What is book building? Book building is the process to asses demand for a particular public issue at various prices, based on which the issue is priced and sold to the investors. A number of companies in the recent past including ICICI bank and ONGC, have taken this route to raise funds from the market.
Who collects the order: The book runner collects orders from various investors through other participating members. Therefore he decided the yields to be offered based on the orders received and the yields quoted for them.
Advantages of Book building: For the investors, there is immediate allotment and early listing, with realistic pricing. The issuing company is able to realise the best terms for the issue as the size and the price is based on actual market demand. Further the company has immediate access to the funds and the risk of issue development is nonexistent and the cost of issue could be reduced.