Chapter-1: Initial Public Offer

Analysis On Initial Public Offering
CHAPTER- 1
INTRODUCTION
 PART- 1.1 INITIAL PUBLIC OFFER
Initial public offering (IPO), also referred to

simply as a "public offering", is when a
company issues common stock or shares to
the public for the first time. They are often
issued by smaller, younger companies
seeking capital to expand, but can also be
done by large privately-owned companies
looking to become publicly traded. In an
IPO, the issuer may obtain the assistance of
an underwriting firm, which helps it determine what type of security to issue (common or
preferred), best offering price and time to bring it to market. Initial Public Offering (IPO)
in India means the selling of the shares of a company, for the first time, to the public in
the country's capital markets. This is done by giving to the public, shares that are either
owned by the promoters of the company or by issuing new shares. During an Initial
Public Offer (IPO) the shares are given to the public at a discount on the intrinsic value of
the shares and this is the reason that the investors buy Shares during
the Initial Public Offering (IPO) in order to make profits for themselves. IPO in India is
done through various methods like book building method, fixed price method, or a
mixture of both. The method of book building has been introduced in the country in 1999
and it helps the company to find out the demand and price of its shares.
A merchant banker is nominated as a book runner by the Issuer of the IPO. The company
that is issuing the Initial Public Offering (IPO) decides the number of shares that it will
Oriental Institute of Management 1

issue and also fixes the price band of the shares. All
these information are mentioned in the company's
red herring prospectus. During the company's Initial
Public Offering (IPO) in India, an
electronic book is opened for at least
five days. During this period of time,
bidding takes place which means that
people who are interested in
buying the shares of the Company makes an offer within the fixed price band. Once
the book building is closed then the issuer as well as the book runner of the Initial Public
Offering (IPO) evaluate the offers and then determine a fixed price. The offers for shares
that fall below the fixed price are rejected. The successful bidders are then allotted the
shares
IPO’s can be a risky investment. For the individual investor, it is tough to predict what
the stock or shares will do on its initial day of trading and in the near future since there is
often little historical data with which to analyze the company. Also, most IPO’s are of
companies going through a transitory growth period, and they are therefore subject to
additional uncertainty regarding their future value
 PART 1.2 REASONS FOR LISTING
When a company lists its shares on a public exchange, it will almost invariably
look to issue additional new shares in order to raise extra capital at the same time. 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 stock market
investors to provide it with large volumes of capital for future growth. The company is

never required to repay the capital, but instead the new shareholders have a right to future
profits distributed by the company and the right to a capital distribution in case of
dissolution.

The existing shareholders will see their shareholdings diluted as a proportion of the
company's shares. However, they hope that the capital investment will make their
shareholdings more valuable in absolute terms.
In addition, once a company is listed, it will be able to issue further shares via a rights
issue, thereby again providing itself with capital for expansion without incurring any
debt. This regular ability to raise large amounts of capital from the general market, rather
than having to seek and negotiate with individual investors, is a key incentive for many
companies seeking to list.
Major Reason for Listing IPO
 The increase in the capital: An IPO allows a company to raise funds for utilizing
in various corporate operational purposes like acquisitions, mergers, working capital,
research and development, expanding plant and equipment and marketing.
 Liquidity: The shares once traded have an assigned market value and can be
resold. This is extremely helpful as the company provides the employees with stock
incentive packages and the investors are provided with the option of trading their
shares for a price.
 Valuation: The public trading of the shares determines a value for the company
and sets a standard. This works in favor of the company as it is helpful in case the
company is looking for acquisition or merger. It also provides the share holders of the
company with the present value of the shares.

 Increased wealth: The founders of the companies have an affinity towards IPO
as it can increase the wealth of the company, without dividing the authority as in case
of partnership.
 PART-1.3 OBJECTIVES AND ROLE OF

IPO
 To get the knowledge of IPO.

 To analyze the returns of IPO’s which were issued in the year 2009
 To know the return of those IPO’s for 1 month, 3 months, 6 months, and 1
year.
 To know the market rate of return for the same period.
 To know the procedure for calculating the Standard Deviation, calculating
Sharpe’s Ratio & the abnormal return.
 Spread awareness about this process.
 Find out the companies which like to adopt this technique.
 Find out the factors which influence the IPO Listing Process.
 What the companies are looking from Open New IPO’s in India?
 Analysis between Share Holder and IPO Companies
 Analysis of IPO’s post/present/future Prospects
 Analysis of Auction, Pricing, Issued Price and Reverse IPO’s.
OBJECTS OF THE OFFERING NEW IPO

 Funds Requirement
 Funding Plan (Means of Finance)
 Appraisal
 Schedule of Implementation
 Funds Deployed
 Sources of Financing of Funds already deployed
 Details of Balance Fund Requirement
 Interim Use of Funds
 Basic Terms of Issue
 Basis for issue price
 Tax Benefits

CHAPTER-2
SIGNIFICANCE OF THE STUDY
 PART- 2.1 GLOBAL IPO MARKET
 Globally, IPO activity picked up in the 2nd halfof2009, driven largely by Asia and
South America
 These two regions raised $68.6B (in11months ending 30Nov’09),
accounting for 72% of total global IPO value
 The recovery of global IPO activity was most pronounced in Asia,
particularly in the Hong Kong and Shanghai markets
– These two exchanges together raised $50B, accounting for 51% of total
global proceeds
 The number of deals went down significantly from Jan’09 to Nov’09, with only
459 IPOs listings, compared to 745 deals in 2008
 However, the capital raised through IPOs in 2009 aggregated at $95B,
nearly the same as 2008’s $94B, led by increase in average IPO size
  Emerging market dominated the IPO market in 2009 with Chinese companies
the largest contributor of total funds raised globally
 India contributed 3.5% of global IPOs (in terms of numbers) in 11 months ending
30 Nov’09, compared to 4.9% in 2008

GLOBAL IPO MARKET IN VOLUME AND IN PROCEEDS
Source: ARC
Source: ARC
Global IPO Market: What Happened in 2009…..

 IPO proceeds in North America declined by ~38% from $26.6B in first 11 months of
2008 to $16.6B in the same period of 2009
 Number of IPOs declined by 27%
 European IPOs accounted for 10% of total global IPOs and a modest $5B proceed
from Jan’09 to Nov’09
 This compares with 22% of total global IPOs raising US$13.6B in the same
period of 2008
 IPO proceeds and activities have fallen dramatically in the Middle East from $13.1B
(from 51 deals in the first 11 months of 2008) to $2.1B in the same period in 2009,
with only 16 IPOs
 Hong Kong Stock Exchange topped the list on the basis of funds raised with 18.7%
($17.7B) followed by New York Stock Exchange with 17.9% ($16.9B) and Shanghai
Stock Exchange with 17.0% ($16.1B)
 The top three exchanges by deal activity are the Shenzhen Stock Exchange (73*),
Hong Kong Stock Exchange (47*) and KOSDAQ Stock Exchange (46*)

Source: ARC
GLOBAL IPO MARKET- COUNTRY WISE PROCEEDS
Source: ARC
Oriental Institute of Management

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IPO MARKET- INDIA vs CHINA
VOLUME* (NO.) Source: ARC
PROCEEDS* ($B) * On the basis of listings

