INTIAL PUBLIC OFFERING IN INDIA

“INITIAL PUBLIC OFFERING (IPO) IN INDIA”
Dissertation Submitted to the Padmashree Dr. D.Y. Patil University in partial fulfillment of the requirements for the award of the Degree of MASTERS IN BUSINESS ADMINISTRATION Submitted by: NITIN B. JAIN MBA-COR-FIN-(Roll No: 0801093)

Research Guide: Ms. Mamta Dhankute Lecturer Department of Business Management Padmashree Dr. D.Y. Patil University CBD Belapur, Navi Mumbai March 2010
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INTIAL PUBLIC OFFERING IN INDIA

DECLARATION

I hereby declare that the dissertation “INITIAL PUBLIC OFFERING (IPO) IN INDIA” submitted for the MBA Degree at Padmashree Dr. D.Y. Patil University’s Department of Business Management is my original work and the dissertation has not formed the basis for the award of any degree, associate ship, fellowship or any other similar titles.

Place: Mumbai Date:

NITIN B. JAIN MBA-COR-FIN-(Roll No: 0801093)

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INTIAL PUBLIC OFFERING IN INDIA

CERTIFICATE

This is to certify that the dissertation entitled

“INITIAL PUBLIC

OFFERING (IPO) IN INDIA” is the bona fide research work carried out by Mr. NITIN B. JAIN student of MBA, at Padmashree Dr. D.Y. Patil University’s Department of Business Management during the year 2008 -2010, in partial fulfillment of the requirements for the award of the Degree of Master in Business Management and that the dissertation has not formed the basis for the award previously of any degree, diploma, associate ship, fellowship or any other similar title.

(Ms. Mamta Dhankute) Lecturer

(Dr. R. Gopal) Director, Department of Business Mgt, Padmashree Dr. D.Y. Patil University

Place: Mumbai Date:
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ACKNOWLEDGEMENTS

In the first place, I thank Ms. Mamta Dhankute, Lecturer, Department of Business Management, Padmashree Dr. D.Y. Patil University, and Navi Mumbai for having given me her valuable guidance for the project. Without her help it would have been impossible for me to complete the project. I would also like to thank the various people from the Capital Market industry who have provided me with a lot of information and in fact even sharing some of the confidential company documents and data – many of which I have used in this report and without which this project could not have been completed. I would be failing in my duty if I do not acknowledge with a deep sense of gratitude the sacrifices made by my parents and thus have helped me in completing the project work successfully.

Place: Mumbai Date: NITIN B. JAIN MBA-COR-FIN-(Roll No: 0801093)

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INTIAL PUBLIC OFFERING IN INDIA TABLE OF CONTENT Chapter No A B C D E F G Title List of tables List of figures List of abbreviations Executive summary Objective of the study Research methodology Review of literature Page No 7 8 9 10 11 12 13

1 2 4 5 6 7 8 9 10 11 12 15 13 14

Financial markets and IPO Short terms in IPO IPO - features Trends Pricing of issue Book building Cost of issue Brief note on intermediaries Sebi and IPO Marketing of IPO IPO grading Guide to understand an offer document Case study analysis IPO scam

16 25 38 33 51 52 56 58 62 72 76 87 91 136

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INTIAL PUBLIC OFFERING IN INDIA 16 17 18 19 Survey report Conclusion and Recommendations Bibliography Reference 139 148 151 152

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LIST OF TABLES
PARTICULARS
IPO In Recent Past Year Recent IPO Data With Break-Up

PAGE NO.
50 50

Difference In Fixed Price Process And Book 54 Building Process Guidelines For Lead Managers By Sebi 58

Underwriting Commission Table Future Capital Subscription Detail

60 93

Reliance Power Subscription Detail

98

Bang Overseas Ltd Subscription Detail

104

J. Kumar Infraprojects Ltd. Subscription Detail

110

Cords Cable Industries Ltd Subscription Detail

116

K.N.R. Construction Ltd Subscription Detail

122

On mobile Global Ltd Subscription Detail

128

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INTIAL PUBLIC OFFERING IN INDIA

LIST OF FIGURES

PARTICULARS Diagram On Overview Of Primary And secondary 18 Market Types Of Issues 22

PAGE NO

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INTIAL PUBLIC OFFERING IN INDIA

LIST OF ABBREVIATIONS

ASBA

Application Amount

Supported

by

Blocked

BSE BRLM

Bombay stock exchange Book Running Lead Manager to the Issue

CRISIL

Credit Rating and Information Services of India Ltd.

DMAT DPO E-IPO FII FPO ICRA IPO IRDA

Dematerialized trading Direct Public Offering Electronic -IPO Foreign institutional investor Further public offering Industrial Credit Rating Agency Initial public offering Insurance Regulator and

Development Authority NIBs OTCEI POP QIBs QIP RHP RI ROC SEBI SEBI (DIP) SCSB Non-Institutional Buyers Over the Counter Exchange of India Public Offering Price Qualified Institutional Buyers Qualified Institutions Placement Red Herring Prospectus Rights Issue Registrar of Companies Security and Exchange Board of India SEBI(Disclosure and Investor Protection) Self Certified Syndicate Bank 9

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EXECUTIVE SUMMARY
When a business entity needs money the general course of action that it follows is that it goes to the bank. However banks may not be ready to provide huge finance for a long time especially if the returns are not fixed. The best way to raise money is through offer of shares. The securities which the companies issue for the first time to the public and other financial institutions either after incorporation or on conversion from private to public company is called “INITIAL PUBLIC OFFERING” or “IPO”. Raising equity gives boost to economical development of the country.

Raising money through IPO is a very complex process. It requires analysis and implementation of various commercial laws applicable to IPO-Prospectus. These laws are Companies Act, Income Tax Act, FEMA, Securities Contract Act and SEBI Guidelines on “Disclosure and Investor Protection”. It is also necessary to implement circulars from time to time by SEBI. The introduction of SEBI attracted Foreign Institutional Investors to invest money in stock market in India. It has also helped Indian Companies to offer securities in most scientific method to Indian and Foreign investors Therefore to understand this complex subject, I decided to undertake studies by this Project Report.

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INTIAL PUBLIC OFFERING IN INDIA

OBJECTIVES OF THE STUDY
To analyze and evaluate the complex IPO process

To study and incorporate the legal requirements of an IPO

SEBI Norms and Guidelines

Various aspects of IPO like cost, Involvement of intermediaries, pricing of an IPO.

Pricing of an issue through the Book-Building Method

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RESEARCH METHODOLOGY

Primary data consist of the Survey done by meeting people who are either Customers in Share Market or have idea about it. The data can be collected by laymen to find out their needs. The sample size was taken was 50 responded. It also includes case analysis of some corporate houses IPO’s.

Secondary data would consist of widely available resources like 1. Newspapers 2. Magazines 3. Journals 4. Websites 5. Books etc.

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INTIAL PUBLIC OFFERING IN INDIA

LITERATURE REVIEW
1. “INITIAL PUBLIC OFFERINGS” BY RICHARD P. KLEEBURG 3RD EDITION IN YEAR 2005, WHICH PUBLISHED BY SOUTH WESTERN EDUCATIONAL PUBLISHING.”

This valuable resource is for the executives and advisers of any firm considering making the transition from a private to public company. An IPO is not just a short-term financial transaction. It often marks the turning point in the life of a company, enabling it to launch new products, enter new markets, accelerate its growth, and attract valuable employees. If an IPO is the way to grow, then a "balanced scorecard" approach needs to be used - an honest evaluation of the process and consideration of whether an IPO, despite its glamour, will or will not produce the desired results. Initial Public Offerings uncovers many of the successful approaches and common pitfalls to going public. It helps officials decide whether an IPO or other financing alternatives is the right strategy, determine which stock market to use, plan and execute the IPO, and stay on track following the IPO - helping companies reach their true potential for success.

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INTIAL PUBLIC OFFERING IN INDIA

2. “DALAL STREET JOURNAL’S “STOCK MARKET BOOK” -PUBLISHED BY RAMDEO MEDIA LTD WITH

DALALSTREETJORNAL.COM”

This book provides an insight into some of the aspects of secondary market and provides with concept clearing on some of the fundamental aspects of IPO.

3. “IPO:

CONCEPTS

AND

EXPERIENCES

-

BY

ARINDAM

BANERJEE PUBLISHED; BY-ICFAI UNIVERSITY PRESS”

One of the striking features that makes any capital market an attractive investment avenue is its liquidity. In this regard, the importance and relevance of Initial Public Offers (IPOs) go beyond explanation. Simply speaking, IPOs serve the purpose of companies going public; the process by which the business owned by one or several individuals is converted into a business owned by many. Several experts are of the opinion that, IPOs strengthen the financial architecture of the entire capital market by enhancing liquidity, while others say, that they bring along with it an array of fraudulent practices that have a strong potential of eroding the investors’ confidence. From the company’s point of view, an IPO can even mark the turning point in an organization’s life. Following an IPO, a company can increase its growth potential, launch its new products as well as enter new markets. IPOs are a general feature of any
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INTIAL PUBLIC OFFERING IN INDIA booming capital market that increases the overall market

capitalization. Of late, the global capital markets have performed considerably well and one primary reason attributed to the same is the surge of public offers that have flooded the markets. This book titled “IPOs: CONCEPTS AND EXPERIENCES” deals with various conceptual parameters of IPOs such as their pricing mechanisms, valuation methods, timing of the offers, technology impact on IPOs and various other related issues. In its entirety, the book itself is a comprehensive guide to the various trends witnessed in the IPO market amidst the volatile environment. 4. “IPO MARKETS: PERSPECTIVES AND EXPERIENCES BY VANDANA SHAJAN PUBLISHED BY-ICFAI”

This book provides detailed analysis by focusing majorly on IPOs rating, IPOs rating, IPOs rating and IPO scams.

5. “NCFM MODULE: FINANCIAL MARKET’S”

A VALUABLE INPUT HAS BEEN TAKEN FROM THE BOOKS AVAILABLE THROUGH NCFM MODULE LIKE CAPITAL MARKET MODULE ETC.

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INTIAL PUBLIC OFFERING IN INDIA

FINANCIAL MARKETS AND THE IPO
The Financial Market is an amorphous set of players who come together to trade in financial assets. Financial Markets in any economic system that acts as a conduit between the organizations who need funds and the investors who wish to invest their money into profitable opportunity. Thus, it helps institutions and organizations that need money to have an access to it and on the other hand, it helps the public in general to earn savings. Thus they perform the crucial function of bringing together the entries who are either financially scarce or who are financially slush. This helps generally in a smoother economic functioning in the sense that economic resources go to the actual productive purposes. In modern economic systems Stock Exchanges are the epicenter of the financial activities in any economy as this is the place where actual trading in securities takes place.

Modern day Stock Exchanges are most of the centers to trade in the existing financial assets. In this respect, they have come a long way in the sense that these days, they act as a platform to launch new securities as well as act as most authentic and real time indicator of the general economic sentiment. The zone of activities in the capital market is dependent partly on the savings and investment in the economy and partly on the performance of the industry and economy in general. In other words capital market constitutes the channel through which the capital resources generated in the society and made available for economic development of the nation.
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INTIAL PUBLIC OFFERING IN INDIA

As such, Financial Markets are functionally classified as having two parts, namely,

The Primary Market The Secondary Market

Primary Market comprises of the new securities which are offered to the public by new companies. It is the mechanism through which the resources of the community are mobilized and invested in various types of industrial securities. Whenever a new company wants to enter the market it has to first enter the primary market. Secondary Market comprises of further issues which are floated by the existing companies to enhance their liquidity position. Once the new issues are floated and subscribed by the public then these are traded in the secondary market. It provides easy liquidity, transferability and continuous price formation of securities to enable investors to buy and sell them with ease. The volume of activity in the Secondary Market is much higher compared to the Primary Market When an investor buys shares from another investor at an agreed prevailing market price, it is called as buying from the secondary market. The secondary market involves the stock exchanges and it is regulated by a regulatory authority. In India, the secondary and primary markets are governed by the Security and Exchange Board of India (SEBI).

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INTIAL PUBLIC OFFERING IN INDIA

“DIAGRAM ON OVERVIEW OF PRIMARY AND SECONDARY MARKET”

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INTIAL PUBLIC OFFERING IN INDIA

PRIMARY MARKET-GENESIS AND GROWTH
When a business entity needs money the general course of action that it follows is that it goes to the bank. However banks may not be ready to provide huge finance for a long time especially if the returns are not fixed. The best way to raise money is through offer of shares and for this: PRIMARY MARKET is the answer The Primary Market deals with the new securities which were previously not trade able to the public. The main function is to facilitate the transfer of resources from savers to entrepreneurs seeking to establish or to expand and diversify existing events. The mobilization of funds through the Primary Market is adopted by the state government and corporate sector. In other words the Primary Market is an integral part of the capital market of a country and together with the securities market. The development of security as well as the scope for higher productive capacity and social welfare depends upon the efficiency of the Primary Market.

WHAT IS AN IPO?
The securities which the companies issue for the first time to the public either after incorporation or on conversion from private to public company is called “INITIAL PUBLIC OFFERING” or “IPO”
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INTIAL PUBLIC OFFERING IN INDIA

GROWTH OF IPO’S IN INDIA

HISTORY OF PRIMARY MARKET

Indian capital market was initiated with establishing the Bombay stock exchange in the year 1875.at that time the main function of stock exchange was to provide place for trading in the stocks. Now the exchange has completed more than 25 years. It has undergone several changes.

Initially the IPO was called ‘New Issue’ and the issues in the Primary Market were controlled by CCI (Controller of capital issue). It was working as a department of MOF (ministry of finance). There were very few issues every year. CCI was highly conservative and hardly allowed any premium issues. Also, the regulatory framework was inadequate to control several issues relating to Primary Market. Therefore, in the year 1992 it was abolished.

There was no awareness of new issues among the investing public. In fact, during 1950s-1960s, the investment in stock market was considered to be gambling. It was prerogative to highly elite business community to participate in new issues. More than 99% of Indian population never participated in any issue during CCI regime.

There was tremendous growth in capital market in U.S.A. and Western Europe. In these markets they had established Security
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INTIAL PUBLIC OFFERING IN INDIA Exchange Commission (SEC). It is most powerful autonomous body. The Government of India realized the importance of a similar body in India for healthy and fast growth of Capital Market. Thus Security Exchange Board of India (SEBI) was established with headquarters in Mumbai in 1992.SEBI is the most powerful body in India.

SEBI has come up with the guidelines for disclosures and investors protection. SEBI has framed rules for various intermediaries like Merchant Bankers, Underwriters, Brokers, Bankers, Registrars and Transfer Agents, Depositories, Stock Exchanges etc. These rules are on the line of similar rules in western world. This has attracted foreign institutional and individual investors to invest money in India. This has resulted in exponential growth of Capital Market in this last decade. POPULARISING THE NEW ISSUE.

Late Shri, Dhirubhai Ambani can be considered as ‘Bhishmapita’ of new issues, though initially he also had to struggle to get subscribers but he always used innovative ideas for marketing IPOs. It is said that investor never lost money in his pricing methods. There are several incidences of the common man participated in his issues, got allotment, sold shares and created fabulous wealth for themselves. As on 31-12-2003, Reliance Group has more than 3.5 million shareholders.

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TYPES OF ISSUES

Public issues can be further classified into Initial Public offerings and further public offerings. In a public offering, the issuer makes an offer for new investors to enter its shareholding family. The issuer company makes detailed disclosures as per the DIP guidelines in its offer document and offers it for subscription. The significant features are illustrated below:

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INTIAL PUBLIC OFFERING IN INDIA

INITIAL PUBLIC OFFERING (IPO) It is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer’s securities.

FURTHER PUBLIC OFFERING (FPO) It is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

RIGHTS ISSUE (RI) It is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.

PRIVATE PLACEMENT It is an issue of shares or of convertible securities by a company to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. A private placement of shares
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INTIAL PUBLIC OFFERING IN INDIA or of convertible securities by a listed company is generally known by name of preferential allotment. A listed company going for preferential allotment has to comply with the requirements contained in Chapter XIII of SEBI (DIP) Guidelines pertaining to preferential allotment in SEBI (DIP) guidelines include pricing, disclosures in notice etc, in addition to the requirements specified in the Companies Act.

QUALIFIED INSTITUTIONS PLACEMENT It is a private placement of equity shares or securities convertible in to equity shares by a listed company to Qualified Institutions Buyers only in terms of provisions of Chapter XIIIA of SEBI (DIP) guidelines. The Chapter contains provisions relating to pricing, disclosures, Currency of instruments etc.

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SOME TERMS IN IPO INDUSTRY :
OFFER DOCUMENT Means Prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue which is filed Registrar of Companies (ROC) and Stock Exchanges. An offer document covers all the relevant information to help an investor to make his/her investment decision.

DRAFT OFFER DOCUMENT Means the offer document in draft stage. The draft offer documents are filed with SEBI, at least 21 days prior to the filing of the Offer Document with ROC/ SEs. SEBI may specifies changes, if any, in the draft Offer Document and the issuer or the Lead Merchant banker shall carry out such changes in the draft offer document before filing the Offer Document with ROC/SEs. The Draft Offer document is available on the SEBI website for public comments for a period of 21 days from the filing of the Draft Offer Document with SEBI.

RED HERRING PROSPECTUS It is a prospectus which does not have details of either price or number of shares being offered or the amount of issue. This means that in case price is not disclosed, the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares are

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INTIAL PUBLIC OFFERING IN INDIA determined later. An RHP for and FPO can be filed with the ROC without the price band and the issuer, in such a case will notify the floor price or a price band by way of an advertisement one day prior to the opening of the issue. In the case of book-built issues, it is a process of price discovery and the price cannot be determined until the bidding process is completed. Hence, such details are not shown in the Red Herring prospectus filed with ROC in terms of the provisions of the Companies Act. Only on completion of the bidding process, the details of the final price are included in the offer document. The offer document filed thereafter with ROC is called a prospectus.

