GUIDELINES FOR BOOK BUILDING
11.1 An issuer company proposing to issue capital through book building shall comply with the following:
A) 75% Book Building Process
11.2 In an issue of securities to the public through a prospectus the option for 75% book building shall be available to the issuer company subject to the following:
(i) The option of book-building shall be available to all body corporate which are otherwise eligible to make an issue of capital to the public.
(ii) (a) The book-building facility shall be available as an alternative to, and to the extent of the percentage of the issue which can be reserved for firm allotment, as per these Guidelines.
(b) The issuer company shall have an option of either reserving the securities for firm allotment or issuing the securities through book-building process.
(iii) The issue of securities through book-building process shall be separately identified / indicated as 'placement portion category', in the prospectus.
(iv) (a) The securities available to the public shall be separately identified as 'net offer to the public'.
(b) The requirement of minimum 25% of the securities to be offered to the public shall also be applicable.
(v) In case the book-building option is availed of, underwriting shall be mandatory to the extent of the net offer to the public.
(vi) The draft prospectus containing all the information except the information regarding the price at which the securities are offered shall be filed with the Board.
(vii) One of the lead merchant banker to the issue shall be nominated by the issuer company as a Book Runner and his name shall be mentioned in the prospectus.
(viii) (a) The copy of the draft prospectus filed with the Board may be circulated by the Book Runner to the institutional buyers who are eligible for firm allotment and to the intermediaries eligible to act as underwriters inviting offers for subscribing to the securities.
(b) The draft prospectus to be circulated shall indicate the price band within which the securities are being offered for subscription.
(ix) The Book Runner on receipt of the offers shall maintain a record of the names and number of securities ordered and the price at which the institutional buyer or underwriter is willing to subscribe to securities under the placement portion.
(x) The underwriter(s) shall maintain a record of the orders received by him for subscribing to the issue out of the placement portion.
(xi) (a) The underwriter(s) shall aggregate the offers so received for subscribing to the issue and intimate to the Book Runner the aggregate amount of the orders received by him.
(b) The institutional investor shall also forward its orders, if any, to the book runner.
(xii) On receipt of the information, the Book Runner and the issuer company shall determine the price at which the securities shall be offered to the public.
(xiii) The issue price for the placement portion and offer to the public shall be the same.
(xiv) On determination of the price of the underwriter shall enter into an underwriting agreement with the issuer indicating the number of securities as well as the price at which the underwriter shall subscribe to the securities.
Provided that the Book Runner shall have an option of requiring the underwriters to the net offer to the public to pay in advance all monies required to be paid in respect of their underwriting commitment.
(xv) On determination of the issue price within two day, thereafter the prospectus shall be filed with the Registrar of Company.
(xvi) The issuer company shall open two different accounts for collection of application moneys, one for the private placement portion and the other for the public subscription.
(xvii) One day prior to the opening of the issue to the public, Book Runner shall collect from the institutional buyers and the underwriters the application forms along with the application moneys to the extent of the securities proposed to be allotted to them / subscribed by them.
(xviii) (a) Allotments for the private placement portion shall be made on the second day from the closure of the issue.
(b) However, to ensure that the securities allotted under placement portion and public portion are pari passu in all respects, the issuer company may have one date of allotment which shall be the deemed date of allotment for the issue of securities through book building process.
(xix) In case the Book Runner has exercised the option of requiring the underwriter to the net offer to the public to pay in advance all moneys required to be paid in respect of their underwriting commitment by the eleventh day of the closure of the issue the shares allotted as per the private placement category shall be eligible to be listed.
(xx) (a) Allotment of securities under the pubic category shall be made as per the Guidelines.
(b) Allotment of securities under the public category shall be eligible to be listed.
(xxi) (a) In case of undersubscription in the net offer to the public spillover to the extent of under subscription shall be permitted from the placement portion to the net offer to the public portion subject to the condition that preference shall be given to the individual investors.
(b) In case of under subscription in the placement portion spillover shall be permitted from the net offer to the public to the placement portion.
(xxii) The issuer company may pay interest on the application moneys till the date of allotment or the deemed date of allotment provided that payment of interest is uniformly given to all the applicants.
(xxiii) (a) The Book Runner and other intermediaries associated with the book building process shall maintain records of the book building process.
(b) The Board shall have the right to inspect such records.
