INTRODUCTION:

An initial public offering, or IPO, is the first sale of stock by a company to the public. A company can raise money by issuing either debt or equity. If the company has never issued equity to the public, it's known as an IPO. Companies fall into two broad categories: private and public. A privately held company has fewer shareholders and its owners don't have to disclose much information about the company. Anybody can go out and incorporate a company: just put in some money, file the right legal documents and follow the reporting rules of your jurisdiction. Most small businesses are privately held. But large companies can be private too. Did you know that IKEA, Domino's Pizza and Hallmark Cards are all privately held? It usually isn't possible to buy shares in a private company. You can approach the owners about investing, but they're not obligated to sell you anything. Public companies, on the other hand, have sold at least a portion of themselves to the public and trade on a stock exchange. This is why doing an IPO is also referred to as "going public." Public companies have thousands of shareholders and are subject to strict rules and regulations. They must have a board of directors and they must report financial information every quarter. In the United States of America, public companies report to the Securities and Exchange Commission (SEC). In other countries, public companies are overseen by governing bodies similar to the SEC. From an investor's standpoint, the most exciting thing about a public company is that the stock is traded in the open market, like any other commodity. If you have the cash, you can invest. The CEO could hate your guts, but there's nothing he or she could do to stop you from buying stock.

BASICS OF IPO: Introduction to initial public offering The term initial public offering means the first sale of stock by a private company to the public. IPO s are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market (IPO) slipped into everyday speech during the tech bull market (A financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.) of the late 1990s. Back then, it seemed you couldn't go a day without hearing about a dozen new dotcom (A company that embraces the internet as the key component in its business.) millionaires in Silicon Valley who were cashing in on their latest IPO. The phenomenon spawned the term siliconaire ( Slang referring to young dotcom entrepreneurs in their 20s and 30s who found themselves suddenly rich due to stock options from their Silicon Valley Internet companies) 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.

Why do Companies go Public? There are many reasons why a company goes public. Among the most popular reasons a company might choose to go public are to, Raise capital to expand its business. Financial acquisitions. Pay debt and have greater access to capital in the future.

How do Companies go Public? Going public is an involved process. Step 1: Company selects an Underwriter. Step 2: Registers its IPO with SEC. Step 3: Preparation of Prospectus. Step 4: Presents its Road show to the Institutional Investors. Step 5: Finally the Deal is priced by the Underwriter and the Co.s Management. Underwriter: Underwriter is a company or other entity, which administers the public issuance and distribution of securities from a corporation or other issuing body. An underwriter works closely with the issuing body to determine the offering price of the securities. Underwriters generally receive underwriting fees from their issuing clients, but they also usually earn profits when selling the underwritten shares to investors. An underwriter to the issue could be a banker, broker, merchant banker or a financial institution. Registration of IPO: In this process the second and foremost step is registration of IPO. When they company wants to go IPO, then registered into Securities Exchange Commission (SEC). Prospectors: These are two types: (i) Preliminary Prospectus: When a company does an initial public offering, the company is forced to offer the fullest disclosure of operations, strategy, finances, compensation and insider transactions that it will ever have to provide in one document. It is called the preliminary prospectus.

(ii) Final Prospectus: Final Prospectus is a legal document stating the price of a newly issued security, the delivery date and other facts that are important for investors. The final prospectus must be given to every investor who purchases a new issue of registered securities. Pricing of IPO: Pricing of IPO is a process of fixing the price for the company stock. The price is normally based on such factors as the company's financials, products and services, income stream, as well as the demand for the shares and current market conditions. A company may follow Book Building or Fixed Price Method to price its IPO.

i) Book Building Method: Book building is the process of price discovery. That means there is no fixed price for the shares. Instead, the company issuing the shares comes up with a price band. The lowest price is referred to as the floor and the highest, the cap. Bids are then invited for the shares. Each investor states how many shares he / she wants and hat he / she is willing to pay for those shares (depending on the price band).

ii) Fixed Price Method: Fixed Price is the second method of price discovery. That means there is fixed price for the shares.

Figure 3.1: Types of Issues

Public Issue:- Offering of shares to the public directly by an issuer without the Assistance of any investment banking firm.

Right Issue: - Offering of shares to already existing shareholders. Private Placement: - An offer to specific known persons selected by sponsors. Initial Public Offering :- First time that a company offers its shares for sale to the Public is called as IPO.

Further Public Offering: - When already listed company makes either a fresh issue of securities to the public or an offer to sale to the public, through an offer. Data Items to be collected under Latest IPO Events: Through this data set, we can provide the following important details to the investors. Status: There are four stages of an IPO: Expected, Filed, Priced and Withdrawn/postponed. When a company plans to go public, then the status is Expected When a company files its registration document with the SEC, then the status of the IPO is Filed When a company Prices its IPO the status of the IPO is Priced 5

When a company withdraws or postpones its IPO then the status of the IPO is Withdrawn / Postponed Proposed Ticker: Under this data item, we capture the ticker symbol, on which the company is going to be trade in a stock exchange. Proposed Stock Exchange: Here we capture the name of the stock exchange where the company is going to listed after the IPO. Here a process person has to select the stock exchange name through drop down box, which is available in application. Date of Listing: This is the date on which the company is going to be listed on a proposed stock exchange. Mostly date of listing would be immediately the date after the IPO is priced. Total Shares Offered: This is the total no. of shares that the company is offering through this IPO to the public, this also includes, total shares offered by Share holder shares Offered. Pricing Method: Pricing Method is the method, which the company uses to price its IPO; there are two kind of pricing method, Book Building Method and Fixed Pricing. Offer Price: Here we capture the issue price of the each share, which is offered to the public. Under this price issue, we are following three Methods. (i) Cap Price: This is the high end of the price at which stock is offered to the public through book building process. Ex. Offer Price is $13 - $14; here the Cap Price is $14 6

(ii) Floor Price: This is the low end of the price at which stock is offered to the public through book building process. Ex: Offer Price is $13 - $14; here the Floor Price is $13 (iii) Mid Price: This is the average price of the offer price range, i.e. average of offer Cap Price and offer Floor Price. Ex. Offer price is $13 - $14; here the Mid Price is $13.5 Total Amount of Offering: This is total amount that the company is going to receive through the public offering. Total Amount of Offering = Total No. of Shares offered * offer price Shareholder Shares Offered: These shareholders are also known as selling stockholders/shareholders. Selling stockholders are Investors in a company who sell part or their entire stake as part of that company's IPO. Selling shareholders may be, 1. Insiders (Officers and Directors) 2. Parent Company 3. Venture Capital firms 4. Financial Institutions, etc., Proceeds to Shareholder Shares: This is amount that the selling stockholders are going to receive through this offering. Proceeds to Shareholders Shares = Shareholder Shares Offered * Offer Price Offer Open & Closed Dates: This is the date, on which the company open & closes of shares offer to the public, means subscription to stock wont be accepted by the company after this date.

Lead Underwriter: The lead underwriter, who would underwrite the majority of the shares offered through the IPO.

Co-underwriter 1, 2s, 3, 4: These are other underwriters / lead managers who would underwrite the majority of the shares offered after lead underwriter.

Over Allotment Shares: Additional shares allotted to the underwriters upon subscription of all the shares issued in the offering. Under this, we collect the information like no. of days, and the no. of shares option, given to the underwriter. Withdrawn/Postponed Date: This is date on which company withdraws its registration from the SEC to go public. Sometimes company may also postpone the IPO date, on which the company goes to public, this is known as postponed date.

