DOMESTIC ISSUE

MANAGEMENT
(CHAPTER 8)

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THE IPO DECISION
 Strategic dimension
 Corporate philosophy
 Unlock Value
 Better visibility, credibility, attracts and retains better talent
if listed.
 Large family of small shareholders
 Requires higher maturity levels for the company
 Makes it more expensive for promoters to consolidate stakes.
 Post-issue promoter holding is a concern for possible hostile
bids.
 Privacy, less regulation if unlisted
 Disclosures, corporate governance, higher compliance and
shareholder activism if listed.
THE IPO DECISION

 Financial dimension
 IPO decision is often more financial than strategic. An
imperative in capital intensive industries.
 IPO provides liquidity in shares and more fund raising
opportunities for growth financing.
 Necessity to maintain acceptable DERs which need
equity support beyond promoters’ margins.
 Liquidity event for existing investors and ESOP holders
 Provides currency for M&A
 Requires preparation of the proper balance sheet.
 Requires a credible investment plan.
 Post-listing performance pressures.
THE IPO DECISION

 Investment Banking dimension

 Business Plan, future outlook, past financial
performance, grading potential
 Proposed Issue pricing, size of the offer
 Post-Issue Capital Structure
 Prevailing market conditions, timing the offer.
 Issue Structure, free float
 Possibility of finding institutional support.
 Smaller issues backed by non-reputed merchant bankers
lack credibility and have been pulled up by SEBI.
PUBLIC OFFER STRUCTURES
 Initial Public offer can be made under the
following structures -
 New issue of Shares by the Issuer – This has the effect
of increasing the issued capital of the company.
Resolution under section 81(1A) of the Companies Act
would be required.
 Offer for Sale – Under this structure, the existing
shareholders make an offer to the public of existing
shares. No impact on company’s balance sheet. Shares
should have been held for atleast one year.
 Combined Public Offer – A combination of a public
issue and an offer for sale.
OFFER STRUCTURE CASES

 TATA CONSULTANCY LTD – Mix of

Public issue and Offer for Sale
 BIOCON – Mix of Public issue and Offer for
Sale
 MCX – Pure Offer for Sale
 JUST DIAL – Pure Offer for Sale
REGULATORY FRAMEWORK FOR PUBLIC OFFERS

 Public Offers are regulated under the SEBI (Issue of

Capital and Disclosure Requirements) Regulations 2009
(formerly DIP Guidelines 2000 upto 25th August 2009) as
amended from time to time, in short, the ICDR
Regulations.
 Other aspects of issues such as issue of shares to the
public, allotments and incidental matters are governed
by sections 56-58, 60-76 of the Companies Act 1956 –
(corresponding to Chapter III of the Companies Act
2013).
 Issues are also governed by Listing Guidelines and the
SCRA 1956, SCR Rules 1957 for the purpose of listing
and secondary market trading thereafter.
 The issue of shares to non-residents is governed by the
Foreign Exchange Management Act 1999.
KEY PROVISIONS OF THE COMPANIES ACT 2013 ON PUBLIC
OFFERS

 Public companies may make public offers, rights offers,

bonus issues and private placements. Private companies
can make only rights offers, bonus issues and private
placements. – sec 23
 Any document used for issue of shares meant for the
public will be deemed a prospectus – sec 25
 Sec 27 (corresponding to previous sec 61) has new
provision on change of objects stated in a prospectus only
by special resolution. Dissenting shareholders to be given
mandatory exit option by promoters or controlling
shareholders at exit price to be specified by SEBI.
 No company can list as a SPAC to acquire shares in listed
companies – Proviso to section 27(1)
KEY PROVISIONS OF THE COMPANIES ACT 2013 ON PUBLIC
OFFERS