ABRIDGED PROSPECTUS Means the memorandum as prescribed in Form 2A under sub-section (3) of section 56 of the Companies Act, 1956. It contains all the salient features of a prospectus. It accompanies the application form of public issues.

LETTER OF OFFER Means the offer document prepared by company for its rights issue and which is filed with the Stock Exchanges. The letter of offer contains all the disclosures as required in term of SEBI (DIP) guidelines and enable shareholder in making an informed decision.

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INTIAL PUBLIC OFFERING IN INDIA ABRIDGED LETTER OF OFFER Means the abridged version of the letter of offer. Listed company is required to send the abridged letter of offer to each and every shareholder who is eligible for participating in the rights issue along with the application form. A company is also required to send detailed letter of offer upon request by any Shareholder.

PLACEMENT DOCUMENT Means document prepared by Merchant Banker for the purpose of Qualified Institutions placement and contains all the relevant and material disclosures to enable QIBs to make an informed decision

LOCK-IN “Lock-in” indicates a freeze on the shares. SEBI (DIP) Guidelines have stipulated lock-in requirements on shares of promoters mainly to ensure that the promoters or main persons who are controlling the company, shall continue to hold some minimum percentage in the company after the public issue. The requirements are detailed in Chapter IV of DIP guidelines. There is lock-in on the shares held before IPO and also on shares acquired through preferential allotment route. However there is no lock- in on shares/ securities allotted through QIP route. The requirements are detailed in Chapter IV, Chapter XIII and Chapter XIIIA of DIP guidelines.

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INTIAL PUBLIC OFFERING IN INDIA

PROMOTER The promoter has been defined as a person or persons who are in over-all control of the company, who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public and those named in the prospectus as promoters(s). It may be noted that a director / officer of the issuer company or person, if they are acting as such merely in their professional capacity are not be included in the definition of a promoter. 'Promoter Group' includes the promoter, an immediate relative of the promoter (i.e. any spouse of that person, or any parent, brother, sister or child of the person or of the spouse). In case promoter is a company, a subsidiary or holding company of that company; any company in which the promoter holds 10% or more of the equity capital or which holds 10% Or more of the equity capital of the Promoter; any company in which a group of individuals or companies or combinations thereof who holds 20% or more of the equity capital in that company also holds 20% or more of the equity capital of the issuer company. In case the promoter is an individual, any company in which 10% or more of the share capital is held by the promoter or an immediate relative of the promoter' or a firm or HUF in which the 'Promoter' or any one or more of his immediate relative is a member; any company in which a company specified in, holds 10% or more, of the share capital; any HUF or firm in which the aggregate share of the promoter and his

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INTIAL PUBLIC OFFERING IN INDIA immediate relatives is equal to or more than10% of the total, and all persons whose shareholding is aggregated for the purpose of disclosing in the prospectus "shareholding of the promoter group".

GREEN-SHOE OPTION A Green Shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days in accordance with the provisions of Chapter VIIIA of DIP Guidelines, Which is granted to a company to be exercised through a Stabilizing Agent? This is an arrangement wherein the issue would be over allotted to the extent of a maximum of 15% of the issue size. From an investor’s perspective, an issue with green shoe option provides more probability of getting shares and also that post listing price may show relatively more stability as compared to market.

E-IPO A company proposing to issue capital to public through the on-line system of the stockexchange for offer of securities can do so if it complies with the requirements under Chapter 11A of DIP Guidelines. The appointment of various intermediaries by the issuer includes a prerequisite that such members/registrars have the required facilities to accommodate such an online issue process.

SAFETY NET Any safety net scheme or buy-back arrangements of the shares proposed in any public issue shall be finalized by an issuer company
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INTIAL PUBLIC OFFERING IN INDIA with the lead merchant banker in advance and disclosed in the prospect us. Such buy back or safety net arrangements shall be made available only to all original resident individual allottees limited up to a maximum of 1000 shares per allottee and the offer is kept open for a period of 6 months from the last date of dispatch of securities. The details regarding Safety Net are covered under Clause 8.18 of DIP Guidelines

SYNDICATE MEMBER The Book Runner(s) may appoint those intermediaries who are registered with the Board and who are permitted to carry on activity as an ‘Underwriter’ as syndicate members. The syndicate members are mainly appointed to collect and entre the bid forms in a book built issue.

FLIPPING Flipping is reselling a hot IPO stock in the first few days to earn a quick profit. This isn't easy to do, and you'll be strongly discouraged by your brokerage. The reason behind this is that companies want long-term investors who hold their stock, not traders. There are no laws that prevent flipping, but your broker may blacklist you from future offerings. Institutional investors flip stocks all the time and make big money. The double standard exists and there is nothing we can do about it because they have the buying power. Because of flipping, it's a good rule not to buy shares of an IPO if you don't get in on the initial offering. Many IPOs that have big gains on the first day will come back to earth as the institutions take their profits.
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INTIAL PUBLIC OFFERING IN INDIA OPEN BOOK/CLOSED BOOK Presently, in issues made through book building, Issuers and merchant bankers are required to ensure online display of the demand and bids during the bidding period. This is the Open book system of book building. Here, the investor can be guided by the movements of the bids during the period in which the bid is kept open. Under closed book building, the book is not made public and the bidders will have to take a call on the price at which they intend to make a bid without having any information on the bids submitted by other bidders.

HARD UNDERWRITING Hard underwriting is when an underwriter agrees to buy his commitment at its earliest stage. The underwriter guarantees a fixed amount to the issuer from the issue. Thus, in case the shares are not subscribed by investors, the issue is devolved on underwriters and they have to bring in the amount by subscribing to the shares. The underwriter bears a risk which is much higher in soft underwriting.

SOFT UNDERWRITING Soft underwriting is when an underwriter agrees to buy the shares at later stages as soon as the pricing process is complete. He then, immediately places those shares with institutional players. The risk faced by the underwriter as such is reduced to a small window of time. Also, the soft underwriter has the option to invoke a force Majeure (acts of God) clause in case there are certain factors beyond

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INTIAL PUBLIC OFFERING IN INDIA the control that can affect the underwriter’s ability to place the shares with the buyers.

CUT OFF PRICE In Book building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called “Cut off price”. This is decided by the issuer and LM after considering the book and investors’ appetite for the stock. SEBI (DIP) guidelines permit only retail individual investors to have an option of applying at cut off price.

DIFFERENTIAL PRICING Pricing of an issue where one category is offered shares at a price different from the other category is called differential pricing. In DIP Guidelines differential pricing is allowed only if the security to applicants in the firm allotment category is at a price higher than the price at which the net offer to the public is made. The net offer to the public means the offer made to the Indian public and does not include firm allotments or reservations or promoters’ contributions.

BASIS OF ALLOCATION/BASIS OF ALLOTMENT After the closure of the issue, the bids received are aggregated under different categories i.e., firm allotment, Qualified Institutional Buyers (QIBs), Non-Institutional Buyers (NIBs), Retail, etc. The

oversubscription ratios are then calculated for each of the categories as against the shares reserved for each of the categories in the offer
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INTIAL PUBLIC OFFERING IN INDIA document. Within each of these categories, the bids are then segregated into different buckets based on the number of shares applied for. The oversubscription ratio is then applied to the number of shares applied for and the number of shares to be allotted for applicants in each of the buckets is determined. Then, the number of successful allottees is determined. This process is followed in case of proportionate allotment. In case of allotment for QIBs, it is subject to the discretion of the post issue lead manager.

QUALIFIED INSTITUTIONAL BUYER (QIBS) Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP Guidelines, a ‘Qualified Institutional

Buyer’ shall mean: A. Public financial institution as defined in section 4A of the Companies Act, 1956; B. scheduled commercial banks; C. mutual funds; D. foreign institutional investor registered with SEBI; E. multilateral and bilateral development financial institutions; F. venture capital funds registered with SEBI. G. foreign Venture capital investors registered with SEBI. H. State Industrial Development Corporations.

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INTIAL PUBLIC OFFERING IN INDIA I. insurance Companies registered with the Insurance Regulator and Development Authority (IRDA). J. provident Funds with minimum corpus of Rs. 25 crores K. pension Funds with minimum corpus of Rs. 25 crores) These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.

APPLICATION SUPPORTED BY BLOCKED AMOUNT (ASBA) Means an application for subscribing to an issue containing an authorization to block the application money in a bank account.

ASBA INVESTOR Means an Investor who intends to apply through ASBA process and A. is a “Resident Retail Individual Investor” B. is bidding at cut-off, with single option as to the number of shares bid for; C. is applying through blocking of funds in a bank account with the SCSB; D. has agreed not to revise his/her bid; E. is not bidding under any of the reserved categories.

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INTIAL PUBLIC OFFERING IN INDIA

SELF CERTIFIED SYNDICATE BANK (SCSB) It is a Banker to an Issue registered under SEBI (Bankers to an Issue) Regulations; 1994which offers the service of making an Applications Supported by Blocked Amount and recognized as such by the Board)

MINORITY IPO An initial public offering in which a parent company spins off one of its subsidiaries or divisions, but retains a majority stake in the company after issuance. This means that after the public offering, the parent company will still have a controlling stake of the new public company. The parent company may retain this majority stake forever or may slowly dissolve their ownership over time. This type of IPO allows the company to raise funds, accessing the value of the subsidiary, to fund its own operation or return value to shareholders.

PUBLIC OFFERING PRICE - POP The price at which new issues are offered to the public by an underwriter. When underwriters determine the public offering price, they look at a number of factors. Some of these include the company's financial statements (how profitable it is), public trends, growth rates and even investor confidence.

UNDERPRICING The pricing of an initial public offering (IPO) below its market value. When the offer price is lower than the price of the first trade, the stock
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INTIAL PUBLIC OFFERING IN INDIA is considered to be underpriced. A stock is usually only underpriced temporarily because the laws of supply and demand will eventually drive it toward its intrinsic value. It is believed that IPOs are often underpriced because of concerns relating to liquidity and uncertainty about the level at which the stock will trade. The less liquid and less predictable the shares are, the more underpriced they will have to be in order to compensate investors for the risk they are taking. Because an IPO's issuer tends to know more about the value of the shares than the investor, a company must under price its stock to encourage investors to participate in the IPO.

DIRECT PUBLIC OFFERING - DPO When a company raises capital by marketing its shares directly to its own customers, employees, suppliers, distributors and friends in the community. DPOs are an alternative to underwritten public offerings by securities broker-dealer firms where a company's shares are sold to the broker's customers and prospects. Direct public offerings are considerably less expensive than traditional underwritten offerings. Additionally, they don't have the restrictions that are usually associated with bank and venture capital financing. On the other hand, a DPO will typically raise much less than a traditional offering.

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INTIAL PUBLIC OFFERING IN INDIA QUIET PERIOD In terms of an IPO, the period where an issuer is subject to a SEC ban on promotional publicity. The quiet period usually lasts either 40 or 90 days from the IPO. In other words, If you take your company public, you can't talk about your stock to anybody for 3 months. There are two time windows commonly referred to as "quiet periods" during an IPO's history. The first and the one linked above is the period of time following the filing of the company's registration statement, but before SEC staff declare the registration statement effective. During this time, issuers, company insiders, analysts, and other parties are legally restricted in their ability to discuss or promote the upcoming IPO. The other "quiet period" refers to a period of 40 calendar days following an IPO's first day of public trading. During this time, insiders and any underwriters involved in the IPO, are restricted from issuing any earnings forecasts or research reports for the company. Regulatory changes enacted by the SEC as part of the Global Settlement, enlarged the "quiet period" from 25 days to 40 days on July 9, 2002. When the quiet period is over, generally the lead underwriters will initiate research coverage on the firm. Further to this, the NASD and NYSE have approved a rule mandating a 10-day quiet period after a secondary offering and a 15-day quiet period both before and after expiration of a "lock-up agreement" for a securities offering.

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INTIAL PUBLIC OFFERING IN INDIA

The first public offer of securities by a company after its inception is known as Initial Public Offering (IPO). Going public (or participating in an “initial public offering” or IPO) is a process by which a business owned by one or several

individuals is converted in to a business owned by many. It involves the offering of part ownership of the company to the public through the sale of equity securities (stock). IPO dilutes the ownership stake and diffuses corporate control as it provides ownership to investors in the form of equity shares. It can be used as exit strategy and finance strategy. As a financing strategy, its main purpose is to raise funds for the company. When used as an exit strategy, existing investors can offload equity holdings to the public.

REASONS FOR GOING PUBLIC

To raise funds for financing capital expenditure needs like expansion diversification etc. To finance increased working capital requirement As an exit route for existing investors For debt financing.
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INTIAL PUBLIC OFFERING IN INDIA ADVANTAGES OF GOING PUBLIC

Stock holder Diversification Easier to raise new capital Enhances liquidity Establishes value for the firm Image Other advantages DISADVANTAGES OF GOING PUBLIC

Cost of Reporting Disclosure Self dealings Inactive market low price Control

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INTIAL PUBLIC OFFERING IN INDIA THE RISK FACTOR

Investing in IPO is often seen as an easy way of investing, but it is highly risky and many investment advisers advise against it unless you are particularly experienced and knowledgeable. The risk factor can be attributed to the following reasons:

UNPREDICTABLE: The Unpredictable nature of the IPO’s is one of the major reasons that investors advise against investing in IPO’s. Shares are initially offered at a low price, but they see significant changes in their prices during the day. It might rise significantly during the day, but then it may fall steeply the next day.

NO PAST TRACK RECORD OF THE COMPANY: No past track record of the company adds further to the dilemma of the shareholders as to whether to invest in the IPO or not. With no past track record, it becomes a difficult choice for the investors to decide whether to invest in a particular IPO or not, as there is basis to decide whether the investment will be profitable or not.

POTENTIAL OF STOCK MARKET: Returns from investing in IPO are not guaranteed. The Stock Market is highly volatile. Stock Market fluctuations widely affect not only the individuals and household, but the economy as a whole. The volatility of the stock market makes it difficult to predict how the shares will perform over a period of time as the profit and risk potential of the
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INTIAL PUBLIC OFFERING IN INDIA IPO depends upon the state of the stock market at that particular time.

RISK ASSESSMENT: The possibility of buying stock in a promising start-up company and finding the next success story has intrigued many investors. But before taking the big step, it is essential to understand some of the challenges, basic risks and potential rewards associated with investing in an IPO. This has made Risk Assessment an important part of Investment Analysis. Higher the desired returns, higher would be the risk involved. Therefore, a thorough analysis of risk associated with the investment should be done before any consideration. For investing in an IPO, it is essential not only to know about the working of an IPO, but we also need to know about the company in which we are planning to invest. Hence, it is imperative to know: The fundamentals of the business The policies and the objectives of the business Their products and services Their competitors Their share in the current market The scope of their issue being successful It would be highly risky to invest without having this basic knowledge about the company.

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INTIAL PUBLIC OFFERING IN INDIA There are 3 kinds of risks involved in investing in IPO: BUSINESS RISK: It is important to note whether the company has sound business and management policies, which are consistent with the standard norms. Researching business risk involves examining the business model of the company.

FINANCIAL RISK: Is this company solvent with sufficient capital to suffer short-term business setbacks? The liquidity position of the company also needs to be considered. Researching financial risk involves examining the corporation's financial statements, capital structure, and other financial data.

MARKET RISK: It would beneficial to check out the demand for the IPO in the market, i.e., the appeal of the IPO to other investors in the market. Hence, researching market risk involves examining the appeal of the corporation to current and future market conditions.

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INTIAL PUBLIC OFFERING IN INDIA

TRENDS IN IPO
PRIMARY REASONS FOR A COMPANY GOING PUBLIC. Most people label a public offering as a marketing event, which it typically is. For the majority of firms going public, they need additional capital to execute long-range business models, increase brand name, to finance possible acquisitions or to take up new projects. By converting to corporate status, a company can always dip back into the market and offer additional shares through a rights issue.

PERFORMANCE IN 90s Let us have a look at the general development of the Primary Markets in the nineties. There have been many regulatory changes in the regulation of primary market in order to save investors from fraudulent companies. The most path breaking development in the primary market regulation has been the abolition of CCI (Controller of capital issues). The aim was to give the freedom to the companies to decide on the pricing of the issue and this was supposed to bring about a self-managing culture in the financial system. But the move was hopelessly misused in the years of 1994-1995 and many companies came up with issues at sky-high prices and the investors lost heavily. That phase took a heavy toll on the investor’s sentiment and the result was the amount of money raised through IPO route.

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INTIAL PUBLIC OFFERING IN INDIA 1993-96: SUNRISE, SUNSET. With controls over pricing gone, companies rushed to tap the Primary Market and they did so, with remarkable ease thanks to overly optimistic merchant

bankers and gullible investors. Around Rs20000 crores were raised through 4053 issues during this period. Some of the prominent money mobilizes were the so called ‘sunrise sectors’-polyester, textiles, finance, aquaculture. The euphoria spilled over to the Secondary Market. But reality soon set in. Issuers soon failed to meet projections, many disappeared or sank. Result: the small investor deserted both markets-till the next boom!

1998-2000: ICE ON A HOT STREAK As the great Indian software story played itself out, software stocks led a bull charge on the bourses. The Primary Market caught up, and issues from the software markets flooded the market. With big IPOs from companies in the ICE (Information Technology, Communication and Entertainment) sectors, the average issue price shot up from Rs.5 crore in 1994-96 to Rs.30 crore. But gradually, hype took over and valuations reached absurd levels. Both markets tanked.

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INTIAL PUBLIC OFFERING IN INDIA 2001-2002-ALMOST CLOSED There were hardly any IPOs and those who ventured, got a lukewarm response. A depressed Secondary Market had ensured that the doors for the Primary Market remained closed for the entire FY 20012002.There were hardly any IPOs in FY 2001-2002.

