Final Ipo of Nitin

INTIAL PUBLIC OFFERING IN INDIA
“INITIAL PUBLIC OFFERING (IPO) IN INDIA”
Dissertation Submitted to the

Padmashree Dr. D.Y. Patil University
in partial fulfillment of the requirements for the award of the Degree of
MASTERS IN BUSINESS ADMINISTRATION
Submitted by:
NITIN B. JAIN
MBA-COR-FIN-(Roll No: 0801093)
Research Guide:
Ms. Mamta Dhankute
Lecturer
Department of Business Management

CBD Belapur, Navi Mumbai
March 2010
DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 1

DECLARATION
I hereby declare that the dissertation “INITIAL PUBLIC OFFERING

(IPO) IN INDIA” submitted for the MBA Degree at Padmashree Dr.
D.Y. Patil University’s Department of Business Management is my
original work and the dissertation has not formed the basis for the
award of any degree, associate ship, fellowship or any other similar
titles.
Place: Mumbai
Date:
NITIN B. JAIN

CERTIFICATE
This is to certify that the dissertation entitled “INITIAL PUBLIC

OFFERING (IPO) IN INDIA” is the bona fide research work carried
out by Mr. NITIN B. JAIN student of MBA, at Padmashree Dr. D.Y.
Patil University’s Department of Business Management during the
year 2008 -2010, in partial fulfillment of the requirements for the
award of the Degree of Master in Business Management and that the
dissertation has not formed the basis for the award previously of any
degree, diploma, associate ship, fellowship or any other similar title.
(Ms. Mamta Dhankute)

Lecturer
(Dr. R. Gopal)
Director,
Department of Business Mgt,
Place: Mumbai
Date:

ACKNOWLEDGEMENTS
In the first place, I thank Ms. Mamta Dhankute, Lecturer, Department

of Business Management, Padmashree Dr. D.Y. Patil University, and
Navi Mumbai for having given me her valuable guidance for the
project. Without her help it would have been impossible for me to
complete the project. I would also like to thank the various people
from the Capital Market industry who have provided me with a lot of
information and in fact even sharing some of the confidential
company documents and data – many of which I have used in this
report and without which this project could not have been completed.
I would be failing in my duty if I do not acknowledge with a deep

sense of gratitude the sacrifices made by my parents and thus have
helped me in completing the project work successfully.
Place: Mumbai
Date:
NITIN B. JAIN

TABLE OF CONTENT
Chapter
No Title Page No
A List of tables 7
B List of figures 8
C List of abbreviations 9
D Executive summary 10
E Objective of the study 11
F Research methodology 12
G Review of literature 13
1 Financial markets and IPO 16

2 Short terms in IPO 25
4 IPO - features 38
5 Trends 33
6 Pricing of issue 51
7 Book building 52
8 Cost of issue 56
9 Brief note on intermediaries 58
10 Sebi and IPO 62
11 Marketing of IPO 72
12 IPO grading 76
15 Guide to understand an offer document 87
13 Case study analysis 91
14 IPO scam 136

16 Survey report 139

17 Conclusion and Recommendations 148
18 Bibliography 151
19 Reference 152

LIST OF TABLES
PARTICULARS PAGE NO.

IPO In Recent Past Year 50
Recent IPO Data With Break-Up 50
Difference In Fixed Price Process And Book 54

Building Process
Guidelines For Lead Managers By Sebi 58
Underwriting Commission Table 60
Future Capital Subscription Detail 93
Reliance Power Subscription Detail 98
Bang Overseas Ltd Subscription Detail 104
J. Kumar Infraprojects Ltd. Subscription Detail 110
Cords Cable Industries Ltd Subscription Detail 116
K.N.R. Construction Ltd Subscription Detail 122
On mobile Global Ltd Subscription Detail 128

LIST OF FIGURES
PARTICULARS PAGE NO
Diagram On Overview Of Primary And secondary 18
Market
Types Of Issues 22

LIST OF ABBREVIATIONS
ASBA Application Supported by Blocked

Amount
BSE Bombay stock exchange
BRLM Book Running Lead Manager to the
Issue
CRISIL Credit Rating and Information Services of
India Ltd.
DMAT Dematerialized trading
DPO Direct Public Offering
E-IPO Electronic -IPO
FII Foreign institutional investor
FPO Further public offering
ICRA Industrial Credit Rating Agency
IPO Initial public offering
IRDA Insurance Regulator and
Development Authority
NIBs Non-Institutional Buyers
OTCEI Over the Counter Exchange of India
POP Public Offering Price
QIBs Qualified Institutional Buyers
QIP Qualified Institutions Placement
RHP Red Herring Prospectus
RI Rights Issue
ROC Registrar of Companies
SEBI Security and Exchange Board of India
SEBI (DIP) SEBI(Disclosure and Investor Protection)
SCSB Self Certified Syndicate Bank

EXECUTIVE SUMMARY
When a business entity needs money the general course of action

that it follows is that it goes to the bank. However banks may not be
ready to provide huge finance for a long time especially if the returns
are not fixed. The best way to raise money is through offer of shares.
The securities which the companies issue for the first time to the
public and other financial institutions either after incorporation or on
conversion from private to public company is called “INITIAL PUBLIC
OFFERING” or “IPO”. Raising equity gives boost to economical
development of the country.
Raising money through IPO is a very complex process. It requires

analysis and implementation of various commercial laws applicable to
IPO-Prospectus. These laws are Companies Act, Income Tax Act,
FEMA, Securities Contract Act and SEBI Guidelines on “Disclosure
and Investor Protection”. It is also necessary to implement circulars
from time to time by SEBI. The introduction of SEBI attracted Foreign
Institutional Investors to invest money in stock market in India. It has
also helped Indian Companies to offer securities in most scientific
method to Indian and Foreign investors
Therefore to understand this complex subject, I decided to undertake
studies by this Project Report.

