DR.

GAUR HARI SINGHANIA INSTITUTE OF MANAGEMENT AND RESEARCH PGDM (FULL TIME) 16th BATCH (2010-2012)
SUMMER TRAINING PROJECT REPORT ON RELIGARE SECURITIE PVT.LTD

THE PROCESS AND PRICING FOR IPO

COMPANY GUIDE:
MR. SANTOSH Kr. SINGH Branch Manager-Equity RELIGARE SECURITIES LTD. RAJOURI GARDEN, NEW DELHI

FACULTY GUIDE
Asst. Prof. SHASHI KANT DIKSHIT Dr. GAUR HARI SINGHANIAINSTITUTE OF MANAGEMENT RESEARCH KANPUR

SUBMITTED TO
Dr. GAUR HARI SINGHANIA INSTITUTE OF MANAGEMENT AND RESEARCH JAY KAY LON COLONY, KAMLA NAGAR, KANPUR-208005

SUBMITTED BY SHIVAKRITI KAPOOR BATCH: 2010-2012 ROLL NO.: 1395

DECLARATION I hereby declare that the dissertation The Pricing and Process for IPO submitted for the PGDM at GHS-IMR KANPUR is my original work and the dissertation has not formed the basis for the award of any degree, associate ship, fellowship or any other similar titles.

Place: KANPUR Date:

SHIVAKRITI KAPOOR

CERTIFICATE FROM INTERNAL GUIDE

This is to certify that Ms. Shivakriti Kapoor, with enrollment no. 1395 has carried out the project work, entitled The Process and Pricing for IPO for the award of Post Graduate Diploma in Management from Dr. Gaur Hari Singhania- Institute of Management and Research under my supervision. The project report embodies results of original work and studies carried out by student herself and the contents of the project report do not form the basis for the award of any other degree to the candidate or to anybody else.

Prof. Shashi Kant Dikshit Project Guide

ACKNOWLEDGEMENT I would like to express my sincere thanks to Religare Securities Limited, New Delhi for giving me the opportunity to carry out the Summer Internship Program in their organization. The whole period spent with the organization has been of immense learning experience about the Indian Stock Market. Preparing a project of such a kind is not an easy task in itself and I am sincerely thankful to all those people who help me lot, in preparing and completing this project. I am grateful to Religare Securities Limited who has given me this opportunity to carry out the project The Pricing and Process for IPO. I sincerely thank to Mr. Santosh Kr. Singh (Branch Manager-Equity) for providing me this valuable learning opportunity. I would also like to thank Asst.Prof. Shashi Kant Dikshit Faculty Guide, GHS-IMR Kanpur for his valuable guidance and insight amidst his busy schedule. I am also obliged to Mr. Pankaj Choudhary- Asst. Branch Head, Mr.Ranjit Kumar-RM, Mr.Ranjit Singh-RM, Ms. Deveki Kumari-Dealer-Equity, Mr.Rakesh Singh-RM-Commodity Priyanka Priyadarshini-RM Mr.Kunal Kishore-BACK OFFICE and all The Staff Member of RELIGARE SECURITIES LTD.RAJOURI GARDEN NEW DELHI. And last I owe my heartiest thank to all my revered faculty members and all my classmates for supporting me throughout my project.

Regards, Shivakriti Kapoor Roll No.: 1395 Place: Kanpur

EXECUTIVE SUMMARY Initial Public Offerings (IPOs) are the first time a company sells its stock to the public. Sometimes IPOs are associated with huge first-day gains; other times, when the market is cold, they flop. It's often difficult for an individual investor to realize the huge gains, since in most cases only institutional investors have access to the stock at the off ering price. By the time the general public can trade the stock, most of its first-day gains have already been made. However, a savvy and informed investor should still watch the IPO market, because this is the first opportunity to buy these stocks. When a privately held corporation needs to raise additional capital, it can either take on debt or sell partial ownership. If the corporation chooses to sell ownership to the public, it engages in an IPO. Corporations choose to "go public" instead of issuing de securities for several bt reasons. The most common reason is that capital raised through an IPO does not have to be repaid, whereas debt securities such as bonds must be repaid with interest. Despite this apparent benefit, there are also many drawbacks to an IPO. A large drawback to going public is that the current owners of the privately held corporation lose a part of their ownership. Corporations weigh the costs and benefits of an IPO carefully before performing an IPO. Raising money through IPO is a very complex process. It requires analysis and implementation of various commercial laws applicable to IPO -Prospectus. These laws are Companies Act, Income Tax Act, FEMA, Securities Contract Act and SEBI Guidelines on Disclosure and Investor Protection. It is also necessary to implement circulars from time to time by SEBI. The introduction of SEBI attracted Foreign Institutional Investors to invest money in stock market in India. It has also helped Indian Companies to offer securities in most scientific method to Indian and Foreign investors. Therefore to understand this complex subject, I decided to undertake studies by this Project Report. I also included some data of the shares of Religare Enterprises. The main findings of this report are The Indian initial public offer (IPO) market has always had more than its fair share of doomsayers. Right from the Maruti issue, which pundits decried as being overpriced, to the ONGC and TCS issues, where the huge sizes of the offer drew predictions of calamitous ef fects on the secondary markets, the opinions of the experts have proved to be wide off the mark. Not only did the mega issues sail through, but the secondary markets proved to be far more resilient than anybody had anticipated. Most of the money has been raised by big companies with a long-term track record. A substantial number of issuesbarring that of TCSalso happened during the early part of the year, before the markets got the shivers. The heavy oversubscriptions in many cases can also be traced to the availability of bank finance for IPO investment.

Nevertheless, there is no denying the enormous interest retail and other investors have shown in the primary market, perhaps even more so than in the secondary one. This interest has been sustained despite the lack of bounce in the secondary market and is not confined to the big issues; even smaller issues have sailed through with large oversubscriptions. If investors are gung-ho about IPOs, there are several reasons for it. Unlike earlier IPO booms, this one is being driven by a much better quality of offer. Missing in action so far are the fly-by-night operators of the 1990s who made public offers only to collect the money and vanish. Next, most recent IPOs have resulted in gains on listing for the investor. The listing gains have probably initiated a kind of virtuous cycle, tempting investors who have already made money to return to the primary market. There is also reason to believe that companies are pricing their issues less aggressively thi s time, either due to general concerns about a volatile market, or because of a deliberate effort to leave something on the table for all investors. Companies have been quick to take advantage of the investor interest in IPOs, and banks, broking houses, retail outfits, media houses and government companies such as NTPC and Power Finance Corporation are lining up issues. Even mutual funds have got into the act, and are tailoring their offer to match current market fanciesmid-cap funds, dividend yield funds, and what-have-you. If the government wants to get some money into its kitty through disinvestment programmes, this is the time to make a dash for it.

TABLE OF CONTENTS Page No.

II. COMPANY STUDY

8-21

Introduction of the Company . Corporate Structure Client Interface ... Products of Religare Securities Management Team .. Joint Ventures .. Competitors .. Trading Procedure

8-9 10-11 12-13 14 15 16-17 18 19-21

III. PROJECT .. Introduction-IPO ......... Significance of IPO . Analyzing IPO investment .. IPO investment strategies Process of IPO . Pricing of IPO .. IPO Valuation: DCF Analysis . SEBI & IPO . IRDA: IPO Guidelines . Current IPOs . An example: Coal India IPO . Eligibility criterion for IPO ..

23-57

23-25 25-27 28-29 29-30 31-32 33-43 44 45-51 52 53-54 55 56-57

III. ON JOB TRAINING..

58-62

IV. BIBLIOGRAPHY...

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PART-II : COMPANY STUDY

      

Industry Study Organization Structure : Company History; Ownership Patterns Divisions, Number of People, Department Workers Etc. Financial Profile Of Company Products & Services Competitors Any Other Relevant Inform

INTRODUCTION OF THE COMPANY

About RELIGARE SECURITIES PVT.LTD: Religare is a diversified financial services group of India offering a multitude of investment options. The diverse bouquet of financial services which Religare offers can be broadly clubbed across three key verticals- Retail, Institutional and Wealth spectrums. The services extended from Asset Management, Life Insurance, Wealth Management to Equity Broking, Commodity Broking, Investment Banking, Lending Services, Private Equity and Venture Capital. Religare has also ventured into the alternative investments sphere through its holistic Arts Initiative and Film Fund. With a view to expand, diversify and introduce offerings benchmarked against global best practices, Religare operates in the Life Insurance space under AEGON Religare Life Insurance Company Limited and wealth management under the brand name Religare Macquarie Private Wealth. A diversified financial services group with a pan-India presence in multiple international locations, Religare Enterprises Limited (REL) offers s a comprehensive suite of customerfocused financial products and services targeted at retail investors, high net worth individuals and corporate and institutional clients. REL, along with its joint venture partners, offers a range of products and services in India, including asset management, life insurance, wealth management, equity and commodity broking, investment banking, lending services, private equity and venture capital. Religare has also ventured into the alternative investments sphere through its holistic arts initiative and film fund. REL operates from seven domestic regional offices, 43 sub-regional offices, and has a presence in 498* cities and towns controlling 1837* business location all over India. To make a mark in the global arena, REL acquired UK-based Hichens, Harrison & Co. was incorporated in London in the year 1803 and is believed to be one of the oldest firms of stockbrokers in the City of London. The vision to build Religare as a globally trusted brand in the financial services domain and present it as the Investment Gateway of India. All employees of the group guided by an experienced and professional management team are committed to providing financialcare, backed by the core values of diligence, innovation, ambition and passion.Pusuant to expansion of RELs business, the company has grown from largely an equity trading company into a diversified financial services company. With the additional of RHH the REL group now operates out of multiple global locations, other than India, (the UK the USA, , Brazil, South Africa, Dubai and Singapore).

