This action might not be possible to undo. Are you sure you want to continue?
A primary market is a financial market in which new issue issues of a security such as a bond or a stock, are sold to initial buyers by the corporation or government agency borrowing the funds. The primary markets for securities are not well known to the public because selling of securities to initial buyers often takes place behind closed doors. An important financial institution that assists in the initial sale of securities in the primary market is the investment bank. In Bangladesh, Investment Bank and Merchant Bank are used synonymously. Merchant Bank plays a key role in our Capital Market. Merchant Bank is primarily responsible for primary market making. Besides, they also perform some tasks such as secondary market making, trading, corporate restructuring, financial engineering, portfolio management, venture capital, underwriting, advisory services etc. In Bangladesh, Merchant Banks should perform all functions of Investment Bank and gain efficiency in primary market making process.
Primary objective of this report is to submit this report as course requirement. Secondary objectives of this report are: To know the corporate practice of Due Diligence Process. To know the procedure of Issue Management, Portfolio Management and underwriting done by Merchant Banks.
This part comprises of the following heads: a. Data Source To complete this report, data are primarily collected from the Issue Manager’s office (AAA Consultants & Financial Advisers Ltd.) in which I have completed my Internship. Besides this, I’ve collected data from Securities & Exchange Commission (SEC); Dhaka Stock Exchange (DSE); Chittagong Stock Exchange (CSE); United Airways (BD) Ltd. (Issuer); Ahmed Zaker & Co. (Auditor), Underwriters. b. Variables Material information for due diligence process are corporate information, products/services information, plant & property information, Financial information, Employees’ & Directors’ Information, Risk Assessment, Legal requirements and inspection of necessary papers and documents. These material information are considered as key variables in this report. 2
c. Analytical Approach To complete this report, due diligence process is monitored by selecting an Initial Public Offering of AAA Consultants & Financial Advisers Ltd by highlighting and analyzing potential material information.
To complete this report following limitations are prominent: Few access to Underwriters and Directors Few access to Price Sensitive Information Inadequate information about Issues in Dhaka Stock Exchange (DSE) & Securities & Exchange Commission (SEC) Inadequate knowledge about Due Diligence Process.
1.5 Structure of the Report
This report is done in compliance with the all securities laws applicable in Bangladesh and other related rules. In chapter 2, basic information about the Company such as company background, key services, total issues, sector wise classification etc are given. A brief review of capital Market of Bangladesh is illustrated in Chapter 3. In Chapter 4, Due Diligence Process in Public issue Rules is given. The Main part of the report is given in chapter 5. Due Diligence process is illustrated by analyzing the material information of R. N. Spinning Mills Ltd. Summary of Findings & Policy Implication is given in Chapter 6 and it is followed by Conclusion.
Chapter – 2
A Brief Review of Capital Market of Bangladesh
2.1 Securities & Exchange Commission
1920 b. Now. DSE hires the CEO of DSE which requires Commission’s approval. Depository Act. Transaction and transfer of most of the securities listed on DSE are now executed in electronic form. Robust capital market plays a pivotal for industrialization and economic development of a country. As a self-regulatory organization DSE supervises the functions of listed companies.2 Dhaka Stock Exchange The Dhaka Stock Exchange was established in 1954 but its commercial operation started in 1956. Securities & Exchange Commission Act. DSE is a self-regulatory not for profit organization.In a market economy securities market is a vehicle through which surplus fund is invested in alternative investment opportunities. 1993 (Act 15 of 1993). 12 directors are elected by direct votes of DSE members and 12 directors are nominated by the elected members from non-DSE members with the approval of the commission. Basic laws of the capital market are as follows: a. 1993 d. Due to nationalization policy trading activities of DSE remained suspended during the post liberation period and resumed again in 1976. This happens only when investors are confident that the securities market is transparent and efficient. 1993 as capital market regulator in Bangladesh through the Securities & Exchange Commission Act. Administration of DSE is run be the Dhaka Stock Exchange (Board and Administration) Regulations 2000. According to the rules every member must be a corporate body. 1999 2. The major functions are: 5 . 1969 c. by the intermediaries and persons and institutions related with capital market. Securities Act. Securities & Exchange Ordinance. The commission ensures compliance of capital market related laws. For increasing the depth and breadth of the markets attracting investors is important. The Securities & Exchange Commission (SEC) was established on June 8. The CEO conducts the daily affairs of DSE. The Chief Executive Officer (CEO) of DSE is also a nonvoting Director. At present DSE its on-line trading activities into the divisional and district towns of the country. rules and regulations etc. there are 234 members in DSE of which 194 members are registered by the SEC for conducting securities business. The board of directors consists of 24 members.