OBJECTIVES OF THE STUDY
To analyze and evaluate the complex IPO process
To study and incorporate the legal requirements of an IPO
SEBI Norms and Guidelines
Various aspects of IPO like cost, Involvement of intermediaries,

pricing of an IPO.
Pricing of an issue through the Book-Building Method

RESEARCH METHODOLOGY
Primary data consist of the Survey done by meeting people who are
either Customers in Share Market or have idea about it. The data can
be collected by laymen to find out their needs. The sample size was
taken was 50 responded. It also includes case analysis of some
corporate houses IPO’s.
Secondary data would consist of widely available resources like

1. Newspapers
2. Magazines
3. Journals
4. Websites
5. Books etc.

LITERATURE REVIEW
1. “INITIAL PUBLIC OFFERINGS” BY RICHARD P. KLEEBURG 3RD

EDITION IN YEAR 2005, WHICH PUBLISHED BY SOUTH
WESTERN EDUCATIONAL PUBLISHING.”
This valuable resource is for the executives and advisers of any firm
considering making the transition from a private to public company.
An IPO is not just a short-term financial transaction. It often marks the
turning point in the life of a company, enabling it to launch new
products, enter new markets, accelerate its growth, and attract
valuable employees. If an IPO is the way to grow, then a "balanced
scorecard" approach needs to be used - an honest evaluation of the
process and consideration of whether an IPO, despite its glamour,
will or will not produce the desired results. Initial Public Offerings
uncovers many of the successful approaches and common pitfalls to
going public. It helps officials decide whether an IPO or other
financing alternatives is the right strategy, determine which stock
market to use, plan and execute the IPO, and stay on track following
the IPO - helping companies reach their true potential for success.

2. “DALAL STREET JOURNAL’S “STOCK MARKET BOOK”

-PUBLISHED BY RAMDEO MEDIA LTD WITH
DALALSTREETJORNAL.COM”
This book provides an insight into some of the aspects of secondary

market and provides with concept clearing on some of the
fundamental aspects of IPO.
3. “IPO: CONCEPTS AND EXPERIENCES - BY ARINDAM

BANERJEE PUBLISHED; BY-ICFAI UNIVERSITY PRESS”
One of the striking features that makes any capital market an

attractive investment avenue is its liquidity. In this regard, the
importance and relevance of Initial Public Offers (IPOs) go beyond
explanation. Simply speaking, IPOs serve the purpose of companies
going public; the process by which the business owned by one or
several individuals is converted into a business owned by many.
Several experts are of the opinion that, IPOs strengthen the financial
architecture of the entire capital market by enhancing liquidity, while
others say, that they bring along with it an array of fraudulent
practices that have a strong potential of eroding the investors’
confidence. From the company’s point of view, an IPO can even mark
the turning point in an organization’s life. Following an IPO, a
company can increase its growth potential, launch its new products
as well as enter new markets. IPOs are a general feature of any

booming capital market that increases the overall market

capitalization. Of late, the global capital markets have performed
considerably well and one primary reason attributed to the same is
the surge of public offers that have flooded the markets. This book
titled “IPOs: CONCEPTS AND EXPERIENCES” deals with various
conceptual parameters of IPOs such as their pricing mechanisms,
valuation methods, timing of the offers, technology impact on IPOs
and various other related issues. In its entirety, the book itself is a
comprehensive guide to the various trends witnessed in the IPO
market amidst the volatile environment.
4. “IPO MARKETS: PERSPECTIVES AND EXPERIENCES BY -

VANDANA SHAJAN PUBLISHED BY-ICFAI”
This book provides detailed analysis by focusing majorly on

IPOs rating, IPOs rating, IPOs rating and IPO scams.
5. “NCFM MODULE: FINANCIAL MARKET’S”
A VALUABLE INPUT HAS BEEN TAKEN FROM THE BOOKS

AVAILABLE THROUGH NCFM MODULE LIKE CAPITAL MARKET
MODULE ETC.

FINANCIAL MARKETS AND THE IPO
The Financial Market is an amorphous set of players who come

together to trade in financial assets. Financial Markets in any
economic system that acts as a conduit between the organizations
who need funds and the investors who wish to invest their money into
profitable opportunity. Thus, it helps institutions and organizations
that need money to have an access to it and on the other hand, it
helps the public in general to earn savings. Thus they perform the
crucial function of bringing together the entries who are either
financially scarce or who are financially slush. This helps generally in
a smoother economic functioning in the sense that economic
resources go to the actual productive purposes. In modern economic
systems Stock Exchanges are the epicenter of the financial activities
in any economy as this is the place where actual trading in securities
takes place.
Modern day Stock Exchanges are most of the centers to trade in the
existing financial assets. In this respect, they have come a long way
in the sense that these days, they act as a platform to launch new
securities as well as act as most authentic and real time indicator of
the general economic sentiment. The zone of activities in the capital
market is dependent partly on the savings and investment in the
economy and partly on the performance of the industry and economy
in general. In other words capital market constitutes the channel
through which the capital resources generated in the society and
made available for economic development of the nation.
As such, Financial Markets are functionally classified as having two