2002: QUALITY ON OFFER. The Primary Market boom promises to be different. To start with, the cream of corporate India is queuing up, which ensures quality. In this fragile market, issue pricing remains to be conservative, this could potentially mean listing gains. This could rekindle the interest of small investors in stocks and draw them back into the capital market. The taste of gains from the primary issues is expected to have a spillover effect on the secondary market, where valuations today are very attractive. 2003: IPO-IMPROVED PERFORMANCE OVERALL! Even as the secondary market moved into top gear in 2003 the primary market too scripted its own revival story, buoyed largely by the Maruti IPO which was oversubscribed six and a half times. In 2003 almost all primary issues did well on domestic bourses after listing, prompting retail investors to flock to IPO’s. All IPO’s, including Indraprastha Gas and TV Today Network which was oversubscribed 51 times showed the growing appetite for primary issues. Divi Labs hit the market in February followed by Maruti. Initially, the Maruti share price was considered steep at Rs125 per share for a Rs5 paidup share. By the end of the year, the stock had climbed to over
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INTIAL PUBLIC OFFERING IN INDIA Rs355. Close on the heels of Maruti, came the Uco Bank IPO, which attracted about 1mn applicants. The primary issue of Indian Overseas Bank attracted about 4.5mn applicants and Vijaya Bank over Rs40bn in subscriptions. The last one to get a huge response was Indraprastha Gas, which reportedly garnered about Rs30bn. TV Today’s public offer was expected to draw in excess of Rs30bn. In overseas listings, the only notable IPOs were Infosys Technology's secondary ADR offering and the dull debut of Sterlite Group company Vedanta on the London Stock Exchange. It was really Maruti Udyog that took the lead with its new issue in June. The issue was heavily over-subscribed and by the middle of December the share value appreciated 186 per cent. The near trebling of the investment in less than 6 months inspired the retail investor who is now back again in the market scouting for good scrips. After the phenomenal success of Maruti issue, a number of companies have approached the capital market and a lot more are waiting for SEBI approval. SEBI has taken enough care to force companies to make relevant disclosures for the investor to judge the quality of new issues. Besides, the companies themselves have been careful not to overprice the shares. On the contrary, some of the companies have deliberately under-priced them to let the issue get over-subscribed and to let the investor share some of the capital gain after listing. With

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INTIAL PUBLIC OFFERING IN INDIA the care taken by SEBI and the companies it is unlikely that the experience of 1995 will be repeated. 2007: INITIAL PUBLIC OUTBURST In 2007, the Indian equity market was in full swing with the index gaining ~53% Y-o-Y and valuations edging beyond explanation. The total market capitalization of the Indian stock market increased 8% (INR 5,230 bn) on the back of 96 new listings in 2007. 2007 stood out in the history of Indian capital markets with the highest funds raised through IPOs in any calendar year with maximum companies from the construction (16) and IT sectors (11).• Almost 61 of the 96 IPOs (63%) debuted in premium in CY 07 as compared to 54 out of 75 IPOs (72% of total IPOs) in 2006.

2008: IPO IN DOWNTURN On January 15, 2008, Reliance Power attracted $27.5 billion of bids on the first day of its IPO, equivalent to 10.5 times the stock on offer, thereby, creating India's IPO record. Its upper cut off price was Rs. 450. The proposed IPO was to fund the development of its six power projects across the country. Emaar MGF’s IPO, at $1.6 billion is estimated to be the second largest IPO in the world so far this year, behind Reliance Power's $3 billion IPO. Thomson Financial data reveals that India accounts for 49.1% of global IPO proceeds at the moment, compared to just 3.7% same time last year. Significant, given that global IPOs declined 36.1% over the last one year.
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INTIAL PUBLIC OFFERING IN INDIA 2009: IPO IN RECOVERY PERIOD The severe economic downturn in 2008 sent worldwide IPO markets plummeting by over 60% in both deal numbers and funds raised since 2007. With assets being revalued globally, no IPO market was insulated from the financial crisis. The spreading financial contagion effectively shut down public markets worldwide, bringing to an abrupt end the record-setting IPO boom years of 2006-07. Even so, some larger quality companies with strong business plans still managed to access the public markets with positive results. Despite faltering economies and sinking stock markets in 2008, the US and China led in IPO fundraising and deal numbers, respectively, while Saudi Arabia emerged as the third largest IPO market.

Trends in IPO activity can be difficult to predict, especially in times of market volatility. Global markets will require a period of

macroeconomic stability and confidence rebuilding for the window of IPO opportunity to reopen. Nevertheless, the 2009 IPO pipeline contains many quality companies from both developed and emerging markets, which continue to ready themselves to go public while waiting for market conditions to improve.

After extensive interviews with some of the world’s top investment bank leaders and stock exchange leaders, Ernst & Young’s Global IPO trends report 2009 reviews the major developments in the worldwide IPO markets of 2008 and the first quarter of 2009. As the sixth global IPO report produced by Ernst & Young, this review offers

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INTIAL PUBLIC OFFERING IN INDIA an in-depth examination of the key trends for companies planning an IPO today, as well as perspectives on IPO readiness.

As Jim Turley, Chairman and CEO, Ernst & Young, emphasizes in the report’s opening interview, “A crisis is a terrible thing to waste.” Indeed, many market-leading companies were formed during challenging economic times. Companies that undergo an effective IPO readiness transformation during these tough times will be the first to go public when markets reopen. Early signs suggest a shift toward a new economic landscape favoring companies that offer innovative and productive solutions for the changing environment. We look forward to working with these pioneering companies in their transformation from a private entity to a public enterprise.

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INTIAL PUBLIC OFFERING IN INDIA

IPO’S IN PAST RECENT YEAR’S
YEARS 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 NO. OF IPO’S 19 23 76 76 84 21 AMOUNT (CR. RS) 3191.10 14662.32 10797.88 23706.16 41323.45 2033.99

RECENT IPO DATA WITH BREAK-UP
YEAR FRESH CAPITAL NO.OF AMOUNT IPOs (Rs.crore) OFFERS FOR SALE NO.OF IPOs AMOUNT (Rs.crore) NO.OF IPOs TOTAL AMOUNT (Rs.crore)

2003-04 16 2004-05 21 2005-06 76 2006-07 74 2007-08 82 2008-09 21

1813.42 8099.59 9130.21

5 9 11

1377.68 6562.73 1667.67 960.72 2688.81 48.92

19 23 76 76 84 21

3191.10 14662.32 10797.88 23706.16 41323.45 2033.99

22745.44 12 38634.65 9 1985.08 3

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INTIAL PUBLIC OFFERING IN INDIA

PRICING OF ISSUE
CONTROLLER OF CAPITAL ISSUE During the Controller of Capital Issue (CCI) regime the issues were priced by the company and approved by CCI. Generally the CCI was very conservative and hardly allowed premium issues.

ARRIVAL OF SEBI After the Arrival of SEBI free market policy is followed for pricing of issue. Merchant Bankers are responsible for justifying the premium. The company was allowed to give future profit projections. A company can issue shares to applicants in the firm allotment category at higher price than the price at which securities are offered to public. Further, an eligible company is free to make public/rights issue in any denomination determined by it in accordance with the Companies Act, 1956 and SEBI norms.

DECIDING PREMIUM BY BID SYSTEM Since year 2000 SEBI has changed pricing formula. The promoters cannot give future projections and merchant banker alone cannot decide the pricing of IPO. At present, 50%of the IPO is reserved for the wholesale investors and 50% is for the small investor. The LeadManager starts road show in consultation with Institutional Investors. Then they call for bid at recommended prices. Once, bids are received pricing is open for discussion. The mean bid price is accepted and allocation is done.
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INTIAL PUBLIC OFFERING IN INDIA

BOOK BUILDING
THE LATEST AVTAAR OF PRICE DISOVERY

WHAT IS BOOK BUILDING? Book Building is basically a capital issuance process used in Initial Public Offering (IPO), which aids price and demand discovery. IT is a process used for marketing a public offer of equity shares of a company and is a common practice in most developed countries. Book Building is so-called because the collection of bids from investors is entered in a "book". These bids are based on an indicative price range. The issue price is fixed after the bid closing date.

PERSONS INVOLVED IN THE BOOK-BUILDING PROCESS The principal intermediaries involved in the Book Building process are the company; Book Running Lead Managers (BRLM) and syndicate members who are intermediaries registered with SEBI and are eligible to act as underwriters. Syndicate members are appointed by the BRLM.

HOW IS THE BOOK BUILT? A company that is planning an initial public offer appoints a category-I Merchant Banker as a book runner. Initially, the company issues a draft prospectus which does not mention the price, but gives other details about the company with regards to issue size, past history and future plans among other mandatory disclosures. After the draft prospectus is filed with the SEBI, a particular period is fixed as the bid
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INTIAL PUBLIC OFFERING IN INDIA period and the details of the issue are advertised. The book runner builds an order book, that is, collates the bids from various investors, which shows the demand for the shares of the company at various prices. For instance, a bidder may quote that he wants 50,000 shares at Rs.500 while another may bid for 25,000 shares at Rs.600. Prospective investors can revise their bids at anytime during the bid period that is, the quantity of shares or the bid price or any of the bid options.

BASIS OF DECIDING THE FINAL PRICE On closure of the book, the quantum of shares ordered and the respective prices offered are known. The price discovery is a function of demand at various prices, and involves negotiations between those involved in the issue. The book runner and the company conclude the pricing and decide the allocation to each syndicate member.

PAYMENT FOR THE SHARES The bidder has to pay the maximum bid price at the time of bidding based on the highest bidding option of the bidder. The bidder has the option to make different bids like quoting a lower price for higher number of shares or a higher price for lower number of shares. The syndicate member may waive the payment of bid price at the time of bidding. In such cases, the issue price may be paid later to the syndicate member within four days of confirmation of allocation. Where a bidder has been allocated lesser number of shares than he or she had bid for, the excess amount paid on bidding, if any will be

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INTIAL PUBLIC OFFERING IN INDIA refunded to such bidder. Advantage of the Book Building process versus the Normal IPO marketing process Unlike in Book Building, IPO’s are usually marketed at a fixed price. Here the demand cannot be anticipated by the merchant banker and only after the issue is over the response is known. In book building, the demand for the share is known before the issue closes. The issue may be deferred if the demand is less. This process allows for price and demand discovery. Also, the cost of the public issue is reduced and so is the time taken to complete the entire process.

DIFFERENCE IN FIXED PRICE PROCESS AND BOOK BUILDING PROCESS

Features Pricing

Fixed price process

Book building process at which the

Price at which the Security Price is offered /allotted

is Security will be offered advance to the investor. Only an indicative price range is known.

known in advance to the /allotted is not known in investor.

Demand

Demand securities

for offered

the Demand

for

the

is securities offered can be

known only after the known everyday as the closure of the issue. book is built.
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INTIAL PUBLIC OFFERING IN INDIA Guidelines for Issues to be made through 100% Book Building Route SEBI had issued guidelines in October 1997 for book building which were applicable for 100% of the issue size and for issues above Rs.100 Crores. The guidelines were revised subsequently to reduce the limit to issues of Rs.25 crores to encourage the use of this facility. However, no issuer used this facility. SEBI modified the framework for Book Building further in October 1999 to make it more attractive. The modified framework does not replace the existing guidelines. The issuer would have option to issue securities using book building facility under the existing framework:

1. The present requirement of graphical display of demand at bidding terminals to syndicate members as well as the investors has been made optional. 2. The 15% reservation for individual investors bidding for up to 10 marketable lots may be merged with the 10% fixed price offer. 3. Allotment for the book built portions shall be made in demat form only. 4. The issuer may be allowed to disclose either the issue size or the number of securities to be offered to the public. 5. Additional disclosure with respect to the scheme for making up the deficit in the sources of financing and the pattern of deployment of excess funds shall be made in the offer document.

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COST OF PUBLIC ISSUE.
The cost of public issue is normally between 8 and 12 percent depending on the size of the issue and on the level of marketing efforts. The important expenses incurred for a public issue are as follows:

Underwriting expenses: The underwriting commission is fixed at 2.5 % of the nominal value (including premium, if any) of the equity capital being issued to public.

Brokerage: Brokerage applicable to all types of public issues of industrial securities are fixed at 1.5% whether the issue is underwritten or not. The managing brokers (if any) can be paid a maximum remuneration of 0.5% of the nominal value of the capital being issued to public.

Fees to the Managers to the Issues: The aggregate amount payable as fees to the managers to the issue was previously subject to certain limits. Presently, however, there is no restriction on the fee payable to the managers of the issue. Fees for Registrars to the Issue: The compensation to he registrars, typically based on a piece rate system, depends on the number of applications received, number of allotters, and the number of unsuccessful applicants.
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INTIAL PUBLIC OFFERING IN INDIA Printing Expenses: These relate to the printing of the prospectus, application forms, broachers, share certificate, allotment/refund letters, envelopes, etc.

Postage Expenses: These pertain to the mailing of application forms, brochures, and prospectus to investors by ordinary post and the mailing of the allotment/refund letters and share certificates by register posts.

Advertising and Publicity Expenses: These are incurred primarily towards statutory announcements, other advertisements, press conferences, and investor’s conferences.

Listing Fees: This is the concerned fee payable to concerned stock exchange where the securities are listed. It consists of two components: initial listing fees and annual listing fees.

Stamp Duty: This is the duty payable on share certificates issued by the company. As this is the state subject, it tends to vary from state to state.

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INTIAL PUBLIC OFFERING IN INDIA

BRIEF NOTE ON INTERMEDIARIES
The following are the important intermediaries involved in the process-

MERCHANT BANKERS Eligibility criteria-SEBI issues an authorization letter to the finance companies, which are eligible to work as merchant bankers. The eligibility criteria depend on network and infrastructure of the company. The company should not be engaged in activities that are banned for merchant bankers by SEBI. SEBI issues authorization letter valid for 3 years and the company has to pay necessary fees. Such merchant banker can be appointed as lead manager for IPO. Responsibility-lead managers are fully responsible for the content and correctness of the prospectus. They must ensure the commencement to the completion of the IPO. Certain guidelines are laid down in section 30 of the SEBI act 1992 on the maximum limits of the intermediaries associated with the issue. GUIDELINES FOR LEAD MANAGERS BY SEBI
Size of the Issue 50 cr. 50-100 cr. 100-200 cr. 200-400 cr. Above 400 cr. No of Lead Managers 2 3 4 5 1 or more as agreed by the board

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INTIAL PUBLIC OFFERING IN INDIA The number of co managers should not exceed the number of lead managers. There can be only 1 adviser to the issue. There is no limit on the number of underwriters.

BROKERS All the recognized stock exchange members are called brokers and A broker offer marketing support, underwriting support, disseminates information to investors about the issue and distributes issues stationary at retail investor level. The brokers are governed by rules of SEBI and the respective stock exchange. The brokers are key to the success of the issue. The brokers appoint sub brokers who are in direct contact with the investors.

UNDERWRITERS The underwriter is the principle player in the IPO providing the firm with- Reputation-as the underwriter is legally liable and because he has ongoing dealing with the customers to whom he sells shares. The underwriter puts his reputation on the line. Underwriting involves a commitment from the underwriter to subscribe to the shares of a particular company to the extent it is under subscribed by the public or existing shareholders of the corporate. An underwriter should have a minimum net worth of 20 lacs and his total obligation at any time should not exceed 20 times his net worth. A commission is paid to the writers on the issue price for undertaking the risks of under subscription. The maximum rate of underwriting commission paid is as follows.

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INTIAL PUBLIC OFFERING IN INDIA UNDERWRITING COMMISSION TABLE

Nature of Issue

On amount Devolving on On amounts subscribed Underwriters by the public 2.5%

Equity

shares 2.5%

preference shares and Debentures Issue amount up to Rs5 2.5% lacs Issue exceeding % amount 2.0% 1.0% 2.5%

The fees for underwriter and broker are decided by the company within the maximum possible limit as fixed by the SEBI.

BANKERS TO THE ISSUE Any scheduled bank registered with SEBI can be appointed as the banker to the issue. They get fees on amount collected by them. There are no restrictions on the number of bankers to the issue. The main function of banker involves collection of duly filed application forms with money (cheque/drafts) maintains a daily report,

transferring the proceeds to the share application money collected with the application forms to the registrar.

REGISTRAR AND TRANSFER AGENTS Registration with SEBI is mandatory to take on responsibilities as a registrar or share transfer agent. The registrar provides administrative support to the issue process. Each agent is registered with SEBI. Hey
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INTIAL PUBLIC OFFERING IN INDIA have to maintain net worth and infrastructure criteria. They have to renew their License periodically. He collects all application from the bank and ensures reconciliation of funds and of application amount and participates in process of basis of allotment. If the IPO is oversubscribed they provide computerized program for allotment. They manage refund orders and allotment letters. They provide the final list of allotees to Lead Manager ROC and stock exchange. If the company wants they also manage post issue IPO functions relating to shareholders register for the company.

DEPOSITORIES Since the year 2000 it’s compulsory that all fresh issue of shares must be made only in the dematerialized format (DMAT). The Depository institute issues unique number of every IPO or company, when shares are allotted to the company/registrar provides shareholders register to depository in electronic form. Thus automatically all shareholders get allotment in their DMAT account.

LEGAL ADVISOR. Normally the company for the purpose of IPO does this appointment. He is responsible legal compliance of IPO process. There are other intermediaries like Advertising Agents etc. but the company governs their role.

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INTIAL PUBLIC OFFERING IN INDIA

SEBI AND IPO
ELIGIBILITY NORMS FOR UNLISTED COMPANIES It should have a pre issue network of a minimum amount of Rs1 crores in 3 out of the preceding 5 financial years. In addition the company should compulsorily need the minimum network level during the two immediately preceding years.

It should have a track record distributable profits as given in section 205 of companies act 1956 for at least 3 years in the preceding 5 years period.

The issue size (i.e. Offer + Form allotment + Promoters contribution through the offer document) should not exceed an amount equal to 5 times its pre issue worth. FOR LISTED COMPANIES It should have a track record distributable profits as given in section 205 of companies act 1956 for at least 3 years in the preceding 5 years period.

It should have a pre issue network of a minimum amount of Rs1 crores in 3 out of the preceding 5 financial years with the minimum net Worth to be met during the immediately preceding 2 years.

