InvestorQ : Can you explain how exactly the process of book building works in the market?
Dawn Cherian made post

Can you explain how exactly the process of book building works in the market?

Answer
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Mitali Bhutta answered.
2 years ago


Book building is a process of price discovery. A floor price or price band within which the bids can move is disclosed at least five working days before opening of the issue in case of an IPO and at least one day before opening of the issue in case of an FPO. The applicants bid for the shares quoting the price and the quantity that they would like to bid at. After the bidding process is complete, the ‘cut-off’ price is arrived at based on the demand of securities. The basis of Allotment is then finalized and allotment/refund is undertaken. 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’.