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Sahil finance project

BBA (Savitribai Phule Pune University)

Studocu is not sponsored or endorsed by any college or university

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A
PROJECT REPORT
ON
“STUDY OF IPO’S RECENTLY LISTED ON STOCK MARKET”
SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY
IN PARTIAL FULFILMENT OF THE COURSE
BACHELOR OF BUSINESS ADMINISTRATION
BY
(SAHIL SUDHIR SHELAR)
SEAT NO:
B.B.A. Sem-V

UNDER THE GUIDANCE OF PROJECT GUIDE

Asst. Prof. Snehal H. Borkar

MARATHAWADA MITRA MANDAL’s COLLEGE OF

COMMERCE
202/A, DECCAN GYMKHANA, PUNE-411004
YEAR 2022-23

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MARATHWADA MITRA MANDAL’S COLLEGE OF COMMERCE

202 A, Deccan Gymkhana, Pune – 411004.

DEPARTMENT OF BUSINESS ADMINISTRATION

CERTIFICATE

This is to certify that the project entitled (STUDY OF IPO’S

RECENTLY LISTED ON STOCK MARKET) is being submitted by (SAHIL
SUDHIR SHELAR) in partial fulfillment for the degree of Bachelor of Business
Administration (TYBBA) under the guidance of (Asst. Prof. Snehal H. Borkar).
As per syllabus laid down by the Savitribai Phule Pune University during academic
year 2022-23.

Date:- 11/05/2023

Exam Seat No.:-

Internal Examiner External Examiner

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DECLARATION
This is to certify that the project-work titled “STUDY OF IPO’S
RECENTLY LISTED ON STOCK MARKET” has been completed
satisfactorily and submitted in partial fulfilment of Bachelor Degree in
Business Administration of Savitribai Phule Pune University for the
academic year 2022-2023 by the following student of MARATHAWADA
MITRA MANDAL’s COLLEGE OF COMMERCE, PUNE 411004.
My intention to understanding this project lies towards enhancing my
knowledge in the field of (Analysis of financial statements)

PROJECT GUIDE HOD PRINCIPAL

Asst. Prof. Snehal Borkar Dr. Ashwini Kulkarni Dr. Devidas Golhar

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ACKNOWLEDGEMENT

I would like to express my sincere thanks to the Savitribai Phule Pune

University and Principal- Dr DEVIDAS GOLHAR, Head of Department-
Dr. Ashwini Kulkarni, and Marathwada Mitra Mandal’s college of
Commerce for giving me the opportunity to prepare and present this report.
“There is a good saying that the work is successfully completed if the person
is guided properly at the right time by the right person”, with that the good
opportunities that we receive as well as the efficient supervision and the
most valuable the internal guidance.
Hereby, I would like to express my deep gratitude towards our ‘Asst. Prof.
SNEHAL BORKAR, who helped and guide me in project work. Her
encouragement and whole-hearted co-operation throughout the progress
helped me in completion of project.
Last but not the least I would like to thank my family and friends for their
encouragement and direct or indirect support in completion of the project.

(SAHIL SUDHIR SHELAR)

TYBBA (Financial Management)

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INDEX
SR.No CONTENTS Page No.

1 Introduction 06-24

2 Objectives 25

3 Scope of the Study 26

4 Limitation 27

5 Research Methodology 27

6 Data Analysis and Interpretation 27-32

7 Nexus Select Trust (NST) 33-40

8 Conclusion 40-41

9 Suggestion 41

10 Reference 41

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STUDY OF IPO’S RECENTLY LISTED ON STOCK

MARKET

INTRODUCTION
The word IPO is very much often used in the issues of shares by the companies
when they want to go for public for the huge amount of investment into the
purpose of the company for achieving the desired objectives.

The word IPO stands for Initial Public Offer and this is unique in more ways than
one since it permanently changes the profile of a company and the way the

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promoters and the management need to think thereafter. The responsibility of

living up to the expectation of the market and shareholders is a mammoth task.
Given the fact that there is always a temptation for companies to look at the
primary market as a source of finance through IPO route, the regulator SEBI has
evolved an IPO code in the form of the SEBI (Disclosure and Investor Protection)
guidelines. SEBI has also brought in several structural improvements in the way
the public offers are made in the primary market.

History of IPOs
The concept and practice of publicly trading shares and having IPOs is hundreds of
years old. The first modern IPO is likely to have occurred in the early 1600s with
shares in the Dutch East India Company that were offered to residents of the
Netherlands. In the U.S. an IPO, and the ability to trade shares in a company
publicly, is an idea that is almost as old as the country itself. The NYSE traces its
roots back to 1792, with the first U.S. IPOs including the Bank of New York and
the First Bank of the United States.

In the 20th century, the stock exchanges grew alongside the emergence of different
communications technologies. These include the stock ticker telegraph (also
known as a ticker tape), telephone and the internet.

In the technology space, IBM was publicly traded in 1911, when the company was
producing business machines, such as a typewriters and scales. The 1980s was a
particularly noteworthy period for technology IPOs, with many industry stalwarts
going public. In March 1986, Microsoft went public with IPO share prices of $21.
In the same month, Oracle went public at an initial price of $15 a share.

The dot-com bubble era of the late 1990s also led to an explosion of technology
IPOs. This included Amazon in May 1997 and eBay in September 1998, with both
companies initially trading at $18 a share. The dot-com era also led to numerous
large IPOs for companies that ultimately failed, including Pets.com, which had its
IPO in February 2000 and ended up ceasing operations in November of the same
year.

