What is the book-building method?

The book-building method is an IPO issuance method in which the IPO price is set at the end of the subscription window based on the book that is formed.

In the book-building method, the issuer announces a price range (e.g., Rs 75 to Rs 80) for the issue. The lower price of the price range is called the base price or floor price and the upper price of the price range is called the cap price or ceiling price.

Investors place bids within this price range. Retailers have the option to bid at the cut-off price. The cut-off price is the final price at which shares are issued to investors.

At the end of the bidding process, the lead manager evaluates the demand for the issue and derives the cut-off price using the weighted average method of the bids received at the different price levels.

The investors who submit bids at or above the cut-off price have a chance to receive an allotment. However, applications that are below the cut-off price will be rejected. Depending on the allotment status, you will receive the shares or a refund (as applicable).

  SME IPO Enquiry