Investment Banking Introduction:

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Private Placement: Private Placement is defined as issuance of securities to fewer than 50 persons, without issuing prospectus/letter of offer and without seeking permission for listing on the stock exchanges for the debt securities issued. This definition is derived on the basis of non-compliance of Rule 19 (2) (b) of SC(R) Act, 1957 a pre-condition for listing of the securities to be issued. Over the past years, private placement has emerged as an additional method of raising funds by the corporate sector. The specified investors of private placement include institutional buyers, high net worth individuals and corporates. Eligible Securities: Eligible Securities include equity shares, non-convertible debt instruments along with warrants and convertible securities other than warrants. Listed Issuer: The provisions of SEBI (ICDR) Regulations, 2009 [under chapter XIII (A)] are applicable to qualified institutional placement made by a listed issuer. Private Placement Basis: The placement document for QIP shall clearly specify that no offer is being made to the public or any other class of investors. Qualified Institutional Buyer: i. A mutual fund, venture capital and foreign venture capital investor registered with the Board; ii. A foreign institutional investor and sub-account (other than a sub-account which is a foreign corporate or foreign individual), registered with the Board; iii. A public financial institution as defined in section 4A of the Companies Act, 1956; iv. A scheduled commercial bank; v. A multilateral and bilateral development financial institution; vi. A state industrial development corporation; vii. An insurance company registered with the Insurance Regulatory and Development Authority;

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Investment Banking viii. A provident fund with minimum corpus of twenty five crore rupees; ix. A pension fund with minimum corpus of twenty five crore rupees; Relevance of Private Placement:

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A private placement is essentially resorted to when a corporate desires to raise funds in a timely and cost effective manner. It affords flexibility, time saving and easy access to funds, which are necessary in a scenario where interest rates are dynamic and subject to quick changes. The method of fund raising mainly depends on amount to be raised. Over the past years, private placement has emerged as an additional method of raising funds by the corporate sector. The specified investors of private placement include institutional buyers, high net-worth individuals and corporates.

It involves no cost on advertisement and limited expenses on printing and brokerage. Hence, issue cost for private placement is lower than public issues. It is argued that private placement ensures accuracy in pricing and the price is known at the time of launch itself. It caters to specific investor needs and issuer preferences; leads to innovation and development of new products. It is also flexible as the issuer can alter the terms of issue later on, depending on the market conditions. Funds can be accessed in quicker time compared to public issues, where a number of formalities have to be completed post-issue.

Private placements are neither underwritten nor do they have any minimum subscription requirement. These private placement issues can be tailored to meet specific requirements. The terms and conditions of issuers are negotiable on each deal. The instruments made under private placement are confidential and provide inherent advantages to the corporates.

The following table Explains the various regulations related with private placement with two examples i.e. equity issue (Tata Motors Ltd.) and Debt issue (Bharat Forge Ltd.) which are listed on BSE and NSE and are regulated by SEBI regulations as per chapter VIII SEBI act on Issue of Capital and Disclosure Requirements.

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Investment Banking REGULATIONS ON PRIVATE PLACEMENT S. No Particulars Regulations Tata Motors Limited (Issue of ordinary and "A" ordinary shares through private placement)

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Issue size

Pricing

No limit is specified for the controlling owner but for QIB it should not be more than 5 times the net worth of issuing firms. The issue price should be greater than the higher of the 2 value 1. Average of the weekly high and low prices six month before the issue of announcement date. 2. Average of weekly low and high prices 2 week before the issue announcement date. 1. For Promoter: The share allotted for controlling owner will be locked in for a period of 3 years from the date of allotment (convertible securities are locked for 1 year. The promoter's pre

Bharat Forge Limited (Issues Secured redeemable NonConvertible Debentures through Private Placement) Rs. 33,510.1 million The Issue if 1760 comprising 8,320,300 NCD's aggregating to Ordinary Shares and Rs. 1760 Million 32,165,000 A Ordinary

Floor Price: 1. Rs. 1,074 per Ordinary Share 2. Rs. 764 per A Ordinary Share

1. NCD issue Price: Rs.10,00,000/ NCD 2.Coupon:10.75% (Semiannually) 3. YTM:11.0389 % per annum Redeemable in three year installments starting at the end of 4th year to the end of 6th year in the ratio 35:35:30 from the deemed date of allotment. If allotted Securities pursuant to the Issue, you shall, for a period of one year from the date of Allotment, sell the Securities so acquired only on the floor of the Stock Exchanges.

Resale restriction (lock in period)

If allotted Securities pursuant to the Issue, you shall, for a period of one year from the date of Allotment, sell the Securities so acquired only on the floor of the Stock Exchanges.

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Investment Banking preferential allotment shares are locked in for 6 months from the date of allotment. 2. For QIB: The share allotted will be locked in for a period of 1 year. Then after they can sell it in the market. 4 Eligibility Can be sold to substantial shareholders, bank, private equity player, QIB. The purpose for which private placement is being made should be disclosed before issuing to the utilization of funds raised through preferential allotment should be disclosed under a separate heading in the annual report.

