RIZVI ACADEMY OF MANAGEMENT

PANKAJ LIPARE

A
Project report On

Initial Public Offering

In partial fulfillment of the requirements of the Summer Internship of Post Graduate Diploma in Business Management Through Rizvi Academy of Management under the guidance of Prof. Vishal Singhi

Submitted by Pankaj Lipare

PGDBM Batch: 2010 – 2012.

INIITAL PUBLIC OFFER

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RIZVI ACADEMY OF MANAGEMENT

PANKAJ LIPARE

CERTIFICATE

This is to certify that Mr. Pankaj Lipare, a student of Rizvi Academy of Management, of PGDBM III bearing Roll No. 66 and specializing in Finance has successfully completed the project titled

“Initial Public Offering”
under the guidance of Prof. Vishal Singhi in partial fulfillment of the

requirement of Post Graduate Diploma in Business Management by Rizvi Academy of Management for the academic year 2010 – 2012.

_______________ Prof. Vishal Singhi Project Guide

_______________ Prof. Umar Farooq Academic Coordinator

INIITAL PUBLIC OFFER

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RIZVI ACADEMY OF MANAGEMENT

PANKAJ LIPARE

ACKNOWLEDGEMENT

I would like to express my gratitude towards my project guide Prof. Vishal Singhi without whose continuous guidance and encouragement this project would not have been possible.

Also I would like to thank our director Dr. Kalim Khan who has provided us with the necessary infrastructure and guidance in the course of the project. Also I would like to take this opportunity to thank all the teaching as well as non-teaching staff for their continuous help and support.

INIITAL PUBLIC OFFER

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RIZVI ACADEMY OF MANAGEMENT

PANKAJ LIPARE

EXECUTIVE SUMMARY

INIITAL PUBLIC OFFER

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RIZVI ACADEMY OF MANAGEMENT

PANKAJ LIPARE

Table of Contents
Topics IPOs (Initial Public Offerings) Regulations for IPOs Eligibility norms for making an IPO Disclosures/Offer Documents Pricing Types of Issues: Fixed Price & Bookbuilding Allocations in an IPO Understanding an offer document Applying in an IPO Allotments in IPO Anchor Investors Listing & Trading Key Intermediaries Filing Investor Grievances Other Aspects Page No. 2 5 7 10 13 15 20 22 25 33 38 39 40 43 43

INIITAL PUBLIC OFFER

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RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE IPOS (INITIAL PUBLIC OFFERINGS) What is an IPO? An IPO is when a company which is presently not listed at any stock exchange makes either a fresh issue of shares or makes an offer for sale of its existing shares or both for the first time to the public. Though the number of IPOs was small. INIITAL PUBLIC OFFER Page 6 . 2034 crore. the amounts being raised were increasing. 2003-04 to 2007-08 saw an active market for IPOs. Through a public offering. The shares are made available to the investors at the price determined by the promoters of the company in consultation with its investment bankers. The year 2009-10 yet again witnessed a revival in the IPO market. the issuer makes an offer for new investors to enter its shareholding family. the amount mobilised in 2008-09 nosedived to a meager Rs. through just 21 small IPOs. Due to a huge downturn in the economy and the secondary market. The successful completion of an IPO leads to the listing and trading of the company‘s shares at the designated stock exchanges.

crore) 3191. Companies also go public to provide a route for some of the existing shareholders including venture capitalists to exit fully or partially from the company‘s shareholding or for promoters to partially dilute their holding. This is called an offer for sale where the proceeds of the issue go to the selling shareholders and not to the company.88 23706.OF IPOs AMOUNT (Rs.10 14662.16 41323. INIITAL PUBLIC OFFER Page 7 .99 24948. Given below is the table of monies raised through issue of fresh capital and through offers for sale in IPOs. This is called fresh issue of capital where the proceeds of the issue go to the company.06 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 (till 31 May 2011) 19 23 76 76 84 21 39 52 10 SOURCE : PRIME Database Why does a company make an IPO? Going public provides an opportunity to the companies to raise cash for setting up a project or for diversification/expansion or sometimes for working capital or even to retire debt or for potential acquisitions.77 2223.31 33097.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE YEAR NO.45 2033.32 10797.

it increases the company‘s ability to raise debt at finer rates.99 24948.32 10797.OF AMOUNT NO.45 13240.72 2688.31 33097.06 SOURCE : PRIME Database Listing offers several benefits. The company also gets a continuing window for raising more capital.92 3115.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE YEAR FRESH CAPITAL OFFERS SALE FOR TOTAL NO.77 2223.65 1985.08 21832.OF IPOs 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 (till 31 May 2011) 16 21 76 74 82 21 39 49 10 AMOUNT NO.59 9130.20 0.86 19857. Acquisitions also become simpler as instead of cash payouts.crore) 1377. both from the domestic and overseas equity markets. which is very critical for the success of employee stock ownership plans.88 23706.44 38634.73 1667.crore) 3191.42 8099. INIITAL PUBLIC OFFER Page 8 . Of course. companies can use shares as a currency. For one.68 6562. Listing also lends liquidity to the stock.57 2223.21 22745.OF AMOUNT (Rs.67 960. listing carries a considerable degree of prestige for the company.45 2033.10 14662.00 IPOs 19 23 76 76 84 21 39 52 10 (Rs.81 48.16 41323. which help to attract top talent.crore) 1813.06 IPOs 5 9 11 12 9 3 11 14 0 (Rs.

Moreover. stipulate continuing disclosures in specified formats and frequency. Officials of SEBI at various levels examine the compliance with SEBI ICDR Regulations 2009 and ensure that all necessary material information is disclosed in the draft offer documents. the company has to open its issue within three months period. 100 crore shall be filed with the concerned regional office of the Board under the jurisdiction of which the registered office of the issuer company falls. Does SEBI approve the contents of the offer document? Submission of offer document to SEBI should not in any way be deemed or construed that the same has been cleared or approved by SEBI. The validity period of SEBI‘s observation letter is three months only i. SEBI‟s Role in IPOs/FPOs Any company making an IPO/FPO is required to file a draft offer document with SEBI for its observations. companies have to comply with the listing agreement. which among other things.e. especially with reference to the minority shareholders. This INIITAL PUBLIC OFFER Page 9 . such companies should have a board of directors. where at least half the members are independent of the promoters/company. SEBI oversees that such companies act in a reasonable and fair manner. For example. The Lead manager certifies that the disclosures made in the offer document are generally adequate and are in conformity with SEBI guidelines for disclosures and investor protection in force for the time being.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE REGULATIONS FOR IPOS Because of the public participation. Does it mean that SEBI recommends an issue? SEBI does not recommend any issue nor does take any responsibility either for the financial soundness of any scheme or the project for which the issue is proposed to be made or for the correctness of the statements made or opinions expressed in the offer document. Draft offer document in respect of issues of size upto Rs.

They are strongly warned against any ‗tips‘ or news through unofficial means. SEBI does not associate itself with any issue/issuer and should in no way be construed as a guarantee for the funds that the investor proposes to invest through the issue. INIITAL PUBLIC OFFER Page 10 .RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE requirement is to facilitate investors to take an informed decision for making investment in the proposed issue. Does the SEBI clearance tag make the IPO/FPO safe for the investors? The investors should make an informed decision purely by themselves based on the contents disclosed in the offer documents. the investors are generally advised to study all the material facts pertaining to the issue including the risk factors before considering any investment. However.

