Book Building (1)

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BOOK BUILDING

By: Aaliya Pirzada

  Chetna Rathi

  Jay Desai

  Pooja Desai

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CONTENTS

• I. MeaningII. Concept and MechanismIII. Types o Boo! B"ildingI#. Boo! B"ilding Process#. $"idelines Prescri%ed %y &'BI#I. (imitations

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MEANING

• Boo! B"ilding reers to the collection o %ids romin)estors* %ased on a +oor price* ,hich isindicated %eore the opening o the %iddingprocess. The iss"e price is -ed ater the %id

closing date.

• Boo! B"ilding is a techni/"e "sed or mar!eting ap"%lic o0er o e/"ity shares o a company.

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DEFINATIONS

• Book Building is a process of xing the pricefor an issue of securities on the feedbackfrom potential investors based upon their

 perception about the company

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INVESTMENT IN SECURITIES

• IP2 3Initial P"%lic 20er4

•  Thro"gh Direct mar!et p"rchase.3B&'* 5&'4 IP2 is,hen a pri)ately o,nedcompany iss"es shares o stoc! to%e sold to the general p"%lic.

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BOOK BUILDING & IPO

IP2 %eore Boo! B"ilding

• B"ying o shares on -ed price.

IP2 ater Boo! B"ilding

• &hare prices %et,een a speci-ed price %and

• Price %and in the %oo! %"ilding process reers tothe %and ,ithin ,hich the in)estors can %id. The

spread %et,een the +oor and the cap o the price%and sho"ld not %e more than 678.

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TYPES OF BOOK BUILDING

B229BI(DI5$

;<8 B229B(DI5$

=778 B229BI(DI5$

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TYPES OF INVESTORS

•  >>>? RII 3Retail indi)id"al in)estors 4

• is an in)estor ,ho applies or stoc!s or a )al"e onot more than R&. =77*777.

>>>? 5IIs 3non @ instit"tional in)estors 4

• are reerred to as high net>,orth indi)id"als.

>>>? IBs 3/"ali-ed instit"tional %"yers4

•  are instit"tional in)estors ,ho possess theepertise the -nancial

m"scle to in)est in the sec"rities mar!et.

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75% BOOK BUILDING

 Total P"%lic Iss"ei.e. net o0er to the p"%lic

Boo! B"ildingMethod

ied PriceMethod

;<8 o the net o0er to thep"%lic can %e o0ered to

instit"tional as ,ell as non>instit"tional in)estors ,ho had

participated in the %iddingprocess

6<8 o the net o0er to thep"%lic can %e o0ered at theprice determined thro"gh

%oo! %"ilding shall %ereser)ed or allocation to

retail indi)id"al in)estors ,hohad not participated in the

%idding process

5ot less than 6<8 o the neto0er to the p"%lic shall %e

a)aila%le or allocation to non>/"ali-ed instit"tional %"yers

5ot more than <78 o the neto0er to the p"%lic shall %e

a)aila%le to /"ali-edinstit"tional %"yers

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100% BOOK BUILDING Total P"%lic Iss"e

i.e. 5et o0er to thep"%lic

Allocation to Retailindi)id"al in)estors

3,ho participated inthe %idding process4,ho %ids or sec"ritiesor a )al"e o notmore than Rs <7*777

Allocation tonon @

instit"tionalin)estors ,hoparticipated in

the %iddingprocess

Allocation to

/"ali-edinstit"tional %"yers,ho participated inthe %idding process

5ot lessthan 6<8 othe net o0erto the p"%lic

shall %ea)aila%le or

allocation

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DIVISION OF SHARES IN 100%

BOOK BUILDING

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BOOK BUILDING PROCESS

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GUIDELINES PRESCRIBED BY

SEBI

• The option o %oo!>%"ilding shall %e a)aila%le to all %ody corporate,hich are other,ise eligi%le to ma!e an iss"e o capital to thep"%lic.

• The iss"er company shall ha)e an option o either reser)ing thesec"rities or -rm allotment or iss"ing the sec"rities thro"gh %oo!>

%"ilding process.• The re/"irement o minim"m 6<8 o the sec"rities to %e o0ered tothe p"%lic shall also %e applica%le

•In case the %oo!>%"ilding option is a)ailed o* "nder,riting shall %emandatory to the etent o the net o0er to the p"%lic.

•

Iss"e o capital shall %e Rs.6<crores and a%o)e.•In April 6777* &'BI modi-ed g"idelines or the =778 %oo!>%"ildingprocess. i.e. a maim"m o E78 o the iss"e ,as allo,ed toInstit"tional in)estors and at least =<8 to non>instit"tional in)estors,ho had applied or more than =*777shares

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LIMITATIONS

• The n"m%er o in)estors in)ited to apply are limited.

• Boo! %"ilding relies on m"ch interaction among -rms*merchant

%an!ers* and in)estors* ,hich is a%sent in India.

• lac! o transparency at critical steps o the %oo!

%"ildingprocess.

• A%sence o strong reg"lation.

• More lag time %F, iss"e pricing and listing.

• Collecti)e %argaining po,er o instit"tions.

• Gigh instit"tionalized holding may a0ect the stoc!s

li/"idity*and made it )olatile as ,ell.• The limits -ed are "ngi%le and can %e altered depending "pon

mar!et conditions.

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