Professional Documents
Culture Documents
BY
RADHE SHYAM LAL
(Registration No. 09/042)
Institute of Computer & Business Management
School of Business Excellence
Member ACBSE
ACKNOWLEDGEMENT
I owe a great many thanks to a great many people who helped and supported me
during the writing of this book.
First of all I would like to convey my sincere gratitude to Dr. S. Zarar and
Mrs. Ritu Zarar, Principal and chairman (Institute for Computers and
Business Management) for their unprecedented support and giving me an
opportunity to do my summer internship program at RELIGARE SECURITIES
LTD, which has been a pure learning experience and has enlightened my
knowledge and skills about financial aspect.
I would also like to express my gratitude to Prof. Jitender Govindani,
Administrative Director, Institute of Computers and Business Management
and my special thanks to finance faculty and my mentor Mr. Ramesh Babu Sir
and Mrs. Annie Kavita Maam for his outstanding and undeniable
considerations. I would also like to thank all my friends who have bore with me
during this project, apart from that, those who have helped up in to some way or
the other. Last but not the least I would like to extend my heartfelt thanks to my
parent, who were with me when I was some expensive about the project. Their
help and encouragement also proved to be a handful.
I express my gratefulness to the Mr. Praveen Mahendraker, associate Vice
President Investment Banking in Religare Capital Markets Limited in
Hyderabad for their valuable suggestion, constant encouragement, silent
support & unwavering confidence, without which this project would not have
been possible. It was they who motivated for this cause (to do something
entirely new) and always was present with their expert guidance and disciplined
ideas.
Radhe Shyam Lal
DECLARATION
I hereby declare that the project on Study on Indian Initial Public Offering
(IPO) market and its Regulatory aspect with reference to Religare
Securities Ltd in Hyderabad is completely my work. It has been submitted to
ICBM-SCHOOL OF BUSINESS EXCELLENCE for partial fulfillment of the
educational session and allotment of marks.
CONTENT
SR.NO
PARTICULAR
PAGE. NO
1.1
1.2
1.3
1.4
1.5
1.6
Introduction
Objectives of the Project
Research Methodology
Scope of the Project
Limitation
Review of Literature
INDUSTRY PROFILE
2.1 Initial Public Offer
2.2 SEBI (Regulatory Aspect)
2.3 NSE
2.4 BSE
8
8-10
11-12
13-14
15-16
COMPANY PROFILE
3.1 Name of the Organization
3.2 History and background
3.3 Group structure
3.4 About Religare Sec. limited
3.5 The Religare Edge
3.6 Company IPO
17
17
18
19
20-21
21-22
23
24
25-26
27-33
34-51
5
6
52-64
65
66-67
68
7
8
BIBLIOGRAPHY
ANNEXURE
69
70-77
INTRODUCTION
1-2
3
4
5
6
7
This report, as the title Public issue suggests, is an attempt to bring forth the
importance of the process of Issue of an Initial Public Offer (IPO).
When a Company issues an IPO, it means it is going public. The issue of an
IPO introduces a great degree of transparency in a Companys operations. All
the relevant and updated information pertaining to the company is laid down
before the investors so that they may make an investment decision. Again, there
are set procedures, rules, regulations and laws to be followed in laying down
this information before the investors. A document called the Prospectus must
be prepared. The Prospectus captures all the necessary information that is to be
made available to the investors. Apart from the Prospectus, there are various
other company documents that need to be verified and summarized in order to
present them before the investors.
Many Intermediaries are appointed for the purpose of managing the public
issue of an IPO of a company. They play a vital role by co-ordinating the
activities of the company, the Regulatory Bodies and Investors. The
following are the responsibilities:
Investors, to give them all the relevant and updated information on the
Company, while at the same time protecting their interests
diligently. The process through which they verify and summarize the
Companys information is thus called the process of Due Diligence.
These Intermediaries must issue Due Diligence Certificates at various
points during the issue process, saying that the company documents have
all been verified and are correct.
This report will take the reader through the entire process of the
Issue of an IPO and will lay special emphasis on the dynamic role played
by them.
This report aims at highlighting the key points about an IPO issue by
separating the concrete points regarding an issue from the frills, and
focusing on these concrete points.
To study and analysis the Indian initial public offering (IPO) market and
Role of its regulatory aspect.
To study and understand the concept of and procedure, problem, benefits,
involved in Initial Public Offers (IPOs).
To understand the role of intermediaries in managing Initial Public
Offers.
To know various services offered by religare securities.
To study risks faced by investor in primary market.
Research Methodology
Sources of Study
The data for the project has been collected from both primary and
secondary sources.
Primary data has been collected by:
Consulting the officials associate Vice President Investment Banking
in Religare Capital Markets Limited in Hyderabad.
Also, IPO prospectus and all the necessary documents required for, and
furnished by, the companies for managing the issue of IPOs and IPO
process have been used as primary data.