IPO GRADING: In order to give more protection to the investors, the SEBI has introduced the Initial Public Offering (IPO) grading too. IPO grading is an endeavor to make additional information available to the investors in order to facilitate their assessment of equity issues offered through an IPO. The SEBI has made grading mandatory for all the IPOs from March 21, when its board took a decision in this regard. The decision follows the recommendations of the SEBI-appointed Primary Market Advisory Committee (PMAC). This is for the first time in the world that a securities market regulator (SEBI) has made grading mandatory for the companies tapping the primary market. The SEBI permitted the grading of IPOs by selected rating agencies including ICRA, CRISIL, CARE and Fitch Rating. The model of IPO rating is similar to that of the debt instrument. IPO grading is not looking at Price Earning (PE) Ratio. They are only looking at the fundamentals. In debt rating, credit rating gives no indication of the return potential. Rating only reflects the companys ability to repay the 8

debt. Similarly, the IPO grades do not suggest to go and buy, they state whether the company is good of bad. For a complete investment decision, an investor has to answer three questions: 1) is it a good company? 2) Is the price right? And 3) Is it the right time?

Objectives: The SEBI has clearly said that the grading exercise would restrict itself to assessing the fundamental business strength of the company and would not be an investment recommendation as such. Grading is to give some sort of Indication about the company to investors and compare it with other companies in that group. The objective is to enable more realistic pricing of shares and help investors make an informed decision. Grading will also help those companies which are not very well known to tap the markets. According to the Managing Director and CEO, CRISIL, Investors can make their own judgment following the rating. There might be incidents where the company is sound and gets a good rating but debuts in a volatile market and the investors may lose out on money. However, they will still hold on to the stock based on the fundamentals. Process for IPO Grading IPO grading can be done either by filling the draft offer documents with the SEBI of thereafter. IPO is now mandatory for those companies which have filled the draft offer document for its IPO with the SEBI, on or after May 1, 2007. It is required to obtain a grade for the IPO from at least one credit rating agency. Grading is for the IPO of equity shares or any other security which may be converted or exchanged with equity shares, at a later date. A grade represents a relative 9

assessment of the fundamentals of the issue in relation to the other listed equity securities in India. Grading is based on a five-point scale with 5 indicating strong fundamentals and 1 indicating weak fundamentals as shown below: IPO grade1: Poor fundamentals. IPO grade2: Below-average fundamentals. IPO grade3: Average fundamentals. IPO grade4: Above-average fundamentals. IPO grade5: Strong fundamentals. IPO grading process is expected to take into account the prospects of the industry in which the company operates. While the actual factors considered for grading may not be identical or limited. A few are listed below, which are generally looked into by the rating agencies: Business Prospects and Competitive Position -Industry Prospects -Company Prospects Financial Position Management Quality Corporate Governance Practices Compliance and Litigation History New projects- Risks and Prospects

The rating process takes nearly two or three weeks. The rating agency may ask for information from the company, which is not available in the draft of the red herring prospectus. However, this information will be strictly confidential. The company desirous of making the IPO is required to bear the expenses incurred for grading. The grading fee from the companies is taken in advance to avoid any vested interest. 10

The SEBI does not play any role in the assessment made by the grading agency. Grading is intended to be an independent and unbiased opinion of the agency. IPO grades cannot be rejected once taken by the company. However, the issuer has the option to choose another grading by a different agency. All grades obtained with a description should be available in the prospectus or any other place where the issuer company is advertising its issue. IPO grade needs to be read together with the disclosures made in the prospectus including the risk factors and price at which the shares are offered. The four credit rating agencies, CRISIL, ICRA, CARE, and Fitch Rating India Pvt. Ltd. (registered with the SEBI), are already in the IPO grading process.

First-ever Mandatory IPO Grading IPO of MBL Infrastructure Ltd. (MBL Infra), was the first IPO, after such grading was made mandatory by the SEBI. CRISIL has graded one on five i.e., 1/5. This grade indicates that the fundamentals of the issue were poor relative to other listed securities on the Indian bourses. The Kolkata based MBL Infras public-issue was of 60 lakhs shares at a target price of Rs. 100 per share and intended to aggregate to Rs. 60cr. The companys performance, strengths and weaknesses were compared with the leading companies in the sector like Gammon India, Larsen and Toubro (L&T), IVRCL and Hindustan Construction Ltd. According to CRISIL, the lower rating was due to MBLs weak competitive position in the road construction industry. The companys management has been a late mover in capturing the business opportunities in its area of operations. The returns from the companys planned large investments in the Build Operates and Transfer (BOT) segment would be subject to a lead time of four to five years.

MARKET PROFILE

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Definition of stock exchange: Stock exchange means anybody or individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. It is an association of member brokers for the purpose of protecting and self-regulating the interest of its members. It can operate only if it is reorganized by the Government under the securities contracts (regulation) Act, 1956. The recognition is granted under the section 3 of the Act by the central Government, Ministry of Finance.

Role of stock exchange: The securities contracts (regulation) act is the basis for the operation of the stock exchange in India. No other exchange can operate legally without the government permission or recognition. Stock exchanges are given monopoly in certain areas under section 19 of the above act to ensure that the control and regulation are, Recognition can be granted to a stock exchange provided certain conditions are satisfied and the necessary information is supplied by the government. Recognition can also be withdrawn, if necessary. Where there is no stock exchange, the government can license some of the brokers to perform the functions of a stock exchange in its absence.

BSE: The Mumbai stock exchange popularly known as BSE was established in 1875 as the native share and stock brokers association, as a voluntary non-profit making association. It has an evolved over the years into its present status as the premiere stock exchange in the country. It may be TOKYO stock exchange, which was founded in 1878. The exchange, while providing and efficient and transparent market for trading in securities, upholds the interest of the companies or 12

its own member brokers. It also strives to educate and enlighten the investors by making available necessary informative inputs and conducting investor education programmers. A governing board comprising of 9 elected directors, 2 SEBI Nominees, 7 public representatives and an executive director is the apex body, which decides the policies and regulates the affairs of the exchange. The executive director as the chief executive officer is responsible

for the day today administration of the exchange. The average daily turnover of the exchange during year 2000-01 (April-may) was Rs.3984.19crs and average number of daily trade is 5.69lakhs. However the average daily turnover of the exchange during the year 2001-02 has declined to Rs.1244.10crs and the number of average daily trade during the period to 5.17lakhs.The average daily turnover of the exchange during the year 2002-03 has declined a number average daily trades during the period are also decreased. The ban on all deferral products like BLESS AND ALBM in the Indian capital markets by SEBI i.e. July 2, 2001, abolition of account period settlements, introduction of compulsory rolling settlements in all scripts traded on exchanges i.e. Dec 31,2001,etc., have adversely impacted the liquidity and consequently there is a considerable decline in the turnover at the exchange. The average daily turnover of the exchange present scenario is 110363(lacks) and number of daily trade 1057 (lacks).

