What is IPO book building?

IPO book building is an efficient pricing mechanism where the price of the shares is determined based on the demand for the shares at the end of the bidding process.

The issuer announces a price range (e.g. Rs 75 to Rs 80) for the issue. Investors place bids at different price levels within the price range. Demand for the IPO is known daily as the book builds. The issuing company and the lead manager decide the cut-off price for the issue based on the demand.

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