Secondary data
It includes, information secured from web sites, magazines and the daily
experience, observations and through newspapers.
Books related to Financial Management.
Web sites were used as the vital information source.
Although Initial Public Offers are issued by many companies, this study
is confined to a few companies only. These are companies that fall within
limited company.
This study will be limited to the information willingly shared by the
Review of Literature
IPO has been one of the most important generators of funds for the small
companies making them big and given a new vision in past and it is still
continuing its work and also for many coming years.
INDUSTRY PROFILE
The term initial public offering (IPO) slipped into everyday speech during the
tech bull market of the late 1990s. Back then, it seemed you couldn't go a day
without hearing about a dozen new dotcom millionaires in Silicon Valley who
were cashing in on their latest IPO. The phenomenon spawned the term
siliconaire, which described the dotcom entrepreneurs in their early 20s and 30s
who suddenly found themselves living large on the proceeds from their internet
companies' IPOs.
INVESTORS are still wary of equities in the 1990s, to blame are the excesses in
the primary market in the 1990s. Of the thousands of IPOs (initial public
offerings) and offers for sale made between 1994 and 1996, less than a hundred
were from companies with track record. Even in this shortlist, only a few
managed to complete planned projects and deliver value to investors. The rest
just frittered the money away.
The primary market of the mid-1990s was merely used as a channel to move
public funds into private hands. The Securities and Exchange Board of India
(SEBI) was late to wake up to the excesses, but when it did, it improved the
disclosure framework, tightened the prerequisites for an IPO, and towards the
end of the decade, introduced book-building.
India accounts for 49.1% of global IPO proceeds at the moment, compared to
just 3.7% same time last year. Significant, given that global IPOs declined
36.1% over the last one year.
It was the real estate sector which took the maximum advantage of the bullish
stock market trends in 2012. According to the industry body Assocham, real
estate players raised the maximum amount of funds from the capital market
through IPOs last year. Realty firms picked up around 42.7% of the total funds
generated through IPOs. Of the Rs.34,119 crore raised in the primary market in
the period starting from January 1, 2012 to mid-December, about Rs.14,591
crore was raised by the realty firms.
Financial Year
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Secondary markets out performed primary markets in 2014, but we expect 2010
will be exciting performance for both primary and secondary markets.
With more than 60 firms already in process for approval form SEBI to raise
approximate INR 400B, we expect the number of draft offer document filed
with SEBI will match the levels of 2012
The divestment programme is expected to gain the momentum in 2010, with
government expecting to raise INR 500 B by end of 2010.
2010 will see the IPOs of BSNL and RITES and FPO of SAIL.
With the handy increase in liquidity in market and stabilization in secondary
markets, the companies will raise money with ease in early in 2010.
When shares are bought in an IPO it is termed primary market. The primary
market does not involve the stock exchanges. A company that plans an IPO
contacts an investment banker who will in turn called on securities dealers to
help sell the new stock issue.
This process of selling the new stock issues to prospective investors in the
primary market is called underwriting.
When an investor buys shares from another investor at an agreed prevailing
market price, it is called as buying from the secondary market.
The secondary market involves the stock exchanges and it is regulated by a
regulatory authority. In India, the secondary and primary markets are governed
by the Security and Exchange Board of India (SEBI).
Increased capital
Liquidity
Increased Prestige
Valuation
Increased wealth
DISADVANTAGES
FUNCTIONS
The regulation of the capital markets is primarily the responsibility of the
Securities and Exchange Board of India (SEBI), which is located in
Mumbai. Some of the major functions of SEBI are:
SEBI is expected to regulate the business in stock exchanges and any
other securities markets.
Registering and regulating the working of collective investment schemes,
including mutual funds is a responsibility of SEBI.
SEBI is responsible for prohibiting fraudulent and unfair trade practices relating
to securities markets.
Prohibiting insider trading in securities, with the imposition of monetary
penalties, on erring market intermediaries.
Regulating substantial acquisition of shares and takeover of companies.
The National Stock Exchange (NSE) is India's leading stock exchange covering
various cities and towns across the country. NSE was set up by leading
institutions to provide a modern, fully automated screen-based trading system
with national reach. The Exchange has brought about unparalleled transparency,
speed & efficiency, safety and market integrity. It has set up facilities that serve
as a model for the securities industry in terms of systems, practices and
procedures.
The Organization
The National Stock Exchange of India Limited has genesis in the report of the
High Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions
(FIs) to provide access to investors from all across the country on an equal
footing. Based on the recommendations, NSE was promoted by leading
Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company unlike other stock
exchanges
in
the
country.
The above graph depicts the turnover of NSE from 2000 to 2012,the graph
shows from a mare turnover of above 1,000,000 crore in the year 2000 how it
has decreased and increased to more than 3,500,000 crore in the year 2012,
constant increase in turnover itself proves the growth and attractiveness of this
market.
