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

Which statement about the primary market in India is correct for a company making an Initial Public Offer through the book building process?

In book building, investors bid within a declared price band and the final issue price is discovered once bidding closes, based on the demand collected. It differs from a fixed price issue, and it is open to institutional and non-institutional investors as well as retail.

  1. AThe issue price is always fixed before the issue opens, with no price band
  2. BInvestors bid within a price band and the final issue price is discovered after the bidding closesCorrect
  3. COnly retail investors are permitted to bid
  4. DShares are allotted only after listing on the stock exchange

Explanation

In book building, the issuer declares a price band (floor and cap) and investors bid within it; demand is collated and the final price is discovered after the book closes. A fixed price issue has the price set in advance. Allotment precedes listing, and institutional and non-institutional investors also bid.

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