Department of Commerce, Seethalakshmi Ramaswamy College, Tiruchirapalli-620 002
Online published on 11 September, 2015.
The impetus generated under the globalization and liberalization processes, has had a phenomenal effect on the Indian capital market; many structural modifications have been done and a host of new mechanisms and instruments have been developed, mostly conforming to and in line with international practices. A crucial factor to strengthen the investor confidence is, no doubt, the transparency in the pricing policies for the shares floated and related disclosures involved. Of great significance is the introduction of a new mechanism termed ‘Book-Building,’ in the scheme of Initial Public Offerings (IPOs) and recognition of the same by SEBI in India in 1995. In international markets, the most active investors are mutual funds and other institutional investors and the entire 100% of issue is allotted through the book-building process. The lead in India was taken by ICICI; it chose book-building in 1996 for its 1000crore bond issue. This was followed by L&T, TISCO & HCL issues; the last got over-subscribed by 27 times and the original price band of Rs.450–540 was revised to 500–580 and finally offered at Rs.580/- Nevertheless, several critical assessments also were churned out. This paper aims to examine whether the high profile advantages of the method have actually been consolidated at the present juncture or a critical review/systemic re-routing is called for. The study reveals that the Book–Building method appears to be evolving over the last decade in our capital markets. In the end, if the issuer company, the lead merchant bankers and the regulators discharge their responsibilities to the best interests of the investors, success through Book-Building would consolidate into a strong capital foundation of our economy.
