This document discusses listing of securities, book building, and reverse book building. It defines listing as admitting a company's securities to trading on a stock exchange. The major objectives of listing are to provide marketability, negotiability, and protection for shareholders and investors. Book building is a process used in IPOs and FPOs where bids are collected within a price band to determine demand and set the issue price. Reverse book building is used for share buybacks, where bids are taken from current investors to discover a final price above market value.

1. RAHUL S
S3 MBA
ROLL NO.: 04
UIMPUNLAUR
LISTING OF SECURITIES
BOOK BUILDING

2. LISTING

3. LISTING OF SECURITIES
• Listing means the admission of securities of a company to
trading on a stock exchange. Listing is not compulsory under
theCompanies Act.
• It becomes necessary when a public limited company desires
to issue share or debentures to the public. When securities are
listed in a stock exchange, the company has to comply with
therequirements of theexchange.

4. OBJECTIVES OF LISTING
The major objectives of listing are
• 1. To provide ready marketability and liquidity of a
company’s securities.
• 2 To provide freenegotiabilitytostocks.
• 3. To protect shareholders and investors interests.
• 4. To provide a mechanism for effective control and
supervision of trading.

5. LISTING REQUIREMENTS
• A company which desires to list its shares in a stock exchange has to comply with the
following requirements:
• 1. Permission for listing should havebeenprovided for in the MOAand AOA.
• 2. The company should have issued for public subscription at least the minimum
prescribed percentageof its share capital (49percent).
• 3. The prospectus should contain necessary information with regard to the opening of
subscription list, receipt of share application etc.
• 4. Allotment of shares should bedone in a fair and reasonable manner.
• 5. The company must enter into a listing agreement with the stock exchange. The
listing agreement contains the terms and conditions of listing. It also contains the
disclosures that have to bemadeby the company ona continuous basis.+

6. LISTING PROCEDURE
The following are the steps to be followed in listing of a
company’s securities in a stock exchange:
• 1. The promoters should first decide on the stock exchange or
exchangeswhere they want theshares tobe listed.
• 2. They should contact the authorities to the respective stock
exchange/exchanges wherethey propose tolist.
• 3. They should discuss with the stock exchange authorities the
requirements and eligibility for listing.

7. LISTING PROCEDURE
• 4. The proposed Memorandum of Association, Articles of Association
and Prospectus should be submitted for necessary examination to the
stockexchange authorities
• 5. The company then finalizes the Memorandum, Articles and
Prospectus
• 6. Securities are issued andallotted.
• 7. The company enters into a listing agreement by paying the
prescribed fees and submitting the necessary documents and
particulars.
• 8. Shares are then availablefor trading

8. BOOK BUILDING

9. BOOK BUILDING
Meaning of Book Building:
• Every business organization needs funds for its business activities. It can
raise funds either externally or through internal sources. When the
companies want to go for the external sources, they use various means for
the same. Two of the most popular means to raise money are Initial Public
Offer (IPO)and Follow on Public Offer (FPO).
• During the IPO or FPO, the company offers its shares to the public either at
fixed price or offers a price range, so that the investors can decide on the
right price. The method of offering shares by providing a price range is
called book building method. This method provides an opportunity to the
market to discover price for the securities which are on offer

10. BOOK BUILDING
• Book Building may be defined as a process used by companies raising
capital through Public Offerings-both Initial Public Offers (IPOs) and
Follow-onPublicOffers(FPOs) toaidprice anddemanddiscovery.
• 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 prices,
which are within the price band specified by the issuer. The process is
directed towards both the institutional investors as well as the retail
investors. The issue price is determined after the bid closure based on
thedemandgeneratedin theprocess.

11. BOOK BUILDINGPROCESS
• Thefollowing aretheimportant points in book building process:
• 1. The Issuer who is planning an offer nominates lead merchant banker(s) as
‘book runners’.
• 2. The Issuer specifies the number of securities to be issued and the price
band for the bids.
• 3. The Issuer also appoints syndicate members with whom orders are to be
placedby the investors.
• 4. The syndicate members put the orders into an ‘electronic book’. This
process is called ‘bidding’ andis similar to openauction.
• 5. Thebook normally remains open for a period of 5days.

12. • 6. Bidshave to be entered within the specified price band.
• 7. Bidscan be revised by the bidders before the book closes.
• 8. On the close of the book building period, the book runners evaluate the
bids on the basis of the demand at various price levels.
• 9. The book runners and the Issuer decide the final price at which the
securities shallbe issued.
• 10. Generally, the number of shares is fixed; the issue size gets frozen based
on the finalprice per share.
• 11. Allocation of securities is made to the successful bidders. The rest
bidders get refund orders.
BOOK BUILDINGPROCESS

13. BENEFITS OFBOOK BUILDING:
• Book building helps in evaluating the intrinsic worth of the instrument
being offered and the company’s credibility in the eyes of public. The entire
exercise isdone on awholesale basis.:
• (a) Price of instrument is determined in a more realistic way on the
commitments made by the prospective investors to the issue.
• (b) The prime objective of book building process is to determine the highest
market price for shares and securities and demand level from highest
quality investors in order to adjust pricing and allocation decision.
• (c) Book building is a process of fixing price for an issue on feedback from
potential investors on how they are willing to bid to pick up issues and
instruments.

14. BENEFITS OFBOOK BUILDING:
• (d) The process of book building is advantageous to the issuer company
as the pricing of issue would be more realistic as the final price is
decided about 11 to 12 days before the opening of the issue. Book
building alsooffers accessto capitalmore quicklythanthe public issue.
• (e) As the issue is pre-sold, there would be no uncertainties relating to
the fate of the issue involved.
• (f) The Issuer company saves advertising and brokerage commissions.
• (g) Issuers can choose investors by quality.

15. LIMITATIONS OF BOOK BUILDING
The book-building system has various limitations, some ofthese limitations
are summarized as follows:
• 1. Book building isappropriatefor mega issues only. In thecase ofsmall issues,
thecompanies can adjustthe attributesof the offeraccording tothe preferences
ofthe potential investors. It may not be possible in big issues, since therisk-
returnpreferenceofthe investors cannot beestimated easily.
• 2. The issuer company should befundamentally strongand wellknown tothe
investors.
• 3. The book building system worksvery efficientlyin maturedmarketconditions.
In such circumstances, the investors areawareofvariousparametersaffecting
themarketpriceofthe securities.But,such conditions arenot commonly found
in practice.
• 4. There is a possibility ofpriceriggingonlistingas promotersmaytrytobailout
syndicate members.

16. • While book building is used to raise capital for the company’s business
operations, reverse book building is used for buyback of shares from
the market. Reverse book building is also a price discovery method, in
which the bids are taken from the current investors and the final price is
decided on the last day of the offer. Normally the price fixed in reverse
book building exceeds the market price.
BOOK BUILDING
VS.
REVERSEBOOK BUILDING

17. •THANK YOU