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In the 2020s, one of the largest software IPOs was with cloud data platform
Snowflake's public offering in September 2020, in which the company raised over
$3 billion.

The volume of IPOs in any given period can and will fluctuate for a number of
different reasons. In times of overall economic growth, there tend to be more IPOs
as investors tend to be more optimistic and willing to participate. The inverse is
often true with times of high inflation, slow economic growth or other factors
influencing macro-economic stability and tempering investor sentiment toward
IPOs.

WHAT IS AN IPO?

An initial public offering, or IPO, is the first sale of stock by a company to the
public. A company can raise money by issuing either debt or equity if the company
has never issued equity to the public, it's known as an IPO.

Companies fall into two broad categories: private and public.

A privately held company has fewer shareholders and its owners don't have to
disclose much information about the company. Anybody can go out and

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incorporate a company: just put in some money, file the right legal documents and
follow the reporting rules of your jurisdiction. Most small businesses are privately
held. But large companies can be private too. Did you know that IKEA, Domino's
Pizza and Hallmark Cards are all privately held?

It usually isn't possible to buy shares in a private company. You can approach the
owners about investing but they're not obligated to sell you anything. Public
companies, on the other hand, have sold at least a portion of themselves to the
public and trade on a stock exchange. This is why doing an IPO is also referred to
as "going public."

Public companies have thousands of shareholders and are subject to strict rules and
regulations. They must have a board of directors and they must report financial
information every quarter. In the United States, public companies report to
the Securities and Exchange Commission (SEC). In other countries, public
companies are overseen by governing bodies similar to the SEC. From an
investor's standpoint, the most exciting thing about a public company is that the
stock is traded in the open market, like any other commodity. If you have the cash,
you can invest. The CEO could hate your guts, but there's nothing he or she could
do to stop you from buying stock.

Why go Public
Going public raises cash, and usually a lot of it. Being publicly traded also opens
many financial doors:

 Because of the increased scrutiny, public companies can usually get better
rates when they issue debt.

 As long as there is market demand, a public company can always issue more
stock. Thus, mergers and acquisitions are easier to do because stock can be
issued as part of the deal.

 Trading in the open markets means liquidity. This makes it possible to

implement things like employee stock ownership plans, which help to attract
top talent.

Being on a major stock exchange carries a considerable amount of prestige. In the

past, only private companies with strong fundamentals could qualify for an IPO

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and it wasn't easy to get listed.

The internet boom changed all this. Firms no longer needed strong financials and a
solid history to go public. Instead, IPO’s were done by smaller startups seeking to
expand their businesses. There's nothing wrong with wanting to expand, but most
of these firms had never made a profit and didn't plan on being profitable any time
soon. Founded on venture capital funding, they spent like Texans trying to
generate enough excitement to make it to the market before burning through all
their cash. In cases like this, companies might be suspected of doing an IPO just to
make the founders rich. This is known as an exit strategy, implying that there's no
desire to stick around and create value for shareholders. The IPO then becomes the
end of the road rather than the beginning.

Significance of an IPO

As the facts mentioned in the above paragraph bring us to the discussion on

whether the IPO decision is purely market driven or not. Before we discuss the
determinants of the IPO decision, it is imperative to understand the significance of
an IPO and what it does to the company.

Every company when it is unlisted offers an ownership or equity opportunity to an

outside investor which, for the purpose of discussion, has been termed as the
“private window”. The private window also does not provide any price validation
for the company’s unlisted stock, which has to be derived from time to time
through complex valuation methodologies.

When a company makes an IPO, what it actually creates is second ownership

opportunity that can be termed as ‘market window’, unlike the private window,
provides any time entry and exit facility to investors from the company’s equity
capital. Therefore, it is meant either for the retail investors who would wish to have
instant liquidity for their investments or for speculators who intend to make profits
through regular trading in the company’s stock. Being a continuous evaluation
mechanism, the market window is market driven- it can be overheated at times or
be completely indifferent to the company’s fundamentals. During times of frenetic
market activity, the market window may over value a company’s share while in
dull phases; the market price can be extremely low. Due to this phenomenon,
though empirically speaking, the market price tends to conform to the trends in the

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intrinsic worth of a share in the long term, at any given point of time, it represents
the instant entry or exit price for an investor.

A strategic investor would be prepared to pay an entry premium for the company’s
share, which may result in the company’s share being valued at much more than its
current market price. The premium that a strategic investor would want to pay is
arrived at based on long-term
term considerations that have more of a business
perspective than a pure financial perspective.

Lastly, financial investors may just want the company to make an IPO and open up
the market window which can be used by them from time to time to make
m gradual
sale of their holdings at the best available market prices.

This brings us to the discussion on how exactly an IPO should be perceived. Since
an IPO is a significant milestone in the life of a company, it could have several
implications such as the following mentione below:

Implications

 It can be a source of finance if it is meant to finance a specified use.

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 It creates a new ownership opportunity called the market window and a class
of investors called the ‘retail investors’.

 It can be liquidity event since it creates an exit route for the existing and
future investors of company

 It creates market capitalization for the company, which is the aggregate

value of all its issued shares as multiplied by the current market price.

 Being listed can open up the gates for hostile takeover attempts on the
company

 It makes future acquisition of stakes in the company by the promoters quite

expensive and cumbersome.

