NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Securities Market Segments
Which of the following best describes a 'book building' issue in the Indian primary market?
In a book building issue, the price is discovered from investor bids placed within a disclosed price band, and the cut-off price is set based on the demand in the order book. In a fixed price issue, the price is set beforehand.
- AThe issue price is discovered based on bids received from investors within a price bandCorrect
- BThe issue price is fixed by the issuer and disclosed in advance without any bidding
- CShares are offered only to existing shareholders in proportion to their holding
- DShares are issued only to employees of the company
Explanation
In book building, the issuer offers a price band and investors bid within it; the final price is discovered from the demand collected in the book. A fixed price issue sets the price in advance. Rights issues are offered to existing shareholders.
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