Bombay Stock Exchange Limited (the Exchange) is the oldest stock exchange
in Asia with a rich heritage. Popularly known as "BSE", it was established as
"The Native Share & Stock Brokers Association" in 1875. It is the first stock
exchange in the country to obtain permanent recognition in 1956 from the
Government of India under the Securities Contracts (Regulation) Act, 1956.The
Exchange's pivotal and pre-eminent role in the development of the Indian
capital market is widely recognized and its index, SENSEX, is tracked
worldwide. Earlier an Association of Persons (AOP), the Exchange is now a
demutualised and corporatised entity incorporated under the provisions of the
Companies Act, 1956, pursuant to the BSE Scheme, 2010 notified by the
Securities and Exchange Board of India (SEBI).Bombay Stock Exchange
Limited received its Certificate of Incorporation on 8th August, 2010 and
Certificate of Commencement of Business on 12th August, 2010. The 'Due
Date' for taking over the business and operations of the BSE, by the Exchange
was fixed for 19th August, 2010, under the Scheme. The Exchange has
succeeded the business and operations of BSE on going concern basis and its
recognition as an Exchange has been continued by SEBI
The Exchange has a nation-wide reach with a presence in 417 cities and towns
of India. The systems and processes of the Exchange are designed to safeguard
market integrity and enhance transparency in operations. During the year 20092010, the trading volumes on the Exchange showed robust growth.
Coverage:
The equity shares of 200 selected companies from the specified and non
specified lists of this Exchange have been considered for inclusion in the
sample for `BSE-200'. The selection of companies has primarily been done on
the basis of current market capitalization of the listed scripts on the exchange.
Besides market capitalization, the market activity of the companies as reflected
by the volumes of turnover and certain fundamental factors were considered for
the final selection of the 200 companies.
Choice of Base Year:
The financial year 1989-90 has been chosen as the base year for the price
stability exhibited during that year and due to its proximity to the current
period.
Graph depicting the turnover of BSE:
The above graph shows the turnover in BSE from the year 2000 to the year
2012.
The graph easily shows that the turnover of BSE has increased in leaps and
bounds over the given period.
COMPANY PROFILE
Religare Finvest
ltd
Religare
Religare Wealth
Securities Ltd
Religare capital
Religare
Commodities Ltd
Markets Ltd
RELIGARE
ENTERPRISE
LIMITED
Religare
Insurance
Religare finance
Ltd
Broking Ltd
Religare Venture
Religare Realty
Ltd
BRND IDENTITY
Name
Religare is a Latin word that translates as 'to bind together'. This name has been
chosen to reflect the integrated nature of the financial services the company
offers.
Symbol
The Religare name is paired with the symbol of a four-leaf clover. Traditionally,
it is considered good fortune to find a four-leaf clover as there is only one fourleaf clover for every 10,000 three-leaf clovers found.
The second leaf of the clover represents Trust, The ability to place
ones own faith in another. To have A relationship as partners in a team. To
accomplish a given goal with the balance that brings satisfaction to all, not in
the binding, but in the bond that is built.
The third leaf of the clover represents Care, The secret ingredient
that is the cement in every relationship. The truth of feeling that underlines
sincerity and the triumph of diligence in every aspect. From it springs true
warmth of service and the ability to adapt to evolving environments with
consideration to all.
The fourth and final leaf of the clover represents Good Fortune.
Signifying that rare ability to meld opportunity and planning with circumstance
to generate those often looked for remunerative moments of success.
Diverse offerings
Dynamic Management Team
State-of-the art technology
Vast Distribution and Reach
Robust Brand Recognition
Synergistic partnerships
Innovative Initiative
INDIA
DUBAI
QATAR
HONG KONG
MALAYSIA
SINGAPORE
TOKYO
INDONESIA
BRAZIL
NEW YORK
SAN FRANCISCO
UNITED KINGDOM
Companys IPO
Name
of the
issue
Sr.
N
o
1
2
3
Book
Running
Lead
Manager
Date
of
issue
KAUSAR
INDIA
LIMITED
Religare
capital
markets
limited
Mar 23,
2014 to
Mar 25,
2014
EMMBI
POLYARN
S
LIMITED
KEYNOTE
CORPORATIO
N
SERVICE
LIMITED
INFINITE
COMPUTE
R
SOLUTION
(INDIA
LTD)
INDIA
INFOLINE LTD
&
SPA
MERCHANT
BANKER LTD
Floo
No. of
r
Exit
No. of
biddin Issue Price Pric
member
g
Size
(in
e
s
centers
Rs)
(in
Rs
1
30
01/02/
2010 TO
03/02/
2010
84
51
11/JAN
/ 2010
TO
13/
JAN/
2010
121
45
13.00
50.5
4
95.74
40
TO
45
45
115,03
155
TO
165
165
9,74,26
8
STAN EQ
Issue Period
Issue Size
Issue Type
Price Range
Rs 100 to Rs 115
Tick Size
Re. 1/-
Market Lot
200 IDRs
200 IDRs
Rs.100000
Corporate 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:
a) 100% of the net offer to the public through the book building route.
b) 75% of the net offer to the public through the book building process
c) 25% through the fixed price portion.