 It brings with it additional costs of regulatory compliance, certain

restrictions on future capital transactions and cumbersome procedures.

From the above implications, it is quite evident that an IPO can act as a double
edged sword. So in good times it enhances share holder wealth but in difficult
times, listed status can become a hindrance and a drag on the company’s
performance and prospects.

The IPO Decision

The IPO decision is depends on the following two stages the pre IPO stage and the
post IPO stage. The pre IPO stage relates to the timing of an IPO decision, while
the post IPO stage is about continuance or discontinuance of the listed status.

Timing of an IPO is a strategic, financial and merchant banking decision. The

strategic decision is to determine whether listing fits into the company’s overall
strategy and if so, whether the company is mature enough for it.

The financial decision to make is to decide whether a company needs the capital
proposed to be raised, how much is to be raised and how effectively it should be
deployed. The merchant banking decision is made to determine the appropriate
structure, pricing, timing and marketing strategy for the IPO.

Strategically speaking a company should go for an IPO only when it is mature

enough for it. This depends on the following points:

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 Does the company need the IPO as a liquidity event for its existing
investors? In other words, are there no private exit options available so that
the IPO can be pushed further into the future?

 Has the company matured enough to unlock the value?

 Is the company’s business model retail-oriented with a strong brand

presence so as to identify with the retail investor?

 Is the company’s visibility in the market is sufficient enough for investors to

perceive its business model to the full extent and unlock value for its share
holders through the IPO?

 Is the company confident of strong financial growth in the future so as to

sustain the pressure of constant market validation after the IPO?

Important Aspects of an IPO

It has been evident that an IPO can be made for listing a company either by a
public issue, i.e. an offer of fresh shares to the public or through an offer for sale
by the existing share holders of the company to the public. Before going to the
various aspects of the IPO in particular, it is important to know the some key terms
that are used in merchant banking parlance and their definitions.

Key Concepts:

IPO- Initial Public Offer is the first public issue of fresh equity or convertibles by a
company due to which its share gets listed on the stock exchange.

Public Issue - An invitation by a company to public to subscribe to the securities

offered through a prospectus.

Offer for sale- An offer of securities by the existing share holders to the public for
subscription.

Rights Issue - An issue of cap ital under sub-section (1) of sec 81 of the companies
Act, 1956 to be offered to the existing shareholders of the company through a letter
of offer.

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Preferential Allotment- An issue of capital made by a body corporate in pursuance

of a resolution passed under sub-sec (1A) of sec 81 of the companies Act, 1956.

Private Placement- An offer made to select private investors known to the issuer
through a private arrangement to the exclusion of the general public.

Lock-in- A specified time period during which shares are cannot be sold,
transferred and pledged in any way.

QIBs- Qualified Institutional Buyers shall mean public financial institutions as

defined under sec 4A of companies Act, scheduled commercial banks, mutual
funds, foreign institutional investors registered with SEBI, venture capital funds
and insurance companies registered with SEBI, provident funds and pension funds
with a minimum corpus of Rs. 25 crore and state industrial development corps.

Issue Pricing

The Securities and Exchange Board of India (SEBI) introduced free pricing of
shares for public offerings in 1992. As per the current guide lines (Disclosure and
Investor Protection guide lines 2000), every company either unlisted or listed,
which is eligible to make a public issue can freely price its shares.

The first step in formulating an issue structure is pricing of the issue. This is one
important thing done by the merchant banker in public offering. Appropriate price
can not only ensure success of the issue but pro vide good returns to the
prospective investors as well. Therefore, proper issue pricing can be a win-win
situation for the company and investor as well.

The merchant banker usually arrives at an approximate pricing for the issue and
tries to carry the management of the company with him on the pricing. Over
pricing an issue is an over kill that should be avoided even if it results in short term
gain for the issuer and the merchant banker. At the same time the price should
provide reasonable returns to existing investors in a company who wish to make an
exit in the issue. Therefore issue pricing is considered a trade off between
immediate gains long-term returns to the issuing company and its promoters.

Pricing issue is done keeping in mind the qualitative features, and by using
selective multiples as benchmarks than through the conventional approach of the

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discounted cash flow method. The usual parameters used are the Pric to Earning
Ratio and Price to Book value Ratio. In addition to the above, the following points
have to be kept in mind:

 Projected earnings of the company cannot be used as a justification for the

issue price in the offer document.

 The accounting ratios should be calculated after giving effect to the

consequent increase in capital on account of compulsory conversions
outstanding, as well to subscribe for additional capital shall be exercised.

 Comparison of all the accounting ratios of the issuer company as mentioned

above has to be made with the industry average and with the other
companies.

Capital Structuring

The capital structure of the company post-issue has to be structured so as to reflect

the desirable position for the company and for the marketability of the issue as
well. The starting point for this exercise is the pre-issue capital structure. The
following steps have to be followed in this regard in the case of 100% retail issue.

1. Taking into consideration the issue size and proposed pricing, the total
number of new shares to be issued is determined.

2. Based on the pre-issue paid-up capital and the number of new shares
determined under step1, the total issued and paid up post-issue capital is
arrived at.

3. The post-issue paid up capital is superimposed over the pre-issue capital

structure to determine the post-issue capital structure.

4. The individual shareholder components in the post-issue capital are

examined for regulatory compliance under the companies Act, DIP guide
lines, the securities (contract) regulation Act, foreign exchange management
Act and the listing agreement of the stock exchange.