Source: ARC
GLOBAL IPO MARKET- SECTOR COMPARISON

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 In 2009*, on the basis of proceeds Financials, Industrials*** and Real Estate

sector accounted for 50%* of total IPO proceeds with 23%, 17% and 10%
compared to 28%, 15%, and 2% in 2008 respectively
 In 2008, Financials, Energy & Power, Materials*** and Industrial accounted for
~80% of total proceeds with 28%, 19%, 17% and 15%respectively
*Till Nov’09
** Others include Energy and Power, Telecom, Consumer goods and retail, Media and
Entertainment, Financials, Healthcare, Real estate
*** Includes Automobiles and components, Building/Construction and Engineering;
Construction Materials, Machinery and other industrials, Transportation and infrastructure
**** Includes chemicals, Construction materials, Containers and Packaging; Metals, Mining
and other materials; Paper and Forest Products
LARGEST IPOs IN 2009: global

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 China dominated the largest IPO list, representing seven of the ten initial public
offerings
 Top five IPOs in 2009 includes two construction firms from China and three
financial companies, two from Brazil and one from China
 BancoSantander Brasil SA’s $8.1B was the largest IPO of the year across the
globe in 2009, followed by $7.3B IPO of China State Construction
 The largest IPO of 2009 (BancoSantander Brasil SA, Brazil, $8.1B) was just
45% (in terms of value) of the largest IPO of 2008 (Visa, US, $17.86B), but
equivalent to largest IPO of 2007 (VTB Bank, Russia, $8B)
 Financial sector was the pick with 4 largest IPOs in top 10, contributing 47%
of the top 10 IPO proceeds
Largest IPOs in 2009
COMPANY NAME COUNTRY OFFER ISSU INDUSTRY RETUR

DATE E

13
SIZE
N (%)*
$B
Banco Santander Brasil SA Brazil 06 Oct'09 8.1 Financial 4.O%
China State Construction China 23 Jul'09 7.3 Capital Goods 12.90%
Metallurgical Corp. of
China Hong Kong 16 Sep'09 5.1 Capital Goods -15.30%
VisaNet(Cielo) Brazil 25 Jun'09 4.3 Financial 2.30%
China Minsheng Banking Hong Kong 19 Nov'09 3.9 Financial -4.00%
China Pacific Insurance Hong Kong 16 Dec'09 3.8 Financial -8.50%
Maxis Malaysia 09 Nov'09 3.3 Communications 7.40%
Sands China Hong Kong 21 Nov'09 2.4 Consumer -8.90%
China Longyuan Power Hong Kong 04 Dec'09 2.3 Energy 23.00%
China Shipbuilding Industry China 10 Dec'09 2.2 Transportation 2.70%
*Offer Price to closing price on 31st Dec’2009 Source: ARC
 PART-2.2 IPO MARKET IN INDIA
The IPO Market in India has been developing since the liberalization of the Indian
economy. It has become one of the foremost methods of raising funds for various

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developmental projects of different companies. The IPO Market in India is on the boom
as more and more companies are issuing equity shares in the capital market. With the
introduction of the open market economy, in the 1990s, the IPO Market went through its
share of policy changes, reforms and restructurings. One of the most important
developments was the disassembling of the Controller of Capital Issues (CCI) and the
introduction of the free pricing mechanism.
This step helped in developing the IPO Market in India, as the companies were permitted
to price the issues. The Free pricing mechanism permitted the companies to raise funds
from the primary market at competitive price.
The Central Government felt the need for a governed environment pertaining to the
Capital market, as few corporate houses were using the abolition of the Controller of
Capital Issues (CCI) in a negative manner. The Securities Exchange Board of India
(SEBI) was established in the year 1992 to regulate the capital market. SEBI was given
the authority of monitoring and regulating the activities of the bankers to an issue,
portfolio managers, stockbrokers, and other intermediaries related to the stock markets.
The effects of the changes are evident from the trend of the resources of the primary
capital market which includes rights issues, public issues, private placements and
overseas issues.
The IPO Market in India experienced a boom in its activities in the year 1994. In the year
1995 the growth of the Indian IPO market was 32 %. The growth was halted with the
South East Asian crisis. The markets picked up speed again with the introduction of the
software stocks.
Energy and Power, Hottest Sector Among the Investors…

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India IPO Activity Ramping Up Out of Deep Slumber… (1/2)

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Even though the Sensex surged ~8,000 points or 81% in 2009, public issues
remained stagnant for most part of the year
With secondary markets going north since Mar’09, primary market picked up the
pace in 2nd half of 2009 and accounted for 15 listings out of total of 17 in 2009
Continuing the trend witnessed in 2008, number of IPOs declined by 55% in 2009
over 2008 and 83% on 2007 levels
In 2008 and 2009, number of IPOs oversubscribed by more than 10 times, was a
mere 25% compared to ~50% in 2007
Source: ARC
India IPO Activity Ramping Up Out of Deep Slumber… (2/2)

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Capital raised by Corporate India through IPO route in 2009 aggregated at

INR157B, lowest in the last 4 years
NHPC contributed 39% of the total proceeds in 2009
There was very little excitement in the IPO market after it dried. But a flurry of
debuts came in the 2nd half of 2009 as confidence in stock markets grew
Though the volume and proceeds declined in 2009, the average IPO size increased
to INR9.2B in 2009 from INR5.0B in 2008, an increase of 86%

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PART-2.32 UPCOMING IPOs IN THE MARKET
Upcoming Initial Public Offering (IPOs) in India at a glance:

Initial Public Offer (IPO) in India, means the first sale by a private company of its shares
to the public. Initial Public Offers (IPOs) in India, are usually issued by small companies
but at the same time big private companies also go public by issuing their shares.
Various companies issuing upcoming IPOs in India as on 8th March 2010 are:
S.N. Company Lead Managers
JM FINANCIAL SERVICES PVT

1 STERLITE ENERGY LTD LTD
2 PERSTIGE ESTATES PROJECTS LTD ENAM SECURITIES PVT LTD

3 NITESH ESTATES LTD LTD
4 KUMAR URBAN DEVELOPMENT LTD. ENAM SECURITIES PVT LTD
5 JAYPEE INFRATECH LTD ENAM SECURITIES PVT LTD
ANAND RATHI FINANCIAL

6 INFINITY INFOTECH PARKS LTD SERVICES PVT LTD
7 AJANTA MANUFACTURING LTD ENAM SECURITIES PVT LTD
8 APOLLO HEALTH STREET LTD ICICI SECURITIES LTD
9 RITES LTD ENAM SECURITIES PVT LTD

10 BHARAT OMAN REFINERIES LTD LTD
11 FUTURE VENTURES INDIA LTD ENAM SECURITIES PVT LTD

12 PRINCE FOUNDATIONS LTD LTD
13 MULTI COMMODITY EXCHANGE INDIA LTD JM MORGAN STANLEY

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FINANCIAL SERVICES PVT LTD
14 NKG INFRASTRUCTURE LTD SPA SECURITIES LTD
15 MICROSEC FINANCIAL SERVICES LTD SBICAP SECURITIES LTD

16 RELIANCE INFRATEL LTD LTD
17 PNC INFRATECH LTD ENAM SECURITIES PVT LTD
18 VIGRO ENGINEERS LTD ENAM SECURITIES PVT LTD
19 ASHOKA BULDCON LTD ENAM SECURITIES PVT LTD
20 JAIPRAKASH POWER VENTURES LTD ENAM SECURITIES PVT LTD
21 UTI ASSET MANAGEMENT COMPANY LTD SBICAP SECURITIES LTD
SAFFRON CAPITAL ADVISORS