The Chittagong Stock Exchange (CSE) started first on line trading system in Bangladesh Capital market in 1998 and at present it is carrying out trading activities from Dhaka. Block Market d.Gifting of share / granting approval to the transaction/transfer of share outside the of the exchange (As per Listing Regulations 42) . Barisal. Now.Investors Protection Fund (As per investor protection fund Regulations 1999) . . Odd-lot Market 2.4 Trading of Securities in the Exchanges In DSE and CSE trading of securities is done through automated system.Monitoring the activities of listed companies.3 Chittagong Stock Exchange The Chittagong Stock Exchange was set up in 1995.Listing of Companies. It is also a self-regulatory not for profit organization and its management structure is same as DSE. Sylhet. . Cox’s Bazar and Khulna. . 2. trading is done in the following four market segments: a.Investors grievance Cell (Disposal of complaint bye laws 1997).Publication of Monthly Review. Spot Market c. . trading system 2. of Listed Companies in DSE & CSE 6 . Chittagong.Market Administration & Control. . Rajshahi.5 Name of Industries & No. Public Market b.(As per Listing Regulations)..(As per Settlement of Transaction Regulations) .Settlement of trading. .Providing the screen based automated trading of listed Securities. (As per Listing Regulations).Announcement of Price sensitive or other information about listed companies through online. .Market Surveillance. As a result volume of transactions has increased substantially over the years.
Name of Industry Bank Cement Ceramics Sector Corporate Bond Debenture Engineering Financial Institution Food & Allied Fuel & Power Insurance IT Sector Jute Miscellaneous Mutual Funds Paper & Printing Pharmaceuticals & Chemicals Services & Real Estate Tannery Industries Telecommunication Textile Treasury Bond No. of Listed Companies 29 7 4 2 8 22 21 23 10 44 5 3 11 23 2 20 6 5 1 27 164 2.6 Statistics up to September 2010 Total Number of Listed Securities Total Number of Companies Total Number of Mutual Funds 463 246 28 7 .
2001 Securities and Exchange Commission (Public Issue) Rules.) 3. 09.020. of Full-fledged Merchant Banks No. of Only Portfolio Manager No.194 2. 1996 Margin Rules.802 55 2.Total Number of Debentures Total Number of Treasury Bonds Total Number of Corporate Bonds Total Issued Capital of : Total Market Capitalisation of: All Listed Securities All Listed Companies Shares All Listed Mutual Funds All Debentures All Listed Govt.344 37. 08.) (Figure in mn Tk. 1999 Securities and Exchange Commission (Issue of Capital) Rules. 04. 03.L. T-Bonds All Listed Corporate Bonds (Figure in mn Tk. 05. 2001 Securities and Exchange Commission (Over-theCounter) Rules. 10. 01. 1993 I G·‡PÄ Kwgkb 8 .559 32. 1969 Securities and Exchange Rules. of Only Issue Manager 31 28 01 02 2.8 Rules & Regulations related to Capital Market S.006 473 8 5. 02. Name of Rules & Regulations Securities and Exchange Ordinance.1987 Credit Rating Companies Rules.313 3.815 8 179 2 (Figure in mn US$) (Figure in mn US$) 43. 2006 Securities and Exchange Commission (Rights Issue) Rules.578. 07.7 List of Registered Merchant Banks No.931 576 404. 2006 Notifications issued under the Ordinance wmwKDwiwUR AvBb. 06. of Registered Merchant Banks No. No.
21. 17. 23. 9 . 18. 19. 20. wmwKDwiwUR I G·‡PÄ Kwgkb (mfv msµvš—) wewagvjv. 1994 wmwKDwiwUR I G·‡PÄ Kwgkb (Avcxj) cÖweavbgvjv. 1995 wmwKDwiwUR I G·‡PÄ Kwgkb Gi Kg©Pvix PvKzix cÖweavbgvjv. 22. 2000 wmwKDwiwUR I G·‡PÄ Kwgkb (evRvi m„wóKvix) wewagvjv. 2000 wmwKDwiwUR I G·‡PÄ Kwgkb (wgDPz¨qvj dvÛ) wewagvjv. 24. 1995 wmwKDwiwUR I G·‡PÄ Kwgkb (gv‡P©›U e¨vsKvi I †cvU©‡dvwjI g¨v‡bRvi) wewagvjv. 16. 1999 wWcwRUwi cÖweavbgvjv. óK-‡eªvKvi I Aby‡gvw`Z cÖwZwbwa) wewagvjv. 2000 wWcwRUwi (e¨envwiK) cÖweavbgvjv. 2001 wmwKDwiwUR I G·‡PÄ Kwgkb (D‡jL‡hvM¨ msL¨K †kqvi AR©b.11. 13. 1996 wmwKDwiwUR I G·‡PÄ Kwgkb (óK-wWjvi. 2003 wmwKDwiwUR I G·‡PÄ Kwgkb (m¤ú` wfwËK wmwKDwiwU Bmy¨) wewagvjv. wmwKDwiwUR I G·‡PÄ Kwgkb (myweav‡fvMx e¨emv wbwl×KiY) wewagvjv. 12. 2004 wWcwRUwi AvBb. AwaMÖnY I KZ©„Z¡ MÖnY) wewagvjv. 1995 14. 2003 …………***……………. 15. 2002 wmwKDwiwUR I G·‡PÄ Kwgkb (wmwKDwiwU Kv÷wWqvj †mev) wewagvjv.
