PART A TABLE OF CONTENTS Sr. No. Particulars Page No. 1. Executive Summary 2 2. Financial markets and IPO 4 3. Primary Market 6 4.

IPO- Features 9 5. Trends 13 6. Pricing Of Issue 20 7. Book Building 22 8. Cost Of Issue 27 9. Brief Note on Intermediaries 29 10. SEBI and IPO 35 11. Marketing of IPO 46 12. Analysis of Biocon IPO 52 13. Conclusion 63 14. Bibliography 65 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 OFFER 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. The basic objective of my study on IPO is mainly as underTo analyze and evaluate the complex IPO process To study and incorporate the legal requirements of an IPO SEBI Norms and Guidelines 2 Various aspects of IPO like cost, Involvement of intermediaries, pricing of an IPO. Pricing of an issue through the Book-Building Method Analysis of the Biocon IPO is the heart of the project. I have included the prospectus of the latest IPO-TATA Consultancy Services in a compact form. I

have given prospectus to explain applicability of various laws and guidelines. The limitations with this report are as underI have excluded guidelines and procedures relating to ADR/GDR to raise money by issuing securities abroad. I have also excluded procedures relating to listing securities in Foreign Stock Exchange I have excluded provision relating to the stock invest option in the IPO-Application form. If the company is making IPO just to get securities listed on Stock Exchange and make disinvestment promoters, then the money will not come to company and pricing method followed will also be different. I have not covered how the IPO process is carried out in international markets. 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. As such, Financial Markets are functionally classified as having two parts, namely, 1. The Primary Market 2. 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

Now the exchange has completed more than 25 years. It provides easy liquidity. Therefore. There were very few issues every year. Initially the IPO was called New Issue and the issues in the Primary Market were controlled by CCI (Controller of capital issue). Secondary Market comprises of further issues which are floated by the existing companies to enhance their liquidity position. Whenever a new company wants to enter the market it has to first enter the primary market. More than 99% of Indian population never participated in any issue during CCI regime. In other words the Primary Market is an integral part of the capital market of a country and together with the securities market. transferability and continuous price formation of securities to enable investors to buy and sell them with ease. In fact. CCI was highly conservative and hardly allowed any premium issues. There was no awareness of new issues among the investing public. 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 tradeable to the public. . the regulatory framework was inadequate to control several issues relating to Primary Market. 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 development of security as well as the scope for higher productive capacity and social welfare depends upon the efficiency of the Primary Market.various types of industrial securities. The volume of activity in the Secondary Market is much higher compared to the Primary Market 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. Once the new issues are floated and subscribed by the public then these are traded in the secondary market.at that time the main function of stock exchange was to provide place for trading in the stocks. It was prerogative to highly elite business community to participate in new issues. The mobilization of funds through the Primary Market is adopted by the state government and corporate sector. 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 OFFER or IPO 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. It has undergone several changes. However banks may not be ready to provide huge finance for a long time especially if the returns are not fixed. It was working as a department of MOF (ministry of finance). Also. during 1950s-1960s. the investment in stock market was considered to be gambling. in the year 1992 it was abolished.

It is said that investor never lost money in his pricing methods. it must either go to its existing shareholders or shop around for other investors. its founders often have most of its wealth tied up in the company.  To finance increased working capital requirement  As an exit route for existing investors  For debt financing. IPO dilutes the ownership stake and diffuses corporate control as it provides ownership to investors in the form of equity shares. In these markets they had established Security Exchange Commission (SEC). Thus Security Exchange Board of India (SEBI) was established with headquarters in Mumbai in 1992. SEBI has come up with the guidelines for disclosures and investors protection.A. existing investors can offload equity holdings to the public.SEBI is the most powerful body in India.5 million shareholders. Stock Exchanges etc. This has attracted foreign institutional and individual investors to invest money in India. Going public (or participating in an initial public offer or IPO) is a process by which a business owned by one or several individuals is converted in to a business owned by many. Registrars and Transfer Agents. It can be used as exit strategy and finance strategy. Depositories. Late Shri. Brokers. It involves the offer of part ownership of the company to the public through the sale of equity securities (stock). Reliance Group has more than 3. This has resulted in exponential growth of Capital Market in this last decade. sold shares and created fabulous wealth for themselves. Underwriters. Dhirubhai Ambani can be considered as Bhishmapita of new issues. As on 31-12-2003. As a financing strategy. POPULARISING THE NEW ISSUE. though initially he also had to struggle to get subscribers but he always used innovative ides for marketing IPOs. By selling some of their stock in a public offer. By going public it becomes easier to find new investors for the business. ADVANTAGES OF GOING PUBLIC Stock holder Diversification As a company grows and becomes more valuable. These rules are on the line of similar rules in western world. The Government of India realized the importance of a similar body in India for healthy and fast growth of Capital Market. REASONS FOR GOING PUBLIC  To raise funds for financing capital expenditure needs like expansion diversification etc.There was tremendous growth in capital market in U. Easier to raise new capital If a privately held company wants to raise capital a sale of a new stock. It is most powerful autonomous body. The first public offer of securities by a company after its inception is known as Initial Public Offer (IPO). Bankers. Enhances liquidity . the founders can diversify their holdings and thereby reduce somewhat the risk of their personal portfolios. and Western Europe. its main purpose is to raise funds for the company. When used as an exit strategy.S. SEBI has framed rules for various intermediaries like Merchant Bankers. There are several incidences of the common man participated in his issues. This can often be a difficult and sometimes impossible process. got allotment.

 Control Owning less than 50% of the shares could lead to a loss of control in the management. Most people label a public offer as a marketing event. increase brand name. By converting to corporate status.  Disclosure Management may not like the idea or reporting operating data. .The sock of a closely held firm is not liquid. they need additional capital to execute long-range business models. If one of the holders wants to sell some of his shares. which it typically is. a company can always dip back into the market and offer additional shares through a rights issue. It helps to increase company and personal prestige. to finance possible acquisitions or to take up new projects.  Other disadvantages The profit earned by the company should be shared with its investors in the form of dividend An IPO is a costly affair. because such data will then be available to competitors. then its stock will not really be liquid and the market price may not be truly representative of the stocks value. it is hard to find potential buyers-especially if the sum involved is large. A substantial amount of time and effort has to be invest TRENDS IN IPO PRIMARY REASONS FOR A COMPANY GOING PUBLIC. Image The reputation and visibility of the company increases. These problems are easily overcome in a publicly owned company Establishes value for the firm This can be very useful in attracting key employees with stock options because the underlying stock have a market value and a market for them to be traded that allows for liquidity for them. although legal they may not want to disclose to the public. This also helps to attract potential employees It commands better valuation of the company Better situated for making acquisitions DISADVANTAGES OF GOING PUBLIC  Cost of Reporting A publicly owned company must file quarterly reports with the Securities and exchange Board of India. Other advantages Additional incentive for employees in the form of the companies stocks. These reports can be costly especially for small firms. For the majority of firms going public. Even if a buyer is located there is no establishes price at which to complete the transaction.  Inactive market low price If a firm is very small and its and its shares are not traded frequently.  Self dealings The owner s managers of closely held companies have many opportunities for self-transactions. Around 15-20% of the amount realized is spent on raising the same.