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SEBI NORMS
SEBI has come up with Investor Protection and Disclosure Norms for raising funds through IPO. These rules are amended from time to time to meet with the requirement of changing market conditions.

DISCLOSURE NORMS.

Risk Factor-The Company/Merchant Banker must specify the major risk factor in the front page of the offer document. General Risk.-Attention of the investor must be drawn on these risk factors. Issuers Responsibility-It is the absolute responsibility of the issuer company about the true and correct information in the prospectus. Merchant Banker is also responsible for giving true and correct information regarding all the documents such as material contracts, capital structure, appointment of

intermediaries and other matters. Listing Arrangement- It must clearly state that once the issue is subscribed where the shares will be listed for trading. Disclosure Clause- It is compulsory to mention this clause to distinctly inform the investors that though the prospectus is submitted and approved by SEBI it is not responsible for the financial soundness of the IPO.

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INTIAL PUBLIC OFFERING IN INDIA Merchant Bankers Responsibility-Disclaimer Clause the Lead Manager has to certify that disclosures made in the prospectus are generally adequate and are in conformity with the SEBI Guidelines. Capital StructureThe Company must give complete

information about the Authorized capital, Subscribed Capital with top ten shareholders holding pattern, Promoters interest and their subscription pattern etc. Also about the reservation in the present issue for Promoters, FII`s, Collaborators, NRI`s etc. Then the net public offer must be stated very clearly. Auditors Report- The Auditors have to clearly mention about the past performances, Cost of Project, Means of Finance, Receipt of Funds and its usage prior to the IPO. Auditor must also give the tax-benefit note for the company and investors.

INVESTOR PROTECTION NORMS.

Pricing of Issue-The pricing of all the allocations for the present issue must follow the bid system. The reservation must be disclosed for different categories of investors and their pricing must be specified clearly. Minimum Subscription- If the company does not receive minimum subscription of 90% of subscription in each category of offer and if the issue is not underwritten or the underwriters are unable to meet their obligation, then fund so collected must be refunded back to all applicants.

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INTIAL PUBLIC OFFERING IN INDIA Basis of Allotment- In case of full subscription of the issue, the allotment must be made with the full consultation of the concerned stock exchange and the company must be impartial in allotting the shares. Allotment/Refund- Once the allotment is finalized, the refund of the excess money must be made within the specified time limits otherwise the company must pay interest on delayed refund orders. Dematerialization of Shares-As per the provisions of the Depositories Act, 1996, And SEBI Rules, now all IPO will be in Demat form only. Listing of Shares- It is mandatory on the part of the promoters that once the IPO is fully subscribed, and then the underlying shares must be listed on the stock exchange. This provides market and exit routes to the investors.

The above are the major Guidelines for the Investor Protection and Disclosure Norms. The SEBI has provided rules for every possible situation.

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SEBI GUIDELINES
IPO of Small Companies Public issue of less than five crores has to be through OTCEI (Over the Counter Exchange of India) and separate guidelines apply for floating and listing of these issues.

Public Offer of Small Unlisted Companies (Post-Issue Paid-Up Capital up to Rs.5 crores) Public issues of small ventures which are in operation for not more than two years and whose paid up capital after the issue is greater than 3 crores but less than 5 crores the following guidelines apply. 1. Securities can be listed where listing of securities is screen based. 2. If the paid up capital is less than 3 crores then they can be listed on the Over The Counter Exchange of India (OTCEI) 3. Appointment of market makers mandatory on all the stock exchanges where securities are proposed to be listed.

SIZE OF THE PUBLIC ISSUE Issue of shares to general public cannot be less than 25%of the total issue. In case of IT, Media and Telecommunication sectors, this stipulation is reduced subject to the conditions that 1. Offer to the public is not less than 10% of the securities issued. 2. A minimum number of 20 lakh securities is offered to the public 3. Size of the net offer to the public is not less than Rs.30 crores.
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INTIAL PUBLIC OFFERING IN INDIA PROMOTERS CONTRIBUTION 1. Promoters should bring in their contribution including premium fully before the issue 2. Minimum promoter’s contribution is 20-25% of the public issue. 3. Minimum lock in period for promoter’s contribution is five years. 4. Minimum lock in period for firm allotment is three years.

COLLECTION CENTERS FOR RECEIVING APPLICATIONS 1. There should be at least 30 mandatory collection centers, which should include invariably the places where stock exchanges have been established. 2. For issues not exceeding Rs.10 crores the collection centers shall be situated at:The 4 metropolitan centers’ viz. Mumbai Delhi Calcutta Chennai All such centers where stock exchanges are located in the region in which the registered office of the company is situated.

REGARDING ALLOTMENTS OF SHARES 1. Net Offer the general public has to be at least 25% of the total issue size for listing on a stock exchange 2. It is mandatory for a company to get its shares listed at the regional stock exchange where the registered office of the issuer is located. 3. In an issue of more than 25 crores the issuer is allowed to place the whole issue by book-building.
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INTIAL PUBLIC OFFERING IN INDIA 4. Minimum of 50% of the Net Offer to the public has to be reserved for the investors applying for less than 1000 shares. 5. There should be at least 5 investors for every 1 lakh equity offered. 6. Quoting of PAN or GIR No. in application for the allotment of securities is compulsory where monetary value of investment is Rs.50000/- or above. 7. Indian development financial institutions and Mutual Fund can be allotted securities up to 75% of the issue amount. 8. A venture capital fund shall not be entitled to get its securities listed on any stock exchange till the expiry of 3 years from the date of issuance of securities. 9. Allotment to categories of FIIs and NRIs/OCBs is up to maximum of 24%, which can be further extended to 30% by an application to the RBI-supported by a resolution passed in the General Meeting.

TIMEFRAMES FOR ISSUE AND POST-ISSUE FORMALITIES

The minimum period for which the public issue is to be kept open is 3 working days and the maximum for which it can be kept open is 10 working days. The minimum period for right issue is 15 working days and the maximum is 60 working days. A public issue is affected if the issue is able to procure 90% of the total issue size within 60 days from the date of the earliest closure of the public issue.

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INTIAL PUBLIC OFFERING IN INDIA 1. In case of oversubscription the company may have he right to retain the excess application money and allot shares more than the proposed issue, which is referred to as “greenshoe” option 2. Allotment has to be made within 30 days of the closure of the Public issue and 42 days in case of Rights issue 3. All the listing formalities of a Public Issue have to be completed within 70 days from the date of closure of the subscription list.

DISPATCH OF REFUND ORDERS. 1. Refund orders have to be dispatched within 30 days of the closure of the issue. 2. Refunds of excess application money i.e. non-allotted shares have to be made within 30 days of the closure of the issue.

OTHER REGULATIONS 1. Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public unless it is disinvestment where it is not applicable. 2. If the issue is undersubscribed then the collected amount should be returned back 3. If the issue size is more than Rs500 crores, voluntary disclosures should be made regarding the deployment of funds and an adequate monitoring mechanism put in place to ensure compliance.

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INTIAL PUBLIC OFFERING IN INDIA 4. There should not be any outstanding warrants for financial instruments of any other nature, at the time of the IPO. 5. In the event of the initial public offer being at a premium and if the rights under warrants or other instruments have been exercised within 12 months prior to such offer, the resultant shares will be not taken into account for reckoning the minimum promoters contribution further, the same will also be subject to lock-in. 6. Code of advertisement as specified by SEBI should be adhered to 7. Draft prospectus submitted to SEBI should also be submitted simultaneously to all stock exchanges where it is proposed to be listed.

RESTRICTIONS ON ALLOTMENTS 1. Firm allotments to mutual funds, FII and employees are not subject to any lock-in period. 2. Within 12 months of the public issue no bonus issue should be made. 3. Maximum percentage of shares, which can be distributes to employees cannot be more than 5% and maximum shares to be allotted to each employee cannot be more than 200.

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INTIAL PUBLIC OFFERING IN INDIA RELAXATION OF ENTRY NORMS FOR INFRASTRUCTURE COMPANIES

With a view channelize greater flow of funds to infrastructure companies, SEBI granted a number of relaxations to infrastructure companies. These included:

Exemption from the requirement of making a minimum public offer of 25 percent of securities and also from the requirement of 5shareholders per Rs.1 lakh of offer made. Exemption from the minimum subscription of 90 per cent provided disclosure is made about the alternate source of funding considered by the company, in the event of undersubscription in the public issue. Permission to keep the issues opens for 21 days to enable the companies to mobilize funds. Exemption from requirement to create and maintain a debenture redemption reserve in case of debenture issues as provided in the SEBI Disclosure & Investor Protection Guidelines.

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MARKETING OF IPO
The role of marketing, and particularly promotion, in the pricing and trading of Securities is fairly limited

PRELIMINARY REQUIREMENTS The company has to complete all legal requirements, appoint all intermediaries and once they get SEBI card (approval), the process of marketing of IPO can commence.

TIMING OF IPO This the most important factor for the success of IPO. If, secondary market is depressed, if there is political unrest, if serious international problems are prevailing then it is considered to be negative factors for timing of IPO’s. If these factors are favorable then the Company must find out about the timing of other prestigious IPO’s. This year more than 29 companies are coming with IPO’s. Around Rs.25, 000-30,000crore of capital is going to be raised this year.

Marketing initial public offers (IPO’s) through the secondary market SEBI approved a proposal of marketing IPO’s through the secondary market. It proposes to use the existing infrastructure of stock exchanges (terminals, brokers and systems), presently being used for secondary market transactions, for marketing IPO’s with a view to get
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INTIAL PUBLIC OFFERING IN INDIA rid of certain inherent disadvantages faced by issuers and investors like tremendous load on banking and postal system and huge costs in terms of money and time associated with the issue process.

THE EFFECTS OF MARKETING ON IPO’S An investment banker’s marketing campaign for an IPO is critical. This campaign, as much as anything that precedes or follows it, will determine the success or failure of the IPO. The key is to stimulate investor demand for the stock so that, the demand will exceed the supply. Through the marketing effort, the underwriter attempts to create an imbalance in the supply/demand equation for the issue, so that there are more buyers than sellers when the stock is finally released for sale to the public.

The reputation of an investment banker could expand a firm’s investor base at a lower cost than the firm can, since the promotional efforts of an investment banker on behalf of the firm would be more creditable. The efforts of an investment banker to promote an IPO through increased media coverage will increase retail interest in that stock.

The effects of an investment banker’s promotional efforts are not only important for explaining the initial returns of some IPO’s, but also for explaining the rankings of investment bankers

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INTIAL PUBLIC OFFERING IN INDIA Promoting an issue sufficiently to insure a run up in its early run-up ear aftermarket prices attracts further investor interest catches the interest of analysts and helps to maintain or expand the investor base of the stock.

If the sole motivation of a road show were to sell IPO’s to their regular institutional investors and if those investors were to hold onto these and stocks, then there would be no motivation for an investment banker to do more than a minimal amount of promotion since there would be no need to attract retail investors in early aftermarket trading.

MARKETING
PRESS CONFERENCE Promoters and Lead Managers call for press conference in each major investment center. Reporters are briefed about the issue. They carry it as news-item in their papers. item

INVESTORS CONFERENCE The prospective investors are called by invitation. The Promoters and Lead

Managers give presentations. They reply to the questions of the investors to boost their confidence.

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ROAD-SHOW This is like the investors conference but normally is done abroad for marketing ADR/GDR issues. It is an expensive process and requires a lot of legal compliances. The company has to observe the rules of the concerned country. However, road shows are becoming more and more popular in India.

NEWSPAPER ADVERTISEMENT The company releases statutory advertisements advertisements in leading

newspapers. The company has to publish abridges prospectus in leading newspapers. It is the responsibility of the promoters to ensure that the issuing company and their group companies should not release any commercial advertisement, which may influence the investor’s decision for investment.

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IPO GRADING
GRADING OF IPOS Investment decisions in IPOs are becoming increasingly difficult, given the flurry of public offers that hit the market these days. Differentiating a good offer from a bad one, assessing the company fundamentals and verifying the credentials are becoming more complex. In this backdrop, the Securities and Exchange Board of India's decision to make IPOs (initial public offers) grading by credit rating agencies mandatory, is likely to provide some respite to retail investors.

However, the rating is unlikely to throw much light for short-term investors or traders seeking to make a quick buck from the `listing gains'.

We take a look at what the grading system proposes to do and what changes, if any, it is likely to bring in.

In a move, which does not appear to have any precedence elsewhere in the world of capital markets, the SEBI has introduced compulsory grading of initial public offers that will hit the market from now on. Credit rating agencies such as the CRISIL and ICRA will grade the various forthcoming IPOs on a five-point scale from grade 5 (indicating strong fundamentals) to grade 1 (indicating poor fundamentals).

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INTIAL PUBLIC OFFERING IN INDIA This grading, which will be based on the agencies' assessment of company fundamentals, will consider the following five parameters — earnings per share, financial risks, accounting quality, corporate governance and management quality. Thus, the rating awarded to an IPO will mirror the company's general health in terms of these qualitative and quantitative factors. The IPO pricing, however, is not factored in for the purpose of rating.

These ratings, apart from being available in the respective offer documents of the companies, can also be viewed on the respective rating agency's Web site.

For instance, a company X decides to tap the primary market for raising capital. The rating agencies will now be required to grade the company. This process will include market checks, plant visits and practice of due diligence apart from studying the other already-specified macro factors. At the end of the process, say, X is awarded grade 1 (indicating poor fundamentals). This would mean that the company is fundamentally weak and investments in that company could be risky. However, the rating does not go on to say whether such an offer is to be avoided or not.

In a similar manner, if X gets a grade 5 (the highest one possible), it does not mean a blanket approval from the rating agency to invest in the public offer. It only means that X is
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INTIAL PUBLIC OFFERING IN INDIA fundamentally sound on the basis of metrics used by the rating agency.

Thus, in general, the grading process that has been introduced is meant to make the retail investors aware of the health of the company's business. It cannot be interpreted as a

recommendation to invest or avoid any offer that is so rated.

ADVANTAGES OF IPO GRADING

IPO grading, a hitherto optional exercise, has been made compulsory to encourage only serious companies.

Over the long-term, it is likely to help SEBI regulate the IPO market by helping it protect the investors from cases of vanishing companies. The rating will also facilitate the not-sowell known companies in tapping the primary market for capital.

Retail investors, on the other hand, stand to benefit the most. The grading system that purports to give a professional perspective of the company's fundamentals is likely to help investors establish the credentials of the company they plan to invest in.

Neutral agencies can be more objective in their evaluation of a public offer compared to other market participants.

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INTIAL PUBLIC OFFERING IN INDIA This apart, it is likely to help investors weed out companies with poor fundamentals or those with a spurious background at the preliminary stage itself.

DISADVANTAGES OF IPO GRADING

More often than not, the pricing of any IPO is what influences the decision of any investor. The rating agencies, in this case, will not talk about ``what price'' and ``what time'' aspects of the offer.

Given that the decision to invest or avoid investments in any IPO is most often a function of the pricing, the lack of this aspect in the present IPO grading system could make the whole process an unfinished task.

Rating agencies (experienced in debt rating) could face trouble with rating the equities, which, unlike debt rating, is more dynamic and cannot be standardized. Further, IPO grading mechanism is a globally-unique initiative; it could increase the cost of raising capital in India and urge companies to seek capital overseas.

Markets, in the short term, can be price-driven and not purely motivated by company fundamentals. That is to say that, at times, even good companies at a higher price could be a bad

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INTIAL PUBLIC OFFERING IN INDIA investment choice, while the not-as-good ones could be a steal at lower prices.

Despite having disclaimers, a higher graded IPO may well tempt small investors into falsely believing that a high premium would come about on listing.

Investors may get deluded by a low-graded IPO, which could become a `missed opportunity' in the future. The purpose of introducing grading, thus, might get defeated if it leads to a false sense of buoyancy or alarm among investors.

HIGHLIGHTS OF IPO GRADING:

Till such time the utility of the IPO grading system is unraveled, it is advisable for investors to use the grades only as an additional input to make an informed decision. Investors need to be convinced about the business potential, pricing and valuations of an IPO, together with the grading, to make a final choice.

IPO grading is a welcome move from the regulator of the capital market. It is going to bring better efficiency to the market. There is a challenge for the investors to arrive at an informed investment decision based on voluminous and complex disclosure documents. Small investors will be the happier lot with this decision because an independent, reliable and
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INTIAL PUBLIC OFFERING IN INDIA unbiased assessment of the fundamentals of the issuer company will facilitate an informed investment decision.

The major parameters to be considered by a rating agency for the assessment include management quality, business

prospects, industry and company, financial performance, corporate governance, project related factors, compliance track record, litigation history and capital history. The grading provides the investors an independent assessment of the disclosures in the offer documents to the extent that they affect the issuer’s fundamentals to take an informed decision. The grading could be particularly useful for assessing the offerings of companies accessing the equity markets for the first time where there is no track record of their market performance.

Needless to say, the rating is not intended to comment on the pricing of the issue nor would it purport to provide an assessment of the market risk associated with the investment. As in the case of rating of debt instruments, it is an additional tool available to the investors to take an informed investment decision.

The Disclosure for Investor Protection (DIP) guidelines has come a long way from the initial days of Sebi, with the present set of disclosure norms coupled with the IPO grading a decidedly positive move. The disclosures in the offer

documents are as per Sebi DIP guidelines and currently there
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INTIAL PUBLIC OFFERING IN INDIA are no assessments of quality especially on the management bandwidth of the issuer. A proper assessment of the management quality is very critical for the long-term

sustainability of a corporate entity in a highly competitive world. Rating agencies have the expertise to do this job.

Issuers may be worried about a lower grading than expected and also the additional cost and effort. However, this worry would not last long because the issuers will soon realize that the extra cost and effort put into grading is only going to benefit them. Getting listed is a long process; it could take up to a year or more depending upon the preparedness of the issuer. A listed company has huge responsibilities to fulfill. A better prepared issuer company could complete the IPO process faster and will be in a better position to the meet the expectations of the market. To become a successful listed company, an unlisted company should act like a listed company much before the IPO. It is better to be fully prepared before the plunge than regretting after listing and exhibiting poor performance.

