What is meant by book building and how is it done?

Book building is a process where the issuer, with the help of underwriters, prepares an initial prospectus for the primary public offering. The process for book building involves the following steps:

1. The issuer, with the assistance of underwriters, prepares an initial prospectus for the offering.

2. This prospectus is then shared with eligible institutional investors to solicit their participation. The organized institution conducts discussions with them, and, based on the feedback, conducts a program of discussion with the participation of the issuance and sales manager and obtains approval from the board. They negotiate with eligible institutional investors about the minimum purchase quantity desired by them, the issue price, and the method of evaluation, including the method of valuation.

3. Based on the issue price derived from the basis of the value presented by eligible institutional investors, the issuer, with the help of underwriters, determines the selling price limit of the debenture and sells the debenture within the price limit. If any eligible institutional investor is not able to apply for the issue price presented, they will not be able to participate in the bidding process unless one eligible institutional investor submits a bid for more than 20% of the issued debentures than applied for. Thus, when selling debentures, the organized institution must issue 40% of the debentures to eligible institutional investors and 60% to the general public.