Chapter – 3 A Brief Review of Capital Market of India 10 .
debentures and bonds representing titles to property were first issued on the condition of transfer from one person to another. 1992. The investors from the Eastern Zone are also at the forefront today.1 Securities & Exchange Board of India (SEBI) The Securities and Exchange Board of India was established on April 12. and from then the Calcutta Stock broking fraternity has come a long way. The earliest record of dealings in securities in India is the East India Company’s loan securities. while the Calcutta Stock Exchange has emerged as the second largest bourse in the country.3. Though the once famous shelter for Calcutta Stock brokers no longer exists. 3. today plays a crucial role in the country’s capital market. it has been a journey of progress to the Exchange from the pith to the pinnacle. when shares. The Exchange is managed by the Governing Board consisting of members nominated by Securities Exchange Board of India (SEBI). has emerged as a premier Exchange in India. The origin of stock broking in India goes back to a time. The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as “to protect the interests of investors in securities and to promote the development of. Public Representatives. Elected members and an Executive Director.3 Calcutta Stock Exchange The inception of Calcutta Stock Exchange emerges from a get together under a "Neem Tree" way back in the 1830s. The Exchange has been serving the investor community continuously since its inception in the year 1963. and to regulate the securities market and for matters connected therewith or incidental thereto” 3. 11 . The North-Eastern region. Over the decades. the roots laid in the last century have dug themselves deep into the city and the region. from the alcove to the acme and.2 Bangalore stock exchange Limited(bgSE) The Bangalore Stock Exchange Limited (BgSE) is a self regulatory organisation located in the garden city of India. 1992 in accordance with the provisions of the Securities and Exchange Board of India Act.
The Annual turnover of the Exchange in 1997-98 was to the tune of Rs. the Stock Exchange had 150 members. 3.28 as of Feb. 2009). At the time of incorporation in 1908. SENSEX. Exchange traded funds (ETF) on SENSEX.779 crores. are listed on BSE and in Hong Kong. is India's first and most popular Stock Market benchmark index. The BSE Index. BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900).4 Bombay Stock Exchange Bombay Stock Exchange is the oldest stock exchange in Asia What is now popularly known as the BSE was established as "The Native Share & Stock Brokers' Association" in 1875. 1. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE OnLine trading System (BOLT). Calcutta which was constructed in 1928 and has been the office of the Stock Exchange for the last 70 years. BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certification. Futures and options on the index are also traded at BSE. which contains several corporate and institutional members. It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. 2010. The number of companies listed on the Exchange is more than 3. Lyons Range.500. The companies listed on BSE command a total market capitalization of USD Trillion 1. Over the past 135 years. we are ISO 27001:2005 certified. BSE continues to innovate: 12 . which is a ISO version of BS 7799 for Information Security. 1956. Today the total membership has risen to more than 900. The Calcutta Stock Exchange has been granted permanent recognition by the Central Government with effect from April 14. with a view to render useful service to investors.78. 1980 under the relevant provisions of the Securities Contracts (Regulation) Act. BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform.The building at 7. Today. Presently. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31.
and 'Members' • Launched 'BSE SENSEX MOBILE STREAMER' 3. NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country.5 The National Stock Exchange of India Limited The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges. • BSE now offers AMFI Certification for Mutual Fund Advisors through BSE Training Institute (BTI) • • • Co-location facilities for Algorithmic trading BSE also successfully launched the BSE IPO index and PSU website BSE revamped its website with wide range of new features like 'Live streaming quotes for SENSEX companies'. It recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. which enables exchange members to use its existing infrastructure for transaction in MF schemes. Based on the recommendations. 13 . 'Advanced Stock Reach'. 'Market Galaxy'.• Became the first national exchange to launch its website in Gujarati and Hindi and now Marathi Purchased of Marketplace Technologies in 2009 to enhance the in-house technology development capabilities of the BSE and allow faster time-to-market for new products • Launched a reporting platform for corporate bonds christened the ICDM or Indian Corporate Debt Market • Acquired a 15% stake in United Stock Exchange (USE) to drive the development and growth of the currency and interest rate derivatives markets • Launched 'BSE StAR MF' Mutual fund trading platform. 'SENSEX View'.
