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Documentos de Profesional
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NITIN B. JAIN
Research Guide:
Lecturer
DECLARATION
Place: Mumbai
Date:
NITIN B. JAIN
CERTIFICATE
(Dr. R. Gopal)
Director,
Department of Business Mgt,
Padmashree Dr. D.Y. Patil University
Place: Mumbai
Date:
ACKNOWLEDGEMENTS
Place: Mumbai
Date:
NITIN B. JAIN
TABLE OF CONTENT
Chapter
No Title Page No
A List of tables 7
B List of figures 8
C List of abbreviations 9
D Executive summary 10
E Objective of the study 11
F Research methodology 12
G Review of literature 13
LIST OF TABLES
LIST OF FIGURES
PARTICULARS PAGE NO
Diagram On Overview Of Primary And secondary 18
Market
Types Of Issues 22
LIST OF ABBREVIATIONS
EXECUTIVE SUMMARY
RESEARCH METHODOLOGY
Primary data consist of the Survey done by meeting people who are
either Customers in Share Market or have idea about it. The data can
be collected by laymen to find out their needs. The sample size was
taken was 50 responded. It also includes case analysis of some
corporate houses IPO’s.
LITERATURE REVIEW
This valuable resource is for the executives and advisers of any firm
considering making the transition from a private to public company.
An IPO is not just a short-term financial transaction. It often marks the
turning point in the life of a company, enabling it to launch new
products, enter new markets, accelerate its growth, and attract
valuable employees. If an IPO is the way to grow, then a "balanced
scorecard" approach needs to be used - an honest evaluation of the
process and consideration of whether an IPO, despite its glamour,
will or will not produce the desired results. Initial Public Offerings
uncovers many of the successful approaches and common pitfalls to
going public. It helps officials decide whether an IPO or other
financing alternatives is the right strategy, determine which stock
market to use, plan and execute the IPO, and stay on track following
the IPO - helping companies reach their true potential for success.
Modern day Stock Exchanges are most of the centers to trade in the
existing financial assets. In this respect, they have come a long way
in the sense that these days, they act as a platform to launch new
securities as well as act as most authentic and real time indicator of
the general economic sentiment. The zone of activities in the capital
market is dependent partly on the savings and investment in the
economy and partly on the performance of the industry and economy
in general. In other words capital market constitutes the channel
through which the capital resources generated in the society and
made available for economic development of the nation.
DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 16
INTIAL PUBLIC OFFERING IN INDIA
WHAT IS AN IPO?
The securities which the companies issue for the first time to the
public either after incorporation or on conversion from private to
public company is called “INITIAL PUBLIC OFFERING” or “IPO”
Indian capital market was initiated with establishing the Bombay stock
exchange in the year 1875.at that time the main function of stock
exchange was to provide place for trading in the stocks. Now the
exchange has completed more than 25 years. It has undergone
several changes.
Initially the IPO was called ‘New Issue’ and the issues in the Primary
Market were controlled by CCI (Controller of capital issue). It was
working as a department of MOF (ministry of finance). There were
very few issues every year. CCI was highly conservative and hardly
allowed any premium issues. Also, the regulatory framework was
inadequate to control several issues relating to Primary Market.
Therefore, in the year 1992 it was abolished.
SEBI has come up with the guidelines for disclosures and investors
protection. SEBI has framed rules for various intermediaries like
Merchant Bankers, Underwriters, Brokers, Bankers, Registrars and
Transfer Agents, Depositories, Stock Exchanges etc. These rules are
on the line of similar rules in western world. This has attracted foreign
institutional and individual investors to invest money in India. This has
resulted in exponential growth of Capital Market in this last decade.
TYPES OF ISSUES
Public issues can be further classified into Initial Public offerings and
further public offerings. In a public offering, the issuer makes an offer
for new investors to enter its shareholding family. The issuer
company makes detailed disclosures as per the DIP guidelines in its
offer document and offers it for subscription. The significant features
are illustrated below:
PRIVATE PLACEMENT
It is an issue of shares or of convertible securities by a company to a
select group of persons under Section 81 of the Companies Act, 1956
which is neither a rights issue nor a public issue. This is a faster way
for a company to raise equity capital. A private placement of shares
DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 23
INTIAL PUBLIC OFFERING IN INDIA
OFFER DOCUMENT
Means Prospectus in case of a public issue or offer for sale and
Letter of Offer in case of a rights issue which is filed Registrar of
Companies (ROC) and Stock Exchanges. An offer document covers
all the relevant information to help an investor to make his/her
investment decision.
determined later. An RHP for and FPO can be filed with the ROC
without the price band and the issuer, in such a case will notify the
floor price or a price band by way of an advertisement one day prior
to the opening of the issue. In the case of book-built issues, it is a
process of price discovery and the price cannot be determined until
the bidding process is completed. Hence, such details are not shown
in the Red Herring prospectus filed with ROC in terms of the
provisions of the Companies Act. Only on completion of the bidding
process, the details of the final price are included in the offer
document. The offer document filed thereafter with ROC is called a
prospectus.
ABRIDGED PROSPECTUS
Means the memorandum as prescribed in Form 2A under sub-section
(3) of section 56 of the Companies Act, 1956. It contains all the
salient features of a prospectus. It accompanies the application form
of public issues.
LETTER OF OFFER
Means the offer document prepared by company for its rights issue
and which is filed with the Stock Exchanges. The letter of offer
contains all the disclosures as required in term of SEBI (DIP)
guidelines and enable shareholder in making an informed decision.
PLACEMENT DOCUMENT
Means document prepared by Merchant Banker for the purpose of
Qualified Institutions placement and contains all the relevant and
material disclosures to enable QIBs to make an informed decision
LOCK-IN
“Lock-in” indicates a freeze on the shares. SEBI (DIP) Guidelines
have stipulated lock-in requirements on shares of promoters mainly to
ensure that the promoters or main persons who are controlling the
company, shall continue to hold some minimum percentage in the
company after the public issue. The requirements are detailed in
Chapter IV of DIP guidelines. There is lock-in on the shares held
before IPO and also on shares acquired through preferential
allotment route. However there is no lock- in on shares/ securities
allotted through QIP route. The requirements are detailed in Chapter
IV, Chapter XIII and Chapter XIIIA of DIP guidelines.
PROMOTER
The promoter has been defined as a person or persons who are in
over-all control of the company, who are instrumental in the
formulation of a plan or programme pursuant to which the securities
are offered to the public and those named in the prospectus as
promoters(s). It may be noted that a director / officer of the issuer
company or person, if they are acting as such merely in their
professional capacity are not be included in the definition of a
promoter.