Communication and Entertainment) sectors. aquaculture.PERFORMANCE IN 90s Let us have a look at the general development of the Primary Markets in the nineties. hype took over and valuations reached absurd levels. the cream of corporate India is queuing up. 2001-2002-ALMOST CLOSED There were hardly any IPOs and those who ventured. which ensures quality. the average issue price shot up from Rs. 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. issue pricing remains to be conservative.5 crore in 1994-96 to Rs. The most path breaking development in the primary market regulation has been the abolition of CCI (Controller of capital issues). Some of the prominent money mobilizes were the so called sunrise sectors -polyester. where valuations today are very attractive. got a lukewarm response.30 crore. Around Rs20000 crores were raised through 4053 issues during this period. That phase took a heavy toll on the investor s sentiment and the result was the amount of money raised through IPO route. There have been many regulatory changes in the regulation of primary market in order to save investors from fraudulent companies. In this fragile market. textiles. The taste of gains from the primary issues is expected to have a spillover effect on the secondary market. With controls over pricing gone. finance. But reality soon set in. with remarkable ease thanks to overly optimistic merchant bankers and gullible investors. SUNSET. A depressed Secondary Market had ensured that the doors for the Primary Market remained closed for the entire FY 2001-2002. The euphoria spilled over to the Secondary Market. which could potentially mean listing gains. The Primary Market boom promises to be different. 2002: QUALITY ON OFFER. 2003: IPO-IMPROVED PERFORMANCE OVERALL! Even as the secondary market moved into top gear in 2003 the primary market too scripted its own . With big IPOs from companies in the ICE (Information Technology. and issues from the software markets flooded the market. To start with. Both markets tanked. 1993-96: SUNRISE. But gradually. 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 selfmanaging culture in the financial system. companies rushed to tap the Primary Market and they did so. Issuers soon failed to meet projections.There were hardly any IPOs in FY 2001-2002. software stocks led a bull charge on the bourses. This could rekindle the interest of small investors in stocks and draw them back into the capital market. The Primary Market caught up. But the move was hopelessly misused in the years of 19941995 and many companies came up with issues at sky-high prices and the investors lost heavily. many disappeared or sank.

78 Crore) Crew Bos Products (12. prompting retail investors to flock to IPO s.49 Crore another government company which was a huge success was IPCL which too was oversubscribed by 1. It was really Maruti Udyog that took the lead with its new issue in June. banks for capital (Central Bank of India and Punjab & Sind Bank). The latest development in the primary market has been the Indian players thirst for money satiating offshore INITIAL PUBLIC OUTBURST Riding high on the market bull. Divi Labs hit the market in February followed by Maruti. In overseas listings. including Indraprastha Gas and TV Today Network which was oversubscribed 51 times showed the growing appetite for primary issues. The fundamentally good economy makes us very positive about the initial public offer market.5mn applicants and Vijaya Bank over Rs40bn in subscriptions.18 times raising a capital of Rs. Among these Biocon the first Indian Biotech company to come with an IPO was oversubscribed by 33% and raised as much as Rs. After the phenomenal success of Maruti issue.45 Crore. which attracted about 1mn applicants. Nearly 600 companies wish to raise over Rs50. The much awaited government companies ONGC was oversubscribed by 6 times and raised a whooping capital of Rs.25 Crore) Texmaco (15. The primary issue of Indian Overseas Bank attracted about 4. 23 companies tapped the primary market and managed to garner less than Rs200bn. buoyed largely by the Maruti IPO which was oversubscribed six and a half times.49 Crore) Vishal Export Overseas (27 Crore). which reportedly garnered about Rs30bn.1010. for market valuations (Tata Consultancy Services). residual sale (CMC and IBP). With the care taken by SEBI and the companies it is unlikely that the experience of 1995 will be repeated. Initially. In the financial year just ended. and for expansion (Biocon and NDTV). the companies themselves have been careful not to overprice the shares. The last one to get a huge response was Indraprastha Gas. 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. TV Today s public offer was expected to draw in excess of Rs30bn. On the contrary. the Maruti share price was considered steep at Rs125 per share for a Rs5 paid-up share. Other mega issues included TCS which was oversubscribed 5. a number of companies have approached the capital market and a lot more are waiting for SEBI approval.315 Crore. came the Uco Bank IPO. SEBI has taken enough care to force companies to make relevant disclosures for the investor to judge the quality of new issues. Besides. Close on the heels of Maruti. The media company NDTV was oversubscribed 3 times its size.revival story.000 Crore. for venture capital exit (UTV and Secure Meters).1069. All IPO s. the only notable IPOs were Infosys Technology's secondary ADR offer and the dull debut of Sterlite Group company Vedanta on the London Stock Exchange. 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. A slew of IPO s have been lined up in the coming months from the public as well as the private .417 Crore. for a variety of reasons public sector units for capital (Power Finance Corporation and National Thermal Power Corporation). the stock had climbed to over Rs355. companies are preparing to lap up investor s money through Initial Public Offer s (IPO s). In 2003 almost all primary issues did well on domestic bourses after listing.Other IPO s to hit the market this year were Shah Petroleum (31. The issue was heavily oversubscribed and by the middle of December the share value appreciated 186 per cent. By the end of the year. divestment (ONGC and Gas Authority of India Ltd).46 times and raised Rs.

