|
Book
Building
About
Book Building
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.
The
Process:
-
The
Issuer who is planning an IPO nominates a lead merchant banker
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 5 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 the successful bidders.
-
Book
Building is a good concept and represents a capital market which
is in the process of maturing.
Initial Public Offerings
Corporates
may raise capital in the primary market by way of an initial public
offer, rights issue or private placement. An Initial Public Offer
(IPO) is the selling of securities to the public in the primary
market. This Initial Public Offering can be made through the fixed
price method, book building method or a combination of both.
In case the issuer chooses to issue
securities through the book building route then as per SEBI guidelines,
an issuer company can issue securities in the following manner:
- 100%
of the net offer to the public through the book building route.
- 75%
of the net offer to the public through the book building process
and 25% through the fixed price portion.
- Under
the 90% scheme, this percentage would be 90 and 10 respectively.
Difference
between shares offered through book building and offer of shares
through normal public issue:
| Features |
Fixed
Price process |
Book
Building process |
| Pricing |
Price
at which the securities are offered/allotted is known
in advance to the investor. |
Price
at which securities will be offered/allotted is not
known in advance to the investor. Only an indicative
price range is known. |
| Demand |
Demand
for the securities offered is known only after the closure
of the issue |
Demand
for the securities offered can be known everyday as
the book is built. |
| Payment |
Payment
if made at the time of subscription wherein refund is
given after allocation. |
Payment
only after allocation. |
* * * * *
OFFLIE
PACKAGES
KAVERI
SEED COMPANY LIMITED Click
here
HANUS
TECHNOLOGIES LIMITED Click
here
POWER
GRID CORPORATION OF INDIA LTD Click
here
To
receive the pre-printed application forms. It will be purely on
request basis please provide the details as per the below mentioned
type.
NAME OF FIRST APPLICANT
NAME OF THE SECOND APPLICANT
NAME OF THE THIRD APPLICANT
NAME OF FATHER / HUSBAND (OF
FIRST APPLICANT)
AGE OF ALL APPLICANTS
ADDRESS
DP. NAME
DP-ID
BENF. A/C NO.
STATUS (INDUIVIDUAL / HUF)
PAN. NO.OF ALL THE APPLICANTS
Mail the above the details at - ipo@lkpsec.com
|