 Sec 28 - New provision providing statutory framework for an offer

for sale by selling shareholders in consultation with the board.
 Offer for sale expenses to be borne entirely by selling shareholders
– sec 28(3).
 Public offers to be in demat form only – section 29
 Section 33 once again provides for the requirement of application
form (along with abridged prospectus) while SEBI is moving more
towards on-line public offers.
 Any company (private or public / listed or unlisted) may make
GDR issue with special resolution – sec 41
 Sec 40 provides for mandatory approval from stock exchange prior
to opening the public offer while SEBI regulations provide for in-
principle approval. The section does not specify remedies in case
of decline of approval by stock exchange.
 Special resolution.
IMPORTANT CONCEPTS – ICDR REGULATIONS
 Lead Manager – BRLMs, issue management team
 Underwriting syndicate
 Issue Management Team
 Fixed Price Offer
 Book Built Offer – Floor, Cap, Price Band and Cut-off
Price
 Issue Size and NPO (Issue size less Promoters’ component
less reservations).
 Reservations on Competitive Basis – employees (not more
than 5% of issue size, shareholders of group companies
(10%), customers and creditors (bondholders or depositors)
5%. Inter-se adjustments among categories is permitted.
 Anchor Investor – QIB with a minimum application size of
Rs. 100 million. (30% of the QIB allocation should be made
to anchor investors). Anchor investor concept replaced
‘firm allotment’ concept with lock-in of 30 days.
IMPORTANT CONCEPTS – ICDR REGULATIONS

 Qualified Institutional Bidders (QIBs), Retail Investors and

HNIs
 Eligibility to go public
 IPO Grading
 Lock-in of pre-issue capital
 Promoters’ Contribution
 Issue Allocation
 Minimum Lot (for anchor investors Rs. 5 crore, min 2
investors for issues upto Rs. 250 crore, min five investors
beyond Rs. 250 crore). For others minimum application size
between Rs 5000 and Rs. 7000.
 Offer Document – DRHP – RHP - Prospectus
 Green-shoe Option
 Basis of Allotment
 Listing Agreement
 Important Concepts – ICDR Regulations

 Eligibility Criteria – Normal Eligibility conditions failing which

alternative conditions.
 Company should satisfy in 3 out of the preceding 5 financial

years, the following minimum criteria –

 Minimum networth of Rs. 1 crore
 Consolidated Profit of atleast Rs. 15 crore
 Tangible asset base of atleast Rs. 3 crore
 The issue size shall not exceed 5 times the pre-issue networth.
 Alternative Conditions –
 Issue to be made through mandatory book building route.
 Atleast 75% of NPO allotment to QIBs failing which issue will be
cancelled.
 Important Concepts – ICDR Regulations

 Issue Pricing – IPO pricing is different from valuation of a company.

It is more about ‘setting the offer price’. Fundamental approach does
not figure much, instead relative valuation based on P/E and BV
multiples is used.
 Differential Pricing – to employees (not more than Rs. 1 lakh) and
retail investors. Max discount 10%. Anchor investors and promoters
can subscribe at higher prices.
 Price disclosure can be made 2 days before the IPO opens in the RHP.
 No outstanding convertibles shall exist at the time of IPO other than
ESOPs.
 NPO – NPO shall be 25% or 10% of post-issue capital as the case may
be depending upon the size of the issue being more than or less than
Rs. 4000 crore. Minimum NPO requirement does not apply to PSUs
and infra companies whose projects are appraised and funded by
banks or FIs.
Main Provisions for IPOs - ICDR Regulations read
with SCR Rules / Companies Act

 Face Value – Rs. 10 if issue price is upto Rs. 500, less than
Rs. 10 for higher prices.
 Promoters’ Contribution – shall not be less than 20% of
post-issue capital (on fully diluted basis). In a convertible
structure PC should be equivalent to 20% as above either
as equity or through the issue.
 Shares acquired for non-cash consideration in the
preceding three years and at less than offer price in the
preceding one year shall be ineligible for reckoning 20%.
 The promoters shall satisfy the requirements at least one
day prior to the date of opening of the issue and the
amount shall be kept in escrow account.
Main Provisions for IPOs - ICDR Regulations read
with SCR Rules / Companies Act
 Lock-in – The minimum promoters’ contribution of 20% shall be
locked in for 3 years from the date of allotment of shares or from
the date of commencement of operations by the company,
whichever is later.
 Excess contribution by the promoters in an issue over and above
what is required to make up the 20% shall be locked in for one
year.
 The entire pre-issue capital in case of an IPO shall be locked in for
one year except the promoters’ contribution since it is locked-in
separately except –
 shares allotted to employees prior to the IPO under a scheme
 shares held by venture capital fund or a foreign venture capital
investor for a period of at least one year.
 Minimum Subscription – 90% of the offer through the
prospectus. If not received issue to be cancelled and amounts to
be refunded within 70 days for an underwritten issue.
Main Provisions For IPOs - ICDR Regulations Read With SCR
Rules / Companies Act
 Issue Allocation –
 Fixed price issue – Promoter category, Reservations, rest for
NPO (to be as per SCR Rules). Min 50% to retail investors,
other 50% to HNIs and QIBs. No mandatory allocation to QIBs.
 Book-built Offer NPO –
 If normal eligibility conditions are met – min 35% of NPO for retail,
min 15% HNI, rest QIBs including 5% for MFs. Out of the 50% for
QIBs, 30% may be allocated to anchor investors including one-third
to MFs.
 If normal eligibility conditions are not met – minimum 75% for QIBs
(incl 5% for MFs), 10% for retail and 15% for HNI.
 If NPO is 10% under Rule 19(2)(b) the mandatory allocation to QIBs
shall be 60% (incl 5% to MFs), 15% shall be to retail and 25% shall be
to HNIs.
 The issue is not valid if the number of allottees are less than 1000.
Main Aspects Of Public Offer