parts, namely,
The Primary Market

The Secondary Market
Primary Market comprises of the new securities which are offered to

the public by new companies. It is the mechanism through which the
resources of the community are mobilized and invested in various
types of industrial securities. Whenever a new company wants to
enter the market it has to first enter the primary market.
Secondary Market comprises of further issues which are floated by

the existing companies to enhance their liquidity position. Once the
new issues are floated and subscribed by the public then these are
traded in the secondary market. It provides easy liquidity,
transferability and continuous price formation of securities to enable
investors to buy and sell them with ease. The volume of activity in the
Secondary Market is much higher compared to the Primary Market
When an investor buys shares from another investor at an agreed
prevailing market price, it is called as buying from the secondary
market. The secondary market involves the stock exchanges and it is
regulated by a regulatory authority. In India, the secondary and
primary markets are governed by the Security and Exchange Board
of India (SEBI).

“DIAGRAM ON OVERVIEW OF PRIMARY AND SECONDARY

MARKET”

PRIMARY MARKET-GENESIS AND GROWTH
When a business entity needs money

the general course of action that it
follows is that it goes to the bank.
However banks may not be ready to
provide huge finance for a long time
especially if the returns are not fixed.
The best way to raise money is
through offer of shares and for this:
PRIMARY MARKET is the answer
The Primary Market deals with the new securities which were
previously not trade able to the public. The main function is to
facilitate the transfer of resources from savers to entrepreneurs
seeking to establish or to expand and diversify existing events. The
mobilization of funds through the Primary Market is adopted by the
state government and corporate sector. In other words the Primary
Market is an integral part of the capital market of a country and
together with the securities market. The development of security as
well as the scope for higher productive capacity and social welfare
depends upon the efficiency of the Primary Market.
WHAT IS AN IPO?
The securities which the companies issue for the first time to the
public either after incorporation or on conversion from private to
public company is called “INITIAL PUBLIC OFFERING” or “IPO”

GROWTH OF IPO’S IN INDIA
HISTORY OF PRIMARY MARKET
Indian capital market was initiated with establishing the Bombay stock
exchange in the year 1875.at that time the main function of stock
exchange was to provide place for trading in the stocks. Now the
exchange has completed more than 25 years. It has undergone
several changes.
Initially the IPO was called ‘New Issue’ and the issues in the Primary
Market were controlled by CCI (Controller of capital issue). It was
working as a department of MOF (ministry of finance). There were
very few issues every year. CCI was highly conservative and hardly
allowed any premium issues. Also, the regulatory framework was
inadequate to control several issues relating to Primary Market.
Therefore, in the year 1992 it was abolished.
There was no awareness of new issues among the investing public.

In fact, during 1950s-1960s, the investment in stock market was
considered to be gambling. It was prerogative to highly elite business
community to participate in new issues. More than 99% of Indian
population never participated in any issue during CCI regime.
There was tremendous growth in capital market in U.S.A. and

Western Europe. In these markets they had established Security
Exchange Commission (SEC). It is most powerful autonomous body.

The Government of India realized the importance of a similar body in
India for healthy and fast growth of Capital Market. Thus Security
Exchange Board of India (SEBI) was established with headquarters in
Mumbai in 1992.SEBI is the most powerful body in India.
SEBI has come up with the guidelines for disclosures and investors
protection. SEBI has framed rules for various intermediaries like
Merchant Bankers, Underwriters, Brokers, Bankers, Registrars and
Transfer Agents, Depositories, Stock Exchanges etc. These rules are
on the line of similar rules in western world. This has attracted foreign
institutional and individual investors to invest money in India. This has
resulted in exponential growth of Capital Market in this last decade.
POPULARISING THE NEW ISSUE.
Late Shri, Dhirubhai Ambani can be considered as ‘Bhishmapita’ of

new issues, though initially he also had to struggle to get subscribers
but he always used innovative ideas for marketing IPOs. It is said that
investor never lost money in his pricing methods. There are several
incidences of the common man participated in his issues, got
allotment, sold shares and created fabulous wealth for themselves.
As on 31-12-2003, Reliance Group has more than 3.5 million
shareholders.

TYPES OF ISSUES
Public issues can be further classified into Initial Public offerings and
further public offerings. In a public offering, the issuer makes an offer
for new investors to enter its shareholding family. The issuer
company makes detailed disclosures as per the DIP guidelines in its
offer document and offers it for subscription. The significant features
are illustrated below:

INITIAL PUBLIC OFFERING (IPO)

It is when an unlisted company makes either a fresh issue of
securities or an offer for sale of its existing securities or both for the
first time to the public. This paves way for listing and
trading of the issuer’s securities.
FURTHER PUBLIC OFFERING (FPO)

It is when an already listed company makes either a fresh issue of
securities to the public or an offer for sale to the public, through an
offer document. An offer for sale in such scenario is allowed only if it
is made to satisfy listing or continuous listing obligations.
RIGHTS ISSUE (RI)

