Building the book
The price is not set, it is found. Bids arrive at different prices, the demand at each price is added up, and the issue price is the highest one at which the whole issue still sells. SEBI publishes a worked example; so does this chapter.
Chapter 7 · Intermediate
Book building sounds like jargon for something complicated. It is a demand schedule, added up from the top.
What it is
SEBI's definition, read 30 September 2026:
Book building is a process of price discovery. The issuer discloses a price band or floor price before opening of the issue of the securities offered. On the basis of the demands received at various price levels within the price band specified by the issuer, Book Running Lead Manager (BRLM) in consultation with the issuer arrives at a price at which the security offered by the issuer, can be issued.
So the price is an output. Bids come in at various prices inside the band, and the price that clears the issue is calculated from them.
The arithmetic, using SEBI's own example
SEBI's investor material works an issue of 3,000 shares. The bids arrive like this:
| Bid quantity | Bid price | Cumulative quantity | Subscription |
|---|---|---|---|
| 500 | ₹24 | 500 | 16.67% |
| 1,000 | ₹23 | 1,500 | 50.00% |
| 1,500 | ₹22 | 3,000 | 100.00% |
| 2,000 | ₹21 | 5,000 | 166.67% |
| 2,500 | ₹20 | 7,500 | 250.00% |
The third column is the one doing the work. A bidder willing to pay ₹24 is also willing to pay ₹22, so demand accumulates downwards: at ₹22 the buyers are everyone who bid ₹24, ₹23 or ₹22 — 500 plus 1,000 plus 1,500, which is 3,000 shares.
The issue is 3,000 shares. ₹22 is therefore the highest price at which the whole issue sells, and ₹22 is the issue price.
Go one rupee lower and the issue would be 166% subscribed — more demand, but at a worse price for the seller, and there is no reason to accept it. Go one rupee higher and only 1,500 shares find buyers, which leaves half the issue unsold.
Finding the price from the bids
SEBI’s example offers 3,000. Raise it and watch the discovered price fall.
Name a price below the discovered one and the bid is thrown away, not reduced.
| Price | Bid here | Cumulative | Subscribed |
|---|---|---|---|
| ₹24 | 500 | 500 | 16.67% |
| ₹23 | 1,000 | 1,500 | 50% |
| ₹22 | 1,500 | 3,000 | 100% |
| ₹21 | 2,000 | 5,000 | 166.67% |
| ₹20 | 2,500 | 7,500 | 250% |
The issue price
₹22
- The whole book covers the issue
- 2.5×
- Your bid of ₹22
- Valid
At ₹22 the cumulative demand first covers the issue, so that is the price. Your bid of ₹22 is at or above it, so it is valid — and you would pay ₹22, not ₹22. Bidding above the clearing price never costs more than the clearing price.
Who is in, and who is out
Now the consequence for the individual bidder, which is where this connects to chapter 4.
Bids at ₹24, ₹23 and ₹22 are valid — at or above the issue price. Everyone who is allotted pays ₹22, including the person who offered ₹24. Bidding above the clearing price does not cost you more; it only makes you certain of being in the valid pool.
Bids at ₹21 and ₹20 are invalid. They are not partially filled or given a smaller allotment. They are out, and the money is unblocked.
That is what makes the cut-off box a decision rather than a formality. A cut-off bid is valid at ₹22 or at any other price the band could produce. A bid of ₹21 in this issue achieved nothing at all.
Watching the demand while it happens
Unusually for anything in finance, you can watch this live. From SEBI's FAQ:
The status of bidding in a book built issue is available on the website of BSE/NSE on a consolidated basis. The data regarding bids is also available investor category wise.
Category-wise subscription, updated through the day, for free. Three things it is genuinely good for:
Which category is doing the buying. An issue where institutions are at 40x and retail at 2x is being bought by people with analysts. The reverse pattern is worth a pause.
Whether the institutional category fills at all. On the compulsory route of chapter 6, institutions must take at least 75% or the whole issue is refunded. A thin QIB book late on the final day is a real risk to the issue existing.
Nothing about the listing price. Subscription is demand at or above the band. It is not a forecast, and a 60x subscribed issue can list below its issue price. Chapter 11.
Fixed price, for completeness
Some issues — mostly smaller ones — are fixed price: the price is in the offer document from the start, and demand is only known after the issue closes. SEBI's comparison table is blunt about the difference. In a fixed price issue there is nothing to discover and no cut-off option, because the price is already the price.
The point
Demand accumulates downwards, and the issue price is the highest price at which cumulative demand still covers the issue. Bids above it are valid and pay the issue price; bids below it are thrown away. The exchanges publish the running demand, category by category, while you can still act on it.
Check yourself
4 questions. Every answer is explained afterwards, including the ones you get right — guessing correctly is not the same as knowing. Score 70% or more and the chapter is marked done.
Question 1 of 4
0 of 4 answered. You can submit with questions unanswered — they simply score zero.
Now do it with your own numbers
An issue of 5,000 shares receives bids of 1,000 at ₹50, 2,000 at ₹48, 3,000 at ₹46 and 4,000 at ₹44. Find the issue price, and say what happens to someone who bid ₹44.
Add the demand from the highest price downwards. The price is where the running total first reaches the issue size.
Sources
- SEBI Investor Protection and Education Fund, "Primary Market — Initial Public Offerings (IPOs)", updated 30 September 2022 — the worked demand schedule and cumulative subscription table, and the validity of bids — read 2026-09-30
- SEBI, Frequently Asked Questions on the Issue of Capital and Disclosure Requirements Regulations, May 2025 — book building as price discovery, and the category-wise bidding data published by the exchanges — read 2026-09-30