Book Building and Fixed Price Issue are the two types of Initial Public Offerings (IPOs) through which a corporate can raise money in the capital market.

In a book building public issue the bids are received at different price levels and the demand for the issue is built up over a period of time. Depending upon the bids received at different price levels the issue price is ascertained. In a fixed price issue the issue price is pre ascertained by the issuer.

What are IPOs? :

Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public.

Some of the reasons why companies go for an IPO are as follows:

• Additional Capital resources for funding of projects/expansion plans.
• Dilution of existing promoters share holding.
• Value Hedging PMS

Listing enhances corporate image thus providing visibility.

What are the two types of IPO?

There are two types of IPO

• “Book Building” means 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 of the security is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. This method provides an opportunity to the market to discover the price for securities.

In case of a fixed price issue the issue price is fixed.

How to apply in IPOs ?

• To apply in a IPO one needs to have a demat account.
• PAN copy is required in case the application amount is equivalent or more then Rupees 50 thousand.

Basic details such as name of the investor, address, bank details and the contact details need to be provided.

Issue Related Terms & FAQs?

Price Band: Price band indicates the different price levels within a given range in which the investor can enter his bid.

Floor Price: It is the lower end of the price band.

Cap Price: It is the upper end of the price band.

Offer Document: offer document means prospectus in case of a public issue, which is file with Registrar of companies (ROC) and stock exchanges. The offer document contains all relevant details pertaining to the issue upon which the investors can make his/her decision.

Draft Offer Document: means the offer document in the draft stage, which is filed with SEBI for its observations. The draft offer documents are filed with SEBI at least 21 days prior to filing the offer document with ROC and Exchange.

SEBI ROLE: Any company making a public issue or a listed company making a rights issue of value more then Rs 50 Lakhs is required to file a draft offer document with SEBI for its observations. The company can proceed further only after receiving observations from SEBI. The validity of SEBI observation is 3 months only i.e the company has to open its issue within 3 months period.

Cut off Price : In case of public issues the actual discovered price/ issue price can be anything between a given price band. The discovered issue price is called the cut off price.

Basis of Allotment : The allotment in case of QIB category is on a discretionary basis while in case of Retail and Non-QIB(HNI) category the allotment is on a proportionate basis.

Is it compulsory to have a demat account?

As per the regulation any public issue of size in excess of Rs 10 core are to be made compulsory in demat mode.