 Offer Document –
 One of the most important components of making a public
offer.
 It represents the quality of disclosures made by a
prospective issuer.
 It shows the way the company’s management was
conducted in the past and throws light on financial
practices.
 It provides the basis for the issue price based on which
investors can take a call on the investment prospects of the
issue.
Debt Instruments Regulations

 Additional requirements for Pure Debt Instruments –

 Regulated under SEBI (Issue and Listing of Debt Securities)
Regulations 2008
 Unlisted companies may also make public offers under these
regulations.
 Does not include bond issues by Government (G-Secs) and
securitised debt instruments.
 Approvals from shareholders, in-principle approval from
stock exchange, independent credit rating, appointment of
Debenture Trustee are mandatory.
 Underwriting and security creation are optional under the
above regulations.
 Under the Companies Act creation of a Debenture
Redemption Reserve is mandatory.
Convertible Instruments Regulations

 IPO can be made through a convertible issue.

 Optionally Convertible debt structures have to satisfy
the conditions applicable to pure debt instruments
such as DRR, Credit rating and trusteeship.
 Conversion price can be (1) set at the time of the issue,
(2) at the time of conversion or (3) be made subject to
a cap and determinable at the time of conversion. In
case of (2), conversion shall be at the option of the
investor.
 Where debt convertibles are subsisting at the time of
an equity IPO, such convertibles should have a floor
price as fixed at the time of their issue.
IMPORTANT STEPS IN
IPO PROCESS
PREPARING THE COMPANY FOR IPO

 Deciding on the financial year, balance sheet, group structure.

 Formulating the scheme of the IPO – purpose, size, promoters’
stake post-issue, pre-issue capital structure arrangements, pre-
issue disclosure arrangements.
 Negotiations with potential lead managers and evaluating bids
 Deciding with the lead manager the main parameters of the issue

 Pricing
 Issue Structure
 Pre-issue placements
 Marketing
 Issue Budget
 Offer document preparation, risk factors, disclosures relating to
promoters, group companies, litigations etc.
 Assisting in the due diligence process, paper-work
 Co-ordination with LM and other agencies during the entire
issue process.
IPO PROCESS
 Pre-issue Activities
 Board and EGM / AGM resolutions.
 Decide on Fixed Price Offer or Book Built Offer
 Engage lead merchant banker and enter into agreement.
 Appoint other merchant banker and intermediaries such as
syndicate members, underwriters, brokers, bankers, registrar,
printers, PR agency.
 Due diligence by pre-issue merchant banker.
 Finalisation of Issue Structure and issue budget.
 Preparation of DRHP including financial certification by
auditors.
 Filing DRHP with SEBI. Quiet Period for 30 days.
 Prepare and file listing application with stock exchange along
with DRHP for in-principle approval.
 A copy of DRHP is also filed with ROC for observations.
IPO PROCESS
 Pre-issue Activities
 Road shows and talks with potential underwriters, anchor
investors, press, brokers and investor associations.
 IPO grading process from atleast one rating agency.
 SEBI observations, stock exchange observations, changes to DRHP
and finalise RHP. File final RHP with ROC for registration.
 Receipt of in-principle listing approval from stock exchange. Under
ICDR it should be within 15 days of filing DRHP.
 Tripartite agreement with NSDL / CDSL and registrar for
dematerialisation of shares.
 Printing of application forms (with abridged prospectus as per
necessary disclosures provided in Schedule VIII of IDCR
Regulations) and RHP.
 Statutory and voluntary advertisements in print and media.
 Despatch of issue stationery to all mandatory collection centres of
syndicate members, brokers, investor associations etc.
IPO PROCESS