PROCESS OF AN IPO
The Process:
The Issuer who is planning an IPO nominates a lead merchant banker as a
'book runner'.
The Issuer specifies the number of securities to be issued and the price
band for orders.
The Issuer also appoints syndicate members with whom orders can be
placed by the investors.
Investors place their order with a syndicate member who inputs the
orders into the 'electronic book'. This process is called 'bidding' and is
similar to open auction.
A Book should remain open for a minimum of 5 days.
Bids cannot be entered less than the floor price.
Bids can be revised by the bidder before the issue closes.
On the close of the book building period the 'book runner evaluates the
bids on the basis of the evaluation criteria which may include Price Aggression
Investor quality
Earliness of bids, etc.
The book runner and the company conclude the final price at which it is
willing to issue the stock and allocation of securities.
Generally, the number of shares are fixed, the issue size gets frozen based
on the price per share discovered through the book building process.
Allocation of securities is made to the successful bidders.
Book Building is a good concept and represents a capital market which is
in the process of maturing.
The red herring prospectus may contain either the floor price for the securities
or a price band within which the investors can bid. The spread between the floor
and the cap of the price band shall not be more than 20%. In other words, it
means that the cap should not be more than 120% of the floor price. The price
band can have a revision and such a revision in the price band shall be widely
disseminated by informing the stock exchanges, by issuing press release and
also indicating the change on the relevant website and the terminals of the
syndicate members. In case the price band is revised, the bidding period shall be
extended for a further period of three days, subject to the total bidding period
not exceeding thirteen days
Pricing is critical and the most important process in IPO. Pricing involves lot of
research and calculations. Pricing is done in such a way that investors are
benefited and also the companys objective is achieved that is its aim for an IPO
is achieved. Thus, pricing is the most important factor in IPO process generally
there are two methods of IPO pricing
Fixed Pricing
Book building Process
PROCEDURE
The sale (that is, the allocation and pricing) of shares in an IPO may take
several forms. Common methods include:
Dutch auction
Firm commitment
Best efforts
Bought deal
Self Distribution of Stock
A large IPO is usually underwritten by a "syndicate" of investment banks led by
one or more major investment banks (lead underwriter). Upon selling the
shares, the underwriters keep a commission based on a percentage of the value
of the shares sold. Usually, the lead underwriters, i.e. the underwriters selling
the largest proportions of the IPO, take the highest commissionsup to 8% in
some cases.
Multinational IPOs may have as many as three syndicates to deal with differing
legal requirements in both the issuer's domestic market and other regions. For
example, an issuer based in the E.U. may be represented by the main selling
syndicate in its domestic market, Europe, in addition to separate syndicates or
selling groups for US/Canada and for Asia. Usually, the lead underwriter in the
main selling group is also the lead bank in the other selling groups.
Because of the wide array of legal requirements, IPOs typically involve one or
more law firms with major practices in securities law, such as the Magic Circle
firms of London and the white shoe firms of New York City.
Usually, the offering will include the issuance of new shares, intended to
raise new capital, as well the secondary sale of existing shares. However,
certain regulatory restrictions and restrictions imposed by the lead underwriter
are often placed on the sale of existing shares.
Public offerings are primarily sold to institutional investors, but some shares are
also allocated to the underwriters' retail investors. A broker selling shares of a
public offering to his clients is paid through a sales credit instead of a
commission. The client pays no commission to purchase the shares of a public
offering; the purchase price simply includes the built-in sales credit.
Fixed Pricing
An issuer company is allowed to freely price the issue. The basis of issue price
is disclosed in the offer document where the issuer discloses in detail about the
qualitative and quantitative factors justifying the issue price. Fixed price does
not allow an opportunity to the issuer or the merchant banker to do any
discretionary allotment, which is possible only in a book building issue. So
there is one factor that we should remember which drives book building issue
more.
Book building Process
Book building Process as Mentioned in the SEBI
Book Building is basically a capital issuance process used in Initial Public Offer
(IPO) which aids price and demand discovery. It is a process used for marketing
a public offer of equity shares of a company. It is a mechanism where, during
the period for which the book for the IPO is open, bids are collected from
investors at various prices, which are above or equal to the floor price. The
process aims at tapping both wholesale and retail investors.
The offer/issue price is then determined after the bid closing date based on
certain evaluation criteria.
Guidelines for Book Building
Rules governing book building is covered in Chapter XI of the Securities and
Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000.
Feature
Book Building
process
Pricing
Price at which
securities are
securities will be
offered/allotted is
offered/allotted is
known in advance
not known in
to the investor.
advance to the
investor. Only an
indicative price
range is known.
Demand
Payment
securities offered
securities offered
can be known
everyday as the
issue
book is built.