currency and interest rate derivatives.6 Dseindia Stock Exchange Dseindia Stock Exchange is provide information related to financial institutions. With this. 3. links to various other important sites. by NSE. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. stock derivatives and the first volatility index IndiaVIX in April 2008. 1956 in April 1993. equity derivatives. now both the retail and institutional investors can participate in equities. 3.On its recognition as a stock exchange under the Securities Contracts (Regulation) Act. August 2008 saw introduction of Currency derivatives in India with the launch of Currency Futures in USD INR by NSE. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. stock exchange glossary. giving them wide range of products to take care of their evolving needs. Interest Rate Futures was introduced for the first time in India by NSE on 31st August 2009. Exchange traded funds (ETF). exactly after one year of the launch of Currency Futures. latest stock news. list of various stock exchanges. The following years witnessed rapid development of Indian capital market with introduction of internet trading. reference articles.7 Rules & Regulations related to Capital Market 14 .
1 What is Due Diligence Process? 15 .Chapter – 4 Due Diligence Process (DDP) in Bangladesh 4.
Due Diligence is nothing but investigation of the issuer in respect of all potential material information for the greater interest of common shareholders. issue manager has to communicate with the following parties: Issuer Underwriter Bankers to the Issue Auditor Legal Authorities Securities & Exchange Commission (SEC) Dhaka Stock Exchange (DSE) Chittagong Stock Exchange Central Depository Bangladesh Limited (CDBL) Bangladesh Bank etc. the investment banker must perform a very thorough investigation of the issuer. For. together with financial ability.2 What is Material Information? As the name implies. This is called a Due Diligence Investigation.N. The Securities & Exchange Commission Ordinance. 4. First. Spinning Mills Ltd. 1987 and Securities & Exchange Commission Rules.Preparation of the issuance involves a number of steps.Spinning Mills is selected. R. extends to the underwriters as well.N. To perform Due Diligence Process. To perform due diligence process. R. 2006. Due Diligence Process is shown below in compliance with the Securities & Exchange Commission (Public Issue) Rules. the following heads are termed as material information: Corporate Information Products/Services Information 16 . The responsibility for the due diligence investigation. 2006 require that a firm offering its securities to the public make a reasonable effort to disclose to potential investors all material information or be held liable for its absence.
2 1.1 Principal Products 8(B) (5) (b) (1) 17 8(B) (5) (a) 8(B) (5) (a) 8(B) (5) (a) 8(B) (5) (a) 8(B) (5) (b) (3) Description of Business Name of Head under which it is published in the prospectus . CORPORATE INFORMATION 1.6 Miscellaneous Information 2. 2006: 4. No. PRODUCTS/SERVICES INFORMATION 2. 2006 1.3 Due Diligence Checklist of Bangladesh Due Diligence Process (DDP) entails thorough investigation of the issuer in respect of material information.3 1.5 Date of Incorporation Date of Commercial Operation Authorized & Paid Up capital structure Nature of the Business Associates. the following information are considered as material information and should be checked cautiously by the issue manager: DUE DILIGENCE CHECKLIST SL. Subsidiary/Related Holding Company 1. 2006.4 1. Material Information Reference to Public Issue Rules. According to the Securities & Exchange Commission (Public Issue). Customers’ and Suppliers’ Information Plant & Property Information Employees’ and Directors’ Information Financial Information Risk Assessment Legal Requirements Inspection of Necessary Papers & Documents The above heads are illustrated below in compliance with the Securities & Exchange Commission (Public Issue) Rules.1 1.
2 Competitive Conditions in the Business Sources and availability of Raw Materials and the Name of the Principal Suppliers 3. CUSTOMERS’ AND SUPPLIERS’ INFORMATION 3. PLANT & PROPERTY INFORMATION 4.2 Employees’ Position Director’s Involvement/interest in other companies 5.1 4.3 5.2.3 Name of the customer(s) who purchase 10% or more of the Company’s product/services 3.2 4.5 CIB Report 8(B) (8) (f) 18 8(B)(8)(d) 8(B) (8) (d) Directors and Officers 8(B) (5) (b) (11) 8(B)(8)(a) Description of Business .2 2.4 Location of the Principal Plants & Property Ownership of the Property Mortgage/Lien Status Lease Status 8(B) (6) (a) 8(B) (6) (b) 8(B) (6) (c) 8(B) (6) (d) Description of Property 5. EMPLOYEES’ AND DIRECTORS’ INFORMATION 5.1 3.3 Market of the Products Relative contribution of the Services contributing more than 10% of total revenue 8(B) (5) (b) (1) 8(B) (5) (b) (2) 2.4 Family Relationship among the Directors Family Relation between Directors & Officers 5.1 5.4 Contract with Principal Suppliers/Customers 8(B) (5) (b) (9) 8(B) (5) (b) (8) Description of Business 8(B) (5) (b) (5) 8(B) (5) (b) (6) 4.3 4.4 2.5 Distribution of Products/Services Production Capacity and Current utilization 8(B) (5) (b) (4) 8(B) (5) (b) (12) Description of Business 3.