BSE indices: In order to enable the market participants, analysts, etc., to track the various ups and downs in the Indian stock market, the exchange has introduced in 1986 an equity stock index BSE-SENSEX that subsequently became the barometer of moments of the shares prices in the Indian stock market. It is market capitalization weighted index of 30 components stock representing a sample of large, well established leading companies. The base year for sensex is taken as 1979-79. The

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sensex is widely reported in both domestic and internationals markets through print as well as electronic media. Sensex is calculated using a market capitalization weighted method. As per this methodology, the level of the index reflects the total market value of all 30 components stocks from different industries related to particular period. The total market value of a company is determined by multiplying the price of its stick by the number of shar3es outstanding. Statisticians call an index of a set combined variable (such as price and number of shares) a composite index. An indexed number is used to represent the result of these calculations in order to make the value easier to work with and track over a time. It is much easier to make the value easier to work with and track over a time. It is much easier to graphs a charts based on indexed values than one based on actual values world of majority of the well-known indices are constructed using market capitalization weighted method. In practice, the daily calculation of sensex is done by dividing the aggregate market value of the 30 companies in the index by the number called the index divisor. The divisor keeps the index comparable over a period of time and if the reference point for the entire index maintain ace adjustments . SENSEX is widely used to describe the mood in the Indian stock market. Base year average is changed as per the formula new base year average= old base year average * (new market value/old market value). NSE: The NSE was incorporated in Nov 1992 with an equity capital of Rs. 25 crores. The international securities consultancy (ISC) of Hong Kong has helped in setting up NSE. ISC has prepared the detailed business plans and installation of hardware and software systems. The promotions for NSE were financial institutions, insurances companies, banks and SEBI 14

capital

market

ltd,

infrastructure leasing

and financial

services ltd

and stock

holding

corporation ltd. It has been set up to strengthen the move towards professionalization of the capital market as well as provide nation wide securities trading facilities to investors. NSE is not an exchange in the traditional sense where brokers own and manage the exchange. A two tier administrative set up involving a company board and a governing abroad of the exchange is envisaged. NSE is a national market for shares PSU bonds, debentures and government securities since infrastructure and trading facilities are provides.

NSE-Nifty: The NSE on April 22, 1996 launched a new equity index which replaces the existing NSE-50. The new index, which replaces the existing NSE-100 index, is expected to serve as an appropriate the index for the new segment of futures and options. NIFTY means national index for fifty stocks. The NSE-50 comprises 50 companies that represent 20 board industry groups with an aggregate market capitalization of around Rs. 1,70,000 crores. All companies included in the index have a market capitalization in excess of Rs 500 crores each and should have traded 85% of trading days at the impact of less than 1.5%. The base period for the index is the close of prices on Nov 3, 1995, which make one year of completion of operation of NSE s capital market segment. The base value of the index has been set at 1000. SEBI: SEBI was set up as an autonomous regulatory authority by the government of India in 1988 to protect the interests of the investors in securities market and to promote the development of, and to regulate the securities market and for matters connected there with or incidental thereto. It empowered by two acts namely the SEBI Act, 1992 and the securities contract (regulation) Act, 1956 to perform the function of protecting investors rights and regulating the capital market 15

PRIMARY MARKET: The primary is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. Features of Primary Market This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called New Issue Market (NIM). In a primary issue, the securities are issued by the company directly to investors. The company receives the money and issue new security certificates to the investors. Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital, this is known as going public. Methods of issuing securities in the Primary Market:1. Initial Public Offer. 2. Rights issue (for existing companies) and 3. Preferential Issue. 16

SECONDARY MARKET: The secondary market is the financial market for trading of securities that have already been issued in an initial private or public offering. Alternatively, secondary market can refer to the market for any kind of used goods. The market that exists in a new security just after the new issue is often referred to as the aftermarket. Once a newly issued stock is listed on a stock exchange, investors and speculators can easily trade on the exchange, market makers provide bids and offers in new stock. In the secondary market, securities are sold by and transferred from one investor or speculator to another. It is therefore important that the secondary market be highly liquid (Originally, the only way to create this liquidity was for investors and speculators to meet at a fixed place regularly. This is how stock exchanges originated see History of the Stock Exchange). Secondary marketing is vital to an efficient and modern capital market. Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the investor's desire not to tie up his or her money for a long period of time, in case the investor needs it to deal with unforeseen circumstances) with the capital user's preference to be able to use the capital for an extended period of time. For example, a traditional loan allows the borrower to pay back the loan, with interest, over a certain period. For the length of that period of time, the bulk of the lender's investment is inaccessible to the lender, even in cases of emergencies. Likewise, in an emergency, a partner in a traditional partnership is only able to access his or her original investment if he or she finds another investor willing to buy out his or her interest in the partnership. With a securitized loan or equity interest (such as bonds) or tradable stocks, the investor can sell, relatively easily, his or her interest in the investment, particularly if the loan or ownership equity has been broken into relatively small parts. This selling and buying of small parts of a larger loan or ownership interest in a venture is called secondary market trading. Under traditional lending and partnership arrangements, investors may be less likely to put their money into long-term investments, and more likely to charge a 17

higher interest rate (or demand a greater share of the profits) if they do. With secondary markets, however, investors know that they can recoup some of their investment quickly, if their own circumstances change.

NEED FOR THE STUDY

The main reason behind the need for the studies are..
To study about the IPOs To study about stock exchanges

OBJECTIVES OF THE PROJECT

To study and understand the concept and procedure involved in Initial Public Offer (IPO). To analyze the various IPOs and recommend others to invest in good initial public offerings after thorough research of financial statements of the companies.

To study the various practices practiced by the Inter-connected Stock Exchange of India Ltd. (ISE) in IPOs.

SOURCES OF DATA COLLECTION

The data has been collected from the primary and secondary sources 18

Primary Data: The primary data has been collected by the interactions, discussions with the concerned officials of the Inter-connected Stock Exchange of India Ltd. (ISE).

Secondary Data: The secondary data has been gathered from the text books, journals, magazines and annual reports, brochures and websites of the Inter-connected Stock Exchange of India Ltd.(ISE).

SCOPE OF THE STUDY

The study operations have been confined to the Inter-connected Stock Exchange of India Ltd. (ISE) of the Hyderabad branch. The Study is limited to IPOs and the Reliance power Ltd was taken as a representative sample for the study. The study cant be said as totally perfect. Any alteration may come. The study made a humble Attempt at evaluation IPOs market only in Indian context. The study is not based on the international perspective of IPOs s markets, which exists in NASDAQ, CBOT etc.

PERIOD OF STUDY
The project study pertains to the time period 2006-2010.

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LIMITATIONS
The study was conducted on the scientific lines though it suffers from the following limitations.
The study does not look any nifty index future and option and international into the consideration.

Although Initial Public Offers are issued by many companies, this study was confined to Reliance power Ltd Company only. .

This study was limited to the information willingly shared by the authorities and clients of ISE Ltd

ISE- A PROFILE
Inter-connected Stock Exchange of India Limited (ISE) is a national-level stock exchange, providing trading, clearing, settlement, risk management and surveillance support to its Trading Members. It has 841 Trading Members, who are located in 131 cities spread across 25 states. These intermediaries are administratively supported through the regional offices at Delhi, Kolkata, Patna, Ahmadabad, Coimbatore and Nagpur, besides Mumbai. ISE aims to address the needs of small companies and retail investors by harnessing the potential of regional markets, so as to transform them into a liquid and vibrant market using state-of-the art technology and networking.