'Promoter Group' includes the promoter, an immediate relative of the
promoter (i.e. any spouse of that person, or any parent, brother, sister
or child of the person or of the spouse). In case promoter is a
company, a subsidiary or holding company of that company; any
company in which the promoter holds 10% or more of the equity
capital or which holds 10%
Or more of the equity capital of the Promoter; any company in which
a group of individuals or companies or combinations thereof who
holds 20% or more of the equity capital in that company also holds
20% or more of the equity capital of the issuer company. In case the
promoter is an individual, any company in which 10% or more of the
share capital is held by the promoter or an immediate relative of the
promoter' or a firm or HUF in which the 'Promoter' or any one or more
of his immediate relative is a member; any company in which a
company specified in, holds 10% or more, of the share capital; any
HUF or firm in which the aggregate share of the promoter and his
GREEN-SHOE OPTION
A Green Shoe option means an option of allocating shares in excess
of the shares included in the public issue and operating a post-listing
price stabilizing mechanism for a period not exceeding 30 days in
accordance with the provisions of Chapter VIIIA of DIP Guidelines,
Which is granted to a company to be exercised through a Stabilizing
Agent? This is an arrangement wherein the issue would be over
allotted to the extent of a maximum of 15% of the issue size. From an
investor’s perspective, an issue with green shoe option provides more
probability of getting shares and also that post listing price may show
relatively more stability as compared to market.
E-IPO
A company proposing to issue capital to public through the on-line
system of the stockexchange for offer of securities can do so if it
complies with the requirements under Chapter 11A of DIP Guidelines.
The appointment of various intermediaries by the issuer includes a
prerequisite that such members/registrars have the required facilities
to accommodate such an online issue process.
SAFETY NET
Any safety net scheme or buy-back arrangements of the shares
proposed in any public issue shall be finalized by an issuer company
DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 29
INTIAL PUBLIC OFFERING IN INDIA
SYNDICATE MEMBER
The Book Runner(s) may appoint those intermediaries who are
registered with the Board and who are permitted to carry on activity
as an ‘Underwriter’ as syndicate members. The syndicate members
are mainly appointed to collect and entre the bid forms in a book built
issue.
FLIPPING
Flipping is reselling a hot IPO stock in the first few days to earn a
quick profit. This isn't easy to do, and you'll be strongly discouraged
by your brokerage. The reason behind this is that companies want
long-term investors who hold their stock, not traders. There are no
laws that prevent flipping, but your broker may blacklist you from
future offerings. Institutional investors flip stocks all the time and
make big money. The double standard exists and there is nothing we
can do about it because they have the buying power. Because of
flipping, it's a good rule not to buy shares of an IPO if you don't get in
on the initial offering. Many IPOs that have big gains on the first day
will come back to earth as the institutions take their profits.
DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 30
INTIAL PUBLIC OFFERING IN INDIA
HARD UNDERWRITING
Hard underwriting is when an underwriter agrees to buy his
commitment at its earliest stage. The underwriter guarantees a fixed
amount to the issuer from the issue. Thus, in case the shares are not
subscribed by investors, the issue is devolved on underwriters and
they have to bring in the amount by subscribing to the shares. The
underwriter bears a risk which is much higher in soft underwriting.
SOFT UNDERWRITING
Soft underwriting is when an underwriter agrees to buy the shares at
later stages as soon as the pricing process is complete. He then,
immediately places those shares with institutional players. The risk
faced by the underwriter as such is reduced to a small window of
time. Also, the soft underwriter has the option to invoke a force
Majeure (acts of God) clause in case there are certain factors beyond
the control that can affect the underwriter’s ability to place the shares
with the buyers.
DIFFERENTIAL PRICING
Pricing of an issue where one category is offered shares at a price
different from the other category is called differential pricing. In DIP
Guidelines differential pricing is allowed only if the security to
applicants in the firm allotment category is at a price higher than the
price at which the net offer to the public is made. The net offer to the
public means the offer made to the Indian public and does not include
firm allotments or reservations or promoters’ contributions.
ASBA INVESTOR
Means an Investor who intends to apply through ASBA process and
A. is a “Resident Retail Individual Investor”
B. is bidding at cut-off, with single option as to the number of shares
bid for;
C. is applying through blocking of funds in a bank account with the
SCSB;
D. has agreed not to revise his/her bid;
E. is not bidding under any of the reserved categories.
MINORITY IPO
An initial public offering in which a parent company spins off one of its
subsidiaries or divisions, but retains a majority stake in the company
after issuance. This means that after the public offering, the parent
company will still have a controlling stake of the new public company.
The parent company may retain this majority stake forever or may
slowly dissolve their ownership over time. This type of IPO allows the
company to raise funds, accessing the value of the subsidiary, to fund
its own operation or return value to shareholders.
UNDERPRICING
The pricing of an initial public offering (IPO) below its market value.
When the offer price is lower than the price of the first trade, the stock
DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 35
INTIAL PUBLIC OFFERING IN INDIA
QUIET PERIOD
In terms of an IPO, the period where an issuer is subject to a SEC
ban on promotional publicity. The quiet period usually lasts either 40
or 90 days from the IPO. In other words, If you take your company
public, you can't talk about your stock to anybody for 3 months.
There are two time windows commonly referred to as "quiet periods"
during an IPO's history. The first and the one linked above is the
period of time following the filing of the company's registration
statement, but before SEC staff declare the registration statement
effective. During this time, issuers, company insiders, analysts, and
other parties are legally restricted in their ability to discuss or promote
the upcoming IPO.
The other "quiet period" refers to a period of 40 calendar days
following an IPO's first day of public trading. During this time, insiders
and any underwriters involved in the IPO, are restricted from issuing
any earnings forecasts or research reports for the company.
Regulatory changes enacted by the SEC as part of the Global
Settlement, enlarged the "quiet period" from 25 days to 40 days on
July 9, 2002. When the quiet period is over, generally the lead
underwriters will initiate research coverage on the firm.
Further to this, the NASD and NYSE have approved a rule mandating
a 10-day quiet period after a secondary offering and a 15-day quiet
period both before and after expiration of a "lock-up agreement" for a
securities offering.
