| The impetus generated under the globalization and liberalization
processes, has had a phenomenal effect on the Indian capital market;
many structural modifications have been done and a host of new
mechanisms and instruments have been developed, mostly conforming to and
in line with international practices. A crucial factor to strengthen the
investor confidence is, no doubt, the transparency in the pricing
policies for the shares floated and related disclosures involved. Of
great significance is the introduction of a new mechanism termed
‘Book-Building,’ in the scheme of Initial Public Offerings (IPOs) and
recognition of the same by SEBI in India in 1995. In international
markets, the most active investors are mutual funds and other
institutional investors and the entire 100% of issue is allotted through
the book-building process. The lead in India was taken by ICICI; it
chose book-building in 1996 for its 1000crore bond issue. This was
followed by L&T, TISCO & HCL issues; the last got over-subscribed by 27
times and the original price band of Rs.450–540 was revised to 500-580
and finally offered at Rs.580/- Nevertheless, several critical
assessments also were churned out. This paper aims to examine whether
the high profile advantages of the method have actually been
consolidated at the present juncture or a critical review/ systemic
re-routing is called for. The study reveals that the book–building
method appears to be evolving over the last decade in our capital
markets. In the end, if the issuer company, the lead merchant bankers
and the regulators discharge their responsibilities to the best
interests of the investors, success through book-building would emerge
as a strong capital foundation of our economy |