 During Issue
 Issue should be closed after keeping it open for a minimum of 3
working days and maximum of ten days including 3 days for
price revision if any.
 Each bidder can furnish three options in his bid but the amount
to be paid along with the bid would be the one applicable to the
highest bid amount payable among the options.
 QIB investors can bid placing a margin amount in escrow while
the others have to bid paying the full amount with their bid
forms.
 Applicants can bid for three different prices and quantities at or
above the floor price or within the price band as may be
applicable. Retail investors are allowed to bid at cut-off price.
 The collection centres receive the payments and send them to
the escrow bank for collection.
IPO PROCESS

 Post-issue Activities
 Issue process reduced to T+12 in 2010. In the past (2003) SEBI
attempted to introduce T+7 which was resisted by the
investment bankers. SEBI moved to a T+6 global standard
model in 2016.
 No allotments can be made until the minimum subscription is
received.
 No allotments can be made until the beginning of the fifth day
of the issue of the Prospectus .
 Receipt of confirmations from bankers and determination of
valid subscription lists by registrar.
 Determination of Cut-off Price based on bidding schedules.
IPO PROCESS
 Post-issue Activities
 Finalising the basis of allotment –
 Use of the over-subscription ratio

 Applicable issue allocation norms should be followed

 Allotment subject to Minimum lot

 Over-subscription leads to draw of lots

 Board resolution to be passed confirming basis of allotment.

 Intimation to successful and unsuccessful allottees. Transfer of
refund amounts to refund account to be refunded (in case of non-
ASBA applications). Credit of shares to demat accounts of successful
allottees.
 Completion of final listing approval formalities with stock exchange.
 Transfer of funds from escrow account to company’s account after
filings with SEBI and Stock Exchange.
 Trading begins on listing day.
 Filing of allotment details with ROC in prescribed form.
PROCESS OVERVIEW AND TIME FRAME
Illustrative Book Built Public Issue Process in weeks

Determination of Floor
Price/ Price Band,
Filing of Final
Formation of Prospectus with ROC,
underwriting syndicate, underwriting
road shows and agreements, issue opens
amendments to DRHP and closes, allotments,
and finalizing of RHP. trading.

Issue presentations
(Pitching), MOU
by lead managers,
Due Diligence,
Filing of DHRP
with SEBI.

6-8 w 12 w 16-18 w
ISSUE MANAGEMENT
ISSUE MANAGEMENT TEAM

 Lead Manager(s) / BRLMs

 Underwriting Syndicate
 Brokers
 Other Service Providers – Registrar, Bankers,
Printers, Courier, PR Agency
 Auditors
 Legal Advisers
 Issuer’s team –
 CFO
 Company Secretary / Compliance Officer
 Financial Adviser
ISSUE MANAGEMENT

 Main aspects -
 Issue Structuring
 Due Diligence
 Preparation of Offer Document
 Ensure necessary statutory compliance
 Tying up appropriate underwriting arrangements
 Preparing, controlling and monitoring issue budget.
 Marketing of Issue, proper positioning and branding.
 Interactions with various agencies involved with the
issue – SEBI, underwriters, bankers, auditors, experts,
law firm, registrar, printer, PR agency, press and media,
brokers, courier agency and investor associations.
 Post Issue allotment, compliance matters and listing
formalities.
IMPORTANT ASPECTS

 Issue Pricing – unlike valuation, issue pricing is

based on relative valuation and market variables
 Capital Structure – total expansion to existing
capital, post-issue number of shares and
shareholding pattern, compliance to guidelines,
marketability.
 Issue Structure – Face value of share and issue
price, minimum subscription amount, terms of
payment, allocation of issue, NPO, underwriting,
costing.
IMPORTANT ASPECTS OF ISSUES