Cost of Reporting
Disclosure
Self dealings
Inactive market low price
Control
UNPREDICTABLE:
The Unpredictable nature of the IPO’s is one of the major reasons
that investors advise against investing in IPO’s. Shares are initially
offered at a low price, but they see significant changes in their prices
during the day. It might rise significantly during the day, but then it
may fall steeply the next day.
IPO depends upon the state of the stock market at that particular
time.
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 big step, it is essential to understand some of the
challenges, basic risks 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.
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
corporation's financial statements, capital structure, and other
financial data.
MARKET RISK:
It would beneficial to check out the demand for the IPO in the market,
i.e., the appeal of the IPO to other investors in the market. Hence,
researching market risk involves examining the appeal of the
corporation to current and future market conditions.
TRENDS IN IPO
PERFORMANCE IN 90s
Let us have a look at the general development of the Primary Markets
in the nineties. There have been many regulatory changes in the
regulation of primary market in order to save investors from
fraudulent companies. The most path breaking development in the
primary market regulation has been the abolition of CCI (Controller of
capital issues). The aim was to give the freedom to the companies to
decide on the pricing of the issue and this was supposed to bring
about a self-managing culture in the financial system. But the move
was hopelessly misused in the years of 1994-1995 and many
companies came up with issues at sky-high prices and the investors
lost heavily. That phase took a heavy toll on the investor’s sentiment
and the result was the amount of money raised through IPO route.
2001-2002-ALMOST CLOSED
There were hardly any IPOs and those who ventured, got a lukewarm
response. A depressed Secondary Market had ensured that the
doors for the Primary Market remained closed for the entire FY 2001-
2002.There were hardly any IPOs in FY 2001-2002.
Even as the secondary market moved into top gear in 2003 the
primary market too scripted its own revival story, buoyed largely by
the Maruti IPO which was oversubscribed six and a half times. In
2003 almost all primary issues did well on domestic bourses after
listing, prompting retail investors to flock to IPO’s. All IPO’s, including
Indraprastha Gas and TV Today Network which was oversubscribed
51 times showed the growing appetite for primary issues. Divi Labs
hit the market in February followed by Maruti. Initially, the Maruti
share price was considered steep at Rs125 per share for a Rs5 paid-
up share. By the end of the year, the stock had climbed to over
DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 45
INTIAL PUBLIC OFFERING IN INDIA
Rs355. Close on the heels of Maruti, came the Uco Bank IPO, which
attracted about 1mn applicants. The primary issue of Indian Overseas
Bank attracted about 4.5mn applicants and Vijaya Bank over Rs40bn
in subscriptions. The last one to get a huge response was
Indraprastha Gas, which reportedly garnered about Rs30bn. TV
Today’s public offer was expected to draw in excess of Rs30bn. In
overseas listings, the only notable IPOs were Infosys Technology's
secondary ADR offering and the dull debut of Sterlite Group company
Vedanta on the London Stock Exchange.
It was really Maruti Udyog that took the lead with its new issue in
June. The issue was heavily over-subscribed and by the middle of
December the share value appreciated 186 per cent. The near
trebling of the investment in less than 6 months inspired the retail
investor who is now back again in the market scouting for good
scrips.
the care taken by SEBI and the companies it is unlikely that the
experience of 1995 will be repeated.
2003-04 19 3191.10
2004-05 23 14662.32
2005-06 76 10797.88
2006-07 76 23706.16
2007-08 84 41323.45
2008-09 21 2033.99
PRICING OF ISSUE
ARRIVAL OF SEBI
After the Arrival of SEBI free market policy is followed for pricing of
issue. Merchant Bankers are responsible for justifying the premium.
The company was allowed to give future profit projections. A
company can issue shares to applicants in the firm allotment category
at higher price than the price at which securities are offered to public.
Further, an eligible company is free to make public/rights issue in any
denomination determined by it in accordance with the Companies
Act, 1956 and SEBI norms.
BOOK BUILDING
THE LATEST AVTAAR OF PRICE DISOVERY
period and the details of the issue are advertised. The book runner
builds an order book, that is, collates the bids from various investors,
which shows the demand for the shares of the company at various
prices. For instance, a bidder may quote that he wants 50,000 shares
at Rs.500 while another may bid for 25,000 shares at Rs.600.
Prospective investors can revise their bids at anytime during the bid
period that is, the quantity of shares or the bid price or any of the bid
options.
MERCHANT BANKERS
Eligibility criteria-SEBI issues an authorization letter to the finance
companies, which are eligible to work as merchant bankers. The
eligibility criteria depend on network and
infrastructure of the company. The company
should not be engaged in activities that are
banned for merchant bankers by SEBI. SEBI
issues authorization letter valid for 3 years
and the company has to pay necessary fees. Such merchant banker
can be appointed as lead manager for IPO. Responsibility-lead
managers are fully responsible for the content and correctness of the
prospectus. They must ensure the commencement to the completion
of the IPO. Certain guidelines are laid down in section 30 of the SEBI
act 1992 on the maximum limits of the intermediaries associated with
the issue.
GUIDELINES FOR LEAD MANAGERS BY SEBI
Size of the Issue No of Lead Managers
50 cr. 2
50-100 cr. 3
100-200 cr. 4
200-400 cr. 5
Above 400 cr. 1 or more as agreed by the board
BROKERS
All the recognized stock exchange members are called brokers and A
broker offer marketing support, underwriting support, disseminates
information to investors about the issue and distributes issues
stationary at retail investor level. The brokers are governed by rules
of SEBI and the respective stock exchange. The brokers are key to
the success of the issue. The brokers appoint sub brokers who are in
direct contact with the investors.
UNDERWRITERS
The underwriter is the principle player in the IPO providing the firm
with- Reputation-as the underwriter is legally liable and because he
has ongoing dealing with the customers to whom he sells shares. The
underwriter puts his reputation on the line.
Underwriting involves a commitment from the underwriter to
subscribe to the shares of a particular company to the extent it is
under subscribed by the public or existing shareholders of the
corporate. An underwriter should have a minimum net worth of 20
lacs and his total obligation at any time should not exceed 20 times
his net worth. A commission is paid to the writers on the issue price
for undertaking the risks of under subscription. The maximum rate of
underwriting commission paid is as follows.
The fees for underwriter and broker are decided by the company
within the maximum possible limit as fixed by the SEBI.
DEPOSITORIES
Since the year 2000 it’s compulsory that all fresh issue of shares
must be made only in the dematerialized format (DMAT). The
Depository institute issues unique number of every IPO or company,
when shares are allotted to the company/registrar provides
shareholders register to depository in electronic form. Thus
automatically all shareholders get allotment in their DMAT account.
