Definition
Book building is a process used during an IPO (Initial Public Offering) to decide the price of shares. In this method, investors place bids within a price range, and the final share price is determined based on these bids.
Example
When a company plans an IPO with a price range of Rs 100 to Rs 120 per share, investors place bids at different prices within this range. If most investors bid around Rs 115, the final price may be fixed close to that level.
Caution
The final price in book building depends on investor demand. Sometimes shares may be priced higher due to strong demand, so investors should carefully evaluate the company before investing.