Professional Documents
Culture Documents
PUBLIC
OFFER
Page |1
Topics Covered
Executive Summary
----------------------------------------------------- 3
Introduction
----------------------------------------------------------------- 4
What Is An IPO
---------------------------------------------------------------- 5
Why Go Public
----------------------------------------------------------------- 8
Getting In An IPO
----------------------------------------------------------- 9
Registration Process
----------------------------------------------- 18
IPO Scams
-------------------------------------------------------------------------
19
Recent IPO’s
------------------------------------------------------------------ 29
Bibliography
--------------------------------------------------------------- 34
Page |3
EXECUTIVE SUMMARY
This report talks about how IPO helps in raising fund for the
companies going public, what are its pros and cons, and also it gives us
detailed idea why companies go public. How and what are the steps
taken by the companies before going for any IPO and also the role of
(SEBI) Securities and Exchange Board of India the BSE and NSE , what
are primary and secondary markets and also the important terms
related to IPO. It gives us idea of how IPO is driven in the market and
what are various factors taken into consideration before going for an
IPO. And it also tells us how we can more or less judge a good IPO.
Then we all know that scams have always been a part of any sector
you go in for which are covered in it and also few recommendations are
given for the same. It also gives us some idea about what are the
expenses that a company undertakes during an IPO.
Page |4
INTRODUCTION
IPO stands for Initial Public Offering and means the new
offer of shares from a company which was previously unlisted. This is
done by offering those shares to the public, which were held by the
promoters or the private investors prior to the IPO. In the case when
other investors or Promoter held the shares the stake holding comes
down to the extent their shares are offered to the public. In other cases
new shares are issued to the public and the shares, which are with the
promoters stay with them. In both cases the share of the promoters in
the total capital comes down.
Page |5
What is an IPO
Page |6
companies going through a transitory growth period, and they are
therefore subject to additional uncertainty regarding their future value.
Primary and Secondary markets
In the primary market securities are issued to the public
and the proceeds go to the issuing company. Secondary market is term
used for stock exchanges, where stocks are bought and sold after they
are issued to the public.
PRIMARY MARKET
Page |7
SECONDRY MARKET
Once the offer price is fixed and the shares are issued to
the people, stock exchanges facilitate the trading of shares for the
general public. Once a stock is listed on an exchange, people can start
trading in its shares. In a stock exchange the existing shareholders sell
their shares to anyone who is willing to buy them at a price agreeable
to both parties. Individuals cannot buy or sell shares in a stock
exchange directly; they have to execute their transaction through
authorized members of the stock exchange who are also called STOCK
BROKERS.
Page |8
Why Go Public?
Basically, going public (or participating in an "initial public
offering" or IPO) is the process in which a business owned by one or
several individuals is converted into a business owned by many. It
involves the offering of part ownership of the company to the public
through the sale of debt or more commonly, equity securities (stock).
Page |9
Because of the increased scrutiny, public companies can usually
get better rates when they issue debt.
Getting In On an IPO
P a g e | 10
shares on its own, but realistically, an investment bank is required - it's
just the way Wall Street works. Underwriting is the process of raising
money by either debt or equity (in this case we are referring to equity).
You can think of underwriters as middlemen between companies and
the investing public. The biggest underwriters are Goldman Sachs,
Merrill Lynch, Credit Suisse First Boston, Lehman Brothers and Morgan
Stanley.
P a g e | 11
Finally, the securities are sold on the stock market and the
money is collected from investors.
Bottom line, your chances of getting early shares in an IPO are slim to
none unless you're on the inside. If you do get shares, it's probably because nobody else
wants them. Granted, there are exceptions to every rule and it would be incorrect for us to
say that it's impossible. Just keep in mind that the probability isn't high if you are a small
investor.
P a g e | 12
the advantages and disadvantages of conducting an IPO and will briefly
discuss the steps to be taken to register an offering for sale to the
public. The purpose of this memorandum is to provide a thumbnail
sketch of the process. The reader should understand that the process
is very time consuming and complicated and companies should
undertake this process only after serious consideration of the
advantages and disadvantages and discussions with qualified advisors.
Increased Capital
Liquidity
Increased Prestige
Public companies often are better known and more visible than
private companies, this enables them to obtain a larger market
for their goods or services. Public companies are able to have
access to larger pools of capital as well as different types of
capital.
Valuation
P a g e | 13
a company that is looking for a merger or acquisition. It also
allows the shareholders to know the value of the shares.
Increased wealth
Disclosure
P a g e | 14
information is available to investors, employees, and
competitors.
Regulatory Review
If the shares of the company's stock fall, the company may lose
market confidence, decreased valuation of the company may
effect lines of credits, secondary offering pricing, the company's
ability to maintain employees, and the personal wealth of
insiders and investors.