 Offer Document – One of the most important

components of making a public offer.
 It represents the quality of disclosures made by a
prospective issuer and sets a benchmark for
future disclosures.
 It shows the way the company’s management
was conducted in the past and throws light on
financial practices.
 It provides the basis for the issue price based on
which investors can take a call on the investment
prospects of the issue.
IMPORTANT ASPECTS OF ISSUES

 Determination of Cut-off Price

 Finalising the basis of allotment –
 Use of the over-subscription ratio
 Applicable isse allocation norms should be
followed
 Allotment subject to Minimum lot
 Over-subscription leads to draw of lots
SELECT PUBLIC OFFERS PRIOR TO 2008 MELTDOWN

Name of the Issuer Issue IPO No. of times Listing Price /

Price Rs Grading subscribed Price Trend
per share Rs. per share

Jet Airways 1100 NA 16 (80% top 685

end 1125)

GMR Infra 310 NA 8.6 315 - 152

Tech Mahindra 365 NA 75 (QIB 104, 550

HNI 140)
Punjab National Bank 390 NA NA 500-300

Reliance Petroleum 60 NA 50 102 (since

merged)
Reliance Power (Bonus issue 450 4 by 73 Listing day
3:5 in June 2008) Post Bonus ICRA 530-386
cost 280
IPO SUCCESS – EXPERT SPEAK

 ‘Positioning’ and marketing are crucial.

 IPO marketing is akin to a movie /pizza/cola/FMCG.
 “A company making IPO should stimulate you to ‘consume’ the IPO. If
branding, timing, pricing and communication are not correct, the IPO
will be lost.” – Jagdeep Kapoor, Marketing Consultant
 “Pricing is the key. The IPO pricing exercise needs to strike a fine
balance between optimally monetising the issuer’s holdings and
achieveing high valuations for the stock on one hand, and making it
attractive from the investor’s standpoint and after-market performance
on the other. It is back to the good old days, where investors are
extremely value sensitive and display low appetite for high risk, high
growth stories with low near-term visibility of revenues / earnings” –
Kotak I-banking
 The PR firm managing the issue campaign and the broking community
also have a huge role to play. Numerous broking houses become
opinion makers. “Third party testimonials play a major role as analysts
with sectoral knowledge step in.” – Head of a large brokerage house.
IPO MARKET TRENDS
AND CASE STUDIES
PUBLIC OFFERS – 2008 AND LATER

 Towards the close of the bull markets in early 2008, two

public offers, namely EMAAR Developers and Wockhardt
Hospitals were withdrawn for lack of investor support
inspite of scaling down their price. While the former was
withdrawn after the issue opened, the latter was
withdrawn prior to its opening.
 In 2009 (post rebounding of markets), the IPO market saw
some action with the huge success of Adani Power IPO,
which was the first major issue. The Rs. 3000 crore issue at
offer price of Rs. 90-100 per share was graded 3 by ICRA
was oversubscribed 21 times overall with QIB going at 410
times. It traded above offer price until mid 2011.
PUBLIC OFFERS – 2008 AND LATER

 But listing gains were not seen in NHPC public offer, a

disinvestment offer by the Government. The issue, priced
at Rs.36 opened at Rs. 39 and closed at Rs. 36 on the
opening day, going down below the offer price in the next
week.
 In order to provide better investor response, several I-
banks and finance companies re-initiated IPO financing
products in the market. HNI investors could not recover
financing costs even in the NHPC offer.
 Another disinvestment issue of OIL also opened in the
first week of September at a price band of Rs. 950-1050.
Both NHPC and OIL were branded as over-priced by
analysts. NHPC had an offer P/E of 38 (the highest among
all disinvestment IPOs) while OIL was at 10.
PUBLIC OFFERS – 2008 AND LATER

 Another interesting development has been the return of corporate

bond offerings in the public market after a span of a more than a
decade.
 The successful issues have been that of Tata Capital, L&T Finance
SBI, Shriram Transport Finance Corporation. All of them were
offers of NCDs except SBI (as opposed to bonds) with different
structures.
 L&T’s Rs. 1 billion issue (with a green shoe of 100%) was
oversubscribed 4 times overall and in all categories as well. HNI
was the best category registering 6 times. favoured more by
institutional investors than retail investors, through about 70% was
reserved for them.
 Coal India Ltd’s IPO in 2010 at cut-off price of Rs. 245 per share
was graded 5 by CRISIL was well received by QIBs and saw fair
returns in the past two years. Listed at Rs.290. Only major success
in 2010.
PUBLIC OFFERS – 2011

