book building

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					Book Building process
• Price of the security to be issued is determined by book building process • 50% of the issue is to be allocated to QIB (Banks, FIIs, Mutual Funds) • 15% for non QIB (Application for more than 1000 shares) • 35% for retail segment (Small investors)

SEBI guidelines for book building
• Issuer Co. appoints eligible merchant banker(s) as book runner(s) (BR) • Draft prospectus is prepared & must contain all information except price, (however, price band is to be given) to be filed with SEBI • Underwriting is mandatory at predetermined price

SEBI guidelines contd….
• On approval of prospectus by SEBI, Co.can give advt. in newspaper • Book runner (BR) circulates copy of the prospectus to QIBs and brokers • On receipt of the offer, book runner maintains record which contains…..
– Name of the offer maker – Number of securities ordered – Price which applicants are willing to pay

SEBI guideline contd….
• Issue price of the security is jointly decided by Co. and book runner • Final prospectus is to be filed with ROC • BR collects application form with application money from brokers • Individuals as well as QIBs should place their bid only through broker

Bidding procedure
• Bid should be open for at least 3 days • The advt. contains names and address of syndicate members / brokers where bids are accepted • Broker will enter the details of the order in the system • Amount collected by broker is deposited in escrow account • Usually broker collects 100 % of the application money

Allotment procedure
• After finalisation of the basis of allotment Registrar to the issue send the details of allotment to the broker • Co. will announce pay-in-day for the broker • Broker would be responsible for the payment – escrow account must have enough money

Allotment procedure contd….
• Non allotters get back their money from broker • Under writer will bring the amount for the shortfall, if any • Clearing house will debit the escrow account of each broker • “Escrow security account” of the broker will be credited • Broker will transfer security to depository account of the client

Benefits of Book Building
• More realistic way of security price determination • Helps to get highest market price of the security • Issue is pre sold, hence uncertainty is avoided • Investors confidence in the system

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