6 6. RISK ASSESSMENT 7.1 Risk Factors 8(B)(3) Risk Factors and Management’s Perception about the Risks 8. LEGAL REQUIREMENTS 8.8 6.7 Aggregate Amount of Remuneration paid to Directors & Officers 5.3 6.7 Internal and External Sources of Cash Capital Expenditure Status Material Change from period to period Future Contractual Liabilities Lease Status 8(B)(7)(b)(1) 8(B)(7)(b)(2) 8(B)(7)(b)(3) 8(B)(7)(b)(8) 8(B)(7)(b)(11)+ 8(B)(7)(b)(12) 6.11 Financial Structure 8(B)(18)(d) Description of Securities Outstanding or Being Offered 7.1 6. FINANCIAL INFORMATION 6.6 Remuneration paid to top five (05) salaried Executives 8(B)(11)(a) Executive Compensation 8(B)(11)(b) 5.4 6.8 Beneficial Owners Holding Shares 5% or Above 8(B)(15)(a) + 9 Ownership of the Company’s Securities 6.10 Loan Status Revaluation Status Allotment of Shares to Promoters other than for cash 6.2 Key Financial Highlights Ratio Analysis 8(B)(20)(c) Financial Statement Requirements 6.5 6.1 VAT and Customs Duty Status 8(B)(7)(b)(10) 19 8(B)(7)(b)(12) 8(B)(7)(b)(15) 8(B)(7)(b)(18) Plan of Operation and Discussion of Financial Condition .5.9 6.
3 Involvement of Directors and Officers in Legal proceedings 8(B)(9) Involvement of Directors and Officers in Legal proceedings 9. INSPECTION OF NECESSARY PAPERS & DOCUMENTS 9.2 Income Tax Status 8(B)(7)(b)(10) Discussion of Financial Condition 8.1 Exhibits 18 Exhibits ………..***………. Chapter – 5 Due Diligence Process (DDP) in India 20 ..Plan of Operation and 8.
2 1. Material Information Reference to Issue of Capital and disclosure requirements ) Regulations 2009.1 1.1 Due Diligence Checklist in India (Pre and On going Issue) Due Diligence Process (DDP) entails thorough investigation of the issuer in respect of material information. According to the Securities & Exchange Commission Board of India(SEBI)(Issue of Capital and disclosure requirements ) Regulations 2009. 1.5 Date of Incorporation Date of Commercial Operation Authorized & Paid Up capital structure Nature of the Business Associates.6 Miscellaneous Information 21 General Information Name of Head under which it is published in the prospectus . Subsidiary/Related Holding Company 1. No.3 1. the following information are considered as material information and should be checked cautiously by the issue manager: DUE DILIGENCE CHECKLIST (Pre and On going Issue) SL. GENERAL INFORMATION 1.5.4 1.
2 Business Strategy (a) A brief statement about business strategy.7 Objectives of the Issue Requirement of Funds Funding Plan (Means of Finance) Appraisal Schedule of Implementation Deployment of Funds Issue Details 22 . (e) Products or services of the issuer (f) 2. BUSINESS INFORMATION 2.2. etc (c) Collaborations (d) Infrastructure facilities for raw materials and utilities like water. technology. etc.3 2. (b) A brief statement about future prospects.5 3. including capacity and capacity utilisation 2.1 Details of the Business of the issuer (a) Location of the project (b) Plant.4 2. electricity.4 3. process.5 Intellectual Property Rights Purchase of Property Land Business Overview Business Overview 3.2 3.6 3. machinery. ISSUE INFORMATION 3.1 3.
Raising of capital in form of equity or debt. date of commencement of business. 23 . amalgamation. managerial competence and capacity built-up. mergers. Negative features like time / cost overrun.1 (a) History and main objects and present business of the issuer including • • • date of incorporation. (g) The number of members/ shareholders of the issuer. including Capacity/facility creation. (f) Details regarding acquisition of business/undertakings. market. (d) Corporate profile of the issuer (e) The technology. revaluation of assets etc. HISTORY AND CORPORATE STRUCTURE INFORMATION 4. marketing.3. Competition.8 Interim Use of Funds 4. dates on which names have been changed. products. changes in registered offices of the issuer and reasons dates on which the Memorandum of Association of the issuer History and Corporate Structure Information • • • (b) Details of the major events in the history of the issuer. location of plant. date of conversion of partnership into limited company or private limited company to public limited company. defaults and lock out /strikes etc (c) Complete details of the subsidiaries and holding company.
