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