ASSIGNMENT 1

Ans.1 The assessment of the company is based on the SEBI guidelines to determine if the company ABC Pvt. Ltd can go for an IPO. The inference is as follows Net tangible assets of at least 3 crores in each of the proceeding 3 years 2012 Net Tangible Assets 4 2011 4.8 2010 4

So the criterion is met by the company.

Ans.2 Distributable profit is at least 3 of the 5 proceeding years The company is earning adequate profits as it can be seen in PAT of previous years. The company has been distributing the profits as dividends. Also the company has been retaining some profits for future investment expansion plans 2012 PAT 50L 2011 20L 2010 30L 2009 35L 2008 40L

Net worth of at least Rs.1 Crore in each of the proceeding 3 years. The net worth of the company in the current year is Rs.1.5 Crore assuming that the equity share of the company has been maintained by the promoters in the previous year, the company by keeping the outside liability constant. The issue size does not exceed 5 times the pre-issue net worth as per the audited balance sheet of the last financial year. The company wants to raise Rs.5 Crore so it is within the norms of IPO issue. As the current position and the previous performance of the company meets all the conditions set up by SEBI for an IPO issue, so it can go ahead with the IPO with profitability route of raising funds.

Criteria for FPO If the company has changed its name within the last one year , at least 50 % revenue for preceding one year should be from activity suggested by the new name. The issue size does not exceed 5 times the pre-issue net worth as per the audited balanced sheet of the last financial year. It is assumed that the companys at least 50 % revenue are generated from the activity suggested by the new name and to issue size should not exceed 5 times of previous public offers.

Ans. 3 a) Promoters contribution in Public Issue: Public Isuue by an unlisted issuer: The promoter should not contribute less than 20 % of the past issue capital or 20 % of issue size. Public Issue by listed issuer: The promoter shall contribute not less than 20% of the past issue capital or 20% of the issue size. This provision ensures that the promoters of the company must have some minimum stake on the company for a minimum period after the issue. b) QIB v/s retail investor QIB: A corporate entity that falls within the "accredited investor" category, defined in SEC Rule 501 of Regulation D. A Qualified Institutional Buyer (QIB) is one that owns and invests, on a discretionary basis, at least $100 million in securities; for a broker-dealer the threshold is $10 million. QIBs encompass a wide range of entities, including banks, savings and loans associations, insurance companies, investment companies, employee benefit plans or entities owned entirely by accredited investors. Banks and S&L associations must also have a net worth of at least $25 million to satisfy the QIB criteria. Retail Investor: Also known as individual or small investor, those who buy and sell securities for their personal account and not for another company or organization. Retail Investor buys small quantities than larger Institutional Investors.