RELIGARE is RANBAXY Promoters Company. Religare is one of the leading integrated financial services institution of India. The company offers a large and diverse bouquet of services ranging from equities, commodities, insurance broking, to wealth advisory, portfolio management services, personal finance services, Investment banking and institutional broking services. Religare Enterprises Limited is the holding company for all its businesses, structured and being operated through various subsidiaries. Religares businesses, routed through subsidiaries in which it holds 75 -100 per cent stakes, span stock broking, loans against shares, commodities broking, personal lending, depository services, wealth management, venture capital, insurance broking, real estate investing, insurance and arts advisory services. These are offered to retail and institutional clients. 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. The name is intended to unite and bring together the phenomenon of money and wealth to coexist and serve the interest of individuals and institutions, alike. The Milestone:
2005 2004 Mutual fund distribution BSE Membership & Commodities 2004 100+ Branches & 200+ Franchise Locations

2004 2003 2002 2001 1999 Custodial Service Institutional Business Retail Operations Corporate Finance

Portfolio Management Service

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CORPORATE STRUCTURE: Religare Securities Ltd. Retail Equity Brokerage & Research Institutional Equity Brokerage & Research Depository Portfolio Management Services Merchant Banking (Proposed)

Religare Finvest Ltd. Lending Services Equity & Others Corporate Finance - Equity & Debt Mutual Fund Distribution Business IPO Distribution

Religare Comdex Ltd. Religare Commodity Brokerage and Research Commodity Advisory Services

Religare Insurance Advisory Services Ltd. Reinsurance Service Insurance Distribution Service

SYMBOL: The Religare name is paired with the symbol of a four-leaf clover. The four-leaf clover is used to define the rare quality of good fortune that is the aim of every financial plan. It has traditionally been considered good fortune to find a single four leaf clover considering that statistically one may need to search through over 10,000 three leaf clovers to even find one four leaf clover. Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.

The first leaf of the clover represents HOPE. The aspirations to succeed. The dream of becoming. Of new possibilities. It is the beginning of every step and the foundations on which a person reaches for the stars.

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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. Hope, Trust, Care & Good fortune. All elements perfectly combine in the emblematic and rare, four-leaf clover to visually symbolize the values that bind together and form the core of the Religare vision. Vision - To build Religare as a globally trusted brand in the financial services domain and present it as the Investment Gateway of India Mission -Providing financial care driven by the core values of diligence and transparency. Brand Essence -Religare is driven by ethical and dynamic processes for wealth creation. Services y y y y y y y y Online access to our Institutional and Technical research. We provide contract note through electronic format as well as in physical form. Online access of your ledger balance, stock, dividends. Dedicated Relationship Managers for assisting multiple investments needs. NSE-BSE cash segment, NSE F&O on a single platform. Trade online and on phone (offline) at branch. Online and offline transfer of funds through multiple banks such as ICICI, HDFC, and Axis bank. Live Broker Terminal.

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CLIENT INTERFACE:-

Retail Spectrum Caters to a large number of retail clients by offering all products under one roof through branch network and online mode.
y y y y y y y y y

Wealth Spectrum To provide customized wealth advisory services to high net worth individuals. y y y y y Wealth advisory services Portfolio Management Services International Equity Priority Client Services Art Initiatives

Institutional Spectrum To build and forge strong relationships with corporate and institutional clients. y y y y Institutional Broking Equity Investment Banking Merchant Banking Transaction Advisory Services

Equity and Commodity Trading Personal Financial Services Distribution of mutual funds. Distribution of Insurance Distribution of Savings Product Personal Credit Personal Loan Services Loans against shares Online Investment

Retail Spectrum Covers equity brokerage services, commodity brokerage services, personal financial services (financial planning for the retail investor, including the distribution of mutual funds, savings products, life insurance and initial public offerings (IPOs)) and personal credit (personal loans services (PLS) and loans against shares (LAS). Historically, the services offered in this spectrum have been the most substantial part of Religare business. Religare Retail Spectrum services in India are being offered through a network of 979 business locations spread across 330 cities and towns and also through Religare online platform, www.religareonline.com, which is being developed as an integrated portal to offer financial and other services. Religare business locations include intermediaries, or Religare Business Associates, who deliver a standard quality of service offering on the basis of a pre determined revenue sharing ratio for the business generated through them. Religare Retail Spectrum focuses on clients who keep less than Rs. 2.5 million on a continuing basis, in the form of either equity trading account margin, mutual fund investment, portfolio management

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investments or insurance premiums paid up. We have also increased Religare local commodity locations (or Mantis) to 38 as of March 31, 2007 in order to expand Religare retail commodity brokerage services.

Wealth Spectrum Covers products and services which are geared to service high net worth individuals and provide wealth advisory services (on an asset allocation model), PMS (discretionary equity investments), priority client equity services (non -discretionary equity trading services), art initiatives (an art fund which we intend shortly to launch as an investment diversification product) and international equity investment advisory services. Religare has entered into an exclusive arrangement with Wall Street Electronica, Inc., a New York broker -dealer, to give Indian clients access through us to U.S. markets. Religare Wealth Spectrum focuses on clients who keeps at least Rs. 2.5 million on a continuing basis or more in the form of equity trading account margins, mutual fund investments, portfolio management investment or insurance premiums paid up.

Institutional Spectrum Covers products and services which cater under one service offering to corporate and institutional clients, including domestic mutual funds, FIIs, banks and corporate customers. The Institutional Spectrum provides services to the institutional investor community through institutional brokerage and investment banking serv ices. Also link corporate clients with a transaction advisory group, which consists of account managers through whom institutional clients are able to access the full range of Religare services.

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PRODUCTS:Religare securities deals in equities and commodities as well. There are mainly two types of trading which are R-ALLY and R-ACE. R-ALLY is ODIN based platform which is also known as online trading and R-ACE is Asian CERC platform. R-ALLY is mainly divided into three products. Products are as follows:(1)RALLY BASIC: In this product/service, Company offer a DMAT and TRADING Account to our customers. They can trade through Phone or physical presence at office campus. We provide all facility in office campus. There is a trading hall where all dealers buy/sell the share according to orders of clients. Thus, we provide this service to customer with the charge of Rs. 500/ only. After opening account they can buy/sell shares through our company. The all work done by dealer in this service, he will buy/sell share on the behalf of client through his client code. (2)RALLY LITE: In this product/service, company offers the all service online through webpage. It is a web based services. Customer can sell/buy shares through net himself. In this service there is no need to call to dealer or physical presence of client. They can do own. This facility is free, the account opening charge is Rs. 500/-, but in this product customer have to pay minimum Rs. 5000/- only for using this service. This is not security money. It is usable money for any buying shares. A client can use this money. ( 3)R A LL Y P R O: In this product/service, company offers software Odin Diet. Customer can sell/buy shares from this software. There is no need to call or physical presence for trading. This software is downloaded to clients Pc. He can use it at own computer or own place. This software is also free, but there is a brokerage commitment in these service charges. If client cross the brokerage limit across the Rs. 1800/- only then this is refundable money for client. It is credited to clients account. Means the brokerage is adjusted against this amount. Now the customer analysis is depended their preference or requirement. If a client usually do the business of share trading. He is able to come at office then he prefers Rally Basic. Or a person, who is busy with other business, can use telephonic services, in such cases Rally Basic preferred. A person has Personal computer. His working on computer. He has no time t come at office o or call again and again then he can prefer Software or online Services. Thus it is depended on customers convenience. The mainly thing is brokerage Rate in competition to other companies. Company offers 3 paisa and 30 paisa on Intra-Day and Delivery to their clients. If client does work more or higher turnover then it is negotiated.

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MANAGEMENT TEAM:

Mr. Sunil Godhwani Chairman and Managing Director, Religare Enterprises Limited Central Leadership TeamMr. Sunil Godhwani CEO & Managing Director, Religare Enterprises Limited Mr. Shachindra Nath Group Chief Operating Officer, Religare Enterprises Limited Mr. Anil Saxena Group Chief Finance Officer, Religare Enterprises Limited

Mr. Malvinder Mohan Singh Chairman (Non Executive)

Board of Directors - Religare Enterprises Limited Mr. Malvinder Mohan Singh Non Executive Chairman Mr. Sunil Godhwani Managing Director & Group CEO Mr. Shivinder Mohan Singh Non Executive Director Mr. Harpal Singh Non Executive Director Mr. Deepak Ramchand Sabnani Independent Director Mr. Padam Bahl Independent Director Mr. J. W. Balani Independent Director Ms. Sunita Naidoo Independent Director

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JOINT VENTURES: AEGON Religare Life Insurance Company Life Insurance business (AEGON as a partner) For more information log on to www.aegonreligare.com

Religare Macquarie Wealth Management Ltd. Private Wealth business (Macquarie, Australian Financial Services major as a partner) For more information log on to http://www.religaremacquarie.com/

Vistaar Religare -The Film Fund India's first SEBI approved Film Fund (Vistaar as a partner) For more information log on to http://www.vistaarreligare.com/

Milestone Religare - Private Equity Fund Milestone, one of India's premier independent fund houses and Religare have come together and through the JV have formed an entity, Milestone Religare Investment Advisors Private Limited. For more information log on to http://www.milestonereligare.com/

OTHER GROUP COMPANIESFortis Healthcare Limited, established in 1996 was founded on the vision of creating an integrated healthcare delivery system. With 22 hospitals in India, including multi-specialty & super specialty centres, the management is aggressively working towards taking this number to a significant level in the next few years to provide quality healthcare facilities and services across the nation.

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Super Religare Laboratories Limited (formerly SRL Ranbaxy) within 11 years of inception has become the largest Pathological Laboratory network in South Asia. It started a revolution in diagnostic services in India by ushering in the most specialized technologies, backed by innovation and diligence. The current footprint extends well beyond India in the Middle East and parts of Europe. For more information log on to: http://www.srl.in/

Religare Technova Limited is the holding company for global IT business of the promoter group, offering Enterprise IT Solutions, Knowledge Management Solutions and software products and services. Currently with over 1500 employees and presence in over 10 countries, Religare Technova is poised to be a leader in the global IT space. For more information log on to: http://www.religaretechnova.com/

Religare Voyages Limited is the holding company for the promoter groups integrated aviation and travel businesses. The Air Charter business is one of the largest in the non-scheduled space in the country with its own top-of-the-line fleet that comprises jets, helicopters and turbo props. The travel business is duly accredited for complete management of both in -bound and out-boundomestic and international travel.