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5. The merchant banker has to be satisfied on the capital structure from the
marketability aspect as well. Otherwise suitable changes are made with in
the permissible statutory parameters.

Issue Structuring

The issue structure refers to the following points

 The face value of the share, the premium thereon and the final price. In book
built issues, the final price is not done until after the bidding is over, but a
floor price is determined.

 The minimum amount of subscription per applicant and the maximum.

 The terms of the issue with regard to payment of the offer price and
eligibility criteria for applicants.

 Firm allotments if any and any other details thereof, as per applicable DIP
guide lines.

 Net public offer.

 Underwriting, either mandatory or discretionary.

 Cost parameters for the issue and an acceptable issue budget.

The issue size and structure is determined as follows:

 The issue size = ‘promoters’ quota+ firm allotments + net public offer.

 Public offer = firm allotments + net public offer.

 Net public offer = issue size – promoters quota – firm allotment.

Differential Pricing and Price Band

 Any unlisted company making an IPO for equity shares or convertibles may
issue such securities to applicants in the firm allotment category at a price
different from the price at which net offer to the public is made provided that
the price at which the security is offered to the applicant is higher than the
price to the public issue made.

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 A justification has to be furnished in the offer document on the price

differential for the firm allotment category.

 The issuer company can mention a price band of 20 %( the cap should not be
more than the floor by 20%) in the offer documents filed with SEBI and the
actual price can be determined at a later date before filing the offer
document with the ROC.

Other Important Issue Requirements

 All new issues shall be in dematerialized form can also be made through
online interface following the necessary guide lines.

 The minimum application size shall be worth Rs. 2000. The maximum size
of an application can be equal to the net public offer.

 In an offer for sale, the entire subscription amount shall be brought in at the
time of application.

 If there are calls on shares, they should be completed with in 12 months of

the issue.

 Over-subscription of a maximum of 10% of the net offer to public can be

retained.

 Buy back arrangements can be made with a minimum period of 6 months

and for a maximum of 1000 shares per allottee.

 Issues should be opened within 365 days from the date of SEBI approval or
after 21 days of filing with SEBI.

 IPO shall be kept open for a min of 3 days and max of 10 working days.

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IPO Process Steps:

Step 1: Hiring Of an Underwriter or Investment Bank

To start the initial public offering process, the company will take the help of
financial experts, like investment banks. The underwriters assure the company
about the capital being raised and act as intermediaries between the company and
its investors. The experts will also study the crucial financial parameters of the
company and sign an underwriting agreement. The underwriting agreement will
usually have the following components:

 Details of the deal

 Amount to be raised

 Details of securities being issued

Step 2: Registration For IPO

This IPO step involves the preparation of a registration statement along with the
draft prospectus, also known as Red Herring Prospectus (RHP). Submission of
RHP is mandatory, as per the Companies Act. This document comprises all the
compulsory disclosures as per the SEBI and Companies Act. Here’s a look at the
key components of RHP:

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 Definitions: It contains the definitions of the industry-specific terms.

 Risk Factors: This section discloses the possibilities that could impact a
company’s finances.

 Use of Proceeds: This section discloses how the money raised from investors
will be used.

 Industry Description: This section details the working of the company in the
overall industry segment. For instance, if the company belongs to the IT
segment, the section will provide forecasts and predictions about the
segment.

 Business Description: This section will detail the core business activities of
the company.

 Management: This section provides information about key management

personnel.

 Financial Description: This section comprises financial statements along

with the auditor's report.

 Legal and Other Information: This section details the litigation against the
company along with miscellaneous information.

This document has to be submitted to the registrar of companies, three days before
the offer opens to the public for bidding. Alongside, the submitted registration
statement has to be compliant with the SEC rules. Post-submission, the company
can make an application for an IPO to SEBI.

Step 3: Verification by SEBI:

Market regulator, SEBI then verifies the disclosure of facts by the company. If the
application is approved, the company can announce a date for its IPO.

Step 4: Making An Application To The Stock Exchange

The company now has to make an application to the stock exchange for floating its
initial issue.

Step 5: Creating a Buzz By Roadshows

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Before an IPO opens to the public, the company endeavors to create a buzz in the
market by roadshows. Over a period of two weeks, the executives and staff of the
company will advertise the impending IPO across the country. This is basically a
marketing and advertising tactic to attract potential investors. The key highlights of
the company are shared with various people, including business analysts and fund
managers. The executives adopt various user-friendly measures, like Question and
Answer sessions, multimedia presentations, group meetings, online virtual
roadshows, and so on.

Step 6: Pricing of IPO

The company can now initiate pricing of IPO either through Fixed Price IPO or by
Book Binding Offering. In the case of Fixed Price Offering, the price of the
company’s stocks is announced in advance. In the event of Book Binding Offering,
a price range of 20% is announced, following which investors can place their bids
within the price bracket. For the bidding process, the investors have to place their
bids as per the company’s quoted Lot price, which is the minimum number of
shares to be purchased. Alongside, the company also provides for IPO Floor Price,
which is the minimum bid price and IPO Cap Price, which is the highest bidding
price. The booking is typically open from three to five working days and investors
can avail the opportunity of revising their bids within the stipulated time. After
completion of the bidding process, the company will determine the Cut-Off price,
which is the final price at which the issue will be sold.

Step 7: Allotment of Shares

Once the IPO price is finalised, the company along with the underwriters will
determine the number of shares to be allotted to each investor. In the case of over-
subscription, partial allotments will be made. The IPO stocks are usually allotted to
the bidders within 10 working days of the last bidding date.