Payment if made
at the time of
allocation.
subscription
wherein refund is
given after
allocation.
(iii)
The issue of securities through book-building process shall be Separately
identified / indicated as 'placement portion category', in the Prospectus.
(iv)
(a) The securities available to the public shall be separately identified as
'net offer to the public'.
(b) The requirement of minimum 25% of the securities to be offered to
the public shall also be applicable.
(v)
In case the book-building option is availed of, underwriting shall be mandatory
to the extent of the net offer to the public.
(vi)
The draft prospectus containing all the information except the information
regarding the price at which the securities are offered shall be filed with the
Board.
(vii)
One of the lead merchant banker to the issue shall be nominated by the
issuer company as a Book Runner and his name shall be mentioned in the
prospectus.
(viii)
(a)
The copy of the draft prospectus filed with the Board may be
circulated by the Book Runner to the institutional buyers who
are eligible for firm allotment and to the intermediaries eligible
to act as underwriters inviting offers for subscribing to the
securities.
-35-
(b) The draft prospectus to be circulated shall indicate the price band
within which the securities are being offered for subscription.
(ix)
The Book Runner on receipt of the offers shall maintain a record of the
names and number of securities ordered and the price at which the institutional
buyer or underwriter is willing to subscribe to securities under the placement
portion.
(x)
The underwriter(s) shall maintain a record of the orders received by him
for subscribing to the issue out of the placement portion.
Duration of the issue
Subscription list for public issues shall be kept open for at least 3
working days and not more than 10 working days. In case of Book built issues,
the minimum and maximum period for which bidding will be open is 37
working days extendable by 3 days in case of a revision in the price band. The
public issue made by an infrastructure company, may be kept open for a
maximum period of 21 working days and Rights issues shall be kept open for at
least 30 days and not more than 60 days.
-36-
-37-
198
((c) persons who, on the date of filing of the draft offer document with
the Board, have business association, as depositors, bondholders and
Subscribers to services, with the issuer making an initial public offering,
provided that allotment to such persons shall not exceed 5% of the issue
Provided further that no reservation shall be made for the issue management
team, syndicate members, their promoters, directors and employees and for the
group/associate companies of issue management team and syndicate members
and their promoters, directors and employees.)
(iv)
The issuer company shall appoint an eligible Merchant Banker(s) as book
runner(s) and their name(s) shall be mentioned in the draft prospectus.
199
((iv) (a) The issuer company shall enter into an agreement with one or
more of the Stock Exchange(s) which have the requisite system of on-line offer
of securities. The agreement shall specify inter-alia, the rights, duties,
responsibilities and obligations of the company and stock exchange (s) inter se.
The agreement may also provide for a dispute resolution mechanism between
the company and the stock exchange.
(iv) (b) The company may apply for listing of its securities on an
exchange other than the exchange through which it offers its securities to public
through the on-line system.)
-38200
(V) The Lead Merchant Banker shall act as the Lead Book Runner.)
201
((v) (a) In case the issuer company appoints more than one 202(merchant
banker(s)), the names of all such (merchant bankers(s)) who have submitted the
due diligence certificate to SEBI, may be mentioned on the front cover page of
the prospectus. A disclosure to the effect that " the investors may contact any of
such (merchant bankers(s)), for any complaint pertaining to the issue" shall be
made in the prospectus, after the "risk factors.)
203
((v) (b) The lead book runner/issuer may designate, in any manner, the
other Merchant Banker(s), subject to the following;
Eligible for reservation
In a book built issue allocation to Retail Individual Investors (RIIs), Non
Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs) is in
the ratio of 35: 15: 50 respectively. In case the book built issues are made
pursuant to the requirement of mandatory allocation of 60% to QIBs , the
respective figures are 30% for RIIs and 10% for NIIs. This is a transitory
provision pending harmonization of the QIB allocation.
It provides a fair, efficient & transparent method for collecting bids using
latest electronic trading systems
Costs involved in the issue are far less than those in a normal IPO
Procedures
Issuers
Issuers desirous of using NSE's online IPO system are required to comply with
the following procedures:
1. Submit a written request as per prescribed format (Letter1, Letter2,
BRLM) for usage of electronic facilities and software of NSE
2. Give details regarding Book Running Lead Manager, Co Book Running
Lead Managers and Syndicate Members.
3. Pay the requisite charges to NSE.
-41-
Trading Members
The Book Running Lead Manager will give the list of trading members who are
eligible to participate in the Book Building process to the Exchange. Members
have to submit a one time undertaking to the Exchange. Eligible trading embers
have to give in the prescribed format details of the user IDs that they would like
to use.
Subscribers
Subscribers can approach any of the approved trading members for submitting
bids in the NEAT IPO system. On line transaction registration slip are generated
automatically after entering the bids in to the system which acts as proof of the
registration of each Bid option.
-42-
The companies are classified into two categories: large cap and Small cap. A
company is treated as a large cap company if the issue size is greater than or
equal to Rs 10 crore and market capitalization of not less then Rs 25 crore.
