6. Session Ppt Book_Building

7/29/2019 6. Session Ppt Book_Building

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Options for Raising Funds

Fund Raising Options

HybridDebtIn India

OutsideIndia

From Banks & FIs Bonds /Deb

ECBADR/GDR

Various forms of Convertibles

FCCB & FCEB

Equity IPO/FPO/Rights/Bonus

EquityDebtHybrid


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KINDS OF ISSUES

Public Issue Right Issue Bonus Issue

IPO FPO

Fresh IssueOffer for Sale Offer for Sale

Fresh IssueQIPs

Preferential IssuePrivate Placement

Issues

Composite IssueSponsored Issue

Public IssueDeposit Receipt

INCLUDING RIGHTS

GOVERNED BY DISCLOSURE & INVESTORPROTECTION SEBI GUIDELINES


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IPO ProcessFixed Price Issue

Due diligence

Appointment of IBand legal counsel

Drafting of DraftProspectus

Filing with SEBI &Stock Exchanges

SEBI Clearance& ROC Filing of

ProspectusPre-Marketing

Decision to go forIPO

Roadshows

Issuer

Issue Open

Allotment

Issue Closure

Listing

Funds transferred toissuer

Preparation / Approvals Filing the Prospectus and Marketing Launch & Completion

Management gets approval of BOD

SEBI GIVEN UP VETTING OF PROSPECTUS


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n BAD ISSUES ARE OVERPRICED

n GOOD ISSUES ARE UNDERPRICED

n QUEST FOR HEALTHY IPO MARKET

n NECESSARY TO FIND MECHANISM FOR PRICE DISCOVERY

n MARKET TO BE GIVEN PREROGATIVE TO DECIDE RIGHTPRICE FOR PUBLIC ISSUE

n BOOK BUILDING OPTION TO ASCERTAIN

n MKT PERCEPTION ABOUT DEMAND & PRICE OF SHARES

n SEBI ENCOURAGED THIS METHOD

IPO REALITY


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Issue priced 60-70 days before opening of issue

Issuer having no clear idea about market perception of pricedetermined

Leads to under pricing

FIXED PRICE OFFERING - DISADVANTAGES


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Book Building is a process used by issuing company to

assess optimum price and allot securities based uponinvestor response through bidding.

It is called so because it refers to the collection of the bids from investors , which isbased on an indicative price range.

BOOK BUILDINGWHAT IT IS ????

(SEBI): A process undertaken by which a demand for the securities proposed tobe issued by a body corporate is elicited and built up and the price for suchsecurities is assessed for the determination of the quantum of such securities to beissued by means of a notice, circular, advertisement, document or informationmemoranda or offer document.


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Book Building

Issue price not decided

Price range for bidding

Demand known every day during offerperiod

No norms for minimum subscription

Can be deferred in case of scantdemand

Revision of bids possible

Payment made at time of subscription

Fixed Price

Issue price decided, known in advance

Investors cant choose the price

Demand known only when the issue

closes

Min 90% subs including promoters

Cant be deferred in case of scantdemand

Revision not possible if submitted

Payment made only after allocation

BOOK BUILDING Vs FIXED PRICE


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Due diligence

Appointment of

BRLM, Co BRLM

and legal counsel

Drafting Red Herring

Filing with SEBI &

Stock Exchanges

SEBI Clearance

& ROC Filing

Pre-Marketing, Circulate

offer document to

syndicate members

Decision to go for

IPO

Roadshows

Issuer

Book building, record

of subscribers & their

orders

RoC filing of Prospectus

Pricing as weighted

av of order recvd

Securities Issued &

Listed

Funds transferred to

issuer

Preparation / Approvals Marketing and Estimation of Price Range Launch & Completion

Trading Commences

on Exchange

Form syndicate of

brokers, arrangers,

underwriters, FIs

Underwriting,

Allocation

Understand Companys revenue model

Identify key selling points

Build case for valuation

Fiduciary obligations

Make the Company IPO Ready

Identify key concerns

Good disclosures about business

strategy, objectives, management and

financial condition

Emphasize key marketing highlights of

the equity story

Articulate positioning

1-on-1 meetings arranged with

institutional investors

Group presentations made for retail

investors

Signing of Syndicate Agreement

and Escrow Agreement

BOOK BUILDING -PROCESS


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Red Herring Prospectus:

Offer document for book built IPO. All details except price or number ofshares

Contains either the floor price or price band

Net Offer to Public Offer made to Indian public and does not include reservations/ firm

allotments/promoters contribution.