B) 100% BOOK BUILDING PROCESS
11.3 In an issue of securities to the public through a prospectus option for 100% Book Building shall be available to any issuer company subject to the following:
11.3.1 (i) Issue of capital shall be Rs.25 crores and above.
(ii) Reservation or firm allotment to the extent of percentage specified in these Guidelines shall not be made to categories other than the categories mentioned in sub-clause (iii) below.
(iii) Book Building shall be for the portion other than the promoters contribution and the allocation made to;
(a) ‘permanent employees of the issuer company and in the case of a new company the permanent employees of the promoting companies';
(b) ‘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’.
(iv) The issuer company shall appoint an eligible Merchant Banker(s) as book runner(s) and their name(s) shall be mentioned in the draft prospectus.
(v) The Lead Merchant Banker shall act as the Lead Book Runner and the other eligible Merchant Banker(s), so appointed by the Issuer, shall be termed as Co-Book Runner(s).
(vi) The primary responsibility of building the book shall be that of the Lead Book Runner.
(vii) The Book Runner(s) may appoint those intermediaries who are registered with the Board and who are permitted to carry on activity as an ‘Underwriter’ as syndicate members.
(viii) The draft prospectus containing all the disclosures as laid down in Chapter VI except that of price and the number of securities to be offered to the public shall be filed by the Lead Merchant Banker with the Board.
Provided that the total size of the issue shall be mentioned in the draft prospectus.
(ix) (a) In case of appointment of more than one Lead Merchant Banker or Book Runner for book building, the rights, obligations and responsibilities of each should be delineated.
(b) In case of an under subscription in an issue, the shortfall shall have to be made good by the Book Runner(s) to the issue and the same shall be incorporated in the interse allocation of responsibility given in Schedule II.
(x) (a) The Board within 21 days of the receipt of the draft prospectus may suggest modifications to it.
(b) The Lead Merchant Banker shall be responsible for ensuring that the modifications / final observations made by the Board are incorporated in the prospectus.
(xi) (a) The issuer company shall after receiving the final observations if any on the offer document from the Board make an advertisement in an English National daily with wide circulation, one Hindi National newspaper and a Regional language newspaper with wide circulation at the place where the registered office of the Issuer company is situated.
(b) The advertisement so issued shall contain the salient features of the final offer document as specified in Form 2A of the Companies Act circulated along with the application form.
(xii) The issuer company shall compulsorily offer an additional 10% of the issue size offered to the public through the prospectus.
(xiii) The pre-issue obligations and disclosure requirements as specified in Chapter V and VI respectively of these Guidelines, shall be applicable to issue of securities through book building unless stated otherwise in this Chapter.
(xiv) The Book Runner(s) and the issuer company shall determine the issue price based on the bids received through the ‘syndicate members’.
(xv) On determination of the price, the number of securities to be offered shall be determined (issue size divided by the price which has been determined).
(xvi) Once the final price (cut-off price) is determined all those bidders whose bids have been found to be successful (i.e. at and above the final price or cut-off price) shall become entitle for allotment of securities.
(xvii) No incentive, whether in cash or kind, shall be paid to the investors who have become entitled for allotment of securities.
(xviii) On determination of the entitlement under sub-clause (xvi), the information regarding the same (i.e. the number of securities which the investor becomes entitled) shall be intimated immediately to the investors.
(xix) The final prospectus containing all disclosures as per these Guidelines including the price and the number of securities proposed to be issued shall be filed with the Registrar of Companies.
(xx) Arrangement shall be made by the issuer for collection of the applications by appointing mandatory collection centres as per these Guidelines.
(xxi) The investors who had not participated in the bidding process or have not received intimation of entitlement of securities may also make an application.
11.3.2 Additional Disclosures
Apart from meeting the disclosure requirements as specified in these Guidelines, the following disclosures shall be suitably made:
(i) The particulars of syndicate members along with the details of registrars, bankers to the issue, etc.
(ii) The following statement shall be given under the 'basis for issue price':-
"The issue price has been determined by the Issuer in consultation with the Book Runner(s), on the basis of assessment of market demand for the offered securities by way of Book-building."
(b) The following accounting ratios shall be given under the basis for issue price for each of the accounting periods for which the financial information is given:
where available (giving the source from which industry P/E has been
taken).
5. The accounting ratios disclosed in the offer document shall be
calculated after giving effect to the consequent increase of capital on account of compulsory conversions outstanding, as well as on the assumption that the options outstanding, if any, to subscribe for additional capital shall be exercised.