Particular
Amount (Rs)
7500
4200
8400
14000
28000
42000
Above 50 crore
70000
The lead manager also draws up the various marketing strategies for the issue.
The post issue activities including management of escrow accounts, coordinate
non-institutional allocation, intimation of allocation and dispatch of refunds to
bidders etc are performed by the LM. The post Offer activities for the Offer will
involve essential follow-up steps, which include the finalization of trading and
dealing of instruments and dispatch of certificates and demat of delivery of
shares, with the various agencies connected with the work such as the
Registrar(s) to the Offer and Bankers to the Offer and the bank handling refund
business. The merchant banker shall be responsible for ensuring that these
agencies fulfill their functions and enable it to discharge this responsibility
through suitable agreements with the Company.
Role of registrar
The Registrar finalizes the list of eligible allottees after deleting the
invalid applications and ensures that the corporate action for crediting of shares
to the demat accounts of the applicants is done and the dispatch of refund orders
to those applicable are sent. The Lead manager coordinates with the Registrar to
ensure follow up so that that the flow of applications from collecting bank
branches, processing of the applications and other matters till the basis of
allotment is finalized, dispatch security certificates and refund orders completed
and securities listed.
Merchant Banking
Issue Management Services to act as Book Running Lead
Manager/Lead
Project appraisal
Corporate Advisory Services
underwriting of equity issues
Banker to the Issue/Paying Banker
Refund Banker
Monitoring Agency
Debenture Trustee
Investment Banking
Private Equity
Private equities are equity securities of unlisted companies. Private
equities are generally illiquid and thought of as a long-term investment. Private
equity investments are not subject to the same high level of government
regulation as stock offerings to the general public. Private equity is also far less
liquid than publicly traded stock.
Acquisition
Acquisition is the process through which one company takes over the
controlling interest of another company. Acquisition includes obtaining supplies
or services by contract or purchase order with appropriated or non-appropriated
funds, for the use of Federal agencies through purchase or lease.
Venture Capital
Venture Capital is the money and resources made available to startup
firms and small businesses with exceptional growth potential. Most venture
capital money comes from an organized group of wealthy investors.
Underwriter
Lead Merchant Banker shall ensure that the underwriters appointed or
proposed to be appointed are capable of discharging their obligations under the
Issue.
.2 Where an issuer opts to obtain IPO grading under clause 5.6B.1, it shall
disclose all grades so obtained by it, including unaccepted grades, in the
prospectus and abridged prospectus.
Analysis last six year (2009-2014) no. of issue and issue amount
Year
No. of issues
2009
23
13,749
2010
76
10,936
2011
76
28,504
2012
84
42,595
2013
21
3582
2014
17
1978
Interpretation:
As shown in the table during the economic boom there were much more IPOs.
During 2012-2013 the share market witnessed its highest number of IPOs in
past one decade and highest issue amount. Due to inflation and slowdown in
economic it affect the Indian IPO market in year 2013, 2014.
During 2014, there were 20 IPOs. Of which, 16 IPOs have listed and 4
IPOs are yet to be listed.
Of the 16 IPOs that have listed, 5 IPOs have received investment from
Anchor Investors; and 11 IPOs have not received investment from
Anchor Investors.
company
Adani
Power
Ltd.
Pipavav
Shipyard
Ltd.
Indiabulls
Power Ltd
DEN
Networks
Ltd.
Cox and
Kings
(India)
Ltd
Total
Anchor
investor
Issue Size
(INRM)
Current
Value
INR M
Yes
30,165
29,200
Yes
4,956
Issue
Price
(INR)
Price (INR)
31 Dec09
Return*
(%)
621.7
36
34.0
-5.6%
4,540
102.8
58
54.2
-6.6%
15,291
11,350
332.0
45
34.9
-22.4
Yes
3,900
3,760
82.4
195
196.0
0.5%
Yes
6,105
7,680
131.3
330
452.2
37.0%
60,417
56330
Yes
Issue
Size
($M)
2.9
Interpretation
Of the 5 IPOs that have received investment from Anchor Investors, 3 IPOs are
trading below the issue price (that is 60% of such issues) and only 2 IPO is
trading above the issue price. On an aggregate basis, about Rs. 60417 Crores is
mobilized by such IPOs that have received anchor investors. However, the
current value of such IPOs is down to Rs. 5,6330 Crores, indicating a Mark-toMarket loss of about Rs. 4087 Crores, indicating current Mark-to-Market profit
of 2.9 %.
11 IPOs have not received investment from Anchor Investors.
Sr.No
Company
Anchor
Investor
Issue
Size
(INRM)
Current
value
Edserv
Softsystems
Ltd.
Mahindra
Holiday &
Resorts India
Ltd.
Excel
Infoways
Ltd.
Raj Oil Mills
Ltd
NHPC Ltd.