Price Band:

Band within which investors bid quoting the price & quantity of bid Decided by BRLM in consultation with issuer

Spread between the floor & price band not more than 20% (e.g. Rs 80-100)

Rs 80floor price (Min Price), Rs 100cap price (Max Price), Price

subsequently discoveredCut off price

Can be revised. If revised bidding period can be extended

BOOK BUILDING -BASICS


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BOOK BUILDING- BASICS

BRLM (Lead Merchant Banker)/Co BRLM

BRLM, CO BRLM & Syndicate members can act as underwriters


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BOOK BUILDING- BASICS

Syndicate Members

BRLM appoints syndicate members (registered with SEBI) tounderwrite the issue to the extent of net offer to public

Investors give bid through syndicated members mentioning price &quantity they are willing to buy

Syndicate members input orders into electronic books. This is calledbidding and is similar to open auction


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Bid

Offer made to investor to acquire equity share of company at price at orabove floor price including all revisions & modifications thereto

Definite period is fixed as bid period (7 days normally)

SYNDICATE MEMBERS MAY DEMAND PAYMENT OF BID PRICEAT TIME OF BIDDING.

WHERE BIDDER HAS BEEN ALLOCATED LESSER SHARE, EXCESSAMT PAID ON BIDDING WILL BE REFUNDED



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Changing/Revising/ Cancelling Bid

Allowed by filling form within the date of closure of issue



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Cut-Off Price

Subscribing securities at any price discovered within the price band Option to retail investors (applying shares worth Rs 100,000)

Always remain valid for purpose of allotment


Bid Price No. of Shares

(Rs. Per

Share)501 200 0.00% 200 0.00%

400 900 0.00% 2,200 0.00%

250 3,400 0.00% 10,000 0.00%

200 30,500 0.00% 56,600 0.01%

150 3,63,000 0.04% 6,64,000 0.07%

140 6,46,200 0.07% 15,02,300 0.15%

135 22,86,400 0.23% 40,51,000 0.41%

130 3,10,63,400 3.17% 3,59,80,600 3.67%

125* 67,08,89,600 68.42% 71,74,58,300 73.17%

120 15,28,68,000 15.59% 90,24,25,700 92.04%

115 73,78,35,000 7.53% 98,05,27,200 100.00%*Includes Bids received at Cut-off price

% to

Total

Cumulative

Shares

Cumulative

%

BIDDERS RENEDERING BID AT OR ABOVE

CUT OFF PRICE BECOME ELIGIBLE FOR

ALLOTMENT

ALL SUBSCRIBERS PAY THIS AMNT

THOUGH THEY MAY HAVE BID THE

HIGHER PRICE


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GREEN SHOE OPTION For stabilising post listing price of its shares

Option of allocating excess shares

Board must authorise Helps reducing price volatility post listing of security



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BOOK BUILDINGPROMOTERs CONTRIBUTION

Minimum 20% of post issue capital Book built issue

Fixed price offering

Public issue by unlisted, listed company, composite issue, fast track issue

To be brought in full at least one day before public issue opens

Lock in period for 3 years.

