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Unit 5: Primary Market

requirement of minimum 25 per cent of the securities to be offered to the public is also Notes
applicable. Underwriting is mandatory to the extent of the net offer to the public. The draft
prospectus containing all the information, except the information regarding the price at
which the securities are offered, should be filed with the SEBI. One of the lead merchant
banker(s) to the issue should be nominated by the issuer company as a book runner and
his name should be mentioned in the prospectus. The copy of the draft prospectus, filed
with the SEBI, should be circulated by the book runner to the (i) institutional buyers, who
are eligible for firm allotment, and (ii) intermediaries, eligible to act as underwriters,
inviting offers for subscription to the securities.
2. The draft prospectus circulated should, however, indicate the price band within which the
securities are being offered for subscription. The book runner on receipt of the offer
should maintain a record of the names and number of securities ordered and the price at
which the institutional buyer/underwriter is willing to subscribe to the securities under
the placement portion. The underwriter(s) should maintain a record of the orders received
by him for subscribing to the issue out of the placement portion. He should aggregate
these offers and intimate the same to the book runner. The situational investor should also
forward its orders, if any, to the book runner, on receipt of the compaction. The book
runner and the issuer company determine the price at which the securities should be
offered to the public the issue price for the placement portion and offer to the public could
subscribe to the securities, The book runner should, however, have an option to require
the under writers to pay all monies with respect to their underwriting commitment in
advance. Within two of determination of the issue price, the prospectus should be filed
with the ROCs and the issuer company should open two different accounts for collection
of application money(ies) - one for the private placement portion and the other for the
public subscription. A day prior to the opening of the issue to the public, the book runner
should collect the application forms along with the application money(ies) from the
institutional buyers and the underwriter to the extent of the securities proposed to be
allotted to them/subscribed by them. The allotments for the private placement portion
should be made on the second day from the closure of the issue. However, to ensure that
the shares allotted under the placement portion and public portion are pari passu in all
respects, the company may have a new date of allotment, which should be deemed as the
date of allotment for the issue of securities through the book-building process. In case the
book runner has exercised option to require the underwriter to pay in advance all
money(ies) required to be paid with respect to their underwriting commitment by the
11th day of the closure of the issue, the shares allotted as per the private placement
category would be eligible to be listed. In case of under-subscription in the net offer to the
public, a spillover to the extent of under-subscription should be permitted from the
recumbent portion subject to the condition that preference would be given to individuals
investors. In case of under-subscription in the placement portion, spillover would be
permitted from the net offer public. The issuer company may pay interest on the application
money(ies) till the date of allotment or the deemed date of allotment uniformly to all the
applicants. The book runner and other intermediaries should maintain records of the
book-building process. The SEBI has the right to inspect such records.

Offer to Public through Book-building Process

An issuer company may make an issue of securities to the public through a prospects in the
following manner:
1. 100 per cent of the net offer to the public through the book-building process or
2. 75 per cent of the net offer to the public through the book building process and 25 per cent
at the price determined through book building. Reservation or firm allotment to the

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