It is when a listed company which proposes to issue fresh securities
to its existing shareholders as on a record date. The rights are
normally offered in a particular ratio to the number of securities held
prior to the issue. This route is best suited for companies who
would like to raise capital without diluting stake of its existing
shareholders unless they do not intend to subscribe to their
entitlements.
PRIVATE PLACEMENT
It is an issue of shares or of convertible securities by a company to a
select group of persons under Section 81 of the Companies Act, 1956
which is neither a rights issue nor a public issue. This is a faster way
for a company to raise equity capital. A private placement of shares
or of convertible securities by a listed company is generally known by

name of preferential allotment. A listed company going for preferential
allotment has to comply with the requirements contained in Chapter
XIII of SEBI (DIP) Guidelines pertaining to preferential allotment in
SEBI (DIP) guidelines include pricing, disclosures in notice etc, in
addition to the requirements specified in the Companies Act.
QUALIFIED INSTITUTIONS PLACEMENT

It is a private placement of equity shares or securities convertible in to
equity shares by a listed company to Qualified Institutions Buyers
only in terms of provisions of Chapter XIIIA of SEBI (DIP) guidelines.
The Chapter contains provisions relating to pricing, disclosures,
Currency of instruments etc.

SOME TERMS IN IPO INDUSTRY :
OFFER DOCUMENT
Means Prospectus in case of a public issue or offer for sale and
Letter of Offer in case of a rights issue which is filed Registrar of
Companies (ROC) and Stock Exchanges. An offer document covers
all the relevant information to help an investor to make his/her
investment decision.
DRAFT OFFER DOCUMENT

Means the offer document in draft stage. The draft offer documents
are filed with SEBI, at least 21 days prior to the filing of the Offer
Document with ROC/ SEs. SEBI may specifies changes, if any, in the
draft Offer Document and the issuer or the Lead Merchant banker
shall carry out such changes in the draft offer document before filing
the Offer Document with ROC/SEs. The Draft Offer document is
available on the SEBI website for public comments for a period of 21
days from the filing of the Draft Offer Document with SEBI.
RED HERRING PROSPECTUS

It is a prospectus which does not have details of either price or
number of shares being offered or the amount of issue. This means
that in case price is not disclosed, the number of shares and the
upper and lower price bands are disclosed. On the other hand, an
issuer can state the issue size and the number of shares are

determined later. An RHP for and FPO can be filed with the ROC
without the price band and the issuer, in such a case will notify the
floor price or a price band by way of an advertisement one day prior
to the opening of the issue. In the case of book-built issues, it is a
process of price discovery and the price cannot be determined until
the bidding process is completed. Hence, such details are not shown
in the Red Herring prospectus filed with ROC in terms of the
provisions of the Companies Act. Only on completion of the bidding
process, the details of the final price are included in the offer
document. The offer document filed thereafter with ROC is called a
prospectus.
ABRIDGED PROSPECTUS
Means the memorandum as prescribed in Form 2A under sub-section
(3) of section 56 of the Companies Act, 1956. It contains all the
salient features of a prospectus. It accompanies the application form
of public issues.
LETTER OF OFFER
Means the offer document prepared by company for its rights issue
and which is filed with the Stock Exchanges. The letter of offer
contains all the disclosures as required in term of SEBI (DIP)
guidelines and enable shareholder in making an informed decision.

ABRIDGED LETTER OF OFFER

Means the abridged version of the letter of offer. Listed company is
required to send the abridged letter of offer to each and every
shareholder who is eligible for participating in the rights issue along
with the application form. A company is also required to send detailed
letter of offer upon request by any Shareholder.
PLACEMENT DOCUMENT
Means document prepared by Merchant Banker for the purpose of
Qualified Institutions placement and contains all the relevant and
material disclosures to enable QIBs to make an informed decision
LOCK-IN
“Lock-in” indicates a freeze on the shares. SEBI (DIP) Guidelines
have stipulated lock-in requirements on shares of promoters mainly to
ensure that the promoters or main persons who are controlling the
company, shall continue to hold some minimum percentage in the
company after the public issue. The requirements are detailed in
Chapter IV of DIP guidelines. There is lock-in on the shares held
before IPO and also on shares acquired through preferential
allotment route. However there is no lock- in on shares/ securities
allotted through QIP route. The requirements are detailed in Chapter
IV, Chapter XIII and Chapter XIIIA of DIP guidelines.

PROMOTER
The promoter has been defined as a person or persons who are in
over-all control of the company, who are instrumental in the
formulation of a plan or programme pursuant to which the securities
are offered to the public and those named in the prospectus as
promoters(s). It may be noted that a director / officer of the issuer
company or person, if they are acting as such merely in their
professional capacity are not be included in the definition of a
promoter.
'Promoter Group' includes the promoter, an immediate relative of the
promoter (i.e. any spouse of that person, or any parent, brother, sister
or child of the person or of the spouse). In case promoter is a
company, a subsidiary or holding company of that company; any
company in which the promoter holds 10% or more of the equity
capital or which holds 10%
Or more of the equity capital of the Promoter; any company in which
a group of individuals or companies or combinations thereof who
holds 20% or more of the equity capital in that company also holds
20% or more of the equity capital of the issuer company. In case the
promoter is an individual, any company in which 10% or more of the
share capital is held by the promoter or an immediate relative of the
promoter' or a firm or HUF in which the 'Promoter' or any one or more
of his immediate relative is a member; any company in which a
company specified in, holds 10% or more, of the share capital; any
HUF or firm in which the aggregate share of the promoter and his

