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The first public offer of securities by a company after its inception of known as Initial Public Offering (IPO).

Entry strategy

Exit strategy

Why IPO?

For financing capital expenditure. For working capital requirement. exit route for existing investors. For debt financing.

Funding future needs



Incentive for employee s

Reputatio n and Visibility

Profit as Dividend s

Time and effort.


Costly Affair

Securitie s and Exchang e Board of India (SEBI).

IPO expenses
Underwriting Fees Selling Fees Management Fees

Important steps in Public Issue

BOARD MEETING Meeting of Board to discuss Public Issue

LEAD MANAGERS Merchant banker who starts the issue in coordination with the company

CO-MANAGERS Appointment of co-managers

ADVISORS Appointment of advisors for counseling purpose

UNDERWRITERS Agreement between capital issuing company and underwriters whereby the underwriters guarantee to subscribe the whole or part of the issued capital that would remain unsubscribed by the public against commission -minimum subscription

BANKERS Collect the money, application form from applicants -Escrow A/c - ASBA A/c

BROKERS AND PRINCIPAL BROKERS Appointment of brokers who facilitate the subscription of the issue applicable brokerage is 1.5 per cent

REGISTERS TO THE ISSUE Appointment of Registrars for various post-issue tasks -collection of application forms, scrutiny of application forms, data management, financialisation of the basis of allotment, allotment letters, share certificates and refund orders. compensation-is based on a piece-rate system

PROSPECTUS Prospectus is an invitation to the public to subscribe to its shares/debentures -Prospectus, AoA, MoA are sent to SEBI

APPLICATION TO STOCK EXCHANGE TO LIST SHARES Company should submit an application to the Stock Exchange(s) for enlistment of securities offered to the public by the said issue

REGISTRAR OF COMPANIES (ROC) On approval from the SEs and legal advisors, underwriters, bankers, auditors, registrars and others a copy of the prospectus duly signed by the directors, alongwith other required documents as listed out in the Companies Act, 1956 must be filed with the ROC.

PROSPECTUS AND APPLICATION FORM Printing of prospectus,21 says prior to first announcement

INITIAL LISTING APPLICATION Company has to file the initial listing application with SEs within 10 days of filing of the prospectus.

PROMOTIONAL CAMPAIGN Conferences for investors, brokers and press is held by the company -advertisements are made in newspapers, televisions and periodicals.

STATUTORY ANNOUNCEMENT Atleast 10 days before the opening of the subscription list the statutory announcement of the issue has to be made. The opening date and the closing date and the bank branches should be mentioned in this announcement as well as in the prospectus.

SUBSCRIPTION LIST Subscription list has to be kept open for atleast 3 working days and for a total period of not exceeding 10 working days

COLLECTION OF APPLICATIONS The bankers to the issue collect application money -The lead managers & registrars monitor the entire situation

SEPARATE BANK ACCOUNT Separate Bank account is opened for collection of funds -Escrow A/c

PROCESSING OF APPLICATION Scrutinize the applications Sorted on investments and coding done

MINIMUM SUBSCRIPTION if the company does not receive a minimum of 90% of the issue and from underwriters , the amount of subscription received is required to be refunded to the applicants The company should refund the amount within 10 weeks of the closing of the subscription list and pay interest.

UNDERWRITERS LIABILITY segregate the applications , Compare the number of shares procured by each underwriter, Finally, credit the total number of shares in the general pool to the underwriters

ALLOTMENT OF SHARES One-half - upto 1,000 shares Balance one-half for larger applications The proportionate system of allotment has to be followed

OVER SUBSCRIPTION The over-subscribed amount should after the finalization of allotment, refunded to the applicants within 10 weeks of the closure of subscription list.

COMPLIANCE REPORT within 45 days of the closure of issue, a compliance certificate from statutory auditor is to be forwarded to SEBI

LISTING detailed listing application alongwith the listing agreement and the listing fees has to be submitted to the SEs

ISSUANCE OF SHARE CERTIFICATES Company should deliver the share certificate within 3 months after the allotment of shares.

Some IPO Scams

Suzlon Energy IPO: Rs 1,496.34 cr (September 23-29, 2005) Key operators used 21,692 fictitious accounts to corner 3,23,023 shares which is equal to 3.74 per cent of the total number of shares allotted to retail individual investors. Jet Airways IPO: Rs 1899.3 crore (Feb 18-24, 2005) Key operators used 1,186 fake accounts for cornering 20,901 shares which is equal to 0.52 per cent of the total number of shares allotted to retail investors.

National Thermal Power Corporation IPO Rs 5,368.14 crore (Oct 7-14, 2004). 12,853 afferent accounts were used for cornering 27,50,730 shares representing 1.3 per cent of the total number of shares allotted to retail investors. Tata Consultancy Services IPO: Rs 4,713.47 crore 14,619 'benami' accounts were used to corner 2,61,294 shares representing 2.09 per cent of the total shares allotted to retail individual investors.

Employee Stock Option Plan


Specific type of are allotted shares below market price to the employees including managers of the company an option to buy shares of company Lock in period

Benefits Extra financial interest Investment Build up of sizeable capital

Sweat Equity

The equity that is created in a company or some other asset as a direct result of hard work by the owner(s) or employees.

Steps in Sweat Equity

Approval from BoD Allotted share fixation Determining the form of allotment Determination of allotment price Determination of instrument Identification of Employees Criteria formulation for employees Lock in period Dissemination of information Settlement of dues

Employee relations Loyalty Labour participation Higher Employee status Improves productivity Sense of belonging Industrial democracy Participation


Profits and control Salary +dividend Compensation package Retention of efficient employees Encouragement Sense of ownership Employee confidence

Unfavorable Response lower price Profit affects morale Remote reward Leads to Dispute Unscrupulous Employees Wages over ownership

Bonus preference Limited share Fall in prices Increase costs Unsound stock market Successful for profit making companies