22 RITHWIK PROJECTS LTD PVT LTD
23 MADHANA INDUSTRIES LTD EDELWEISS SECURITIES LTD
24 PRIDE HOTELS LTD EDELWEISS SECURITIES LTD
CITIGROUP GLOBAL MARKETS

25 RAMKY INFRASTRUCTURE LTD INDIA PVT LTD
26 ACME TELE POWER LTD KOTAK SECURITIES LTD
27 JHAVERI FLEXO INDIA LIMITED SREI CAPITAL MARKETS LTD
28 NEEL METAL PRODUCTS LTD ICICI SECURITIES LTD
29 TCG LIFESCIENCES ENAM SECURITIES PVT LTD
30 YBRANT TECHNOLOGIES LTD ENAM SECURITIES PVT LTD
31 KHADIM INDIA LTD MICROSEC INDIA LTD
32 TACPRO SYSTEMS LTD SBICAP SECURITIES LTD

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33 RNS INFRASTRUCTURE LTD ICICI SECURITIES LTD
34 RAMSARUP LOHH UDYOG LTD MICROSEC CAPITAL LTD
35 MIDVALLEY ENTERTATIANMENT LTD RELIGARE SECURITIES LTD
36 BRAHAMPUTRA CONSORTIUM LTD A K STOCKMART PVT LTD
37 OSWAL WOLLEN MILLS LTD UTI BANK LTD
38 UMA PRECISION LTD KARVY STOCK BROKING LTD
Source: ARC

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CHAPTER-3
REVIEW OF LITERATURE
 PART-3.1 ADVANTAGES AND DRAWBACKS OF IPO
The Advantages of IPO are numerous. The companies are launching more and more
IPO’s to raise funds which are utilized for undertakings various projects including
expansion plans. The Advantages of IPO is the primary factor for the immense growth of
the same in the last few years. The IPO or the initial public offering is a term used to
describe the first sale of the shares to the public by any company. All types of companies
with the idea of enhancing growth launch IPOs to generate funds to cater the
requirements of capital for expansion, acquiring of capital instruments, undertaking new
projects.
Major Advantages of IPO
IPO has a number of advantages. IPO helps the company to create a publi
c awareness about the company as these public offerings generate publicity by inducing
their products to various investors.
 The increase in the capital: An IPO allows a company to raise funds for utilizing
in various corporate operational purposes like acquisitions, mergers, working capital,
research and development, expanding plant and equipment and marketing.
 Liquidity: The shares once traded have an assigned market value and can be
resold. This is extremely helpful as the company provides the employees with stock
incentive packages and the investors are provided with the option of trading their shares
for a price.

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 Valuation: The public trading of the shares determines a value for the company
and sets a standard. This works in favor of the company as it is helpful in case the
company is looking for acquisition or merger. It also provides the share holders of the
company with the present value of the shares.
 Increased wealth: The founders of the companies have an affinity towards IPO
as it can increase the wealth of the company, without dividing the authority as in case of
partnership.
Drawbacks of IPO’s
 Time and Expense
It is true that IPO raises huge capital for the issuing company. But, in order to
launch an Initial Public Offering (IPO), it is also necessary to make certain investments.
Setting up an IPO does not always lead to an improvement in the economic performance
of the company. A continuing expenditure has to be incurred after the setting up of an
IPO by the parent company. A lot of expenses have to be incurred in the form of legal
fees, printing costs and accounting fees, which are connected to the registering of an IPO.
Such expenses might cost hundreds of US dollars. Apart from such enormous costs, there
are other factors as well that should be taken into consideration by the company while
introducing an IPO.
Such factors include the rules and regulations involved to set up public offerings and this
entire process on the other hand involve a number of complexities which sometime
require the services of experts in relevant fields. Some companies hire experts to do the
needful to ensure a hassle-free execution of the task. After the IPO is introduced, the
expenses become a routine in every activity involved. Besides, the CEO of the company
would have to spend a lot of time in handling the SEC regulations or sometimes he hires
experts to do the same. All these aspects, if not handled with efficiency, prove to be some
major drawbacks related to the launch of IPOs.

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 Management Decision based on ownership of shares
The launch of IPO also brings about shareholders of the company. Shareholders
have ownership in the company. The primary owners of the company or the people
holding maximum authority in the company cannot take decisions all by themselves once
an IPO has been launched and shareholders have been formed. The shareholders have an
active participation in every decision that is being taken even if they do not hold 50
percent share of the company. They have their individual demands to be met as they own
a certain percentage of stakes in the company. The SEC regulations require notifications
from the shareholders of the company, meetings, and also approvals from them while
making important business decisions. A major risk with shareholders is that, they can sell
off their stocks any time they want, in case they see the price band of the stakes of that
company is going down. This will lead to a further drop of the value of shares in the
market which in turn will decrease the overall value of the company.
 Decisions based upon Stock Price
Management's decisions may be effected by the market price of the shares and the
feeling that they must get market recognition for the company's stock.
 Regulatory Review
The Company will be open to review by the SEC to ensure that the company is
making the appropriate filings with all relevant disclosures.
 Falling Stock Price
If the shares of the company's stock fall, the company may lose market
confidence, decreased valuation of the company may affect lines of credits, secondary

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offering pricing, the company's ability to maintain employees, and the personal wealth of
insiders and investors.
 Vulnerability
If a large portion of the company's shares are sold to the public, the company may
become a target for a takeover, causing insiders to lose control. A takeover bid may be
the result of shareholders being upset with management or corporate raiders looking for
an opportunity. Defending a hostile bid can be both expensive and time consuming. Once
a company has weighed the advantages and disadvantages of being a public company, if
it decides that it would like to conduct an IPO it will have to retain a lead
 Disclosure
The SEC disclosure rules are very extensive. Once a company is a reporting
company it must provide information regarding compensation of senior management,
transactions with parties related to the company, conflicts of interest, competitive
positions, how the company intends to develop future products, material contracts, and
lawsuits. In addition, once the offering statement is effective, a company will be required
to make financial disclosures required by the Securities and Exchange Act of 1934. The
1934 Act requires public companies to file quarterly statements containing unaudited
financial statements and audited financial statements annually. These statements must
also contain updated information regarding nonfinancial matters similar to information
provided in the initial registration statement. This usually entails retaining lawyers and
auditors to prepare these quarterly and annual statements. In addition, a company must
report certain material events as they arise. This information is available to investors,
employees, and competitors.

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 PART-3.2 IPO ALLOTMENT STATUS
Initial public offering is also popularly known as IPO, is the first time sale of
stocks, of a private company. A new company can launch IPO to raise capital to initiate
its business. Moreover, Initial Public Offering can also be launched to raise money for
expansion or other important operations of an existing company. The sale of stock
through such Initial Public Offering (IPO) is meant for the individual and corporate
investors. The aim of such issuance of Initial Public Offering is to invest the accumulated
corpus for, either opening -up of a company or expansion of an existing company.
Thus, effectively, an Initial Public Offering pools investments and utilizes it in building
or expansion of the said company. The shares held by such investors give them the rights
of the company and to its future profits. The process which involves determination of the
issue size and type, offer price and best time of introduction into the market is called
"underwriting". The underwriting is generally done by the investment bankers. These
underwriting firms or investment bankers are allotted some specified numbers of shares
to sell, which is called as IPO Allotment Status. In other words, IPO Allotment Status
can also be defined as the number of stocks which an investment banker is permitted to
sell to the general investor before the share is being traded on an exchange. The excess
shares are then allotted to other investment bankers which are eligible to sell such shares.
In India, the main governing body that determines such eligibility criteria and the IPO
Allotment Status is the Securities and Exchange Board of India (SEBI).