11.3.3 Underwriting
(i) The entire offer other than to the categories referred to in clause 11.3 (iii) above shall be fully underwritten by the ‘syndicate members’/ Book Runner(s).
(ii) (a) The ‘syndicate members’ shall enter into an underwriting agreement with the Book Runner(s) indicating the number of securities which they would subscribe at the predetermined price.
(b) The Book Runner(s) shall in turn enter into an underwriting agreement with the Issuer company.
(iii) In the event of the syndicate members not fulfilling their underwriting obligations the Book Runner(s) shall be responsible for bringing in the amount devolved.
(iv) There shall not be any undersubscription in the category reserved for persons applying upto 10 tradeable lots as the Underwriters shall bring in the amount devolved subject to the fulfillment of the minimum shareholders criterion.
11.3.4 Procedure for bidding:
11.3.4.1 The method and process of bidding shall be subject to the following:
(i) Bid shall be open for atleast 5 days.
(ii) The advertisement mentioned at clause 11.3.1 (xi) shall also contain the following:
(a) the date of opening and closing of the bidding(not less than 5 days).
(b) the names and addresses of the syndicate members as well as the
bidding terminals for accepting the bids.
(c) the method and process of bidding.
(iii) Bidding shall be permitted only if an electronically linked transparent facility is used.
(iv) The ‘syndicate members’ shall be present at the bidding centres so that at least one electronically linked computer terminal at all the bidding centres is available for the purpose of bidding.
(v) (a) The number of bidding centres shall not be less than the number of mandatory collection centres specified in these Guidelines.
(b) The same norms as applicable for collection centres shall be applicable for the bidding centres also.
(vi) Individual as well as institutional investors shall place their bids only through the ‘syndicate members’ who shall have the right to vet the bids.
(vii) The investors shall have the right to revise their bids.
(viii) Bidding Form
(a) There shall be a standard bidding form to ensure uniformity in bidding and accuracy.
(b) The bidding form shall contain information about the investor, the price and the number of securities that the investor wishes to bid.
(c) The bidding form before being issued to the bidder shall be serially numbered at the bidding centres and date and time stamped.
(d) The serial number may be system generated or stamped with an automatic numbering machine.
(e) The bidding form shall be issued in duplicate signed by the investor and countersigned by the syndicate member, with one form for the investor and the other for the syndicate member(s)/Book Runner(s).
(ix) At the end of each day of the bidding period the demand shall be shown graphically on the terminals for information of the syndicate members as well as the investors.
11.3.5 Allocation / Allotment Procedure
(i) Atleast 15% of the issue size shall be reserved for allocation to individual investors applying upto 10 tradeable lots through the syndicate member.
(ii) 10% of the issue size offered to the public through the prospectus shall be reserved for allocation to individual investors who had not participated in the bidding process or have not received an intimation for entitlement of securities under clause 11.3 (xix).
(iii) Allotment to investors under sub-clauses (i) and (ii) of this clause, shall be made on the basis of the proportionate allotment system as specified in Schedule XVIII.
(iv) In case of undersubscription in the category referred to in clause (ii) of this clause, the Issuer company has the option to allocate it to whichever category it deems fit or let the undersubscribed portion lapse.
(v) (a) For the class of investors other than those mentioned at clauses (i) and (ii) of this clause, the allocation shall be determined by the Book Runner(s) based on prior commitment, investor quality, price aggression, earliness of bids, etc.
(vii) Schedule XX may be referred to for Clarificatory Examples for issue size and allocation has been specified in Schedule XX.
(viii) Model Time Frame for Book Building is specified in Schedule XXI.
(ix) (a) The offer shall remain open for subscription from the public for a period of atleast 3 working days after completing all the requirements of advertisement and despatch of issue material to all the stock exchanges.
(b) During the time when the offer is open, the investors who have received an intimation of entitlement of securities under the clause (xviii) shall submit the application forms along with the application moneys.
(c) The other individual investors who had not participated in the bidding process or have not received intimation of entitlement of securities under clause (xviii) may also make an application.
11.3.6 Maintenance of Books and Records
11.3.6 (i) A final book of demand showing the result of the allocation process shall be maintained by the book runner/s.
(ii) The Book Runner/s and other intermediaries in the book building process associated shall maintain records of the book building prices.
(iii) The Board shall have the right to inspect the records, books and
documents relating to the Book building process and such person shall extend
full co-operation.