History and Corporate Structure Information 4. customers.7 Shareholders’ Agreements Other Agreements Strategic Partners Financial Partners History and Corporate Structure Information 5. age.4 4. (d) shareholding of the issuer. experience.6 4. managing director (b) The nature of any family relationship between any of the directors.3 Details regarding subsidiary(ies) of the issuer including: (a) Name of the subsidiary. pursuant to which of the directors was selected as a Management Information 24 . (b) nature of business.5 4. Director Identification Number.4. occupation and date of expiration of the current term of office of manager. (c) Any arrangement or understanding with major shareholders. (c) capital structure. suppliers or others.2 Main objects as set out in the Memorandum of Association 4. address. qualifications.1 Board of Directors (a) Name. MANAGEMENT INFORMATION 5. (e) amount of accumulated profits or losses of the subsidiary(ies) not accounted for by the issuer.
(d) Details of service contracts entered into by the directors with the issuer providing for benefits upon termination of employment and a distinct negative statement in the absence of any such contract. if any.2 5.5 5.6 Compensation of Managing Directors/ Whole time Directors Interest of Directors Corporate Governance Key Management Personnel Employees Management Information 5. DIVIDEND INFORMATION 6.3 5. (e) Details of borrowing powers.4 5.director or member of senior management. in dividends announced and dividends paid and time gap between the dividends announced and dividends paid.7 Promoters/Principal Shareholders 6. 25 Dividend Policy . 5.1 (a) Dividend policy of the issuing company (b) Rate of dividend and amount of dividend paid for the last five financial years (c) Regulatory framework in the country of incorporation/share listed concerning dividends (d) Details of arrangement with the depositories for payment of dividend to the IDR holders (e) Information about changes.
Financial Statement Information 7. (c) Brief terms and conditions of the term loans including re-schedulement.2 Financial Information of the issuer (a) profits and losses and assets and liabilities. 7. default.(f) Information about dividend yield. significant accounting policies as well as the auditors’ qualifications shall be incorporated. Selected Consolidated Financial and Operating Data (a) “Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India (b) All the notes to the accounts.1. (d) Age-wise analysis of sundry debtors (e) Aggregate book value of quoted investments as well as aggregate market value of quoted investments (f) All significant accounting policies and standards followed in the preparation of the financial statements (g) Related Party Transactions: Information with Financial Statement Information respect to transactions or loans between the issuer 26 . FINANCIAL STATEMENT INFORMATION 7. etc. (b) the rates of dividends for each of the five financial years immediately preceding the issue of the offer document. prepayment. (g) Taxation aspects of dividend distribution. penalty.
material associate companies and others 8. (iii) enterprises in which a substantial interest in the voting power is owned. (ii) associates. key managerial personnel.and (i) enterprises that directly or indirectly through one or more intermediaries. directly or indirectly. individuals owning. an interest in the voting power of the company. and the debt/ equity ratios before and after the issue (j) Break-up of total outstanding unsecured loans taken by the issuer (k) Break-up of the total outstanding unsecured loans taken [from the issuer] by the promoters. (ii) Return on net worth: This ratio shall be calculated after excluding revaluation reserves and extra-ordinary items. related parties. group companies. net worth. (i) A Capitalisation Statement showing total debt.1 Outstanding Litigations and Material 27 . directly or indirectly (h) Accounting and Other ratios (i) Earnings per Share and Diluted Earnings Per Share: This ratio shall be calculated after excluding extra ordinary items. LEGAL AND OTHER INFORMATION 8. (iii) Net Asset Value per share. This ratio shall be calculated excluding revaluation reserves.
(f) Net Asset Value per share after issue and comparison thereof with the issue price. technical approvals. all government and other approvals (e) Authority for the issue and details of resolution passed for the issue.1 (a) Earnings Per Share and Diluted Earnings Per Share.Developments (a) Outstanding litigations involving the issuer (b) Outstanding litigations involving the promoter and group companies: (c) Material developments since the last balance sheet date. pre-issue. RISK FACTORS 28 . (d) Minimum Return on Increased Net Worth required to maintain pre-issue Earnings Per Share. (d) Government Approvals or Licensing Arrangements such as Investment approvals. for the last three years (as adjusted for changes in capital). (f) No prohibition by the board or other authorities (g) Eligibility of the issuer to enter the capital market. Legal and Other Information 9. PRICING INFORMATION 9. (c) Average Return on Net Worth in the last three years. (b) Price Earning ratio pre-issue. (e) Net Asset Value per share based on last balance sheet. Basis for Issue 10.
industry risk.1 General Information: (a) Name of the Issuer (b) Issue opening date (c) Earliest closing date (d) Actual closing date (e) Date of filing prospectus with RoC General Information 1. Material Information Reference to Public Issue Rules. INSPECTION OF NECESSARY PAPERS & DOCUMENTS 11. 2006 Name of Head under which it is published in the prospectus 1. INITIAL POST ISSUE REPORT 1. market risk.10.1 Disclosures 18 Disclosures 5. operational risk etc. 8(B)(3) Risk Factors 11.1 Risk Factors such as Interest Rate risk.2 Due Diligence Checklist in India (Post Issue) DUE DILIGENCE CHECKLIST (Post Issue) SL. No.2 Issue Details: (a) Nature of specified securities (b) Offer price per security for different categories (c) Amount per security on application for different categories (d) Issue size: (i) Promoters' contribution (ii) Date of submission of auditors' certificate 29 .
