“There are two types of IPO Fixed price offering and Book building offering“
When an IPO is brought into the market, the companies first determine the share price of it which is applicable in two ways. The first is Fixed price offering and the second is the Book building offering. Before the IPO is launched, the companies will get DRHP all their details of the SEBI. They enter the pass and get it listed in the market only after getting approval.
What is Fixed Price Offering?
In this process the company evaluates its assets, liabilities, and every financial aspect, setting a fixed value of the shares. This price is fixed from the first day to the last day of the issue, and the shares are sold at the same price. The Company How much is the demand for securities, its leaf only runs on the last day of the issue. It is then issued according to the demand.
Difference Between Book Building Offering & Fixed Price Offering
In IPO, both these methods are important, but there is considerable difference between the two, which is as follows: –
- Pricing-In the Fixed Price Offering Method, the share price is decided from day one, which is printed in the order document. In / Book Building Method, the price is not fixed, only the price band is fixed, and the price is fixed after the last date of the bid.
- Demand – Fixed price method can be known only after the issue is closed, how much demand has been made. In the / Book Building Method, you can know every day how much demand is there.
- Payment – 100% advance payment is made in Fixed Price Method and the amount is refunded after allotment. / Whereas payment is made after allocation in Book Building Method.
- Reservation – In the Fixed Price Offering Method, 50% of the allocation – is reserved for investments below 2 lakhs and the rest is for high amount investors. / Whereas in Book Building Method 50% allocation (QIB) is reserved for QIBs and 35% for small investors and remaining for other investors.
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