A section of merchant bankers allege that many institutional intermediaries involved in the book-building process act in concert with the lead managers to manipulate the process. This is how it goes: before the issue a hype is created about the company fundamentals to justify the price arrived through book-building and the retail investors are lured. The investors end up paying more for the overvalued stock on the listing day.

"A look at the pre- and post-IPO shareholding pattern of these issues shows a huge offloading of shares to the public on the day of listing. Normally, on the listing day, the stock prices move up and the co-lead managers take advantage of this situation by dumping their equities and earning a profit on their holdings. This results in sharp decline in the prices. This renders the market illiquid for such stocks for the common investor," bankers said.

Ultimately, the common investor, who subscribes to such shares, gets stuck up because of no trade takes place in the secondary market.

Some merchant bankers feel that there has been a nexus between promoters and institutional players in pricing these issues. While, on one hand promoters of media companies raised huge quantum of money by choosing the book-built route, on the other hand, institutional investors were restless in subscribing because they thought the opportunity to earn a "quick buck" on the day of listing would be lost. Also, the money that they raised was more than what was needed for their project. There was a miscalculation in the earnings projection too.

In India the opportunity for media stocks has always been there. Today, what we experience is, through this mechanism the price is not discovered but rather it is fixed by institutions associated with issues. Therefore, going by the experience, the book-building process, as a mechanism, has failed to discover the price.

Given the degree of freedom in choosing the prospective shareholders, the lead manager can structure the issue in such a way that bulk of the allotment is made to institutional investors, they added.

Speaking to The Financial Express, a market expert said, "The Indian capital market singularly lacks depth to adopt book-building as a concept, the purpose of the book-building process introduced by the Securities and Exchange Board of India (Sebi) in 1995 was for optimum price discovery but it has not happened because it has made the market more volatile reducing the interest of the retail investors."

"In India we have not reached the stage of development of the institutional framework to experiment with the book-building process. We are yet to discover a price based on the book-building approach. The price is fixed, whether it is band or non-band and it is decided by the lead merchant banker," he added.