Can be pledged with banks or DFIs as collateral security for loans


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BOOK BUILDING -WHO CAN INVEST

The Retail Individual Investor (RII) To apply or bid for stock not more than Rs 1,00,000

Can apply at cut off rate instead of writing the specific bid

prices

Proportionate allotment within 15 days

Qualified Institutional Buyers (QIBs)

Anchor Investors

Non-institutional investor (NII)

BOOK BUI DING WHO CAN INVEST


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DFI, Banks, MFs, FIIs, VCFs, FVCFs, SIDCs, Insurance Cos,

Provident & Pension Funds , National Investment Funds

Max 50% allotment of net offer to public

of this 5% reserved to MFs

Up to 30% may be allocated to Anchor Investors

QIBs with min app of 10 cr

Will pay margin of min 25% on app & balance within 2

days of closure

Bidding for then open one day before the issue opens

Lock in 30 days from date of allotment in public issue

Allocation on discretionary basis subject to min Rs 250 cr

to 2 investors & more than 250 cr for 5 investors

The mandatory allotment of 50% to

QIBs ensures that informed,

knowledgeable investors are assuming

the risk inherent in the companies

BOOK BUILDING WHO CAN INVEST


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Proportionate Allotment to QIBs is at the discretion of the BRLM.

40/200 x 5 = 1

20 x 95/495 = 3.84

(401) x 95/495 = 7.48

BOOK BUILDING WHO CAN INVEST


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Non-Institutional investor (NII) Investors other than QIBs & retail individual investors

min 15% allotment in net offer to public

Proportionate allotment

High net worth individuals

Applies stock over & above Rs 1,00,000

Cant apply at cut off rate

BOOK BUILDING TYPE


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BOOK BUILDINGTYPE

75% book building Offer to public through book building

100% of net offer to public through 100% book

building

75% of net offer to public through book building &

25% at price determined through book building

75% OF BOOK BUILDING PROCESS


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75% OF BOOK BUILDING PROCESS

Known as placement

portion, underwriting

mandatory

Issue price for

both should be

same

Date of allotment

for both same

Mandatory

underwriting for

public portion

Net offer to the public shall

mean the offer made to

Indian public and does notinclude reservations/ firm

allotments/ promoters

contribution.

OFFER TO PUBLIC THROUGH BOOK BUILDING PROCESS


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100% of net offer to public through

100% book building

Min 35% as per latest

guidelines Min 15% Max 50%. Out of this

5% to be allocated

proportionately to

mutual funds &

maximum 30% toAnchor Investors

E.g. Maruti Issue, Bharati

Tele Ventures



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75% of net offer to public

through book building

& 25% at price

determined through

book building

E.g. Hughes software,

HCL Technologies

Out of this 5% to be allocated

proportionately to mutual funds

& maximum 30% to Anchor

Investors

BOOK BUILDING BASIC ADVANTAGE


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REDUCES TRANSACTION COST

FACILITATES PRICE DISCOVERY

Market driven pricing of securities

DEMAND PATTERN IS KNOWN

PROTECTION OF SMALL SHAREHOLDERS

BOOK BUILDING BASIC ADVANTAGE


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R d Hi i P t f TV T d


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Red Hiring Prospectus of TV Today


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Voluntary delisting by promoter or acquirer

Aim to determine optimum exit price for cos share

REVERSE BOOK BUILDING


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Similar process as that of book building

Acquirer determines av price of 26 weeks before the date of

announcement of public announcement

No cap or maximum price

Cut off/Final offer price determined at price at which max no. of

shares have been offered

The promoter/acquirer has option to accept the price.

If accepted all sh holders bidding at or below discovered pricereceive the discovered price for their holding

If rejected shares returned to share holders

REVERSE BOOK BUILDING


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Sh holders tender shares with trading

members prior to placement of order

at/above the floor price

Utilizes trading

system network of SE

Trading member

appointed for

placing bids on

online electronic

system


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BOOK BUILDING Vs REVERSE BOOK BUILDING

Book Building

To raise capital for

companyPrice range for bidding

Reverse book Building

To buy shares from market

Floor price set

BOOK BUILDING PROCESS


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DAY OVERSUBSCRIPTION

1ST DAY (12TH JUNE) 1.46 TIMES

2ND DAY (13TH JUNE) 2.72 TIMES

4TH

DAY (15TH

JUNE) 4 88 TIMES

ISSUE OFFERED IN 75 CITIES & 150 CENTRES

Date post:	04-Apr-2018
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6. Session Ppt Book_Building

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