Rs. 1,100.00 14 Mar 2005

50

BOOK BUILDING PROCESS B) JINDAL POLY FILMS LIMITED

Scrip Code

500227 Name of Company

JINDAL POLY FILMS LIMITED

Book Running Lead Manager Type of Securities Type of Issue Issue Size Book Building Size (Rs.) Face Value (Rs.) Floor Price (Rs.) Tick Size Book Building Start Date Book Building End Date Fixed Price Portion Start Date Fixed Price Portion End Date Issue Price (Rs.) Listed Date

ICICI Securities Limited,JM Morgan Stanley Private Limited Equity ---Rs. 10.00 Rs. 360.00 Rs. 1 09 Jun 2005 15 Jun 2005 --Rs. 360.00 01 Jul 2005

51

BOOK BUILDING PROCESS C) PATNI COMPUTER SYSTEMS LIMITED

Scrip Code

532517 Name of Company

Patni Computer Systems Limited

Book Running Lead Manager Type of Securities Type of Issue Issue Size Book Building Size (Rs.) Face Value (Rs.) Price Band (Rs.) Tick Size Book Building Start Date Book Building End Date Fixed Price Portion Start Date Fixed Price Portion End Date Issue Price (Rs.) Listed Date

DSP Merrill Lynch Limited Equity -18724000 -Rs. 2.00 Rs. 200.00 - 230.00 Rs. 1 27 Jan 2004 05 Feb 2004 --Rs. 230.00 25 Feb 2004

52

BOOK BUILDING PROCESS D) PROVOGUE(INDIA)LIMITED

Scrip Code

532647 Name of Company

PROVOGUE (INDIA) LTD.

Book Running Lead Manager Type of Securities Type of Issue Issue Size Book Building Size (Rs.) Face Value (Rs.) Price Band (Rs.) Tick Size Book Building Start Date Book Building End Date Fixed Price Portion Start Date Fixed Price Portion End Date Issue Price (Rs.) Listed Date

SBI Capital Markets Limited,Karvy Investor Services Limited,Anand Rathi Securities Pvt. Limited Equity -4049402 -Rs. 10.00 Rs. 130.00 - 150.00 Rs. 1 10 Jun 2005 16 Jun 2005 --Rs. 150.00 07 Jul 2005

53

BOOK BUILDING PROCESS E) EMAMI LIMITED

Scrip Code

531162 Name of Company

EMAMI LIMITED

Book Running Lead Manager Type of Securities Type of Issue Issue Size Book Building Size (Rs.) Face Value (Rs.) Price Band (Rs.) Tick Size Book Building Start Date Book Building End Date Fixed Price Portion Start Date Fixed Price Portion End Date Issue Price (Rs.) Listed Date

ANAND RATHI SECURITIES PRIVATE LIMITED, ICICI SECURITIES LIMITED Equity -5000000 -Rs. 2.00 Rs. 60.00 - 70.00 Rs. 1 04 Mar 2005 10 Mar 2005 --Rs. 70.00 24 Mar 2005

54

BOOK BUILDING PROCESS F) INDIA INFOLINE LIMITED

Scrip Code

532636 Name of Company

INDIA INFOLINE LIMITED

Book Running Lead Manager Type of Securities Type of Issue Issue Size Book Building Size (Rs.) Face Value (Rs.) Price Band (Rs.) Tick Size Book Building Start Date Book Building End Date Fixed Price Portion Start Date Fixed Price Portion End Date Issue Price (Rs.) Listed Date

ENAM FINANCIAL CONSULTANTS PRIVATE LIMITED Equity -11878138 -Rs. 10.00 Rs. 70.00 - 80.00 Rs. 1 21 Apr 2005 27 Apr 2005 --Rs. 76.00 17 May 2005

55

BOOK BUILDING PROCESS Appendix A Book Building - Glossary

Bid A bid is the demand for a security that can be entered by the syndicate/sub-syndicate members in the system. The two main components of a bid are the price and the quantity. Bidder The person who has placed a bid in the Book Building process.

