CS Executive · Capital Market and Securities Laws · Basics of Capital Market
In a book-building public issue by Orion Infra Ltd, the issuer announces a price band and investors place bids within it. What is the main purpose of book building?
The main purpose of book building is price discovery. Investors bid within a stated price band, and the final issue price is decided on the basis of the demand collected, rather than being fixed in advance by the issuer.
- ATo fix the issue price in advance without investor input
- BTo discover the issue price based on demand from biddersCorrect
- CTo allot shares only to existing shareholders
- DTo list shares without any allotment
Explanation
Book building is a price-discovery process: bids are collected within a price band and the final price is determined according to demand. It is not a fixed-price method, and it is not limited to existing shareholders.
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