This document discusses book-building, which is a process used to determine the price and quantity of securities to be issued by a company. It involves eliciting demand from investors to help set the price. Key aspects of book-building include determining the quantity of shares to issue, discovering the right price through investor bids, and allocating portions of the offering to different investor types like qualified institutional buyers. The document then outlines the various financial intermediaries involved like merchant bankers and syndicate members, and the stages of the book-building process from pre-issue activities to allotment of shares.
2. Book-Building
A process undertaken by which a demand for the
securities proposed to be issued by a body corporate
is elicited and built up and the price for such
securities is assessed for the determination of the
quantum of such securities to be issued by means of
a notice, circular, advertisement, document or
information memoranda or offer document.
-SEBI (Disclosure & Investor Protection) Guidelines
2000
3. Features of
Book-Building
Quantity Assessment
Price Discovery
A 20% Price Band to Bid
QIB Portion (50%) and
Public Issue Portion
(35%)
Only Demat Account-
Holders
10% Application Money
by QIBs
100% by Others
4. Rationale for
Book-Building
Institutional
Investors
Legal
Compulsion :
Issue Exceeding
5 times the pre-issue
networth
Bidding Choice
for the
Applicants
Shorter Process
of Issue
5. Financial
Intermediaries
Merchant Banker
as Lead Book-
Running Manager
Co-Book Runners
Syndicate Members
Registrar to the
Issue
Bankers to the
Issue
6. Merchant Banker As Book Runner
Facilitating Appointment of Other
Book Runners
Facilitating Appointment of
Syndicate Members
Circulation of Information
Memorandum
Gathering the Input through IM
Filing Red Herring Prospectus
with SEBI along with IM
Facilitating Appointment of other
FIs
Filing Due Diligence Certificate with
SEBI
Determination of Price Band
Opening & Closure of Subscription
List
Allotment of Shares
Getting the Shares Listed
Filing Final Prospectus
7. Functions of Syndicate Members
Facilitating Quantity Assessment
Underwriting
Collection of Bid-cum-Application
Forms
8. Functions of Registrar to the Issue
Appointment of Bankers
Printing & Supply of Forms
Allotment
Other Procedure
10. Quantity Assessment Stage
Appointment of Financial Intermediaries
Preparation of Information Memorandum
Sending Information Memorandum
Determination of Quantity & Price-Band
Underwriting
12. Actual Issue Stage
Opening the Subscription List
Receipt of Application cum Bid
Forms
Uploading the Information
Closure of Subscription List
Allotment by BRLM & R&T Agents
13. Allotment Stage
Determining the Cut-Off Price
Actual Allotment
Crediting Demat Accounts
Listing the Shares
Filing Final Prospectus
14. A Recent Instance of Book-Building
-Snowman Logistics Limited
Objects of the Issue:
1. Capital expenditure for setting up new temperature controlled
and ambient warehouses;
2. Long term working capital; and
3. General corporate purposes.
Issue Detail:
»» Issue Open: Aug 26, 2014 - Aug 28, 2014
»» Issue Type: 100% Book Built Issue IPO
»» Issue Size: 42,000,000 Equity Shares of Rs. 10
»» Issue Size: Rs. 197.40 Crore
»» Face Value: Rs. 10 Per Equity Share
»» Issue Price: Rs. 44 - Rs. 47 Per Equity Share
»» Market Lot: 300 Shares
»» Minimum Order Quantity: 300 Shares
»» Listing At: BSE, NSE
Snowman Logistics IPO Grading:
CRISIL Research has assigned a CRISIL IPO grade of '4/5‘ to the
proposed IPO of Snowman Logistics Ltd (Snowman).
15. Merits of Book-Building
Realisation of a High Price
Quick Issue Process
Fast Availability of Funds
Lesser Issue Expenses
Quick Update
Lack of Uncertainty
Quick Allotment
Opportunity for
Revision
Quick Listing of Shares
Less Administrative
Cost
Preference by
Institutional
Investors
Up-to-date
Information
16. Demerits of Book-Building
Suitable for Mega Issues
Compulsory Demat A/c
Networking of Stock Exchange with Subscription Terminals
Less Time for Subscription
Manipulation of Price
Less Access to Investors & Differential Application Money
Retail Investors Shy Away
Lesser Reservation to Retail Investors
Concentrated Holding