 The year 2011 was disastrous for IPOs with about 30 IPOs
that traded below offer price. Investors lost about 80% of
their initial investment in about 12 issues. While 11 issues
were between Rs 100 crore and Rs 1,000 crore, 25 offers were
small ticket ones with a size of less than Rs 100 crore. This
forced even the government to abandon its FPO plans for
ONGC and instead go for an institutional placement in
March 2012 which was eventually bailed out by LIC.
 There were only three public offers with sizes of above Rs
1,000 crore in 2011 (Tata Steel and PFC FPOs and L&T
Finance Holdings IPO). In 2010 there were 14 public offers
with issue size of above Rs 1,000 crore.
 In 2011, 29 IPOs were called off due to poor market
conditions.
PUBLIC OFFERS – 2012

 The year 2012 saw the successful IPO of Multi Commodity Exchange
(MCX) . Among the several banks that held stake in MCX prior to the
IPO, only SBI, Bank of Baroda and Corporation Bank offloaded bulk of
their stakes in the IPO through an offer for sale. The issue raised Rs.
660 crore at a cut-off price of Rs.1032 per share and was oversubscribed
54 times with huge over-subscriptions across all categories. The MCX
scrip was also one of the first to be listed on the new norms introduced
by SEBI to curb listing day volatility in stock price. The scrip started to
trade at a discovered price of Rs 1387 and reached an intra-day high of
Rs. 1416 before closing the first day at Rs.1297. Traded above offer price
until May 2012. Currently at Rs. 1100.
 Speciality Restaurants’s IPO was offered at Rs. 150 opened at Rs. 153
and presently quotes above Rs. 200. (IPO Grading 4 indicating above
average fundamentals). There was good response from Anchor
Investors.
PUBLIC OFFERS – 2012

 Tribhovandas Bhimji Zaveri IPO quoted below offer price of Rs. 120 since
listing at Rs. 115. (IPO Grading 3 indicating average fundamentals)
 The first SME IPO (BCB Finance) was offered at Rs. 25 and presently also
quotes at Rs. 25 due to the presence of market making.
 The Rs 1665 crore IPO of Samvardhana Motherson Finance Ltd (SMFL)
was withdrawn due to poor response from investors across the board.
SMFL’s offer was subscribed 0.23 times on its final day of subscription.
QIB quota was the most subscribed with bids for 57% shares. The response
in HNI, retail and employee quota was the worst in recent years. All of
these categories received bids only for 1% of the quota allocated. As per
experts, wrong timing of the IPO and stiff pricing of the shares were the
major reasons for the failure of the IPO. J.P. Morgan and Standard
Chartered Securities were the BRLMs.
 The company had a profit of Rs. 13 crore on gross income of Rs. 40 crore
for the FY 2011. The IPO was graded 4 (above average fundamentals) by
ICRA and the pricing was Rs. 113-118 per share.
 In 20102, 17 IPOs were called off till June due to poor market conditions
including Goodwill Hospitals, Galaxy Surfactants, Plastene etc.
PUBLIC OFFERS – 2013 – JUST DIAL

 Just dial is a 24/7 Free Search service on a single national number

08888888888 that receives over 130 Million Calls every year. It
provides reliable information about local businesses, products and
services to the users in over 2000 cities in India having more than
300 million users.
 Selling advertisement and qualified leads is the main source of
earning for Justdial. They have more than 145,000 paid advertisers.
Companies promote their brand across the Just Dial network and
reach millions people who are actively looking for information
about the products and services. There are 4 ways available to
promote brand or advertise on JustDial including Listing on Web,
Listing on Phone Search, Listing on Mobile Search and Placing
Video Ads.
 The company did not require any funds through IPO. The main
purpose of listing was the offer for sale by selling shareholders. The
entire offer was an offer for sale.
PUBLIC OFFERS – 2013 – JUST DIAL

