Book building is a price discovery method in which the company issuing the shares doesn’t fix a specified price of the shares issued. Instead, it provides an indicative price range or a band. This means that the knowledge of the price of the issued shares is unknown in advance.
Points to remember:
In a book building process, the demand of the shares is identified every day while the book is built.
The book is filled with prices that investors indicate to pay per share.
After the book is closed, the price is determined by a Book Running Lead Manager by analyzing the book’s values.
This process is governed by SEBI’s ICDR regulations in India.