FINAL POST ISSUE REPORT 2.1 In Case of Subscribed Issue: (i)Name of the issuer (ii) Issue opening date (iii) Actual closing date (iv) Issue Details (as per the prospectus) : (a) Nature of instrument (b) Offer price per instrument (c) Amount per instrument on application (d) Issue Size (v) 3-Day Report (a) Due on : (b) Submitted on : 30 . % of (ii) to (i) (iii) Amount subscribed by the reserved categories 2.3 Provisional Subscription Details: (i) Total amount to be collected on application (ii) Amount collected on application (iii) % subscribed i.to the Board for receipt of promoters' contribution : (iii) Amount through offer document (including reserved categories and net public offer) (iv) Reserved Category Amount reserved on competitive basis (Rs lakhs) (v) Net Public Offer 1.e.
of unsuccessful allottees (8) Actual Date(s) of completion of despatch of Refund Orders (b) Certificates/Allotment Letters : (c) Reasons for delay in despatch. (iv) No. if any : (d) Whether interest paid for delayed period. 31 . if so. (ii) No. of applications recd. of instruments applied for (iii) Amount of subscription received : Rs. for which period : (9) Amount of refund due : Rs. of bank branches) (vii) Bank-wise names of branches which did not submit final consolidated certificates from closure of issue and mention the dates when they actually submitted (viii) Subscription Details : (a) Public Offer (Net) (Including unsubscribed portion of reserved category added back to net public offer) (i) No. of collecting banks : (Also specify no. of successful allottees per 1 lakh shares (b) No.(vi) No. of times issue subscribed Actual Date of finalisation of Basis of Allotment (enclose copy) (10) Allotment Details (a) No.
of underwriters to whom devolvement notices had been issued (f) Date of issue of devolvement notices (g) No.2 In Case of Undersubscribed Issue: (a) If the issue is underwritten. of underwriters who did not pay devolvement (Please give names. amount 32 8(B) (5) (a) . mention how the shortfall was met (e) No. if any : (12) Date of completion of despatch of refund orders : (13) Name of Designated Stock Exchange : (14) Names of other stock exchanges where listing is sought : (15) Date on which application was filed with each stock exchange for listing of instruments : (16) Date when listing and trading permission given by each stock exchange (Enclose copies of permission letters of stock exchanges) (17) Reasons for delay in listing for trading. if any : 2.(10) Refund Banker(s) (Name and Address) : (11) Date of transfer of refund amount to Refund Banker. of underwriters (d) If devolvement notices had not been issued. mention the amount of issue underwritten : (b) Extent of under subscription on the date of closure of the issue: (i) Percentage (ii) Amount (c) Total no.
mention how the shortfall was met (i) In case where FIs/ MFs had subscribed to make up shortfall not as underwriter : (i) Name of FI/MF (ii) No.underwritten and reasons for not paying) (h) In case of default from underwriters. of securities applied for (iii) Amount received Chapter – 6 Comparison of Due Diligence Process in Bangladesh and India 33 .
For India these are considered as material information: • General information • Business information 34 . In Bangladesh.As Due Diligence Process means material information related to the issue. these information are necessary to be considered as material information: • Corporate information • Product/services information • Risk factors • Directors’ information etc. all related parties have to disclose these information.
Government support. and Skilled and experienced senior management team and competent and committed workforce. on the basis of assessment of market demand from the Bidders for the offered Equity Shares by way of the Book Building Process. between India and Bangladesh. Diversified business portfolio.• Issue information • History and corporate structure information • Dividend information • Financial Statement information • Legal and Other information etc. 35 .0 times the face value of our Equity Shares.1 Pricing of the Issue The face value of our Equity Shares is Rs. Strong financial position and cash flow from operations. the following things differ: • Pricing of the issue • Lock-in Provision • Minimum offer to public 6.10 and the Issue Price of Rs. Effective project implementation. The Issue Price has been determined by our Company and the Selling Shareholder in consultation with the BRLMs. Attractive tariffs. Qualitative Factors • • • • • • • • Leadership position in Indian power transmission sector. High operational efficiencies. and on the basis of the following qualitative and quantitative factors. competitive landscape and business model. 90 is 9. Generally.