Book Running Lead Manager A Lead Merchant Banker who has been appointed by the Issuer Company as the Book Runner Lead Manager. The name of the Book Runner Lead Manager is mentioned in the offer document of the Issuer Company.

Floor Price The minimum offer price below which bids cannot be entered. The Issuer Company in consultation with the Book Running Lead Manager fixes the floor price. Merchant Banker An entity registered under the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1999. Syndicate Members Syndicate Members are the intermediaries registered with the Board and permitted to carry on activity as underwriters. The Book Running Lead Managers to the issue appoints the Syndicate Members. Order Book It is an 'electronic book' that shows the demand for the shares of the company at various prices.

56

BOOK BUILDING PROCESS Appendix B

Comparison between Indian Fixed Public Issue process and the Book Building Process

FEATURE Pricing

Indian fixed Price Public Issue

Book Building Process

Fixed Price set before marketing, Price set after marketing, based on fundamentals and estimates in response to investor of investor demand demand

Valuation

Not maximised since price may have Maximised since price set to be set conservatively before the in response to investor marketing period demand refund after Pay only for shares

Payment

Subscription allocation

with

allocated

Allocation

Allocation can occur as late as 4 Lead Manager allocates weeks after Public Issue closes (within immediately after pricing 30 days from closure of issue) in the book building

portion Underwriting risk From setting of fixed price until From pricing to settlement allocation (3 5 weeks) (5 days)

57

BOOK BUILDING PROCESS Appendix C

Key Steps for an IPO Transaction

Develop Target Orchestrate Price Equity Investors and And PreStory Roadshow Allocation marketing
Highli ght unique positioning of the company Differentiat e the Company from other comparable companies for investors Ensure Investor Understanding of story * Educate sales force about equity story * Warm ups and premarketing with research analysts Set the Floor Price create direct dialogue between research analysts, management & Investors Show case management expertise and depth *Meet Key Investors one-toone *Address key Investors concerns

After Market

*Set price to optimize issuer and investor objectives * Direct shares to Institutions of highest quality with confirmed interest in security *Encourage investor focus with ongoing research *Initiate Investor relations program

58

BOOK BUILDING PROCESS CONCLUSION

Book Building is basically a capital issuance process used in Initial Public Offer (IPO) which aids price and demand discovery.

It helps in getting best issue price and cost as opposed to Indian fixed price method.

Public issue of common shares is essentially carried out in two ways:

Fixed price method, and Book-building method.

Fixed price issues are issues in which the issuer is allowed to price the shares as he wishes. The basis for the price is explained in an offer document through qualitative and quantitative statements. This offer document is filed with the stock exchanges and the registrar of companies.

Book-building is a process of price discovery used in public offers. The issuer sets a base price and a band within which the investor is allowed to bid for shares. Take the recent, Yes Bank IPO, the floor price was Rs 38 and the band was from Rs 38 to Rs 45.

The investor had to bid for a quantity of shares he wished to subscribe to within this band. The upper price of the band can be a maximum of 1.2 times the floor price. Every public offer through the book-building process has a book running lead manager (BRLM), a merchant banker, who manages the issue.

Further, an order book, in which the investors can state the quantity of the stock they are willing to buy, at a price within the band, is built. Thus the term 'book-building.'

59

BOOK BUILDING PROCESS An issue through the book-building route remains open for a period of 3 to 7 days and can be extended by another three days if the issuer decides to revise the floor price and the band.
Closing note : Don't forget there are no guarantees in subscribing to IPOs.

The lead manager may have certified the facts as disclosed in the prospectus are right. Prominent financial institutions may agree to underwrite the issue. The issue may end up being oversubscribed. But the responsibility for investing in an issue rests fairly and squarely on you, the investor. So make sure you have studied the company and the issue thoroughly before you make the decision to invest.

In view of the above advantages of Book Building Process over fixed Indian price method more and more companies are going for making IPO through Book Building method.

60

BOOK BUILDING PROCESS

WEBLIOGRAPHY

www.nseindia.com www.bseindia.com

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