The Hindu Business Line reports that the PSUs, starting with NTPC Limited, may be adopting the ‘French auction’ model for their FPOs under this dispensation:
Under this alternative book building model, institutional buyers would be free to bid above a certain floor price and the allotment would be on price-priority basis and at differential prices.This is being implemented on the expectation that the French auction would lead to a more optimal price discovery.
About half of the 41.23 crore shares to be sold in the issue is reserved for the QIB (qualified institutional buyer) portion and would be allocated to investors based on the `higher the bid, higher the allocation' basis. The `French auction' model is likely to be replicated for the institutional portion of the upcoming Rural Electrification Corporation (REC) and mining major NMDC's share sales as well.
… The highest bidders, in the descending order, will get preference based on the price bids they have placed for the shares. …