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ISE has floated ISE Securities & Services Limited (ISS) as a wholly-owned subsidiary under the policy formulated by the Securities and Exchange Board of India (SEBI) for Revival of Small Stock Exchanges. The policy enunciated by SEBI permits a stock exchange to float a subsidiary, which can take up membership of larger stock exchanges, such as the National Stock Exchange of India Limited (NSE), and Bombay Stock Exchange Limited (BSE). ISS has been registered by SEBI as a Trading-cum-Clearing Member in the Capital Market segment and Futures & Options segment of NSE and Capital Market segment of BSE. Trading Members of ISE can access NSE and BSE by registering themselves as Sub-brokers of ISS. Thus, the trading intermediaries of ISS can access other markets in addition to the ISE market. ISS thus provides the investors in smaller cities, a one-stop solution for cost-effective and efficient trading and settlement services in securities. Complementing the stock trading function, ISEs depository participant (DP) services reach out to intermediaries and investors at industry-leading prices. The full suites of DP services are offered using online software, accessible through multiple connectivity modes - leased lines, VSATs and internet. Operation of the demat account by a client requires just a few mouse clicks. The Research Cell has been established with the objective of carrying out quality research on various facets of the Indian financial system in general and the capital market in particular. It brings out a monthly newsletter titled NISE and a fortnightly publication titled V share. The Research Cell plans to expand its activities by publishing a host of value based research publications, covering a number of areas, such as equities, derivatives, bonds, mutual funds, risk management, pension funds, money markets and commodities. The ISE Training Centre conducts class-room training programmers on different subjects related to the capital market, such as equities trading and settlement, derivatives trading, day trading, arbitrage operations, technical 21

analysis, financial planning, compliance requirement, etc. Through these courses, the training centre provides knowledge to stock brokers, sub-brokers, professionals and investors to also appear for the certificate courses conducted by the stock exchanges. It also aims to make and build the professional careers of MBAs, post graduates and graduates, with a view to enabling them to work effectively in securities trading, risk management, financial management, corporate finance disciplines or function as intermediaries (viz. stock brokers, subbrokers, merchant bankers, clearing bankers, etc.,

MILESTONES July 6, 1996 A report on Inter-connected Market System (ICMS) submitted to the Federation of Indian Stock Exchange (FISE). October 26, 1996 January 4, 1997 Steering Committee was constituted by FISE at Hyderabad. Price water House Coopers, the management consultancy firm, submitted a feasibility report and recommended the establishment of ICMS. January 22, 1998 February 26, 1999 December 31, 1999 January 18, 2000 February 24, 2000 May 3, 2000 January 10 , 2001 ISE incorporated as a company limited by guarantee. Commencement of trading on ISE. Induction of 450 Dealers commences. Incorporation of ISS as a company limited by share capital. SEBI registers ISS for the Capital Market segment of NSE. Commencement of trading by ISS in the Capital Market segment of NSE. Turnover in the Capital Market segment of NSE crosses Rs. 1000 million per November 18, 1998 SEBI grants recognition to ISE.

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day. February 28, 2001 Turnover of Rs. 1508.80 million recorded by ISS in the Capital Market segment of NSE. May 4, 2001 Internet trading for clients started by ISS for the NSE segment through Dot Ex Plaza. May 19, 2001 February 13, 2002 May 6, 2002 March 12, 2003 April 1, 2003 June 21, 2003 ISEs website, www.iseindia.com, launched. SEBI registers ISS for the Futures & Options segment of NSE. ISS commences trading in the Futures & Options segment of NSE. ISS admitted as a member of the Equities segment of BSE. DP services through CDSL launched by ISE. First Investor Education Program under the Securities Market Awareness Campaign (SMAC) of SEBI conducted at Vashi. January 9, 2004 Peak turnover of Rs.3034.90 million recorded by ISS in the Capital Market segment of NSE. May 17, 2004 July 17, 2004 July 24, 2004 September 3, 2004 December 27, 2004 October 20, 2005 MISSION ISE shall endeavor to provide flexible and cost-effective access to multiple markets to its intermediaries across the country using the latest technology. First DP branch office opened at Coimbatore by ISE. First Investor Point opened at the Vashi Railway Station Complex by ISE. Second DP branch opened at New Delhi by ISE. Third DP branch opened at Kolkata by ISE. Trading in the BSE equities segment started by ISS. Switchover to Direct Client Dealing commences in ISS.

September 15, 2005 Approval of ISEs Corporatization and Demutualization Scheme by SEBI.

OBJECTIVE

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Create a single integrated national-level solution with access to multiple markets by providing high cost-effective service to investors across the country.

Create a liquid and vibrant national-level market for all listed companies in general and small capital companies in particular.

Optimally utilizing the existing infrastructure and other resources of Participating Stock Exchanges, which are under-utilized now?

Provide a level playing field to small Trading Members by offering opportunity to participate in a national market for investment-oriented business. .

Spread demats trading across the country.

BOARD OF DIRECTORS

Shri K. Rajendran Nair - Chairman, Public Interest Director Shri P. J. Mathew - Managing Director Shri S. Ravi - Public Interest Director Shri K. V. Thomas - Shareholder Director Shri K. D. Gupta - Shareholder Director Shri Maninder Singh Grewal - Shareholder Director Shri Sanjeev Puri - Shareholder Director Shri T. N. T. Nayar - Shareholder Director Shri P. Siva Kumar - Shareholder Director Shri Surendra Holani - Trading Member Director Shri Rajiv Vohra - Trading Member Director

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IPO-BACK GROUND:
In 1602, the Dutch East India Company was the first company to issue stocks and bonds in the world in an initial public offering.

Reasons for listing

When a company lists its securities on a public exchange, the money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of investors to provide it with capital for future growth, repayment of debt or working capital. A company selling common shares is never required to repay the capital to investors. Once a company is listed, it is able to issue additional common shares via a secondary offering, thereby again providing itself with capital for expansion without incurring any debt. This ability to quickly raise large amounts of capital from the market is a key reason many companies seek to go public.

ADVANTAGES OF IPO:
Increased Capital. A public offering will allow a company to raise capital to use for various corporate purposes such as working capital, acquisitions, research and development, marketing, and expanding plant and equipment. Liquidity. Once shares of a company are traded on a public exchange, those shares have a market value and can be resold. This allows a company to attract and retain employees by offering stock incentive packages to those employees. Moreover, it also provides investors in the company the option to trade their shares thus enhancing investor confidence.

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 Increased Prestige. Public companies often are better known and more visible than private companies, this enables them to obtain a larger market for their goods or services. Public companies are able to have access to larger pools of capital as well as different types of capital. Valuation. Public trading of a company's shares sets a value for the company that is set by the public market and not through more subjective standards set by a private valuator. This is helpful for a company that is looking for a merger or acquisition. It also allows the shareholders to know the value of the shares. Increased wealth. The founders of the company often have the sense of increased wealth as a result of the IPO. Prior to the IPO these shares were illiquid and had a more subjective price. These shares now have an ascertainable price and after any lockup period these shares may be sold to the public, subject to limitations of federal and state securities laws.

DISADVANTAGES OF IPO:
Time and Expense. Conducting an IPO is time consuming and expensive. A successful IPO can take up to a year or more to complete and a company can expect to spend several hundreds of thousands of dollars on attorneys, accountants, and printers. In addition, the underwriter's fees can range from 3% to 10% of the value of the offering. Due to the time and expense of preparation of the IPO, many companies simply cannot afford the time or spare the expense of preparing the IPO. Disclosure. The SEC disclosure rules are very extensive. Once a company is a reporting company it must provide information regarding compensation of senior management, transactions with parties related to the company, conflicts of interest, competitive positions, how the company intends to develop future products, material contracts, and lawsuits. In

26

addition, once the offering statement is effective, a company will be required to make financial disclosures required by the Securities and Exchange Act of 1934. The 1934 Act requires public companies to file quarterly statements containing unaudited financial statements and audited financial statements annually. These statements must also contain updated information regarding nonfinancial matters similar to information provided in the initial registration statement. This usually entails retaining lawyers and auditors to prepare these quarterly and annual statements. In addition, a company must report certain material events as they arise. This information is available to investors, employees, and competitors. Decisions based upon Stock Price. Management's decisions may be effected by the market price of the shares and the feeling that they must get market recognition for the company's stock. Regulatory Review. The Company will be open to review by the SEC to ensure that the company is making the appropriate filings with all relevant disclosures. Falling Stock Price. If the shares of the company's stock fall, the company may lose market confidence, decreased valuation of the company may affect lines of credits, secondary offering pricing, the company's ability to maintain employees, and the personal wealth of insiders and investors. Vulnerability. If a large portion of the company's shares are sold to the public, the company may become a target for a takeover, causing insiders to lose control. A takeover bid may be the result of shareholders being upset with management or corporate raiders looking for an opportunity. Defending a hostile bid can be both expensive and time consuming. Once a company has weighed the advantages and disadvantages of being a public company, if it decides that it would like to conduct an IPO it will have to retain a lead underwriter to

27

sell the securities, an attorney to assist in the preparation of a registration statement, and auditors to prepare financial statements. ALLOTMENT OF IPO Allotment is the distribution of shares to the public during an offer. According to the book building process, three classes of investors can bid for the shares, Qualified Institutional Buyers: These include mutual funds and Foreign Institutional Investors. At least 50% of the shares are reserved for this category. Retail investors: At least 25% is reserved for this category. The balance bids are offered to high net worth individuals and employees of the company.