immediate relatives is equal to or more than10% of the total, and all

persons whose shareholding is aggregated for the purpose of
disclosing in the prospectus "shareholding of the promoter group".
GREEN-SHOE OPTION
A Green Shoe option means an option of allocating shares in excess
of the shares included in the public issue and operating a post-listing
price stabilizing mechanism for a period not exceeding 30 days in
accordance with the provisions of Chapter VIIIA of DIP Guidelines,
Which is granted to a company to be exercised through a Stabilizing
Agent? This is an arrangement wherein the issue would be over
allotted to the extent of a maximum of 15% of the issue size. From an
investor’s perspective, an issue with green shoe option provides more
probability of getting shares and also that post listing price may show
relatively more stability as compared to market.
E-IPO
A company proposing to issue capital to public through the on-line
system of the stockexchange for offer of securities can do so if it
complies with the requirements under Chapter 11A of DIP Guidelines.
The appointment of various intermediaries by the issuer includes a
prerequisite that such members/registrars have the required facilities
to accommodate such an online issue process.
SAFETY NET
Any safety net scheme or buy-back arrangements of the shares
proposed in any public issue shall be finalized by an issuer company
with the lead merchant banker in advance and disclosed in the

prospect us. Such buy back or safety net arrangements shall be
made available only to all original resident individual allottees limited
up to a maximum of 1000 shares per allottee and the offer is kept
open for a period of 6 months from the last date of dispatch of
securities. The details regarding Safety Net are covered under
Clause 8.18 of DIP Guidelines
SYNDICATE MEMBER
The Book Runner(s) may appoint those intermediaries who are
registered with the Board and who are permitted to carry on activity
as an ‘Underwriter’ as syndicate members. The syndicate members
are mainly appointed to collect and entre the bid forms in a book built
issue.
FLIPPING
Flipping is reselling a hot IPO stock in the first few days to earn a
quick profit. This isn't easy to do, and you'll be strongly discouraged
by your brokerage. The reason behind this is that companies want
long-term investors who hold their stock, not traders. There are no
laws that prevent flipping, but your broker may blacklist you from
future offerings. Institutional investors flip stocks all the time and
make big money. The double standard exists and there is nothing we
can do about it because they have the buying power. Because of
flipping, it's a good rule not to buy shares of an IPO if you don't get in
on the initial offering. Many IPOs that have big gains on the first day
will come back to earth as the institutions take their profits.
OPEN BOOK/CLOSED BOOK

Presently, in issues made through book building, Issuers and
merchant bankers are required to ensure online display of the
demand and bids during the bidding period. This is the Open book
system of book building. Here, the investor can be guided by the
movements of the bids during the period in which the bid is kept
open. Under closed book building, the book is not made public and
the bidders will have to take a call on the price at which they intend to
make a bid without having any information on the bids submitted by
other bidders.
HARD UNDERWRITING
Hard underwriting is when an underwriter agrees to buy his
commitment at its earliest stage. The underwriter guarantees a fixed
amount to the issuer from the issue. Thus, in case the shares are not
subscribed by investors, the issue is devolved on underwriters and
they have to bring in the amount by subscribing to the shares. The
underwriter bears a risk which is much higher in soft underwriting.
SOFT UNDERWRITING
Soft underwriting is when an underwriter agrees to buy the shares at
later stages as soon as the pricing process is complete. He then,
immediately places those shares with institutional players. The risk
faced by the underwriter as such is reduced to a small window of
time. Also, the soft underwriter has the option to invoke a force
Majeure (acts of God) clause in case there are certain factors beyond

the control that can affect the underwriter’s ability to place the shares
with the buyers.
CUT OFF PRICE

In Book building issue, the issuer is required to indicate either the
price band or a floor price in the red herring prospectus. The actual
discovered issue price can be any price in the price band or any price
above the floor price. This issue price is called “Cut off price”. This is
decided by the issuer and LM after considering the book and
investors’ appetite for the stock. SEBI (DIP) guidelines permit only
retail individual investors to have an option of applying at cut off price.
DIFFERENTIAL PRICING
Pricing of an issue where one category is offered shares at a price
different from the other category is called differential pricing. In DIP
Guidelines differential pricing is allowed only if the security to
applicants in the firm allotment category is at a price higher than the
price at which the net offer to the public is made. The net offer to the
public means the offer made to the Indian public and does not include
firm allotments or reservations or promoters’ contributions.
BASIS OF ALLOCATION/BASIS OF ALLOTMENT

After the closure of the issue, the bids received are aggregated under
different categories i.e., firm allotment, Qualified Institutional Buyers
(QIBs), Non-Institutional Buyers (NIBs), Retail, etc. The
oversubscription ratios are then calculated for each of the categories
as against the shares reserved for each of the categories in the offer
document. Within each of these categories, the bids are then

segregated into different buckets based on the number of shares
applied for. The oversubscription ratio is then applied to the number
of shares applied for and the number of shares to be allotted for
applicants in each of the buckets is determined. Then, the number of
successful allottees is determined. This process is followed in case of
proportionate allotment. In case of allotment for QIBs, it is subject to
the discretion of the post issue lead manager.
QUALIFIED INSTITUTIONAL BUYER (QIBS)

Qualified Institutional Buyers are those institutional investors who are
generally perceived to possess expertise and the financial muscle to
evaluate and invest in the capital markets.
In terms of clause 2.2.2B (v) of DIP Guidelines, a ‘Qualified
Institutional
Buyer’ shall mean:

A. Public financial institution as defined in section 4A of the
Companies Act, 1956;
B. scheduled commercial banks;
C. mutual funds;
D. foreign institutional investor registered with SEBI;
E. multilateral and bilateral development financial institutions;
F. venture capital funds registered with SEBI.
G. foreign Venture capital investors registered with SEBI.
H. State Industrial Development Corporations.