LEGAL ADVISOR.
Normally the company for the purpose of IPO does this appointment.
He is responsible legal compliance of IPO process. There are other
intermediaries like Advertising Agents etc. but the company governs
their role.
SEBI NORMS
DISCLOSURE NORMS.
The above are the major Guidelines for the Investor Protection and
Disclosure Norms. The SEBI has provided rules for every possible
situation.
SEBI GUIDELINES
PROMOTERS CONTRIBUTION
1. Promoters should bring in their contribution including premium
fully before the issue
2. Minimum promoter’s contribution is 20-25% of the public issue.
3. Minimum lock in period for promoter’s contribution is five years.
4. Minimum lock in period for firm allotment is three years.
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 days.
A public issue is affected 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.
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 to ensure
compliance.
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 than 200.
MARKETING OF IPO
The role of marketing, and particularly promotion, in the pricing and
trading of Securities is fairly limited
PRELIMINARY REQUIREMENTS
The company has to complete all legal requirements, appoint all
intermediaries and once they get SEBI card (approval), the process
of marketing of IPO can commence.
TIMING OF IPO
This the most important factor for the
success of IPO. If, secondary market is
depressed, if there is political unrest, if
serious international problems are prevailing
then it is considered to be negative factors
for timing of IPO’s. If these factors are
favorable then the Company must find out
about the timing of other prestigious IPO’s.
This year more than 29 companies are coming with IPO’s. Around
Rs.25, 000-30,000crore of capital is going to be raised this year.
If the sole motivation of a road show were to sell IPO’s to their regular
institutional investors an
and
d if those investors were to hold onto these
stocks, then there would be no motivation for an investment banker to
do more than a minimal amount of promotion since there would be no
need to attract retail investors in early aftermarket trading.
MARKETING
PRESS CONFERENCE
Promoters and Lead Managers call for press conference in each
major investment center. Reporters are briefed about the issue. They
carry it as news-item
item in their papers.
INVESTORS CONFERENCE
The prospective investors are called by
invitation. The Promoters and Lead
Managers give presentations. They reply
to the questions of the investors to boost
their confidence.
ROAD-SHOW
This is like the investors conference but normally is done abroad for
marketing ADR/GDR issues. It is an expensive process and requires
a lot of legal compliances. The company has to observe the rules of
the concerned country. However, road shows are becoming more
and more popular in India.
NEWSPAPER ADVERTISEMENT
The company releases statutory advertisement
advertisements
s in leading
newspapers. The company has to publish abridges prospectus in
leading newspapers. It is the responsibility of the promoters to ensure
that the issuing company and their group companies should not
release any commercial advertisement, which may influence the
investor’s decision for investment.
IPO GRADING
GRADING OF IPOS
Investment decisions in IPOs are becoming increasingly difficult,
given the flurry of public offers that hit the market these days.
Differentiating a good offer from a bad one, assessing the company
fundamentals and verifying the credentials are becoming more
complex. In this backdrop, the Securities and Exchange Board of
India's decision to make IPOs (initial public offers) grading by credit
rating agencies mandatory, is likely to provide some respite to retail
investors.
More often than not, the pricing of any IPO is what influences
the decision of any investor. The rating agencies, in this case,
will not talk about ``what price'' and ``what time'' aspects of the
offer.
Till such time the utility of the IPO grading system is unraveled,
it is advisable for investors to use the grades only as an
additional input to make an informed decision.
Investors need to be convinced about the business potential,
pricing and valuations of an IPO, together with the grading, to
make a final choice.
Small investors demanded it: Who in the world would not say
yes to free actionable investment advice from experts? But are
investor associations even aware of the pitfalls of IPO grading,
and that what will be delivered is a subjective opinion, and that
too incomplete. In spite of disclaimers and education, most
small investors will only look at the grade digit; history tells us
so. As such, they will reject a low-grade IPO and invest in a
high-grade one. But if subsequently low-grade IPOs do well
after listing, they will complain about missed opportunities. The
fundamentals of a company can change dramatically after its
IPO. IPOs are all about the future; IPO grading is all about the
past. Incidentally, of the six graded IPOs that have hit the
market, five low-graded ones were handsomely over-
subscribed and have listed above their offer prices
have already graded all listed stocks (over 2,500 at the least)
which they clearly have not. Are the rating agencies not
misguiding investors by calling absolute marks as relative
grades?
With grading, we are taking the small investor away from the
stated objective of “informed decision making”. Equity is risk
capital, and investors should know about the company they
invest in. Protecting investor interests is also to ensure that they
are not guided by subjective, incomplete advice.
This section basically tries to tell the reader about the structure of
presentation of the content in the Offer Document. This is with a view to
help the reader navigate through the content of an offer document.
A. COVER PAGE
The Cover Page of the offer document covers full contact details of the
issuer company, lead managers and registrars, the nature, number,
price and amount of instruments offered and issue size, and the
particulars regarding listing. Other details such as Credit Rating, IPO
Grading, if opted for, risks in relation to the first issue, etc are disclosed if
applicable.
B. RISK FACTORS
Here, the issuer’s management gives its view on the Internal and
external risks faced by the company. Here, the company also makes a
note on the forward looking statements. This information is disclosed in
the initial pages of the document and it is also clearly disclosed in the
abridged prospectus. It is generally advised that the investors should go
through all the risk factors of the company before making an investment
decision.
C. INTRODUCTION
The introduction covers a summary of the industry and business of the
issuer company, the offering details in brief, summary of consolidated
financial, operating and other data.
General Information about the company, the merchant bankers and their
responsibilities, the details of brokers/syndicate members to the Issue,
DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 87
INTIAL PUBLIC OFFERING IN INDIA
credit rating (in case of debt issue),debenture trustees (in case of debt
issue), monitoring agency, book building process in brief and details of
underwriting Agreements are given here. Important details of capital
structure, objects of the offering, funds requirement, funding plan,
schedule of implementation, funds deployed, sources of financing of
funds already deployed, sources of financing for the balance fund
requirement, interim use of funds, basic terms of issue, basis for issue
price, tax benefits are covered.
D. ABOUT US
This presents a review of on the details of the business of the company,
business strategy, competitive strengths, insurance, industry-regulation
(if applicable), history and corporate structure, main objects, subsidiary
details, management and board of directors, compensation, corporate
governance, related party transactions, exchange rates, currency of
presentation dividend policy and management's discussion and analysis
of financial condition and results of operations are given.
