IPO and Book Building Process: Corporate Accounting CIA 1.1

CORPORATE ACCOUNTING
CIA 1.1
IPO and Book Building Process
Submitted to :- Mrs.Anuradha
Submitted By:- Deepak Arora
Class:- 2-BBA C
Register No.:- 1820308

IPO Definition and Types
An initial public offering, or IPO, is the very first sale of stock issued by a
company to the public. Prior to an IPO the company is considered private, with
a relatively small number of shareholders made up primarily of early investors
(such as the founders, their families and friends) and professional investors
(such as venture capitalists or angel investors). The public, on the other hand,
consists of everybody else – any individual or institutional investor who wasn’t
involved in the early days of the company and who is interested in buying
shares of the company. Until a company’s stock is offered for sale to the public,
the public is unable to invest in it. You can potentially approach the owners of a
private company about investing, but they're not obligated to sell you anything.
Public companies, on the other hand, have sold at least a portion of their shares
to the public to be traded on a stock exchange. This is why an IPO is also
referred to as "going public.
Type of IPO:-
 Fixed Price Issue
 Book Building Issue
The initial price offer can be made through the fixed price issue or book
building issue or a combination of both.
Fixed Price Issue

In the fixed price IPO process, the Company along with their underwriters
evaluate the companies’ assets, liabilities, and every financial aspect. Then they
work with these figures to fix a price per issue to achieve the target funds. This
price which is fixed per issue is printed in the order document. The order
document justifies the price with qualitative and quantitative factors. The
demand for securities is known only after the issue is closed. The
oversubscription levels are high in the fixed price offerings, sometimes several
hundred times.
Book Building Issue

Compared to the developed countries, the concept of book building is new to
India. In the book building issue, the price is discovered during the process of
IPO. There is no fixed price, but there is a price band. The lowest price in the
band is referred to as the ‘floor price’ and the highest price is referred to as the
‘cap price’.
The price band is printed in the order document. And the investors can bid for
desired quantity of shares with the price which they would like to pay.
Depending on the bids, the share price is decided. The securities are offered
above or equal to the floor price. The demand is known everyday as the book is
built.
Why Go Public?
Basically, going public (or participating in an "initial public offering" or IPO) is

the process in which a business owned by one or several individuals is
converted into a business owned by many. It involves the offering of part
ownership of the company to the public through the sale of debt or more
commonly, equity securities (stock).Going public raises cash and usually a lot
of it. Being publicly traded also opens many financial doors
Steps involved in issuing of IPO

1. Have a trusted and reliable management team
Going public requires greater demands following the complexity of the process.
Thus, putting the right people to maneuver the process will help a lot. They
must possess strong communication skills to handle investors or SEC queries
and be able to clearly present the company’s vision and plans.
2. Be ready with your financial reporting systems
Important financial reports required:
2.1. disclosure controls and procedures
2.2. internal controls over financial reporting
Once the company goes public it requires a thorough disclosure of the financial
health of the company thereby adopting more complex financial and accounting
requirements. The company must have a credible system in place to ensure all
data are recorded in a timely and accurate manner.
3. Choose your investment bankers
Investment bankers or the “underwriters” play an important role in the IPO

process. They look for and approach potential investors. They act as the sales
guy offering to buy shares for the company. Thus, characteristics of your ideal
investment banker include sales and distribution capabilities and strong analyst
coverage. Some of the known biggest underwriters are Goldman Sachs, Credit
Suisse First Boston and Morgan Stanley.
4. Write your company’s story
Writing your company’s story or overview of the business enables your