3 crore in each of the preceding three full years Distributable profits for at least three out of the immediately preceding five years Net worth of at least Rs. 1 crore in each of the preceding three full years The issue size should not exceed 5 times the pre-issue net worth If there has been a change in the company‘s name. may not be able to comply with all the eligibility norms. (b) The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a compulsory market-making for at least 2 years OR Alternative II: (a) The ―project‖ is appraised and participated to the extent of 15% by FIs/Scheduled Commercial Banks of which at least 10% comes from the appraiser(s).RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE ELIGIBILITY NORMS FOR MAKING AN IPO SEBI has stipulated the eligibility norms for companies planning an IPO which are as follows: a) b) c) d) e) Net tangible assets of at least Rs. with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (QIBs). two other alternative routes are available to such companies: Alternative I: (a) Issue shall be through book building route. for one reason or the other. INIITAL PUBLIC OFFER Page 11 . at least 50% of the revenue for preceding one year should be from the new activity denoted by the new name Alternative routes Recognizing that many good companies.

firm allotment & promoter contribution) to be offered to the public Minimum offer size – Rs. 100 crores Issuance through book building with 60% QIB allocation INIITAL PUBLIC OFFER Page 12 . 1949 A corresponding new bank set up under the Banking Companies Act. the company shall also satisfy the criteria of having at least 1000 prospective allottees in its issue. However. Exemptions to certain category of entities from the eligibility norms The following categories of entities are eligible for exemption from entry norms. a minimum of 25% of each class of security must be offered to the public for subscription.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE (b) The minimum post-issue face value capital shall be Rs. 1970 An infrastructure company Whose project has been appraised by a Public Financial Institution (PFI) Not less than 5% of the project cost is financed by any of the PFI Rights Issue by a listed company Minimum Public Shareholding Requirements Clause 40A of the BSE Listing Agreement requires at least 25% of the post issue paid up capital to be with the ‗public‘ (i. 10 crore or there shall be a compulsory market-making for at least 2 years. As per rule 19(2) (b) of the Securities Contract (Regulation) Rules. at least 10% can be offered if the following 3 conditions are fulfilled: Minimum 2 MM securities (excluding reservations. other than promoter and promoter group). A banking company including a local area bank set up under the Banking Regulation Act.e. In addition to satisfying the aforesaid eligibility norms.

Note: Section 617 of the Companies Act. infrastructure companies (as defined under Chapter II Clause 14(4) of the SEBI ICDR Regulations 2009) and companies referred to the Board for Industrial and Financial Reconstruction. INIITAL PUBLIC OFFER Page 13 . 1956). The aforesaid requirement of maintaining minimum level of public shareholding on a continuous basis will not be applicable to government companies (as defined under Section 617 of the Companies Act. 1956 defines Government company as follows Government Company means any company in which not less than 51% of the paid-up share capital is held by the Central Government. or partly by the Central Government and partly by one or more State Governments. or by any State Government or Governments. and includes a company which is a subsidiary of a Government company as thus defined.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Continuous public shareholding since listing also needs to be maintained as per Clause 40A of the listing agreement.

Types of Offer Documents Draft Offer Document It refers to the first document filed by companies with SEBI and stock exchanges for approval. It is also placed on the websites of recognized stock exchanges where specified securities are proposed to be listed and merchant bankers associated with the issue for public comments for a period of at least 21 days. The disclosure requirements regarding the issuance of securities are covered in detail in the SEBI ICDR Regulations 2009. after expiry of the above period (of at least 21 days). who after reviewing. if any. the issuer either on the date of filing the draft offer document with SEBI or on the next day has to make a public announcement in one English national daily newspaper. disclosing to the public the fact of filing of draft offer document and inviting the public to give their comments to SEBI. which the company has to incorporate in the offer document. SEBI typically requires a period of 30 days for processing a draft offer document. INIITAL PUBLIC OFFER Page 14 . one Hindi national daily newspaper and one regional language newspaper at the place where its registered office is situated. The draft offer document is placed by SEBI on its website. to be made in the draft offer document. the entire IPO/FPO regulation is driven by disclosures-inform the investors as much as is possible and is relevant for him to take an informed investment decision. Furthermore. The lead merchant bankers.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE DISCLOSURES/OFFER DOCUMENTS Since 1992. communicate their observations to the Company. file with SEBI a statement giving information of the comments received by them or the issuer on the draft offer document during that period and the consequential changes.

The offer document filed thereafter with ROC is called a prospectus. It contains all the salient features of a prospectus. it is a process of price discovery as the price cannot be determined until the bidding process is completed. Only on completion of the bidding process. Offer Document It means the final prospectus in the case of a public issue/offer for sale which is filed and registered with the Registrar of Companies and the stock exchanges. Abridged Prospectus the memorandum as prescribed in Form 2A under sub-section (3) of section 56 of the Companies Act. An offer document covers all the relevant information required to be disclosed under various regulations and incorporates the observations of the Registrar of Companies and SEBI. the details of the final price are included in the offer document.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Red herring prospectus A red herring prospectus (RHP) is a preliminary registration document that is filed with SEBI in the case of bookbuilding issue which does not have details of either price or number of shares being offered or the amount of issue. an issuer can state the issue size and the number of shares are determined later. the number of shares and the upper and lower price bands are disclosed. Hence. This means that in case price is not disclosed. Accessing draft offer documents before even the IPO/FPO is cleared by SEBI The draft offer document/letter of offer remains posted on SEBI website for a period of 21 days from the date of filing the same to SEBI and can also be downloaded from there Public comments/complaints on the issuer company or others connected with the issue The objective of making an offer document public is to invite public comments. It accompanies the application form of public issues. such details are not shown in the Red Herring prospectus filed with ROC in terms of the provisions of the Companies Act. INIITAL PUBLIC OFFER Page 15 . On the other hand. The comments should be submitted within 21 days of the filing of the draft offer document by the company with SEBI. 1956. In the case of book-built issues.

INIITAL PUBLIC OFFER Page 16 . the stock exchanges and the company. the lead managers. These are also available on the websites of SEBI. its lead managers and syndicate members.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Obtaining full copy of the offer document Full copy of the offer document is available from the company.

provided that such difference is not more than 10% of the price at which specified securities are offered to other categories of applicants.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE PRICING Any restrictions on pricing by companies? Since 1992. the price of the specified securities offered in the public issue can be different from the price offered in rights issue and justification for such price difference needs to be given in the offer document. the single prices in case of fixed price issue as well as the price band in the case of a bookbuilding issue are determined by the company. subject to the following: (a) retail individual investors or retail individual shareholders [or employees entitled for reservation made under regulation 42 making an application for specified securities of value not more than two lakh rupees] may be offered specified securities at a price lower than the price at which net offer is made to other categories of applicants. The issuer is required to disclose in detail about the qualitative and quantitative factors justifying the issue price. The companies are however required to give in the offer document a detailed justification of the price. (d) In case the issuer opts for the alternate method of book building in terms of Part D of Schedule XI of the SEBI ICDR Regulations 2009. Differential pricing is permitted. the issuer can offer specified INIITAL PUBLIC OFFER Page 17 . Differential Pricing Pricing of an issue where one category is offered shares at a price different from the other category is called differential pricing. (c) in case of a composite issue. (b) in case of a book built issue. The basis of issue price is disclosed in the offer document. As such. the price of the specified securities offered to an anchor investor cannot be lower than the price offered to other applicants. companies have been allowed to freely price their issues. SEBI does not play any role in deciding the price for issues.

RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE securities to its employees at a price lower than the floor price provided that the difference between the floor price and the price at which specified securities are offered to employees is not more than 10% of the floor price. if any. it has been decided to allow investors eligible for differential pricing in public issues to make the payment at a price net of discount. The effect of differential pricing. the ability to apply for more shares with the same cash outlay etc. at the time of bidding itself. 2011. if any. in a public issue is being given to eligible investors only at the stage of allotment of specified securities and not at the time of filing an application for such allotment. INIITAL PUBLIC OFFER Page 18 . Effective June 15. This takes away certain benefits from investors such as lower cash outflow at a price net of discount.