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COMPETITORS OF RELIGARE SECURITIES:

and others.

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TRADING PROCEDURE A client is allowed to trade only upon payment of margin/deposit to RSL which may be in the form of Cheque, Bank Transfer (BT), Pay order, Demand Draft or non cash collaterals like scrip after applying applicable haircuts, FDR, Bank Guarantee etc.).The financial ledger balance of the client is also considered as deposit for this purpose & at all point of time trading is allowed to the client based on the available deposit of such client. Further only such exposure is allowed to the clients on which the margin requirement is e qual to or less than his available deposits with Religare & such validations are carried out at order level in the trading system. Similarly, if a client has paid additional deposit or margin, the system will allow him exposure up to such level i.e. up to which the margin requirement on such exposure is equal to or less than his total deposit i.e. (initial deposit + additional deposit / margin) of the client. As soon as the margin requirement on any order entered by the client exceeds the available depositof the client the order will get rejected & margin inadequate reason will be displayed on the trading terminal. At end of day, the margin requirement is recalculated in F&O segment based on the client level margin file received from the exchange in respect of the derivatives net outstanding position of a client. Besides this, the settlement due is also calculated which would be the Mark-To-Market Margin, Premium Margin, Assignment Margin and the profits or losses actually sustained including obligation pay in. All these figures are communicated to the clients through a contract note & through Religare website so that the client can see his obligations & make arrangements for his pay in obligations in order to avoid any action from Religare. The obligation of a client thus arrived at towards his margin and pay is blocked out of his -in available deposit i.e. NAM (Net available margin) for the purpose of his trading limit and only the balance amount is made available to the client towards his fresh exposures/trading/MTM loss at commencement of next day trading session. A client can anytime during the trading session pay additional security deposit by depositing funds/securities with RSL. Such deposit transaction details shall be uploaded by the client through web & RMC after ensuring the realization of such deposits in Religare account shall give benefit of such deposits & the trading/exposure limits of the client would be increased accordingly. The credit for payment received from the client in the following mode shall be given immediately, 1. Cheque of RSL specified Bank 2. Bank Transfers from RSL specified Banks 3. Pay Orders 4. Demand Drafts

In case the cheque deposited by the client relates to the Bank other than the RSL specified Bank then immediate credit would be allowed up to Rs.50000 & if the cheque is amounting to more than Rs.50000 the credit is allowed only after the same is realized into RSL account.

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In order to ensure that the payment are received from the client & not from any third party it would be mandatory for each client that before punching payment details on web the scan copy of the instrument must be compulsory sent otherwise credit for such requests will not be allowed further, if the payment request is in Demand Draft/Pay Orders the an undertaking n would also be required from the client that these DD/PO are made out of client own money. In case a client is required to pay to RSL any amount towards his pay in or margin obligation including T5 debits and the client fails to pay the same, RSL would be at liberty to square off his position either on the same day or on subsequent days. However, a client cannot take shelter & plea for any subsequent liability resulting from an existing open position. In order to square off positions of a defaulting client, the RSL may feed such offsetting transactions on account of and on behalf of such defaulting clients as limit order or market orders, for the existing open positions, either in full or in part and all differences and loss arising out of su ch squaring off shall be paid by such defaulting client. In case square off trades of open positions of such defaulting client could not take place due to lack of liquidity or otherwise, the defaulting client would be responsible for final settlement of those contracts. In case a client fails to pay margin obligation payable at beginning of the trading session and such payment is not received even till end of day, such unpaid margin amount will not be carried forward to the subsequent days obligation, beca the margin obligation at end of use day will be calculated afresh depending upon the closing price at end of that date. But, in case of pay in obligation i.e. MTM loss, Premium & Assignment margins the unpaid amount will be carried forward to the subsequen days, and the system would automatically t track all unpaid amounts in this manner client-wise till the amount is received. Such unpaid amount will also be blocked out of the available deposits of such clients, if any, for the purpose of calculation of his allowable limits. Further, the client would be charged delayed payment charges on a monthly basis on his debit outstanding at such rate which may be specified by Religare from time to time. Trading Timings BSE & NSE (Cash & Derivative Segments) 9.55 AM to 3.30 PM, Closing session 3.50 PM to 4 PM in cash segment in both NSE & BSE. No closing session in F&O segment Trade Modification If a branch/dealer is willing to modify the trades wrongly executed by them due to punching mistake at their end, they may forward their request to RMC/BOS who shall after validating the adequacy of margin deposit of the target client code will modify the same. In case of BSE the dealers can modify the trades at their own which is later validated & crossed checked by the RMC, the difference/abnormality noticed is clarified from the concerned branch / client.

Trade modifications timings are as under 1. In BSE thru respective TWS from 3.40 PM to 4 PM from respective location.

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2. In NSE F&O thru Neat id from up to 4.15 may be thru RO or HO RMC this can be done any time after opening of the market. 3. IN NSE Cash up to 4.15 only thru HO Back office thru file upload to NSE

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PART III-PROJECT

y y y y y y y y y y y

IPO-An Introduction Significance of IPO IPO Investment Strategies Eligibility criteria for IPO Analysis of Investment Strategies Pricing of an IPO Process of IPO SEBI and IPO IRDA: IPO Guidelines Current IPOs Example : Coal India IPO

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INITIAL PUBLIC OFFERING (IPO)-An Introduction: In financial terms, IPO or initial public offering is the first issuance of a company's shares to the general public. It is called as primary market. These shares are allowed to be transacted in the stock market where they can be bought and sold. It is called secondary market. In other words, an IPO is defined as an exercise when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. One thing to note is the shares allocated to the public do not constitute 100%of the company's shares. Only a certain percentage is allocated to the public. Usually the company owner or the board of directors will still hold the majority of the shares. The most important objective of an IPO is to raise capital for the company. It helps company to tap wide range of investors who would provide large volumes of capital to the company for future growth and development. A company going for an IPO stands to make a lot of money from the sale of its shares which it tries to anticipate how to use for further expansion and development. The company is not required to repay the capital and the new shareholders get a right to future profits distributed by the company.

DEFINITIONS OF IPO:y y y

initial public offering: a corporation's first offer to sell stock to the public IPO is a station on Line D (yellow line) of the Porto Metro, Portugal. Code Monkeys is an American animated series on the video game -oriented television channel G4. The show was created by Adam de la Pea, the ... When a privately held companyowned, for example, by its founders and its venture capital investorsoffers shares of its stock to the public. a process of taking a private company to public by offering the sharesof the company to the public market via a stock exchange. See Publicly -listed companies for more info. The first sale of a companys securities to the general public. A company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking ... When shares of the company are sold to the public for the first time. The process of going public through an offering of securities by a corporation to the public and filing and seeking effectiveness of a ... Occurs when a company registers its stock with the Securities and Exchange Commission and can sell equity ownership in the company to the public. ...

y y

y y

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y y

A company first public issue of shares. the "flotation" of a company through the open sale of its shares in a stock market - the conventional exit route for early investors such as business angels and venture capital funds The initial sale of stock in a public corporation. The dot-com boom of the late 1990's coincided with the mainstreaming of open source ... The first offering of a companys common stock in an offering involving general solicitation, as opposed to a private placement. ... The first time a company sells shares of its stock to the public. Also known as going public, an IPO can generate funds for working capital, debt repayment, acquisitions, and a host of other uses.

History:
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. There are several benefits to being a public company, namely:
y y y y y y y

Bolstering and diversifying equity base Enabling cheaper access to capital Exposure, prestige and public image Attracting and retaining better management and employees through liquid equity participation Facilitating acquisitions Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc. Increased liquidity for equity holder.

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SINGNIFCANCE OF IPO Investing in IPO has its own advantages and disadvantages. Where at one hand, high risk is involved, if successful, it can even result in a higher rate of return. The rule is Higher the Risk, Higher the Return. The company issues an IPO with its own set of management objectives and the investor looks for investment keeping in mind his own objectives. Both have alot of risk involved. But then investment also comes with an advantage for both the company and the investors. The significance of investing in IPO can be studied in two viewpoints: -for the companies -for the investors
y Significance for the Companies: When a privately held corporation needs capital, it

can borrow cash or sell stock to raise needed funds. Or else it may decide to go public. Going public is the best choice for a growing business for the following reasons:
- the costs of initial public offering are small as compared to the costs of borrowing

large sums of money for ten or more years. - The capital raised has never to be repaid. - when a company sells its stock publicly, there is also a possibility for the appreciation of the share price due to market factors not directly related to the company. -it allows a company to tap a wide of investors to provide it with large volumes of capital for future growth. y
Significance to the Shareholders: The investors often see IPO as an easy way to make

money. One of the attractive features of an IPO is that the shares offered are usually priced very low and the companys stock prices can increase significantly during the day the shares that are offered. This is seen as a good opportunity by speculative investors looking to notch out some shot-tern profit. The speculative investors are interested only in the short term potential rather than long tern gains. Investing in IPO is often seen as an easy way of investing, but it is highly risky and many investment advisors advise against it unless you are particularly experienced and knowledgeable. The risk factor can be attributed to the following reasons:

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UNPREDICTIBLE: The unpredictable nature of the IPOs is one of the major reasons that investors advise investing in IPOs. Shares are initially offered at a low price, but they see significantly during the day, but it may fall steeply the next day. NO PAST TRACK RECORD OF THE COMPANY: No past track record of the company adds further to the dilemma of the shareholders as to whether to invest in the IPO or not. With no past track record, it becomes a difficult choice for the investors to decide whether to invest in a particular IPO or not, as there is basis to decide whether the investment will be profitable or not. POTENTIAL OF STOCK MARKET: Returns from investing in IPO are not guaranteed. The stock market is highly volatile. Stock Market fluctuations widely affect not only the individuals and household, but the economy as a whole. The volatility of the stock market makes it difficult to predict how the shares will perform over a period of time as the profit and risk potential of the IPO depends upon the state of the stock market at the particul r time. a RISK ASSESSMENT The possibility of buying stock in a promising start-up company and finding the next success story has intrigued many investors. But before taking the bigstep, it is essential to understand some of the challenges, basic risk and potential rewards associated with investing in an IPO. This has made Risk Assessment an important part of Investment Analysis. Higher the desired returns, higher would be the risk involved. Therefore, a thorough analysis of risk associated with the investment should be done before any consideration. For investing in an IPO, it is essential not only to know about the working of an IPO, but we also need to know about the company in which we are planning to invest. Hence, it is imperative to know:      The fundamentals of the business The policies and the objectives of the business Their products and services Their competitors their share in the current market The scope of their issue being successful

It would be highly risky to invest without having this basic knowledge about the company. Their 3 types of risk involved in investing in IPO:

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I.