prospect investors to see the objectives of the company. Your story must present
your company’s goal, mission and vision – emphasizing its strengths, greater
market opportunity, and why your company will be a good investment in the
long run.
5. Register with SEC
Next step would be to present the final company story as well as the prospectus
to SEC for registration and review process. Initial prospectus contains all
information about the company except for the offer price and date, which are
not shown yet. Normally, the registration takes more than a month.
6. Start your road show
Once your company has complied with SEC’s comments and recommendations,
then you may now proceed to meeting your prospective investors. You must
travel and attend a lot of meetings, press conferences (if your budget allows),
city/area visits to introduce your company and the merits of investing in it. This
is also considered as your marketing venue to attract more investors.
7. Price your IPO
After completing the review process and generating a list for possible IPO
investors, the company’s board of directors and underwriters agree on a value to
which the company sets a price per share of stock.
8. Now, get ready to be publicly-owned company
Nothing is more exciting than going public. After pricing, the IPO normally
close on the 4th business day. Issuer and selling stockholders will issue the
shares to the underwriters, and the underwriters will buy those shares at a 7
percent discount more or less. Issuers will still undergo SEC quiet period for 25
days following the pricing. This period gives broker-dealers time to approach
and deliver IPO sales materials to investors.
Advantages and Disadvantages of Issuing IPO
Advantages:-
 Increased Capital
 Liquidity
 Increased Prestige
 Valuation
 Increased wealth
Disadvantages:-
 Time and Expense
 Disclosure
 Regulatory Review
 Falling Stock Price
 Vulnerability
PC JEWELLER
About the Company:-
PC Jeweller Limited (BSE: 534809) is a jeweller based in New Delhi, India. It started
operations in April 2005 with one showroom at Karol Bagh Delhi and 94 showrooms
across India. It is a first generation business promoted by two brothers- Padam Chand
Gupta and Balram Garg. The company however, had a vision of expanding its presence
in the retail segment. It has accordingly been opening showrooms at regular intervals
and today has strength of 94 stores spread over 74 cities.
PC Jeweller engages in the manufacture, export, wholesale and retail of jewelry in

India. It offers gold and diamond jewelry. The company’s business model consists of
opening large format, stand alone stores at high street locations. Its stores stock a wide
range of jewellery across all price points, with an increasing focus on diamond jewelry.
The company sells only hall marked jewellery and certified diamond jewellery
Steps Followed By the Company to issue the IPO
Book Building
Book building is the process by which an underwriter attempts to determine the price to place
a securities offering, such as an initial public offering (IPO), based on demand from
institutional investors. An underwriter builds a book by accepting orders from fund managers,
indicating the number of shares they desire and the price they are willing to pay.
Effects of IPO on Book Building of the Company

PC Jeweller will hit the capital market on December 10 with an initial public offer (IPO) to
raise up to Rs 609 crore for funding its expansion plans.
The company has fixed the price band of the IPO, comprising of over 4.51 crore equity
shares, at Rs 125-135 per share having a face value of Rs 10 each. The public issue will close
on December 12.
At the upper band, PC Jeweller would raise a little over Rs 609 crore through the IPO, while
at the lower band, the company would mop up Rs 564 crore.
The IPO would constitute 25.2 per cent of the post-issue paid-up equity share capital of the
company. The company is offering a discount of Rs 5 to retail individuals.
References
 https://economictimes.indiatimes.com/markets/stocks/news/pc-jeweller-
announces-share-buyback-worth-rs-424-crore/articleshow/64113724.cms
 https://www.chittorgarh.com/ipo/pc_jeweller_ipo/359/
 https://www.investopedia.com/terms/b/bookbuilding.asp
1317620434757.pdf


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CORPORATE ACCOUNTING

Submitted By:- Deepak Arora

Register No.:- 1820308

 Book Building Issue

Fixed Price Issue

Book Building Issue

Basically, going public (or participating in an "initial public offering" or IPO) is

Steps involved in issuing of IPO

Important financial reports required:

2.1. disclosure controls and procedures

2.2. internal controls over financial reporting

3. Choose your investment bankers

Investment bankers or the “underwriters” play an important role in the IPO

4. Write your company’s story

Writing your company’s story or overview of the business enables your

5. Register with SEC

7. Price your IPO

8. Now, get ready to be publicly-owned company

PC Jeweller engages in the manufacture, export, wholesale and retail of jewelry in

Effects of IPO on Book Building of the Company

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