This method provides an opportunity to the market to discover the price for securities. Price Discovery through Bookbuilding Process ―Book Building‖ means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built up and the price for the securities is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. which is based on a price range. At the end of bidding period the order book is closed and consequently the quantum of shares ordered and the respective prices offered are known. The issue price is fixed after the closing date of the bid.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE TYPES OF ISSUES: FIXED PRICE & BOOKBUILDING There are two types of issues : Fixed Price Issues An issuer company is allowed to freely price the issue. A particular time frame is fixed as the bidding period. The Issuer company can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the Draft offer documents filed with SEBI and actual price can be determined at a later date before filing of the final offer document with SEBI/ROCs. The basis of issue price is disclosed in the offer document where the issuer discloses in detail about the qualitative and quantitative factors justifying the issue price. A company planning an IPO/FPO appoints a merchant bank as a book runner. INIITAL PUBLIC OFFER Page 19 . The process is named so because it refers to collection of bids from investors. The determination of final price is based on demand at various prices. The book runner then builds an order book that collates bids from various investors. Potential investors are allowed to revise their bids at any time during the bidding period.

as can be seen from the table below. Though there are fixed price issues.98 1959.0 99. it is mandatory to have an online display of the demand and bids during the bidding period.00 69.crore) 2641. (Under closed book building.crore) 3191.13 33051.OF IPOs 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 (till 31 May 2011) 9 15 53 65 74 17 39 50 AMOUNT (Rs.50 17.04 14507. only electronic facility is allowed to be used in case of book building.20 82.OF IPOs 10 8 23 11 10 4 0 2 AMOUNT (Rs.8 98.28 572.6 3.4 100.43 23469.4 96. The spread between the floor and the cap of the price band can not INIITAL PUBLIC OFFER Page 20 .6 0.crore) 550. As per SEBI. YEAR BOOKBUILDING NO.OF IPOs 19 23 76 76 84 21 39 52 AMOUNT (Rs.7 99.47 74.0 0.2 % TOTAL NO. the book is not made public and the bidders have to take a call on the price at which they intend to make a bid without having any information on the bids submitted by other bidders). This is known as open book system.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Bookbuilding has become the preferred route of raising capital.45 237.3 1.07 155.32 10797.99 24948.8 % FIXED PRICE NO.92 24948. Price Band The offer document may have a floor price for the securities or a price band within which the investors can bid.0 99. by amount.13 32982.45 2033.0 0.10 254.2 1.16 41323.9 94.1 5.70 SOURCE : PRIME Database Open Bookbuilding In book-built issues.88 23706.07 41068.04 10225.10 14662.07 0. the bookbuilding IPO/FPOs dominate.

by issuing press release and also indicating the change on the relevant website and the terminals of the syndicate members.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE be more than 20%. Final Issue Price The demand at various price levels within the price band is made available on the websites of the designated stock exchanges during the entire tenure of the issue and once the issue closes. the bidding period has to be extended for a further period of three days. the issuer is required to indicate either the price band or a floor price in the red herring prospectus. SEBI requires that any revision in the price band has to be widely disseminated by informing the stock exchanges. the final price is determined by the issuer and made known to the investors. Minimum Number of Days for which an IPO/FPO Subscription List has to remain Open INIITAL PUBLIC OFFER Page 21 . SEBI ICDR Regulations 2009 permit only retail individual investors to have an option of applying at cut off price. The price band can have a revision. subject to the total bidding period not exceeding thirteen days. it means that the cap should not be more than 120% of the floor price. The actual discovered issue price can be any price in the price band or any price above the floor price. The company decides the price band in consultation with the investment bankers. This issue price is called ―Cut off price‖. Cut-off Price In Book building issue. In other words. Floor Price Floor price is the minimum price at which bids can be made. This is decided by the issuer and LM after considering the book and investors‘ appetite for the stock. and typically after undertaking a pre-marketing exercise with some leading QIBs. When the price band is revised.

1 (iii) of Chapter II may be kept open for a maximum period of 21 working days. Where. Pure Auction as an Additional Bookbuilding Mechanism SEBI has decided to introduce an additional method of book building. If the floor price is not mentioned in the red herring prospectus. then allotment shall be done on proportionate basis. in which the issuer would decide on a floor price and may mention the floor price in the red herring prospectus. the bidding (issue) period disclosed in the red herring prospectus shall be extended for a minimum period of three working days. Allotment to retail individual investors. however the number of specified securities bided for at a price is more than available quantity. The public issue made by an infrastructure company. satisfying the requirements in Clause 2. The issuer may:INIITAL PUBLIC OFFER Page 22 . the issuer shall announce the floor price at least one working day before opening of the bid in all the newspapers in which the pre-issue advertisement was released.4. for FPOs. The bidder who bids at the highest price shall be allotted the number of securities that he has bided for and then the bidder who has bided at the second highest price and so on. Qualified institutional buyers shall bid at any price above the floor price. non-institutional investors and employees shall be allotted specified securities at the floor price subject to provisions of Clause (d) of Regulation 29 of SEBI ICDR Regulations 2009. public issue shall be kept open for at least three working days but not more than ten working days including the days for which the issue is kept open in case of revision in price band. to start with. In case the price band in a public issue made through the book building process is revised. provided that the total bidding period shall not exceed ten working days. Allotment shall be done on price priority basis for qualified institutional buyers.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Except as otherwise provided in the SEBI ICDR Regulations 2009. noninstitutional investors and employees of the issuer shall be made proportionately as illustrated in Schedule XI of SEBI ICDR Regulations 2009. until all the specified securities on offer are exhausted. Retail individual investors.

Fast Track Issues In order to enable well established and compliant listed companies to access Indian primary market in a time effective manner through follow-on public offerings and rights issues. it need not be deemed as non compliance. SEBI introduced the concept of Fast Track Issues (FTIs) in November 2007. 5000 crore from Rs.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE (a) place a cap either in terms of number of specified securities or percentage of issued capital of the issuer that may be allotted to a single bidder. In case the clause relating to composition of Board of Directors has not been complied with in one or more quarters. (b) decide whether a bidder be allowed to revise the bid upwards or downwards in terms of price and/or quantity. SEBI has relaxed certain requirements of FTIs such as reducing the average market capitalization of public shareholding of the issuer to Rs. 10000 crore. provided the company is in compliance in this regard at the time of filing the offer document with stock exchange/ ROC and adequate disclosures are made in the offer document in this respect. pegging the annualized trading turnover to free float for companies whose public shareholding is less than 15% of the issued capital. (c) decide whether a bidder be allowed single or multiple bids. INIITAL PUBLIC OFFER Page 23 .

mutual funds. 2. other than QIBs or individuals applying for less than Rs. 2. this category includes High Net Worth Individuals (HNIs) and corporate bodies. 2. Definition of Non Institutional Investors (NIIs) All applicants. Bookbuilding Issues In a book built issue. 2.00.000. Definition of Qualified Institutional Buyers (QIBs) QIBs are those institutional investors who are perceived to possess expertise and the financial strength to evaluate and invest in the capital markets. scheduled commercial banks.00.000 or more and Investors applying for upto Rs.000 are considered as NIIs. 1956. A QIB is defined by SEBI as a) b) c) public financial institution as defined in section 4A of the Companies Act. Definition of Retail Individual Investors (RIIs) ‗Retail individual investor‘ means an investor who applies or bids for securities of or for a value of not more than Rs. allocation to Retail Individual Investors (RIIs).00. Non Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs) is in the ratio of 35:15: 50 respectively.00.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE ALLOCATIONS IN AN IPO Fixed Price Issues There are two buckets in the fixed price IPO/FPOs: Investors applying for Rs.000. Typically. INIITAL PUBLIC OFFER Page 24 .