 The public issue of Just Dial services was the most successful
in 2013.
 Issue was opened around end of May 2013.
 It listed on June 5th and closed the first day with a handsome
gain of 15% on the offer price. The price band was Rs. 470-
543. Cut-off Price was Rs. 530. IPO grading by CRISIL 5/5.
 The issue offered a 10% discount and a safety net to retail
investors upto Rs. 50,000. The net was to be triggered for a
20% fall in market price below the offer price.
 The Offer price of Rs. 530 was at a P/E of 90 without any peer
comparison. The offer price was close to 10 times the BV of
share.
 The total issue budget amounted to 4.55% of the Issue Size
and was borne entirely by the selling shareholders.
PUBLIC OFFERS – 2014

 Incorporated in 1993, Snowman Logistics Limited is an

integrated temperature controlled logistics service provider with
23 temperature controlled warehouses across 14 locations in
India. Its IPO in Aug 2014 with a price band of Rs.44-47 per
share was well received getting oversubscribed 60 times. It listed
at Rs. 75 and traded well thereafter. It was a public issue of
shares.
 Wonderla Holidays Ltd is one of the largest operators of
amusement parks in India. Its IPO in April 2014 with a price
band of Rs.115-125 was subscribed 38 times overall but the issue
size was small at Rs. 181 crore. It opened at Rs. 165 and was
trading around Rs. 275 after an year of listing. The IPO had good
anchor support from domestic institutional investors.
PUBLIC OFFERS – 2015

 The IPO of UFO Moviez in April 2015 drew good response of 2.04
times with the retail quota being oversubscribed by 1.02 times. UFO
Moviez Ltd is India's largest digital cinema distribution network and
in-cinema advertising platform. The company being profit making,
went for a 100% book built offer with 50% quota to retail, 28.5% to
QIBs and 21.5% to HNIs. With a price band of Rs. 615-625 per
share, the QIB quota was subscribed more than 5 times. It was a
100% offer for sale. Issue size Rs. 600 crore.
 VRL Logistics Ltd (VRL) is one of the leading pan-India surface
logistics and parcel delivery service provider. It owns and operates
the largest fleet of commercial vehicles in the private sector in India.
Its IPO in April 2015 with a price band of Rs. 195-205 per share
was cut-off at Rs. 205 due to heavy oversubscription of 74 times
overall. It listed at Rs. 288 and has successfully traded above offer
price in aftermarket trading. Issue size was about Rs. 473 crore.
PUBLIC OFFERS – 2015

 Teamlease Services Ltd is a HR and people supply-chain company.

The IPO was for Rs. 424 Cr comprising of new issue of Rs. 150 Cr and
secondary issue of Rs.273 Cr. The issue was made finally at the upper
band of Rs.850 per share with an offer P/E of 45. The offer was well
received with overall 66 times subscription (NII 185 times). It listed at
Rs. 860 and gave listing returns though there was selling pressure.
Traded at Rs. 920 after 4 months.
 Interglobe Aviation runs Indigo Airlines with the largest market share
in India currently. The company also runs Ibis Hotels in association
with Accor Hotels. The IPO has primary and secondary components.
Offer price Rs. 750, Issue size Rs. 1272 Cr, good QIB support (18
times), retail undersubscribed but overall subscription was 6 times.
Profit making at the time of IPO. Listed comfortably at Rs. 855 and
traded at over Rs. 1000 after about 9 months.
PUBLIC OFFERS – 2015

 Coffee Day Enterprises Ltd, a loss-making company, made a new

issue of shares for Rs.1150 Cr at an offer price of Rs. 328. Company
had very well known anchor investors such as Blackrock, Merrill
Lynch and Swiss Finance Corp. QIB response was good but other
categories were undersubscribed. Overall it received 1.82 times. Listed
below offer price at Rs. 317 and went down to Rs. 217 on first day
close. Was trading below offer price even after 9 months.
 Syngene International Ltd a profit making company and subsidiary
of Biocon went public with a secondary offer of shares at Rs. 250 for a
small issue of Rs. 550 Cr. It received very good response from all
categories with overall 32 times (QIB 51 times). It listed high at Rs.
295 and traded at Rs. 400 after one year. Syngene International is an
India-based contract research organisation (CRO), offering a suite of
integrated, end-to-end discovery and development services for novel
molecular entities.
PUBLIC OFFERS – 2016

