IPO i.e.

Initial Public Offer in India means the new offer made by a Company of its shares to the
public. It is the first sale of the shares by a Company to the public. When the Company for the first
time is coming to the public for raising the funds for its expansion projects is called as Initial Public
offer.IPO market is referred as primary market
IPO is a good way to raise the funds by the Company when it is planning to expand and grow. But
raising funds through IPO is not easy as pie. It involves too many complexities and the compliances on
the part of the Company. The capital market regulator SEBI (Securities and Exchange Board of India)
has laid down various requirements and conditions to be fulfilled by the Company wishes to raise the
fund through public.
The IPO in India is normally done through book building method. This book building method helps the
company to find out the demand and price of its shares. The Company fixes the price band of the
shares i.e the range within which the share is likely to be priced in. 
The process of IPO involves appointment of various intermediaries like Merchant Banker, Registrar to
the issue, Underwriters etc. The company issuing the Initial Public Offering (IPO) decides the number
of shares that it will issue and also fixes the price band of the shares which alongwith all the
information about the company, share capital, its promoters etc. are mentioned in the company's red
herring prospectus. All the necessary documents are required to be submitted to the SEBI, who acts
as a regulatory authority.

During the book building process, an electronic book is opened for some days during which bidding
takes place i.e .people who are interested in buying the shares of the company make an offer to buy
shares within the fixed price band. After the closure of book building, the offers received are evaluated
and then the price is determined. Any offer of share below the fixed price as mentioned in price band
is rejected. The successful bidders are then allotted the shares. The issue can be under subscribed and
over subscribes. In case of over subscribed issue, the allotment is made on proportionate basis but
there is no guarantee that a person will definitely get the shares. Those who have not got the shares
will get the refund of their money within a period of 40-45 days.
After the completion of the IPO process, Company is required to get its shares listed at the Stock
Exchange.
 About Public Issues
Corporates may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Ini
Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made thr
fixed price method, book building method or a combination of both. 

There are two types of Public Issues:

OFFER DEMAND PAYMENT RESERVATIONS

ISSUE TYPE PRICE
Fixed Price Issues Price at which the Demand for the 100 % advance 50 % of the shares
securities are securities offered is payment is required offered are reserved for
offered and would known only after to be made by the applications below Rs. 1
be allotted is the closure of the investors at the time lakh and the balance for
made known in issue of application. higher amount
advance to the applications.
investors
Book BuildingIssues A 20 % price band Demand for the 10 % advance 50 % of shares offered
is offered by the securities offered , payment is required are reserved for QIBS, 35
issuer within and at various to be made by the % for small investors and
which investors prices, is available QIBs along with the the balance for all other
are allowed to bid on a real time application, while investors.
and the final price basis on the BSE other categories of
is determined by website during the investors have to
the issuer only bidding period.. pay 100 % advance
after closure of the along with the
bidding. application.

More About Book Building

Book Building is essentially a process used by companies raising capital through Public Offerings-both Initial Public Offers
Follow-on Public Offers ( FPOs) to aid price and demand discovery. It is a mechanism where, during the period for which th
for the offer is open, the bids are collected from investors at various prices, which are within the price band specified by the
The process is directed towards both the institutional as well as the retail investors. The issue price is determined after the
closure based on the demand generated in the process.

The Process: 

 The Issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'.
 The Issuer specifies the number of securities to be issued and the price band for the bids.
 The Issuer also appoints syndicate members with whom orders are to be placed by the investors.
 The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to o
auction.
 The book normally remains open for a period of 5 days.
 Bids have to be entered within the specified price band.
 Bids can be revised by the bidders before the book closes.
 On the close of the book building period, the book runners evaluate the bids on the basis of the demand at various
levels.
 The book runners and the Issuer decide the final price at which the securities shall be issued.
 Generally, the number of shares are fixed, the issue size gets frozen based on the final price per share.
 Allocation of securities is made to the successful bidders. The rest get refund orders.
Guidelines for Book Building

Rules governing Book building are covered in Chapter XI of the Securities and Exchange Board of India (Disclosure and In
Protection) Guidelines 2000. 

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 thr
over 7000 Trader Work Stations via leased lines, VSATs and Campus LANS.
 The software is operated by book-runners of the issue and by the syndicate members , for electronically placing th
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 websi
as all BSE terminals.

What is book-building process?

Sebi guidelines 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 and the price for the securities is assessed on the basis of the bids
obtained for the quantum of securities offered for subscription by the issuer”.
This process provides an opportunity to the market to discover price for the securities on offer. In common words,
book building is a method for public offer of equity shares of a company. The process is named so because it refers
to collection of bids from investors, which is based on a price range. The issue price is fixed after the closing date of
the bid.
A company planning an IPO appoints a merchant bank as a book runner. Then the company issues a prospectus that
does not mention the price, but provides other details related to the issue size, the company’s operating area and
business, the promoters and future plans among other disclosures.
A particular time frame is also fixed as the bidding period. Then the book runner builds an order book that collates
bids from various investors. Potential investors are allowed to revise their bids at any time during the bidding period.
At the end of bidding period the order book is closed and consequently the quantum of shares ordered and the
respective prices offered are known. The calculation of final price is based on demand at various prices and also
involves negotiations between those involved in the issue.
The book runner and the company finalise the pricing and allocation to each syndicate member.