2005 of the Government of India published in the Gazette of India m) insurance funds set up and managed by army. insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA). venture capital funds registered with SEBI. India such as Postal Life Insurance Fund (PLIF) and Rural Postal Life Insurance Fund (RPLIF) These entities are not required to be registered with SEBI as QIBs. 25 crores pension Funds with minimum corpus of Rs. F. navy or air force of the Union of India n) Insurance funds set up by Department of Posts. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE d) foreign institutional investor registered with SEBI and sub-account (other than a sub-account which is a foreign corporate or foreign individual) registered with SEBI. state Industrial Development Corporations. e) f) g) h) i) multilateral and bilateral development financial institutions. INIITAL PUBLIC OFFER Page 25 . This has been done to avoid inflated demand in Public Issues and to provide a level playing field to all investors subscribing for securities. 2/3/2005-DDII dated November 23. 25 crores National Investment Fund set up by resolution no. No. foreign venture capital investors registered with SEBI. All types of investors are required to bring in 100% of the application money as margin along with the application for securities in Public Issues. j) k) l) provident Funds with minimum corpus of Rs.

debenture trustees (in case of debt issue). the issuer‘s management gives its view on the Internal and external risks faced by the company. book building process in brief and details of underwriting Agreements are given here. Risk Factors Here. funds requirement. Introduction The introduction covers a summary of the industry and business of the issuer company. objects of the offering. interim use of funds. Cover Page The Cover Page of the offer document covers full contact details of the issuer company. sources of financing of funds already deployed. and the particulars regarding listing. lead managers and registrars. basis for issue price.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE UNDERSTANDING AN OFFER DOCUMENT This section basically deals with the contents in an offer document. credit rating (in case of debt issue). number. Important details of capital structure. the merchant bankers and their responsibilities. schedule of implementation. It is generally advised that the investors should go through all the risk factors of the company before making an investment decision. operating and other data. monitoring agency. the company also makes a note on the forward looking statements. tax benefits are covered. This information is disclosed in the initial pages of the document and it is also clearly disclosed in the abridged prospectus. the details of brokers/syndicate members to the Issue. General Information about the company. Other details such as Credit Rating. etc are disclosed if applicable. summary of consolidated financial. the nature. funds deployed. basic terms of issue. sources of financing for the balance fund requirement. INIITAL PUBLIC OFFER Page 26 . risks in relation to the first issue. the offering details in brief. funding plan. Here. price and amount of instruments offered and issue size.

government approvals/licensing arrangements.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE About Us This presents a review of on the details of the business of the company. outstanding debentures or bonds. consents. underwriting commission. prohibition by SEBI. industry-regulation (if applicable). currency of presentation dividend policy and management's discussion and analysis of financial condition and results of operations are given. outstanding preference shares. management and board of directors. fees payable to the lead managers. disclaimer clause of the stock exchanges. main objects.). corporate governance. expert opinion. eligibility of the company to enter the capital market. capitalisation of reserves or profits. related party transactions. letters of allotment or refund orders. exchange rates. minimum subscription. previous rights and public issues. Financial Statements Financial statement. competitive strengths. previous issues for cash. disclaimer in respect of jurisdiction. commission and brokerage on. compensation. subsidiary details. distribution of information to investors. fees payable to the issue management team. promoters and group companies are disclosed. disclaimer clause. Also material developments since the last balance sheet date. history and corporate structure. all government and other approvals. business strategy. INIITAL PUBLIC OFFER Page 27 . impersonation. technical approvals. litigations involving the company and its subsidiaries. listing. issues otherwise than for cash. previous issues. are disclosed. fees payable to the registrars. investment approvals (FIPB/RBI etc. changes in accounting policies in the last three years and differences between the accounting policies and the Indian Accounting Policies (if the Company has presented its Financial Statements also as per Either US GAAP/IAS are presented. expenses of the issue. Other Regulatory and Statutory Disclosures Under this head. indebtedness. etc. Legal and Other Information Outstanding litigations and material developments. brokerage and selling commission. the following information is covered: authority for the Issue. insurance. changes in the auditors in the last 3 years.

SEBI. payment instructions. interest on refund of excess bid amount. ranking of equity shares. escrow mechanism. INIITAL PUBLIC OFFER Page 28 . material contracts and documents for inspection. basis of allotment or allocation. issuance of confirmation of allocation note("can") and allotment in the issue. terms of payment and payment into the escrow collection account. dispatch of refund orders. disposal of application and application monies. utilisation of issue proceeds.. signing of underwriting agreement and filing of prospectus with SEBI/ROC. promise vis-à-vis performance in the past issues. Offering Information Under this head. method of proportionate allotment. mode of payment of dividend. other instructions. nomination facility to investor. . maximum and minimum bid size. etc. face value and issue price. Past Track Record of Defaults/Economic Offences Investors should also visit www. purchase of property. rights of the equity shareholder. definitions and abbreviations. a website aided and sponsored by the Ministry of Company Affairs under its Investor Education & Protection Fund. stock market data for equity. announcement of statutory advertisement. restrictions on foreign ownership of Indian securities. BSE. shares of the company. market lot. designated date.. bidding process. mechanism for redressal of investor grievances. the following information is covered: Terms of the Issue. price discovery and allocation. bidding bids at different price levels. RBI. undertaking by the company. classes of shares. instructions for completing the bid form.watchoutinvestors. book building procedure if applicable. Other Information This covers description of equity shares and terms of the Articles of Association. issue procedure. electronic registration of bids.com. communications. who can bid. revaluation of assets. submission of bid form.NSE etc) for an economic offence and/or for non-compliance laws/guidelines and/or who are no longer in the specified activity. general instructions. declaration.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE option to subscribe in the issue. etc. build up of the book and revision of bids. This website is a national registry of all entities and individuals who have been indicted by various regulators ( like MCA. bid form.

00. should mention his/her PAN allotted under the Income Tax Act. 10 crore or more. the investors should read the application form) 3.000 or more. However. Application money cannot be paid in cash. (NSDL) and Central Depository Services ( India) Ltd. Applications without this information and documents are treated incomplete and are liable to be rejected. while QIBs and large investors (applying for more than Rs.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE APPLYING IN AN IPO Prerequisites 1.Both have An extensive network of authorized Depository Participants (DPs). can apply only in demat form. In any case. the bidder. Bank Account/DD Applications for IPO/FPOs are valid only if payment is made through a cheque or a demand draft. There are two depositories in the country-National Securities Depository Ltd. 2. The investor should fill in his the correct DP ID and Client ID details in the application forms. it is advisable to get the allotment in demat form as the shares issued through an IPO/FPO are tradable only in the demat form. INIITAL PUBLIC OFFER Page 29 . The copy of PAN card or PAN allotment letter is required to be submitted with the application form. or in case of a bid in joint names. Demat Account An investor has the option to apply for and receive the shares in physical form. (For more details. 50. (CDSL) .000). each of the bidders. Permanent Account Number (PAN) Where the bids are for Rs. for all IPO/FPOs of any security of issue size of Rs. 2. issues have to be compulsorily be only in dematerialized form. An investor can open a demat account with any of these DPs.