00 573.10 16. The company was allowed to give future profit projections.95 Oil & Natural Gas Corporation Ltd. 17/02/2003 130 1. Central Bank of India. Merchant Bankers are responsible for justifying the premium.05 802.00 114.16 Divi's Laboratories Ltd.00 126.V.05 231.95 179. 27/02/2004 161. 05/06/2002 525.85 Canara Bank 18/11/2002 25.67 Tata Teleservices (Maharashtra) Ltd 20/09/2000 2. Today Network Ltd.136.81 Dishman Pharmaceuticals & Chemicals Ltd.00 6.30 Power Trading Corporation of India Ltd. 19/02/2001 30.169.000-30.20 23.07 Datamatics Technologies Ltd. 27/12/2003 95 105. 18/07/2000 55. Generally the CCI was very conservative and hardly allowed premium issues.105.00 253.36 Tele Data Informatics Ltd.44 Arvind Remedies Ltd. 14/02/2001 2. Among the companies slated to come out with IPO s include: SET India. 17/01/2001 9. 02/11/2000 77.50 16. 05/02/2004 230 311.36 Indraprastha Gas Limited 05/12/2003 48 18.50 Birla Corporation Ltd.00 8. 08/03/2004 16 53.50 188. The IPO s are estimated to raise Rs25.54 Aksh Optifibre Ltd.50 PRICING OF ISSUE ¾ Controller Of Capital Issue During the Controller of Capital Issue (CCI) regime the issues were priced by the company and approved by CCI.00 90.13 -79.47 Patni Computer Systems Ltd.75 407.00 9.60 Balaji Telefilms Ltd.52 Creative Eye Ltd.10 -22. 05/03/2004 185. 20/07/2000 15.00 16. 06/10/2000 120.00 62.65 -61. 13/03/2004 712.56 Gas Authority of India Ltd.50 -52.54 T. The sentiment for IPO s has been bolstered after the government came out with fair pricing of its stake sale in IPCL. 19/04/2004 110 136.10 -4.00 41.47 Adlabs Films Ltd. 06/01/2001 90. 28/04/2004 70 87.sector.93 Indian Petrochemicals Corporation Ltd.00 773.55 25.20 188. 11/12/2000 115. 03/11/2000 45.14 Maruti Udyog Limited 19/06/2003 125 360.00 1.50 703.00 89. NTPC and Hutchinson Max Telecom.75 35.17 New Delhi Television Ltd.57 Centurion Bank Ltd.20 1.05 934.78 Aztec Software & Technology Services Ltd.17 I-Flex Solutions Ltd. Company Issue Date Issue Price Current Price % Change Tata Consultancy Services Ltd 05/08/2004 850 987.71 Moving Picture Company (India) Ltd. ¾ Arrival of SEBI After the Arrival of SEBI free market policy is followed for pricing of issue.62 Biocon Ltd 18/03/2004 315 503.60 162.00 6.38 -98.85 242.25 176.80 11. A . 07/04/2004 175 459.20 -1.000 Crore.25 1. Shoppers Stop.55 -24.00 18.14 Punjab National Bank 21/03/2002 21.00 Union Bank of India 20/08/2002 6.30 -70.00 36.20 -81.85 59.

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. The mean bid price is accepted and allocation is done. This resulted in cautious approach by the merchant bankers and underwriters for taking up underwriting of the future issues.company can issue shares to applicants in the firm allotment category at higher price than the price at which securities are offered to public. 50%of the IPO is reserved for the wholesale investors and 50% is for the small investor. Book Building is so-called because the collection of bids from investors is entered in a "book". an eligible company is free to make public/rights issue in any denomination determined by it in accordance with the Companies Act. The company looses money it has spent on IPO. Accurate pricing is essential for the success of IPO. 1956 and SEBI norms. At present. These bids are based on an indicative . Further. ¾ Deciding Premium by Bid System Since year 2000 SEBI has changed pricing formula. bids are received pricing is open for discussion. The promoters cannot give future projections and merchant banker alone cannot decide the pricing of IPO. there has been a good rush of such issues. BOOK BULIDING THE LATEST AVTAAR OF PRICE DISOVERY The basic motto of Book Building is that the market knows the best . What is Book Building? Book Building is basically a capital issuance process used in Initial Public Offer (IPO). The retail investor has to follow this price and submit application with cheque or demand draft. Once. Thus pricing is most important and difficult aspects of IPO. Number of companies came in with stiff premium and faced investor resistance. The lead manager has to ensure full subscription of the full quota. Then they call for bid at recommended prices. During the booming period stock market issues got oversubscribed beyond imagination. Ever since SEBI allowed companies with no profitability record to come up with IPO via Book Building route. The Lead-Manager starts road show in consultation with Institutional Investors. If the issue is not underwritten and subscription received is less than 90% then the IPO is considered as fail and whatever fund has been received has to refunded. However in the present scenario most of the issues are priced by the book building method. Then the price is declared in the newspapers. This part of the issue should also be fully subscribed.

the demand for the share is known before the issue closes. In such cases. past history and future plans among other mandatory disclosures. Initially.000 shares at Rs. How is the book built? A company that is planning an initial public offer appoints a category-I Merchant Banker as a book runner. Price at which the Security will be offered/allotted is not known in advance to the investor. Syndicate members are appointed by the BRLM. a particular period is fixed as the bid period and the details of the issue are advertised. Only an . but gives other details about the company with regards to issue size. Prospective investors can revise their bids at anytime during the bid period that is. Basis of Deciding the Final Price On closure of the book. the issue price may be paid later to the syndicate member within four days of confirmation of allocation. Advantage of the Book Building process versus the Normal IPO marketing process Unlike in Book Building. In book building.price range. a bidder may quote that he wants 50. the quantity of shares or the bid price or any of the bid options. the cost of the public issue is reduced and so is the time taken to complete the entire process. The issue price is fixed after the bid closing date. Where a bidder has been allocated lesser number of shares than he or she had bid for. 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. and involves negotiations between those involved in the issue. the excess amount paid on bidding. The issue may be deferred if the demand is less.500 while another may bid for 25. The price discovery is a function of demand at various prices. the quantum of shares ordered and the respective prices offered are known.600. The book runner and the company conclude the pricing and decide the allocation to each syndicate member. Here the demand cannot be anticipated by the merchant banker and only after the issue is over the response is known. if any will be refunded to such bidder. that is. This process allows for price and demand discovery. The syndicate member may waive the payment of bid price at the time of bidding. After the draft prospectus is filed with the SEBI. Features Fixed Price Process Book Building Process Pricing Price at which the Security is offered/allotted is known in advance to the investor. collates the bids from various investors. The book runner builds an order book. For instance. which shows the demand for the shares of the company at various prices. Persons Involved in the Book-Building Process The principal intermediaries involved in the Book Building process are the company. 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. Book Running Lead Managers (BRLM) and syndicate members who are intermediaries registered with SEBI and are eligible to act as underwriters.000 shares at Rs. the company issues a draft prospectus which does not mention the price. IPO s are usually marketed at a fixed price. Also.

