Skip to content

NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Securities Market Segments

Ms. Rao is analysing a company's IPO. The issue is a book-built issue with a price band of ₹180 to ₹190. Which statement about the book building process is correct?

In a book-built issue, investors bid within the disclosed price band, and the final issue price is determined after bidding closes based on the demand collected. This differs from a fixed-price issue where the price is set in advance.

  1. AThe issue price is fixed by the company before bidding opens and cannot vary
  2. BBids are collected within the price band and the final issue price is discovered after the bidding closesCorrect
  3. COnly the floor price is disclosed and bidders may bid below it
  4. DRetail investors cannot bid at the cut-off price

Explanation

In book building, investors bid within the disclosed price band, and the issue price is discovered from demand once bidding closes. Fixed price is the alternative method, so the first option is wrong. Bids below the floor are not valid, and retail investors can bid at the cut-off price.

Did you get it right without looking?

One question tells you little. A timed set on Securities Market Segments shows your real accuracy, how long you take and where you lose marks.

Practise Securities Market SegmentsFree diagnostic mock

More Securities Market Segments questions