In this post we will discuss about what is book building and its process….
📌What is book building?
📌Define book building.
📌what are the processes of book building?
📌Book building Process.
📌important points in book building process.
Q:- What is book building? What are the process of it?
Ans :- Two of the most standard means to raise money are Initial public offering (IPO) and follow on public offer (FPO) . During the IPO or During the IPO or FPO the organization offers its offers to the public either at fixed cost or offer a price range, the organization offers its offers to the public either at fixed cost or offer a price range, so that the investors can decide on the right price. The method of offering provides an opportunity to the market to discover price for the securities which are on offer.
Book building may be defined as process used by companies raising capital through Public Offering- both Initial public offers(IPOs) and Follow on Public offers.(FPOs) to aid price and demand discovery. It is a mechanism where during the period for which the book for the offer is open the bids are collected from investors at various places which are within the price than specified by the issue of the process is directed towards both institution investors as well as a retail investors .the issue price is determined after the bid closure formed on the demand produced in the process.
The principal intermediaries included in a book building process are the companies. Book Running Lead Manager (BRLM) and Syndicate members are the intermediaries registered with SEBI and competent to act as underwriters. Syndicate members are assigned by the BRLM . The book building process is undertaken primarily to regulate investor appetite for a share at a particular price . It is undertaken before forming a public offer and it helps determine the issue price and the number of shares to be issued.
The following are the two important points in Book building process:
1 . The issue one who is planning an offer lead merchant banker as book runners.
2. The issuer also assigns Syndicate members with whom orders are to be placed by the investor’s.
3. The issuer states the number of securities to be issued and the price band for the bids .
4. The Syndicate members put the instructions into an electronic book . This procedure is called bidding and is homogeneous to open auction.
5. The book usually remains open for a period of 5 days.
6. Bids have to be entered within the defined price band.
7. Bids can be revised by the Bidders prior to the book closes.
8. On the close of the book building period ,the book runners asses the bids on the basis of the demand at several price levels.
9. The book runners and the issuer set the final price at which the security shall be issued.
10. Generally, the number of shares is fixed , the issue size gets frozen based on the fire price as per share.
11. Allocation of securities is made to the successful bidder .The rest bidders get refund orders.