25 crore to encourage the use of this facility. COST OF PUBLIC ISSUE. Is the process followed in India different from abroad? Unlike international markets. 25 per cent of the issue has to be offered to the general public.indicative price range is known. 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. 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. 2. the most active investors are the Mutual Funds and Other Institutional Investors. 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. The rest of the book built portion is open to any investor. Demand Demand for the securities offered is known only after the closure of the issue. So the entire issue is book built. The other option is to split the 25 per cent on offer to the public (small investors) into a fixed price portion of 10 per cent and a reservation in the book built portion amounting to 15 per cent of the issue size. The 15% reservation for individual investors bidding for up to 10 marketable lots may be merged with the 10% fixed price offer. Internationally. The important expenses incurred for a public issue are as follows: Underwriting expenses: The underwriting commission is fixed at 2. SEBI modified the framework for Book Building further in October 1999 to make it more attractive.100 Crore. The issuer would have option to issue securities using book building facility under the existing framework: 1. Allotment for the book built portions shall be made in demat form only. 5. But in India. Payment Payment if made at the times of subscription wherein refund is given after allocation Payment only after allocation. 3. However. Here there are two options to the company. 4. The issuer may be allowed to disclose either the issue size or the number of securities to be offered to the public. The present requirement of graphical display of demand at bidding terminals to syndicate members as well as the investors has been made optional. The modified framework does not replace the existing guidelines. no issuer used this facility. India has a large number of retail investors who actively participate in IPO s. According to the first option.5 % of the nominal value . The guidelines were revised subsequently to reduce the limit to issues of Rs. Demand for the securities offered can be known everyday as the book is built. 25 per cent of the issue has to be sold at a fixed price and 75 per cent is through Book Building.

other advertisements. They must ensure the commencement to the completion of the IPO. brochures. The managing brokers (if any) can be paid a maximum remuneration of 0. SEBI issues authorization letter valid for 3 years and the company has to pay necessary fees. which are eligible to work as merchant bankers. Postage Expenses: These pertain to the mailing of application forms. allotment/refund letters. etc. Certain guidelines are laid down in section 30 of the SEBI act 1992 on the maximum limits of the intermediaries associated with the issue. 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. and prospectus to investors by ordinary post and the mailing of the allotment/refund letters and share certificates by register posts. and the number of unsuccessful applicants. Fees for Registrars to the Issue: The compensation to he registrars. there is no restriction on the fee payable to the managers of the issue. application forms. press conferences. The eligibility criteria depend on network and infrastructure of the company.5% of the nominal value of the capital being issued to public. As this is the state subject. and investor s conferences. It consists of two components: initial listing fees and annual listing fees. In this process it is important that all the intermediaries should work cohesively and within a framework of law. however. Any serious error by any intermediary can affect the IPO. typically based on a piece rate system. The company should not be engaged in activities that are banned for merchant bankers by SEBI. Listing Fees: This is the concerned fee payable to concerned stock exchange where the securities are listed. The following are the important intermediaries involved in the process-  MERCHANT BANKERS Eligibility criteria-SEBI issues an authorization letter to the finance companies. it tends to vary from state to state. brouchers. Printing Expenses: These relate to the printing of the prospectus. depends on the number of applications received. envelopes. Responsibility-lead managers are fully responsible for the content and correctness of the prospectus. number of allotters.(including premium. . Such merchant banker can be appointed as lead manager for IPO. Functions-Merchant banker can work as lead manager co lead manager investment banker underwriter etc. BRIEF NOTE ON INTERMEDIARIES The process of IPO is highly complex and its success is extremely important for the company. Presently. Advertising and Publicity Expenses: These are incurred primarily towards statutory announcements. Stamp Duty: This is the duty payable on share certificates issued by the company. Brokerage: Brokerage applicable to all types of public issues of industrial securities are fixed at 1. if any) of the equity capital being issued to public.5% whether the issue is underwritten or not. share certificate.

This makes their job easier and helps them earn the goodwill of investors. 4 200-400 cr. Underwriters are the ones who provide proper guidance. A broker offer marketing support. The brokers are governed by rules of SEBI and the respective stock exchange. Will the investors be institutional or private? Is the company widely held or are the shares concentrated with just a few investors? Experience-the underwriter knows the detail of the process better than any other participant since issuing shares is one of their primary business functions. 3 100-200 cr. Finding investors-the underwriter first puts together a syndicate of other underwriters to distribute the shares. underwriting support. This has serious implications. 2 50-100 cr. There can be only 1 adviser to the issue. 5 Above 400 cr. The underwriter puts his reputation on the line. The syndicate finds investors willing to put their money into the company. After market support-the underwriter protects investors and thus makes the offer more attractive. The brokers appoint sub brokers who are in direct contact with the investors.Size of the Issue No of Lead Managers 50 cr. The brokers can work as broker and underwriter or both. disseminates information to investors about the issue and distributes issues stationary at retail investor level.  UNDERWRITERS The underwriter is the principle player in the IPO providing the firm withReputation-as the underwriter is legally liable and because he has on going dealing with the customers to whom he sells shares. Informational Asymmetry-in general merchant bankers know the market better than the issuing company.  BROKERS All the recognized stock exchange members are called brokers and thus any member of a recognized stock exchange can become a broker to the issue. They can give underwriting commitment in accordance with their net worth. 1 or more as agreed by the board The number of co managers should not exceed the number of lead managers. It is important for the firm to have a clear understanding with the underwriter exactly how much . In India usually a broker not only does his normal broking business buying and selling securities for brokerage but also works as an underwriter. They would exploit the superior knowledge to under price issues. The brokers are key to the success of the issue. There is no limit on the number of underwriters.