PRICE EARNING RATIO (“P/E RATIO”): P/E Ratio in relation to Issue Price of ` 90 per Equity Share of face value of ` 10 each: a) As per our audited unconsolidated financial statements for Fiscal 2010: 18. 3.Quantitative Factors The information presentation below relating to the Company is based on audited unconsolidated financial statements for Fiscals 2009 and 2010 and unconsolidated limited reviewed financial statements for the six months ended September 30.41 36 .56 b) As per our Weighted Average EPS: 19.57 1 12. 1.57 Fiscal Weighted Average As per our unconsolidated limited reviewed financial statements for the six months ended September 30.83 2 12. AVERAGE RETURN ON NET WORTH (“RoNW”): RoNW as per audited unconsolidated financial statements Fiscal 2009 2010 Weighted Average RoNW Weight 11.69 c) Industry P/E – There are no listed companies in India which are in the business of power transmission. prepared in accordance with Indian GAAP. EARNING PER SHARE (“EPS”): Basic & Diluted EPS (in Rs. 2010. the basic and diluted EPS was ` 3.) Weight 2009 4.22. 2010. 2.85 2 4.02 1 2010 4.
and is justified based on the above quantitative and qualitative factors.81 b. At the higher end of the Price Band: 11. discount of ` 4. At the lower end of the Price Band: 11. 2010. comparative data for the peer group/industry is not available. respectively. At the Issue Price: 11. 2010 (unconsolidated) : ` 37. 2010: a. As of September 30. Promoters’ holding in excess of minimum 1 year Minimum promoters’ contribution promoters’ contribution 37 . Issue Price : ` 90 d. on the basis of assessment of market demand from the Bidders for the offered Equity Shares by way of the Book Building Process. whichever is later.86%. the RoNW was 7.96 c.50 to the Issue Price is being offered to Retail Bidders and Eligible Employees. 2010 from the Selling Shareholder. Minimum Return on Total Net Worth after Issue needed to maintain Pre-Issue EPS for the year ended March 31. COMPARISON WITH OTHER LISTED COMPANIES We believe none of the listed companies in India are in the business of power transmission. NET ASSET VALUE (“NAV”) PER EQUITY SHARE: a. 6. The Issue Price of ` 90 has been determined by our Company and the Selling Shareholder.52% b. 4.As per our unconsolidated limited reviewed financial statements for the six months ended September 30.40% 5. Hence. 2010 (unconsolidated) after the Issue: ` 45. 6. in consultation with the BRLMs. 2010 (unconsolidated) : ` 40. As of September 30.40% c.21 Bidders should note that pursuant to the letter dated July 27. As of March 31.2 Lock-in Provision 3 years from the date of commencement of commercial production or date of allotment in the public issue.
Chapter – 7 Summary of Findings and Policy Recommendations 38 . of the postissue capital. shall be at least ten per cent. Of the issue size.Pre-issue capital held by persons other than promoters 1 year 6. shall be at least ten per cent. the net offer to public: (a) in case of an initial public offer. or twenty five per cent. 1957. as the case may be. or twenty five per cent.3 Minimum offer to Public According to the clause (2) of rule 19 of Securities Contracts (Regulations) Rules. and (b) in case of a further public offer. as the case may be.
issue management services. 39 . we can find out the following points: • Generally. • The scope and responsibility of the issue manager is fully mentioned in the agreement contract between issuer and issue manager. underwriting cooperation.1 Findings After analyzing the differences between the due diligence process between India and Bangladesh. Issue manager is responsible for the duties for which he has been appointed. normally Issue analysis. Issue arrangements. Due Diligence process begins with the agreement between issuer and issue manager. Financing strategy.7. post issue services are mentioned. In the agreement. This agreement includes both pre issue and post issue services.
Employees’ and Directors’ Information etc to find the strength and weaknesses of the issue. 7. 3. Due Diligence Certificate after the issue should also be added. there exist a lot of options. Lock in provision in India is different from that of Bangladesh. • The capital market of India is very vast. 40 . 2. it analyzed the material information such as Corporate Information. Bangladesh should consider more factors for risk assessment. Minimum promoters’ contribution is locked in for 3 years from the date of commercial operation date of allotment in the public issue. • Promoters’ holding in excess of minimum promoters’ contribution will be locked in for a year of 1 year. Pre-issue capital held by persons other than promoters will be locked in for a year of 1 year. whichever is later. Customers and Suppliers’ Information. we can recommend some policy implications for Bangladesh: 1. Products/Services information. Financial Information.2 Policy Implications In comparing the differences between the due diligence process between India and Bangladesh. Due Diligence process should be monitored cautiously.• Being an issue manager. So.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.