lIP – EXERCISE no 1(slide 1 to 3)

Solvent Public Company Limited which is very profitable engaged in producing

cement. It wants to expand its business so that it can sale in entire country

It is a profitable business, but the company doesn’t have the money in hand to
expand capacity . And it does not want to go for debt. Hence, it decides to go for
Initial Public Offering.

It contacts a local investment bank, and the investment banks value the company.
The investment bank finds out that the valuation at ₹400 crores and advises for an
IPO of 2,00,00,000 shares by offering each share at ₹200 per share

The owners decides to keep 50% ownership and issues the rest of the shares at
₹200 per share. The company has ₹200 crores to expand the capacity. It set up
one plant in south india and becomes more profitable.

The purpose is to create funds by selling the company’s shares to the public. It’s
the best way out to those who don’t want to go for long term Loan.
From the above Case on IPO Strategy

Suggest fund raising option- should it go for public offer ? How

and when and how much ? Give reasons and safeguards.

*Present share holding

pattern- closely held

*Fund Requirements- substantial for capital investment

*Growth strategy- in growth spiral and prospectus are

good

*Future profitability- expect to generate n profit margin to

grow further

*Present gearing - has substantial long term borrowing

continued------
continued

*Industry scenarios- in a consolidation face

small firm risks acquisition

*Promoters Support- not much expected

*Strategic interest - for those who wish to

consolidate

*Banking relationships- excellent

Exercise no 2