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What Is a Hot IPO?

The first time a company issues shares to the general public through a stock
exchange is known as an initial public offering (IPO). One or many investment
banks can act as underwriters for such an offering. The objective of an IPO is to
raise capital for the issuing company’s growth, while also offering an exit route for
existing shareholders.

An Initial public Offering with significant demand is known as a hot IPO. These
IPOs are popular even before meeting the market, generating immense interest
from investors and media. This surrounding hype and attention generally impact
the stock price positively, once the company goes public. Hot IPOs can be tricky to
invest in, particularly for those companies that do not have a proven success
record.

How hot IPOs work

When a company is first formed, it is owned by a single person or a distinct group

of people. One way for private companies to raise money is to ‘go public’ through
an IPO. They can raise a fair amount of money in a short time, especially if the
issue gets public attention and becomes a hot IPO. IPOs allow private companies

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to harness the public demand for their stock. The proceeds may be used to repay
debt, finance expansion, or invest money for future growth.

The first step is to find at least one investment bank to analyze the prospects for a
successful IPO of the company's stock, of which, one or more investment banks
will act as underwriters for the proposed issue. The underwriter helps the company
set the price per share. They even acquire some shares to offer to either
institutional investors or individual investors, at their discretion. Another term one
comes across is ‘underwriting spread’. This is nothing but a commission or a fee
on the proceeds of the sale that the bank charges.

Increased demand for stock during a hot IPO, often results in a sharp rise in stock
prices, soon after it begins trading. This steep price rise is generally considered
unsustainable, with an impending price decline that can have a significant impact
on the market itself.

Sharp price moves can affect initial shareholders after trading opens on the
secondary market. Underwriters may give preferential treatment to high-value
clients when offering shares in a hot IPO, so they bear some risk if they overprice
the stock.

Rapid price fluctuations after a trade opens can impact early shareholders in the
secondary market. Underwriters may distribute risk, by giving preference to high-
value clients when offering shares in a hot IPO.

Example of a hot IPO

Facebook’s (now, Meta) initial public offering is a classic example of a hot IPO.
The issue sought to raise about $10.6 billion by selling more than 337 million
shares at $28 to $35 per share. Analysts predicted an oversubscribed IPO.

When the market opened on May 18, 2012, investor interest showed that demand
for company stock was higher than supply. To meet investor demand and make the
most of the oversubscribed issue, Facebook increased the number of shares to 421
million. Additionally, it also raised the price range from $34 to $38 per share.

Facebook increased both — stock supply and price — to meet demand and to
effectively reduce oversubscription. However, the stocks plummeted in the first

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four months of the deal. The stock failed to trade above its IPO price until July 31,
2013.

Reasons for launching hot IPOs

Companies issue an IPO to raise equity capital in a short period, allowing early
investors to cash out. Most of the money raised for that stock allows companies to
fund their business’s growth and cover their existing obligations.

The process of setting up an IPO comes with tremendous regulatory compliance.

All information is disclosed to potential investors through a prospectus. Many IPO
issuing companies are in a nascent stage — small, and probably risky — but
generate strong interest because of their market position. Internally generated funds
are deemed inadequate to enable growth, and therefore an infusion of cash from an
external source becomes the only viable option.

What is FPO?

Every business activity requires funds to execute the ideas successfully and
achieve predetermined financial goals. If a company wants to develop a new
product, it needs capital for R&D, manufacturing and marketing. The same need
for capital goes towards expansion, which is seen as the fundamental factor in
increasing a company’s profitability. However, as the company grows bigger and
aims towards better profitability, the need for capital rises immensely. Almost all
companies try to avoid taking loans from financial institutions as higher debt can
reflect negatively on a company’s balance sheet.

In such a case, where companies want to raise funds without borrowing, they look
towards an Initial Public Offering. IPO is a means for the company to get listed on
the stock exchange and allow its shares to be traded on the exchange. When a
company offers its equity to the public for the first time, it is called "Initial Public
Offering (IPO)".

However, what happens when the company wants to raise more capital after a few
years of an IPO? That is where they leverage a capital raising process called
Follow-on Public Offer (FPO).

Know more about FPO?

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FPO, also called a Follow-up public offering, is the process through which a
company issues new shares to the investors after it has already been listed on the
stock exchange through an Initial Public Offer. The FPO is a direct follow-up to an
IPO and allows companies to raise fresh capital after having already raised funds in
the past through the IPO.

An FPO is carried out to raise additional capital and reduce any existing debt that
the company needs to pay off. The process for carrying out an FPO is similar to
that of an IPO. However, the FPO process is more cost-effective when compared to
an IPO.

Types of FPO

Unlike IPOs that either has a Fixed-price offering or a Book Building Offering,
FPOs are categorized into three types:

 Diluted FPO: This is the process where the company issues additional fresh
shares to the public to raise capital. It results in increasing the company’s
total outstanding shares, decreasing the Earnings Per Share (EPS).
Furthermore, a diluted FPO always reduces the company’s share price as
new investors are added as shareholders. However, the company’s value
remains the same. The funds raised through the diluted FPO are generally
used to change the company’s capital structure or reduce the outstanding
debt.

