Corporates may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both.
In case the issuer chooses to issue securities through the book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner:

Public constitutes of both Institutional and Non Institutional investors.
  
Institutional investors includes:

» Foreign institutional investors (FII’S)
» Mutual funds (MF’S)
» Public sector banks
» Private sector banks
» Domestics institutions (FI’S)
» OCB’s
» Corporates

Non-Institutional includes:
Indian and NRI Investors

Nearly 1 month

Securities and Exchange Board Of India (SEBI) is the nodal authority for all capital market activities including public issues. All companies wishing to come out with an IPO has to file the draft offer document with SEBI through a merchant banker.

Judging the financial health and the expected cash flow of the company and together with various other factors, the merchant bankers and the issuer company decides the additional amount besides the face value. This additional amount is called the premium of the share.

The face value together with the premium is called the price of the share in a public issue.