ASBA co-exists with the current process. Meaning of ASBA: ASBA is an application for subscribing to an issue. containing an authorisation to block the application money in a bank account. whose names and addresses are printed on the application form. These forms are also easily available to investors from the website of BSE or NSE. as well as for all rights issues. Application forms can also be picked up from the vendors at major commercial streets in most towns (for example outside the Bombay Stock Exchange) In the case of fixed price issues. Availability of ASBA bid-cum application forms: Investors can obtain ASBA bidcum-application forms from Self Certified Syndicate Banks (SCSBs). b. Self Certified Syndicate Bank (SCSB) SCSB is a bank which offers the facility of applying through the ASBA process. Forms are normally available from share brokers. The said list will be displayed by SEBI on its website at INIITAL PUBLIC OFFER Page 30 . Application forms should be filled carefully as incomplete/incorrect forms can be rejected due to incomplete details ASBA In an endeavour to make the existing public issue process more efficient. lead managers. the application form along with a cheque/demand draft for the requisite amount has to be deposited with the designated collecting bankers to the issue. i. The main features of ASBA process are as follows: a. A bank desirous of offering ASBA facility shall submit a certificate to SEBI. syndicate members and collecting banks. wherein cheque is used as a mode of payment. viz. SEBI introduced a supplementary process of applying in public issues.. for inclusion of its name in SEBI‘s list of SCSBs. the ―Applications Supported by Blocked Amount (ASBA)‖ process. The ASBA process is available in all public issues made through the book building route.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Process of Applying in an IPO/FPO An investor needs to first obtain an IPO/FPO application form.

A. BANK OF BARODA BANK OF INDIA BANK OF MAHARASHTRA BNP PARIBAS CANARA BANK CENTRAL BANK OF INDIA CITIBANK N. No. 13. 2011. 9.N. 5. whose names appear in the list of SCSBs displayed in SEBI‘s website. whichever is earlier. 12.in.sebi.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE www.gov. NAME OF THE BANK 1. 11. CORPORATION BANK DEUTSCHE BANK AG INIITAL PUBLIC OFFER Page 31 . 10.f. 14. 8. 3. a bank shall commence its activities as an SCSB w. BANK OF AMERICA.A.e. 7. the 1st or 15th of a month. 6. 2. Given below is the list of Banks which have been authorized to accept ASBAs in all issues as on May 02. It shall then be deemed to have entered into an agreement with the issuer and shall be required to offer the ASBA facility to all its account holders for all issues to which ASBA process is applicable. from the date of such inclusion. SR. 4. CITY UNION BANK LTD. On inclusion in the list of SCSBs. ALLAHABAD BANK ANDHRA BANK AXIS BANK LTD. ASBAs can be accepted only by SCSBs.

17.. 19. ORIENTAL BANK OF COMMERCE PUNJAB NATIONAL BANK SOUTH INDIAN BANK LTD. 34. 23.LTD. 16. 18. 27.THE STANDARD CHARTERED BANK LTD. 35. 24. 30. 31.A. FEDERAL BANK LTD.THE HDFC BANK LTD. HONGKONG & SHANGHAI BANKING CORP..RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE 15. NUTAN NAGARIK SAHAKARI BANK LTD..THE KARUR VYSYA BANK LTD. 26.THE KOTAK MAHINDRA BANK LTD.THE ICICI BANK LTD. STATE BANK OF BIKANER & JAIPUR STATE BANK OF HYDERABAD STATE BANK OF INDIA STATE BANK OF TRAVANCORE INIITAL PUBLIC OFFER Page 32 . 33. INDIAN BANK INDIAN OVERSEAS BANK INDUSIND BANK LTD. 25. 20. KALUPUR COMMERCIAL CO-OPERATIVE BANK LTD. 22. 28. IDBI BANK LTD. JP MORGAN CHASE BANK..N. 29. 21.. 32.

ii BSE/NSE websites Investors can download and print ASBA application forms from the websites of the Stock Exchanges i. INIITAL PUBLIC OFFER Page 33 . Stock Exchanges and Merchant Bankers. The SCSB shall communicate the following details to Stock Exchanges for making it available on their respective websites. its DBs and CB shall continue to act as such. (iii) Name and contact details of a nodal officer at a senior level from the CB. after which SEBI will add the DB to the list of SCSBs maintained by it. 39. fax number and email ids. The SCSB. An SCSB shall identify its Designated Branches (DBs) at which an ASBA investor shall submit ASBA and shall also identify the Controlling Branch (CB) which shall act as a coordinating branch for the Registrar to the Issue. 42. UCO BANK UNION BANK OF INDIA UNITED BANK OF INDIA VIJAYA BANK YES BANK LTD. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). 37. these details shall also be made available by the SCSB on its website: (i) (ii) Name and address of the SCSB Addresses of DBs and CB and other details such as telephone number. Each ASBA form. 38.e. 40. so downloaded. 41.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE 36. The SCSB may identify new DBs for the purpose of ASBA process and intimate details of the same to SEBI. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) which provideact as an electronic interface for ASBA facility i.e. for all issues to which ASBA process is applicable. SYNDICATE BANK TAMILNAD MERCANTILE BANK LTD.

blocking of funds etc. The application data shall thereafter be uploaded by the SCSB in the electronic bidding system through a web enabled interface provided by the Stock Exchanges. as the case may be.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE shall have a unique application number and can be used for making ASBA applications in public issues. Syndicate/Sub-Syndicate members may also procure ASBA forms from the investors and submit it to SCSBs (Syndicate / Sub. For revisions of bids. Therefore. the Registrar to the Issue shall send an appropriate request to the SCSB for unblocking the relevant bank accounts and for transferring the requisite amount to the issuer‘s account. ASBA Process in brief An ASBA investor shall submit an ASBA physically or electronically through the internet banking facility. to the SCSB with whom the bank account to be blocked is maintained. The ASBA form for a specific public issue is made available on the websites of the Stock Exchanges at least one day before opening of a particular public issue. c. investors can take print of a bid revision form. The unique application number on the form is important from a control and processing perspective point of view. SCSBs shall carry out further action for such ASBA forms such as signature verification. In case of withdrawal/ failure of the issue. INIITAL PUBLIC OFFER Page 34 . the amount shall be unblocked by the SCSB on receipt of information from the pre-issue merchant bankers.Syndicate members would be required to upload the bid and other relevant details of such ASBA forms in the bidding platform provided by the stock exchanges and forward the same to the respective SCSBs. Investors will also have online access to soft copy of the abridged prospectus/prospectus of the public issue. Once the basis of allotment is finalized. The application money shall remain blocked in the bank account till finalisation of the basis of allotment in the issue or till withdrawal/ failure of the issue or till withdrawal/ rejection of the application. and forward these forms to the registrar to the issue). A hyperlink to the websites of BSE or NSE websites for this facility is also provided on the websites of Merchant Bankers and SCSBs. applications made using photocopy of the downloaded form shall not be accepted.

Withdrawal of an Application after Closure of an IPO/FPO The Indian laws allow for a withdrawal of an application before the date of allotment. or (ii) in the plain paper application as to whether they desire to avail of the ASBA option. Proof a Bidder can Request from a Trading Member for Entering Bids The syndicate member returns the counterfoil with the signature. INIITAL PUBLIC OFFER Page 35 . The investor can retain this as a sufficient proof that the bids have been taken into account. Obligations of the Issuer The issuer shall ensure that adequate arrangements are made by the Registrar to the Issue to obtain information about all ASBAs and to treat these applications similar to nonASBA applications while finalizing the basis of allotment. is maintained. to the Self Certified Syndicate Bank (SCSB) with whom the bank account to be blocked. e. The ASBA facility has been made mandatory for nonretail investors (Qualified Institutional Buyers and Non-Institutional Investors) making applications in public/rights issues with effect from May 01. Applying for IPO/FPOs on the Internet Websites of various brokerage firms now allow the facility to their clients to apply for IPO/FPOs online. Applicability of ASBA process ASBA process shall be applicable to all public issues and rights issues which provide for not more than one payment option. date and stamp of the syndicate member.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE ASBA facility in rights issue shall enable a shareholder of the company as on record date to apply through ASBA mode by selecting the option of ASBA either (i) in Part A of the application form of rights issue. d. 2011. as per the procedure specified in the Guidelines.