E. FINANCIAL STATEMENTS
Financial statement, changes in accounting policies in the last three
years and differences between the accounting policies and the Indian
Accounting Policies (if the Company has presented its Financial
Statements also as per Either US GAAP/IAS are presented.
H. OFFERING INFORMATION
Under this head, the following information is covered: Terms of the
Issue, ranking of equity shares, mode of payment of dividend, face value
and issue price, rights of the equity shareholder, market lot, nomination
facility to investor, issue procedure, book building procedure if
applicable, bid form, who can bid, maximum and minimum bid size,
bidding process, bidding bids at different price levels, escrow
I. OTHER INFORMATION
This covers description of equity shares and terms of the Articles of
Association, material contracts and documents for inspection,
declaration, definitions and abbreviations, etc.
Other Information:
• Open - 11 Jan.
• Close - 16 Jan.
• Issue Type -100% Book Building Issue.
• Maximum Subscription Amount for Retail: Rs 100,000/-
• Listing - BSE, NSE.
• Registrar -In time Spectrum Registry Limited.
• Minimum and maximum shares for retail category - 1 lot - 8
shares and 16 lots - 128 shares.
• Minimum and maximum amount for retail category - 1lot - Rs
6120 and 16 lot - Rs 97920 @ cut off.
• Application Multiple - 8 and in multiples there off starting with
at least 8 shares
• Cheque In Favor Of - "Escrow Account - FCH Public Issue -
Resident" For Retail category.
Subscribe Statistics:
The Issue received 1138493 applications for 846511648 equity
shares resulting in 131.7979 times subscription. The details of the
applications received in the Issue from Qualified Institutional
Buyers, Non-Institutional, Retail Individual Investors are as under
(Before technical rejections):
The Basis of Allocation to the Retail Investors, who have bid at cut-off or
at the Issue Price of Rs 765 per Equity Share, was finalized in
consultation with BSE. The category was over subscribed 50.759 times.
The total number of shares allotted in this category is 1926840 Equity
Shares.
The Basis of Allocation to the Non institutional, who have bid at the
Issue Price of Rs.765 per Equity Share, was finalized in consultation
with BSE. The category was subscribed 75.874734 times. The total
number of shares allotted in this category is 642280 Equity Shares.
VALUATION:
At Rs 765, the higher end of the price band, the offer values the entire
business at a price-book value (P/BV) of about 6.6 times. Assuming an
asset-based valuation for the advisory business (at 15 per cent of
expected assets), the consumer credit business alone is being valued at
4.5-5 times book value post-IPO. Entrenched peers in banking/financial
services with similar opportunities for growth — India bulls Financial,
ICICI Bank and IDFC — are available at comparable valuations. Future
Capital reported a total income of Rs 31.3 crores and a net loss of Rs 12
crores on consolidated operations for the six months ended September
2007; the present financials do not offer scope for a meaningful PE
computation.
Sector: Power
About the Company: Reliance Power (RPL), part of the Reliance Anil
Dhirubhai Ambani Group (R-ADAG) company, a unit of India's second-
biggest utility by market value, is engaged in the construction and
development of various gas- and coal-based thermal power projects and
hydroelectric power projects in various parts of the country.
Other Information:
• Open - 15 Jan
• Close - 18 Jan
• Issue Type -100% Book Building Issue
• Issue Size - 1,300,000,000 Equity Shares of Rs.10 each.
• Issue Price - Rs 405/- to Rs 450/- per Equity share
Subscribe Statistics:
The Issue received 48, 02,930 applications for 1599, 71, 29,272 equity
shares resulting in 61.52 times subscription. The details of the
applications received in the Issue from Qualified Institutional Buyers,
Non-Institutional, Retail Individual Investors are as under (Before
technical rejections):
The Basis of Allocation to the Retail Individual Investors, who have bid at
cut-off or at the Issue Price of Rs.450 per Equity Share, was finalized in
consultation with BSE. The category was oversubscribed 13.572340
times. The total number of shares allotted in this category is 6, 84,
00,000 Equity Shares to 41, 73,929 successful applicants.
The Basis of Allocation to the Non institutional Investors, who have bid
at the Issue Price of Rs.450 per Equity Share, was finalized in
consultation with BSE. The category was subscribed 159.556149 times.
The total number of shares allotted in this category is 2, 28, 00,000
Equity Shares to 11,862 successful applicants.
VALUATION:
RPL is part of the Reliance Anil Dhirubhai Ambani (Reliance ADA) group
and was established with the purpose of developing, constructing and
operating power projects domestically and internationally. The company
is currently in the process of developing 13 medium and large sized
DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 99
INTIAL PUBLIC OFFERING IN INDIA
The Indian power sector has robust growth prospects with a large
demand and supply deficit. With various proactive reforms in the power
sector encouraging private-sector participation in all the three core
segments of generation, transmission and distribution, players such as
RPower, who will be the face of the group for power generation, will be
able to capitalize on strong growth opportunities in the country.
Project portfolio and its customers are well diversified. The locations of
all the 13 projects are either near the load centre or fuel source. Fuel
required is also diversified.
Has no power project in operation and its first power generation unit, the
Phase I of the 600-MW Rosa Power project, will go on stream only in
December 2009. Unless there is any inorganic expansion, there will not
be any operating revenue or cash flow from the core business of power
generation.
Ahead of the IPO, all the listed stocks in the power generation sector
have been re-rated based on the expected price of RPower. The offer
price band stands at Rs 405 to Rs 450. The discount of Rs 20 for retail
investors and part payment of the issue price (Rs 115 on application and
balance on call) is a sweetener. With no financial track record and no
operational income expected to be generated till December 2009, when
the first unit of Rosa I is expected to go on stream, the RPower scrip
could end up with high volatility on news flow on the implementation of
its various projects and winning of new projects.. At higher price band,
RPower will have a market capitalization of Rs 101700 crores compared
with NTPC's current market capitalization of Rs 221630 crores. While
RPower has plans to implement 28,200-MW capacity with no assured
returns in many projects and little experience in large project execution,
NTPC already has 27,904-MW capacity with plans to set up additional
22,100 MW. Most of NTPC’s projects enjoy assured returns and it has
one of the best track records of power-project execution. In the long run,
RPower has many execution risks to contend with. But in the short term,
the market seems willing to ignore all that.