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 PART-3.3 IPO PROCEDURE
IPO’s generally involve one or more investment banks as "underwriters." The

company offering its shares, called the "issuer," enters a contract with a lead underwriter
to sell its shares to the public. The underwriter then approaches investors with offers to
sell these shares.
The sale (that is, the allocation and pricing) of shares in an IPO may take several forms.
Common methods include:
 Best efforts contract

 Firm commitment contract
 All-or-none contract
 Bought deal
 Dutch auction
 Self distribution of stock
A large IPO is usually underwritten by a "syndicate" of investment banks led by one or
more major investment banks (lead underwriter). Upon selling the shares, the
underwriters keep a commission based on a percentage of the value of the shares sold.
Usually, the lead underwriters, i.e. the underwriters selling the largest proportions of the
IPO, take the highest commissions—up to 8% in some cases.
Multinational IPOs may have as many as three syndicates to deal with differing legal
requirements in both the issuer's domestic market and other regions. For example, an
issuer based in the E.U. may be represented by the main selling syndicate in its domestic
market, Europe, in addition to separate syndicates or selling groups for US/Canada and
for Asia. Usually, the lead underwriter in the main selling group is also the lead bank in
the other selling groups.

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Because of the wide array of legal requirements, IPOs typically involve one or more law
firms with major practices in securities law, such as the Magic Circle firms of London
and the white shoe firms of New York City.
Usually, the offering will include the issuance of new shares, intended to raise new
capital, as well the secondary sale of existing shares. However, certain regulatory
restrictions and restrictions imposed by the lead underwriter are often placed on the sale
of existing shares.
Public offerings are primarily sold to institutional investors, but some shares are also
allocated to the underwriters' retail investors. A broker selling shares of a public offering
to his clients is paid through a sales credit instead of a commission. The client pays no
commission to purchase the shares of a public offering; the purchase price simply
includes the built-in sales credit.
The issuer usually allows the underwriters an option to increase the size of the offering
by up to 15% under certain circumstance known as the green shoe or over allotment
option.
The first sale of stock by a private company to the public. IPOs are often issued by
smaller, younger companies seeking the capital to expand, but can also be done by large
privately owned companies looking to become publicly traded. In an IPO, the issuer
obtains the assistance of an underwriting firm, which helps it determine what type of
security to issue (common or preferred), the best offering

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MAJOR PROCESS OF AN IPO
 Eligibility Criteria:
 Net Tangible assets of Rs. 3.00 Crore in each of the preceding 3 years.
 Track record of Distributable profits at least 3 out of 5 preceding years.
 The Company has a Networth of Rs. 1.00 Crore in preceding 3 years.
 The proposed issue should not exceed 5 times of its Pre-issue
 The process of an IPO - Eligibility criteria: (Alternate route)

 Book building process and 50% of the offer to QIBs or
 15% participation in project by F/Is or Schedule Banks;
 10% of the Project cost from appraiser;
 10% of the Issue to QIBs.
 Minimum post issue face capital of Rs.10 Crores or
 Market making for 2 years and Minimum number of allottees atleast 1000
 Official Process of IPO

 Appointment of Brokers, Advertisers and Bankers
 Conducting Road shows and Press Conference
 Opening and closing of Subscription list
 Preparation of Basis of Allotment
 Allotment of shares
 Listing of shares
 price and the time to bring it to market

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 PART-3.4 CRITICAL AREAS TO FOCUS
 Compliance with SEBI Guidelines

 90% subscription of the issue
 Underwriting Agreements
 Firm Allotments
 Listing approvals from the Stock Exchanges
 ROC approval for the prospectus
 Advertising and Road Shows
 Statutory advertisements
 In-time allotments and refunds
 Listing of the shares with the Exchanges
SEBI GUIDELINES
 Filing of prospectus:
Prospectus to be filed with SEBI through Merchant Banker At least 30 days < filing with
ROC SEBI may suggest changes < 30 days SEBI to consider only after approval
from St.Ex
 Issuer is obligated
 SEBI is not obligated
 Application for Listing:

No IPO without application for listing

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 Dematerialization of shares:
Agreement with Depository Present shares also to be in demat public may opt either
physical or demat shares
 “Qualified Institutional Buyer” shall mean:

 Public financial institution as defined in section 4A of the Companies Act,
1956; scheduled commercial banks;
 Mutual funds;
 Foreign institutional investor 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 minimum corpus of Rs. 25 crores;
 Pension funds with minimum corpus of Rs. 25 crores).
 Exemption from Eligibility Norms:

 Banking Co. including Pvt. Banks Subject to licensing by
RBI
 New Bank being set up on acquisition or take over of a
bank
 An infrastructure Company, whose project is appraised by
F/I, IL & FS and IDFC

32
 IPO Grading:
 No IPO unless; (as on the date of filing the
prospectus with ROC):
 Grading for IPO has been obtained from at
least one agency
 Grading and the rationale have been
included in the prospectus
 Grading expenses to be borne by the issuer
 Present shares to be fully paid-up:

 No IPO, if there are any
shares partly paid up as on the date of IPO
 The Shares to be fully paid
up or forfeited
 Price Band:
 Price Band to be 20%
 Max price can be 20% above the floor price
 Board of directors may be authorized to fix the price
 Denomination of shares
 Denomination of the shares is not restricted
 In case the issue price is <Rs.500, the Face Value shall be Rs.10/-
 The Face Value may be less, where the issue price is Rs.500 or
more

33
 Full disclosure of the face value in offer document
 Guidelines on issue of advertisement:

 Advertisement shall be truthful, fair and clear
 Shall not contain untrue or misleading or
misleading statement
 Disclose all relevant facts
 Clear, concise and
 Understandable language
 Avoid technical, legal, complex terms
 No advertisement in Crawlers
 Reference to the red-herring prospectus
 No slogans, captions or one liners
 Shall include risk factors
 Risk factors to be given in the same font size
 The print size shall not be less than point size 7

34
 PART-3.5
UNDERSTANDING THE ROLE OF INTERMEDIARIES
 Who are the intermediaries in an issue?
Merchant Bankers to the issue or Book Running Lead Managers (BRLM),

syndicate members, Registrars to the issue, Bankers to the issue, Auditors of the
company, Underwriters to the issue, Solicitors, etc. are the intermediaries to an issue. The
issuer discloses the addresses, telephone/fax numbers and email addresses of these
intermediaries. In addition to this, the issuer also discloses the details of the compliance
officer appointed by the company for the purpose of the issue.
 Who is eligible to be a BRLM?
A Merchant banker possessing a valid SEBI registration in accordance

with the SEBI (Merchant Bankers) Regulations, 1992 is eligible to act as a Book Running
Lead Manager to an issue.