Business Risk: It is important to note whether the company has sound business and management policies, which are consistent with the standard norms. Researching business risk involves examining the business model of the company. Financial Risk: Is this company solvent with sufficient capital to suffer short-term business setbacks. The liquidity position of the company also needs to be considered. Researching financial risk involves examining the corporations financial statements, capital structure, and other financial data. Market Risk: It would be beneficial to check out the demand for the IPO in the market, i.e., the appeal of the IPO to others investors in the market. Hence, researching market risk involves examining the appeal of the corporation to the current and future market conditions.

II.

III.

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ANALYSING AN IPO INVESTMENT: Potential investors and the objectivesInitial Public Offering is a cheap way of raising capital, but all the same it is not considered as the best way of investing for the investor. Before investing, the investor must do a proper analysis of the risk to be taken and the returns expected. He must be clear about the benefits he hope to derive from the investment. The investor must be clear about the objective he has for investing, whether it is long-term capital growth or short-term capital gains. The potential investors and their objectives could be categorized as: y Income Investor: An income investor is the one who is looking for steadily rising profits that will be di s t r ibut e d t o s ha r e h ol de r s r e gu l ar l y. F or t his , he n e eds t o e xa mi n e t he c o mp a ny s potential for profits and its dividend policy. Growth Investor; A growth investor is the one who is looking for potential steady increase in profits that are reinvested for further expansion. For this he needs to evaluate the company's growth plan, earnings and potential for retained earnings. Speculator: A speculator looks for short-term capital gains. For this he needs to look for potential of an early market breakthrough or discovery that will send the price up quickly with little care about a rapid decline.

Investor ResearchIt is imperative to properly analyze the IPO the investor is planning to invest into. He needs to do a thorough research at his end and try to figure out if the objective of the company match his own personal objectives or not. The unpredictable nature of IPOs and volatility of the stock market adds greatly to the risk factor. So, it is advisable that the investor does his homework, before investing.

The investor should know about the following:

Business Operations: a. What are the objectives of the business? b. What are its management policies? c. What is the scope for growth? d. What is the turnover of the labour force? e. Would the company have long-term stability? Financial Operations: a. What is the companys credit history? b. What is the companys liquidity position? c. Are there any defaults on debts?

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d. Companys expenditure in comparison to competitors. e. Companys ability to pay-off its debts. f. What are the projected earnings of the company. y Marketing Operations: a. Who are the potential investors? b. What is the scope for success of the IPO? c. What is the appeal of the IPO for the other investors? d. What are the products and services offered by the company? e. Who are the strongest competitors of the company?

IPO INVESTMENT STRATEGIES: Investing in IPOs is much different than investing in seasoned stocks. This is because there is limited information and research on IPOs, prior to the offering. And immediately following the offering, research opinions emanating from the underwriters are invariably positive. There are some of the strategies that can be considered before investing inthe IPO: y Understand the working of IPO: The first and foremost step is to understand the working of an IPO and the basics of an investment process. Other investment options could also be considered depending upon the objective of the investor. Gather Knowledge: It would be beneficial to gather as much knowledge as possible about the IPO market, the company offering it, the demand for it and any offer being planned by a competitor. Investigate Before Investing: The prospectus of the company can serve as a good option for finding all the details of the company. It gives out the objectives and principles of the management and will also cover the risks. Know Your Broker: This is a crucial step as the broker would be the one who would majorly handle your money. IPO allocations are controlled by underwriters. The first step to getting IPO allocations is getting a broker who underwrites a lot of deals. Measure The Risk Involved: IPO investments have a high degree of risk involved. It is therefore, essential to measure the risks and take the decision accordingly.

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Invest At Your Own Risk: Finally, after the homework is done, and the big step needs to be taken. All that can be suggested is to invest at your own risk. Do not take a risk greater than your capacity.

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THE PROCESS OF IPO

Preliminary work focuses on getting the business into a corporate form that will be viable and capable of independent growth and development. This will include the legal and accounting work needed to put this in place, as well as due diligence associated with the marketing documentation used in the IPO. The appointment of advisers is critical to address the various issues that form the core of the IPO process.

Once the preliminary work has been completed, the IPO process can get under way.

IPO decisions and preparation

Appoint lead adviser Choice of market Capital structure Offer structure Timing Valuation

Marketing

Appoint syndicate Analysts reports Road shows PR campaign I Book building Pricing finalised B

Final agreements and launch

Issue launched Underwriting Allocation

Trading and aftermarket

Aftermarket

final undertakings

fee splits / performance

Target shareholder list Aftermarket trading

Price stabilisation

Mainly the small private companies issue IPO to grow and trade publicly. The process of initial public offering consists of several steps. Those are discussed below:y When a company is aiming to go public, at first it hires an investment bank to do the underwriting, the way of raising money through equity or debt, functions associated with the issue. Although, a company itself also may sell its shares, but usually an investment bank is selected for the purpose Underwriters act as intercessors between . the public, who are investing, and the companies. The investment bank and the company will first initiate the process deal negotiation. The main discussing issues are the money amount that the company is going toraise, security type to be issued and all the other details involved with the underwriting agreement.

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Once the deal finalized the investment bank sets a registration statement up which will be submitted to the Securities and Exchange Commission. That reg istration statement consists of information regarding the offering and also other company informations like, background of the management, financial statements, legal issues, etc. The Securities and Exchange Commission (SEC) needs a cooling off period during which it will examine all the submitted documents and make sure that all information regarding the deal have been given to them. After getting the SECs approval, a date is going to be fixed on which the company will offer the stock to the public. During the above mentioned cooling off period the underwriters publishes an initial prospectus that contains all the necessary information regarding the company. The effective dates of issuing the stock as well as the price have not been mentioned in the prospectus, for these are not known at this time. Then the company and the underwriter meet to decide the price of the stock. This decision depends highly on the current market condition. Lastly, the stocks are sold in the market and money is raised from the investors.

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PRICING OF AN IPOThe pricing of an IPO is a very critical aspect and has a direct impact on the success or failure of the IPO issue. There are many factors that need to be considered while p ricing an IPO and an attempt should be made to reach an IPO price that is low enough to generate interest in the market and at the same time, it should be high enough to raise sufficient capital for the company. The process for deter mining an optimal pric for the IPO involves the e underwriters arranging share purchase commitments from leading institutional investors. Process:Once the final prospectus is printed and distributed to investors, company management meets with their invest ment bank to choose t e final offering price h and size. The invest ment bank tries to fix an appropriate price for the IPO depending upon the demand expected and the capital requirements of the company The pricing of an IPO is a delicate balancing act as the invest ment firms r y to t strike a balance between the company and the investors. The lead underwriter has the responsibility to ensure smooth trading of the companys stock. The underwriter is legally allowed to support the price of a newly issued stock by either buying them in the market or by selling them short. IPO pricing differences:It is generally noted, that there is a large differ ence between the price at the time of issue of an Initial Public Offering (IPO) and the price when they start trading in the secondary market. These pricing disparities occur mostly when an IPO is considered hot, or in other words, when it appeals to large number of investors. An IPO is hot when the demand for it exceeds the supply. This imbalance between demand and supply causes a dramatic rise in the price of each share in the first day itself, during the early hours of trading. Underpricing and Overpricing Of IPOs: Underpricing- The pricing for an IPO at less than its market value is referred to as Underpricing. In other words, it is difference between the offer price and the price of the first trade. Historically, IPOs have always been underpriced. Underpriced IPO helps to generate additional stock when it first becomes publicly traded. This might result in significant gains for investors who have been allotted shares at the offering price. However, under pricing also results in loss of significant amount of capital that could have been raised had the shares been offered at the higher price.

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Overpricing- The pricing of an IPO at more than its market value is referred to as Overpricing. Even overpricing of shares is not as healthy option. If the stock is offered is at a higher price than what the market is willing to pay, than it is likely to become difficult for the underwrites to fulfill their commitment to sell shares. Furthermore, even if the underwriters are successful in selling all the issued shares and the stock falls in value on the first day itself trading, then it is likely to lose its marketability and hence, even more of its value.

PRINCIPAL STEPS IN AN IPO:  Approval of BOD: Approval of BOD is required for raising capital from public.  Appointment of Lead Managers: The lead manager is the merchant banker who orchestrates the issue in consultation of the company.

 Appointment of other intermediaries: a) b) c) d) e) Co-managers and advisors Underwriters Bankers Brokers and principal brokers Registrars

Filing the prospectus with SEBI: The prospectus or the offer document communicates information about the company and the proposed security issue to the investing public. All the companies seeking to make a public issue have to file their document with SEBI. If SEBI or public does not communicate its observations within 21 days from the filing of the offer document, the company can proceed with its public issue. Filing of the prospectus with the registrar of the companies: Once the prospectus have been approved by the concerned stock exchanges and the consent obtained from the bankers,auditors,registrar,underwriters andothers, the prospectus signed by the directors, must be filed with the registrar of companies, with the required documents as per the Companies Act,1956.

Printing and dispatch of prospectus: After the prospectus is filed with the registrar of companies, the company should print the prospectus. The quantity in which prospectus is printed should be sufficient to meet requirements. They should be send to the stock exchanges and brokers so they receive them atleast 21 days before the first announcement is made in the newspapers .

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Filing of initial listing application: Within 10 days of filing the prospectus, the initial listing application must be made to the concerned stock exchanges with the listing fees.

 

Promotion of the issue: The promotional campaign typically commences with the filing of the prospectus with registrar of the companies and ends with the release of the statutory announcement of the issue. Statutory announcement: The issue must be made after seeking approval of the stock exchange. This must be published atleast 10 days before the opening of the subscription list. Collection of applications: The statutory announcement specifies when the subscription would open, when it would close, and the banks where the applications can be made. During the period the subscription is kept open, the bankers will collect the applications on behalf of the company.