Vulnerability
P a g e | 15
Good investing principles demand that you study the
minutes of details prior to investing in an IPO. Here are some
parameters you should evaluate:-
Promoters
Is the company a family run business or is it professionally
owned? Even with a family run business what are the credibility and
professional qualifications of those managing the company? Do the top
level managers have enough experience (of at least 5 years) in the
specific type of business?
Industry Outlook
The products or services of the company should have a
good demand and scope for profit.
Business Plans
Check the progress made in terms of land acquisition,
clearances from various departments, purchase of machinery, letter of
credits etc. A higher initial investment from the promoters will lead to a
higher faith in the organization.
Financials
Why does the company require the money? Is the company
floating more equity than required? What is the debt component? Keep
a track on the profits, growth and margins of the previous years. A
steady growth rate is the quality of a fundamentally sound company.
Check the assumptions the promoters are making and whether these
assumptions or expectations sound feasible.
P a g e | 16
Risk Factors
The offer documents will list our specific risk factors such
as the company’s liabilities, court cases or other litigations. Examine
how these factors will affect the operations of the company.
Key Names
Every IPO will have lead managers and merchant bankers.
You can figure out the track record of the merchant banker through the
SEBI website.
Pricing
Compare the company’s PER with that of similar
companies. With this you can find out the P/E Growth ratio and
examine whether its earning projections seem viable.
Listing
You should have access to the brokers of the stock
exchanges where the company will be listing itself.
P a g e | 17
Who are the intermediaries in an issue?
P a g e | 18
Company.
P a g e | 19
What is the Registration Process?
Going public requires a Registration Statement which is a
carefully crafted document that is prepared by your attorneys and
accountants. It requires detailed discussions on information pertaining
to:
Business product/service/markets
Company Information
Risk Factors
Proceeds Use (How are you going to use the money)
Officers and Directors
Related party transactions
Identification of your principal shareholders
Audited financials
IPO SCAMS
YES BANK Ltd. CASE
P a g e | 20
The modus operandi adopted in manipulating the YES Bank
Ltd (YBL)'s initial public offering (IPO) allotment involved opening of
over 7,500 benami dematerialised accounts.
The IPO of YBL opened on June 15, 2005 and its shares
were listed on the BSE and the NSE on July 12, 2005.
P a g e | 21
same address in Ahmedabad. There are three more addresses of
locations in Ahmedabad, which have been linked to Ms Panchal. All the
6,315 entities have their bank accounts with Bharat Overseas Bank and
demat accounts with Karvy-DP.
P a g e | 22
SEBI said in IDFC's IPO too four investors opened as many
as 14,807 dematerialized accounts with Karvy-DP and "strangely", all
these account holders have their bank accounts with Bharat Overseas
Bank Ltd, Ahmedabad. SEBI order said: "further probe is required for
examining the systemic fault, if any, of the registrar Karvy-RTI i.e.
Karvy Computer Shares P Ltd, and the lead managers Kotak Mahindra
Capital Company Ltd, DSP Merrill Lynch Ltd and SBI Capital Markets Ltd
in identifying and weeding out the benami applications."
"It is seen that one branch manager has on the same date
signed as authorized signatory of different branches of the bank. This
raises a doubt as to the authenticity of the bank documents obtained
by Karvy-DP for opening dematerialised accounts," the SEBI order by
its Whole-time Director Mr G. Anantharaman said. SEBI also banned
four investors (in whose names the multiple accounts were opened)
viz., Ms Roopalben Nareshbhai Panchal (who was also named in the
YES Bank IPO scam), Sugandh Estates & Investments P Ltd, Mr
Purshottam Ghanshyam Budhwani and Mr Manojdev Seksaria from
doing any kind of transactions in the securities market, till further
directions.
Another 35 firms were also barred from participating in the IPOs in the
future, till further orders, the SEBI order said.
MARUTI Case
P a g e | 23
The Charges
Description
Some of the demat accounts that were used to manipulate
allotments in the initial public offer of Yes Bank and IDFC were opened
during 2003, and not in the last year as was earlier believed. The first
IPO in which the key operators have participated was that of Maruti
Udyog Ltd, in June 2003, though the numbers of fictitious demat
accounts were not very high then, the interim order from Securities
and Exchange Board of India has said.
Inter-linkages
P a g e | 24
themselves. This shows that there are inter-linkages amongst the
master account holders as well as between groups of master account
holders and their principals, the order said.
In the dock
Description
P a g e | 25
Common address
P a g e | 26
IPO scam: HDFC Bank, 2 others fined
The Reserve Bank of India on Monday 27th Feb 2006 fined
HDFC Bank, IDBI and ING Vysya Bank for violation of Know Your
Customer norms and other irregularities in relation to the recent IPO
scam.