 Non-Diluted FPO: A non-diluted FPO is when the company’s largest

shareholders, such as the founders or board of directors, offer the shares they
hold privately to the general public. The process of non-diluted FPO does
not increase the number of outstanding shares that are available to the
company, but it does increase those available to the public. Unlike a diluted
IPO, this method does not increase or decrease the company’s number of
shares. Since the number of shares remains unchanged, there is no effect on
the company Earnings Per Share (EPS). Under non-diluted FPO, the cash
proceeds from the public go directly to the largest shareholders who have
offered their shares.

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 At-the-Market FPO: This allows the companies to raise funds based on the
real-time price of the shares. If the company that is issuing the fresh shares
through FPO witnesses the fall in the share price, it can pull out from
offering the shares to the public. At-the-Market FPO is also called controlled
equity distributions owing to its feature to offer shares in the secondary
market at the current market price of its shares.

Examples of FPO

Numerous companies have used the route of an FPO to raise capital after their
Initial Public Offering. Some examples of the well-known companies that have
issued FPOs in India are Tata Steel Ltd., Power Finance Corporation Ltd,
Engineers India Ltd, Power Grid Corporation of India etc. However, there have
been numerous examples where the FPO of companies failed, and the share price
fell steeply.

The success of an FPO entirely depends on factors such as the profitability of the
company, market and investor sentiments, the current market trend, growth
potential of the company etc. Furthermore, the Indian government has used the
FPO method as an effective way to disinvest its stake in government-held listed
companies. With a disinvestment target of Rs 1.75 lakh crore for the fiscal year
2021-22, the Indian government is expected to use the FPO process to achieve the
target.

Objectives
 To aware the intending investors about the procedure what has to be
followed in the issue of securities for public subscription.

 To provide them the guidelines which are to be followed by companies in an

IPO?

 To know the key terms and various stages in an IPO process.

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 About the various parties involved along with the company for making an
IPO.

 To look into the aspects of different companies which have come for an IPO
recently along with their respective strengths and weaknesses.

 To know how the shares are valued and the different methods of pricing
them in an IPO.

 To know the various parties involved in an IPO and their respective

formalities to be completed.

 To know the factors which can lead to success or failure of an IPO?

Scope of the study

In initial public offering (IPO), the companies have to look into the various aspects
like what guidelines it has to follow, the procedure for coming to public issue of
shares for the proposed objective. So the company has to fulfill various formalities
and regulations specified by the controller SEBI before coming to an IPO. Scope
of this project is limited to the guidelines and procedures for coming to an IPO
along with the factors which leads to the success or failure of an IPO of different
companies. And the scope is limited to mentioned companies which recently came
for an IPO and their strengths and weaknesses for succeeding in an IPO.

Limitations
 The project is prepared in limitation to the availability of data.

 The regulations and procedure to be followed is mentioned according to the

SEBI rules.

 Study is limited to companies which are used in analysis of an IPO

performance at the end.

 The data is limited to recent amendments which are to be followed.

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 The duties mentioned for each and every participant are in consideration to
the recommendations from SEBI.

Research Methodology
The research methodology for an Initial Public Offering (IPO) can vary depending
on the specific research questions and goals. However, some common research
methodologies used in IPO include:

Primary Data: collecting data through questionnaires or interviews with

stakeholders and publicly such as investors, industry experts, and company
management.

Secondary Data: using publicly available data sources such as financial statements,
stock market data, and news articles to gain insights into the company and its
performance.

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Data Analysis and Interpretation

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Nexus Select Trust (NST) is the owner of India's leading consumption centre
platform of high-quality assets that serve as essential consumption infrastructure
for India's growing middle class (Source: CBRE Report, by Completed Area). NST
expects to be the first publicly listed consumption centre REIT in India upon the
listing of its Units on the Stock Exchanges. Consumption growth has served as a
key driver of the Indian economy over the last decade (Source: Technopak Report),
and the trust believes its Portfolio is well-positioned to benefit from the
consumption tailwinds of India's growing middle class and rapid urbanization.

NST's Portfolio offers an attractive opportunity to capitalize on India's

consumption growth through a robust business model and diversified asset base
that can serve as a natural hedge against inflation. Its Portfolio comprises 17 best-
in-class Grade A urban consumption centres with a total Leasable Area of 9.2 msf,
two complementary hotel assets (354 keys) and three office assets (1.3 msf) as of
December 31, 2022.

NST's assets are strategically located across 14 leading cities in India, which
constituted 30% of India's total discretionary retail spending in FY20 and had an
average population CAGR that was 226 bps higher than the national average from
financial years 2011 to 2021 (Source: Technopak Report). It believes that it has
invested in among the highest quality assets in prime in-fill locations of India's
major cities such as Delhi, Navi Mumbai, Bengaluru, Pune, Hyderabad and
Chennai. These cities have limited organized retail stock and continue to witness
strong demand fundamentals as domestic and international retailers expand their

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businesses even as the future supply of retail space is expected to remain

constrained (Source: CBRE Report).

However, demand remains strong as brick-and-mortar and online retail are

expected to grow by capturing market share from unorganized retail (Source:
Technopak Report). The quality, scale and reach of NST's Pan-India Portfolio, its
superior shopping experience and its holistic retail offering have enabled it to
achieve a market-leading position, which makes most of Portfolio assets
destinations of choice for leading brands that are looking to expand in India
(Source: CBRE Report).