There are no restrictions on the number of bankers to the issue.  BANKERS TO THE ISSUE Any scheduled bank registered with SEBI can be appointed as the banker to the issue. Pre offer assistance-the underwriter will conduct road shows with the company s management distribute the prospectus and marketing of the underwriters directly generates talk to potential investors about appropriate pricing. Some part of the value that the potential shareholders attach to shares. They provide the final list of allotees to Lead Manager ROC and stock exchange.0% 1.5% 2. They accept duly filled forms with cheque/ drafts. Several commercial banks are working as bankers to the issue.5% Issue amount upto Rs5 lakhs 2. The maximum rate of underwriting commission paid is as follows. A commission is paid to the writers on the issue price for undertaking the risks of under subscription. He collects all application from the bank and ensures reconciliation of funds and of application amount and participates in process of basis of allotment. 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. If the company wants they also manage post issue IPO functions relating to shareholders register for the .0% The fees for underwriter and broker are decided by the company within the maximum possible limit as fixed by the SEBI. Future services-a good relationship with an underwriter can save time and money in future dealings. Each agent is registered with SEBI. They get fees on amount collected by them. Hey have to maintain net worth and infrastructure criteria. They prepare collection reports and transfer funds and applications to the company/registrar. The registrar provides administrative support to the issue process.5% Issue amount exceeding % 2. If the IPO is oversubscribed they provide computerized program for allotment. An underwriter should have a minimum net worth of 20 lakhs and his total obligation at any time should not exceed 20 times his net worth. Nature of Issue On amount Devolving on Underwriters On amounts subscribed by the public Equity shares preference shares and Debentures 2. The bank provides application forms to the investors. They have to renew their License periodically. 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. They manage refund orders and allotment letters.5% 2.  REGISTRAR AND TRANSFER AGENTS Registration with SEBI is mandatory to take on responsibilities as a registrar or share transfer agent.support he plans to provide if the IPO is not fully subscribed and accordingly his underwriting commission is fixed.

In addition the company should compulsorily need the minimum network level during the two immediately preceding years. Normally the company for the purpose of IPO does this appointment. š It should have a pre issue network of a minimum amount of Rs1 crore in 3 out of the preceding 5 financial years with the minimum net worth to be met during the immediately preceding 2 years.e. FOR LISTED COMPANIES š 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. when shares are allotted to the company/registrar provides shareholders register to depository in electronic form.company. He is responsible legal compliance of IPO process. SEBI NORMS .  LEGAL ADVISOR. SEBI AND IPO ELIGIBILITY NORMS FOR UNLISTED COMPANIES š It should have a pre issue network of a minimum amount of Rs1 crore in 3 out of the preceding 5 financial years. š The issue size (i. Offer + Form allotment + Promoters contribution through the offer document) should not exceed an amount equal to 5 times its pre issue worth. There are other intermediaries like Advertising Agents etc. š 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. Thus automatically all shareholders get allotment in their DMAT account. but the company governs their role. The Depository institute issues unique number of every IPO or company.  DEPOSITORIES Since the year 2000 it s compulsory that all fresh issue of shares must be made only in the dematerialized format (DMAT).

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.In case of full subscription of the issue. FII`s. Basis of Allotment.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. . Subscribed Capital with top ten shareholders holding pattern. Also about the reservation in the present issue for Promoters. Auditors Report. These rules are amended from time to time to meet with the requirement of changing market conditions. Then the net public offer must be stated very clearly. Dematerialisation of Shares-As per the provisions of the Depositories Act. Cost of Project.SEBI has come up with Investor Protection and Disclosure Norms for raising funds through IPO.-Attention of the investor must be drawn on these risk factors. General Risk. Merchant Banker is also responsible for giving true and correct information regarding all the documents such as material contracts. Receipt of Funds and its usage prior to the IPO. Allotment/Refund. Capital Structure. the refund of the excess money must be made within the specified time limits otherwise the company must pay interest on delayed refund orders. Risk Factor-The Company/Merchant Banker must specify the major risk factor in the front page of the offer document. then fund so collected must be refunded back to all applicants. Disclosure Clause. Listing Arrangement.Once the allotment is finalized. Auditor must also give the tax-benefit note for the company and investors. Pricing of Issue-The pricing of all the allocations for the present issue must follow the bid system. Promoters interest and their subscription pattern etc.It must clearly state that once the issue is subscribed where the shares will be listed for trading. 1996. The reservation must be disclosed for different categories of investors and their pricing must be specified clearly. Disclosure Norms.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. Means of Finance.The company must give complete information about the Authorised capital. Minimum Subscription. capital structure. appointment of intermediaries and other matters.The Auditors have to clearly mention about the past performances. INVESTOR PROTECTION NORMS. Issuers Responsibility-It is the absolute responsibility of the issuer company about the true and correct information in the prospectus. Collaborators. the allotment must be made with the full consultation of the concerned stock exchange and the company must be impartial in allotting the shares. NRI`s etc. And SEBI Rules.

Media and Telecommunication sectors. Size of the net offer to the public is not less than Rs. Promoters should bring in their contribution including premium fully before the issue 2. There should be at least 30 mandatory collection centers. Size of the Public Issue Issue of shares to general public cannot be less than 25%of the total issue. this stipulation is reduced subject to the conditions that 1. Collection Centers for Receiving Applications 1. 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. Offer to the public is not less than 10% of the securities issued. This provides market and exit routes to the investors. 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. Appointment of market makers mandatory on all the stock exchanges where securities are proposed to be listed. Minimum promoter s contribution is 20-25% of the public issue. which should include invariably the places where stock exchanges have been established. 2.30 crores. 1. Incase of IT. Securities can be listed where listing of securities is screen based. The above are the major Guidelines for the Investor Protection and Disclosure Norms. A minimum number of 20 lakh securities is offered to the public 3.now all IPO will be in Demat form only. and then the underlying shares must be listed on the stock exchange. Promoters Contribution 1. .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. Listing of Shares. The SEBI has provided rules for every possible situation.It is mandatory on the part of the promoters that once the IPO is fully subscribed. Public Offer of Small Unlisted Companies (Post-Issue Paid-Up Capital upto Rs. Minimum lock in period for firm allotment is three years. 3. Minimum lock in period for promoter s contribution is five years. 4. 2.

2. 8. 3. Refunds of excess application money i. The minimum period for right issue is 15 working days and the maximum is 60 working days. 1.e. 5. which can be further extended to 30% by an application to the RBI-supported by a resolution passed in the General Meeting. Indian development financial institutions and Mutual Fund can be allotted securities upto 75% of the issue amount. All the listing formalities of a Public Issue have to be completed within 70 days from the date of closure of the subscription list. in application for the allotment of securities is compulsory where monetary value of investment is Rs. Allotment to categories of FIIs and NRIs/OCBs is upto maximum of 24%. Net Offer the general public has to be atleast 25% of the total issue size for listing on a stock exchange 2. 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. Allotment has to be made within 30 days of the closure of the Public issue and 42 days in case of Rights issue 5. Minimum of 50% of the Net Offer to the public has to be reserved for the investors applying for less than 1000 shares. 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. Timeframes for Issue and Post-Issue Formalities 1. 9. Regarding allotments of shares 1. Quoting of PAN or GIR No. non-allotted shares have to be made within 30 days of the closure of the issue. Dispatch of Refund Orders. There should be atleast 5 investors for every 1 lakh equity offered. Mumbai Delhi Calcutta Chennai All such centres where stock exchanges are located in the region in which the registered office of the company is situated. 6. . A public issue is effected 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. 2. 4. 3. 7.or above. which is referred to as green-shoe option 4. 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. In an issue of more than 25 crores the issuer is allowed to place the whole issue by book-building.2. In case of oversubscription the company may have he right to retain the excess application money and allot shares more than the proposed issue. For issues not exceeding Rs.50000/.10 crores the collection centers shall be situated at:The 4 metropolitan centres viz. Refund orders have to be dispatched within 30 days of the closure of the issue.

