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COMPARATIVE STUDY ON INITIAL PUBLIC OFFER (IPO

)
Submitted to : Dr. Prof. Paresh Shah IIM - Ahmedabad

Management of Indian Financial Systems
Submitted by : Prashant Maharshi ISBE/PGP/SS/2011-13

What is IPO?
 Process of selling securities to public in primary market  Made with 2 types – • Fixed Price Issues • Book building Issues  Majorly done to raise Capital  Process is directed towards both institutional & the retail investors

Why IPO is done? • New capital  Almost all companies go public primarily because they need money to expand the business • Future capital  Once public. firms have greater and easier access to capital in the future • Mergers and acquisitions  Its easier for other companies to notice and evaluate a public firm for potential synergies  IPOs are often used to finance acquisitions .

10. • If the above conditions are not satisfied..000. either at the time of filing the draft offer document with the Securities and Exchange Board of India (“SEBI”) or at the time of opening of the issue. then the IPO can be made only through a book-building process. should not exceed five times the pre-issue net worth as per the last available audited account. 3. It must have a track record of distributing dividends for at least 3 out of the immediately preceding 5 years. with a minimum net worth to be met during the 2 immediately preceding years. It must have a pre-issue net worth of not less than Rs. i. provided that sixty percent (60%) of the issue size must be allotted to Qualified Institutional Buyers (“QIBs”). and The issue size. the firm allotment and the promoter’s contribution through the offer document. .000 (Rupees One crore) in 3 out of the preceding 5 years.SEBI Guidelines for IPO 1. the offer through the offer document.e. 2.

the book runners evaluates the price levels • At last the book runners & the issuer decides the final price • Allocation of securities is made to the successful bidders • Rest get refund orders. .The Process of IPO • • • • • • • Company nominates lead merchant banker(s) Disclose of securities to be issued & price band for bidding Appointment of syndicate members Bidding process Process normally remains for 5 days Bids have to be entered within the specified price band On the closure of the process.

TRIBHOVANDAS BHIMJI ZAVERI IPO .

About the Company • The 148 year old company. • Around 72% revenue comes from gold jewellery and 25% from diamonds . Tribhovandas Bhimji Zaveri. Mumbai’s local jeweller.7 million shares. • The company is in the retail jewellery business with 14 showrooms across 5 states mainly in western and central India. 200 crore through 16. plans to raise around Rs.

200 Crore 16.About IPO Offer Date Price Band Minimum Application Reserved for QIB Reserved for Non Institutional Bidders Reserved for retail Total Amount to be raised Total No.7 million Got BID for Subscribed by 1. Of Share on sale 24 – 26 April Rs.15 times .62 crore shares 1. 120 – 126 per Share 45 Shares 50% 15% 35% Rs.

adding 43 new ones in India by 2015 • To use about Rs.Plans • To finance establishment of new showrooms • To expand this to around 57 showrooms. • To finance working capital requirements • The remaining amount would be used for general corporate purpose . 20 Crore to open 9 new large format showrooms by the end of fiscal 2013.

Financial Information In Rs.9 87 37.4 137.5 FY 11 1194 34.3 47 11 17 63.6 9 Months FY 12 1117 NA 102 NA 50.5 NA . Crore Net Sales % Change Operation Profit % Change Net Profit % Change FY 10 885 32.2 40.

Competitors / Peers • Tanishq • Rajesh Exports • Gitanjali Gems • Shri Ganesh Jewellery • Suraj Diamond .

81% 11.17% .85% Promoter holding FII DII Others 74.17% 10.Share holding pattern post IPO % 3.

110. 111.00 Rs. 115. 119.00 Rs.Day 1 trading 122 Listing Day Trading Information BSE NSE 120 118 116 Issue Price: Rs. 120.50 Rs.157.00 1.05 Rs. 110. 115.892 Rs.20 1.00 Rs. 111.00 114 BSE 112 NSE Open: Low: Rs.253. 120. 120.983 110 108 High: Last Trade: Open High Low Close 106 104 Volume: .80 Rs.00 Rs.

of times issue is subscribed Subscribed by 1.16 1.68 Anchor Investors 1.29 Qualified Institutional Buyers Non Institutional Investors Retail Investors 0.No.91 .

. • The company has its own manufacturing facilities in Kandivali with a carpet area of 5.755 sq.Strength of TBZ • Strong and trusted Brand Name • Focus to develop new design and products by understanding customer requirement with constant interaction • The company has substantial experience in expanding operations and managing the launch of new showrooms. ft.

Weakness of TBZ • Inventory risk and gold price fluctuation is also high • Working capital situation of the company is not good • Financial performance of the company is also not encouraging • Peers are doing good in compare to TBZ .

of women investing her saving in gold/diamond jewellery – Conscious marketing efforts by companies • Steady rise in gold prices across the global market.Opportunities for TBZ • Branded retail chains are expanding their presence by creating growth opportunities in jewellery market • The Indian gold jewellery sector accounted for 61% total domestic gold demand in 2011 • It is expected that domestic industry to grow at a CAGR of 10% – 12% up to 2015 because of: – Higher disposable income – Rising young population with the urge to spend – Higher no. .

.Threats of TBZ • There is intense competition in the jewellery retailing market • Branded players are also willing to expand • Devaluation of gold may affect the business • The company has not registered its jewellery designs so it could be duplicated by competitors • The new tax policy where the customer has to give his/ her PAN number on purchase made above `5 lakh is likely to hinder the business.

ft. • Increasing marketing activities to increase footfalls and sales at showrooms. • Focusing to increase its diamond studded jewellery sales which will improve its overall profit margin. . 17739 sq.Future Strategy of TBZ • The company is planning to add 43 showrooms by end of fiscal year 2014 • It is building additional facility at Kandivali with a carpet area of Approx.

.86 %.Conclusion • IPO of TBZ got moderate response because: – The Shares are offered quite expensive in compare to its peers – As it intend to utilize 70% of its raised funds for working capital needs . this may affect the performance of the company. while that in the case of diamond jewellery is around 36 %. – The opening of new stores will mount pressure on profitability due to time taken for break-even of new stores. higher marketing expenses and working capital requirement – Even though the gross margin in the gold segment is around 10. company intent to invest in gold business.

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