CONCEPT OF IPO One of the striking features that makes any capital market an attractive investment avenue is its liquidity. In this regard, the importance and relevance of Initial Public Offers (IPOs) go beyond explanation. Simply speaking, IPOs serve the purpose of companies going public; the process by which the business owned by one or several individuals is converted into a business owned by many. Several experts are of the opinion that, IPOs strengthen the financial architecture of the entire capital market by enhancing liquidity, while others say, that they bring along with it an array of fraudulent practices that have a strong potential of eroding the investors? confidence From the company? s point of view, an IPO can even mark the turning point in an organizations? life. Following an IPO, a company can increase its growth potential, launch its new products as well as enter new markets. IPOs are a general feature of any booming capital market that increases the overall market capitalization. Of late, the global capital markets have performed considerably well and one primary reason attributed to the same is the surge of public offers that have flooded the markets. 28

PROCEDURE OF IPO IPOs generally involve one or more investment banks as "underwriters." The company offering its shares, called the "issuer," enters a contract with a lead underwriter to sell its shares to the public. The underwriter then approaches investors with offers to sell these shares. 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

29

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. The issuer usually allows the underwriters an option to increase the size of the offering by up to 15% under certain circumstance known as the green shoe or over allotment option.

30

Symbol - Series Issue Period Post issue Modification Period Issue Size Issue Type Price Range Face Value Tick Size Market Lot Minimum Order Quantity IPO Grading Rating Agency Maximum Subscription Amount for Retail Investor IPO Market Timings Book Running Lead Manager Syndicate Member Categories* No. of Cities with Bidding Centers Name of the registrar Address of the registrar Contact person name number and Email id

VMS EQ May 30, 2011 to Jun 02, 2011 Jun 03,2011 Public issue of [*] Equity Shares of Rs. 10/- each aggregating to Rs. 2575.00 Lacks 100% Book Building Rs. 36/- to Rs. 40/Rs.10/Re. 1/160 equity shares 160 equity shares IPO GRADE 1 ICRA Limited Rs.200000 10.00 a.m. to 5.00 p.m. Ashika Capital Limited Ashika Capital Limited FI,IC,MF,FII,OTH,CO,IND,and NOH 35 Cameo Corporate Services Limited Subramanian Building', No. 1 Club House Road, Chennai ? 600 002 Mr. R. D. Ramasamy Tel.: +91-44-2846 0390 / 2846 0425 Fax: +91-44- 2846 0129 E-mail: vmsipo@cameoindia.com

VMS INDUSTRIES LIMITED:

Issue Details

31

VMS Industries Limited (VMS) proposes to come out with an Initial Public Offer (IPO) of (#) equity shares of face value Rs. 10 each, aggregating to Rs. 25.75 crores. The issue is being made through a 100% book building process wherein up to 50% of the issue shall be allocated on proportionate basis to Qualified Institutional Buyers (QIBs), out of which 5% shall be available for allocation on a proportionate basis to mutual funds only and the remaining QIB portion shall be available for allocation on proportionate basis to all QIBs, including mutual funds, subject to valid bids being received from them at or above the issue price. Under-subscription, if any, in the mutual funds portion will be met by a spill over from the QIB portion and be allotted proportionately to the QIB bidders. Further, not less than 15% of the issue shall be available for allocation on a proportionate basis to non-institutional bidders and not less than 35% of the issue shall be available for allocation on a proportionate basis to retail individual bidders, subject to valid bids being received from them at or above the issue price. Proposed Use of IPO Proceeds The IPO proceeds of Rs. 25.75 crores and the companys internal accrual of Rs. 0.18 crores are proposed to be used in the manner as stated in Table 1. Table 1: VMS utilization of IPO Proceeds and companys internal accrual Particulars Rs. crores Purchase of machineries 5.58 Setting up of corporate office at Ahmedabad 1.10 Long-term working capital requirement 17.40 Issue expenses 1.85 Total 25.93

Strengths

32

Relatively larger ship breaking plot leased to the company at Sosiya-Alang in Gujarat, and established infrastructure for beaching and cutting ships. However, further capital expenditure towards purchase of equipment is required to scale up the operations Significant growth in the companys revenue in FY10 primarily led by commencement of ship breaking activities in 2009 Healthy profit margins of the company witnessed in FY10 supported by ship recycling and offshore business activities; VMS registered an Operating margin (OPBDITA/OI) of 15.30% and Return of net worth (RONW) of 14.37% in FY10 Concerns Moderate scale of operations and limited experience of the company in ship-recycling business, having actively forayed in this segment in 2009 Business exposed to volatility in demand in metal sector and cyclical nature of the ship recycling Industry Despite relatively higher entry barriers, the industry is characterized by moderate profit margins due to fierce competition, low value addition and long working capital cycles Exposure to foreign exchange rate risks could lead to variability in earnings Grading Rationale ICRA has assigned an IPO Grade 1 indicating poor fundamentals to the proposed initial public offering (IPO) of VMS Industries Limited (VMS). ICRA assigns IPO grading on a scale of IPO Grade 5 through IPO Grade 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals. The grading positively factors in the availability of relatively larger ship breaking plot, successful commissioning of ship recycling operations in May 2009 and healthy operating margin during FY10. The grading also takes into account the capable management team and the aggressive plans of the company in ship recycling business to achieve high rate of growth in near to medium term. However; the IPO grade is constrained by VMS limited track record in ship recycling business, modest scale of operations and price risks inherent in the business given the substantial lead time between purchase of ship and sale of scrap. The company also remains 33

exposed to various environmental and regulatory risks due to the nature of business. The grading is also constrained by high competitive intensity and low value additive nature of operations. Moreover, the profit margins of company remain vulnerable to cyclicality in the ship recycling industry, volatility in metal sector and VMSs exposure to foreign currency exchange rate risk.VMS is a relatively new player in ship-recycling industry having commenced its operations in May 2009.Till FY08; VMS revenue largely comprised of fee income from Management services and consultancy. Prior to venturing into ship recycling activity, VMS was providing consulting and information technology services to Bhavnagar Municipal Corporation and also had share in the profit of a partnership firm M/s Eternal Automobiles - a dealer of two wheelers for Honda Motor Cycle and Scooter India Pvt.Ltd(HMC). VMS holds 25% stake in Eternal Automobiles with 75% stake being held by Mrs. Sangeeta Jain who is also one of the promoters of VMS. The company owns tug and speed boat that are leased out to third parties. In FY09, company recorded a total turnover of Rs. 1.41 crore of which 93.0% was due to the leasing activity; 3.5% was in the form of Management services & consultancy and 1.6% was from share in the profit from partnership firm. In FY10 with the commencement of ship breaking activities, the companys scale of operations increased significantly and it discontinued its Management services and consultancy business. During FY10, the companys Operating Income (OI)1 stood at Rs. 28.66 crore of which 89.8% was from ship-breaking division; 9.9% from leasing activity of the offshore division and 0.1% though profit from share in partnership firm. Till July 2010, the company had purchased 6 ships with a total tonnage of 36,702 MT and had recycled 3 ships with a total tonnage of 20,150 MT. In July 2010, remaining 3 ships were in the process of dismantling, cutting and scrapping.