a retail investor is often disappointed in not getting any allotments or getting miniscule allotments. How to improve the chances of allotment in an IPO/FPO? As most IPO/FPOs get oversubscribed. details of offer documents filed with SEBI and observations issued. he should use the cut-off option.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Changing/Revising the Bids The investor can change or revise the quantity or price in the bid using the form for changing/revising the bid that is available along with the application form. he should commit as much resources as he can to that IPO/FPO. the entire process of changing of revising the bids should be completed within the date of closure of the issue. For making bids at cut-off price. provided all of them are applying from their own accounts and all of them have a valid demat account. He should apply for as many shares as possible. In case a lower price is finalized or in case the investor is an unsuccessful allottee or is allotted lesser shares than applied for. This would ensure that his application will be considered valid at all prices. he would get the necessary refund. within the limit of Rs.000.00. INIITAL PUBLIC OFFER Page 36 . Knowing about IPO/FPOs currently open or are about to hit the market Every week SEBI issues press releases for information of the public. At what Price should a Retail Investor apply? A retail investor is not required to make his bid at a specific price. 2. the payment has to be made at the highest price of the price band. It would also be worthwhile to apply in the names of all family members. However. including the final price decided by the issuer. If an investor has decided on investing in a specific IPO/FPO based upon merits. Since he is not able to take a call on the right price.

and listed group companies. SEBI ICDR Regulations 2009 provide for maximum 25% of shares which can be reserved on firm basis. Reservations on a Competitive Basis Reservation on Competitive Basis means reservation wherein specified securities are allotted in proportion of the number of specified securities applied for in respect of a particular reserved category to the number of specified securities reserved for that category. in case of an existing issuer INIITAL PUBLIC OFFER Page 37 . in case of a new issuer. the issuer may make reservation on competitive basis out of the issue size excluding promoters‘ contribution and net offer to public in favour of the following categories of persons: (a) employees. and in case of a new issuer. Allotment on firm basis indicates that allotment to the investor is on firm basis. In case of an issue made through the book building process. persons who are in the permanent and full time employment of the promoting companies excluding the promoters and an immediate relative of the promoter of such companies (b) shareholders (other than promoters) of: (i) (ii) listed promoting companies. The shares to be allotted on ―firm allotment category‖ can be issued at a price different from the price at which the net offer to the public is made provided that the price at which the security is being offered to the applicants in firm allotment category is higher than the price at which securities are offered to public.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE ALLOTMENTS IN IPOS Firm Allotments A company making an issue to public can reserve some shares on ―allotment on firm basis‖ for some categories as specified in SEBI ICDR Regulations 2009.

as on the date of filing the draft offer document with the Board.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Provided that if the promoting companies are designated financial institutions or state and central financial institutions. persons who are in the permanent and full time employment of the promoting companies excluding the promoters and an immediate relative of the promoter of such companies (b) shareholders (other than promoters) of: (i) (ii) listed promoting companies. syndicate members. INIITAL PUBLIC OFFER Page 38 . and listed group companies. directors and employees and for the group or associate companies of the issue management team and syndicate members and their promoters. their promoters. bondholders or subscribers to services of the issuer making an initial public offer Provided that the issuer shall not make the reservation to the issue management team. the issuer may make reservation on competitive basis out of the issue size excluding promoters‘ contribution and net offer to public in favour of the following categories of persons: (a) employees. In case of a further public offer (not being a composite issue). the issuer may make reservation on competitive basis out of the issue size excluding promoters‘ contribution and net offer to public in favour of retail individual shareholders of the issuer. directors and employees. in the case of an existing issuer Provided that if the promoting companies are designated financial institutions or state and central financial institutions. in the case of a new issuer. and in case of a new issuer. (c) persons who. the shareholders of such promoting companies shall not be eligible for the reservation on competitive basis. are associated with the issuer as depositors. In case of an issue made other than through the book building process. the shareholders of such promoting companies shall not be eligible for the reservation on competitive basis.

the issuer may make reservation for employees subject to the condition that value of allotment to any employee shall not exceed two lakh rupees. there cannot be any discretion in the allotment process. as the case may be. The reservation on competitive basis shall be subject to following conditions: (a) the aggregate of reservations for employees shall not exceed 5% of the post issue capital of the issuer (b) (c) reservation for shareholders shall not exceed 10% of the issue size reservation for persons who as on the date of filing the draft offer document with the Board. shall not exceed two lakh rupees In the case of reserved categories. if any. Any Preference while doing the Allotment? No.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE In case of rights issues. the allotment to the Qualified Institutional INIITAL PUBLIC OFFER Page 39 . after such inter-se adjustments among the reserved categories shall be added to the net offer to the public category (f) in case of under-subscription in the net offer to the public category. have business association as depositors. Prior to the SEBI Circular on DIP Guidelines dated September 19. a single applicant in the reserved category may make an application for a number of specified securities which exceeds the reservation. spill-over to the extent of under-subscription shall be permitted from the reserved category to the net public offer category (g) value of allotment to any employee in pursuance of reservation made under sub- regulations (1) or (2). 2005. bondholders and subscribers to services with the issuer making an initial public offer shall not exceed 5% of the issue size (d) no further application for subscription in the net offer to public category shall be entertained from any person (except an employee and retail individual shareholder) in favour of whom reservation on competitive basis is made (e) any unsubscribed portion in any reserved category may be added to any other reserved category and the unsubscribed portion.

Within each of these segments. The oversubscription ratio is then applied to the number of shares applied for and the number of shares to be allotted for applicants in each of the buckets is determined. In the case of a fixed price issue. the number of successful allottees is determined. Within each of these segments. applications below Rs. In the case of a bookbuilding issue. This however has been amended and all allottees are allotted shares on a proportionate basis within their respective categories. The refund orders/allotment advice is dispatched within two working days of finalizing the basis of allotment. Basis of Allotment In case of over-subscription in a fixed price issue. INIITAL PUBLIC OFFER Page 40 . Non-Institutional Buyers (NIIs) and Retail Individual Investors. 2. the applications received are aggregated under two categories.000 and those above this amount. Then. after its closure. the allotment is done on a proportionate basis. the bids are segregated into different categories based on the number of shares applied for. Number of Days for an Investor to Receive the Refund Order/Allotment Advice Companies are required to finalize the basis of allotment within 30 days from the closure of the issue in case of a fixed price issue and within 15 days from the closure of the issue in case of a book building issue or else they are liable to pay interest at the rate of 15% per annum. the bids received are aggregated under different categories. after its closure. the number of successful allottees is determined. The oversubscription ratio is then applied to the number of shares applied for and the number of shares to be allotted for applicants in each of the buckets is determined.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Buyers (QIBs) was on a discretionary basis.00. the bids are segregated into different categories based on the number of shares applied for. such as reserved allotments. Then. The oversubscription ratios are calculated for each of the categories against the shares reserved for each of the categories in the offer document. Qualified Institutional Buyers (QIBs). The oversubscription ratios are calculated for each of the categories against the shares reserved for each of the categories in the offer document.