35
 What is the role of a Lead Manager? (pre and post issue)
In the pre-issue process, the Lead Manager (LM) takes up the due
diligence of company’s operations/ management/ business plans/ legal etc. Other
activities of the LM include drafting and design of Offer documents, Prospectus, statutory
advertisements and memorandum containing salient features of the Prospectus. The
BRLMs shall ensure compliance with stipulated requirements and completion of
prescribed formalities with the Stock Exchanges, RoC and SEBI including finalization of
Prospectus and RoC filing. Appointment of other intermediaries viz., Registrar(s),
Printers, Advertising Agency and Bankers to the Offer is also included in the pre-issue
processes. The LM also draws up the various marketing strategies for the issue.
The post issue activities including management of escrow accounts, co-

ordinate non-institutional allocation, intimation of allocation and dispatch of refunds to
bidders etc are performed by the LM. The post Offer activities for the Offer will involve
essential follow-up steps, which include the finalization of trading and dealing of
instruments and dispatch of certificates and demat of delivery of shares, with the various
agencies connected with the work such as the Registrar(s) to the Offer and Bankers to
the Offer and the bank handling refund business. The merchant banker shall be
responsible for ensuring that these agencies fulfill their functions and enable it to
discharge this responsibility through suitable agreements with the Company.
 What is the role of a registrar?
The Registrar finalizes the list of eligible allottees after deleting the
invalid applications and ensures that the corporate action for crediting of shares to the
demat accounts of the applicants is done and the dispatch of refund orders to those
applicable are sent. The Lead manager co-ordinates with the Registrar to ensure follow
up so that that the flow of applications from collecting bank branches, processing of the

36
applications and other matters till the basis of allotment is finalized, dispatch security
certificates and refund orders completed and securities listed.
 What is the role of bankers to the issue?
Bankers to the issue, as the name suggests, carries out all the activities of
ensuring that the funds are collected and transferred to the Escrow accounts. The Lead
Merchant Banker shall ensure that Bankers to the Issue are appointed in all the mandatory
collection centers as specified in DIP Guidelines. The LM also ensures follow-up with
bankers to the issue to get quick estimates of collection and advising the issuer about
closure of the issue, based on the correct figures.
 Question on Due diligence
The Lead Managers state that they have examined various documents
including those relating to litigation like commercial disputes, patent disputes, disputes
with collaborators etc. and other materials in connection with the finalization of the offer
document pertaining to the said issue; and on the basis of such examination and the
discussions with the Company, its Directors and other officers, other agencies,
independent verification of the statements concerning the objects of the issue, projected
profitability, price justification, etc., they state that they have ensured that they are in
compliance with SEBI, the Government and any other competent authority in this behalf.

37
 PART-3.6 PARAMETERS TO JUDGE AN IPO
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

38
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.
 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.

39
 PART-3.7 GREEN SHOE OPTION
Companies that want to venture out and start selling their shares to the public
have ways to stabilize their initial share prices. One of these ways is through a legal
mechanism called the greenshoe option. A greenshoe is a clause contained in the
underwriting agreement of an initial public offering (IPO) that allows underwriters to buy
up to an additional 15% of company shares at the offering price. The investment banks
and brokerage agencies (the underwriters) that take part in the greenshoe process have the
ability to exercise this option if public demand for the shares exceeds expectations and
the stock trades above the offering price.
The Origin of the Greenshoe
The term "greenshoe" came from the Green Shoe Manufacturing Company (now called
Stride Rite Corporation), founded in 1919. It was the first company to implement the
greenshoe clause into their underwriting agreement.

40
In a company prospectus, the legal term for the greenshoe is "over-allotment option",
because in addition to the shares originally offered, shares are set aside for underwriters.
This type of option is the only means permitted by the Securities and Exchange
Commission (SEC) for an underwriter to legally stabilize the price of a new issue after
the offering price has been determined. The SEC introduced this option in order to
enhance the efficiency and competitiveness of the fundraising process for IPOs.
Price Stabilization
This is how a greenshoe option works:
 The underwriter works as a liaison (like a dealer), finding buyers for the shares
that their client is offering.
 A price for the shares is determined by the sellers (company owners and directors)
and the buyers (underwriters and clients).
 When the price is determined, the shares are ready to publicly trade. The
underwriter has to ensure that these shares do not trade below the offering price.
 If the underwriter finds there is a possibility of the shares trading below the
offering price, they can exercise the greenshoe option.
In order to keep the price under control, the underwriter oversells or shorts up to 15%
more shares than initially offered by the company.
For example, if a company decides to publicly sell 1 million shares, the underwriters (or
"stabilizers") can exercise their greenshoe option and sell 1.15 million shares. When the
shares are priced and can be publicly traded, the underwriters can buy back 15% of the
shares. This enables underwriters to stabilize fluctuating share prices by increasing or
decreasing the supply of shares according to initial public demand.

41
If the market price of the shares exceeds the offering price that is originally set before
trading, the underwriters could not buy back the shares without incurring a loss. This is
where the greenshoe option is useful: it allows the underwriters to buy back the shares at
the offering price, thus protecting them from the loss.
If a public offering trades below the offering price of the company, it is referred to as a
"break issue". This can create the assumption that the stock being offered might be
unreliable, which can push investors to either sell the shares they already bought or
refrain from buying more. To stabilize share prices in this case, the underwriters exercise
their option and buy back the shares at the offering price and return the shares to the
lender (issuer).
Full, Partial and Reverse Greenshoes
The number of shares the underwriter buys back determines if they will exercise a partial
greenshoe or a full greenshoe. A partial greenshoe is when underwriters are only able to
buy back some shares before the price of the shares increases. A full greenshoe occurs
when they are unable to buy back any shares before the price goes higher. At this point,
the underwriter needs to exercise the full option and buy at the offering price. The option
can be exercised any time throughout the first 30 days of IPO trading.
There is also the reverse greenshoe option. This option has the same effect on the price of
the shares as the regular greenshoe option, but instead of buying the shares, the
underwriter is allowed to sell shares back to the issuer. If the share price falls below the
offering price, the underwriter can buy shares in the open market and sell them back to
the issuer
The Greenshoe Option in Action
Say, for instance, that a company is planning to issue only 100,000 shares, but in order to
utilize the greenshoe option, it actually issues 115,000 shares, in which case the over-

42
allotment would be 15,000 shares. The company does not issue any new shares for the
over-allotment.
The 15,000 shares used for the over-allotment are actually borrowed from the pre-issue
existing shareholders and promoters with whom the stabilizing agent enters into a
separate agreement. For the subscribers of a public issue, it makes no difference whether
the company is allotting shares out of the freshly issued 100,000 shares or from the
15,000 shares borrowed from the promoters. Once allotted, a share is just a share for an
investor.
For the company, however, the situation is totally different. The money received from the
over-allotment is required to be kept in a separate bank account. The main job of the
stabilizing agent begins only after trading in the share starts at the stock exchanges. In
case the shares are trading at a price lower than the offer price, the stabilizing agent starts
buying the shares by using the money lying in the separate bank account. In this manner,
by buying the shares when others are selling, the stabilizing agent tries to put the brakes
on falling prices. The shares so bought from the market are handed over to the promoters
from whom they were borrowed. In case the newly listed shares start trading at a price
higher than the offer price, the stabilizing agent does not buy any shares.
Then how would he return the shares? At this point, the company by exercising the
greenshoe option issues new shares to the stabilizing agent, which are in turn handed over
to the promoters from whom the shares were borrowed.
Conclusion
One of the benefits of using the greenshoe is its ability to reduce risk for the company
issuing the shares. It allows the underwriter to have buying power in order to cover their
short position when a stock price falls, without the risk of having to buy stock if the price
rises. In return, this helps keep the share price stable, which positively affects both the
issuers and investors.