 

Processing of applications: Scrutinizing of the applications is done Establishing the liability of the underwriters: If the issue is undersubscribed, the liability of the underwriters has to be established.

 

Allotment of shares: Proportionate system of allotment is to be followed. Listing of the issue: The detail listing application should be submitted to the concerned stock exchange along with the listing agreement and the listing fee. The allotment formalities should be completed within 30 days.

BOOK BUILDING is the process of Price Discovery (Basic Concept) What is Book Building?

SEBI guidelines defines Book Building as "a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built up and the price for such securities is assessed for the determination of the quantum of such sec urities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document". Book Building is basically a process used in Initial Public Offer (IPO) for efficient price discovery. It is a mechanism where, during the period for which the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The offer price is determined after the bid closing date.

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As per SEBI guidelines, an issuer company can issue securi ies to the public though t prospectus in the following manner: 1. 100% of the net offer to the public through book building process 2. 75% of the net offer to the public through book building process and 25% at the price determined through book building. The Fixed Price portion is conducted like a normal public issue after the Book Built portion, during which the issue price is determined. The concept of Book Building is relatively new in India. However it is a common practice in most developed countries. y The company does not come out with a fixed price for its shares;instead,it indicates a price band that mentions the lowest ( referred to as the floor) and the highest (the cap) prices at which a share can be sold. Bids are then invited for the shares. Each investor states how many shares she/he wants and what he/she is willing to pay for those shares (depending on the price band). The actual price is then discovered based on these bids. As we continue with the series, the process will be explained in detail. According to the book building process, th classes of investors can bid for the ree shares, : a) Qualified Institutional Buyers- Mutual Funds and Foreign Institutional Investors. b) Retail Investors- Anyone who bids for shares under Rs. 50,000 is a retail investor. c) High Net Worth Individuals and employees of the company. y Allotment is the process whereby those who apply are given ( allotted) shares. The bids are first allotted to the different categories and the over-subscription (more shares applied for than shares available) in each category is determined. Retail investors and high net worth individuals get allotments on a proportional basis. For Instance:- (i) Assuming you are a retail investor and have applied for 200 shares in the issue, and the issue is over-subscribed five times in the retail category, you qualify to get 40 shares ( 200 shares/5). Sometimes, the over-subscription is huge or the issue is priced so high that you cant really bid too many shares before the Rs. 50,000 limit is reached. In such cases, allotments are made on the basis of a lottery. (ii) Say, a retail investor has applied for five shares in an issue, and the retail category has been over-subscribed 10 times. The investor is entitled to half a share. Since that isnt possible, it may then be decided that every 1 in 2 retail investors will get allotment. The investors are then selected by lottery and the issue allotted on a proportional basis. That is why there is no way you can be sure of getting allotment.

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Book Building is basically a capital issuance process used in Initial Public Offer (IPO) which aids price and dema nd discovery. It is a process used for mar keting 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 pr ocess 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. Book-Building Process Company Plans an IPO via book-build route

Appoints a merchant banker as book-runner

Issues a draft prospectus (containing all mandatory company disclosures other than price)

Draft prospectus filed simultaneously with concerned authority (SEBI)

Book-runner appoints syndicates members and registered intermediaries to garner subscription

Price discovery begins through the biding process

At close bidding, book runner and company decide upon the allocation and allotments

The Process: a) The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'. b) The Issuer specifies the number of securities to be issued and the price band for orders. c) T he I s s u e r a l s o a p p oi nt s s y n d i c a t e me mb e r s w i t h w h o m or d e r s c a n b e p l a c e d b y t h e investors.

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d) I n v e s t or s p l a c e t h e i r or d e r w i t h a s y n d i c a t e me mb e r w h o i n p u t s t h e or d e r s i nt o t h e electronic book'. This process is called 'bidding' and is similar to open auction. e) A Book should remain open for a minimum of 5 days. f) Bids cannot be entered less than the floor price. g) Bids can be revised by the bidder before the issue closes. h) 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. i) The book runner the company concludes the final price at which it is willing to issue the stock and allocation of securities. j) Generally, the numbers of shares are fixed; the issue size gets frozen based on the price per share discovered through the book building process. k) Allocation of securities is made to the successful bidders. l) Book Building is a good concept and represent s a capital market which is in the process of maturing. Book-building is all about letting the compa ny know the price at which you are willing to buy the stock and getting an allotment at a price that a majorit y of th e investors are willing t o pay. The price discovery is made depending on the demand for the stock. The price that you can suggest is subject to a certain minimum price level, called the floor price. For instance, the floor price fixed for the Maruti's initial public offering was Rs 115, which means that the price you are willing to pay should be at or above Rs 115. In some cases, as in Bio.con, the price ba nd (minimum and maximum price) at which you can apply is specified. A price band of Rs 270 to Rs 315 means that you can apply at a floor price of Rs 270 and a ceiling of Rs 315. If one is not still very comfortable fixing a price, do not worry. One, as a retail investor, has the option of applying at the cut-off price. That is, one can just agree to pick up the shares at the final price fixed. This way, one does not run the risk of not getting an allotment because you have bid at a lower price. If one bid at the cut-off price a nd the price is revised upwards, then the ma nagers to the offer may reduce the number of shar es allott ed t o keep it within the pa yment alrea dy ma de. One can get application for ms from the nearest offices of the lea d ma nagers to t he offer or from the corporat e or the registered office of t h compa ny. e How are shares allotted? y As per regulators, at least 25% of the shar es on offer should be set aside for retail invest ors. 50% of t he other is for qualified institutional investors. Qualified Institutional Bidders (QIB) ar e specified under the

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regulation and allot ment to this class is made at the discretion of t he compa ny based on certain crit eria. y QIBs can be mutual funds, foreign institutional investors, ba nks or insurance companies. If any of these categories in under-subscribed, sa y the retailer portion is not adequately subscribed, then that portion can be allott ed a mong the other two categories at the shar es (or generally 25% of the offer) are reserved for retail investors. But if the bids from t his category are received are only for 40,000 shares, t hen 10,000 shares can be allocated either to the QIBs or non-institutional invest ors.

The allot ment of shares is ma de on pro-rata basis. Consider this illustration: An offer is made for two lakhs shares and is oversubscribed by times, i.e., bids are received for six lakh shares. The minimum allotment is 100 shares. 1,500 applicants have applied for 100shares each; and 200 applicants have bid for 500 shares each. The shares would be allotted inthe following manner: Shares are segregated into various categories depending on the number of shares applied for. In the above illustration, all investors who applied for 100 shares will fall in category A and those for 500 shares in category B and so on. The total number of shares to be allotted in category A will be 50,000 (100*1500*1/3).That is, the number of shares applied for (100)* number of applications received (1500)*oversubscription ratio (1/3). Category B will be allotted 33,300 shares in a similar manner. Shares allotted to each applicant in category A should be 33 shares (100*1/3). That is, shares applied by each applicant in the category multiplied by the oversubscription ratio. As, t h e m i n i m u m a l l o t m e n t l ot i s 1 0 0 s h a r e s , i t i s r o u n d e d of f t o t h e n e a r e s t m i ni m u m l o t . Therefore, 500 applicants will get 100 shares each in category A total shares allotted to the category (50,000) divided by the minimum lot size (100). In category B, each applicant should be allotted 167 shares (500/3). But it is rounded off to 200 shares each. Therefore, 167 applicants out of 200 (33300/200) would get an allotment of 200 shares each in category B. The final allot ment is ma de by drawing a lot from each cat egory. If you are lucky you may get allotment in the final draw. The shares are listed and trading commences within seven working days of finalization of the basis of allot ment. You can check t he daily status of t he bids r eceived, the price bid for and the response form various categories in the Web sites of stock exchanges. This will give you an idea of the dema nd for the stock and a cha nce to cha nge your mind. Afte seeing the response, if you r

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feel you have bid at a higher or a lower price, you can always change the bidprice and submit a revision form. y The traditional method of doing IPOs is the fixed price offering. Here, the issuer and the merchant banker agr ee on an "issue price" - e.g. Rs.100. Then one have the choice of filling i n a n a p p l i c a t i o n f or m a t t hi s pr i c e a n d s u b s c r i b i n g t o t h e i s s u e . E x t e ns i v e r e s e a r c h ha s revealed that the fixed price offering is a poor way of doing IPOs. Fixed price offerings, all over the world, suffer from `IPO under pricing'. In India, on average, the fixed -price seems to b e a r ou n d 5 0 % b e l o w t h e pr i c e a t f i r s t l i s t i n g; i . e . t h e i s s u e r ob t a i ns 5 0 % l o w e r i s s u e proceeds as compared to what might have been the case. This average masks a steady stream of dubious IPOs who get a n issue price which is much higher than the price at first listing. Hence fixed price offerings are wea k in t wo dir ections: dubious issues get overpriced and good issues get underpriced, with a prevalence of under pricing on average. What is needed is a way to engage in serious price discovery in setting the price at the IPO. Noissuer knows the true price of his shares; no merchant banker knows the true price of the shares; it is only the market t hat knows this price. In that case, can we just ask the market to pick the price at the IPO?

Difference between Book Building Issue and Fixed Price Issue :- In Book Building securities are offered at prices above or equal to the floor prices, whereas securities are offered at a fixed price in case of a public issue. In case of Book Building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue

Imagine a process where an issuer only releases a prospectus, announces t h e number of shar es that are up for sale, with no price indicated. People from all over India would bid to buy shares in pr i c e s a n d qu a nt i t i e s t h a t t h e y t hi n k f i t . T hi s w o u l d yi e l d a pr i c e . S u c h a pr oc e d u r e s h ou l d innately obtain an issue price which is very close to the price at first listing -- the hallmark of a healthy IPO market. Recently, in India, there had been issue from Hughes Software Solutions which was a milestone in our growth from fixed price offerings to true price discovery IPOs. While the HSS issue has many positive and fascinating features, the design adopt ed was stil l riddled with flaws, and we can do much better.