• There shall be a lock-in of 30 days on the shares allotted to the Anchor Investors from the date of allotment in the public issue. shall be made available in public domain by the merchant banker before opening of the issue.250 crore and 5 investors for allocation of more than Rs. • If the price fixed for the public issue through book building process is higher than the price at which the allocation is made to Anchor Investors. • funds. the additional amount shall be paid by the Anchor Investors. • The bidding for Anchor Investors shall open one day before the issue opens and One-third of the Anchor Investor portion shall be reserved for domestic mutual shall be completed on the same day. up to 30% may be allocated to Anchor Investors subject to the following: • Anchor Investors shall necessarily be Qualified Institutional Buyers who make an application for a value of ten crore rupees or more in a public issue made through the book building process in accordance with the SEBI ICDR Regulations 2009.250 crore. However. • Allocation to Anchor Investors shall be on a discretionary basis subject to minimum number of 2 investors for allocation of upto Rs. difference shall not be payable to the Anchor Investors. • The number of shares allocated to Anchor Investors and the price at which the allocation is made. • No person related to the book running lead managers/ promoters/promoter group in the concerned public issue or the book running lead managers to the concerned public issue can apply under Anchor Investor category.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE ANCHOR INVESTORS Out of the portion available for allocation to Qualified Institutional Buyers. if the price fixed for public issue is lower than the price at which the allocation is made to Anchor Investors. INIITAL PUBLIC OFFER Page 41 .

• The applications made by Qualified Institutional Buyers under Anchor Investor category and under Non Anchor Investor category may not be considered as multiple applications. INIITAL PUBLIC OFFER Page 42 .RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE • The parameters for selection of Anchor Investors shall be clearly identified by the merchant banker and shall be available as part of records of the merchant banker for inspection by SEBI.

With effect from May 1. INIITAL PUBLIC OFFER Page 43 . 2010 the time between public issue closure and listing has been reduced to 12 days from existing of up to 22 days.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE LISTING & TRADING Number of Days for a Company to get its Securities Listed after the Issue The post-issue lead manager ensures that all steps for completion of the necessary formalities for listing and commencement of trading at all stock exchanges where the securities are to be listed are taken within 7 working days of finalisation of basis of allotment.

Printers. Syndicate Members The Book Runner(s) may appoint those intermediaries who are registered with the Board and who are permitted to carry on activity as an ‗Underwriter‘ as syndicate members. The merchant banker shall be responsible for ensuring that these agencies fulfill their functions and enable it to discharge this responsibility through suitable agreements with the Company. The INIITAL PUBLIC OFFER Page 44 .RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE KEY INTERMEDIARIES Merchant Bankers A Merchant Banker possessing a valid SEBI registration in accordance with the SEBI (Merchant Bankers) Regulations. Appointment of other intermediaries viz. with the various agencies connected with the work such as the Registrar(s) to the Offer and Bankers to the Offer and the bank handling refund business. RoC and SEBI including finalisation of Prospectus and RoC filing. The post issue activities including management of escrow accounts. Prospectus. The LM also draws up the various marketing strategies for the issue. In the pre-issue process. statutory advertisements and memorandum containing salient features of the Prospectus. which include the finalisation of trading and dealing of instruments and dispatch of certificates and demat of delivery of shares. 1992 is eligible to act as a Book Running Lead Manager to an issue. Advertising Agency and Bankers to the Offer is also included in the pre-issue processes. coordinate noninstitutional allocation. Registrar(s). intimation of allocation and dispatch of refunds to bidders etc are performed by the LM. Other activities of the LM include drafting and design of Offer documents. The BRLMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges. The post Offer activities for the Offer will involve essential follow-up steps.. the Lead Manager (LM) takes up the due diligence of company‘s operations/ management/ business plans/ legal etc.

RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE syndicate members are mainly appointed to collect and entire the bid forms in a book built issue. dispatch security certificates and refund orders completed and securities listed. Registrars The Registrar finalizes the list of eligible allottees after deleting the invalid applications and ensures that the corporate action for crediting of shares to the demat accounts of the applicants is done and the dispatch of refund orders to those applicable are sent. Some of the Bankers have joined the new ASBA process Issue Stationery Printers These are firms that specialize in printing of issue stationery-offer documents. Bankers to the Issue Bankers to the issue. The Lead manager coordinates with the Registrar to ensure follow up so that that the flow of applications from collecting bank branches. based on the correct figures. The Lead Merchant Banker shall ensure that Bankers to the Issue are appointed in all the mandatory collection centers as specified in SEBI ICDR Regulations 2009. processing of the applications and other matters till the basis of allotment is finalized. abridged prospectuses and application forms. IPO grades are assigned by a Credit Rating Agency registered with SEBI. carries out all the activities of ensuring that the funds are collected and transferred to the Escrow accounts. and in subsequently dispatching these to the designated points. as the name suggests. INIITAL PUBLIC OFFER Page 45 . The LM also ensures follow-up with bankers to the issue to get quick estimates of collection and advising the issuer about closure of the issue. IPO Grading Agencies IPO grading has been made mandatory by SEBI as an endeavor to make additional information available for the investors in order to facilitate their assessment of equity issues offered through an IPO.

or delay in receipt of refund or allotment and payment of interest thereon. shall continue to hold some minimum percentage in the company after the public issue. Promoter The promoter has been defined as a person or persons who are in over-all control of the company. if they are acting as such merely in their professional capacity are not be included in the definition of a promoter. It may be noted that a director / officer of the issuer company or person. SEBI ICDR Regulations 2009 have stipulated lock-in requirements on shares of promoters mainly to ensure that the promoters or main persons. OTHER ASPECTS Lock-in ―Lock-in‖ indicates a freeze on the shares. who in turn will take up the matter with registrar to redress the complaints. The requirements are detailed in Chapter III Part IV of SEBI ICDR Regulations 2009. Office of investors Assistance. who are controlling the company. an immediate relative INIITAL PUBLIC OFFER Page 46 . Investors can also lodge their complaints at www. a website aided and sponsored by the Ministry of Company Affairs under its Investor Education & Protection Fund. In case the investor does not receive any reply within a reasonable time. 'Promoter Group' includes the promoter.investorhelpline. investor may complain to SEBI.in. These complaints shall be made to the post issue Lead Manger.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE FILING INVESTOR GRIEVANCES Most of the issue complaints pertain to non-receipt of refund or allotment. who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public and those named in the prospectus as promoters(s).

a subsidiary or holding company of that company. sister or child of the person or of the spouse). In addition. or any parent. In case of public issues by listed companies. the promoters have to necessarily offer at least 20% of the post issue capital. INIITAL PUBLIC OFFER Page 47 . any company in which the promoter holds 10% or more of the equity capital or which holds 10% or more of the equity capital of the Promoter. Promoter's Contribution and Lock-in In case of an IPO/FPO. and all persons whose shareholding is aggregated for the purpose of disclosing in the prospectus "shareholding of the promoter group" The details are provided in the SEBI ICDR Regulations 2009. the entire pre-issue share capital. any company in which a group of individuals or companies or combinations thereof who holds 20% or more of the equity capital in that company also holds 20% or more of the equity capital of the issuer company. In case of any issue of capital to the public the minimum contribution of promoters shall be locked in for a period of three years.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE of the promoter (i. such excess contribution shall also be locked in for a period of one year. and shares issued on a firm allotment basis along with issue shall be locked-in for a period of one year from the date of allotment in public issue. any spouse of that person. any company in which 10% or more of the share capital is held by the promoter or an immediate relative of the promoter' or a firm or HUF in which the 'Promoter' or any one or more of his immediate relative is a member. both for an IPO/FPO and public issue by listed companies. In case the promoter is an individual. any HUF or firm in which the aggregate share of the promoter and his immediate relatives is equal to or more than 10% of the total. of the share capital. the promoters shall participate either to the extent of 20% of the proposed issue or ensure post-issue share holding to the extent of 20% of the post-issue capital. brother. any company in which a company specified in (i) above. In case of an IPO/FPO.e. holds 10% or more. In case promoter is a company. or paid up share capital prior to IPO/FPO. if the promoters' contribution in the proposed issue exceeds the required minimum contribution.