No
240
No
3
4
5
6
7
8
9
10
11
Profit
Loss
960
Current
MTM
Return
(%)
304.25%
2,780
3,950
42.3%
No
480
330
-30.88%
No
1,140
680
-40.25%
No
60,385
54,350
-10%
Jindal Cotex
Ltd.
Globus
Spirits Ltd.
Oil India
Ltd.
Euro
Multivision
Ltd.
No
844
1,140
35%
No
750
710
-5.05%
No
27,772
32,800
18.10%
No
660
270
-58.73%
Thinksoft
Global
Services Ltd.
Astec
Lifesciences
Ltd.
No
460
1,070
135.36%
No
620
640
3.35%
96,131
96,900
0.81%
Total
Particular
Return
(%)
IPO
IPO
in
in
Profit Loss
60,417
56,330
2.9%
96,131
96,900
0.81%
Total
1,56,548
1,53,230
3.71%
Interpretation
Outof the 11 IPOs that have not received investment from Anchor investors,
about 6 IPOs are trading above the issue price and 5 IPOs are trading below the
issue price. The total amount that is mobilized by such IPOs that have not
received investment from Anchor investors is about Rs. 9,6131 Crores. And, the
current value of such IPOs is increased to about Rs. 9,6900 Crores, indicating a
Mark-to-Market gain of about Rs. 769 Crores, indicating current Mark-to
Market gain of +0.81%.
On an aggregate basis, total amount that is mobilized by 16 IPOs is about Rs.
1,56,548 Crores. And, the current value of such IPOs is decreased to Rs.
1,53,230 Crores, indicating a Mark-to-Market loss of Rs. 3,318 Crores,
indicating current Mark-to-Market loss of 3.71%. In total, of the 16 IPOs,
about 8 IPOs are in profit and 8 IPOs are in loss.
Even though the IPO market has tried to stage a comeback during 2014, the
listing performances of several high profile companies has been disappointing,
raising the concerns about the recovery of the primary market. Further, even the
IPOs which could able to attract the anchor investors interest, couldn't able to
fare well. In fact, the IPOs which have received the investment from Anchor
Investors have underperformed in comparison to the IPOs which have not
received the investment from Anchor Investors.
Interpretation
(REI) Healthcare and BFSI sector didnt have any offering in 2014, but
contributed more than 25% (in total volume) in 2013
2IPOs from (REI) and 1 each from (TMT) and Energy & power made their
debut in 2014, but are to be listed in 2010
**Banking finance services & Insurance (BFSI)
**Technology, Media & Telecommunication (TMT)
**Real Estate & Infrastructure (REI)
IPO Proceeds
(INR M)
% of IPO
Proceeds
IPO Volume
% of IPO Volume
Energy&
Power
Industrial
105,842
67.5%
17.6%
34,413
22.0%
29.4%
Hospitality
8,884
5.7%
11.8%
Telecom,
Media &
Technology
Consumer
Goods &
Retail
Outsourcing
5,016
3.2%
17.6%
1,890
1.2%
11.8%
482
0.3%
5.9%
Education
238
0.2%
5.9%
Total
156,765
100%
17
100%
IPO Volume
Interpretation
Out of the total Energy proceeds, NHPC IPO contributed 57%
Out of the total Industrial proceeds, OIL India IPO contributed 81%
Out of the total TMT*** proceeds, Den Networks IPO contributed
74%
Findings
&
Conclusion
Major Findings
Conclusion
IPO is used by a company to raise its funds. The extra amount obtained from
public may be invested in the development o f the company, although it costs a
little to a company but it gives a way to get more money for long term
investments.
The issue of an IPO by a Company involves a number of stages, each
calling for a great deal of verification. The relevant and updated information on
the Company has to be captured precisely in the Prospectus. The decision by the
Investors on whether to invest in a Company is influenced significantly by the
information contained in the Prospectus. The Regulatory Bodies are also
involved and there are set procedures that must be followed. Legal compliance
has to be maintained. Moreover, the Companys potential should not be
understated in or lost in the Prospectus because of the weight of such rules,
regulations and formalities.
.
In this project all the aspects of IPO have been studied like IPO norms, IPO
process and its regulatory aspect, Pricing Process, Factors and financial
parameters to watch before investing in an IPO.
Thus the objective of studying is achieved.
SUGGESTIONS
The investment in IPO can prove too risky because the investor does not
know anything about the company because it is listed first time in the
market so its performance cannot be measure.
On the other hand it can be said that the higher the risk higher the returns
earned. So we can say that the though risky if investment is done then it
can give higher returns as well.
Primary market is more volatile than the secondary market because all
the companies are listed for the first time in the market so nothing can be
said about its performance.
If higher risk is taken, it is always rewarded with the higher returns. So
higher the risk the more the returns rewarded for it.
We can fairly predict the future, but cant make it happen as it is.