Book Building Procedure 34

This Issue is being made through the 100% Book Building process wherein upto 50% of the Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers, out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only and the remaining QIB portion shall be available for allocation on proportionate basis to all QIB Bidders, including Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. Further, not less than 15% of the Issue shall be available for allocation on a proportionate basis to NonInstitutional Bidders and not less than 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received from them at or above the Issue Bid-cum-Application Form Bidders (other than ASBA Bidders) shall only use the specified Bid-cum-Application Form bearing the stamp of a member of the Syndicate for the purpose of making a Bid in terms of the Red Herring Prospectus. The Bidders shall have the option to make a maximum of three Bids in the Bid-cum-Application Form and such options shall not be considered as multiple Bids. ASBA Bidders shall submit an ASBA Bid cum Application Form to the SCSB authorizing blocking of funds that are available in the bank account specified in the ASBA Bid cum Application Form only. Upon the allocation of Equity Shares, dispatch of the CAN and filing of the Prospectus with the RoC, the Bid-cum-Application Form shall be considered as the Application Form. Upon completing and submitting the Bidcum- Application Form to a member of the Syndicate or the SCSB, the Bidder or the ASBA Bidder is deemed to have authorized our Company to make the necessary changes in the Red Herring Prospectus as would be required for filing the Prospectus with the RoC and as would be required by the RoC after such filing, without prior or subsequent notice of such changes to the Bidder or the ASBA Bidder. The prescribed colour of the Bid-cum-Application Form for various categories is as follows

35

Who Can Bid? 1. Persons eligible to invest under all applicable laws, rules, regulations and guidelines. 2. Indian nationals resident in India who are not minors, in single or joint names (not more than three). 3. Hindu Undivided Families or HUFs in the individual name of the Karta. The Bidder should specify that the Bid is being made in the name of the HUF in the Bid-cum-Application follows: "Name of sole or first Bidder: XYZ Hindu Undivided Family applying Form as XYZ,

through

where XYZ is the name of the Karta". Bids by HUFs would be considered at par with those from individuals. 4. Eligible NRIs on a repatriation basis or a non-repatriation basis subject to compliance with applicable laws. NRIs, other than Eligible NRIs, are not permitted to participate in this Issue. 5. Foreign institutional investor and sub-account registered with SEBI, other than a sub-account which is a foreign corporate or foreign individual, under the QIB category. 6. Sub-accounts of FIIs registered with SEBI, which are foreign corporate or foreign individuals, only under the Non Institutional Bidders Category. 7. State Industrial Development Corporations. 8. Insurance companies registered with the Insurance Regulatory and Development Authority, India. 9. Provident Funds with a minimum corpus of ` 25 crore and who are authorized under their constitution to invest in Equity Shares. 10. Pension funds with a minimum corpus of ` 25 crore and who are authorized under their constitution to invest in Equity Shares. 11. Companies, corporate bodies and societies registered under applicable laws in India and authorized to invest in Equity Shares. 12. Venture Capital Funds (VCFs) registered with SEBI. 36

13. Foreign Venture Capital Investors (FVCIs) registered with the SEBI. 14. Mutual Funds registered with the SEBI. 15. Indian financial institutions, scheduled commercial banks (excluding foreign banks), regional rural banks, cooperative banks (subject to the RBI regulations and the SEBI (ICDR) Regulations and regulations, as applicable). 16. Multilateral and bilateral development financial institutions.182 17. Trusts / societies registered under the Societies Registration Act, 1860, as amended, or under any other law relating to trusts and who are authorized under their constitution to hold invest in Equity Shares. 18. Scientific and/or industrial research organizations in India authorized to invest in Equity Shares. 19. National Investment Fund set up by resolution No. F.No.2/3/2005-DDII dated November 23, 2005 of the Government of India published in the Gazatte of India. 20. Insurance funds set up and managed by army, navy or air force of the Union of India 21. Insurance funds set-up and managed by the Department of Posts, India 22. Any other QIBs permitted to invest, subject to compliance with all applicable laws, rules, regulations, guidelines and approvals in the Issue. As per existing regulations, OCBs cannot Bid in the Issue. and

Bids by SEBI registered Venture Capital Fund and Foreign Venture Capital Funds The Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996, and the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000, as amended prescribe investment restrictions on Venture Capital Funds (VCFs) and Foreign Venture Capital Investors (FVCIs) registered with SEBI. Accordingly, whilst the holding by any VCF or FVCI in one (1) venture capital undertaking should not exceed 25% of the corpus of the VCF / 37

FVCI, the VCF can invest its entire funds committed for investments into India in one (1) Company. Further, VCFs can invest only up to 33.33% of the investible funds by way of subscription to an initial public offering. Pursuant to the SEBI (ICDR) Regulations, the shareholding of VCFs and FVCIs held in a company prior to making an initial public offering is exempt from lock-in requirements only if the shares have been held by them for at least one (1) year prior to the time of filing the draft prospectus with SEBI.

Maximum and Minimum Bid size a) For Retail Individual Bidders: The Bid must be for minimum [] number of Equity Shares and in multiples of [] Equity Shares thereafter, so as to ensure that the Bid Amount payable by the Bidder does not exceed ` 2,00,000. In case of revision of Bids, the Retail Individual Bidders have to ensure that the Bid Amount does not exceed ` 2,00,000. Where the Bid Amount is over ` 2,00,000 due to a revision in the Bid or a revision in the Price Band or upon exercise of the option to bid at Cut-off Price, the Bid would be considered for allocation under the Non-Institutional Portion. The Cutoff Price option is given only to Retail Individual Bidders indicating their agreement to the Bid and to purchase the Equity Shares at the Issue Price as determined at the end of the Book Building b) For Non-Institutional Bidders and QIB Bidders: The Bid must be for a minimum of such number of Equity Shares such that the Bid Amount payable by the Bidder exceeds ` 2, 00,000 and in multiples of [] Equity Shares thereafter. A Bid cannot be submitted more than the Issue size. However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them under applicable laws. A QIB Bidder cannot withdraw its Bid after the Bid/Issue Closing Date and is required to pay the Bid Amount upon submission of the Bid. In case of revision in Bids, the Non-Institutional Bidders, who are individuals, have to ensure that the Bid Amount is greater than ` 2, 00,000, for being considered for 38

allocation in the Non Institutional Portion. In case the Bid Amount reduces to ` 2, 00,000 or less due to a revision in Bids or revision of Price Band, the same would be considered for allocation under the Retail Individual Portion. Non Institutional Bidders and QIBs are not allowed to Bid at Cut-off. Payments made upon any revision of Bids shall be adjusted against the payment made at the time of the original Bid or the previously revised Bid. Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under the relevant laws, rules, regulations, guidelines and approvals.184 Information for the Bidders 1. The Company will file the Red Herring Prospectus with the RoC at least 3 (three) days before the Bid/Issue Opening Date. 2. The Price Band shall be advertised at least two working days prior to the Bid Opening Date/Issue Opening Date. 3. The members of the Syndicate will circulate copies of Bid-cum-Application Form to their potential investors and at the request of the potential investors, the copies of Red Herring Prospectus. 4. Any Bidder (who is eligible to invest in the Equity Shares) desirous of obtaining a copy of the Red Herring Prospectus along with the Bid-cum- Application Form can obtain the same from the Registered Office of the Company or from the BRLM or from a member of the Syndicate. 5. Eligible investors who are interested in subscribing for the Equity Shares should approach the BRLM or Syndicate Members or their authorized agent(s) to register their Bids. Bidders who wish to use the ASBA process should approach the Designated Branches of the SCSBs to register their Bids. 6. ASBA Bidders shall correctly mention the bank account number in the ASBA Bid cum Application Form and ensure that funds equal to the Bid Amount are available in the bank account