A majority of our Portfolio assets are market leaders in their respective submarkets
and serve as shopping, entertainment and social destinations for their respective
catchments (Source: CBRE Report, by Completed Area). As a result, NST enjoyed
a 96.2% average Committed Occupancy across the Portfolio as of December 31,
2022, and 11.0% CAGR in tenant sales from FY18 to FY20, and a 7.5% CAGR in
Marginal Rents across Portfolio from CY16 to CY19 (122 bps higher than the
average Marginal Rents for Portfolio Markets (Source: CBRE Report)).

NST owns India's largest portfolio of consumption centres and replicating a

platform of similar scale, quality and geographical diversity would be difficult due
to the limited availability of prime city centre land parcels, long development
timelines, and specialized capabilities required for developing, stabilizing and
operating comparable assets (Source: CBRE Report, by Completed Area). Its
Portfolio has a tenant base of 1,044 domestic and international brands with 2,893
stores as of December 31, 2022, and is well diversified across cities with no single
asset and tenant contributing more than 18.3% and 2.8% of its total Gross Rentals
for the month of December 31, 2022, respectively. It has curated a healthy mix of
tenants across sectors such as apparel and accessories, hypermarket, entertainment,
and food and beverages ("F&B") in order to provide a holistic shopping and
entertainment offering to consumers.

It's diversified exposure and industry-leading asset management capabilities have

conferred significant resilience to the company's Portfolio, with tenant sales in the
three months ended December 31, 2022, recovering to 128.1% of pre-COVID-19
levels as measured in the three months ended December 31, 2019. Further, it

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believes its business is well-hedged against the effects of inflation. As of

December 31, 2022, 95.5% of NST's tenant leases provide for Minimum
Guaranteed Rentals with typical contractual rent escalations of 12% to 15% over a
period of three to five years, and 88.3% of its leases contained Turnover Rental
arrangements which allow it to capitalize upon growth in tenant sales driven by
increased consumption.

Over the last three financial years and nine months, it has been able to recover
more than 80% of its operating and maintenance expenses from tenants, while
incurring significantly lower amounts of tenant improvement capital expenditure
(as a proportion of its total NOI) as compared to consumption centres in the United
States.

While its Portfolio is highly stabilized with Committed Occupancy of 96.2% and
5.7-year WALE as of December 31, 2022, its Portfolio enjoys strong embedded
growth prospects. NST is well-positioned for strong organic growth through a
combination of contractual rent escalations, increased tenant sales leading to higher
Turnover Rentals and re-leasing at higher market rents (NST estimates that Market
Rents for its properties are on average 16.1% higher than In-place Rents as of
December 31, 2022) and lease-up of vacant area. As a result, its Portfolio's total
NOI is projected to grow organically by 17.1% between FY24E and FY26E.
Further, it has a strong track record of delivering inorganic growth through
accretive acquisitions and it believes that it is well-positioned to scale inorganically
through a lowly levered balance sheet with total indebtedness expected to be less
than 20.0% of its initial market value post the utilization of the Net Proceeds from
this offering.

NST is sponsored by Blackstone (Wynford Investments Ltd.), it is managed by

Nexus Select Mall Management Pvt. Ltd. and Axis Trustee Services Ltd. is the
Trustee for the said REITs. The manager directly employs 64 personnel as of
March 31, 2023. The Manager is currently held by certain entities of the Sponsor
Group. Simultaneous with the completion of the Initial Portfolio Acquisition
Transactions, the Manager is proposed to be held jointly by certain entities forming
part of the Sponsor Group and the Select Shareholders in the ratio 79:21.

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ISSUE DETAILS/CAPITAL HISTORY:

NST is coming out with its maiden REITs issue worth Rs. 3200 cr. comprising a
fresh issue of Rs. 1400 cr. and an Offer for Sale (OFS) of Rs. 1800 cr. NST has
announced a price band of Rs. 95 - Rs. 100 for this issue. The issue opens for
subscription on May 09, 2023, and will close on May 11, 2023. The minimum
application is to be made for 150 Units and in multiples thereon, thereafter. Post
allotment, REITs will be listed on BSE and NSE. NST has allocated not more than
75% for Institutional Investors and net less than 25% for Non-Institutional
Investors. Post allotment, units will be listed on BSE and NSE. While allotment
will be proportionate, trading will take place in a lot of one unit.

Out of the net proceeds of the fresh issue, NST will use Rs. 250 cr. cr. for partial or
full repayment/prepayment of debt securities, Rs. 1050 cr. for the acquisition of
stake and redemption of debt securities in certain Asset SPVs, and the rest for
general corporate purposes.

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The Units being issued and transferred shall rank pari passu in all respects,
including rights in respect of the distribution. The Unitholders will be entitled to
participate in the distribution, if any, declared by Nexus Select Trust after the date
of Allotment. In case of any alteration of the terms of the Units, including the
terms of the Offer, which may adversely affect the interest of the Unitholders,
approval from the Unitholders shall be required where the votes cast in favour of
the resolution shall be more than the votes cast against the resolution.

The joint Book Running Lead Managers (BRLMs) to this issue are BofA
Securities India Ltd., Axis Capital Ltd., Citigroup Global Markets India Pvt. Ltd.,
HSBC Securities and Capital Markets (India) Pvt. Ltd., IIFL Securities Ltd., JM
Financial Ltd., J.P. Morgan India Pvt. Ltd., Kotak Mahindra Capital Co. Ltd.,
Morgan Stanley India Co. Pvt. Ltd., and SBI Capital Markets Ltd. while KFin
Technologies Ltd. is the registrar of the issue.