FII and employees are not subject to any lock-in period. 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.  Exemption from the minimum subscription of 90 per cent provided disclosure is made about the alternate source of funding considered by the company. 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. Within 12 months of the public issue no bonus issue should be made. There should not be any outstanding warrants for financial instruments of any other nature. Further. initially fixed at 10% of project cost. Maximum percentage of shares. the minimum participation can be met by any of the appraising agencies. irrespective of whether they appraise the project or not. 3. was reduced to 5%.Other Regulations 1. Draft prospectus submitted to SEBI should also be submitted simultaneously to all stock exchanges where it is proposed to be listed. 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. Firm allotments to mutual funds. .1 lakh of offer made. at the time of the IPO.  Permission to keep the issues open for 21 days to enable the companies to mobilize funds. the resultant shares will be not taken into account for reckoning the minimum promoters contribution further. 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. in the event of under-subscription in the public issue. 5. the same will also be subject to lock-in. Restrictions on Allotments 1. jointly or severally. 2. If the issue size is more than Rs500 crores. Relaxation of entry norms for infrastructure companies With a view channelise greater flow of funds to infrastructure companies.  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 These concessions are available to them if these are appraised by a Development Financial Institution.  Permission to freely price the offer in the domestic market provided the promoter companies along with equipment supplier sand other strategic investors subscribe to 50 percent of the equity at the same price as the price offered to the public or at a price higher than that offered to the public. voluntary disclosures should be made regarding the deployment of funds and an adequate monitoring mechanism put in place to ensure compliance. and there is a minimum financial participation by them. Infrastructure Development Finance Corporation or Infrastructure Leasing and Financing Services Ltd. If the issue is undersubscribed then the collected amount should be returned back 3. Code of advertisement as specified by SEBI should be adhered to 7. SEBI granted a number of relaxations to infrastructure companies. 6. The minimum participation of the appraising agency. 4.

Marketing initial public offers (IPO s) through the secondary market SEBI approved a proposal of marketing IPO s through the secondary market.25. The ideal time for marketing an issue is a boom in the Secondary Market. peaceful socio-politicaleconomic environment and at least two days gap between two issues. TIMING OF IPO This the most important factor for the success of IPO. During 1995-96. MARKETING OF IPO The role of marketing.  The same conditions would apply also to a listed company which has changed its name to reflect activities in IT sector.000crore of capital is going to be raised this year. there was a period during which there were two to three issues in a day.  It can also access the market through the alternative route of appraisal and financing by a bank or financial institution. secondary market is depressed. If. It proposes to use the existing infrastructure of stock exchanges (terminals. A question of Timing Timing the issue is critical as it determines the success or failure of an issue to a great extent. in the pricing and trading of Securities is fairly limited PRELIMINARY REQUIREMENTS The company has to complete all legal requirements. if there is political unrest. This system would confirm to all extant statutory requirements. for marketing IPO s with a view to get 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 registrar in consultation with merchant banker and the regional stock exchange of the issuer will finalize the basis of allotment and intimate the same to the exchanges who in turn shall inform .This year more than 29 companies are coming with IPO s.Eligibility norms for public issues/offers for sale by companies in the IT Sector  Eligibility norms were modified to provide that a company in the IT Sector going for IPO/offer for sale shall have track record of distributable profits as per Section 205 of the Companies Act in three out of five years in the IT business/from out of IT activities. appoint all intermediaries and once they get SEBI card (approval). brokers and systems). and particularly promotion. Primary Market boom. presently being used for secondary market transactions.000-30. Normally in good times many companies are crowding at the same time . the process of marketing of IPO can commence.  The investor would approach broker for placing an order for buying shares of primary issues. Around Rs. if serious international problems are prevailing then it is considered to be negative factors for timing of IPO s. This is a dangerous situation. If these factors are favorable then the Company must find out about the timing of other prestigious IPO s.

research contradict that these institutional investors do not hold onto the shares allocated to them over the long-term.  Subsequently. The buzz is stirred up before the shares are released. it spends a fortune on hype. This campaign. The effects of an investment banker s promotional efforts are not only important for explaining the initial returns of some IPO s. And the ones that are cheap are usually not worth holding five minutes. A security s value is an increasing function of the number of investors who know about the security. The system seeks to reduce the time taken presently for completion of the issue process. Through the marketing effort.  As investors will have to part with their funds only on successful allotment. the underwriter attempts to create an imbalance in the supply/demand equation for the issue. Investor knowledge leads to greater value consequently. The reputation of an investment banker could expand a firm s investor base at a lower cost than the firm can. so that there are more buyers than sellers when the stock is finally released for sale to the public. The efforts of an investment banker to promote an IPO through increased media coverage will increase retail interest in that stock. since the promotional efforts of an investment banker on behalf of the firm would be more creditable.  The clearing house of the exchange will debit the primary issue account of the broker and credit the issuer s account. To understand the sense of these statements one must understand the relationship between the marketing of an IPO and its initial returns. the certificates would be delivered to the investors or the depository account of the investor would be credited. primarily to retail customers in hot issues . The key is to stimulate investor demand for the stock so that. but also for explaining the rankings of investment bankers Promoting an issue sufficiently to insure a run-up in its early 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 stocks. as much as anything that precedes or follows it. will determine the success or failure of the IPO. The Effects of Marketing on IPO s An investment banker s marketing campaign for an IPO is critical.  The broker will deposit the amount received in a separate escrow account for the primary market issue. the demand will exceed the supply.the brokers. and how different parties benefit from this relationship. instead they sell their allocation. the efforts taken by an investment banker to promote awareness in a firm can affect the valuation of its stock by expanding the investor base. Paperwork and publicity to create demand. their funds are not unnecessarily blocked. However. So you never get in cheap.  The brokers will advise the successful allottees to submit the application form and the amount payable towards the shares.  The securities can be listed on the stock exchange from the 15th day from the closure of the issue as against 45-60days at present. 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. Before a company gets to market through an IPO. This would also ensure that refunds are done away with. as well as the cost of the issue.