39

maintained with the SCSB before submitting the ASBA Bid cum Application Form to the respective Designated Branch. 7. If the ASBA Account holder is different from the ASBA Bidder, the ASBA Bid cum Application Form should be signed by the account holder as provided in the ASBA Bid cum Application Form. 8. The Bids should be submitted on the prescribed Bid-cum-Application Form only. Bid-cumApplication Forms (other than the ASBA Bid cum Application Forms) should bear the stamp of the member of the Syndicate. Bidcum- Application Forms which do not bear the stamp of a member of the Syndicate will be rejected. Bids by ASBA Bidders shall be accepted by the Designated Branches of the SCSBs in accordance with the SEBI (ICDR) Regulations and any circulars issued by SEBI in this regard. Bidders applying through the ASBA process also have an option to submit the ASBA Bid cum Application Form in electronic form. The applicants may note that in case the DP ID and Client ID and PAN mentioned in the Bid cum Application Form and entered into the electronic bidding system of the Stock Exchanges by the Syndicate do not match with the DP ID and Client ID and PAN available in the Settlement Depository database, the application is liable to be rejected.

GENERAL INSTRUCTIONS: Dos: (a) Check if you are eligible to apply having regard to applicable law, rules, regulations, guidelines and approval sand the terms of the Red Herring Prospectus; (b) Ensure that your Bid is within the Price Band; (c) Read all the instructions carefully and complete the Bid-cum-Application Form; (d) Ensure that the details about Depository Participant and beneficiary account are correct as Equity Shares will be allotted in the dematerialized form only; 40

(e) Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all respects. (f) Ensure that the Bids are submitted at the bidding centers only on forms bearing the stamp of a member of the Syndicate or with respect to ASBA Bidders, ensure that your Bid is submitted at a Designated Branch of the SCSB where the ASBA Bidder or the person whose bank account will be utilized by the Bidder for bidding has a bank account; (g) With respect to ASBA Bids ensure that the ASBA Bid cum Application Form is signed by the account holder in case the applicant is not the account holder. Ensure that you have mentioned the correct bank account number in the ASBA Bid cum Application Form; (h) Ensure that you have been given a TRS for all your Bid options; (i) Ensure that you have funds equal to the Bid Amount in your bank account maintained with the SCSB before submitting the ASBA Bid cum Application Form to the respective Designated Branch of the SCSB; (j) Ensure that the full Bid Amount is paid for the Bids submitted to the Syndicate and funds equivalent to the Bid Amount are blocked in case of any Bids submitted thought the SCSBs. (k) Instruct your respective banks to not release the funds blocked in the bank account under the ASBA process; (l) Submit Revised Bids to the same member of the Syndicate through whom the original Bid was placed and obtain a revised TRS; (m) Each of the Bidders should mention their Permanent Account Number (PAN) allotted under the IT Act in the Bid Cum Application Form. (Please refer to the sub-section titled "Permanent Account Number" under this section); 194 (n) Ensure that the name(s) given in the Bid-cum-Application Form is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. Where the Bidcum-Application Form is submitted in joint names, ensure that the beneficiary account is also held 41

in same joint names and such names are in the same sequence in which they appear in the Bidcum-Application Form; and

Don'ts: (a) Do not Bid if you are prohibited from doing so under the law of your local jurisdiction; (b) Do not Bid for lower than minimum Bid size; (c) Do not Bid or revise the Bid to less than the lower end of the Price Band or higher than the higher end of the Price Band; (d) Do not Bid on another Bid-cum-Application Form after you have submitted a Bid to the members of the Syndicate or the SCSBs, as applicable; (e) Do not pay Bid amount in cash, through stock invest, by money order or by postal order; (f) Do not provide your GIR number instead of PAN number; (g) Do not Bid at cut off price, in case of Bid by QIB Bidders, Non-Institutional Bidders; (h) Do not complete the Bid-cum-Application Form such that the number of Equity Shares Bid for exceeds the Issue size and/or investment limit or maximum number of Equity Shares that can be held under the applicable laws or regulations or maximum amount permissible under the applicable regulations or under the terms of this Red Herring Prospectus; (i) Do not bid at Bid Amount exceeding ` 2, 00,000, in the case of a Bid by a Retail Individual Bidder; (j) Do not send Bid-cum-Application Forms by post; instead submit the same to a member of the Syndicate or the Designated Branch of SCSBs only; (k) Do not submit the Bid without the BID Amount.

42

Business and Competitive Position Capacity utilization of the ship breaking plot and operational efficiency would be crucial factor to maintain healthy performance of the company going forward: Presently, the companys shipyard at Sosiya (Gujarat) has a capacity to handle ships of tonnage of 40,000 MT in a year. The companys ability to execute its operations efficiently by deploying skilled manpower and additional equipments at the ship recycling yard and to augment its capacity utilization would be the key to its growth. In offshore business; cash flows would depend on the number of days the tug and speed boat are leased in a year along with their respective leasing rate. Focus of the company on ship recycling operations increases vulnerability to cyclical nature of the ship recycling industry and price risks arising from volatility in demand from metal sector: In FY10; nearly 90% of VMS OI was contributed by ship-recycling activities while the remaining portion was contributed by offshore division and share in profit of partnership firm. Ship-recycling being the core business operation; VMS is exposed to cyclicality in the ship recycling industry and price risks arising from the volatility in demand from the metal sector. This is because of large lead time between purchase of ship and sale of scrap. With the increase in the freight rates in recent past; shipping firms might delay scrapping of vessels which may affect the availability of ships in international market. Nevertheless; availability of single-hull vessels is likely to increase in near to medium term on the back of IMO regulation barring ICRA Grading Perspective VMS Industries Limited ICRA Rating Services Page 5 operations of such vessels by the end of 2010. The prospects of the business of ship recycling are also exposed to the demand from the metal sector which largely determines the price of ship scrap. As a result; the timing of the purchase, dismantling of ships and sale of scrap is likely to affect the profitability of the company. The companys offshore activities which involve leasing of tug/speed boat to third parties and the profit sharing in the business of dealership of two wheelers for HMC contributed to nearly 10% of the revenue of VMS in FY10. 43

The long term nature of lease contract is likely to result in relatively stable cash flows from the offshore activities; however, the contribution as a percentage of the total revenue of the company is Significantly low. Exposure to foreign exchange rate risks: VMS expenditure towards purchase of ships is funded by FLCs denominated in foreign currency while the sale value of ship scrap is realized in domestic currency. Consequently; the profitability margins are also exposed to fluctuation in the foreign exchange rates during the lead time between purchase of ship and sale of scrap which can affect the effective purchase cost of ships. Capital intensive nature of the business requires for continual funding from external sources to fund working capital requirements: VMS would require managing the funding of its inventory (purchase of ships); debtors and other operational costs. This is likely to result in high net working capital (NWC) requirement and hence the ability of the company to grow would depend critically on its capability to tie up external funds or promoters capability to infuse equity.

