The process of Book Building Issue is as follows:
- 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 an open auction.
- The book normally remains open for a period of 3 days.
- Bids have to be entered within the specified price band.
- Bids can be revised by the bidders before the book closes.
- At 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 is 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.