Book Building at NSE : The NSE has set up nation-wide network for trading whereby members can trade remotely from their offices located all over the country. The NSE trading network spans variouscities and towns across India. NSE decided to offer this infrastructure for conducting online IPOs through the Book Building process. NSE operates a fully automated screen based biddi g system called NEAT n

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IPO that enables trading members to enter bids directly from their offices through a sophisticated telecommunication network. Book Building through the NSE system offers several advantages:
y

The NSE system offers a nation-wide bidding facility in securities.

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

The IPO market timings are from 10.00 a.m. to 5.00 p.m. On the last day of the IPO, the session timings can be further extended on specific request by the Book Running Lead Manager. IssuersAn Issuer Company can issue capital through book building in following two ways:
y

75% Book Building process The option of 75% Book Building is available to all body corporates that are otherwise eligible to make an issue of capital to the public. The securities issued through the book building process are indicated as 'placement portion category' and securities available to public are identified as 'net offer to public'. In this option, underwriting is mandatory to the extent of the net offer to the public. The issue price for the placement portion and offers to public are required to be same.

100% of the net offer to the public through Book Building process In the 100% of the net offer to the public, entire issue is made through Book Building process. However, there can be a reservation or firm allotment to a maximum of 5% of the issue size for the permanent employees, shareholders of the company or group companies, 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.

The number of bidding centres, in case of 75% book building process should not be less than the number of mandatory collection centres specified by SEBI. In case of 100% book building process, the bidding centres should be at all the places where the recog nised stock exchanges are situated.

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BSE's Book Building System

y y

y y

BSE offers a book building platform through the Book Building software that runs on the BSE Private network. This system is one of the largest electronic book building networks in the world, spanning over 350 Indian cities through over 7000 Trader Work Stations via leased lines, VSATs and Campus LANS. The software is operated by book-runners of the issue and by the syndicate members , for electronically placing the bids on line real-time for the entire bidding period. In order to provide transparency, the system provides visual graphs displaying price v/s quantity on the BSE website as well as all BSE terminals.

Persons Involved in the Book-Building Process The principal intermediaries involved in the Book Building process are : y the company y Book Running Lead Managers (BRLM) and y Syndicate members who are intermediaries registered with SEBI and are eligible to act as underwriters. Syndicate members are appointed by the BRLM.

Documents Required: 1. A company coming out with public issue has to come out with Offer Document/ Prospectus. 2. An offer document is the document that contains all the information you need about the company. It will tell you why the company is coming is out with a public issue,its financials and how the issue will be priced. 3. The Draft Offer Document is the offer document in the draft stage. Any company making public issue is required to file the draft offer document with the Securities and Exchange Board of India, the market regulator. 4. If SEBI demands any changes, they have to be made. Once the changes are made, it is filed with the Registrar of Companies or the Stock Exchange. It must be filed with SEBI atleast 21 days before the company files it with the RoC/ Stock Exchange. During this period one can check it out on the SEBI website. 5. Red Herring Prospectus is just like the above, except that it will have all the information as a draft document; it will, however, not have the details of the price or the number of shares being offered or the amount of issue. That is because the Red Herring Prospectus is used in book building issues only, where the details of the final price are known only after bidding is concerned.

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Players: y y y y y y y Co-managers and advisors Underwriters Lead Managers Bankers Brokers and Principal Brokers Registrars Stock Exchanges

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IPO VALUATION: DCF ANALYSIS Introduction: In simple terms, discounted cash flow tries to work out the value of a company today, based on p r oj e c t i o ns of h o w mu c h mo n e y i t ' s g o i n g t o ma k e i n t h e f ut ur e. D C F a na l ys i s s a ys t ha t a compa ny is worth all of the cash that it could ma ke available to investors in the future. It is described as "discounted" cash flow because cash in the future is worth less than cash today. For example: L e t ' s s a y s o m e o n e a s ke d y o u t o c h o o s e b e t we e n r e c e i v i n g R s 1 0 0 t o da y a n d receiving Rs100 in a year. Chances are you would take the money today, knowing that you could invest that Rs100 now and have more than Rs100 in a year's time. If you turn that thinking on its head, you are saying that the amount that you'd have in one year is worth Rs100 today - or the discounted value is Rs100. Make the same calculation for all the cash you expect a company to produce in the future and you have a good measure of the companys revenue. There are seve tried and true ral approaches to discounted cash flow analysis; we will use the free cash flow to firm approach commonly used by Street analysts to determine the "fair value" of companies. The Forecast Period: The table below shows good guidelines to use when det er mining a company's excess return period/forecast period:

Company Competitive Position Slow-growing company; operates in highly competitive, low margin industry Solid company; operates with advantage such as strong marketing channels, recognizable brand name, or regulatory advantage Outstanding growth company; operates with very high barriers to entry, dominant market position or prospects

Excess Return/Forecast Period

1 year

5 years

10 years

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SEBI AND IPO Eligibility norms For unlisted companies: y It should have a pre issue network of a minimum amount of Rs crore in 3 out of the .1 preceding 5 financial years. In addition the company should compulsorily need the minimum network level during the two immediately preceding years. It should have a track record distributable profits as given in section 205 of companies act 1956 for at least 3 years in the preceding 5 years period. The issue size (i.e. Offer + Form allotment + Promoters contribution through the offer document) should not exceed an amount equal to 5 times its pre issue worth.

y y

For listed companies y y It should have a track record distributable profits as given in section 205 of companies act 1956 for at least 3 years in the preceding 5 years period. It should have a pre issue network of a minimum amount of Rs1 crore in 3 out of the preceding 5 financial years with the minimum net worth to be met during the immediately preceding 2 years.

SEBI Norms SEBI has come up with Investor Protection and Disclosure Norms for raising funds through IPO. These rules are amended from time to time to meet with the requirement of changing market conditions. Disclosure Normsy Pricing of Issue-The pricing of all the allocations for the present issue must follow the bid system. The reservation must be disclosed for different categories of investors and their pricing must be specified clearly .

Minimum Subscription- If the company does not receive minimum subscription of 90% of subscription in each category of offer and if the issue is not underwritten or the underwriters are unable to meet their obligation, then fund so collected must be refunded back to all applicants.

46

Basis of Allotment- In case of full subscription of the issue, the allotment must be made with the full consultation of the concerned stock exchange and the company must be impartial in allotting the shares.

Allotment/Refund- Once the allotment is finalized, the refund of the excess money must be made within the specified time limits otherwise the company must pay interest on delayed refund orders.

Dematerialization of Shares-As per the provisions of the Depositories Act, 1996, And SEBI Rules, now all IPO will be in Demat form only.

Listing of Shares- It is mandatory on the part of the promoters that once the IPO is fully subscribed, and then the underlying shares must be listed on the stock exchange. This provides market and exit routes to the investors.

The above are the major Guidelines for the Investor Protection and Disclosur Norms. e The SEBI has provided rules for every possible situation. SEBI GUIDELINES IPO of Small Companies Public issue of less than five crores has to be through OTCEI (Over the Counter Exchange of India) and separate guidelines apply for floating and listing of these issues. Public Offer of Small Unlisted Companies (Post-Issue Paid-Up Capital upto Rs.5 crores) Public issues of small ventures which are in operation for not more than two years and whose paid up capital after the issue is greater than 3 crores but less than 5 crores the following guidelines apply. y y y y Size of the Public Issue Securities can be listed where listing of securities is screen based. If the paid up capital is less than 3 crores then they can be listed on the Over The Counter Exchange of India (OTCEI) Appointment of market makers mandatory on all the stock exchanges where securities are proposed to be listed.

Issue of shares to general public cannot be less than 25%of the total issue. Incase of IT, Media and Telecommunication sectors, this stipulation is reduced subject to the conditions

47

that 1. Offer to the public is not less than 10% of the securities issued. 2. A minimum number of 20 lakh securities is offered to the public . 3. Size of the net offer to the public is not less than Rs.30 crores. Promoters Contribution

1. Promoters should bring in their contribution including premium fully before the issue 2. Minimum promoters contribution is 20-25% of the public issue. 3. Minimum lock in period for promoters contribution is five years. 4. Minimum lock in period for firm allotment is three years.

Collection Centers for Receiving Applications

1. There should be at least 30 mandatory collection centers, which should include invariably the places where stock exchanges have been established. 2. For issues not exceeding Rs.10 crores the collection centers shall be situated at: The 4 metropolitan centres viz. Mumbai Delhi Calcutta Chennai All such centres where stock exchanges are located in the region in which the registered office of the company is situated.

Regarding Allotments Of Shares

1. Net Offer the general public has to be atleast 25% of the total issue size for listing on a stock exchange. 2. It is mandatory for a company to get its shares listed at the regional sto exchange where ck the registered office of the issuer is located. 3. In an issue of more than 25 crores the issuer is allowed to place the whole issue by book building. 4. Minimum of 50% of the Net Offer to the public has to be reserved for the investors applying for less than 1000 shares. 5. There should be atleast 5 investors for every 1 lakh equity offered. 6. Quoting of PAN or GIR No. in application for the allotment of securities is compulsory where monetary value of investment is Rs.50000/- or above. 7. Indian development financial institutions and Mutual Fund can be allotted securities upto 75% of the issue amount. 8. A venture capital fund shall not be entitled to get its securities listed on any stock exchange till the expiry of 3 years from the date of issuance of securities. 9. Allotment to categories of FIIs and NRIs/OCBs is upto maximum of 24%, which can be further extended to 30% by an application to the RBI-supported by a resolution passed in the General Meeting.

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Timeframes for Issue and Post-Issue Formalities

1. The minimum period for which the public issue is to be kept open is 3 working days and the maximum for which it can be kept open is 10 working days. The minimum period for right issue is 15 working days and the maximum is 60 working da ys. 2. A public issue is effected if the issue is able to procure 90% of the total issue size within 60 days from the date of the earliest closure of the public issue. 3. In case of oversubscription the company may have he right to retain the excess applic ation money and allot shares more than the proposed issue, which is referred to as green -shoe option 4. Allotment has to be made within 30 days of the closure of the Public issue and 42 days in case of Rights issue 5. All the listing formalities of a Public Issue have to be completed within 70 days from the date of closure of the subscription list.