44

CAPITAL STRUCTURE
Date of Allotment 05.12.1991 No. of EQ Shares 20 Face Value 10 Issue Price 10 Conside Ration Cash Reasons For Allotment Subscription to the Memorandum Further Allotment to Promoters, Promoter Group and Non-Promoters Further Allotment to Promoters, Promoter Group Issue(1) Bonus Issue in the ratio 1: 5 Further Allotment to Non-Promoters Further Allotment to Non-Promoters Further Allotment to Non-Promoters Further Allotment to Non-Promoters Cumulative No.Of EQ Shares 20 Cumulative Share Capital 200 Cumulative Share Premium Nill

10.11.1994

135700

10

20

Cash

135720

1357200

nill

24.12.1994

19140

10

10

Cash

154860

1548600

nill

04.10.1995

30972

10

Bonus

185832

1858320

nill

31.05.2004

2500000

10

25

Cash

2685832

268320

37500000

07.06.2004

275000

10

25

Cash

2960832

29608320

41625000

14.12.2004

28750

10

40

Cash

2989582

29895820

42487500

28.03.2007

1673000

10

50

Cash

4662582

46625820

109407500

26.12.2009

4662582

10

Bonus Issue(2) Bonus Issue in the ratio of 1:1

9325164

93251640

62781680

30.12.2009

355000

10

40

Cash

Further Allotment to Non-Promoters Issue(3) Bonus Issue in the ratio of 1

9680164

96801640

73431680

20.01.2010

355000

10

Bonus

10035164

100351640

69881680

45

PROFIT&LOSS A/C
Mar'10 Mar'09 Mar'08 Mar'07 INCOME: Sales Turnover Excise Duty NET SALES Other Income TOTAL INCOME EXPENDITURE: Manufacturing Expenses Material Consumed Personal Expenses Selling Expenses Administrative Expenses Expenses Capitalized Provisions Made TOTAL EXPENDITURE Operating Profit EBITDA Depreciation Other Write-offs EBIT Interest EBT Taxes Profit and Loss for the Year Non Recurring Items Other Non Cash Adjustments Other Adjustments REPORTED PAT KEY ITEMS Preference Dividend Equity Dividend Equity Dividend (%) Shares in Issue (Lakhs) EPS - Annualized (Rs) 29.12 0 29.12 0 29.14 28.62 -6.95 0.68 0 1.92 0 0 24.27 4.85 4.87 0.46 0.03 4.37 0.92 3.45 0.85 2.61 0 0 0 2.6 0 0 0 100.35 2.59 1.44 0 1.44 0 1.46 0.01 0 0.15 0 0.21 0 0 0.37 1.07 1.09 0.24 0.01 0.84 0.1 0.74 0.01 0.72 0 0 0 0.72 0 0 0 41.35 1.75 0.11 0 0.11 0 0.14 0 0 0.03 0 0.03 0 0 0.06 0.05 0.08 0.01 0.01 0.06 0.01 0.05 0.01 0.03 0 0 0 0.03 0 0 0 41.35 0.08 0.05 0 0.05 0 0.07 0 0 0.01 0 0 0 0 0.02 0.04 0.05 0.01 0.01 0.03 0 0.02 0.01 0.02 0 0 0 0.02 0 0 0 41.35 0.04 Mar'06 0.03 0 0.03 0 0.03 0 0 0.01 0 0 0 0 0.02 0.01 0.01 0.01 0 0 0 0 0 0 0 0 0 0 0 0 0 24.62 0

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CASH FLOWS

Particulars Profit Before Tax Net Cash Flows from Operating Activity Net Cash Used in Investing Activity Net Cash Used in Financing Activity Net Inc/Dec in Cash and Cash Equivalent Cash and Cash Equivalent - Beginning of the Year Cash and Equivalent - End of the Year

Mar'10 3.45 -7.58 13.19 1.97 7.58 1.18 8.76

Mar'09 0.74 1 -6.92 6.75 0.82 0.36 1.18

Mar'08 0.05 0 0.39 0 0.29 0.06 0.36

Mar'07 0.02 0.01 -8.54 7.98 -0.5 0.62 0.06

Mar'06 0 0 0.25 0.35 0.57 0.04 0.62

BALANCE SHEET
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Particulars Liabilities Share Capital Reserves & Surplus Net Worth Secured Loans Unsecured Loans TOTAL LIABILITIES Assets Gross Block (-) Acc. Depreciation Net Block Capital Work in Progress. Investments. Inventories Sundry Debtors Cash And Bank Loans And Advances Total Current Assets Current Liabilities Provisions Total Current Liabilities NET CURRENT ASSETS Misc. Expenses TOTAL ASSETS A+B+C+D+E)

Mar'10 10.04 10.4 20.44 15.5 0.66 36.6 7.43 0.81 6.62 0 0.4 6.99 5.15 8.76 10.15 31.05 1.56 0 1.56 29.49 0.09 36.6

Mar'09 4.13 11.75 15.89 6.5 0 22.39 7.62 0.35 7.28 0 13.87 0 0.25 1.18 0.13 1.55 0.34 0 0.34 1.21 0.02 22.39

Mar'08 4.13 11.03 15.16 0.25 0 15.42 0.3 0.11 0.19 0 14.28 0 0.01 0.36 0.62 0.99 0.08 0 0.08 0.91 0.03 15.42

Mar'07 4.13 11 15.13 0 0 15.13 0.32 0.12 0.2 0 14.62 0 0.01 0.06 0.28 0.35 0.08 0 0.08 0.26 0.04 15.13

Mar'06 2.59 4.29 6.88 0 0 6.88 0.32 0.11 0.22 0 6.1 0 0.04 0.62 0.02 0.68 0.14 0 0.14 0.54 0.02 6.88

TOP TEN SHAREHOLDERS AS ON THE DATE OF FILING OF THIS RHP

Sr. No 1 2 3 4 5 6 7 8 9

Name of the Shareholder Mr. Manoj Jain Mrs. Sangeeta Jain Mr. Varun Jain Ms. Neha Agrawal Mr. Ajit Jain Mrs. Sushma Jain Mr. Kaushikbhai Kansara Mr. Vaibhav Jain Mr. Bharatbhai Shah 48

No. of shares 61,68,100 22,92,264 6,24,800 2,00,000 1,00,000 1,00,000 75,000 40,000 40,000

% 61.46 22.84 6.23 1.99 1 0.75 0.75 0.4 0.4

10 11 12 13 14 15 16 17 18

Mr. Deepak Mehta Mr. Roshan Sanghvi Mr. Satish Mehta Mr. Manoj Rathod Mrs. Rajashri Shah Mr. Harshvadan Shah Mr. Amrutlal Mehta Mr. Manish Sanghvi Mr. Poonamchand Sanghvi Total

40,000 30,000 30,000 25,000 25,000 20,000 20,000 20,000 20,000 98,70,164

0.4 0.3 0.3 0.25 0.25 0.2 0.2 0.2 0.2 98.37

PLAN OF THE STUDY

SL.NO.

PARTICULARS Introduction Need for the study Objectives of the study Scope of the study Methodology Period of the study Limitations of the study

DURATION 3 weeks

CHAPTER-I

2 weeks CHAPTER-II Profile of ISE

2 weeks CHAPTER-III Theoretical background of IPOs

CHAPTER-IV

Data analysis

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2 week CHAPTER-V Findings, Conclusions & Suggestions Final report preparation Binding work Submission 1 week 3 days As per Colleges

50