This is the second time HDFC Bank has been fined for
violation of KYC norms. In January, the bank was imposed a penalty of
Rs 5 lakh.
Modus operandi
P a g e | 27
Current account opened in the name of multiple companies on
the same date in the same branch of a bank
Large number of cheques for the same value issued from a single
account on the same day
Operational deficiencies
Factors that facilitated the scam
P a g e | 28
Photographs not obtained
P a g e | 29
issued from time to time. It also raises serious concerns about
the integrity of the systems & systemic risks.
Recent IPOs
P a g e | 30
IPO Rating Offer Price Open Date Close Date
September
Richa Knits 30 13 Sep 2006 19 Sep 2006
August
Voltamp Trans 345 24 Aug 2006 29 Aug 2006
July
Shirdi Ind 67-78 29 Jun 2006 08 Jul 2006
June
Vigneshwara 110-124 07 Jun 2006 16 Jun 2006
P a g e | 31
I. CONVENTIONAL/ GENERAL TERMS
Term
Description
AGM Annual General Meeting of Pratibha Industries Limited
P a g e | 32
Allotment Issue of Equity Shares of the Company pursuant to the Public Issue
to the successful Bidders.
Allottee The successful Bidder to whom the Equity Shares are being issued.
Bankers to the Issue ICICI Bank Limited, Standard Chartered Bank, Deutsche Bank,
Kotak Mahindra Bank Limited
Bid An indication to make an offer made during the Bidding Period by a
prospective investor to subscribe to Equity Shares of the Company at
a price within the Price Band, including all revisions and
modifications thereto
Bid Price / Bid Amount The amount equal to highest value of the optional Bids indicated in
the Bid cum Application Form and payable by the Bidder on
submission of the Bid in the Issue
Bid Opening Dates / Issue The date on which the Syndicate Members shall start accepting Bids
Opening Date for the Issue, which shall be the date notified in a widely circulated
English national newspaper, a Hindi national newspaper and a
Marathi regional newspaper
Bid Closing Date / Issue The date after which the Syndicate Members will not accept any
Closing Date Bids for the Issue, which shall be notified in a widely circulated
English national newspaper, a Hindi national newspaper and a
Marathi regional newspaper
Bid cum Application The Form in terms of which the Bidder shall make an offer to
Form purchase the Equity Shares of the Company and which will be
considered as the application for allotment of the Equity Shares in
terms of this Red Herring Prospectus
Bidder Any prospective investor who makes a Bid pursuant to the terms of
this Red Herring Prospectus
Bidding Period / Issue The period between the Bid/Issue Opening Date and the Bid/Issue
Period Closing Date inclusive of both days and during which prospective
Bidders can submit their Bids
Book Building Process Book building route as provided under Chapter XI of the SEBI
Guidelines, in terms of which, this Issue is being made
BRLM Book Running Lead Manager to the Issue, in this case being Vivro
Financial Services Private Limited
CAN / Confirmation of The note or advice or intimation of allocation of Equity Shares sent
Allocation Note to the Bidders who have been allocated Equity Shares in accordance
with the Book Building Process
Cap Price The higher end of the Price Band, above which the Issue Price will
not be finalized and above which no bids will be accepted
Cut-off price Cut-off price refers to any price within the Price Band. A Bid
submitted at Cut-off is a valid Bid at all price levels within the Price
Band
Designated Stock Bombay Stock Exchange Limited
Exchange
Designated Date The date on which the funds are transferred from the Escrow
Account of the Company to the Public Issue Account after the
Prospectus is filed with the ROC, following which the Board of
Directors shall allot Equity Shares to successful bidders
Red Herring Prospectus This Red Herring Prospectus issued in accordance with Section
60B of the Companies Act, which does not have complete
P a g e | 33
particulars on the price at which the Equity Shares are offered and
size of the Issue. It carries the same obligations as are applicable in
case of a Prospectus and will be filed with ROC at least three days
before the bid/offer opening date. It will become a Prospectus after
filing with ROC after the pricing
Equity Shares Equity Shares of the Company of the face value Rs. 10 each, unless
otherwise specified in the context thereof
Escrow Account Account opened with the Escrow Collection Bank(s) and in whose
favour the Bidder will issue cheques or drafts in respect of the Bid
Amount and refunds (if any) of the amount collected to the Bidders
Escrow Agreement Agreement entered into amongst the Company, the Registrar, the
Escrow Collection Bank(s), the Syndicate Members and the BRLMs
for collection of the Bid Amounts and refunds (if any) of the
amounts collected to the Bidders
Escrow Collection ICICI Bank Limited, Standard Chartered Bank, Deutsche Bank,
Bank(s) Kotak Mahindra Bank Limited
First Bidder The Bidder whose name appears first in the Bid cum Application
Form or Revision Form
Floor Price The lower end of the Price Band, below which the Issue Price will
not be finalized and below which no Bids will be accepted
Fresh Issue / Issue / Public Issue of 42,85,000 new Equity Shares of Rs. 10/- each for
Public Issue / Offer cash at the Issue Price of Rs. [•] per equity share aggregating to Rs.