The compulsory IPO grading will facilitate the issuer to become a mature corporate citizen faster. Additionally, the grading will help better quality issuers to benchmark themselves and project their underlying strength better. A perceptional change from the issuers is essential here.

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INTIAL PUBLIC OFFERING IN INDIA Though there has been criticism initially from the intermediaries involved in the IPOs, it is a matter of time before the merchant bankers, brokers and investment advisors derive the benefits of grading. For the merchant bankers, it will give additional comfort to their due diligence responsibilities. IPO grading as an investment guidance tool is going to be accepted sooner or later. It will widen and deepen market participation and facilitate the move towards a more mature equity IPO market.

Moreover,

private

equity

investors,

strategic

investors,

institutional investors or any large investors can afford to conduct third party due diligence on the issuer company before taking an equity investment decision. The retail investor does not have the privilege and hence this gap could be filled up with compulsory IPO grading system.

This is a beginning and if there is a continuous effort to improve the process of grading, this new development could

substantially benefit the retail investor.

No SEBI proposal has met with the kind of criticism as the mandatory IPO grading one has. There is no body of research, no world experience, no concept paper and no public debate to justify it. And even the pilot voluntary grading exercise — which did not see any company come forward and 19 small companies were then forced to do this — did not validate the

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INTIAL PUBLIC OFFERING IN INDIA concept in any manner. Instead of a detailed rationale even now, there are only oral justifications.

Small investors demanded it: Who in the world would not say yes to free actionable investment advice from experts? But are investor associations even aware of the pitfalls of IPO grading, and that what will be delivered is a subjective opinion, and that too incomplete. In spite of disclaimers and education, most small investors will only look at the grade digit; history tells us so. As such, they will reject a low-grade IPO and invest in a high-grade one. But if subsequently low-grade IPOs do well after listing, they will complain about missed opportunities. The fundamentals of a company can change dramatically after its IPO. IPOs are all about the future; IPO grading is all about the past. Incidentally, of the six graded IPOs that have hit the market, five low-graded ones were handsomely over-

subscribed and have listed above their offer prices

Rating

agencies

are

supposed

to

assess

only

the

fundamentals, but we know that even this is highly subjective. The rating agencies themselves differ in skill sets. Worse, there is no uniform grading methodology. Rating agencies would be learning on the job and the market would have to bear the cost of this. To avoid being seen as mark givers, rating agencies have invented the concept of relative grading. The grades are supposed to be a “relative comparison to the other listed companies”. This presumes that all the three rating agencies
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INTIAL PUBLIC OFFERING IN INDIA have already graded all listed stocks (over 2,500 at the least) which they clearly have not. Are the rating agencies not misguiding investors by calling absolute marks as relative grades?

It is also interesting that grading will not get funded by the Investor Protection Fund but by the companies. If the conflict is now in-built, what use is the grading? Vanishing companies scam: After a drought of nearly eight years, an average of seven IPOs a month in the last year is no deluge. A real potential flood has been avoided because we now have stringent entry norms, there is better vetting of issues by two national stock exchanges and by Sebi and there is a provision for public comments. Most importantly, there is compulsory participation of 50 per cent in an issue by QIBs who are more discerning and better informed and whose response to an issue holds cues for small investors. Rank bad IPOs, in any case, are rejected by stock exchanges and/or Sebi and as such cannot enter the market while overpriced IPOs are rejected by the QIBs; more than 15 IPOs have met such fate. The fear of another vanishing company scam is totally unfounded.

Investors need crispier information: The real need is to revisit the contents and format of the abridged prospectus. And redesign the risk factors, which were introduced to highlight the
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INTIAL PUBLIC OFFERING IN INDIA negatives, but have become a joke. Even after this, a further condensed version of two to three pages would be welcome. And that, in fact, should have been the task assigned to the rating agencies, not that of grading. Grades influences investment decision directly; a condensed summary does not. Rating agencies could also be asked to do a forensic audit and report instances of information gaps or wrong information (based upon which the concerned merchant bankers should be punished.). The information gathered during the grading due diligence should also be included in the offer document.

With grading, we are taking the small investor away from the stated objective of “informed decision making”. Equity is risk capital, and investors should know about the company they invest in. Protecting investor interests is also to ensure that they are not guided by subjective, incomplete advice.

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GUIDE TO UNDERSTAND AN OFFER DOCUMENT:
This section basically tries to tell the reader about the structure of presentation of the content in the Offer Document. This is with a view to help the reader navigate through the content of an offer document.

A. COVER PAGE The Cover Page of the offer document covers full contact details of the issuer company, lead managers and registrars, the nature, number, price and amount of instruments offered and issue size, and the particulars regarding listing. Other details such as Credit Rating, IPO Grading, if opted for, risks in relation to the first issue, etc are disclosed if applicable.

B. RISK FACTORS Here, the issuer’s management gives its view on the Internal and external risks faced by the company. Here, the company also makes a note on the forward looking statements. This information is disclosed in the initial pages of the document and it is also clearly disclosed in the abridged prospectus. It is generally advised that the investors should go through all the risk factors of the company before making an investment decision.

C. INTRODUCTION The introduction covers a summary of the industry and business of the issuer company, the offering details in brief, summary of consolidated financial, operating and other data. General Information about the company, the merchant bankers and their responsibilities, the details of brokers/syndicate members to the Issue,
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INTIAL PUBLIC OFFERING IN INDIA credit rating (in case of debt issue),debenture trustees (in case of debt issue), monitoring agency, book building process in brief and details of underwriting Agreements are given here. Important details of capital structure, objects of the offering, funds requirement, funding plan, schedule of implementation, funds deployed, sources of financing of funds already deployed, sources of financing for the balance fund requirement, interim use of funds, basic terms of issue, basis for issue price, tax benefits are covered.

D. ABOUT US This presents a review of on the details of the business of the company, business strategy, competitive strengths, insurance, industry-regulation (if applicable), history and corporate structure, main objects, subsidiary details, management and board of directors, compensation, corporate governance, related party transactions, exchange rates, currency of presentation dividend policy and management's discussion and analysis of financial condition and results of operations are given.

E. FINANCIAL STATEMENTS Financial statement, changes in accounting policies in the last three years and differences between the accounting policies and the Indian Accounting Policies (if the Company has presented its Financial Statements also as per Either US GAAP/IAS are presented.

F. LEGAL AND OTHER INFORMATION Outstanding litigations and material developments, litigations involving the company and its subsidiaries, promoters and group companies are disclosed. Also material developments since the last balance sheet date, government approvals/licensing arrangements, investment approvals
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INTIAL PUBLIC OFFERING IN INDIA (FIPB/RBI etc.), all government and other approvals, technical approvals, indebtedness, etc. are disclosed.

G. OTHER REGULATORY AND STATUTORY DISCLOSURES Under this head, the following information is covered: authority for the Issue, prohibition by SEBI, eligibility of the company to enter the capital market, disclaimer clause, disclaimer in respect of jurisdiction, distribution of information to investors, disclaimer clause of the stock exchanges, listing, impersonation, minimum subscription, letters of allotment or refund orders, consents, expert opinion, changes in the auditors in the last 3 years, expenses of the issue, fees payable to the lead managers, fees payable to the issue management team, fees payable to the registrars, underwriting commission, brokerage and selling commission, previous rights and public issues, previous issues for cash, issues otherwise than for cash, outstanding debentures or bonds, outstanding preference shares, commission and brokerage on, previous issues, capitalization of reserves or profits, option to subscribe in the issue,purchase of property, revaluation of assets, classes of shares, stock market data for equity, shares of the company, promise vis-à-vis performance in the past issues and mechanism for redressal of investor grievances.

H. OFFERING INFORMATION Under this head, the following information is covered: Terms of the Issue, ranking of equity shares, mode of payment of dividend, face value and issue price, rights of the equity shareholder, market lot, nomination facility to investor, issue procedure, book building procedure if applicable, bid form, who can bid, maximum and minimum bid size, bidding process, bidding bids at different price levels, escrow
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INTIAL PUBLIC OFFERING IN INDIA mechanism, terms of payment and payment into the escrow collection account, electronic registration of bids, build up of the book and revision of bids, price discovery and allocation, signing of underwriting agreement and filing of prospectus with SEBI/ROC, announcement of statutory advertisement, issuance of confirmation of allocation

note("can") and allotment in the issue, designated date, general instructions, instructions for completing the bid form, payment instructions, submission of bid form, other instructions, disposal of application and application moneys, interest on refund of excess bid amount, basis of allotment or allocation, method of proportionate allotment, dispatch of refund orders, communications, undertaking by the company, utilization of issue proceeds, restrictions on foreign ownership of Indian securities, etc.

I. OTHER INFORMATION This covers description of equity shares and terms of the Articles of Association, material contracts and documents for inspection,

declaration, definitions and abbreviations, etc.

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CASE STUDY ON IPO
“FUTURE CAPITAL HOLDINGS LTD” SECTOR: Financial Retail / Advisory Services. ABOUT THE COMPANY: Future Capital Holdings Ltd the financial arm of the Future Group, the parent of India's largest listed retailer Pantaloon Retail India Ltd, deals in private equity and consumer finance - and is developing malls, and townships. Its $850 million domestic Kshitij Fund is building 11 malls in tier II cities, and the $350 million Horizon Fund is building at least four mixed-use townships. The company's $400 million in division funds buy stakes in consumer businesses. Future Capital also plans to launch a $350 million fund to build hotels. THREE PRIMARY LINES OF BUSINESS ARE: o Investment Advisory and Asset Management. o Retail financial services. o Research.

OBJECTS OF THE ISSUE : Achieve the benefits of listing on the Stock Exchanges. Expansion of its retail financial services business. To meet the future capital requirements. General corporate purposes. MERCHANT BANKER: Kotak Mahindra Capital Company Limited, Enam Securities, J.M.Financial Consultants & UBS Securities India Private Limited.

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INTIAL PUBLIC OFFERING IN INDIA ISSUE SIZE: Public Issue of 6,422,800 Equity Shares of Rs.10 each of Future Capital Holdings Limited (The "Company" Or The "Issuer") for cash at a price of Rs.765 per equity share of Rs.10 each including a share premium of Rs.755 per Equity share aggregating Rs.49, 134.42 Lacs. The issue constitutes 10.16% of the post issue paid-up capital of the company. Issue Price Rs.765 Per Equity Share of Face value of Rs.10 each. The issue price is 76.50 times the face value.

Date of listing: 01/02/2008.

Price on Listing : 1044 on BSE/ 1081 on NSE.

Other Information: • Open - 11 Jan. • Close - 16 Jan. • Issue Type -100% Book Building Issue. • Maximum Subscription Amount for Retail: Rs 100,000/• Listing - BSE, NSE. • Registrar -In time Spectrum Registry Limited. • Minimum and maximum shares for retail category - 1 lot - 8 shares and 16 lots - 128 shares. • Minimum and maximum amount for retail category - 1lot - Rs 6120 and 16 lot - Rs 97920 @ cut off. • Application Multiple - 8 and in multiples there off starting with at least 8 shares • Cheque In Favor Of - "Escrow Account - FCH Public Issue Resident" For Retail category.
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INTIAL PUBLIC OFFERING IN INDIA Subscribe Statistics: The Issue received 1138493 applications for 846511648 equity shares resulting in 131.7979 times subscription. The details of the applications received in the Issue from Qualified Institutional Buyers, Non-Institutional, Retail Individual Investors are as under (Before technical rejections):

FUTURE CAPITAL SUBSCRIPTION DETAIL
Category Retail Bidders Non Institutional Bidders Qualified institutional Bidders TOTAL No. of Applications No. of Shares 1135843 2286 100327656 49995104 Subscription 52.0685 77.84

364

696188888

180.6556

1138493

846511648

131.7979

The Basis of Allocation to the categories namely Retail Individuals Bidders, Non-Institutional Bidders and QIB Bidders was finalized in consultation with the Bombay Stock Exchange Limited ("BSE") on January 28, 2008. ALLOCATION TO RETAIL INVESTORS: The Basis of Allocation to the Retail Investors, who have bid at cut-off or at the Issue Price of Rs 765 per Equity Share, was finalized in consultation with BSE. The category was over subscribed 50.759 times. The total number of shares allotted in this category is 1926840 Equity Shares.
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INTIAL PUBLIC OFFERING IN INDIA ALLOCATION TO NON INSTITUTIONAL INVESTORS: The Basis of Allocation to the Non institutional, who have bid at the Issue Price of Rs.765 per Equity Share, was finalized in consultation with BSE. The category was subscribed 75.874734 times. The total number of shares allotted in this category is 642280 Equity Shares. ALLOCATION TO QIB BIDDERS: Allocations to QIBs have been done on a proportionate basis in consultation with the BSE. As per the SEBI guidelines, Mutual Funds were initially allotted 5% of the quantum of shares available 192684 and other QIBs and unsatisfied demands of Mutual Funds were allotted the remaining available shares 3660996 on proportionate basis. The sectoral cap and other limits applicable to the holding of shares in company have been taken into account while allotting shares. Mutual Funds were allotted 5.00 % for QIB segment and other QIB applicants were allotted 95.00 % of the shares for QIB segment. VALUATION: The company is addressing two major financial service businesses with high growth potential — investment advisory services and consumer credit — with an experienced management team at the helm. While the business undoubtedly offers huge room for scalability, earnings visibility is extremely low at this juncture. Capital Market points out that the Future Capital Holdings’ major revenue(76% of the total revenue) comes from the advisory business and the majority of the investment advice is in the real estate and hospitality sector. The risk comes from the fact that these sectors are cyclical in nature.

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INTIAL PUBLIC OFFERING IN INDIA A nascent consumer credit business, untested business model of offering unsecured credit at the point of consumption, high dependence on group companies for business volumes and high competition from private banks and NBFCs peg up risks associated with this investment. The asking price for the offer is stiff, offering little margin of safety on execution. At Rs 765, the higher end of the price band, the offer values the entire business at a price-book value (P/BV) of about 6.6 times. Assuming an asset-based valuation for the advisory business (at 15 per cent of expected assets), the consumer credit business alone is being valued at 4.5-5 times book value post-IPO. Entrenched peers in banking/financial services with similar opportunities for growth — India bulls Financial, ICICI Bank and IDFC — are available at comparable valuations. Future Capital reported a total income of Rs 31.3 crores and a net loss of Rs 12 crores on consolidated operations for the six months ended September 2007; the present financials do not offer scope for a meaningful PE computation.

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“RELIANCE POWER LTD “
Sector: Power About the Company: Reliance Power (RPL), part of the Reliance Anil Dhirubhai Ambani Group (R-ADAG) company, a unit of India's secondbiggest utility by market value, is engaged in the construction and development of various gas- and coal-based thermal power projects and hydroelectric power projects in various parts of the country. Reliance Power won rights to develop a 4,000-MW mega power project at Sasan in the central state of Madhya Pradesh in June. Its parent, Reliance Energy, is building a 1,200-MW power plant at Rosa in northern Uttar Pradesh state. The 4,000-MW project is expected to be the largest pit-head coal-fired power project at a single location in the country and is scheduled to be commissioned during the XI Plan. At the same time, the company expects to complete the Rosa Phase-I, 600-MW coal-fired project in Uttar Pradesh, now under construction, by March 2010. The Rosa Phase II (600-MW expansion project) is scheduled to be commissioned by September 2010. The other identified projects are located in Western Region (12,220 MW), Northern region (9,080 MW) and North-Eastern region (2,900 MW). It is also making a big foray into the hydro power projects in Arunachal Pradesh. The power projects include six coal-fired projects (10,620 MW) to be fuelled by reserves from captive mines and supplies from and abroad, two gas-fired projects (10,280 MW) to be fuelled primarily by reserves from the Krishna Godavari Basin off the East Coast and four hydro power projects (3,300 MW), three of them in Arunachal Pradesh and one in Uttarakhand.
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INTIAL PUBLIC OFFERING IN INDIA Objects of the Issue: Achieve the benefits of listing on the Stock Exchanges. Raise capital to fund subsidiaries to part-finance the construction and development costs of certain of 12 power generation projects currently under various stages of development. General corporate purposes. Merchant Banker: Kotak, UBS, ABN AMRO, Deutsche, Enam, ICICI Securities, JM Financial and J.P. Morgan. Issue size: Public Issue of 260,000,000 Equity Shares of Rs.10 each of RELIANCE POWER LIMITED (("RELIANCE .POWER" OR THE "COMPANY" OR THE "ISSUER") for cash at a price of Rs. . 440* per equity share of Rs.10 each including at a discount of Rs.20 per Equity share aggregating Rs. 115,632 MILLION. The issue constitutes 11.5% of the post issue paid-up capital of the company. Issue Price Rs.440 Per Equity Share of Face value of Rs.10 each.

Date of listing: 11/02/2008. Price on Listing: 547.80 on BSE/ 530 on NSE.

Other Information:
• • • • •

Open - 15 Jan Close - 18 Jan Issue Type -100% Book Building Issue Issue Size - 1,300,000,000 Equity Shares of Rs.10 each. Issue Price - Rs 405/- to Rs 450/- per Equity share
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• • • •

Maximum Subscription Amount for Retail - Rs 100,000/Minimum and Maximum Order Quantity Listing - BSE, NSE Application Multiple - 15 and in multiples there off starting with at least 15 shares.

Registrar - Karvy Computershare Pvt Ltd

Subscribe Statistics: The Issue received 48, 02,930 applications for 1599, 71, 29,272 equity shares resulting in 61.52 times subscription. The details of the applications received in the Issue from Qualified Institutional Buyers, Non-Institutional, Retail Individual Investors are as under (Before technical rejections): RELIANCE POWER SUBSCRIPTION DETAIL Category Qualified Institutional Buyers Non Institutional Investors Retail Individual Investors No. of Applications 446 No of Shares 11299720185 Subscription 82.6

21592

. 3706983112

162.59

4780891

958425975

14.01

The Basis of Allocation to the categories namely Retail Individuals Bidders, Non-Institutional Bidders and QIB Bidders was finalized in consultation with the Bombay Stock Exchange Limited ("BSE") on January 28, 2008.

