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

Under the SEBI framework, the price band in a book-building public issue is subject to which of the following requirements?

In a book-building issue, the cap of the price band must not be more than 120% of the floor price. For example, a floor of Rs 100 allows a cap of at most Rs 120. The floor need not equal face value, and the exchange does not fix the price.

  1. AThe floor price must always equal the face value of the share
  2. BThe cap of the price band must be at most 120% of the floor priceCorrect
  3. CThe cap of the price band can be any multiple of the floor price
  4. DNo price band is needed because the price is fixed by the exchange

Explanation

In book-built issues, the issuer announces a price band where the cap should not exceed 120% of the floor price (the band can be revised, with the cap at most 120% of the floor). So a band of Rs 100 to Rs 120 is permissible but Rs 100 to Rs 150 is not. The other options are wrong because the floor need not equal face value and the cap is limited.

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