Introduced by SEBI in 1995 Recommendation of Mr. Y.H.

Malegam for optimum price discovery of Corporate Securities Share prices are determined on the basis of demand for the shares at various price levels in the market

..a process undertaken by which a demand for the securities proposed to be issued by a body of corporate 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..

The issuer discloses a price band in the Red Herring Prospectus A 20 % price band is offered by the issuer within which investors are allowed to bid and the final price is determined by the issuer only after closure of the bidding 50 % of shares offered are reserved for QIBS, 35 % for small investors and the balance for all other investors

Book building mechanism helps small investors to subscribe to securities at a price, which is arrived at by a transparent process During the period for which the book for the offer is open, the bids are collected from investors at various prices within the price band The issue price is determined after the bid closure based on the demand generated in the process

After the bidding process is complete, on the basis of the demands received at various price levels within the price band specified by the issuer, Book Running Lead Manager (BRLM) in close consultation with the issuer arrives at a price at which the security offered by the issuer, can be issued The final prospectus with all the details including the final issue price and the issue size is filed with ROC, thus completing the issue process. Only the retail investors have the option of

DRHP stands for Draft Red Herring prospectus Filed with SEBI and the Exchanges Issued in accordance with Section 60B of the Companies Act Does not contain complete particulars of the price at which the Equity Shares are issued and the size (in terms of value) of this Issue SEBI makes the DRHP filed by companies available on its website for inviting comments from the public

Issued in accordance with Section 60B of the Companies Act Incorporates all the changes suggested by SEBI It is filed with ROC at least three days before the Bid/Issue Opening Date Become a Prospectus upon filing with the ROC after the Pricing Date

The red herring statement contains: Purpose of the issue Proposed offering price range Disclosure of any option agreement Underwriter's commissions and discounts Promotion expenses Net proceeds to the issuing company (issuer) Balance sheet Earnings statements for last 3 years, if available Names and address of all officers, directors, underwriters and stockholders owning 10% or more of the current outstanding stock Copy of the underwriting agreement Legal opinion on the issue Copies of the articles of incorporation of the issue.