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INTIAL PUBLIC OFFERING IN INDIA A. Allocation to Retail Investors: The Basis of Allocation to the Retail Individual Investors, who have bid at cut-off or at the Issue Price of Rs.450 per Equity Share, was finalized in consultation with BSE. The category was oversubscribed 13.572340 times. The total number of shares allotted in this category is 6, 84, 00,000 Equity Shares to 41, 73,929 successful applicants.

B. Allocation to Non Institutional Investors: The Basis of Allocation to the Non institutional Investors, who have bid at the Issue Price of Rs.450 per Equity Share, was finalized in consultation with BSE. The category was subscribed 159.556149 times. The total number of shares allotted in this category is 2, 28, 00,000 Equity Shares to 11,862 successful applicants.

C. Allocation to QIB Bidders: Allocation to QIBs has been done on a proportionate basis in consultation with BSE. As per the SEBI guidelines, Mutual Funds were initially allotted 5% of the quantum of shares available (68, 40,000) and other QIBs and unsatisfied demands of Mutual Funds were allotted the remaining available shares (12, 99, 60,000) on proportionate basis. VALUATION: RPL is part of the Reliance Anil Dhirubhai Ambani (Reliance ADA) group and was established with the purpose of developing, constructing and operating power projects domestically and internationally. The company is currently in the process of developing 13 medium and large sized
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INTIAL PUBLIC OFFERING IN INDIA power projects with a combined planned installed capacity of 28,200 MW. The identified project sites are located in western India (12,220 MW), northern India (9,080 MW) and northeastern India (2,900 MW) and southern India (4,000 MW). They include 7 coal-fired projects (14,620 MW) to be fueled by reserves from captive mines and supplies from India and abroad, 2 gas-fired projects (10,280 MW) to be fueled primarily by reserves from the Krishna-Godavari Basin off the east coast of India, and 4 hydroelectric projects (3,300 MW), three of them in Arunachal Pradesh and one in Uttarakhand. The Indian power sector has robust growth prospects with a large demand and supply deficit. With various proactive reforms in the power sector encouraging private-sector participation in all the three core segments of generation, transmission and distribution, players such as RPower, who will be the face of the group for power generation, will be able to capitalize on strong growth opportunities in the country. Project portfolio and its customers are well diversified. The locations of all the 13 projects are either near the load centre or fuel source. Fuel required is also diversified. Has no power project in operation and its first power generation unit, the Phase I of the 600-MW Rosa Power project, will go on stream only in December 2009. Unless there is any inorganic expansion, there will not be any operating revenue or cash flow from the core business of power generation. Ahead of the IPO, all the listed stocks in the power generation sector have been re-rated based on the expected price of RPower. The offer price band stands at Rs 405 to Rs 450. The discount of Rs 20 for retail
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INTIAL PUBLIC OFFERING IN INDIA investors and part payment of the issue price (Rs 115 on application and balance on call) is a sweetener. With no financial track record and no operational income expected to be generated till December 2009, when the first unit of Rosa I is expected to go on stream, the RPower scrip could end up with high volatility on news flow on the implementation of its various projects and winning of new projects.. At higher price band, RPower will have a market capitalization of Rs 101700 crores compared with NTPC's current market capitalization of Rs 221630 crores. While RPower has plans to implement 28,200-MW capacity with no assured returns in many projects and little experience in large project execution, NTPC already has 27,904-MW capacity with plans to set up additional 22,100 MW. Most of NTPC’s projects enjoy assured returns and it has one of the best track records of power-project execution. In the long run, RPower has many execution risks to contend with. But in the short term, the market seems willing to ignore all that.

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INTIAL PUBLIC OFFERING IN INDIA

“BANG-OVERSEAS LTD”
Sector: Textiles and Garments. About the Company: Incorporated in the year 1992 Bang Overseas Limited is presently providing fashion fabrics and meeting ready to wear requirements of our customers in apparel, textile and retail segment. Bang Overseas Limited started business from trading in textile and since 1998. Bang Overseas Limited started ready-to-wear men’s segment in 2000 by outsourcing manufacturing process with our experience in designing fabrics and in turn selling to various international brands. Bang Overseas Limited launched ready-to-wear men’s garments under its brand name 'Thomas Scott' in 2002. Objects of the Issue : • Setting up retail outlets across India and brand building. • Setting up a new apparel manufacturing unit. • Warehousing and Logistic facilities. • For general corporate purposes. Merchant Banker: Almondz Global Securities Limited (Formerly Allianz Securities Limited) Issue size: Public Issue of 3,500,000 Equity Shares of Rs.10 each of Bang Overseas Limited ("Bang Overseas” Or the "Company" Or The "Issuer") for cash at a price of Rs. 207 per equity share of Rs.10 each including a share premium of Rs. 197 per Equity share aggregating Rs.
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INTIAL PUBLIC OFFERING IN INDIA 724.5 Million. The issue constitutes 25.81% of the post issue paid-up capital of the company. Issue Price Rs.207 per Equity Share of Face value of Rs.10 each. The issue price is 20.70 times the face value.

Date of listing: 20/02/2008.

Price on Listing : 207 BSE/ 250 on NSE.

Other Information:
• • • • • • • • • •

Open - 28 Jan Close - 31 Jan Issue Type -100% Book Building Issue Issue Size - 3,500,000 Equity Shares Of Face Value Rs.10 Each Issue Size in Rs - 72 Crores Issue Price - Rs 200/- to Rs 207/- Per Equity Share Maximum Subscription Amount for Retail Investor: Rs 100,000/Listing - BSE, NSE Registrar - Karvy Computershare Private Limited Minimum and maximum shares for retail category - 1 lot -30 shares and 16 lot - 480 shares.

Minimum and Maximum amount for retail category - 1 lot - Rs 6210 and 16 lot - Rs 99360 @ cut off.

Application Multiple - 30 and in multiples there off starting with at least 30 shares

Cheque In Favor Of - "Escrow Account - BOL Public Issue - R" For Retail category

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INTIAL PUBLIC OFFERING IN INDIA Subscribe Statistics: The Issue received 4780 applications for 3,966,170 equity shares resulting in 1.13 times subscription. The details of the applications received in the Issue from Qualified Institutional Buyers, NonInstitutional, Retail Individual Investors are as under (Before technical rejections): BANG OVERSEAS LTD SUBSCRIPTION DETAIL Category Qualified Institutional Buyers Non Institutional Investors Retail Individual Investors Employees Total No. of No. of Subscription (No. of Applications Shares Times) 3 1939980 1.14

15

666720

1.3

4733

1257260

1.05

29 4780

102210 3966170

1.02 1.13

The Basis of Allocation to the categories namely Retail Individuals Bidders, Non-Institutional Bidders and QIB Bidders was finalized in consultation with the Bombay Stock Exchange Limited ("BSE") on February 12, 2008.

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INTIAL PUBLIC OFFERING IN INDIA A. Allocation to Employees: The Basis of Allocation to the Employees, who have bid at cut-off or at the Issue Price of Rs. 207/- per Equity Share, was finalized in consultation with BSE. The category was oversubscribed 1.0221 times. The total number of shares allotted in this category is 100,000 Equity Shares to 29 successful applicants. B. Allocation to Retail Investors: The Basis of Allocation to the Retail Individual Investors, who have bid at cut-off or at the Issue Price of Rs.207/- per Equity Share, was finalized in consultation with BSE. The category was oversubscribed 1.040748 times. The total number of shares allotted in this category is 1190000 Equity Shares to 4612 successful applicants.

C. Allocation to Non-Institutional Investors: The Basis of Allocation to the Retail Individual Investors, who have bid at cut-off or at the Issue Price of Rs. 207/- per Equity Share, was finalized in consultation with BSE. The category was under-subscribed 1.307294 times. The total number of shares allotted in this category is 510000 Equity Shares to 15 successful applicants. D. Allocation to QIB’S: Allocation to QIBs has been done on a proportionate basis in consultation with BSE. As per the SEBI guidelines, there were 85,000 equity shares reserved for Mutual Funds category. Since no applications were received from Mutual funds, the spillover portion has been added

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INTIAL PUBLIC OFFERING IN INDIA to all other QIBs and other QIBs were allotted the remaining available shares (1,700,000) on proportionate basis. VALUATION: BOL has a domestic market bias and is, therefore, relatively less exposed to rupee fluctuations and export slowdown, problems that are plaguing most other textile companies. The company started its garments business in 2002. Till then, it was predominantly a trader in imported fabric. The company sells men’s clothing under the brand “Thomas Scott” through a network of multibrand outlets, departmental stores such as Shoppers’ Stop and Globus and 12 exclusive outlets. A growing share of garments in the revenue mix has significantly improved profitability. Revenues and profits have grown at a stupendous pace since 2005. The company ended fiscal 2007 with revenues of close to Rs 100 crores. Garments currently account for about 40 per cent of revenues. Through the proceeds of the offer, the company will expand its garments capacity six-fold to more than 7 million pieces a year and expand its retail chain to 100 stores. The fresh capacity is expected to come on stream by September 2008. The company expects to add an additional 88 stores by June 2009; 41 will be company-operated and the remaining franchisee-run. The additional garment capacity will likely feed its expanding retail operations. and will also help it cater to increasing demand from apparel

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INTIAL PUBLIC OFFERING IN INDIA retailers. BOL is also to foray into women’s wear with a line of clothing — Miss Scott. While these moves can help boost margins and profits in the long-term, there are execution risks, especially when it comes to the retail business. At the upper end of the price band of Rs 200-Rs 207, the offer is valued at close to 20 times the company’s annualized FY 08 per-share earnings, on a fully expanded equity base. The company is in its infancy, and with an insufficient track record in the branded retail business, there could be execution risks to its expansion plans. If it manages to execute its capacity addition and retail expansion plans successfully, the valuation is likely to be at more attractive levels on a forward basis. Given the turbulence in the markets, however, staying invested with better-established players may be a more appropriate strategy.

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INTIAL PUBLIC OFFERING IN INDIA “ J.KUMAR INFRAPROJECTS LIMITED” Sector: Construction/Infrastructure. About the Company: J Kumar Infraprojects is a civil engineering and infrastructure development company with primary focus on development of roads, flyovers, bridges, railway over bridges, irrigation projects, commercial and residential buildings, railway buildings, sports

complexes and airport runways. It deals in transportation, engineering, civil construction, irrigation projects and piling work using hydraulic piling rigs. The company also undertakes the design and construction of flyover projects to the client's specified requirements on turnkey basis. J. Kumar Infraprojects has been most active in Mumbai, Pune, Aurangabad and Vidharbha region of Maharashtra. Objects of the Issue : • Purchase of Capital Equipments. • Funding Working Capital Requirement. • General Corporate Purposes. Merchant Banker: Anand Rathi Securities Limited Issue size: Public Issue of 65,00,000 Equity Shares of Rs.10 each of J. KUMAR INFRAPROJECTS LIMITED (THE "COMPANY" OR THE "ISSUER") for cash at a price of Rs.110 per equity share of Rs.10 each including a share premium of Rs.100 per Equity share aggregating Rs. 7,150,00 LACS. The issue constitutes 30.40% of the post issue paid-up capital of the company. Issue Price Rs.110 Per Equity Share of Face value of Rs.10 each. The issue price is 11 times the face value.
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INTIAL PUBLIC OFFERING IN INDIA Date of listing: 12/02/2008.

Price on Listing: 100 on BSE / 109 on NSE.

Other Information:
• • • • • • • • •

Open - 18 Jan Close - 23 Jan Issue Type -100% Book Building Issue Issue Size - 65,00,000 Equity Shares Of Rs. 10/- Each Issue Price - Rs 110/- to Rs 120/- Per Equity Share Maximum Subscription Amount for Retail Investor: Rs 100,000/Listing - BSE, NSE Registrar - Karvy Computershare Private Limited Minimum and maximum shares for retail category - 1 lot - 55 shares and 15 lot - 825 shares.

Minimum and Maximum amount for retail category - 1 lot - Rs 6600 and 15 lot - Rs 99000 @ cut off.

Application Multiple - 55 and in multiples there off starting with at least 55 shares.

Subscribe Statistics: The Issue received 12,238 applications for 1, 30, 96,660 equity shares resulting in 2.01 times subscription. The details of the applications received in the Issue from Qualified Institutional Buyers, NonInstitutional, Retail Individual Investors are as under (Before technical rejections):

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J.KUMAR INFRAPROJECTS LTD. SUBSCRIPTION DETAIL
Category Qualified Institutional Buyers No. of Applications No. Shares 11 8833990 of Subscription 2.8

Non 40 institutional Investors Retail Individual 12134 Investors Employees 53

848980

0.9

3210190 203500

1.46 1.01

The Basis of Allocation to the categories namely Retail Individuals Bidders, Non-Institutional Bidders and QIB Bidders was finalized in consultation with the Bombay Stock Exchange Limited ("BSE") on January 28, 2008. A. Allocation to Employees: The Basis of Allocation to the Employees, who have bid at cut-off or at the Issue Price of Rs.110/- per Equity Share, was finalized in consultation with BSE. The category was oversubscribed 1.017500 times. The total number of shares allotted in this category is 2, 00,000 Equity Shares to 53 successful applicants. B. Allocation to Retail Individual Investors: The Basis of Allocation to the Retail Individual Investors, who have bid at cut-off or at the Issue Price of Rs.110/- per Equity Share, was finalized in consultation with BSE. The category was oversubscribed 1.354675 times. The spillover portion to the extent of 99870 equity shares has

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INTIAL PUBLIC OFFERING IN INDIA been added to this category. The total number of shares allotted in this category is 2304870 Equity Shares to 10954 successful applicants. B. Allocation to Non Institutional Investors: The Basis of Allocation to the Retail Individual Investors, who have bid at cut-off or at the Issue Price of Rs.110/- per Equity Share, was finalized in consultation with BSE. The category was under- subscribed 0.894317 times. As per the Red Herring Prospectus, the spillover portion to the extent of 99870 equity shares has been added to the Retail Individual Investors category. The total number of shares allotted in this category is 845130 Equity Shares to 38 successful applicants.

C. Allocation to QIB Bidders: Allocation to QIBs has been done on a proportionate basis in consultation with NSE. As per the SEBI guidelines, Mutual Funds were initially allotted 5% of the quantum of shares available (1, 57,500) and other QIBs and unsatisfied demands of Mutual Funds were allotted the remaining available shares (29, 92,500) on proportionate basis. VALUATION: JKI, a construction company with operations in Maharashtra, focuses on building roads, flyovers, buildings and piling works. The offer proceeds (Rs 72-78 crores) are to be utilized for purchasing capital equipment and for working capital requirements. At the offer price band, the market capitalization of the company’s stock would be Rs 228-248 crores. JKI, although incorporated in 1999, started operations in 2005 and saw a huge jump in revenues in 2006. This was after one of the promoter
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INTIAL PUBLIC OFFERING IN INDIA group companies — J. Kumar & Co. — transferred certain assets as well as a contract license for public works department. JKI’s revenue grew from Rs 3 crores in FY-05 to Rs 112 crores in FY-07. The company’s current order-book of Rs 461 crores provides earnings visibility over the next couple of years. However, the annual growth over 2006 and 2007, afforded by a low base, is unlikely to repeat itself. The present infrastructure boom in the country provides ample room for small players such as JKI to share a part of the order flow pie. However, JKI’s current business model depends more on the local municipal and metropolitan development authority’s (in Maharashtra) than on the ‘infrastructure spending’ in the country. While this strategy is likely to fetch steady revenues in the medium term, the growth opportunity appears relatively less as infrastructure players moving to high-end segments could be better options from an investment perspective. The company’s valuation can, therefore, at best be at a discount to other infrastructure players. Concentration of work in a single State also poses the risk of slowdown if the State spending declines. The company has also not stated any plans of moving to locations outside of Maharashtra. The asking price of Rs 110-120 appears stiff, given the present size of the company and the large number of unorganized players in the contracting space. Limited geographical presence, significant expansion in equity and low visibility for growth over the long term are also limiting factors for this company. However, given that the overall prospects for the company’s business appear good, investors can take a second look at the stock post-listing, if its valuation dips due to broad market factors.

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INTIAL PUBLIC OFFERING IN INDIA At the offer band, the IPO is priced at 19-21 times it’s per share earnings of FY 2007 on a pre-issue equity base. Post-issue, the price-earnings multiple is 14-16 times the annualized earnings for FY-08. Similar sized peers are at a discount to this valuation.

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INTIAL PUBLIC OFFERING IN INDIA “CORDS CABLE INDUSTRIES LTD” Sector Cables (Power). About the Company: Cords Cable Industries Limited is in the business of providing cost-effective and quality solutions for various electrical connectivity requirements. Established in 1987 Cords has developed a wide range of specialized cables to address the specific requirements of industries involving modern process technologies, instrumentation and communication demanding the highest standards of precision and reliability, and household users seeking products with assured quality and safety. Some of its products include: LT control cables, LT power cables, instrumentation cables, thermocouple extension cables, compensating cables, coaxial cables, telephone cables, panel wires / household wires & networking cables. CCIL currently manufactures cables up to 1.1 kv at their manufacturing facility in Chopanki, Rajasthan for various applications and caters to the requirements of industries in steel, power, chemical, cement, fertilizer, refineries. The main raw materials used are copper, aluminium, PVC resin, XLPE, GI wire, aluminium tapes, and thermo couple. Objects of the Issue:
• • •

Setting up of production facilities. Working capital requirements. General Corporate Purposes.

