what is Fixed Price Offer and Offer through book building
An issuer company is allowed to freely price the issue. The basis of issue price is disclosed in the offer document where the issuer discloses in detail about the qualitative and quantitative factors justifying the issue price.
The Issuer company can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price)
in the Draft offer documents filed with SEBI and actual price can be determined at a later date before filing of the final offer document with SEBI/ROC
“Book Building” means a process undertaken by which a demand for the securities proposed to be issued by the Company is elicited and built up and the price for the securities is determined on the basis of the bids obtained for the quantity of securities offered for subscription.
This method provides an opportunity to the market to discover price for securities.
Book building is a process of price discovery.
Hence, the Red Herring prospectus does not contain a price. Instead, the red herring prospectus contains either the floor price of the securities offered through it or a price band along with the range within which the bids can move.
The applicants bid for the shares quoting the price and the quantity. Only the retail investors have the option of bidding at ‘cutoff’.
After the bidding process is complete, the ‘cutoff’ price is determined. The basis of Allotment is then finalized and letters of