INITIAL PUBLIC OFFERING

OBJECTIVES OF THE STUDY

To study the IPO registration procedure. To study the criteria required for a company to issue its IPO. To evaluate the risks associated with investing in IPO. To study the different IPO investment strategies.

WHAT IS IPO??
The first sale of stock by a private company to the public. Is 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.

SOME TERMS REGARDING IPO

Follow on public offering Rights issue Preferential issue SEBI s role in issue SEBI recommends an issue? Contents of the issue Is money safe?

IPO PROCESS
1.Once you have chosen an Underwriter, you are now in registration and in the quiet period 2.Initial Organization Meeting
a. Review the schedule b. Discuss offering terms c. Review legal issues d. Accounting issues e. Publicity issues; industry conferences f. Directed shares

CONTD
3.Company Diligence Sessions and Drafting
a. Management must be involved heavily b. During this time, Underwriters conduct their customer and legal due diligence

4.File Registration Statement

a. Generally 4-6 weeks after Org. Meeting b. You are now in the waiting period

5.Address Other Items

a. Nasdaq Listing b. Stockholder Approvals

CONTD
6.Obtain SEC comments (30 days after filing) and respond (usually one week or so) 7.Road Show (2-2 weeks; respond to further SEC Comments) 8.Pricing the deal and going effective

IPO INVESTMENT STRATEGIES

 Understand the working of IPO  Gather knowledge Investigate before investing  Know your broker  Measure the risk involved Invest at your own risk

THE SALE AUCTION TAKES THE FOLLOWING FORMS:

Best efforts contract Firm commitment contract All-or-none contract Bought deal Dutch auction

RISK ASSOCIATED WITH IPO

Potential risk arising out of an IPO is: 1) Regulatory risks: Stock Exchange requirements when preparing for an IPO Enhanced corporate governance responsibility Increased regulatory scrutiny New regulation in relation to the publication of financials Insider trading post IPO

2) Shareholder related risks Alleged errors, omissions, misstatements in the listing offer document Increase in number of shareholders Change in geographical location of shareholders Share price Poor earnings 3 Counterparty risks Potential indemnities to underwriters in the event of being sued as a result of the misstatements, etc 4 Employee risks Pension plan changes:

ISSUE PRICE
Appoints lead manager to decide on appropriate price. There are two ways in which price of IPO can be determined: i) The company ii) Through the process of book building

THE BOOK BUILDING MECHANISM OF IPO

SEBI guidelines, 1995 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 securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document.

HOW BOOK BUILDING WORKS IN INDIA

SEBI GUIDELINES FOR IPO

1) 2) 3) 4) 5) 6) 7) 8) 9) 10) IPO of small companies Size of public issue Promoter contribution Collection centers for receiving application Regarding allotment of shares Timeframes for the Issue and Post- Issue formalities Dispatch of Refund Orders Other regulations pertaining to IPO Restrictions on other allotments Relaxations to public issues by infrastructure companies

 Muthoot Finance Ltd (MFL) is a Kerala based non-banking finance company which provides loans against gold, fixed investment options, money transfer services, insurance, securities, foreign exchange, vehicle, and asset finance services. It is primarily in the business of lending against used household gold jewellery to individuals.

Issue Details
Issue Opens Issue Closes Price Band (INR/Share) Face Value (INR/Share) No of Equity Shares (mn) Size of the Issue (INR mn) IPO Grading Agency IPO Grade April 18, 2011 April 21, 2011 160 175 10 51.5 8,240 / 9,013 CRISIL / ICRA 4/5

Shareholding Pattern (%)

GROUP Promoters & Promoter Group Non Promoter Holding Public TOTAL PRE IPO 93.0 7.0 100 POST IPO 80.1 6.0 13.9 100

Investment Rationale
Leader in the Gold Financing Segment Wide & Increasing Network Strong Management Capabilities to Lead the Business Wide Geographical Presence Strong Funding Profile Robust Operational Metrics

Concerns
Vulnerable to Interest Rate Risk. Sustainability of Regulatory Arbitrage viz. Banks & NBFCs. Margin compression due to increased competition. Volatility in Gold prices.

Objects of the Issue

To augment its capital base to meet future capital requirements to provide for funding of loans to our customers General corporate purpose