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This issue is only QIB as defined in applicable to QIB like regulation 2(1) (zd) of Mutual Funds, SEBI regulations. Registered FIIs etc. Funds raised through placement will be utilized for debt reduction program, capital reduction, long term working capital requirement, growth objectives. The net proceeds of the Issue will be used for our long term funding requirements, and any other uses permissible by law. We intend to temporarily invest such proceeds in creditworthy instruments, including debt oriented mutual funds and deposits with banks. Such investments would be in accordance with applicable laws. The Placement Document contains all information with respect to the Company, its Subsidiaries and the Securities which is

Disclosure

Placement Document

Issuer shall prepare a placement document containing all the relevant and material disclosures. There will be no preissue filing of the

The Placement Document contains all information with respect to the Company, its Subsidiaries and the Securities which is material in the context

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Investment Banking placement document with SEBI. The placement document will be placed on the websites of the Stock Exchanges and the issuer, with appropriate disclaimer to the effect that the placement is meant only for QIBs on private placement basis and is not an offer to the public. Minimum of 10% of specified securities allotted to mutual funds ( If no mutual fund is agreeable to take up the minimum portion mentioned in clause 13A.2.2 or any part thereof, such minimum portion or part thereof may be allotted to other QIBs. No allotment shall be made under this chapter, either directly or indirectly, to any QIB being a promoter or any person related to promoter/s. In case of a security which is convertible into or exchangeable with equity shares at of this Issue.The Securities have not been approved, disapproved or recommended by any regulatory authority in any jurisdiction.

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material in the context of this Issue.The Securities have not been approved, disapproved or recommended by any regulatory authority in any jurisdiction.

Distribution of the issue

Tata has also given 10% preference to Mutual funds.

- -NA- -

Convertibilit y of Security

-NA-

The Debentures are NCD's.

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Investment Banking a later date, the same may be converted/ exchanged in to equity shares at any time after the date of allotment of the security, no later than sixty months from the date of allotment. 9
Shareholders Resolution

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Shares Paid up

Allotment of specified securities issued pursuant to Chapter XIII be completed within twelve months from the date of passing of the resolution. The placements made pursuant to authority of the same shareholders resolution shall be separated by at least six months between each placement. A copy of the placement document shall be filed with the Board for record purpose within 30 days of the allotment of specified securities.

This resolution was passed by Board of Directors on 28th June, 2010 and by Shareholders of the company on 10th August 2010. Offer period was from 1st October, 2010 to 7th October, 2010.

The terms of the offering and the Issue of the Securities were approved by resolutions of the Committee of Directors passed on April 26, 2010.

Shares issued by company are fully paid up with face value of Rs.10 and premium of 1064 that means offer price of Rs.1074

-NA-

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Investment Banking 11 Number of allottees The minimum number of allottees for each placement of specified securities made pursuant to this Chapter shall not be less than: (a) two, where the issue size is less than or equal to Rs. 250 crores; (b) five, where the issue size is greater than Rs. 250 crores. Provided that no single allottee shall be allotted more than 50% of the issue size. Provided further that QIBs belonging to the same group or those who are under common control shall be deemed to be a single allottee for the purpose of this clause. Specified securities allotted pursuant to this Chapter shall not be sold by QIB for a period of one year from the date of allotment, except on a recognized stock exchange.

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The No. of allottees is The subscription must as per chapter VIII of be made in multiples the SEBI act on Issue of of 1 NCD and thereof. Capital and Disclosure Requirements.

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Transferabili ty of specified securities

There is a restriction for transferability of shares for 1 year from the date of allotment

The NCDs being Allotted pursuant to this Issue shall not be sold for a period of one year from the date of Allotment except on the floor of the Stock Exchanges.

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Investment Banking 13 Minimum Float The market regulator has mandated that companies with less than 25% public float will have to raise funds through a public share sale and not through private placement to institutions, a move aimed at widening retail holding and limiting stock price manipulation An institutional placement programme shall be managed by merchant banker(s) registered with the Board who shall exercise due diligence. The eligible seller shall have the option to make allotment as per any of the following methods (a) proportionate basis (b) price priority basis (c) criteria as mentioned in the offer document. The method chosen shall be disclosed in the offer document. Company has already has public float of more than 25%. -NA-

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Appointment of Merchant Banker

They have appointed citi They have appointed group and Credit Suisse Citi group, Axis bank Securities as BRLM. and Kotak Mahindra Capital Company Limited as BRLM.

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Allotment of shares

Allotment of share had been made on discretionary basis and in compliance with Chapter VIII of the SEBI Regulations.

-NA-

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Investment Banking 16 Restrictions in case of over subscription Where the issue has As per SEBI guidelines. been oversubscribed, an allotment of not more than 10% of the offer size shall be made by the eligible seller. The eligible seller The issuer can withdraw shall have the right offer in case it is under to withdraw the offer subscribed. in case it is not fully subscribed. Its equity shares of The Shares of same As per guidelines.

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Withdrawal of offer

The issuer can withdraw offer in case it is under subscribed.

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Issue of same shares

Issue of same class of the same class are class of Tata Motors ltd NCD has been done listed on a stock are listed on NSE and on Aug 1, 1995. exchange having BSE. In principle nationwide trading approvals under Clause terminals. 24(a) of the Equity Listing Agreements for listing of the Shares have been received

from the NSE and the BSE. 19 Pricing of shares in case of convertible debt Where securities which are convertible into or exchangeable with equity shares at a later date are issued pursuant to this Chapter, the issuer shall determine the price of the resultant shares in issue documents only. -NAThe debenture is Non convertible.

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Investment Banking 20 Time gap between 2 Private placement issue The placements made pursuant to authority of the same shareholders resolution shall be separated by at least 6 months between each placement. -NALast

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placement was made to Promoter Group on Nov 8, 1995

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