Dispatch of Refund Orders.

1. Refund orders have to be dispatched within 30 days of the closure of the issue. 2. Refunds of excess application money i.e. non -allotted shares have to be made within 30 days of the closure of the issue.

Other Regulations

1. Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public unless it is disinvestment where it is not applicable. 2. If the issue is undersubscribed then the collected amount should be returned back 3. If the issue size is more than Rs500 crores, voluntary disclosures should be made regarding the deployment of funds and an adequate monitoring mechanism put in place toensure compliance. 4. There should not be any outstanding warrants for financial instruments of any other nature, at the time of the IPO. 5. In the event of the initial public offer being at a premium and if the rights under warrants or other instruments have been exercised within 12 months prior to such offer, the resultant shares will be not taken into account for reckoning the minimum promoters contribution further, the same will also be subject to lock-in. 6. Code of advertisement as specified by SEBI should be adhered to 7. Draft prospectus submitted to SEBI should also be submitted simultaneously to all stock exchanges where it is proposed to be listed.

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Restrictions on Allotments

1. Firm allotments to mutual funds, FII and employees are not subject to any lock-in period. 2. Within 12 months of the public issue no bonus issue should be made. 3. Maximum percentage of shares, which can be distributes to employees cannot be more than 5% and maximum shares to be allotted to each employee cannot be more t an 200. h

Relaxation Of Entry Norms For Infrastructure Companies

With a view channelize greater flow of funds to infrastructure companies, SEBI granted a number of relaxations to infrastructure companies. These included: Exemption from the requirement of making a minimum public offer of 25 percent of securities and also from the requirement of 5shareholders per Rs.1 lakh of offer made. Exemption from the minimum subscription of 90 per cent provided disclosure is made about the alternate source of funding considered by the company, in the event of under subscription in the public issue. Permission to freely price the offer in the domestic market provided the promoter companies  along with equipment suppliers and other strategic investors subscribe to 50 percent of the equity at the same price as the price offered to the public or at a price higher than that offered to the public.  Permission to keep the issues opens for 21 days to enable the companies to mobilize funds. Exemption from requirement to create and maintain a debenture redemption reserve in case of debenture issues as provided in the SEBI Disclosure & Investor Protection Guidelines . These concessions are available to them if these are appraised by a Development Financial Institution, Infrastructure Development Finance Corporation or Infrastructure Leasing and Financing Services Ltd. and there is a minimum financial participation by them. The minimum participation of the appraising agency, initially fixed at 10% of project cost, was reduced to 5%. Further, the minimum participation can be met by any of the appraising agencies, jointly or severally, irrespective of whether they appraise the project or not.

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Eligibility Norms For Public Issues/Offers For Sale By Companies In The It Sector

Eligibility norms were modified to provide that a company in the IT Sector going for IPO/offer for sale shall have track record of distributable profits as per Section 205 of the Companies Act in three out of five years in the IT business/from out of IT activities.

It can also access the market through the alternative route of appraisal and financing by a bank or financial institution. The same conditions would apply also to a listed company which has changed its name to reflect activities in IT sector.

SEBI widens net for fake IPO bidding probe

y

y y

Sebi has decided to conduct a detailed probe on a number of IPOs and would seek relevant data and information about them from bourses, merchant bankers and other entities New Delhi: Market regulator SEBI (Securities and Exchange Board of India) has begun a probe into possible use of fake bids for artificially pushing up the subscription levels in numerous IPOs (initial public offers) over past few years, with a modus-operandi similar to that in Vaswani Industries case. After halting Vaswani Industries listing earlier this month on suspicion of irregularities in its IPO bidding, the market watchdog last week ordered a detailed probe into the matter, which would be completed by the next month. However, SEBI has now received complaints of many IPOs in past 2-3 years, alleging that promoters roped in some operators to inflate the IPO subscription level with fake bids, which they withdrew at a later stage or cashed in on the first day of listing. Concerned over the possible scale of the alleged manipulation, SEBI has decided to conduct a detailed probe on a number of IPOs and would soon seek relevant data and information about them from stock exchanges, merchant bankers and other entities, sources said. The probe would focus particularly on those IPOs where bids were withdrawn during the time the offers had remained open or those cases where shares had plummeted sharply on the first day of the listing, they added. Typically in such cases, the IPO-bound companies promoters, or at times merchant bankers with or without the knowledge of the company, approach certain IPO operators to put in fake bids in investor categories like retail, HNIs (high net worth individuals) and body-corporates. These fake bids help inflate the overall bid levels and thus attract the innocent investors for the public offer. If the desired levels of subscription are achieved during the bidding time, the fake bids are withdrawn, while in some cases the shares alloted for these fake bi s are sold d off within minutes of the listing.

51

y y y

y y

In some cases, means like stop-payment and wrong cheques are also used to withdraw the bids at a later stage. The funding for these fake bids is provided by company promoters or merchant bankers to the operators, sources said. According to them, more than promoters, it is merchant bankers and other advisors who are responsible for such kind of manipulations as they first suggest high valuations to push their fees higher and then resort to such practices for theIPOs to sail through. The fees of bankers and advisors are generally linked to the size of the public offers, which in turn are linked to the valuation of the shares being sold. Sources said that the practice is similar to circular trading in secondary ma rket, where demand is artificially pushed up through dummy sales and purchase of shares.

52

IRDA: IPO Guidelines-

The sectoral regulator IRDA today said it has finalized the IPO guidelines for insurance companies and has referred the same to the capital markets watchdog SEBI for final approval which is expected soon. The government had proposed to ease the norms to allow insurers to list after five years of operation, instead the current 10-year practice. As per the Insurance Act, promoters having 26 percent stake can offload equity after 10 years of operation. The legislation also empowers the government to reduce the mandatory period. IRDA had notified the disclosure norms, necessary for providing details about the operations and balance sheets on quarterly and yearly basis. The IPO guidelines will deal with minimum norms that a company must fulfill before hitting the capital markets.

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CURRENT IPO'S
Issuer Company Issue Open Issue Close Offer Price (Rs.) Issue Type

Issue Size (Crores Rs.)

VMS Industries Ltd IPO

May 30, 2011 May 30, 2011

Jun 02, 2011 Jun 02, 2011

36/- to 40/-

IPO-BB

25.75

Timbor Home Limited IPO

54/- to 63/-

IPO-BB

19.93 - 23.25

Oil & Natural Gas Corp. Ltd FPO Steel Authority of India Ltd (SAIL) FPO Galaxy Surfactants Ltd IPO Power Finance Corporation Ltd FPO Aanjaneya Life care Ltd IPO Sanghvi Forging & Engineering Ltd IPO

Jul 05, 2011

Jul 08, 2011

FPO-BB

Jun 13, 2011

Jun 17, 2011 May 19, 2011 May 13, 2011 May 12, 2011 May 09, 2011 May 03, 2011 Apr 29, 2011

FPO-BB

May 13, 2011 May 10, 2011 May 09, 2011 May 04, 2011

325/- to 340/193/- to 203/228/- to 240/80/- to 85/-

IPO-BB

192.73 - 201.62

FPO-BB

4,578.20

IPO-BB

117.00

IPO-BB

36.90

Vaswani Industries Ltd IPO

Apr 29, 2011

45/- to 49/-

IPO-BB

49.00

Servalakshmi Paper Ltd IPO

Apr 27, 2011

27/- to 29/-

IPO-BB

60.00

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Innoventive Industries Ltd IPO Future Ventures India Ltd IPO Paramount Print packaging Ltd IPO

Apr 26, 2011

Apr 29, 2011 Apr 28, 2011 Apr 25, 2011 Apr 21, 2011

117/- to 120/10/- to 11/-

IPO-BB

219.58

Apr 25, 2011

IPO-BB

750.00

Apr 20, 2011

32/- to 35/-

IPO-BB

45.83

Muthoot Finance Ltd IPO Shilpi Cable Technologies Ltd IPO

Apr 18, 2011

160/- to 175/-

IPO-BB

901.25

Mar 22, 2011

Mar 25, 2011

65/- to 69/-

IPO-BB

55.88

PTC India Financial Services Ltd IPO

Mar 16, 2011

Mar 18, 2011

26/- to 28/-

IPO-BB

438.76

Lovable Lingeries Ltd IPO

Mar 08, 2011

Mar 11, 2011

195/- to 205/-

IPO-BB

93.28

Acropetal Technologies Ltd IPO

Feb 21, 2011

Feb 24, 2011

88/- to 90/-

IPO-BB

170.00

Fineotex Chemical Ltd IPO

Feb 23, 2011

Feb 25, 2011

60/- to 72/-

IPO-BB

29.48

Sudar Garments Ltd IPO

Feb 21, 2011

Feb 24, 2011

72/- to 77/-

IPO-BB

69.98

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Coal India IPO Mother of all IPOs!

It is a known fact that the Primary market exuberance feeds on secondary market sentiment. And, the prevailing positive rub-off from secondary markets can be clearly sensed from the way the corporate India is hitting markets with their public issues to latch to the -on momentum in the liquidity wave. Moreover, when the system is a flush with ample liquidity, a giant-sized IPO can put to test the integrity of the markets and the prevailing market sentiment. In such a scenario, the worlds largest coal producer, Coal India Ltd, planned to raise around $3.4 billion (Rs. 15, 000 crores) through IPO by offering 631.6 million equity shares by the government. The mega-issue opened on October 18 and closed on October 21. The Coal India IPO could go a long way in determining the success of the Indian governments efforts to raise billions of dollars through disinvestment this fiscal year. Last few PSU follow-on offerings (NMDC and NTPC) of 2010 were met with cold response, especially from the retail investors, on account of being over priced and had to be bailed out by big-daddy LIC. Coming back to Coal India IPO, the government has fixed the price band of Rs.225 -245 through a 100% book building process. Analysts are expecting Coal India which is the best bet on Indias rising coal deficit scenario to report EPS at 15% CAGR over FY10-13. As per the observers of the IPO market, the stock could list positively with 15 -20% premium, valuing the stock at 15-16 times the companys FY11 earnings, which is cheaper than some of the listed companies in the power utility sector. Further, the government has indicated that domestic coal prices could see an increase if profit-sharing arrangements in the proposed Mines and Minerals Development and Regulation Act were implemented. In my opinion, Coal India deserves to trade at a premium to global coal peers with a price target anywhere between Rs.300 to Rs.325 on listing. The coal major has substantial headroom to increase prices in coming years and will provide a linear earnings trajectory and impressive returns on the capital employed.