From an investor‘s perspective.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Greenshoe Option A Green Shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days in accordance with the provisions of Chapter III Part V of SEBI ICDR Regulations 2009. the issue is devolved on underwriters and they have to bring in the amount by subscribing to the shares. This is an arrangement wherein the issue would be over allotted to the extent of a maximum of 15% of the issue size. The underwriter guarantees a fixed amount to the issuer from the issue. Underwriting There are two types of underwriting. an issue with green shoe option provides more probability of getting shares and also that post listing price may show relatively more stability as compared to market. in case the shares are not subscribed by investors. Hard Underwriting Hard underwriting is when an underwriter agrees to buy his commitment at its earliest stage. The underwriter bears a risk which is much higher in soft underwriting. which is granted to a company to be exercised through a Stabilizing Agent. INIITAL PUBLIC OFFER Page 48 . Safety Net Any safety net scheme or buy-back arrangements of the shares proposed in any public issue shall be finalized by an issuer company with the lead merchant banker in advance and disclosed in the prospectus. Such buy back or safety net arrangements shall be made available only to all original resident individual allottees limited up to a maximum of 1000 shares per allottee and the offer is kept open for a period of 6 months from the last date of dispatch of securities. Thus. The name comes from the fact that Green Shoe Company was the first to issue this type of option.

to the initial public offering/ follow on public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date. validity of grading. What is „IPO Grading‟? IPO grading is the grade assigned by a Credit Rating Agency registered with SEBI. He then. Also. Such grading is generally assigned on a five-point point scale with a higher score indicating stronger fundamentals and vice versa as below. IPO grade 1: Poor fundamentals IPO grade 2: Below-average fundamentals IPO grade 3: Average fundamentals INIITAL PUBLIC OFFER Page 49 . scope of grading etc. Specific details regarding IPO grading may be obtained directly from the respective Credit Rating Agencies. Frequently Asked Questions on IPO Grading All details regarding operational aspects of IPO grading like.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Soft Underwriting Soft underwriting is when an underwriter agrees to buy the shares at later stages as soon as the pricing process is complete. immediately places those shares with institutional players. The risk faced by the underwriter as such is reduced to a small window of time. as given below are based on the information obtained from the Credit Rating Agencies(CRAs) (including their FAQs) and are meant only for general informational purpose regarding the overall functioning of the IPO Grading system. grading methodology. the soft underwriter has the option to invoke a force Majeure (acts of God) clause in case there are certain factors beyond the control that can affect the underwriter‘s ability to place the shares with the buyers. The grade represents a relative assessment of the fundamentals of that issue in relation to the other listed equity securities in India.

Further information regarding the grading process may be obtained from the Credit Rating Agencies Who bears the cost of the IPO grading process? The company desirous of making the IPO is required to bear the expenses incurred for grading such IPO.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE IPO grade 4: Above-average fundamentals IPO grade 5: Strong fundamentals IPO grading has been introduced as an endeavor to make additional information available for the investors in order to facilitate their assessment of equity issues offered through an IPO. In such an event all grades obtained for the IPO will have to be disclosed in the offer documents. as the case may be. is required to obtain a grade for the IPO from at least one CRA. Irrespective of whether the issuer finds the grade given by the rating agency acceptable or not. However. the grade has to be disclosed as required under the SEBI ICDR Regulations 2009. must contain the grade/s given to the IPO by all CRAs approached by the company for grading such IPO. the Prospectus/Red Herring Prospectus. IPO grading is not optional. However the issuer has the option of opting for another grading by a different agency. Will IPO grading delay the process of issue? INIITAL PUBLIC OFFER Page 50 . Can the issuer company reject an IPO grade? IPO grade/s cannot be rejected. A company which has filed the draft offer document for its IPO with SEBI. 2007. By when is an Issuer required to obtain the grade for the IPO? IPO grading can be done either before filing the draft offer documents with SEBI or thereafter. on or after 1st May. advertisements etc. Is grading optional? No.

INIITAL PUBLIC OFFER Page 51 . Company Prospects Financial Position Management Quality Corporate Governance Practices Compliance and Litigation History New Projects—Risks and Prospects It may be noted that the above is only indicative of some of the factors considered in the IPO grading process and may vary on a case to case basis. as well as the company‘s financial position. the competitive strengths of the company that would allow it to address the risks inherent in the business (es) and capitalise on the opportunities available. Since issuance of observation by SEBI and the grading process. Industry Prospects ii.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE IPO grading is intended to run parallel to the filing of offer document with SEBI and the consequent issuance of observations. while arriving at an IPO grade Business Prospects and Competitive Position i. While the actual factors considered for grading may not be identical or limited to the following. function independently. IPO grading is not expected to delay the issue process. What are the factors that are evaluated to assess the fundamentals of the issue while arriving at the IPO grade? The IPO grading process is expected to take into account the prospects of the industry in which the company operates. the areas listed below are generally looked into by the rating agencies.

IPO grading is done without taking into account the price at which the security is offered in the IPO. Since IPO grading does not consider the issue price. which indicates „above average or strong fundamentals‟ mean one could subscribe safely to the issue? An IPO grade is NOT a suggestion or recommendation as to whether one should subscribe to the IPO or not. Where can one find the grades obtained for the IPO and details of the grading process? All grades obtained for the IPO along with a description of the grades can be found in the Prospectus.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE Does IPO grading consider the price at which the shares are offered in the issue? No. Further the Grading letter of the Credit Rating Agency which contains the detailed rationale for assigning the particular grade will be included among the Material Documents available for Inspection. IPO grade needs to be read together with the disclosures made in the prospectus including the risk factors as well as the price at which the shares are offered in the issue. the investor needs to make an independent judgment regarding the price at which to bid for/subscribe to the shares offered through the IPO. the lowest being Grade 1 and highest Grade 5.The meaning of these grades have been explained under Question 1 in this FAQ. How does one interpret the IPO Grades? The grades are allocated on a 5-point scale. Does an IPO grade. issue advertisement or any other place where the issuer company is making advertisement for its issue. Abridged Prospectus. How does IPO Grading help in deciding about investing in an IPO? IPO Grading is intended to provide the investor with an informed and objective opinion expressed by a professional rating agency after analyzing factors like business and INIITAL PUBLIC OFFER Page 52 .

Kailash Building. SEBI does not pass any judgment on the quality of the issuer company.com ICRA Ltd. the investor needs to make his/her own independent decision regarding investing in any issue after studying the contents of the prospectus including risk factors carefully. SEBI‘s observations on the IPO document are entirely independent of the IPO grading process or the grades received by the company. However.careratings. 1105. Credit Analysis & Research Ltd. Which credit rating agencies are registered with SEBI? The following four credit rating agencies are registered with SEBI. Will IPO Grading given by CRAs be a parameter for SEBI to issue its observations? The grading is intended to be an independent and unbiased opinion of a rating agency. What is the role of SEBI in IPO grading exercise? SEBI does not play any role in the assessment made by the grading agency.RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE financial prospects. The grading is intended to be an independent and unbiased opinion of that agency. 4th Floor. Godrej Coliseum Somaiya Hospital Road Off Eastern Express Highway Sion (East) Mumbai-400022 http://www. Kasturba Gandhi Marg INIITAL PUBLIC OFFER Page 53 . irrespective of the grade obtained by the issuer. 11th Floor 26. management quality and corporate governance practices etc.

RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE New Delhi-110 001 http://www.2nd Floor Bannerghatta Road Near Diary Circle Bangalore-560029 http://www.com Brickwork Ratings India Pvt. 6th Floor 3.fitchindia.Sagar Complex. CRISIL House 121-122 Andheri Kurla Road Andheri (East) Mumbai–400093 http://www.Ltd.in CRISIL Ltd. Apeejay House. Dinshaw Vachha Road Churchgate Mumbai-400020 http://www. #39/2.Ltd.com Fitch Ratings India Pvt.brickworkratings.crisil.com INIITAL PUBLIC OFFER Page 54 .icra.