 Equitas Holdings Ltd is Chennai based financial services provider

focused on individuals and micro and small enterprises (MSEs) in
microfinance, business and vehicle finance and housing finance. .
The IPO had an OFS and a Public Issue component. Equitas holds a
RBI licence to start a small bank. The issue size was Rs. 2175 cr
made at an offer price of Rs. 110 per share. The offer was highly
successful with total bidding of 17 times overall with aggressive
response from QIBs and NIIs. Issue listed at Rs. 144 and was
trading at Rs. 175 after 2 months.
 Ujjivan Financial Services Ltd made an IPO with OFS and Issue
component aggregating to Rs. 888 cr. The offer was
oversubscribedin all segments by 40 times overall but QIB (34) and
NII (135) were very high. Offered at Rs. 210 per share, it listed at
Rs.231 and was trading at Rs. 375 two months later. Ujjivan is a
microfinance company.
PUBLIC OFFERS – 2016

 Thyrocare Technologies Ltd is one of the leading pan-India diagnostic chains.

It made an IPO consisting entirely of secondary stock (OFS) of Rs. 479 cr.
Offer had a high pricing of Rs. 446 per share but listed with a substantial
listing premium at Rs. 662 with good anchor investors. Traded at Rs. 570 two
months later. Offer was heavily over-subscribed overall by 73 times (NII 225
times).
 Another successful IPO in this space was Dr Lal PathLabs which was havily
fancied by QIBs (64 times). Offered at Rs. 550 per share, listed at more than
30% premium. It was an entirely OFS issue.
 Other notable offers were Infibeam (India’s first e-com listing) and Narayana
Hrudayalaya. Infibeam, a cash positive company but loss making company
did not raise any PE capital prior to IPO. It was a fund raising offer for Rs.450
cr at Rs. 432 per share, valuing it at Rs. 2300 Cr (post-IPO), listed at Rs. 453
and quoted at 691 after 2 months. It was just about subscribed at 1.11 times
(QIB under-subscribed). NHL was predominantly a OFS with a small
component of new issue. Total size Rs. 613 cr, Offer Price – Rs. 250, listed at
Rs.291, quoted at Rs. 320 after 6 months. Good response in all categories.
OTHER PROMINENT OFFERS – 2015/16

 Alkem Laboratories - saw its shares fully subscribed on the second

day of the offering. The company raised almost Rs 1,350 crore
($203.7 million), one of the highest IPO capital raising in 2015.
 Inox Wind Ltd – A wind energy solutions provider, it was one of the
early firms of 2015 for IPO. It raised little over $166 million being
oversubscribed 17.5 times.
 Navkar Corporation Ltd– This logistics company made its debut in
2015. The issue of the company got oversubscribed 1.8 times even
after a slow start on day first. The company raised $95.7 million.
 Parag Milkfood – Profit-making company, Issue cum OFS, offered
at Rs. 215, listed at same price, traded over Rs. 250 after a
month. Received overall 1.83 times (QIB 1 time) subscription.
 All the above are cases of successful PE backed IPOs. 2015/15 and
15 saw successful PE backed IPO exit transactions in India.
RIGHTS ISSUES AND
FPOS
MAIN CONSIDERATIONS IN RIGHTS ISSUES

 Pricing of Rights – it has to be a fixed price offer

 Dilution of existing holdings including that of the
promoters
 Expansion in equity base
 Consolidation of stakes
 Financing to be raised
 Type of instrument
 Past history
 Issue structure
 Renunciation
 Market conditions
ISSUE PROCESS

 Consent of existing shareholders

 Appointment of merchant banker
 Preparation of letter of offer
 Issue to be opened and closed within 30-60 days
 Allotments to be finalised and intimated
including those of the renouncees.
 Listing of the rights shares.
FOLLOW ON OFFERS

 Listed companies can make follow on offers

(also known as secondary public offers) in the
same way as an IPO.
 Free pricing is allowed through book building
route if the issue size exceeds 5 times the pre-
issue networth.
 Pricing of FPOs is different from that of IPOs.
 Lock-in of promoter capital shall apply upto 20%
o the post-issue capital.
 All other provisions shall apply mutandis
mutandis as in IPO.
COMPOSITE OFFERS

 A simultaneous rights-cum public offer is

known as a composite issue.
 Differential pricing is allowed in a composite
offer.
 The public issue cannot open after the rights has
closed.
 Requirements of lock-in and minimum
promoters’ contribution shall apply.
 There shall be separate and distinct processes for
the rights and public components.