The Securities and Exchange Board of India guidelines define book building as a process undertaken by which a demand for the securities proposed to be issued by a corporate body is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document.
So what is the difference between offer of shares through book building and offer of shares through normal public issue?
The price at which securities will be allotted is not known in case of offer of shares through book building while in case of offer of shares through normal public issue, price is known in advance to investor.
In the case of book building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue.
The minimum number of days for which a bid is kept open in book building is five. And the issue price for placement portion and net offer to public in a book-built issue will always be the same. Here are Sebi's answers to some queries:
What is the floor price in case of book building?
The floor price is the minimum price at which bids can be made.
Can the individual investor use book building facility for making an application?
Yes.
Can the bidder revise his bids?
Yes.
What proof can bidder request from trading member for entering bids?
A bidder can request for a transaction registration slip as the proof of his/ her having entered the bid.
Whenever a bid is entered by trading members in to the system, a unique transaction registration slip is automatically generated.
Transaction registration slip gives details regarding number of shares bided for, price, the client name, etc.
Is it possible to enter bids less than floor price?
No. The system automatically rejects the bids if price is less than floor price.
Users may also go through the Sebi guidelines in detail for a thorough understanding of the provisions. But remember, queries seeking information of an advisory nature would not be responded to by Sebi.