If any investor asks for a copy of prospectus it must be provided to him without any fees. Headquartered in Bangalore. As India's first and leading biotechnology company Biocon extends its support to numerous community outreach and corporate citizenship initiatives with special concentration in the areas of healthcare. NRI and general public. Sometimes different coloured forms are issued to FI. COMPANY BACKGROUND Biocon is India's premier biotechnology company. PRINTING STATIONERY-PROSPECTUS The company has to print approved prospectus and provide enough copies to all intermediaries. They reply to the questions of the investors to boost their confidence. Biocon has evolved from an enzyme company to a fully integrated biopharmaceutical enterprise. Biocon's success has been characterized by an enduring set of corporate values based on innovation. Sometimes. FII. They will arrange distribution to their sub-brokers and other clients. integrity. PRINTING APPLICATION FORMS Sufficient number of application forms must be printed much before the opening of the issue. The Promoters and Lead Managers give presentations. education and environment. Sufficient quantities should be maintained at the registered office of the company and with the Lead Managers. Biocon aims to continuously create growth in different areas of the company and will . However. The company has to publish abridges prospectus in leading newspapers. company makes direct dispatch of forms to prospective investors. It is compulsory to provide stationery to all underwriters and brokers. The company has to observe the rules of the concerned country. NEWSPAPER ADVERTISEMENT The company releases statutory advertisements in leading newspapers. ROAD-SHOW This is like the investors conference but normally is done abroad for marketing ADR/GDR issues. Each form must contain abridged prospectus in SEBI approved format. INVESTORS CONFERENCE The prospective investors are called by invitation. It is the responsibility of the promoters to ensure that the issuing company and their group companies should not release any commercial advertisement. road shows are becoming more and more popular in India. which may influence the investor s decision for investment. focused on healthcare. Reporters are briefed about the issue.GENERAL PROCEDURE FOR MARKETING OF IPO PRESS CONFERENCE Promoters and Lead Managers call for press conference in each major investment center. strong leadership and social responsibility. It is an expensive process and requires a lot of legal compliances. established in 1978. They carry it as news-item in their papers.

000 equity shares of Rs. State Bank of India. The offer price was fixed at the higher end of the price band at Rs315 per share of Rs 5 each.. In addition Biocon is positioned to be India's largest producer of human insulin and India's first company to set up commercial production of monoclonal antibodies. 2004 Offer price Rs.5/-each at a price of Rs. Canara Bank ListingBSE and NSE stock exchange Competitive strengths- .000.000 equity shares of Rs. It has a market share of around Size of issueThe issue size includes 10. Issue Opens on: March 11. 2004 Issue Closes on: March 18. Lead Manager to the Issue: DSP Merrill Lynch Ltd.000. Karvy Consultants Ltd.soon be the first company.315. HSBC Securities and Capital Markets (India) Pvt Ltd. Registrar to the issue: Karvy Consultants Ltd Bankers to the IssueHSBC.5/-each at a price of Rs [270-315] in cash aggregating to Rs [2700mn. SALIENT FEATURES OF THE ISSUE IssuerBiocon India owned by American International Group Inc is the largest biotechnology enterprise in India was the first biotech company in India to come up with an IPO. PRE ISSUE ANALYSIS Details of the Public Offer The issue size includes 10. Kotak Company Capital Ltd. globally to manufacture human insulin using a Pichia expression system. [270-315] the issue constitutes 10% of the fully diluted post issue paid up capital. The price band was Rs [270-315]. The issue constitutes 10% of the fully diluted post issue paid up capital. The offer is being made through the 100% book building process.3150] mn. The ceiling of allocation of equity share capital to various bidders is as follows: Qualified Institutional Bidders 60% Non Institutional Bidders 15% Retail Individual Bidders 25% Issue Price The offer is being made through the 100% book building process.

Industrial Development Corporation.949.1. The P/E is relatively comparable to peer group P/E average of 25.9 million and Rs422. enzymes. enzymes.The maximum bid should be in multiples of [P] and should not exceed Rs.1 26.The minimum bid for the Equity shares should be in multiples of [P] and the amount should not exceed Rs. The company believes in non infringing processes for the manufacture of products targeted at the therapeutic categories of cardiovascular. Scrip Details.50000. insurance companies etc.9) x FY04P earnings of Rs11. Biocon is the largest Indian Biotechnology company in terms of fiscal 2003 revenue according to India s Association of Biotechnology Led Enterprises. Custom research and clinical research activities.50000. For Non-Institutional Buyers and Qualified Institutional Buyers.7. immunosuppressant. Although Biocon is expensive at the current price.The minimum bid for the Equity shares should be in multiples of [P] and the amount should exceed Rs. currently available at the P/E of (23. In the first 9 months of fiscal year 2004 our Total Consolidated Operating Income and Net Profit Rs.Resident Individuals.4 million respectively The scrip. It is the first Indian Biotechnology company to come up with a public issue. Who can Apply Wholesale investors-Public Financial Institutions as specified in the Sec 4A of the Companies Act. The Total Consolidated Operating Income and Net Profit were Rs. anti-diabetics and oncology.) (at Min. NRI`s and HUF`s in the name of the Karta Allotment mode Compulsory demat mode Valuation Biocon Ltd is the largest biotechnology enterprise in India with presence in biopharmaceuticals.50000.Biocon Ltd is the largest biotechnology enterprise in India with presence in biopharmaceuticals.2819. Maximum and Minimum Bid size For retail investors. Retail Investors. The maximum bid should not exceed the size of the issue. FII`s registered with SEBI. Mutual Funds.3977. it is a good buy taking into consideration its promising future prospects. Custom research and clinical research activities. Market Capital (Rs .4 million and Rs. Basis for Allotment Discretionary in case of Qualified Institutional Buyers and proportionate in case of Non-Institutional Buyers and Retail Investors.Cr.3 million respectively in fiscal 2003. Offer Price) 270-315 .

1-5.31 Nicholas Piramal 7 70.64 Krebs Biochem 8 64.1-22.16 Bharat Serums 9 58 Indian Immunologicals 10 55.P/E (x) FY04 (annualized) 19.3 Market Capital/Sales (x) FY04 (annualized) 5. i Develop biological business .90 Eli Lily 6 71.88 Wipro Health Science 3 98.) FY04E Div Yield (%)FY04E Peer Comparison COMPANY RANK REVENUE (Crore Rs) Biocon India 1 255 Panacea Biotec 2 169./Share (Rs.55 Wockhardt 4 74 Haffkine Bio 5 72.6-26.31 Objects of the Offer i Plans to expand capacity at Rs 400cr.9 Ent.3 Div.Val/EBIT(x) FY04 (annualized) 22.