Merchant Banker: Collins Stewart Inga Private Limited

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INTIAL PUBLIC OFFERING IN INDIA Issue size: Public Issue of 30, 85,000 Equity Shares of Rs.10 each of CORDS CABLE INDUSTRIES LIMITED (THE "COMPANY" OR THE "ISSUER") for cash at a price of Rs.135 per equity share of Rs.10 each including a share premium of Rs.125 per Equity share aggregating Rs. 4164.75 LACS. The issue constitutes 26.38% of the post issue paid-up capital of the company. Issue Price Rs.135 per Equity Share of Face value of Rs.10 each. The issue price is 13.50 times the face value.

Date of listing: 13/02/2008.

Price on Listing: 130 on BSE

Other Information:
• • • • • • • • •

Open - 21 Jan Close - 24 Jan Issue Type -100% Book Building Issue Issue Size - 35,00,000 Equity Shares Of Rs. 10/- Each Issue Price - Rs 125/- to Rs 135/- Per Equity Share Maximum Subscription Amount for Retail Investor: Rs 100,000/Listing - BSE, NSE Registrar - Intime Spectrum Registry Ltd Minimum and maximum shares for retail category - 1 lot - 50 shares and 14 lot - 700 shares.

Minimum and Maximum amount for retail category - 1 lot - Rs 6750 and 14 lot - Rs 94500 @ cut off.

Application Multiple - 50 and in multiples there off starting with at least 50 shares

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INTIAL PUBLIC OFFERING IN INDIA

Cheque In Favor Of - "Escrow Account - CCIL Public Issue - R" For Retail category.

Subscribe Statistics: The Issue received 10564 applications for 14278550 equity shares resulting in 4.6284 times subscription. The details of the applications received in the Issue from Qualified Institutional Buyers, NonInstitutional, Retail Individual Investors are as under (Before technical rejections): CORDS CABLE INDUSTRIES LTD SUBSCRIPTION DETAIL Category Qualified Institutional Buyers No. of Applications No. Shares 30 10291900 of Subscription 6.8271

Non65 Institutional Investors Retail Individual 10456 Investors Employees 13

1435450

3.174

2480300 70900

2.3504 1.0129

The Basis of Allocation to the categories namely Retail Individuals Bidders, Non-Institutional Bidders and QIB Bidders was finalized in consultation with the Bombay Stock Exchange Limited ("BSE") on February 5, 2008. A. Allocation to Employees: The Basis of Allocation to the Employees, who have bid at cut-off or at the Issue Price of Rs. 135/- per Equity Share was finalized in consultation with BSE. The category was oversubscribed 1.0129 times.
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INTIAL PUBLIC OFFERING IN INDIA The total number of Equity Shares allotted in this category is 70000 Equity Shares to 13 successful applicants. B. Allocation to Retail Investors: The Basis of Allocation to Retail Individual Investors, who have bid at cut-off or at the Issue Price of Rs. 135/- per Equity Share, was finalized in consultation with BSE. The category was oversubscribed 2.3019 times. The total number of Equity Shares allotted in this category is 1055252 Equity Shares to 8232 successful applicants.

C. Allocation to Non Institutional Investors: The Basis of Allocation to Non-institutional Investors, who have bid at the Issue Price of Rs. 135/- per Equity Share, was finalized in consultation with BSE. The category was oversubscribed 2.9849 times. The total number ol Equity Shares allotted in this category is 452248 Equity Shares to 57 successful applicants.

D. Allocation to QIB Bidders: Allocation to QIBs has been done on a proportionate basis in consultation with BSE. As per the SEBI (Disclosure and Investor Protection) Guidelines, 2000, Mutual Funds were initially allotted 5% of the quantum of shares available (75375) and other QIBs and unsatisfied demands of Mutual Funds were allotted the remaining available shares (1432125) on proportionate basis.

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INTIAL PUBLIC OFFERING IN INDIA VALUATION: In the business of manufacturing cables, CCIL offers a proxy exposure to the ongoing infrastructure and power growth story. Robust growth in sales and bottom-line, diverse revenue mix, established clientele and the proposed entry into HT (high tension) power, rubber and specialty cables segment, suggest good prospects for the company. CCIL has a diversified clientele and product portfolio. Its current orderbook, with the major portion leaning towards power sector (about 48 per cent), is spread across sectors such as cement, refineries and petrochemicals and steel. The company may be able to further extend its reach to sectors such as railways, shipping and wind power after the proposed expansion of its capacity and the addition of new products. On the product front, it offers an extensive range of high quality control and instrumentation cables, power cables and special cables for oil wells. The company plans to utilize proceeds from the issue towards setting up of production facilities. About Rs 6 crores from the proceeds will be diverted towards working capital requirements. The demand for cables is set to increase significantly, given the ongoing capex in power and infrastructure and strong growth in industries such as metro rail, shipping and aviation. In the price band of Rs 125-135, the stock would be valued at about 12-13 times its likely FY-08 per share earnings on a diluted equity base. The stock is currently available at a P/E of 11x to 12x on the lower and upper price bands respectively of its FY 08E EPS of Rs.11.72. The

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INTIAL PUBLIC OFFERING IN INDIA margins shown by CCIL is one on the higher side while comparing it to its peer group with OPM being at 15% & NPM at 8%. The company has shown excellent growth rate in the last few years & with the upward trend in its user industries, we expect the growth to continue. One of the key concerns is that currently the user industry is on uptrend. A slowdown can hit CCIL’s fortunes. The industry is currently trading at a P/E of 22x, which leaves enough room for upside potential. The company has plans of introducing new products in the product line which will boost the revenues.

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INTIAL PUBLIC OFFERING IN INDIA

“K N R Constructions Limited”
Sector: Construction – Medium/Small. About the Company: Incorporated in 1995, KNR Constructions Ltd an infrastructure project development company providing engineering, procurement and construction services across various fast growing sectors; viz., roads & highways, irrigation and urban water infrastructure management. KNR Constructions Ltd. has in the past executed infrastructure projects independently as well as through joint ventures. Currently, most of the road projects under execution are with its joint venture partner, Patel Engineering Limited with whom it has business association for the past 7 years. As on June 30, 2007, it has 24 projects on hand across various states in India covering Uttar Pradesh, Madhya Pradesh, Assam, Andhra Pradesh, Karnataka, and Tamil Nadu. Objects of the Issue:
• • • •

Further Equity investment in BOT projects Purchase of capital equipment. For meeting working capital requirement. For general corporate purposes.

Merchant Banker: AXIS BANK Limited. Issue size: Public Issue of 7,874,570 Equity Shares of Rs.10 each of KNR CONSTRUCTIONS LIMITED (THE "COMPANY" OR THE "ISSUER") for cash at a price of Rs.130 per equity share of Rs.10 each including a share premium of Rs.120 per Equity share aggregating Rs. 1338.68 MILLION. The issue constitutes 28.00% of the post issue paid-

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INTIAL PUBLIC OFFERING IN INDIA up capital of the company. Issue Price Rs.130 per Equity Share of Face value of Rs.10 each. The issue price is 17 times the face value.

Date of listing: 18/02/2008.

Price on Listing: 180 on BSE / 210 on NSE.

Other Information:
• • • • • • • • • •

Open - 24 Jan Close - 29 Jan Issue Type -100% Book Building Issue Issue Size - 7,874,570 Equity Shares Of Face Value Rs.10 Each Issue Size in Rs - 142 Crores Issue Price - Rs 170/- to Rs 180/- Per Equity Share Maximum Subscription Amount for Retail Investor: Rs 100,000/Listing - BSE, NSE Registrar - Intime Spectrum Registry Limited Minimum and maximum shares for retail category - 1 lot - 35 shares and 15 lot - 525 shares.

Minimum and Maximum amount for retail category - 1 lot - Rs 6300 and 15 lot - Rs 94500 @ cut off.

Application Multiple - 35 and in multiples there off starting with at least 35 shares

Cheque In Favor Of - "ESCROW ACCOUNT - KNR IPO RESIDENT" For Retail category

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INTIAL PUBLIC OFFERING IN INDIA Subscribe Statistics: The Issue received 5948 applications for 9729195 equity shares resulting in 1.2355 times subscription. The details of the applications received in the Issue from Qualified Institutional Buyers, NonInstitutional, Retail Individual Investors are as under (Before technical rejections): K.N.R. CONSTRUCTION LTD SUBSCRIPTION DETAIL Category No. of No. of Equity Subscription Bids/Applications Shares (no. of times) 644910 3683995 0.2382 3.1754

Retail Individual 5847 bidders NonInstitutional bidders Qualified Institutional Buyers Employee bidders 28

22

5317445

1.375

51

82845

0.5918

The Basis of Allocation to the categories namely Retail Individuals Bidders, Non-Institutional Bidders and QIB Bidders was finalized in consultation with the Bombay Stock Exchange Limited ("BSE") on February 08, 2008. A. Allocation to Retail Investors: The Basis of Allocation to the Retail Investors, who have bid at cut-off or at and above the Issue price of Rs.170/- Equity Share, was finalized in consultation with BSE. The category was subscribed 0.234841 times. The total number of equity shares allotted in this category is 635740.
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INTIAL PUBLIC OFFERING IN INDIA B. Allocation to Non Institutional Investors: The Basis of Allocation to the Non-Institutional Investors, who have bid at cut-off or at the Issue Price of Rs.170/- per Equity Share, was finalized in consultation with BSE. The category was

subscribed1.430179 times. The total number of equity shares allotted in this category is 2561340 including Spill over from Employee Category (37620 Equity Shares) and Retail Category (1363535 Equity Shares) to successful applicants.

C. Allocation to Employees: The Basis of Allocation to the Employee Category, who have bid at cutoff or at and above the Issue price of Rs.170/- Equity Share, was finalized in consultation with BSE. The category was subscribed 0.5917 times. The total number of equity shares allotted in this category is 82,845. The unsubscribed portion (57,155 shares) of Employee Category is added to QIB and HNI Category Respectively. D. Allocation to QIB's: Allocation to QIBs has been done on a proportionate basis in consultation with BSE. As per the SEBI guidelines, Mutual Funds were initially allotted 5% of the quantum of shares available (193,365) other QIBs and unsatisfied demands of Mutual Funds were allotted the remaining available shares (4401280) on proportionate basis. The total number of equity shares allotted In this category is 4594645 including spill over from Employee Category (19535 Equity Shares) and Retail Category (707830 Equity Shares) to successful applicants.

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INTIAL PUBLIC OFFERING IN INDIA VALUATION: The Company has strong execution of infrastructure development projects capabilities which requires significant amount of technical expertise and skill. It also has the requisite pre-qualification to bid for such projects, which is based on past experience of execution of similar projects and financial strength. The company has a team of qualified and experienced employees, who have qualities to meet requirements of the clients and the technical skills of the various projects that we undertake. The management team which is led by managing director, has over three decades of experience in the construction industry, has expertise and experience in the road construction sector. On a consolidated basis, its operating income, EBIDTA and PAT have grown at a CAGR of 58.38%, 111.88% and 108.22% over FY05 to FY07. The government is giving special importance to the industry so as to maintain 9% plus economic growth rate, which required large investments in infrastructure segments. As outlined in approach paper to 11th plan, the investment in infrastructure will need to increase by 6% points in average gross domestic investment rate from 29.1% to 35.1% of GDP needed to accelerate GDP growth rate from 7% to 9%, about half should be in infrastructure. Shares of KNRCL are available at price to earnings (P/E) multiple of 16.76x at the floor price and 17.75x at the cap price based on earnings per share (EPS) for FY 2007. The valuation of KNECL seems to be attractive when compared with its peers, MSK Projects India, Madhucon Projects, Patel Engineering and Sadbhav Engineering which were trading at P/E multiple of 17.70x, 31.50x, 39x, and 40.80

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“ONMOBILE GLOBAL LIMITED”
Sector: Telecom Software. About the Company: In the Year 2000 OnMobile Global Limited

Incubated at Infosys. OnMobile Global Limited provides value-added telecommunications software products and services for

telecommunications and media companies primarily in India. It offers a range of applications that are delivered by its carrier customers to their end-user subscribers. The company's products include ring back tones, voice portals, ring tone downloads, subscription manager, contests, music messaging, ondevice client software, mobile radio, voice mail, voice short messaging service, and missed call alerts, which enable subscribers to personalize their mobile phones. It also delivers interactive media solutions to media companies, such as tele-voting, interactive programming, and mobile auditioning; and to marketing companies for mobile adverting and lead generation. In addition, the company provides a range of mobile commerce solutions, which enable subscribers to buy movie tickets, railway tickets, top up their pre-paid mobile phone cards, and pay bills using their mobile phones. Further, it offers MMP2500, a multi-model platform that combines speech, text, and touch input with graphics, text, and audio output to deliver enhanced applications and services. The company is based in Bangalore.

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INTIAL PUBLIC OFFERING IN INDIA Objects of the Issue :
• •

Achieve the benefits of listing on the Stock Exchanges. Purchase equipment for company's office at Bangalore, Mumbai, Delhi and various customer sites.

To meet the long term working capital requirements of the Company.

For general corporate purposes

Merchant Banker: ICICI Securities Limited & Deutsche Equities Private India Limited Issue size: Public Issue of 1, 09, 00,545 Equity Shares of Rs.10 each of ONMOBILE GLOBAL LIMITED (THE "COMPANY" OR THE "ISSUER") for cash at a price of Rs.440 per equity share of Rs.10 each including a share premium of Rs.430 per Equity share aggregating Rs. 47962.39 Lacs. The issue constitutes 18.99% of the post issue paid-up capital of the company. Issue Price Rs.440 Per Equity Share of Face value of Rs.10 each. The issue price is 44 times the face value.

Date of listing: 19/02/2008.

Price on Listing: 440 on BSE / 440 on NSE.

Other Information: • Open - 24 Jan • Close - 29 Jan • Issue Type -100% Book Building Issue

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INTIAL PUBLIC OFFERING IN INDIA • Issue Size - 10,900,545 Equity Shares Of Face Value Rs.10 Each • Issue Size in Rs - 491 Crores • Issue Price - Rs 425/- to Rs 450/- Per Equity Share • Maximum Subscription Amount for Retail Investor: Rs 100,000/• Listing - BSE, NSE • Registrar - Karvy Computershare Private Limited • Minimum and maximum shares for retail category - 1 lot - 15 shares and 14 lot - 210 shares. • Minimum and Maximum amount for retail category - 1 lot - Rs 6300 and 14 lot - Rs 94500 @ cut off. • Application Multiple - 15 and in multiples there off starting with at least 15 shares • Cheque In Favor Of - "Escrow Account - OnMobile Public Issue - R" For Retail category.

Subscribe Statistics: The Issue received 37,738 applications for11, 83, 43,547 equity shares resulting in 10.85 times subscription. The details of the applications received in the Issue from Qualified Institutional Buyers, NonInstitutional, Retail Individual Investors are as under (Before technical rejections):

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ONMOBILE GLOBAL LTD SUBSCRIPTION DETAIL
Category Qualified institutional Buyers No. of Applications No. of Subscription Shares 94 11,22,35,550 17.16

Non 128 Institutional Investors Retail Individual 37,516 Investors

24,20,830

2.21

36,87,167

1.12

The Basis of Allocation to the categories namely Retail Individuals Bidders, Non-Institutional Bidders and QIB Bidders was finalized in consultation with the Bombay Stock Exchange Limited ("BSE") on February 08, 2008. A. Allocation to Retail Investors: The Basis of Allocation to the Retail Individual Investors, who have bid at cut-off or at the Issue Price of Rs.440/- per Equity Share, was finalized in consultation with BSE. The category was oversubscribed 1.115325 times. The total number of shares allotted in this category is 32, 70,164 Equity Shares to 36,462 successful applicants. B. Allocation to Non Institutional Investors: The Basis of Allocation to the Retail Individual Investors, who have bid at cut-off or at the Issue Price of Rs.440/- per Equity Share, was finalized in consultation with BSE. The category was over- subscribed 2.195630

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INTIAL PUBLIC OFFERING IN INDIA times. The total number of shares allotted in this category is 10, 90,054 Equity Shares to 119 successful applicants. C. Allocation to QIB Bidders: Allocation to QIBs has been done on a proportionate basis in consultation with NSE. As per the SEBI guidelines, Mutual Funds were initially allotted 5% of the quantum of shares available (3, 27,016) and other QIBs and unsatisfied demands of Mutual Funds were allotted the remaining available shares (62, 13,311) on proportionate basis. VALUATION: OnMobile Global (OnMobile) was promoted in September 2000 by OnMobile Systems, Inc (OMSI) and Arvind Rao, a B Tech from IIT Mumbai and management graduate from Wharton school, University of Pennsylvania, and Chandramouli Janakiraman, a B Tech and a former Infosys Technologies employee, to develop telecommunication software platforms and applications for the mobile telecommunications industry. Initially, it was incorporated as Onscan Technologies India The name was changed to OnMobile Asia Pacific in April 2001 and to OnMobile Global in August 2007. The customer base includes all the major telecom operators in India and more than 10 international telecom operators in over eight countries including Optus in Australia, Banglalink in Bangladesh, Maxis in Malaysia, and BTEL and Indosat in Indonesia. In addition, markets products and services to media companies such as AOL, Disney, ESPN, India Today Group digital, Star India and Nokia.

