Page 88 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 5: Primary Market

price band would be disclosed one day in case of further public offer and two working days in Notes
case of IPO before the opening of the bid and the investors may be guided in the meantime by
the secondary market prices in case of further public offer; (2) names and edition of the
newspapers/names of websites, journals, other media where/in which the announcement of
the floor price/price band would be made. Where the issuer decides to opt for price band instead
of floor price, the lead book runner should ensure compliance with the following conditions:
1. The cap of the price band should not exceed 20 per cent of the floor, that is, cap of the price
should be less than, or equal, 120 per cent of the floor price of the band.
2. The price band can be revised during the bidding period. The maximum revision on either
side should not exceed 20 per cent. In other words, floor price of the band can move up or
down to the extent of 20 per cent of floor of the price band disclosed and the cap of the
revised price should be fixed as indicated in (1) above.
3. Any revision in the price band should be widely disseminated by (i) informing the stock
exchange, (ii) issuing press releases and (iii) indicating the change on the relevant website
and the terminals of the syndicate member.
4. The bidding period should be extended by 3 days subject to a maximum of bidding period
of 13 days.
5. The manner in which the shortfall in the project financing resulting from lowering of
price band to the extent of 20 per cent would be met should be disclosed. It should also be
disclosed that allotment would not be made unless the financing is tied up.
In the case of appointment of more than one lead merchant banker or book runner, the rights,
obligations and responsibilities of each should be delineated. If there is under-subscription in
an issue, the shortfall would have to be made good by the book runner(s) to the issue and the
same should be incorporated in the inter se allocation of responsibility given by SEBI regulations.
The pre-issue obligations of the lead merchant banker and disclosure requirements as specified
earlier, would be applicable to the issue of securities through book-building unless stated
otherwise. The book runner(s) and the issuer company should determine the issue price based
on the bids received through 'syndicate members' and the SCSBs.

On determination of the price, the number of securities to be offered should be determined
(issue size divided by the price that has been determined). 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) would be entitled for the allotment of securities. On determination of
the entitlement, the information regarding the same (i.e. the number of securities to which the
investor becomes entitled) should be intimated immediately to the investors. No incentive, in
cash or kind, should be paid to the investors who have become entitled for the allotment of
securities. The broker may collect up to 100 per cent of the application money as margin money
from the clients/investors before he places and order on their behalf. The margin collected from
categories other than QIBs should be uniform across the book runner(s)/syndicate member(s)/
SCSBs for each such category. The broker/syndicate member should collect not less than 10 per
cent of the application money as margin money in respect of bids placed by the QIBs. Bids for
securities beyond the investment limits prescribed under relevant laws should not be accepted
by the syndicate members/brokers from any category of clients/investors. The lead book runner
may reject a bid placed by a QIB at the time of acceptance of the bid. The reasons for rejection
should be disclosed to the bidder(s) and included in the offer document. On determination of the
entitlement, the number of securities to which the investor becomes entitled should be
immediately intimated to him. The final prospectus containing all disclosures as per the relevant
SEBI guidelines, including the price and the number of securities proposed to be issued, should
be filed with the ROCs. The issuer should arrange for the collection of the applications from all

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