Book Building

Price Band= 1095 (Floor Price)-1100(Cap Price)

Tick Price= Difference between two bid price if the tick price is Rs. 1; 1095; 1096; 1098….1100

If tick price is Rs. 5 than investor can bid on 1095; 1100

Price Band= 1096-1100 and Tick price Rs. 2; 1096; 1098; 1100

Cut- off= Price Discovery of share through Book Building

Example: VE is issuing 1 lakh of face value Rs. 5. Company wants to go for Book building process and
price band is Rs.100- Rs.120 and Tick price is Rs. 5; Bid can be done at 100; 105; 110; 115; 120. The lot
size of issue is 100 and multiple of 100. Issue open on 24 sep. and Closes on 26 sep.

Day 1 Day 2 Day 3

No of share Bidding rate No of share Bidding rate No of share Bidding rate
5000 @120 10000 @115 10000 @110
8000 @ 120 8000 @110 3000 @105
10000 @ 110 7000 @120 8000 @115
6000 @ Cut- off price 15000 @ 110 5000 @120
5000 @115 5000 @115 15000 @110
34000 share IPO subscribed 45000 share IPO subscribed 41000 share
application by .34 time or 34 application by .79 time or application
received % received 79% received

Total share application received 1,20,000 that means IPO is over subscribed by 1.20 time

Share application received at @ 120= 5000+8000+6000+7000+5000= 31000

Share application received at @ 115= 5000+10000+5000+8000= 28000

Share application received at @110= 10000+8000+15000+10000+15000= 58000

Now total application received at the 120; 115; 110 are 1,17,000 that means are cut- off price 110

Type of Investors

Retail Individual Investor (RII)- they can invest less than 2 lakh rupess; 35% shares of IPO are reserved for
this category

Non- Institutional Investor (NII): Individual/ HUF/ Companies but they can invest more than 2 lakh
rupess in an IPO. 15% shares of IPO are reserved for this category.

Qualified Institutional Investor (QII)/Qualified Institutional Buyers(QIB): Banks/ Financial Institutions/

FIIs/ Mutual Funds/ Pension Fund/ Insurance Company; 50 % shares of IPO are reserved for this
category. Under this category comes Anchor Investor, who invest more than 10 crs in the IPO of a
company.
When submitted to SEBI= Draft Prospectus

When share price is fixed= Prospectus

When submitted to SEBI= Draft Red Herring Prospectus (DRHP)

When share price is not fixed= Red Herring Prospectus (RHP)