I. insurance Companies registered with the Insurance Regulator and

Development Authority (IRDA).
J. provident Funds with minimum corpus of Rs. 25 crores
K. pension Funds with minimum corpus of Rs. 25 crores)
These entities are not required to be registered with SEBI as QIBs.
Any entities falling under the categories specified above are
considered as QIBs for the purpose of participating in primary
issuance process.
APPLICATION SUPPORTED BY BLOCKED AMOUNT (ASBA)

Means an application for subscribing to an issue containing an
authorization to block the application money in a bank account.
ASBA INVESTOR
Means an Investor who intends to apply through ASBA process and
A. is a “Resident Retail Individual Investor”
B. is bidding at cut-off, with single option as to the number of shares
bid for;
C. is applying through blocking of funds in a bank account with the
SCSB;
D. has agreed not to revise his/her bid;
E. is not bidding under any of the reserved categories.

SELF CERTIFIED SYNDICATE BANK (SCSB)

It is a Banker to an Issue registered under SEBI (Bankers to an
Issue) Regulations; 1994which offers the service of making an
Applications Supported by Blocked Amount and recognized as such
by the Board)
MINORITY IPO
An initial public offering in which a parent company spins off one of its
subsidiaries or divisions, but retains a majority stake in the company
after issuance. This means that after the public offering, the parent
company will still have a controlling stake of the new public company.
The parent company may retain this majority stake forever or may
slowly dissolve their ownership over time. This type of IPO allows the
company to raise funds, accessing the value of the subsidiary, to fund
its own operation or return value to shareholders.
PUBLIC OFFERING PRICE - POP

The price at which new issues are offered to the public by an
underwriter. When underwriters determine the public offering price,
they look at a number of factors. Some of these include the
company's financial statements (how profitable it is), public trends,
growth rates and even investor confidence.
UNDERPRICING
The pricing of an initial public offering (IPO) below its market value.
When the offer price is lower than the price of the first trade, the stock
is considered to be underpriced. A stock is usually only underpriced

temporarily because the laws of supply and demand will eventually
drive it toward its intrinsic value. It is believed that IPOs are often
underpriced because of concerns relating to liquidity and
uncertainty about the level at which the stock will trade. The less
liquid and less predictable the shares are, the more underpriced they
will have to be in order to compensate investors for the risk they are
taking. Because an IPO's issuer tends to know more about the value
of the shares than the investor, a company must under price its stock
to encourage investors to participate in the IPO.
DIRECT PUBLIC OFFERING - DPO

When a company raises capital by marketing its shares directly to its
own customers, employees, suppliers, distributors and friends in the
community. DPOs are an alternative to underwritten public offerings
by securities broker-dealer firms where a company's shares are sold
to the broker's customers and prospects. Direct public offerings are
considerably less expensive than traditional underwritten offerings.
Additionally, they don't have the restrictions that are usually
associated with bank and venture capital financing. On the other
hand, a DPO will typically raise much less than a traditional offering.

QUIET PERIOD
In terms of an IPO, the period where an issuer is subject to a SEC
ban on promotional publicity. The quiet period usually lasts either 40
or 90 days from the IPO. In other words, If you take your company
public, you can't talk about your stock to anybody for 3 months.
There are two time windows commonly referred to as "quiet periods"
during an IPO's history. The first and the one linked above is the
period of time following the filing of the company's registration
statement, but before SEC staff declare the registration statement
effective. During this time, issuers, company insiders, analysts, and
other parties are legally restricted in their ability to discuss or promote
the upcoming IPO.
The other "quiet period" refers to a period of 40 calendar days
following an IPO's first day of public trading. During this time, insiders
and any underwriters involved in the IPO, are restricted from issuing
any earnings forecasts or research reports for the company.
Regulatory changes enacted by the SEC as part of the Global
Settlement, enlarged the "quiet period" from 25 days to 40 days on
July 9, 2002. When the quiet period is over, generally the lead
underwriters will initiate research coverage on the firm.
Further to this, the NASD and NYSE have approved a rule mandating
a 10-day quiet period after a secondary offering and a 15-day quiet
period both before and after expiration of a "lock-up agreement" for a
securities offering.

The first public offer of securities by a company after its inception is

known as Initial Public Offering (IPO). Going
public (or participating in an “initial public
offering” or IPO) is a process by which a
business owned by one or several
individuals is converted in to a business
owned by many. It involves the offering of
part ownership of the company to the public through the sale of equity
securities (stock).
IPO dilutes the ownership stake and diffuses corporate control as it
provides ownership to investors in the form of equity shares. It can be
used as exit strategy and finance strategy.
As a financing strategy, its main purpose is to raise funds for the
company. When used as an exit strategy, existing investors can
offload equity holdings to the public.
REASONS FOR GOING PUBLIC
To raise funds for financing capital expenditure needs like

expansion diversification etc.
To finance increased working capital requirement
As an exit route for existing investors
For debt financing.

