Book Building
Book Building is a process where the IPO price is decided based on investor demand.
In the book building process, a company does not fix a single price for its IPO. Instead, it sets a price range (price band), and investors place bids within that range.
After the bidding period ends, the company decides the final price (cut-off price) based on the demand at different price levels.
Key points:
Investors choose a price within the given range
Higher demand helps decide the final price
Final price is called the cut-off price
More transparent pricing method
Example:
If an IPO has a price band of ₹100–₹120, investors can bid within this range. If most investors bid at ₹120, the final price may be fixed at ₹120.