Strong demand by institutional investors saw the issue get an unprecedented four times the response for one crore shares of face value Rs 5 each within five minutes of opening. . This will further boost the recent high growth rates in the revenues and earnings.11 March 2004. Biocon. Several biotech companies plan to go public. India s leading credit rating agency. The company received bids for more than 330m shares versus about 10m on offer. when it opened.i Expand capability in drug business i Leverage position in the export market i Continue to target APIs for high value growth i Launch branded formulations on the domestic market i Grow business through strategic partnership and M&A ISSUE ANALYSIS Performance Evaluation Day One. the upper end of the price band. Biocon with its first mover advantage is well positioned to grab the huge opportunity in the global biopharma market once regulatory norms for biotech are clearly stated by the USFDA for regulated markets in the next 6-12 months. For it is the No. Biocon had a fixed price band between Rs 270 and Rs 315 per equity share of a face value of Rs 5.10. the stock is offered at a P/E of 22x on annualized earnings of Rs. has maintained its P1+ rating for the Rs 20 crore short-term debt programmes. according to its bankers.000 crores. HNI`s and Retail Investors POST ISSUE ANALYSIS Biocon IPO generates overwhelming response The success of Biocon s IPO set the benchmark for future IPO s in the sector.1 for FY04. Biocon IPO generates overwhelming response. the company is well positioned to build strong relationships with existing global players by offer them contract research and manufacturing service. Also. Total demand in excess of Rs. The issue got oversubscribed within five minutes of the opening.6 times on Thursday. etc. with the issue being oversubscribed 33 times. Day two-Biocon IPO gets stronger The IPO of Biocon Ltd was oversubscribed 10. Shantha Biotechnics. It is also the first biotech company to go public CRISIL. The scrip was in demand March 18 Biocon IPO A hit with investors The country s first biotech IPO by Biocon India received a handsome response from investors. 14. the upper end of the price band. Bharat Biotech. Biocon Ltd. IPO gets oversubscribed The long awaited issue of Biocon opened on 11 March. Amreshwara Agri Bio. with most of the bids being submitted at Rs 315. There was large scale participation by QIB`s. At the higher end price of the offer band of Rs.This is the first issue by a biotechnology company. 315.1 biotech company in the country and has strong fundamentals. are looking to go IPO. for its IPO with most of the bids being submitted at Rs 315. the company plans to list on the BSE and NSE.

21 4.91 189.68 Interest Expenditure 4.90 1.95 9.19 AIG Asian Opportunity Fund 10.31 160.0 48.50 1.40 59. enzymes 12% and rest is contributed by .99 253.11 Share Capital 1.66 Total Expenditure 91.21 Depreciation 6.49 40.47 Public .84 45.04 95.Deferred 3.62 254.73 27.71 1.ADDITIONAL INFORMATION Shareholding pattern Share Holding Pattern Pre Offer Post Offer Kiran Mazumdar 44.24 371.10. 5.90 20.64 John Shaw 0.02 65.00 Others 21.77 PBIDT 32.62 19.33 0.53 118.2 7.81 PBT 21.22 Other Income 0.65 2.76 0.Crores) FY01 FY02 FY03 9MFYO4 Revenue 122.66 Tax.17 Tax.05 39.) at FV Rs.74 48.57 EBIDTA Margin 26% 24% 26% 32% Bio pharmaceuticals contribute 81% of total turnover.1 124.56 4.00 Financials (Rs.38 PAT 14.82 1.70 Glentec International 23.52 21.31 86.78 0.Current 3.56 4.00 EPS (Rs.92 107.49 35.59 11.71 9.55 21.21 3.69 4.00 9.04 8.

The current price of a Biocon Share is Rs503. For the first 9 months of FY04. making it obvious that the Indian investor has far more appetite for equities than most people realise. 23.110. A substantial number of issues barring that of TCS also happened during the early part of the year. where the huge sizes of the offer drew predictions of calamitous effects on the secondary markets. Robust product pipeline ensures sustenance of company s high growth rate. the opinions of the experts have proved to be wide off the mark. Not only did the mega issues sail through. Most of the money has been raised by big companies with a long-term track record. Better realization from export resulted in operating margin growth of 7bps in 9MFY04 over FY03.36 compared to Rs.08crs in the previous full year. The data show that as much as Rs. exports of biopharmaceuticals and enzymes accounted for56% of the total turnover and grew sharply toRs.904 Crore has been raised from the primary market in the current calendar year. It has plannedRs. This shows that Biocon is a good buy and good profitable company which is worth investing.customized research. but the secondary markets proved to be far more resilient than anybody had anticipated. to the ONGC and TCS issues. which pundits decried as being overpriced. CONCLUSION The Indian initial public offer (IPO) market has always had more than its fair share of doomsayers Right from the Maruti issue. largely driven by exports to US and Europe.208.400crs expansion over next three years. The stock has risen by 188%. before the .

this is the time to make a dash for it.markets got the shivers. If investors are gung-ho about IPO s. this one is being driven by a much better quality of offer. There is also reason to believe that companies are pricing their issues less aggressively this time. tempting investors who have already made money to return to the primary market. and are tailoring their offer to match current market fancies mid-cap funds. there are several reasons for it. Next. either due to general concerns about a volatile market. broking houses. or because of a deliberate effort to leave something on the table for all investors. Unlike earlier IPO booms. 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. The listing gains have probably initiated a kind of virtuous cycle. there is no denying the enormous interest retail and other investors have shown in the primary market. and banks. most recent IPO s have resulted in gains on listing for the investor. even smaller issues have sailed through with large oversubscriptions. If the government wants to get some money into its kitty through disinvestment programmes. media houses and government companies such as NTPC and Power Finance Corporation are lining up issues Even mutual funds have got into the act. perhaps even more so than in the secondary one. Companies have been quick to take advantage of the investor interest in IPO s. retail outfits. and what-have-you. Nevertheless. This interest has been sustained despite the lack of bounce in the secondary market and is not confined to the big issues. The heavy oversubscriptions in many cases can also be traced to the availability of bank finance for IPO investment. BIBLIOGRAPHY Books and Magazine Indian Capital Markets  Financial management Prasanna Chandra  Business World  The Chartered AccountantJournal of Institute of Chartered Accountants in India Study modules of ICAI . dividend yield funds.

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