BIBLIOGRAPHY
Websites:
www. bseindia.com
www.religareonline.in
www. business-standard.com
www.moneycontrol.com
www.nseindia.com
www.bseindia.com
http://www.theinvestor.tv/money/thebrokerageindustry.htm
http://www.economywatch.com/market/share-market/share-market
trading.html
ANNEXURE
Kingfisher till date has not launched any IPO, but has
expressed its wish to launch one soon. This IPO would be used
to fund its aggressive
The Maruti IPO has set a price range of Rs. 125 per share
above the Floor price of Rs. 115. The subscription for Maruti IPO
opened on June 12, 2003 and closed on June 19, 2003. The
response to Maruti IPO was overwhelming within the
subscription period, which led to an over-subscription of the
public offerings of Maruti by more than ten times.
The government decided to shell out 85 percent shares of IPO
to the noninstitutional investors and 15 percent shares to the
non-institutional high networth individuals. Consequently,
government would get Rs.993 crores for 7.94 crores shares. But
Year
1990-1991
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
Amount in Rs
(Crores)
2251
3851
12630
9306
6793
6520
2724
1703
568
1560
729
No. of Issue
209
316
488
384
351
291
131
49
26
28
27
2001-02
2002-03
2003-04
2009-05
2010-06
2011-07
2012-08
1041
431
1006
3616
4126
3704
13519
76,078
13
12
22
26
36
38
23
2,470
-73-
IPO GLOSSARY
A
Allocation
This is the amount of stock in an initial public offering (IPO) granted by the
underwriter to an investor.
Aftermarket
Trading in the IPO subsequent to its offering is called the aftermarket.
Aftermarket Orders
Underwriters look favorably on investors who buy IPOs in the days after the
IPO first goes public. While underwriters cannot solicit aftermarket orders,
some expect investors to purchase two or three times their IPO allocation in the
aftermarket.
B
Board of Directors
The composition of the Board of Directors is particularly critical for an IPO.
Typically, a board is composed of inside and outside directors.
Broken IPOs
If an IPO trades below its IPO price in the aftermarket, it is said to be a broken
IPO.
C
Calendar
This refers to upcoming IPOs and secondary offerings. Brokerage houses have
equity calendars, bond calendars and municipal calendars.
Clearing Price
The price at which all shares of an IPO can be sold to investors in a Dutch
Auction. Sometimes referred to as the market clearing price.
-74-
F
First Day Close
The closing price at the end of the first day of trading reflects not only how well
the lead manager priced and placed the deal, but what the near-term trading is
likely to be.
Float
When a company is publicly traded, a distinction is made between the total
number of shares outstanding and the number of shares in circulation, referred
to as the float. The float consists of the company's shares held by the general
public.
G
Green Shoe
A typical underwriting agreement allows the underwriters to buy up to an
additional 15% of shares at the offering price for a period of several weeks after
the offering. This option is also called the overallotment and is exercised when
the IPO is oversubscribed and trading above its offer price. The term comes
from the Green Shoe Company, which was the first to have this option.
H
Hot Issue
When there is significantly more demand than supply for an IPO it is said to be
a hot
issue.
I
Initial Public Offering
This is the event of a company first selling its shares to the public.
Insiders
Management, directors and significant stockholders are regarded as insiders
because they are privy to information about the operations of a company not
known to the general public.
IPO Price
Individual investors often ask why the price at which an IPO starts trading is
different from its offer price. This occurs because the offer price is set by the
underwriters before the stock starts trading. Once the stock starts trading, the
price is determined by actual supply and demand and can be higher or lower.
-75-
IPO Research
Prior to the offering, the underwriters involved in the IPO are prohibited from
issuing research or recommendations for forty days. Following the IPO, the
underwriter is allowed to issue a research report
M-N
The total market value of a firm. It is defined as the product of the company's
stock price per share and the total number of shares outstanding
Market Value
The market value of a company is determined by multiplying the number of
shares outstanding by the current price of the stock.
O
Offering Price
This is the price at which the IPO is first sold to the public. It is set by the lead
manager, usually after the close of stock market trading the night before the
shares are distributed to IPO buyers. In the case of some foreign IPOs, the
pricing occurs over the weekend.
Oversubscribed
When a deal has more orders than there are shares available it is said to be
oversubscribed.
P
Preliminary Prospectus
This is the offering document printed by the company containing a description
of the business, discussion of strategy, presentation of historical financial
statements, explanation of recent financial results, management and their
backgrounds and ownership.
Proceeds
Companies go public to raise money. The money raised is referred to as
proceeds.
R
Red Herring
This is the term of art for the preliminary prospectus. It gets its name from the
printed red disclaimer on the left side of the prospectus.
-76-
U-V
Underwriter
This is a brokerage firm that raises money for companies using public equity
and debt markets. Underwriters are financial intermediaries that buy stock or
bonds from an issuer and then sell these securities to the public.
Venture Capital
Funding acquired during the pre-IPO process of raising money for companies. It
is
done
only
by
accredited
investors.