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Listed companies can freely price Equity

shares or convertible securities through


public issues

An eligible unlisted company desirous of


getting listed o a recognized stock exchange
can also freely price shares

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All banks require approval from the
RBI while freely pricing their shares

Free pricing of shares by


infrastructure companies are subject to
compliance with disclosure norms as
specified by the SEBI from time to time.

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More on Pricing…

 No price formula stipulated by SEBI


 Issuer in consultation with the merchant banker
determines the price as well as the price band
 SEBI plays no role in price fixation
 Full disclosure of parameters used for pricing to
SEBI

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(Disclosure And Investor Protection
Guidelines, 2000)
(a) Logo, name, previous name, if any, address,
telephone number, fax number, contact person,
website address and e-mail address of the issuer
company

(b) Nature, number, price and amount of instruments


offered and issue size, as may be applicable

(c) Risks in relation to first issue

(d) General risk regarding investments in equity

(e) Issuer's Absolute Responsibility clause

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(f) Logo, names and addresses of all the Lead Merchant Bankers
with their titles who file the prospectus with the Board, along
with their telephone numbers, fax numbers, website addresses
and e-mail addresses

(g) Logo, names of the Registrar to the Issue, along with its
telephone number, fax number, website address and e-mail
address

(h) Issue Schedule

(i) IPO Grading, Credit Rating, if applicable

(j) Names of the Stock Exchanges where listing is proposed


along with details of in-principle approval

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7) Other Regulatory And
1) Definitions And Abbreviations
Statutory Disclosures
2) Risk Factors
8) Issue Information
3) Introduction
9) Main Provisions Of The
4) About The Issuer Company
Articles Of Association Of
5) Financial Information The Company

6) Legal And Other Information 10) Other Information

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Companies attempt to reach an offering
price that is low enough to stimulate interest
in the stock, but high enough to raise an
adequate amount of capital for the company.

The process of determining an optimal price


usually involves the underwriters ("syndicate")
arranging share purchase commitments from
leading institutional investors.

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Underwriter
Financial intermediaries that buy stock or bonds from
an issuer and then sell these securities to the public

Lead Managers
The commercial or investment bank which has primary
responsibility for organizing a given credit or bond
issuance. This bank will find other lending organizations
or underwriters to create the syndicate, negotiate
terms with the issuer, and assess market conditions.
Also called syndicate manager, managing underwriter or
lead underwriter

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QUALITATIVE QUANTITIVE

 Past Records  Current Market Price &


 Experience of Promoters High Low of last 3 yrs
 Unique Selling  P/E Multiple compared
Proposition to Industry
 Industry Scenario  Growth Rate in PAT &
EPS
 Credit Rating
 Book Value of Shares
 RONW & ROCE

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ISSUE PRICE

There are two ways in which the price of an


IPO can be determined:
The company, with the help of its lead
managers, fixes a price
The price is arrived at through the process
of book building

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FIXED PRICE BOOK BUILDING
 Offer / Allotment Price is  Only indicative Price Range is
known by the investor in known to the Investor.
advance.  Demand for the securities
 Demand for the securities offered can be known
offered is known only after everyday as the book is built.
the closure of the issue  Payment only after allocation
 Payment can be made at the
time of subscription wherein
refund is given after
allocation

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 http://en.wikipedia.org
 http://finance.indiamart.com/india_business_information/sebi_inve
stors_knowhow.html
 http://www.sebi.gov.in
 Khan, M Y, Jain, P K(2004), ‘Financial Management – Text and
Cases’, Tata McGraw Hill Publication, New Delhi, 4th Edition, ISBN 0-
058340-4, P18.16-18.17

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