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What is the process followed in the Book Building Issue in IPO?

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.
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