Issue of Shares through Book Building Process By CS Aakanchha Vyas


Dear Professional Colleagues,

As we all know that Corporate can raise their capital by various modes like Initial Public Offer, Right Issue, Private Placement. IPO can be made through Fixed Price method and Book Building method or both. In this article I am sharing my knowledge about Book Building process.

WHAT IS BOOK BUILDING?

Book Building is a mechanism, in which the book of offer is open for a certain period and the bids are collected from investor at various price (which are within the price band specified by the issuer).

Features of Book Building:-

  • Price not known to the investor in advance at which securities will be allotted.
  • Payment made only after allocation
  • Demand for the securities offered can known everyday.

As per SEBI guidelines a company can issue securities in following manner through the book building route.

  • 100% of the net offer to the public through the book building route.
  • 75% of the net offer to the public through the book building process and 25% through the fixed price portion.

Entry Norms:

  • Net Tangible Assets of at least Rs. 3 crores for 3 full years.
  • Distributable profits in atleast three years.
  • Net worth of at least Rs. 1 crore in three years.
  • If change in name, atleast 50% revenue for preceding 1 year should be from the new activity.
  • The issue size does not exceed 5 times the pre- issue net worth

OFFER TO PUBLIC THROUGH BOOK BUILDING PROCESS:


BOOK BUILDING PROCESS


APPLICATION SUPPORTED BY BLOCKED AMOUNT:

ASBA process is applicable to all book built issues which provide more than one payment option to the retail investors.

Eligibility of Investors:

The following investors eligible to apply through ASBA process:-

  1. Resident retail individual investor
  2. If investor has agreed not to revise his bid
  3. Not bidding under any reserved categories
  4. Applying through blocking of funds in a bank account with the SCSB.

Your valuable comments are welcomed on the article at aakanchhavyas@yahoo.co.in 

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