“BANG-OVERSEAS LTD”
724.5 Million. The issue constitutes 25.81% of the post issue paid-up
capital of the company. Issue Price Rs.207 per Equity Share of Face
value of Rs.10 each. The issue price is 20.70 times the face value.
Other Information:
• Open - 28 Jan
• Close - 31 Jan
• Issue Type -100% Book Building Issue
• Issue Size - 3,500,000 Equity Shares Of Face Value Rs.10 Each
• Issue Size in Rs - 72 Crores
• Issue Price - Rs 200/- to Rs 207/- Per Equity Share
• Maximum Subscription Amount for Retail Investor: Rs 100,000/-
• Listing - BSE, NSE
• Registrar - Karvy Computershare Private Limited
• Minimum and maximum shares for retail category - 1 lot -30
shares and 16 lot - 480 shares.
• Minimum and Maximum amount for retail category - 1 lot - Rs 6210
and 16 lot - Rs 99360 @ cut off.
• Application Multiple - 30 and in multiples there off starting with at
least 30 shares
• Cheque In Favor Of - "Escrow Account - BOL Public Issue - R" For
Retail category
Subscribe Statistics:
A. Allocation to Employees:
The Basis of Allocation to the Retail Individual Investors, who have bid at
cut-off or at the Issue Price of Rs.207/- per Equity Share, was finalized in
consultation with BSE. The category was oversubscribed 1.040748
times. The total number of shares allotted in this category is 1190000
Equity Shares to 4612 successful applicants.
The Basis of Allocation to the Retail Individual Investors, who have bid at
cut-off or at the Issue Price of Rs. 207/- per Equity Share, was finalized
in consultation with BSE. The category was under-subscribed 1.307294
times. The total number of shares allotted in this category is 510000
Equity Shares to 15 successful applicants.
D. Allocation to QIB’S:
to all other QIBs and other QIBs were allotted the remaining available
shares (1,700,000) on proportionate basis.
VALUATION:
BOL has a domestic market bias and is, therefore, relatively less
exposed to rupee fluctuations and export slowdown, problems that are
plaguing most other textile companies.
The company started its garments business in 2002. Till then, it was
predominantly a trader in imported fabric. The company sells men’s
clothing under the brand “Thomas Scott” through a network of multi-
brand outlets, departmental stores such as Shoppers’ Stop and Globus
and 12 exclusive outlets.
Through the proceeds of the offer, the company will expand its garments
capacity six-fold to more than 7 million pieces a year and expand its
retail chain to 100 stores. The fresh capacity is expected to come on
stream by September 2008. The company expects to add an additional
88 stores by June 2009; 41 will be company-operated and the remaining
franchisee-run.
The additional garment capacity will likely feed its expanding retail
operations. and will also help it cater to increasing demand from apparel
retailers. BOL is also to foray into women’s wear with a line of clothing
— Miss Scott.
While these moves can help boost margins and profits in the long-term,
there are execution risks, especially when it comes to the retail
business.
At the upper end of the price band of Rs 200-Rs 207, the offer is valued
at close to 20 times the company’s annualized FY 08 per-share
earnings, on a fully expanded equity base. The company is in its infancy,
and with an insufficient track record in the branded retail business, there
could be execution risks to its expansion plans. If it manages to execute
its capacity addition and retail expansion plans successfully, the
valuation is likely to be at more attractive levels on a forward basis.
Given the turbulence in the markets, however, staying invested with
better-established players may be a more appropriate strategy.
Sector: Construction/Infrastructure.
Other Information:
• Open - 18 Jan
• Close - 23 Jan
• Issue Type -100% Book Building Issue
• Issue Size - 65,00,000 Equity Shares Of Rs. 10/- Each
• Issue Price - Rs 110/- to Rs 120/- Per Equity Share
• Maximum Subscription Amount for Retail Investor: Rs 100,000/-
• Listing - BSE, NSE
• Registrar - Karvy Computershare Private Limited
• Minimum and maximum shares for retail category - 1 lot - 55
shares and 15 lot - 825 shares.
• Minimum and Maximum amount for retail category - 1 lot - Rs 6600
and 15 lot - Rs 99000 @ cut off.
• Application Multiple - 55 and in multiples there off starting with at
least 55 shares.
Subscribe Statistics:
The Issue received 12,238 applications for 1, 30, 96,660 equity shares
resulting in 2.01 times subscription. The details of the applications
received in the Issue from Qualified Institutional Buyers, Non-
Institutional, Retail Individual Investors are as under (Before technical
rejections):
A. Allocation to Employees:
The Basis of Allocation to the Retail Individual Investors, who have bid at
cut-off or at the Issue Price of Rs.110/- per Equity Share, was finalized in
consultation with BSE. The category was oversubscribed 1.354675
times. The spillover portion to the extent of 99870 equity shares has
been added to this category. The total number of shares allotted in this
category is 2304870 Equity Shares to 10954 successful applicants.
The Basis of Allocation to the Retail Individual Investors, who have bid at
cut-off or at the Issue Price of Rs.110/- per Equity Share, was finalized in
consultation with BSE. The category was under- subscribed 0.894317
times. As per the Red Herring Prospectus, the spillover portion to the
extent of 99870 equity shares has been added to the Retail Individual
Investors category. The total number of shares allotted in this category is
845130 Equity Shares to 38 successful applicants.
VALUATION:
The present infrastructure boom in the country provides ample room for
small players such as JKI to share a part of the order flow pie. However,
JKI’s current business model depends more on the local municipal and
metropolitan development authority’s (in Maharashtra) than on the
‘infrastructure spending’ in the country. While this strategy is likely to
fetch steady revenues in the medium term, the growth opportunity
appears relatively less as infrastructure players moving to high-end
segments could be better options from an investment perspective. The
company’s valuation can, therefore, at best be at a discount to other
infrastructure players.
The asking price of Rs 110-120 appears stiff, given the present size of
the company and the large number of unorganized players in the
contracting space. Limited geographical presence, significant expansion
in equity and low visibility for growth over the long term are also limiting
factors for this company. However, given that the overall prospects for
the company’s business appear good, investors can take a second look
at the stock post-listing, if its valuation dips due to broad market factors.
At the offer band, the IPO is priced at 19-21 times it’s per share earnings
of FY 2007 on a pre-issue equity base. Post-issue, the price-earnings
multiple is 14-16 times the annualized earnings for FY-08. Similar sized
peers are at a discount to this valuation.