43
CHAPETR - 4
RESEARCH DESIGN AND METHODOLOGY
 PART-4.1 SOURCES OF DATA
Data’s are the useful information or any forms of document designed in a systematic and
standardize manner which are used for some further proceedings. One of the important
tools for conducting marketing research is the availability of necessary and useful data.
Some time the data are available readily in one form or the other and some time the data
are collected afresh. The sources of Data fall under two categories, Primary Source and
Secondary Sources.
Primary Data- the primary data was collected through the following activities:
Filled the IPO Industry related questionnaire to managers of a select group of companies
And Paper Conversation

44
Secondary Data- the secondary data was collected through the following:
Online Research material of the Various Financial Institution directly or indirectly
involved with IPO, Secondary Data used in External Source of Information Like internet,
magazine, paper cutting.

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 PART-4.2 OTHER SOURCE
 Information Sources
Information has been sourced from namely, books, newspapers, trade
journals, and white papers, industry portals, government agencies, trade
associations, monitoring industry news and developments, and through
access to access to more than 3000 paid databases.
 Analysis Method
The analysis methods include the following: Ratio Analysis, Historical Trend
Analysis, Linear Regression Analysis using software tools, Judgmental
Forecasting and Cause and Effect Analysis etc.

46
CHAPTER – 5
DATA ANALYSIS
 PART-5.1 PAST/PRESENT AND FUTURE OF IPO IN INDIA
India’s rapid economic growth, robust corporate profit stability, and a four-year
bull run on Bombay’s Stock Exchange (BSE), continue to fuel India’s strong IPO
markets. “Keen investor interest in India’s strong growth story has been real acted in the
attractive valuations and key price/earnings multiples garnered by Indian companies,”
says R. Balanchine, IPO Leader, Strategic Growth Markets, Ernst & Young India. In
2006, India’s markets launched 78 IPO’s and raised US$7.23 billion. Currently, India’s
exchanges rank eighth in the world for numbers of IPO’s and value in 2006. Despite a
May 2006 market tumble that erased more than US$100 billion in value in the BSE and
sparked concerns that the four-year Indian stock rally was over, Indian IPO activity
quickly resumed its upward momentum. In 2006, India’s IPO market has been fairly
broad-based, although energy companies dominated with more than 50% share of funds
raised. In 2006, India’s largest IPO was petroleum rife nine company, Reliance
Petroleum, which raised US$1.8 billion, followed by the oil production and exploration
company, Cairn Energy, which raised US$1.3 billion. Real estate IPO’s also generated
stellar returns for investors.
In the United States, during the dot-com bubble of the late 1990s, many venture capital
driven companies were started, and seeking to cash in on the bull market, quickly offered
IPO’s. Usually, stock price spiraled upwards as soon as a company went public. Investors
sought to get in at the ground-level of the next potential Microsoft and Netscape.

47
Initial founders could often become overnight millionaires, and due to generous stock
options, employees could make a great deal of money as well. The majority of IPOs
could be found on the NASDAQ stock exchange, which lists companies related to
computer and information technology. However, in spite of the large amounts of financial
resources made available to relatively young and untested firms (often in multiple rounds
of financing), the vast majority of them rapidly entered cash crisis. Crisis was particularly
likely in the case of firms where the founding team liquidated a substantial portion of
their stake in the firm at or soon after the IPO (Mudambi and Treichel, 2005).
This phenomenon was not limited to the United States. In Japan, for example, a similar
situation occurred. Some companies were operated in a similar way in that their only goal
was to have an IPO. Some stock exchanges were set up for those companies, such as
Osaka Securities Exchange.
Perhaps the clearest bubbles in the history of hot IPO markets were in 1929, when closed-
end fund IPOs sold at enormous premiums to net asset value, and in 1989, when closed-
end country fund IPOs sold at enormous premiums to net asset value. What makes these
bubbles so clear is the ability to compare market prices for shares in the closed-end funds
to the value of the shares in the funds' portfolios. When market prices are multiples of the
underlying value, bubbles are likely to be occurring.

48
SECTOR: - Energy & Power
SECTOR:- INDUSTRIAL
SECTOR: - HOSPITALITY
* On the basis of listings # Offer price to closing price on 31stDecember 2009 Source: ARC

49
SECTOR: TELECOM, MEDIA AND TECHNOLOGY
SECTOR: - CONSUMER GOODS AND RETAIL
SECTOR: OUTSOURCING
SECTOR: - EDUCATION

50
* On the basis of listings # Offer price to closing price on 31stDecember 2009 Source: ARC
A Brief Note on Future of IPOs in India
Secondary markets out performed primary markets in 2009, but we expect 2010 will
be exciting performance for both primary and secondary markets
With more than 60 firms already in process for approval from SEBI to raise
approximate INR400B, we expect the number of draft offer documents filed with SEBI
will match the levels of 2007
The divestment programme is expected to gain the momentum in 2010, with

government expecting to raise INR500B by end of 2010.
2010 will see the IPOs of BSNL and RITES and FPO of SAIL
With the handy increase in liquidity in market and stabilization in secondary

markets, the companies will raise money with ease in early in 2010.

51
 PART-5.2 MAJOR PLAYERS OF IPO IN INDIA
Of the total amount mobilized through the primary market by corporate India, 4
issues raised over INR134B (85% of total IPO proceeds in 2009)
Out of the 17 issues that hit the capital market this year, as many as 8 were of the
size of less than INR 1,000M (including 4 less than INR500M)
Issue Size Issue Size Issue Price Price(INR) *Return

Company (INRM) ($M) (INRM) 31 Dec'09 (%)
NHPC 60,385 1,257.80 36 34.00 -5.60%
Adani Power 30,165 621.70 100 98.90 -1.20%
Oil India 27,772 571.80 1050 1241.00 18.20%

Indiabulls Power 15,291 332.00 45 34.90 -22.40%
Cox and Kings (INDIA) 6,105 131.30 330 452.20 37.00%
Pipavav Shipyard 4,956 102.80 58 54.20 -6.60%
Den Networks 3,900 82.40 195 196.00 0.50%
Mahindra Holdays &
Resorts India 2,780 57.00 300 473.00 57.70%
Raj Oil Mills 1,140 23.70 120 73.00 -39.20%
Jindal Cotex 844 17.40 75 96.00 28.00%

52
* Offer price to closing price on 31stDec’09 Source:

ARC
 PART- 5.3 CASE STUDY ON IPO ON Syncom Healthcare Ltd

(SHL)
Highlights of the issue:
SHL started as a marketing Company, which was outsourcing its requirement of finished
products (Under Its Own Brand And Drug License) from other formulation
manufacturing units based in and around Indore. Presently also SHL is outsourcing some
of its requirement of finished products. With these companies, SHL has a purchase and
sale arrangement where the supplier unit is manufacturing SHL’s products on SHL’s
specification and under SHL’s quality control under which SHL controls the quality of
raw material, their sourcing by the supplier as well as production in the units of these
suppliers. The manufactured goods, manufactured for SHL are sold to SHL on pre-
decided order prices for each formulation product so manufactured.
SHL has set up a manufacturing facility at Dehradun in the state of Uttrakhand, which is
a Tax free & duty free Zone. The Company set up its Plant at Dehradun and it has started
the commercial production in November, 2006.
Catering primarily to the domestic market, SHL manufactures and markets

pharmaceutical formulation under its own brand name in four product segments —
generics, OTC (over the counter), ethical and herbal. It also undertakes contract
manufacturing for various pharmaceutical formulations, neutraceutical products, food
supplements and cosmetics for domestic companies such as Lupin and Piramal

53
Healthcare. Further, it recently added other companies such as Wockhardt, Klar Sehen
and Canixa Sciences to its existing list of contract manufacturing companies.
SHL reported operating income and Profit after Tax (PAT) for the 4MFY10 of Rs. 2.42
crs and Rs. 1.60 crs respectively. For FY09 the same was reported at Rs 6.55 crs and Rs
3.81 crs respectively.
Issue Snapshot:
Issue period January 27 – January 29, 2010
Price Band: Rs. 65 – Rs. 75
Issue Size: Rs. 48.75 cr – Rs. 56 cr
Issue Size: 75,00,000 equity shares
QIB atleast 37,50,000 eq sh
Retail atleast 26,25,000 eq sh
Non Institutional atleast 11,25,000 eq sh
Face Value: Rs 10
Book value: Rs 21.29 (March 31, 2009)
Bid size: 90 equity shares and in multiples thereof
100% Book built Issue

54
Capital Structure:
Pre Issue Equity: Rs. 10.00 cr
Post issue Equity: Rs. 17.50 cr
Listing: BSE & NSE
Lead Manager: Chartered Capital and Investment Ltd.
Registrar to issue: Link Intime India Pvt Ltd
CARE IPO grading: 2/5 indicating average fundamentals
Current Shareholding Pattern:
Share Holding Pattern Pre Issue % Post Issue %

Promoters and Promoters Group 100 57.14
Public (Incl institutions) * 42.86
Total 100 100
Source: HDFC securities
Objects of Issue:
The objects of the Issue are:
· To set up new manufacturing unit at Indore SEZ for manufacturing of various
pharmaceuticals formulations.
· To undertake the upgradation / modernization facilities at Dehradun Plant.
· To meet working capital requirements.
· To set up an Export office in Mumbai.

55
· To undertake “Brand & Product Registration and Approval”.
· General Corporate purposes.
· To meet issue expenses.
Means of Finance: The entire fund requirement will be met from the proceeds of the
fresh issue and from internal accruals.
Fund Requirement: Rs. Cr.
Total Fund Fund Estimated schedule

S.No
Activity requiremen already of deployment of
.
t deployed balance fund
2009-10 2010-11
To set up new manufacturing

1 unit at Indore SEZ 20.48 0.00 3.50 16.98
To undertake the Up gradation/

modernization of manufacturing
2 facilities at Dehradun 6.62 0.66 3.49 2.47
To meet Working Capital

3 Requirements 15.00 0.00 6.00 9.00
For opening Export Office at

4 Mumbai 4.00 0.00 3.00 1.00
For "Brand & Product

5 Registration and Approval" 3.00 0.00 0.75 2.25

56
6 General Corporate Purpose * 0.00 * *
7 Issue Expenses * 0.00 * *
Total * 0.58 * *
Source: HDFC securities
Risks & Concerns:
· Top 10 customers constitutes 68.95%, 68.77%, 55.59%, 51.56%, 40.25% of sales

during the FY 2009, 2008, 2007, 2006, 2005 respectively and loss of any one or more of
clients could adversely affect SHL’s business and financial operations.
· The sundry debtors of the company are very high & Debtors outstanding for a period
over six months have increased manifold from the year 2006-07 to the year 2007-2008.
· SHL’s dependency on few suppliers could affect the financial position and operations
of the company if these suppliers fail to provide the raw materials of specified quality and
quantity at proper time at reasonable rates to the company.
· There are no supply agreements for the raw materials required for manufacturing of
SHL’s products. Volatility in the prices of the raw material could have an adverse impact
on its business and financial operations.
· SHL’s business is dependent on the decisions and actions of its customers, and there
are number of factors relating to its customers that are outside its control that might result
in the termination of contract or the loss of any customer. Any of these factors could

57
adversely affect the business operations and in turn adversely affect SHL’s financial
operations.
· Business of SHL depends on its manufacturing facility. Any loss of or shutdown of

operations of the manufacturing facility on any grounds could adversely affect its
business or results of operations.
· SHL’s inability to fulfill export obligations could result in custom duty liability, which
in turn could adversely affect its financial operations to that extent.
· SHL’s business (pharmaceutical formulations) inherently exposes it to potential

liability. Also, product liability claims could require a pharmaceutical company to spend
money on litigation, divert management's time, damage a company's reputation and affect
the marketability of a company's products.
· Total income of SHL has grown from Rs.11.60 crore in fiscal year 2003 to Rs. 60.56
crore in the fiscal year 2009 at a growth rate of 55.66%, (13.90)%, 24.28%, 58.93%,
78.85% and 10.21% year on year. Profit after tax has grown from Rs.0.10.crore in fiscal
year 2003 to Rs.3.81 crore in the fiscal year 2009 at a growth rate of (1.01)%, (46.44)%,
289.98%, 1115.59%, 33.53% and 4.04% year on year. It, may not be able to sustain its
growth or maintain a similar rate of growth in the future due to a variety of reasons
including a decline in the demand for its products, increased competition, non-availability
of professionals with necessary skill sets, lack of management resources or due to a
general slowdown in the economy. A failure to sustain its growth may have a material
adverse effect on its financial condition and results of operations.
· SHL operates in a highly competitive environment. Significant additional competition

in the markets where it sells its products may erode market share and may result in

58
reduced prices and thereby may negatively affect its revenues and profitability.
Competition from competent low cost competitors may adversely impact SHL’s
revenues.
Conclusion:
SHL’s total income has grown at a CAGR of 47% over the past three years primarily
driven by increase in sales volume from SHL’s manufacturing unit, which became
operational during FY07. During FY 09 total income increased by 17% to Rs. 60.56 crore
which was backed by overall increase in sales from traded and manufactured goods.
During FY09 SHL earned an EPS of Rs. 3.78 compared to Rs.4.55 during FY08. The dip
in EPS was on account of increase in share capital on account of issue of equity shares to
promoters at par coupled with moderate increase in PAT
The small size of operations, relatively lesser experience in manufacturing, modest

branded product portfolio and competitive nature of Indian formulations market,
moderate profitability, longer working capital cycle, restriction on SHL’s access to export
markets on certain brands and pricing at 23.6 – 27.3 times FY10 (E) EPS (some peers
available at single digit P/E) makes the issue unattractive.

