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Offer to Public Through Book Building Process

An issuer company may make an issue of securities to the public through a prospectus in the following manner:

100 per cent of the net offer to the public through the book-building process or

75 per cent of the net offer to the public through the book-building process and 25 per cent at the price determined through book-building. Reservation or firm allotment to the extent of the percentage specified in the relevant SEBI guidelines can be made only to promoters, permanent employees of the issuer company and, in the case of a new company, to the permanent employees of the promoting companies. It can also be made to the shareholders of the promoting companies in the case of a new company and shareholders of group companies in the case of an existing company, either on a competitive basis or on a firm allotment basis.

The primary responsibility of building the books is that of the lead book runner. The book runners may appoint SEBI registered intermediaries show, are permitted to carry on activity as underwriters as syndicate members.

The book runner(s)/syndicate members should appoint registered brokers of the stock exchange who are financially capable of honoring their commitments arising out of defaults of, their clients/investors to accept bids, applications, application money and placing orders with the company. Such brokers would be considered as banking/collection centers. They should collect the money from clients for every escorts placed by them. On failure of the investors to pay for the allotted shares, they would have to pay the amount. They would he paid a commission/fee by the company for the services and the stock exchange must ensure that the broker(s) do not charge a Service fee from their clients/investors. .

The draft prospectus containing all the disclosures as laid down by the SEBI in respect of securities to be offered to the public, should be filed by the lead merchant hanker with the SEBI The total size of the issue should, however, he mentioned in the draft prospectus. The red herring prospectus should disclose either the floor price of the securities offered through it or a price band along with the range within which the price can move. In case the price hand is disclosed, the lead hook runner should ensure compliance with the following conditions:

1. The cap of the price band should not exceed 20 per cent of the floor, that is, cap of the price band should be less than, or equal to, 120 per cent of the floor price of the band.

2. The price band can he revised during the bidding period. The maximum revision on either side should not exceed 20 per cent. In other words, floor price of the band can move up or down to the extent of 20 per cent of floor of the price band disclosed and the cap of the revised price should he fixed as indicated in above.

3. Any revision in the price hand should be widely disseminated by (i) in fanning the stock exchanges, (ii) issuing press releases and (iii) indicating the change on the relevant website and the terminals of the syndicate members.

4. The bidding period should be extended by 3 days subject to a maximum of bidding period of 13 days.

5. The manner in which the short fall in the project financing resulting from lowering of price band to the extent of 20 per cent would be met should be disclosed. It should also be disclosed that allotment would not be made unless the financing is tied up. In the case of appointment of more than one lead banker or book runner, the rights obligations and responsibilities of each should he delineated. If there is under subscription in an issue, the shortfall would have to be made good by the book runner(s) to the issue and the same should be incorporated in the inter se allocation of responsibility.

The SEBI, within 21 days of the receipt of the draft prospectus, may suggest modifications. The lead merchant banker would be responsible for ensuring that the modifications/final observations made by the SEBI are incorporated in toe prospectus. The issuer company should after receiving the final observations on the offer document from the SEBI make an advertisement in an English national daily with wick circulation, one Hindi national newspaper and regional newspaper with wide circulation at the place where the registered office of the company is situated, containing the salient features of the final offer document as specified in form 2-A of the Companies Act (discussed earlier) circulated along with the application form. The advertisement, a addition to other required information, should also contain the following. (i) the date of opening and dosing of issue, (ii) the method and process of application and allotment, (iii) the names addresses, telephone numbers of the stock brokers and centers for bidding. The issuer should circulate the application forms to the bankers.

On determination of the price, the number of securities to he offered should be determined (issue size divided by the price that has been determined). Once the final price (cut-off price) a determined, all those bidders whose bids have been found to he successful (i.e. at and above the final price or cut-off price) would be entitled for the allotment of securities. On determination of the entitlement, the information regarding the same (i.e. the number of securities to which the becomes entitled) should be intimated immediately to the investors. No incentive, will cash , should be paid to the investors who have become entitled for the allotment of securities. Banker may collect up to 100 per cent of the application money as margin money from the investors before he places an order on their behalf. The margin collected from categories than SEBIs should be uniform across the hook runner(s) syndicate member (s) for each such. Bids for securities beyond die investment limits prescribed under relevant should accepted by the syndicate members/brokers from any category of clients/Investors. The prosperity all disclosures as per the relevant SEBI guidelines, including the price number of securities proposed to be issued should be filed with the ROCs. The issuer arrange for the collection of the applications by appointing mandatory collection centers as the relevant SEBI guidelines. Online, real-rime graphical display of demand and bid be made at the bidding terminals. The book running lead manager should ensure the adequate infrastructure for data entry of the bids on a real time basis. The investors had not participated In the bidding process or have not received information of entitlement of ties may also apply.

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