This document provides information about the book building process for issuing securities in India. It defines book building as a process for determining the fair price and quantity of securities to be issued by building demand. The book runner maintains a book of bids from investors and underwriters. SEBI guidelines require at least 25% allocation to retail investors, 25% to non-institutional investors, and 25% to qualified institutional buyers. The final issue price is set based on demand within the disclosed price band.

1. Investment Banking
BOOK BUILDING PROCESS

2. Team Member
 Name Roll No
 Ashish . M 11
 Ashish .T 11
 Rohit . K 09
 Ajsih . T 13
 Shraddha .C 06

3. Book Building
 Introduced by SEBI in 1995
 Recommendation of Mr. Y.H. Malegam for
optimum price discovery of Corporate Securities
 Share prices are determined on the basis of
demand for the shares at various price levels in
the market

4. 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.

5. 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.”

6. 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.

7. Types of Book Building
 75% book building
 100% book building
However. Generally 100% book building is
followed in India

8. Method 1
Total Public Issue
(i.e., net offer to the public)
Book
Building
Method
75% of the public issue can be
offered to institutional investors who
had participated in the bidding
process
Fixed Price
Method
25% of the public issue can be offered
to the public through the prospectus
and shall be reserved for allocation to
individual investor who have not
participated in the bidding process
75% Book Building Process

9. Method 2 (a)
Total Public Issue
(i.e., net offer to the
public)
Allocation to retail
individual investors who
applies or bids for
securities of or for a value
of not more than
Rs.50,000
Allocation to non-
institutional investors who
participated in the biding
process
Allocation to qualified
institutional buyers who
participated in the bidding
process
Not Less
than 25% of
the net offer
to the public
shall be
available for
allocation
Not Less
than 25% of
the net offer
to the public
shall be
available for
allocation
Not Less
than 25% of
the net offer
to the public
shall be
available for
allocation
100% Net offer to the public through 100% book building process

10. Method 2(b)
Total Public Issue
(i.e., net offer to the
public)
Book Building
Method
75% of the net offer to the public can
be offered to the institutional as well as
non-institutional investors who had
participated in the bidding process
Fixed Price Method
25% of the net offer to the public
can be offered at the price
determined through book building ,
shall be reserved for allocation to
retail individual investor who had not
participated in the bidding process
Not Less than 25% of
the net offer to the
public shall be
available for allocation
Non-qualified
institutional buyers
Not Less than 50% of the
net offer to the public shall
be available for allocation
qualified institutional
buyers

11. Book Building Process
 The issuer discloses a price band in the Red
Herring Prospectus
 A 20 % price band is offered by the issuer within
which investors are allowed to bid and the final
price is determined by the issuer only after
closure of the bidding
 50 % of shares offered are reserved for QIBS, 35
% for small investors and the balance for all other
investors

12.  Book building mechanism helps small
investors to subscribe to securities at a price,
which is arrived at by a transparent process
 During the period for which the book for the
offer is open, the bids are collected from
investors at various prices within the price
band
 The issue price is determined after the bid
closure based on the demand generated in
the process

13.  After the bidding process is complete, on the
basis of the demands received at various
price levels within the price band specified by
the issuer, Book Running Lead Manager
(BRLM) in close consultation with the issuer
arrives at a price at which the security offered
by the issuer, can be issued
 The final prospectus with all the details
including the final issue price and the issue
size is filed with ROC, thus completing the
issue process. Only the retail investors have
the option of bidding at ‘cut‐off’.

14. Types of Investors
 The Retail Individual Investor (RII)
 The Non-Institutional Investor (NII)
 The Qualified Institutional Buyers (QIBs)

15. 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.

16. 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.

17. 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.

18. Bibliography
 http://en.wikipedia.org/wiki/Book_building
 http://www.investopedia.com/terms/b/bookbuildin
g.asp
 http://www.sebi.com/

19. Thank You