CORPORATE CREDIT RATING:

NST has been assigned a provisional corporate credit rating of AAA/Stable by

CRISIL and ICRA.

FINANCIAL PERFORMANCE:

On the financial performance front, for the last three fiscals, NST has (on a
combined basis) posted a turnover/net profit - (loss) of Rs. 1780.19 cr. / Rs. 206.74
cr. (FY20), Rs. 1047.97 cr. / Rs. - (199.11) cr. (FY21), and Rs. 1398.52 cr. / Rs. -
(10.95) cr. (FY22). Thus it suffered a setback in line with the general trends
globally on account of the Pandemic.

For 3Qs of FY23 ended on December 31, 2022, it earned a net profit of Rs. 257.02
cr. on a turnover of Rs. 1498.35 cr. and has thus overshot FY20's full year's net.
This also indicates likely trends going forward with the changed lifestyle post-

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pandemic and growth in retail consumption in the world's largest consumer

destination i.e. India.

Post-IPO, the equity value of the trust will be Rs. 15150.00 cr. and NAV per unit in
relation to the offer price shall be 0.78 at the cap price. Its NAV as of December 31,
2022, is Rs. 127.73 per unit.

DISTRIBUTION POLICY:

The Manager shall declare and distribute at least 90% of the net distributable cash
flows of the Nexus Select Trust as distributions ("REIT Distributions") to the
Unitholders. Such REIT Distributions shall be declared and made not less than
once every six months in every FY. Further, in accordance with the REIT
Regulations, REIT Distributions shall be made no later than 15 days from the date
of such declarations. The REIT Distributions, when made, shall be made in Indian
Rupees. The net distributable cash flows shall be calculated in accordance with the
REIT Regulations and any circular, notification or guidelines issued thereunder
and the SEBI Guidelines. These units will thus have a regular steady income as
well as appreciation on residual portion in its realty assets on decreasing value of
units till final redemption.

In terms of the REIT Regulations, if the distribution is not made within 15 days of
the declaration, the Manager shall be liable to pay interest to the Unitholders at the
rate of 15% per annum until the distribution is made. Such interest shall not be
recovered in the form of fees or any other form payable to the Manager by the
Nexus Select Trust. However, Unitholders should note that there is no assurance or
guarantee that distributions will be made in any amount or at all.

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TAX BENEFITS:

The possible tax benefits available to Nexus Select Trust (the "Trust") and its
unitholders under the Income-tax Act, 1961 ('the Act') as amended by the Finance
Act, 2023 read with the Income Tax Rules, 1962, i.e. applicable for the Financial
Year 2023-24 relevant to the assessment year 2024-25 (referred to as 'the Direct
Tax Law'), presently in force in India. Several of these benefits depend on the
Trust or its unitholders fulfilling the conditions prescribed under the relevant
provisions of the Direct Tax Law. Hence, the ability of the Trust or its unitholders
to derive the tax benefits is dependent upon fulfilling such conditions, which are
based on business imperatives the Trust may face in the future, which, the Trust or
its unitholders may or may not choose to fulfil.

As per the auditor's report, this statement is only intended to provide general
information to the investors and is neither designed nor intended to be a substitute
for professional tax advice. In view of the individual nature of the tax
consequences and the changing Direct Tax Laws, each investor is advised to
consult his or her own tax consultant with respect to the specific tax implications
arising out of their participation in the proposed initial public offering of Units of
the Trust (the "Offer") in accordance with the provisions of Securities and
Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014, as
amended and the guidelines and circulars issued thereunder (the "REIT
Regulations").

Conclusion
In conclusion, our research on [Nexus Select Trust (NST)]'s proposed IPO has
found that the company is well-positioned to go public, with a solid financial
performance, a growing market presence, and a clear strategy for future growth.
The IPO process will present the company with several opportunities and
challenges, including attracting a wider range of investors, increasing public
visibility and accountability, and strengthening its competitive position.

Based on our analysis, the following recommendations are made:

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1. The company should consider the current market conditions and the demand
for its stock when deciding on the timing and pricing of its IPO.

2. The company should communicate clearly and transparently with its

stakeholders, including shareholders, employees, and customers, about its
goals, strategies, and performance.

3. The company should continue to focus on delivering strong financial results

and executing on its strategic plans to increase the likelihood of a successful
IPO.

Suggestion
1. Timing and pricing: Suggesting the most favorable time and pricing strategy
for the IPO, taking into account market conditions and demand for the
company's stock.

2. Communication: Advising the company on clear and transparent

communication with stakeholders, including shareholders, employees, and
customers, about its goals, strategies, and performance.

3. Financial performance: Encouraging the company to maintain a strong

financial performance and execute on its strategic plans to increase the
likelihood of a successful IPO.

4. Preparation: Advising the company on the importance of thorough

preparation for the IPO process, including regulatory compliance, due
diligence, and investor relations.

5. Post-IPO strategy: Providing recommendations on the company's post-IPO

strategy, including capital allocation, dividend policy, and governance
structure.

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Reference
1. SEC (Securities and Exchange Commission) guidelines and regulations on
initial public offerings (IPOs)

2. Relevant financial statements and data, including balance sheets, income

statements, and cash flow statements

3. Company business plan and strategy for growth and profitability

4. Due diligence reports by underwriters and financial advisors

5. Legal and compliance documents, such as registration statements and

shareholder agreements

6. Feedback from potential investors and analysts

7. Previous successful IPO case studies and best practices.

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