Description
Book Building Process
BOOK BUILDING PROCESS
Book Building
It means a process undertaken by which a demand for securities proposed to be issued by a body corporate is built up and a ‘fair price’ and ‘quantum’ of securities to be issued is finally determined. In the book building process, the book runner lead manager maintains a book where the bids placed by individuals & institutional investors through the syndicate members are recorded. The syndicate members enter into a underwriting agreement with the company.
As per SEBI guidelines
“Book Building means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and build up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document.”
Advantages of Book Building
? It helps the issuer company and the lead
manager banker to discover the demand of the securities. ? It provides flexibility to a company in fixing the final issue price ? The price at which the issue is likely to be fully subscribed may be ascertained.
Types of Book Building
? 75% book building
? 100% book building
However. Generally 100% book building is followed in India
SEBI Guidelines on Book Building
? The issue of securities through the book building process shall be
separately identified as ‘placement portion category’ in the prospectus.
? The draft prospectus should contain all information except the
information regarding the price.
? One of the lead merchant bankers to the issue shall be nominated by
the issuer company as a Book Runner and his name shall be mentioned in the prospectus.
? The primary responsibility of the building the book shall be that of the
Lead Book Runner.
? The copy of the draft prospectus filed with SEBI may be circulated by
the Book Runner to the institutional buyer and the underwriter inviting offers.
? The draft prospectus to be circulated shall indicate the price band within
which the securities are being offered for subscription.
SEBI Guidelines Cont…
? The Book Runner on receipt of the offer shall record the same in a book. ? The underwriter(s) shall maintain a record of the orders received by him.
? On receipt of the information, the Book Runner and the issuer company
shall determine the price at which the securities shall be offered to the public and the number of securities to be offered. ? All those bidders whose bids have been found to be successful shall became entitled for allotment of securities. ? The method and process of bidding shall be as follows a) Bid shall be opened for atleast 5 days. b) Individuals as well as QIB’s shall place their bids only through the syndicate members. c) The investors shall have the right to reverse their bids.
SEBI Guidelines Cont…
? On determination of the issue price within 2 days, thereafter the
prospectus shall be filed with the ROC. ? One day prior to the opening of the issue to the public, Book Runner shall collect from the institutional buyer and the underwriters the application form along with the application moneys. ? In case of an under subscription in an issue, the shortfall shall have to be made good by the Book Runner(s) to the issue. ? Records of the book building process should be maintained by the Book runner and other intermediaries. SEBI shall have the right to inspect such record.
Thank You
doc_444435853.pptx
Book Building Process
BOOK BUILDING PROCESS
Book Building
It means a process undertaken by which a demand for securities proposed to be issued by a body corporate is built up and a ‘fair price’ and ‘quantum’ of securities to be issued is finally determined. In the book building process, the book runner lead manager maintains a book where the bids placed by individuals & institutional investors through the syndicate members are recorded. The syndicate members enter into a underwriting agreement with the company.
As per SEBI guidelines
“Book Building means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and build up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document.”
Advantages of Book Building
? It helps the issuer company and the lead
manager banker to discover the demand of the securities. ? It provides flexibility to a company in fixing the final issue price ? The price at which the issue is likely to be fully subscribed may be ascertained.
Types of Book Building
? 75% book building
? 100% book building
However. Generally 100% book building is followed in India
SEBI Guidelines on Book Building
? The issue of securities through the book building process shall be
separately identified as ‘placement portion category’ in the prospectus.
? The draft prospectus should contain all information except the
information regarding the price.
? One of the lead merchant bankers to the issue shall be nominated by
the issuer company as a Book Runner and his name shall be mentioned in the prospectus.
? The primary responsibility of the building the book shall be that of the
Lead Book Runner.
? The copy of the draft prospectus filed with SEBI may be circulated by
the Book Runner to the institutional buyer and the underwriter inviting offers.
? The draft prospectus to be circulated shall indicate the price band within
which the securities are being offered for subscription.
SEBI Guidelines Cont…
? The Book Runner on receipt of the offer shall record the same in a book. ? The underwriter(s) shall maintain a record of the orders received by him.
? On receipt of the information, the Book Runner and the issuer company
shall determine the price at which the securities shall be offered to the public and the number of securities to be offered. ? All those bidders whose bids have been found to be successful shall became entitled for allotment of securities. ? The method and process of bidding shall be as follows a) Bid shall be opened for atleast 5 days. b) Individuals as well as QIB’s shall place their bids only through the syndicate members. c) The investors shall have the right to reverse their bids.
SEBI Guidelines Cont…
? On determination of the issue price within 2 days, thereafter the
prospectus shall be filed with the ROC. ? One day prior to the opening of the issue to the public, Book Runner shall collect from the institutional buyer and the underwriters the application form along with the application moneys. ? In case of an under subscription in an issue, the shortfall shall have to be made good by the Book Runner(s) to the issue. ? Records of the book building process should be maintained by the Book runner and other intermediaries. SEBI shall have the right to inspect such record.
Thank You
doc_444435853.pptx