Issue size: Public Issue of 30, 85,000 Equity Shares of Rs.10 each of
CORDS CABLE INDUSTRIES LIMITED (THE "COMPANY" OR THE
"ISSUER") for cash at a price of Rs.135 per equity share of Rs.10 each
including a share premium of Rs.125 per Equity share aggregating Rs.
4164.75 LACS. The issue constitutes 26.38% of the post issue paid-up
capital of the company. Issue Price Rs.135 per Equity Share of Face
value of Rs.10 each. The issue price is 13.50 times the face value.
Other Information:
• Open - 21 Jan
• Close - 24 Jan
• Issue Type -100% Book Building Issue
• Issue Size - 35,00,000 Equity Shares Of Rs. 10/- Each
• Issue Price - Rs 125/- to Rs 135/- Per Equity Share
• Maximum Subscription Amount for Retail Investor: Rs 100,000/-
• Listing - BSE, NSE
• Registrar - Intime Spectrum Registry Ltd
• Minimum and maximum shares for retail category - 1 lot - 50
shares and 14 lot - 700 shares.
• Minimum and Maximum amount for retail category - 1 lot - Rs 6750
and 14 lot - Rs 94500 @ cut off.
• Application Multiple - 50 and in multiples there off starting with at
least 50 shares
Subscribe Statistics:
A. Allocation to Employees:
VALUATION:
CCIL has a diversified clientele and product portfolio. Its current order-
book, with the major portion leaning towards power sector (about 48 per
cent), is spread across sectors such as cement, refineries and
petrochemicals and steel.
The company may be able to further extend its reach to sectors such as
railways, shipping and wind power after the proposed expansion of its
capacity and the addition of new products. On the product front, it offers
an extensive range of high quality control and instrumentation cables,
power cables and special cables for oil wells. The company plans to
utilize proceeds from the issue towards setting up of production facilities.
About Rs 6 crores from the proceeds will be diverted towards working
capital requirements.
The demand for cables is set to increase significantly, given the ongoing
capex in power and infrastructure and strong growth in industries such
as metro rail, shipping and aviation. In the price band of Rs 125-135, the
stock would be valued at about 12-13 times its likely FY-08 per share
earnings on a diluted equity base.
The stock is currently available at a P/E of 11x to 12x on the lower and
upper price bands respectively of its FY 08E EPS of Rs.11.72. The
The company has shown excellent growth rate in the last few years &
with the upward trend in its user industries, we expect the growth to
continue. One of the key concerns is that currently the user industry is
on uptrend. A slowdown can hit CCIL’s fortunes. The industry is
currently trading at a P/E of 22x, which leaves enough room for upside
potential. The company has plans of introducing new products in the
product line which will boost the revenues.
“K N R Constructions Limited”
up capital of the company. Issue Price Rs.130 per Equity Share of Face
value of Rs.10 each. The issue price is 17 times the face value.
Other Information:
• Open - 24 Jan
• Close - 29 Jan
• Issue Type -100% Book Building Issue
• Issue Size - 7,874,570 Equity Shares Of Face Value Rs.10 Each
• Issue Size in Rs - 142 Crores
• Issue Price - Rs 170/- to Rs 180/- Per Equity Share
• Maximum Subscription Amount for Retail Investor: Rs 100,000/-
• Listing - BSE, NSE
• Registrar - Intime Spectrum Registry Limited
• Minimum and maximum shares for retail category - 1 lot - 35
shares and 15 lot - 525 shares.
• Minimum and Maximum amount for retail category - 1 lot - Rs 6300
and 15 lot - Rs 94500 @ cut off.
• Application Multiple - 35 and in multiples there off starting with at
least 35 shares
• Cheque In Favor Of - "ESCROW ACCOUNT - KNR IPO -
RESIDENT" For Retail category
Subscribe Statistics:
The Basis of Allocation to the Retail Investors, who have bid at cut-off or
at and above the Issue price of Rs.170/- Equity Share, was finalized in
consultation with BSE. The category was subscribed 0.234841 times.
The total number of equity shares allotted in this category is 635740.
C. Allocation to Employees:
The Basis of Allocation to the Employee Category, who have bid at cut-
off or at and above the Issue price of Rs.170/- Equity Share, was
finalized in consultation with BSE. The category was subscribed 0.5917
times. The total number of equity shares allotted in this category is
82,845. The unsubscribed portion (57,155 shares) of Employee
Category is added to QIB and HNI Category Respectively.
D. Allocation to QIB's:
VALUATION:
The company's products include ring back tones, voice portals, ring tone
downloads, subscription manager, contests, music messaging, on-
device client software, mobile radio, voice mail, voice short messaging
service, and missed call alerts, which enable subscribers to personalize
their mobile phones.
Issue size: Public Issue of 1, 09, 00,545 Equity Shares of Rs.10 each of
ONMOBILE GLOBAL LIMITED (THE "COMPANY" OR THE "ISSUER")
for cash at a price of Rs.440 per equity share of Rs.10 each including a
share premium of Rs.430 per Equity share aggregating Rs. 47962.39
Lacs. The issue constitutes 18.99% of the post issue paid-up capital of
the company. Issue Price Rs.440 Per Equity Share of Face value of
Rs.10 each. The issue price is 44 times the face value.
Other Information:
• Open - 24 Jan
• Close - 29 Jan
• Issue Type -100% Book Building Issue
Subscribe Statistics:
The Issue received 37,738 applications for11, 83, 43,547 equity shares
resulting in 10.85 times subscription. The details of the applications
received in the Issue from Qualified Institutional Buyers, Non-
Institutional, Retail Individual Investors are as under (Before technical
rejections):
The Basis of Allocation to the Retail Individual Investors, who have bid at
cut-off or at the Issue Price of Rs.440/- per Equity Share, was finalized in
consultation with BSE. The category was oversubscribed 1.115325
times. The total number of shares allotted in this category is 32, 70,164
Equity Shares to 36,462 successful applicants.
The Basis of Allocation to the Retail Individual Investors, who have bid at
cut-off or at the Issue Price of Rs.440/- per Equity Share, was finalized in
consultation with BSE. The category was over- subscribed 2.195630
times. The total number of shares allotted in this category is 10, 90,054
Equity Shares to 119 successful applicants.
VALUATION:
The customer base includes all the major telecom operators in India and
more than 10 international telecom operators in over eight countries
including Optus in Australia, Banglalink in Bangladesh, Maxis in
Malaysia, and BTEL and Indosat in Indonesia. In addition, markets
products and services to media companies such as AOL, Disney, ESPN,
India Today Group digital, Star India and Nokia.