59
CHAPTER-6
FINDINGS AND CONCLUSION
MAJOR FINDINGS
Indian IPO Market Touched Bottom of Last 5 Years
30% of the top 10 IPOs of 2009 actually were the IPOs of 2008 or 2007, which
could not hit market earlier when markets were going south
NHPC, Adani Power and Cox&Kings waited for more than a year to get listed on
stock exchange in 2009, though they received SEBI approval in 2007 or 2008
Despite a surge in the secondary market, the IPO market witnessed just 17* issues in
2009 compared to 37* and 103* public issues got listed in 2008 and 2007 respectively
In terms of the proceeds, 2009 raised INR157B from the market as compared to
INR185B in 2008 and INR342B in 2007

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Most of the IPO activities witnessed in 2 nd half of 2009. 15* out of the 17* IPOs
came in the 2nd half which garnered INR156.5B out of the total 2009 proceeds of
INR157B
In Jun’ 09, SEBI introduced the concept of anchor investors to help the price
discovery process, and lower listing day volatility by bringing in a class of investors with
a slightly longer term view
An anchor investor (who cannot be a promoter of the company) can subscribe up to
half of the 60% portion reserved for qualified institutional buyers in an IPO, but have to
stay invested in the issue for a month after listing
Also, unlike other QIBs who need to pay only 10% as margin money, an anchor
investor has to cough up 25% and follow it up with the remaining 75% within two days
of the closure of the issue
An anchor investor gets firm allotment of shares, as opposed to the proportionate
allotment that other QIB constituents would
SEBI also extended the ASBA (application supported blocked amount) facility to
corporate investors and high net worth individuals (HNIs) to enable them to apply for
IPOs or rights issue by keeping the application money in their bank accounts till
allotment with effect from 1Jan’10
CONCLUSION

61
IPO is used by a company to raise its funds. The extra amount obtained from
public may be invested in the development of the company, although it costs a little to a
company but it gives a way to get more money for long term investments.
CHAPTER-7
LIST OF ABBRIVIATIONS AND DEFINITIONS
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 for
Opening Date the Issue, which shall be the date notified in a widely circulated English
national newspaper, a Hindi national newspaper and a Marathi regional

62
newspaper
Bid Closing Date / Issue The date after which the Syndicate Members will not accept any Bids for
Closing Date 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 Form The Form in terms of which the Bidder shall make an offer to 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.
CAN / Confirmation of The note or advice or intimation of allocation of Equity Shares sent to the
Allocation Note 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 Exchange Bombay Stock Exchange Limited and National Stock Exchange Limited
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 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

63
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 Bank(s) ICICI Bank Limited, Standard Chartered Bank, Deutsche Bank, 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
Issuer Syncom Healthcare Ltd (SHL)
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.
Pay-in-date The last date specified in the CAN sent to the Bidders
Pay-in-Period This term means

64
(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.65/- and the
maximum price (Cap Price) of Rs. 75/- and includes revision thereof
Pricing Date The date on which the Company in consultation with the BRLM finalizes
the Issue Price
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 37,50000
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 Companies

Act, Scheduled Commercial Banks, Mutual Funds registered with SEBI,
Buyers/ QIBs
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 26,25000 Equity Shares
of Rs.10 each available for allocation to Retail Individual Bidder(s)

65
Registrar/ Registrars to the Intime Spectrum Registry Limited

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 Bidder as
Registration Slip 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
CHAPTER-8
BIBLIOGRAPHY

66
 www.altassets.com, Advisory Research Consultancy (ARC)

 http://en.wikipedia.org
http://finance.indiamart.com/india_business_information/sebi_investors_kno
 whow.html
 www.hdfcsecurities.com
 http://demataccount.com/2008/01/15/learning-basic-concepts-of-ipo-india/
 http://www.sebi.gov.in
Special Thanks to:-
 Wikipedia, the free encyclopedia.htm

 http://www.google.com
 http://www.economywatch.com/business-and-financial/IPO-industry
 http://www.fibre2fashion.com/IPO-article
 Grading of IPOs- The Hindu Business Line
 Biggest IPO in India’s -Capital market History Business management article
Business News Newswire
 Global_IPO_Trends_2009-Report by – ARC Financial Service (P) Ltd.
 IPO, IPOs India News Market News - Economic Times
 www.nayaissue.com
 www.investopedia.com
 www.moneycontrol.com
 www.livemint.com, E-news Paper

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Chapter-1: Initial Public Offer

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Chapter-1: Initial Public Offer

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Analysis On Initial Public Offering

 PART- 1.1 INITIAL PUBLIC OFFER

Initial public offering (IPO), also referred to

Oriental Institute of Management 1

 PART 1.2 REASONS FOR LISTING

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Major Reason for Listing IPO

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 PART-1.3 OBJECTIVES AND ROLE OF

 To get the knowledge of IPO.

OBJECTS OF THE OFFERING NEW IPO

Oriental Institute of Management 5

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SIGNIFICANCE OF THE STUDY

 PART- 2.1 GLOBAL IPO MARKET

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GLOBAL IPO MARKET IN VOLUME AND IN PROCEEDS

Global IPO Market: What Happened in 2009…..

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GLOBAL IPO MARKET- COUNTRY WISE PROCEEDS

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IPO MARKET- INDIA vs CHINA

VOLUME* (NO.) Source: ARC

PROCEEDS* ($B) * On the basis of listings

GLOBAL IPO MARKET- SECTOR COMPARISON

Oriental Institute of Management

 In 2009*, on the basis of proceeds Financials, Industrials*** and Real Estate

Oriental Institute of Management

Largest IPOs in 2009

COMPANY NAME COUNTRY OFFER ISSU INDUSTRY RETUR

Oriental Institute of Management

Banco Santander Brasil SA Brazil 06 Oct'09 8.1 Financial 4.O%

China State Construction China 23 Jul'09 7.3 Capital Goods 12.90%

VisaNet(Cielo) Brazil 25 Jun'09 4.3 Financial 2.30%

China Minsheng Banking Hong Kong 19 Nov'09 3.9 Financial -4.00%

China Pacific Insurance Hong Kong 16 Dec'09 3.8 Financial -8.50%

Maxis Malaysia 09 Nov'09 3.3 Communications 7.40%

Sands China Hong Kong 21 Nov'09 2.4 Consumer -8.90%

China Longyuan Power Hong Kong 04 Dec'09 2.3 Energy 23.00%

China Shipbuilding Industry China 10 Dec'09 2.2 Transportation 2.70%

*Offer Price to closing price on 31st Dec’2009 Source: ARC

 PART-2.2 IPO MARKET IN INDIA

Oriental Institute of Management

Energy and Power, Hottest Sector Among the Investors…

Oriental Institute of Management

India IPO Activity Ramping Up Out of Deep Slumber… (1/2)

Oriental Institute of Management

India IPO Activity Ramping Up Out of Deep Slumber… (2/2)

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Capital raised by Corporate India through IPO route in 2009 aggregated at

NHPC contributed 39% of the total proceeds in 2009

Oriental Institute of Management

PART-2.32 UPCOMING IPOs IN THE MARKET

Upcoming Initial Public Offering (IPOs) in India at a glance:

S.N. Company Lead Managers

JM FINANCIAL SERVICES PVT

2 PERSTIGE ESTATES PROJECTS LTD ENAM SECURITIES PVT LTD

JM FINANCIAL SERVICES PVT

4 KUMAR URBAN DEVELOPMENT LTD. ENAM SECURITIES PVT LTD

5 JAYPEE INFRATECH LTD ENAM SECURITIES PVT LTD