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ELIGIBILITY CRITERIA FOR IPOs a. Companies have been classified as large cap companies and small cap companies. A large cap company is a company with a minimum issue size of Rs. 10 crores and market capitalization of not less than Rs. 25 crores. A small cap company is a company other than a large cap company. a. In respect of Large Cap Companies i. The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as "the Company") shall be Rs. 3 crores; and ii. iii. The minimum issue size shall be Rs. 10 crores; and The minimum market capitalization of the Company shall be Rs. 25 crores (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price). b. In respect of Small Cap Companies i. The minimum post-issue paid-up capital of the Company shall be Rs. 3 crores; and ii. iii. The minimum issue size shall be Rs. 3 crores; and The minimum market capitalization of the Company shall be Rs. 5 crores (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price); and iv. The minimum income/turnover of the Company should be Rs. 3 crore s in each of the preceding three 12-months period; and v. The minimum number of public shareholders after the issue shall be 1000. vi. A due diligence study may be conducted by an independent team of Chartered Accountants or Merchant Bankers appointed by the Exchange, the cost of which will be borne by the company. The requirement of a due diligence study may be waived if a financial institution or a scheduled commercial bank has appraised the project in the preceding 12 months.

57

b. For all companies : i. In respect of the requirement of paid-up capital and market capitalization, the issuers shall be required to include in the disclaimer clause forming a part of the offer document that in the event of the market capitalization (product of issue price and the post issue number of shares) requirement of the Exchange not being met, the securities of the issuer would not be listed on the Exchange. ii. The applicant, promoters and/or group companies, should not be in default in compliance of the listing agreement. iii. The above eligibility criteria would be in addition to the conditions prescribed under SEBI (Disclosure and Investor Protection) Guidelines, 2000.

58

ON THE JOB TRAINING

On the job training (OJT) is the practical exposure of the real industry and helps an individual in acquiring the skills for the career road ahead of him. The objectives of my OJT are as follows: y y y First and foremost objective is to generate sales for the company, as much as possible. To gain complete knowledge about the different products and the stock market. To build relationships with new clients and endeavor to make them loyal clients of Religare Securities Ltd., Rajouri Garden.

y y

To maintain good relationship with branch employees. To come up with innovative ideas for the sales promotion of Religare Securities Ltd., Rajouri Garden.

To make the clients aware of the benefits of the products and convince them to buy the product.

WEEK WISE ON THE JOB TRAINING1st Week Work: In the first week, our group of four students was told to observe the stock market and its operations. We were told to have an idea about the company layouts, products and various operations. We were told to maintain branch discipline whatsoever happens. Mr. Santosh Singh. Branch Manager, Religare Securities Ltd., Rajouri Garden, asked us to report to him what we observed in the first week after the completion of first week. Learning: I learned about the basics of share trading. I learnt about the products being offered and even the facilities which Religare Securities offer to its clients. We were told that Religare Securities offers products like trading in equity and commodity to its clients. Every product has its various plans like platinum, gold, silver, excel and flexi, every plan varies on the basis of percentage of brokerage being charged and the margin money which the investor has to invest. During this week I came across terms like shares, stocks, terminal, short selling, margin money, demat account and concepts regarding shot selling, call and put, options, futures,etc.

59

I also learnt the basic regarding how one can trade in shares every transaction in the stock , exchange is carried out through licensed members called brok ers. To trade in shares, you have to approach a broker However, since moststock exchange brokers deal in very high volumes, they generally do not entertain small investors. These brokers have a network of sub-brokers who provide them with orders. The general investors should identify a sub-broker for regular trading in shares and place his order for purchase and sale through the sub-broker. The sub/broker will transmit the order to his broker who will then execute it.

2nd Week Work: During the second week of our SIP, we were assigned the external mentors. Under their guidance we were given the task of tele-calling and to convince the potential clients to buy our products. Learning: During this week we learnt how the pitching is done and how to convince them to buy at least one of our products. The whole week was dedicated to tele -calling. For pitching we were guided by the Acquisition Team of Religare Securities whose work was only to generate clientele for Religare Securities. The process of pitching comprises of following steps: y Greet the client. y Introduce yourself along with Religare Securities y Ask the client if he/she can spare 2mins.from their crucial time. y If yes, then further ask them if they are aware of Religare Securities, if not, then brief them about Religare Securities. y Then further continue by asking if they have ever invested in share market,if no then pursue them to invest and tell about the products and services being offered by Religare Securities to its clients. y Main focus to be laid upon was on brokerage being charged. y In case the client gets interested, then we have to fix a meeting with him/her, ask for the feasible place, time and date for meeting. y Rest we transfer the calls to RM-Relationship Managers of Religare Securities for follow-up purposes. y If the client says no, or he/she is busy, call later etc, we have to for the next time when it will be feasible for us to make a call to them. We started our calling as per the guidance of Acquisition Team. For Example: Good Morning Sir/Maam This is Shivakriti calling you from Religare Securities Can I have 2mins.out of your crucial time please?

60

Client says YES: Thank you Sir/Maam, Sir, since I am from Religare Securities, a broking firm providing all financial services under one roof. Can I talk to you regarding opening a de -mat account with Religare Securities? If client saysYes- Explain/ brief the product plan. No- Motivate the client to invest. Not Interested i) Ask for the reason for dis-interest. ii) Any past experience with any other broking house. iii) Any other query Client says NO: Sir/Maam sorry to disturb you, when can I call you again. 3rd Week Work: Week 3 was a complete selling experience for me. All the six working days of this week I did tele-calling. All the callings were a very good learning experience for me. Learning: I learnt how to handle the clients while calling and how to respond their queries without losing our confidence. I also learnt this week about the true essence of suggestive selling. I learnt that during selling, one should always keep in mind that we should always make the client feel that he is right and simultaneously know in our heart that the client is n ever right. And hence we should guide the client smoothly, without them knowing, to make them purchase our products. 4th Week Work: I continued with tele-calling, though the results were in negative. Learning: This week I learnt about the other formalities that are done after a new client has made. A form is filled with the required formalities (ID Proof-PAN Card, Address Proof-D/L, Voter ID, Passport, Rent Agreement etc. and Passport size photograph alongwith a Cheque required for account opening). Then the form is punched online by the back office staff. 5th Week Work: This whole week was again dedicated to tele calling.

61

6th Week Work: This week also was completely dedicated to tele-calling and selling. This week I learnt about the working of the back office staff. Learning: I also learnt that how the client record is maintained and updated every day. The confirmation is sent to all the existing clients about their transactions made in the equity and commodity market to maintain and enhance client satisfaction. 7th Week Work: This week most of the time went in field work I went to collect visiting cards and spread awareness regarding Religare Securities and share market Mr. Santosh Singh, Branch . Manager, Religare Securities Ltd., Rajouri Garden, dealt with all the complaints with ease and I learnt a lot from him. Learning: Field work gave or can say provided me a platform of dealing with clients face -toface. I was able to create awareness regarding Religare Securities and even re garding share market and its nittigrities. 8th Week Work: This week was dedicated in going through the nittigrities left. Under the benign supervision of Mr. Santosh Singh, Branch Manager, Religare Securities Ltd., Rajouri Garden I learnt a lot.

Overall Learning: This activity based learning in Religare Securities under the benign supervision of Mr.Santosh Kr.Singh-Branch Head; Religare Securities was a lifetime experience. Dealing with clientele, handling the queries of the clients via calls and even face-to-face provided an edge. Training in Religare Securities came in as a boom as I got to know details regarding share market. According to the data provided, most of the calls being made catered between 18-30yrs.since it is assumed that people of this age range have less responsibilities to bear and thus have maximum risk bearing capacity and therefore are more keen towards investments as they have more disposable income as compared to older and retired people .

62

9% 10% 23%

18-30 yrs.
30-40 yrs. 58% 40-50 yrs.

50 and above

While tele-calling I learnt that the clients who were mostly interested to listen about investment in share market were the people who were into service. Since they are able to save sufficient amount from their disposable income. Professionals were almost busy with their hectic schedules which leave them with bare minimum time to ponder over share market investment. Though, I got a chance to talk to few students who keenly listened to what I wanted to tell, either they were a bit interested in investment or mere out of curiosity.

6%

6% 7%

Service Self employed

Professional 24% 57% Student

Retired

While tele-calling I came across clients which were already associated with some other broking firms, like reliance money, share khan, India bulls, icici direct etc. Reliance Money , being the new entrant in the market is moving t a fast pace and using the right pat to expand. h While Religare needs to maintain the quality of services and assistance offered to the customers keep moving ahead consistently. ICICI being the toughest and largest player, it h as a good quantity of customers inspite it charges the most expensive brokerages, because the account opening charges are free.

63

ICICI direct

India Bulls

Karvy

Religare

Share khan

others

3%

3%

5% %

3 %

The core inference which I drew after completing tele-calling was that more than half of the clients were not interested, in which most of the clients were not investing due to high volatility in the share market, some had already been associated with some other broking firm previously and had suffered losses, hence they were not in the condition to invest in more, very few of the population were interested and listened to what I wanted to convey.

not interested

busy

9%

6%

3 %

37%

disconnected

interested

35%

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Not Interested
 
9% % 3%

In total it was valuable learning experience for me.

h rtag

f fund

n tim

58%





alr ad a

iat d with th r br king firm

uff r d l

pr .

 

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BIBLIOGRAPHY
www.nseindia.com www.religaresecurities.in www.en.wikipedia.org/wiki/Initial_Public_offering www.smctradeonline.com/ipo-online.aspx www.investopedia.com www.moneystuffworks.com www.exinfm.com/board/ipo_process.htm www.indiainfoline.com/Markets/IPO/

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