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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