[•] Lakhs by the Company in terms of this Red Herring Prospectus
Issue Account Account opened with the Banker to the issue to receive monies from
the Escrow Accounts on the Designated Date
Issuer Pratibha Industries Limited
Issue Price The final price at which Equity Shares will be issued and allotted in
terms of this Red Herring Prospectus, as determined by the
Company in consultation with the BRLMs, on the Pricing Date
Margin Amount The amount paid by the Bidder at the time of submission of his/her
Bid, being 10% to 100% of the Bid Amount
Members of the Syndicate The BRLM and the Syndicate Members
Non-Institutional Bidders All Bidders that are not Qualified Institutional Buyers, or Retail
Individual Bidders and who have Bid for Equity shares for an
amount more than Rs.1,00,000.
Non-Institutional Portion The portion of the Issue being a minimum of 5,78,475 Equity Shares
of Rs. 10/- each available for allocation to Non-Institutional Bidders
Pay-in-date The last date specified in the CAN sent to the Bidders
Pay-in-Period This term means
(i) With respect to Bidders whose Margin Amount is 100% of the
Bid Amount, the period commencing on the Bid/issue Opening
Date and extending until the Bid/issue Closing Date, and
(ii) With respect to Bidders whose Margin Amount is less than
100% of the Bid Amount, the period commencing on the
Bid/issue Opening Date and extending until the closure of the
Pay-in-Date
Price Band The Price band of a minimum price (Floor Price) of Rs.100/- and the
maximum price (Cap Price) of Rs. 120/- and includes revision
thereof
Pricing Date The date on which the Company in consultation with the BRLM
P a g e | 34
finalizes the Issue Price
Promoters Mr. Ajit B. Kulkarni, Mrs. Usha B. Kulkarni, Mr. Datta B. Kulkarni,
Mr. Vinayak B. Kulkarni, Mr. Ramdas B. Kulkarni and Pratibha
Shareholding Private Limited
Prospectus The Prospectus filed with the ROC containing, inter alia, the Issue
Price that is determined at the end of the Book Building Process, the
size of the Issue and certain other information
Public Issue Account In accordance with Section 73 of the Companies Act, 1956, an
account opened with the Banker(s) to the Issue to receive monies
from the Escrow Account for the Issue on the Designated Date
QIB Portion The portion of the net issue being not less than mandatory 19,28,250
Equity Shares of Rs. 10 each at the Issue Price, available for
allocation to QIBs
Qualified Institutional Public Financial Institutions as specified in Section 4A of the
Buyers/ QIBs Companies Act, Scheduled Commercial Banks, Mutual Funds
registered with SEBI, Foreign Institutional Investors registered with
SEBI, Multilateral And Bilateral Development Financial Institutions,
Venture Capital Funds registered with SEBI, Foreign Venture
Capital Investors registered with SEBI, State Industrial Development
Corporations, Insurance Companies registered with the Insurance
Regulatory And Development Authority (IRDA), Provident Funds
with a minimum corpus of Rs.2500 Lakhs and Pension Funds with a
minimum corpus of Rs. 2500 Lakhs.
Retail Individual Bidders Individual Bidders (including HUFs and NRIs) who have not Bid for
an amount in excess of Rs.1,00,000/- in any of the bidding options in
the Issue.
Retail Portion The portion of the Net Issue being a minimum of 13,49,775 Equity
Shares of Rs.10 each available for allocation to Retail Individual
Bidder(s)
Registrar/ Registrars to Intime Spectrum Registry Limited
the Issue
Revision Form The Form used by the Bidders to modify the quantity of Equity
Shares or the Bid Price in any of their Bid cum Application Forms or
any previous Revision Form(s).
Syndicate Agreement The agreement to be entered into among the Company and the
members of the Syndicate in relation to the collection of Bids in this
Issue
Syndicate Members Intermediaries registered with SEBI and eligible to act as
underwriters. Syndicate Members are appointed by the BRLM and
include the BRLM
Syndicate The Syndicate Members collectively
TRS or Transaction The slip or document issued by the Syndicate Members to the
Registration Slip Bidder as proof of registration of the Bid
Underwriters The BRLM and Syndicate Members
Underwriting Agreement The Agreement among the BRLM, the Syndicate Members and the
Company to be entered into on or after the Pricing Date
P a g e | 35
Bibliography
Web Based
www.investopedia.com
www.sebi.com
www.vivro.net
www.intimespectrum.com
www.pratibhagroup.com
Book Based
Industry Based
P a g e | 36