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INTIAL PUBLIC OFFERING IN INDIA Due to competitive industry dynamics, mobile tariffs have been falling and there has been pressure on the average revenue per subscriber (ARPU) of telecom operators. Thus, telecom operators would be looking for more VAS revenue at very little incremental capital expenditure. This is a potential lever to counter the trend of falling ARPUs. It will result in decent growth opportunity for OnMobile as VAS will have higher growth trajectory on lower base and increasing acceptability Its weaknesses are More than 80% of the revenue from just five largest customers (major telecom service providers), constituting less than 10% of total customers, in the six months ended September 2007. The loss of any major customer or decrease in the volume of work from them or dip in revenue sharing may adversely impact revenue and profitability. Revenue grew at a CAGR of 99% and net profit at a CAGR of over 100% over the three-year period ended March 2007. However, operating profit margin has been declining over the couple of years though is still decent at above 40%. Performance improved significantly in the six months ended September 2007, achieving revenue of Rs 112.51 crores (82% of the revenue in FY 2007) and net profit of Rs 30.52 crores (87% of net profit realized in FY 2007). Share of revenue with telecom operators is about 20% on an average ranging between 15%-40%. Overseas revenue was about 9.1% of total revenue in H1 of FY 2008 as against 5.1% in FY 2007. On annualized EPS of Rs 10.2 in the six months ended September 2007 on post-issue equity capital of Rs 60.09 crores, the P/E works out to 41.8 – 44.3 at the price band of Rs 425 – Rs 450. The trailing 12-month (TTM) P/E of Tanla Solutions (broadly providing similar services outside India) is 20.5.
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INTIAL PUBLIC OFFERING IN INDIA “NATIONAL HYDROELECTRIC POWER CORPORATION LTD” Sector: power sector About the Company: Incorporated in 1975, NHPC Limited (Formerly known as National Hydroelectric Power Corporation Ltd.) is a Govt. of India's Enterprise. NHPC is a hydroelectric power generating company dedicated to the planning, development and implementation of an integrated and efficient network of hydroelectric projects in India. They execute all aspects of the development of hydroelectric projects, from concept to commissioning. NHPC have developed and constructed 13 hydroelectric power stations and their total installed capacity is currently 5,175 MW. This includes two power stations with a combined capacity of 1,520 MW, constructed and operated through our Subsidiary, NHDC. Company's power stations and hydroelectric projects are located in the North and North East of India, in the states of Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Arunachal Pradesh, Assam, Manipur, Sikkim and West Bengal. Company generated 14,813.16 MUs of electricity in Fiscal 2008. Presently, they are engaged in the construction of 11 additional hydroelectric projects, which are expected to increase total installed capacity by 4,622 MW. Further eight projects, including one joint venture project, with an anticipated capacity of 5,751 MW, are currently awaiting sanction from the CCEA. NHPC have obtained ISO 18001:2000, ISO 9001:2000 and ISO 14001:2004 certifications from the Bureau of Indian Standards.

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INTIAL PUBLIC OFFERING IN INDIA Objects of the Issue: a) Utilize the proceeds to part finance the construction and development cost of certain of Identified projects namely Subansiri Lower, Uri – II, Chamera – III, Parbati – III, Nimoo Bazgo, Chutka and Teesta Low Dam – IV Use the proceeds for future growth opportunities. b) Use the proceeds for future growth opportunities. c) For General Corporate Purpose. Merchant Banker: 1. Enam Securities Private Limited 2. Kotak Mahindra Capital Company Limited 3. SBI Capital Markets Limited Issue size: Public issue of 1,67,73,74,015 equity shares of Rs. 10 each (the “equity shares”) for cash at a price of Rs. [•] per equity share of NHPC limited (“NHPC”, “our company” or “the issuer”) aggregating Rs. [•] crores (the “issue”). The issue comprises a fresh issue of 1,11,82,49,343 equity shares by NHPC (the “fresh issue”) and an offer for sale of 55,91,24,672 equity shares by the president of India acting through the ministry of power, government of India (the “selling shareholder”) (the “offer for sale”). The issue comprises a net issue to the public of 1,63,54,39,665 equity shares (the “net issue”) and a reservation of 4, 19, 34,350 equity shares for subscription by eligible employees. Date of listing: September 01, 2009 Price on Listing: Rs. 39.00(BSE) Rs. 42.00(NSE)

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INTIAL PUBLIC OFFERING IN INDIA Other Information:

»» Issue Open »» Issue Type: »» »» »» »» »» »» »» Issue Size: Issue Size: Face Value: Issue Price: Market Lot: Minimum Order Quantity: Listing At:

Aug07,2009-Aug12,2009 100% Book Built Issue IPO 1,677,374,015 Equity Shares of Rs. 10 Rs. 6,038.55 Crores Rs. 10 Per Equity Share Rs. 30 - Rs. 36 Per Equity Share 175 Shares 175 shares BSE, NSE

Subscribe Statistics NATIONAL HYDROELECTRIC POWER CORPORATION LTD

SUBSCRIPTION DETAIL VALUATION: NHPC Limited was incorporated by the Government of India in the year 1975. NHPC is a hydroelectric power generating company committed to the planning, development and implementation of an integrated and efficient network of hydroelectric projects in India. NHPC is involved in all the activities right from commencement to development of hydroelectric projects. The company has experience in the design, development, construction and operation of hydroelectric projects, executing and managing all aspects of projects, from front-end engineering design to commissioning, operation and maintenance. NHPC has selective undertaken projects in alliance with state governments where there is high hydro potential and thus tend to enjoy location and operational advantage. NHPC has constructed and developed 13 hydroelectric power stations with a capacity of 5,175 MW.
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INTIAL PUBLIC OFFERING IN INDIA The current total generation capacity of the company is 5,134.2 MW, taking into account total installed capacity of of the Loktak and Tanakpur power stations (combined capacity of 1,520 MW) constructed and operated through its subsidiary NHDC. The company’s power stations and hydroelectric projects are located predominantly in the North and North East of India. In FY09 the company and its subsidiary sold 14,587.88 MUs and 2,345.01 MUs of electricity, respectively. Currently the company is involved in the construction of 11hydroelectric projects, which are expected to increase its total installed capacity by 4,622 MW. The company is also awaiting the government approval of five projects with an anticipated capacity of 4,565 MW and for certain joint venture projects within anticipated capacity of 2,166 MW.

NHPC is one of the largest hydro power generator in India account to 14% of total hydro capacity in India.

150bps increase in ROE from 14% to 15.5% under new CERC norms for FY2009-14. The Government has estimated the total investment potential of the sector at Rs 9,000 bn for a specified period up to fiscal year 2011.

NHPC has strong operating efficiency as reflected in average capacity index of 93.61% for 2008-09.

Being a mini ratna the company can enter into greater autonomy to undertake new projects without GoI approval subject to investment ceiling of Rs 500 cr.

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INTIAL PUBLIC OFFERING IN INDIA NHPC has got into long term power purchase agreements for major portion of capacity under construction.

NHPC has strong in-house design and engineering team.

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INTIAL PUBLIC OFFERING IN INDIA

IPO SCAM
IPO SCAMS – OVERVIEW

IPO Scams are well structured game played by the absolute opportunists consisting of intermediaries, financiers and bank

employees, who make a lot of money by controlling shares\ meant for retail investors in Initial Public Offer (IPO), as the per the statement of th In the last few years, the capital market in India went through a rapid transformation. The increased use of information technology and the integration of financial markets have stepped up the risk profile of the cap

The two major IPO scams in the Indian Capital market were the Harshad Mehta scam in the year 1992 and the Ketan Parekh scam in loopholes in the Indian capital the Securities Exchange Board of India. capital market. 2001. The IPO Scams opened up the latent market.

IPO SCAMS - CAUSES • Two of the most common factors of the major IPO scams in India were the tacit consent of the banks and the poor surveillance techniques. • The Depository Participants must be provided the proof of identity and proof of address as a routine check for the opening Demat accounts. This was not followed. • Numerous dematerialized accounts and bank accounts had been opened under false names and the IPO applications were made in non existing names.

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INTIAL PUBLIC OFFERING IN INDIA IPO SCAMS - HOW IT WAS DONE

At first bank accounts were opened up "benami" names, which allowed these fictitious account holders to open demat accounts. The master account holders, the person who had executed the planning acts as an intermediary on behalf of the financiers. The shares acquired at the of listing at a premium to get more than the amount of money invested. Investing in fictitious or IPO’s were disposed on the date The banks played an important part by means of opening bank accounts and giving loans to the fictitious entities for the purpose of earning fee incomes. IPO’s are the key stone in the financial structure of the venture industries. But the recent paucity of IPO’s has caused alarm for the venture industry & has intensified a continuing shakeout among the venture capitalist firms. It is good times ahead for early bird investors. If the current government has its way, we might go from a complete death Of IPO’s & follow on issues market with the government both in listed and unlisted space the numbers are staggering. Dalal Street likes noise & India could stand apart with some very good paper hitting the market but the most important will be what this move does for the government. The performance of Indian government goes ahead with reform plan. to a flood of new paper hitting the being a large owner of equities market depends upon a lot how the SEBI has agreed to dispose of pending proceedings against Mr Gautam Zhaveri for his involvement in the IPO scam of 2003 04, following settlement of the Mr Zhaveri, who applied for the consent order, paid Rs 2.7 crores towards settlement, including a disgorgement amount of Rs 2.36 crores, settlement charges of Rs 23.6 lakh, compounding charges of Rs 9 lakh and legal charges of lakh. The applicant (Zhaveri) had been proceeded against for irregular dealings in shares issued through IPOs, and for
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INTIAL PUBLIC OFFERING IN INDIA cornering shares meant for retail investors, making unlawful profits from the shares upon their listing. Case through a consent order. 2003- Rs 1 SEBI had banned the apply market; initiated adjudication proceedings against him, prosecution proceedings in the ACMM court in Mumbai under the Companies Act; and a protest petition before the CBI court for non-filing of charge sheet against the SEBI’s consent order disposes of all these pending proceedings. SEBI will file an application for withdrawal of its protest application at the CBI special court, and shall not oppose compounding of prosecution in the ACMM court, the Regulator said in its consent order. SEBI said it would also drop proceedings against Pratik Stock Vision Pvt Ltd in the matter of carry forward transactions in the shares of Global Tele applicant offered to settle the case, offering Rs 1.25 towards settlement charges applicant from dealing in the securities applicant. Tele-systems Ltd in 2000 charges.

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INTIAL PUBLIC OFFERING IN INDIA

SURVEY ANALYSIS
1. What is your age?

25 years and below

25-40 years

40-60 years

Retired

PARTICULARS 25 years and below 25-40 years 40-60 years Retired Total

RESPONSE 11 16 12 11 50

Below 25 25-40 40-60 Above 60

Out of the responded most of them almost 32% of them were from 25 25-40 age group. Fewer almost 22% were there from age group of below 25 22% and above 65 years almost on retirement age.
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INTIAL PUBLIC OFFERING IN INDIA 2. Which is your preferred area of investment?

Share /equity

Gold

Real estate

Mutual funds

Banks

Other

PARTICULARS Share Gold Real estate Mutual Funds Banks Other Total

RESPONSE 8 11 10 6 12 3 50

Share Gold Real Estate Mutual Funds Banks Others

Most of the responded around 24% were preferring in traditional 24% investment avenue of banks and gold and fewer in share market

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INTIAL PUBLIC OFFERING IN INDIA 3. Do you invest in Equity shares?

PARTICULARS YES NO total

RESPONSE 40 10 50

No

No, 20%

Yes

Yes, 80%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

From the survey conducted of 50 people, about 80% of them invest in Equity shares. So there is a huge market available for targeting those 80% where the products available

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INTIAL PUBLIC OFFERING IN INDIA 4. For what term you invest your money?

PARTICULARS Less than 1 year 2-5 year More than 5 year total

RESPONSE 27 14 9 50

More than 5 years

18%

2 - 5 years

27%

Less than 1 yes

55%

0%

10%

20%

30%

40%

50%

60%

When asked about their investment period, 55% people invest for less than 1 year and 27% of them invest for 2 – 5 yrs, which means majority of them invest for a short term period and only 18% invest for a long term i.e., more than 5 yrs.

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INTIAL PUBLIC OFFERING IN INDIA 5. Approximately how much is your portfolio worth?

More than 10 lacs

14%

5 - 10 lacs

20%

2 - 5 lacs

25%

Less than 2 lacs

41% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

PARTICULARS LESS THAN 2 LACS 2-5 LACS 5 TO 10 LACS MORE THAN 10 LACS total

RESPONSE 20 13 10 7 50

As the response from the survey states that 41% holds less than 2 Lacs portfolio and only 14% shows more than 10 lacs portfolio which shows people are cautious about their investment in stock market considering the risk and volatility it has.

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6. How can you describe your equity investment experience?

Limited

Moderate

Extensive

Particulars Limited Moderate Extensive Total

Response 15 24 11 50

Limited Moderate Extensive

Out of the surveyed almost 50% responded had moderate experience in stock market.30% of them had limited experience in stock market. .30%
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INTIAL PUBLIC OFFERING IN INDIA 7. How much time do you give to Investment options & related reading every day?

Particulars LESS THAN 10 MINUTES 10-30 30-60 MORE THAN 1 HOUR TOTAL

Response 20 15 9 6 50

More than 1 hour

12%

30 - 60 mins

18%

10 - 30 mins

30%

Less than 10 mins

40%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Generally people spend less than 10 minutes on stock reading, may be because they are not trader or having other business to do. 12% of responded spend more than 1 hour which indicate they might be regular investor in market.

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INTIAL PUBLIC OFFERING IN INDIA . 8. Do you know about IPO?

Yes

No

PARTICULARS

RESPONSE

Yes

23

No

27

Total

50

Yes No

Almost 46% responded knows about IPO and rest have no idea.

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INTIAL PUBLIC OFFERING IN INDIA 9. From where you got the knowledge of IPO and other investment options?

PARTICULARS WEBSITES BROKER STUDY MARKET OTHERS TOTAL

RESPONSE 7 15 8 17 3 50

Others Market Study Broker Websites 0%

5% 35% 16% 29% 15% 5% 10% 15% 20% 25% 30% 35% 40%

Information investor and trader generally obtain from market about equity as 35% from surveys indicate it. 29% get news and information from their own broker. Rest of them gets information from websites, study and other sources. Website may play major role in future as internet user are increasing in millions per year in India
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CONCLUSION & RECOMMENDATIONS
CONCLUSION: The Indian initial public offer (IPO) market has always had more than its fair share of doomsayers Right from the Maruti issue, which pundits decried as being overpriced, to the ONGC and TCS issues, where the huge sizes of the offerings drew predictions of calamitous effects on the secondary markets, the opinions of the “experts” have proved to be wide off the mark. Not only did the mega issues sail through, but the secondary markets proved to be far more resilient than anybody had anticipated. The data show that as much as Rs. 2033.99 Crores has been raised from the primary market in the current calendar year, making it obvious that the Indian investor has far more appetite for equities than most people realize. Most of the money has been raised by big companies with a long-term track record. A substantial number of issues—barring that of TCS—also happened during the early part of the year, before the markets got the shivers. The heavy oversubscriptions in many cases can also be traced to the availability of bank finance for IPO investment. Nevertheless, there is no denying the enormous interest retail and other investors have shown in the primary market, perhaps even more so than in the secondary one. This interest has been sustained despite the lack of bounce in the secondary market and is not confined to the big issues; even smaller issues have sailed through with large oversubscriptions.

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INTIAL PUBLIC OFFERING IN INDIA If investors are gung-ho about IPO’s, there are several reasons for it. Unlike earlier IPO booms, this one is being driven by a much better quality of offering. Missing in action so far are the fly-by-night operators of the 1990s who made public offers only to collect the money and vanish. Next, most recent IPO’s have resulted in gains on listing for the investor. The listing gains have probably initiated a kind of virtuous cycle, tempting investors who have already made money to return to the primary market.

There is also reason to believe that companies are pricing their issues less aggressively this time, either due to general concerns about a volatile market, or because of a deliberate effort to leave something on the table for all investors. DQ Entertainment (International) Ltd and NMDC Limited are lining up issues. Even mutual funds have got into the act, and are tailoring their offerings to match current market fancies— mid-cap funds, dividend yield funds, and what-have-you. If the government wants to get some money into its kitty through disinvestment programmers, this is the time to make a dash for it

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INTIAL PUBLIC OFFERING IN INDIA RECOMMENDATIONS: After making the project, I would like to say SEBI is playing very important role in regulating the risk and financial aspects of the investors. Also the DIP guideline is framed in such a manner, which can be understood by any individual. Overall the process and the various intermediaries, which are involved in IPOs or initial public offering, are doing very important task. I found the following points very important from the investor point of view while doing this project: • The IPOs should be consumer friendly: Any investor should be able to analyze the IPO in its simplest form and should be able to understand of whether to apply for it or not. • IPOs should be graded which is already started. But I think such kind of grading is not enough because it doesn’t give enough information about the company; it only says what the level of grade that a company deserves is. • I would suggest shortening the time between application and allocation or listing. We know SEBI and other intermediaries has done great job in doing so in the past, but looking at the current scenario we think it’s very important to do so. This would help investor in investing the same money in other IPOs if he is not allotted shares in that particular company.

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INTIAL PUBLIC OFFERING IN INDIA BIBLIOGRAPHY:

BOOKS AND MAGAZINE:-

Indian Capital Markets Financial management –Prasanna Chandra Ncfm module: financial market’s Initial public offerings- richard p. Kleeburg Dalal street journal’s “stock market book Ipo-conepts and experience-arindam banerjee Ipo markets-prospectives and experience-vandana shajan

WEBSITES:-

www.business.mapsofindia.com/ipo-india/ www.moneycontrol.com www.domain-b.com www.sebi.gov.in www.investopedia.com www.chittorgarh.com/ipo/

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REFERENCE
PADMASHREE DR. D.Y.PATIL UNIVERSITY DEPARTMENT OF BUSINESS MANAGEMENT.

“A survey on people preferences about Investment & IPO”

This research is being done for academic purpose only. All the information provided shall be kept confidential.

Name:

1. What is your age?

25 years and below 40-60 years

25-40 years Retired

2. Which is your preferred area of investment?

Share /equity Mutual funds

Gold Banks

Real estate Other

3. Do you invest in Equity shares?

Yes

No

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4. For what term you invest your money? Less than 1 year 1-5 year For more than 5 year 5. Approximately how much is your portfolio worth? Less than 2 lacs 5-10 lacs 2-5 lacs more than 10 lacs

6. How can you describe your equity investment experience 7. Limited Moderate Extensive

7. How much time do you give to Investment options & related reading every day? less than 10 minutes 30-60 minutes 10-30 minutes more than 60 minutes

8. Do you know about IPO? Yes No

9. From where you got the knowledge of IPO and other investment options? Websites ` Broker Study Market Other
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