Its weaknesses are More than 80% of the revenue from just five largest
customers (major telecom service providers), constituting less than 10%
of total customers, in the six months ended September 2007. The loss of
any major customer or decrease in the volume of work from them or dip
in revenue sharing may adversely impact revenue and profitability.
Merchant Banker:
Issue size:
Public issue of 1,67,73,74,015 equity shares of Rs. 10 each (the “equity
shares”) for cash at a price of Rs. [•] per equity share of NHPC limited
(“NHPC”, “our company” or “the issuer”) aggregating Rs. [•] crores (the
“issue”). The issue comprises a fresh issue of 1,11,82,49,343 equity
shares by NHPC (the “fresh issue”) and an offer for sale of 55,91,24,672
equity shares by the president of India acting through the ministry of
power, government of India (the “selling shareholder”) (the “offer for
sale”). The issue comprises a net issue to the public of 1,63,54,39,665
equity shares (the “net issue”) and a reservation of 4, 19, 34,350 equity
shares for subscription by eligible employees.
Other Information:
Subscribe Statistics
VALUATION:
Being a mini ratna the company can enter into greater autonomy
to undertake new projects without GoI approval subject to
investment ceiling of Rs 500 cr.
NHPC has got into long term power purchase agreements for
major portion of capacity under construction.
IPO SCAM
The two major IPO scams in the Indian Capital market were the Harshad
Mehta scam in the year 1992 and the Ketan Parekh scam in loopholes in
the Indian capital the Securities Exchange Board of India. capital market.
2001. The IPO Scams opened up the latent market.
cornering shares meant for retail investors, making unlawful profits from
the shares upon their listing. Case through a consent order. 2003- Rs 1
SEBI had banned the apply market; initiated adjudication proceedings
against him, prosecution proceedings in the ACMM court in Mumbai
under the Companies Act; and a protest petition before the CBI court for
non-filing of charge sheet against the SEBI’s consent order disposes of
all these pending proceedings. SEBI will file an application for
withdrawal of its protest application at the CBI special court, and shall
not oppose compounding of prosecution in the ACMM court, the
Regulator said in its consent order. SEBI said it would also drop
proceedings against Pratik Stock Vision Pvt Ltd in the matter of carry
forward transactions in the shares of Global Tele applicant offered to
settle the case, offering Rs 1.25 towards settlement charges applicant
from dealing in the securities applicant. Tele-systems Ltd in 2000
charges.
SURVEY ANALYSIS
PARTICULARS RESPONSE
Total 50
Below 25
25-40
40-60
Above 60
Out of the responded most of them almost 32% of them were from 25-40
25
age group. Fewer almost 22%
22% were there from age group of below 25
and above 65 years almost on retirement age.
PARTICULARS RESPONSE
Share 8
Gold 11
Real estate 10
Mutual Funds 6
Banks 12
Other 3
Total 50
Share
Gold
Real Estate
Mutual Funds
Banks
Others
PARTICULARS RESPONSE
YES 40
NO 10
total 50
No No, 20%
PARTICULARS RESPONSE
2-5 year 14
total 50
2 - 5 years 27%
When asked about their investment period, 55% people invest for less
than 1 year and 27% of them invest for 2 – 5 yrs, which means majority
of them invest for a short term period and only 18% invest for a long
term i.e., more than 5 yrs.
5 - 10 lacs 20%
2 - 5 lacs 25%
PARTICULARS RESPONSE
2-5 LACS 13
5 TO 10 LACS 10
total 50
As the response from the survey states that 41% holds less than 2 Lacs
portfolio and only 14% shows more than 10 lacs portfolio which shows
people are cautious about their investment in stock market considering
the risk and volatility it has.
Limited
Moderate
Extensive
Particulars Response
Limited 15
Moderate 24
Extensive 11
Total 50
Limited
Moderate
Extensive
7. How much time do you give to Investment options & related reading
every day?
Particulars Response
LESS THAN 10 MINUTES 20
10-30 15
30-60 9
TOTAL 50
30 - 60 mins 18%
10 - 30 mins 30%
.
8. Do you know about IPO?
Yes No
PARTICULARS RESPONSE
Yes 23
No 27
Total 50
Yes
No
Almost 46% responded knows about IPO and rest have no idea.
9. From where you got the knowledge of IPO and other investment
options?
PARTICULARS RESPONSE
WEBSITES 7
BROKER 15
STUDY 8
MARKET 17
OTHERS 3
TOTAL 50
Others 5%
Market 35%
Study 16%
Broker 29%
Websites 15%
CONCLUSION:
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 offerings drew predictions of calamitous effects 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. The data
show that as much as Rs. 2033.99 Crores has been raised from the
primary market in the current calendar year, making it obvious that the
Indian investor has far more appetite for equities than most people
realize.
Most of the money has been raised by big companies with a long-term
track record. A substantial number of issues—barring that of TCS—also
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 IPO’s, there are several reasons for it.
Unlike earlier IPO booms, this one is being driven by a much better
quality of offering. 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 IPO’s 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 this 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. DQ Entertainment (International) Ltd and
NMDC Limited are lining up issues. Even mutual funds have got into the
act, and are tailoring their offerings to match current market fancies—
mid-cap funds, dividend yield funds, and what-have-you. If the
government wants to get some money into its kitty through
disinvestment programmers, this is the time to make a dash for it
RECOMMENDATIONS:
After making the project, I would like to say SEBI is playing very
important role in regulating the risk and financial aspects of the
investors. Also the DIP guideline is framed in such a manner, which can
be understood by any individual. Overall the process and the various
intermediaries, which are involved in IPOs or initial public offering, are
doing very important task.
I found the following points very important from the investor point of view
while doing this project:
• IPOs should be graded which is already started. But I think such kind
of grading is not enough because it doesn’t give enough information
about the company; it only says what the level of grade that a
company deserves is.
BIBLIOGRAPHY:
WEBSITES:-
www.business.mapsofindia.com/ipo-india/
www.moneycontrol.com
www.domain-b.com
www.sebi.gov.in
www.investopedia.com
www.chittorgarh.com/ipo/
REFERENCE
PADMASHREE DR. D.Y.PATIL UNIVERSITY DEPARTMENT OF
BUSINESS MANAGEMENT.
This research is being done for academic purpose only. All the
information provided shall be kept confidential.
Name:
Yes No
1-5 year
9. From where you got the knowledge of IPO and other investment
options?
Websites `
Broker
Study
Market Other