ADVANTAGES OF GOING PUBLIC
Stock holder Diversification

Easier to raise new capital
Enhances liquidity
Establishes value for the firm
Image
Other advantages
DISADVANTAGES OF GOING PUBLIC
Cost of Reporting
Disclosure
Self dealings
Inactive market low price
Control

THE RISK FACTOR
Investing in IPO is often seen as an easy way of investing, but it is

highly risky and many investment advisers advise against it unless
you are particularly experienced and knowledgeable.
The risk factor can be attributed to the following reasons:
UNPREDICTABLE:
The Unpredictable nature of the IPO’s is one of the major reasons
that investors advise against investing in IPO’s. Shares are initially
offered at a low price, but they see significant changes in their prices
during the day. It might rise significantly during the day, but then it
may fall steeply the next day.
NO PAST TRACK RECORD OF THE COMPANY:

No past track record of the company adds further to the dilemma of
the shareholders as to whether to invest in the IPO or not. With no
past track record, it becomes a difficult choice for the investors to
decide whether to invest in a particular IPO or not, as there is basis to
decide whether the investment will be profitable or not.
POTENTIAL OF STOCK MARKET:

Returns from investing in IPO are not guaranteed. The Stock Market
is highly volatile. Stock Market fluctuations widely affect not only the
individuals and household, but the economy as a whole. The volatility
of the stock market makes it difficult to predict how the shares will
perform over a period of time as the profit and risk potential of the
IPO depends upon the state of the stock market at that particular
time.
RISK ASSESSMENT:
The possibility of buying stock in a promising start-up company and
finding the next success story has intrigued many investors. But
before taking the big step, it is essential to understand some of the
challenges, basic risks and potential rewards associated with
investing in an IPO.
This has made Risk Assessment an important part of Investment
Analysis. Higher the desired returns, higher would be the risk
involved. Therefore, a thorough analysis of risk associated with the
investment should be done before any consideration.
For investing in an IPO, it is essential not only to know about the
working of an IPO, but we also need to know about the company in
which we are planning to invest. Hence, it is imperative to know:
The fundamentals of the business
The policies and the objectives of the business
Their products and services
Their competitors
Their share in the current market
The scope of their issue being successful
It would be highly risky to invest without having this basic
knowledge about the company.

There are 3 kinds of risks involved in investing in IPO:
BUSINESS RISK:
It is important to note whether the company has sound business and
management policies, which are consistent with the standard norms.
Researching business risk involves examining the business model of
the company.
FINANCIAL RISK:
Is this company solvent with sufficient capital to suffer short-term
business setbacks? The liquidity position of the company also needs
to be considered. Researching financial risk involves examining the
corporation's financial statements, capital structure, and other
financial data.
MARKET RISK:
It would beneficial to check out the demand for the IPO in the market,
i.e., the appeal of the IPO to other investors in the market. Hence,
researching market risk involves examining the appeal of the
corporation to current and future market conditions.

TRENDS IN IPO
PRIMARY REASONS FOR A COMPANY GOING PUBLIC.

Most people label a public offering as a marketing event, which it
typically is. For the majority of firms going public, they need additional
capital to execute long-range business models, increase brand name,
to finance possible acquisitions or to take up new projects. By
converting to corporate status, a company can always dip back into
the market and offer additional shares through a rights issue.
PERFORMANCE IN 90s
Let us have a look at the general development of the Primary Markets
in the nineties. There have been many regulatory changes in the
regulation of primary market in order to save investors from
fraudulent companies. The most path breaking development in the
primary market regulation has been the abolition of CCI (Controller of
capital issues). The aim was to give the freedom to the companies to
decide on the pricing of the issue and this was supposed to bring
about a self-managing culture in the financial system. But the move
was hopelessly misused in the years of 1994-1995 and many
companies came up with issues at sky-high prices and the investors
lost heavily. That phase took a heavy toll on the investor’s sentiment
and the result was the amount of money raised through IPO route.

1993-96: SUNRISE, SUNSET.

With controls over pricing gone,
companies rushed to tap the
Primary Market and they did so,
with remarkable ease thanks to
overly optimistic merchant
bankers and gullible investors.
Around Rs20000 crores were
raised through 4053 issues
during this period. Some of the prominent money mobilizes were the
so called ‘sunrise sectors’-polyester, textiles, finance, aquaculture.
The euphoria spilled over to the Secondary Market. But reality soon
set in. Issuers soon failed to meet projections, many disappeared or
sank. Result: the small investor deserted both markets-till the next
boom!
1998-2000: ICE ON A HOT STREAK

As the great Indian software story played itself out, software stocks
led a bull charge on the bourses. The Primary Market caught up, and
issues from the software markets flooded the market. With big IPOs
from companies in the ICE (Information Technology, Communication
and Entertainment) sectors, the average issue price shot up from
Rs.5 crore in 1994-96 to Rs.30 crore. But gradually, hype took over
and valuations reached absurd levels. Both markets tanked.

