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BOOK BUILDING 
Presented By, 
R.JOTHIVEL MBA,. 
Department Of Management Studies 
J.J.CET
Book Building Meaning 
• Book building refers to the process of generating, 
capturing, and recording investor demand for 
shares during an Initial Public Offering (IPO), or 
other securities during their issuance process, in 
order to support efficient price discovery.
Definition 
• SEBI guidelines, 1995 defined book-building 
as “a process undertaken by which a demand 
for the securities proposed to be issued by a 
body of corporate is elicited and built 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”.
Example 
• Book building is actually a price discovery method. In this 
method, the company doesn't fix up a particular price for 
the shares, but instead gives a price range, e.g. Rs 80- 
100. 
When bidding for the shares, investors have to decide at 
which price they would like to bid for the shares, for e.g. Rs 
80, Rs 90 or Rs 100. They can bid for the shares at any 
price within this range. 
• Based on the demand and supply of the shares, the final 
price is fixed. The lowest price (Rs 80) is known as the 
floor price and the highest price (Rs 100) is known as cap 
price.
Characteristics Of Book Building 
 Tendering process 
 Floor Price 
 Minimum Price Level 
 Price Band 
 Lower Band 
 Higher Band 
 Bid 
 Bid Cum Application Form 
 Allotment 
 Participants
Process 
Issuer Company 
Book Runner 
Syndicate Member 
Mutual Stock Advisors Institutional Foreign 
Funds Broker Investors 
Institutional 
Investors
Book building
Book Building Process 
The Issuer who is planning an offer nominates lead merchant 
banker(s) as 'book runners'. 
• The Issuer specifies the number of securities to be issued and 
the price band for the bids. 
• The Issuer also appoints syndicate members with whom 
orders are to be placed by the investors. 
• The syndicate members input the orders into an 'electronic 
book'. This process is called 'bidding' and is similar to open 
auction. 
• The book normally remains open for a period of 5 days. 
• Bids have to be entered within the specified price band. 
• Bids can be revised by the bidders before the book closes.
Con… 
• On the close of the book building period, the book runners 
evaluate the bids on the basis of the demand at various 
price levels. 
• The book runners and the Issuer decide the final price at 
which the securities shall be issued. 
• Generally, the number of shares are fixed, the issue size 
gets frozen based on the final price per share. 
• Allocation of securities is made to the successful bidders. 
The rest get refund orders.
Types of Book-Building 
• The Companies are bound to adhere to the 
SEBI’s guidelines for book building offers in 
the following manner: 
• 75% book building 
• 100% book building
THANK YOU

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Book building

  • 1. BOOK BUILDING Presented By, R.JOTHIVEL MBA,. Department Of Management Studies J.J.CET
  • 2. Book Building Meaning • Book building refers to the process of generating, capturing, and recording investor demand for shares during an Initial Public Offering (IPO), or other securities during their issuance process, in order to support efficient price discovery.
  • 3. Definition • SEBI guidelines, 1995 defined book-building as “a process undertaken by which a demand for the securities proposed to be issued by a body of corporate is elicited and built 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”.
  • 4. Example • Book building is actually a price discovery method. In this method, the company doesn't fix up a particular price for the shares, but instead gives a price range, e.g. Rs 80- 100. When bidding for the shares, investors have to decide at which price they would like to bid for the shares, for e.g. Rs 80, Rs 90 or Rs 100. They can bid for the shares at any price within this range. • Based on the demand and supply of the shares, the final price is fixed. The lowest price (Rs 80) is known as the floor price and the highest price (Rs 100) is known as cap price.
  • 5. Characteristics Of Book Building  Tendering process  Floor Price  Minimum Price Level  Price Band  Lower Band  Higher Band  Bid  Bid Cum Application Form  Allotment  Participants
  • 6. Process Issuer Company Book Runner Syndicate Member Mutual Stock Advisors Institutional Foreign Funds Broker Investors Institutional Investors
  • 8. Book Building Process The Issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'. • The Issuer specifies the number of securities to be issued and the price band for the bids. • The Issuer also appoints syndicate members with whom orders are to be placed by the investors. • The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to open auction. • The book normally remains open for a period of 5 days. • Bids have to be entered within the specified price band. • Bids can be revised by the bidders before the book closes.
  • 9. Con… • On the close of the book building period, the book runners evaluate the bids on the basis of the demand at various price levels. • The book runners and the Issuer decide the final price at which the securities shall be issued. • Generally, the number of shares are fixed, the issue size gets frozen based on the final price per share. • Allocation of securities is made to the successful bidders. The rest get refund orders.
  • 10. Types of Book-Building • The Companies are bound to adhere to the SEBI’s guidelines for book building offers in the following manner: • 75% book building • 100% book building