IPOs and Issue Methods: Indian Perspective

Firms issuing Initial Public Offerings (IPOs) in different capital markets across the world have beenpracticing two of the most popular issue methods: fixed price and book building method. Fixedprice was the only method of pricing the IPO issues, traditionally in India till year 2000. However,owing to the benefits of book building mechanism, the trend had changed. IPO issuers in Indiastarted using book building method for pricing their issues. Thus, book building mechanism hasbecome increasingly popular among issuers in India, especially, after year 2000. The IPO marketin India during the first decade following 2000, was completely dominated by the book buildingmechanism. Major issuers during this period preferred book building method for pricing their issueswith only a few issuers using the traditional fixed price mechanism for their issues. Such a paradigmshift in the IPO issue method was in line with the developments that took place in other majorcapital markets of the world.