2001-2002-ALMOST CLOSED
There were hardly any IPOs and those who ventured, got a lukewarm
response. A depressed Secondary Market had ensured that the
doors for the Primary Market remained closed for the entire FY 2001-
2002.There were hardly any IPOs in FY 2001-2002.
2002: QUALITY ON OFFER.

The Primary Market boom promises to be different. To start with, the
cream of corporate India is queuing up, which ensures quality. In this
fragile market, issue pricing remains to be conservative, this could
potentially mean listing gains. This could rekindle the interest of small
investors in stocks and draw them back into the capital market. The
taste of gains from the primary issues is expected to have a spillover
effect on the secondary market, where valuations today are very
attractive.
2003: IPO-IMPROVED PERFORMANCE OVERALL!
Even as the secondary market moved into top gear in 2003 the
primary market too scripted its own revival story, buoyed largely by
the Maruti IPO which was oversubscribed six and a half times. In
2003 almost all primary issues did well on domestic bourses after
listing, prompting retail investors to flock to IPO’s. All IPO’s, including
Indraprastha Gas and TV Today Network which was oversubscribed
51 times showed the growing appetite for primary issues. Divi Labs
hit the market in February followed by Maruti. Initially, the Maruti
share price was considered steep at Rs125 per share for a Rs5 paid-
up share. By the end of the year, the stock had climbed to over
Rs355. Close on the heels of Maruti, came the Uco Bank IPO, which
attracted about 1mn applicants. The primary issue of Indian Overseas
Bank attracted about 4.5mn applicants and Vijaya Bank over Rs40bn
in subscriptions. The last one to get a huge response was
Indraprastha Gas, which reportedly garnered about Rs30bn. TV
Today’s public offer was expected to draw in excess of Rs30bn. In
overseas listings, the only notable IPOs were Infosys Technology's
secondary ADR offering and the dull debut of Sterlite Group company
Vedanta on the London Stock Exchange.
It was really Maruti Udyog that took the lead with its new issue in
June. The issue was heavily over-subscribed and by the middle of
December the share value appreciated 186 per cent. The near
trebling of the investment in less than 6 months inspired the retail
investor who is now back again in the market scouting for good
scrips.
After the phenomenal success of Maruti issue, a number of

companies have approached the capital market and a lot more are
waiting for SEBI approval.
SEBI has taken enough care to force companies to make relevant

disclosures for the investor to judge the quality of new issues.
Besides, the companies themselves have been careful not to over-
price the shares. On the contrary, some of the companies have
deliberately under-priced them to let the issue get over-subscribed
and to let the investor share some of the capital gain after listing. With

the care taken by SEBI and the companies it is unlikely that the
experience of 1995 will be repeated.
2007: INITIAL PUBLIC OUTBURST

In 2007, the Indian equity market was in full swing with the index
gaining ~53% Y-o-Y and valuations edging beyond explanation. The
total market capitalization of the Indian stock market increased 8%
(INR 5,230 bn) on the back of 96 new listings in 2007. 2007 stood out
in the history of Indian capital markets with the highest funds raised
through IPOs in any calendar year with maximum companies from
the construction (16) and IT sectors (11).• Almost 61 of the 96 IPOs
(63%) debuted in premium in CY 07 as compared to 54 out of 75
IPOs (72% of total IPOs) in 2006.
2008: IPO IN DOWNTURN

On January 15, 2008, Reliance Power attracted $27.5 billion of
bids on the first day of its IPO, equivalent to 10.5 times the
stock on offer, thereby, creating India's IPO record. Its upper
cut off price was Rs. 450. The proposed IPO was to fund the
development of its six power projects across the country.
Emaar MGF’s IPO, at $1.6 billion is estimated to be the second
largest IPO in the world so far this year, behind Reliance
Power's $3 billion IPO.
Thomson Financial data reveals that India accounts for 49.1%
of global IPO proceeds at the moment, compared to just 3.7%
same time last year. Significant, given that global IPOs declined
36.1% over the last one year.

2009: IPO IN RECOVERY PERIOD

The severe economic downturn in 2008 sent worldwide IPO markets
plummeting by over 60% in both deal numbers and funds raised
since 2007. With assets being revalued globally, no IPO market was
insulated from the financial crisis. The spreading financial contagion
effectively shut down public markets worldwide, bringing to an abrupt
end the record-setting IPO boom years of 2006-07. Even so, some
larger quality companies with strong business plans still managed to
access the public markets with positive results. Despite faltering
economies and sinking stock markets in 2008, the US and China led
in IPO fundraising and deal numbers, respectively, while Saudi
Arabia emerged as the third largest IPO market.
Trends in IPO activity can be difficult to predict, especially in times of

market volatility. Global markets will require a period of
macroeconomic stability and confidence rebuilding for the window of
IPO opportunity to reopen. Nevertheless, the 2009 IPO pipeline
contains many quality companies from both developed and emerging
markets, which continue to ready themselves to go public while
waiting for market conditions to improve.
After extensive interviews with some of the world’s top investment

bank leaders and stock exchange leaders, Ernst & Young’s Global
IPO trends report 2009 reviews the major developments in the
worldwide IPO markets of 2008 and the first quarter of 2009. As the
sixth global IPO report produced by Ernst & Young, this review offers

an in-depth examination of the key trends for companies planning an

IPO today, as well as perspectives on IPO readiness.
As Jim Turley, Chairman and CEO, Ernst & Young, emphasizes in

the report’s opening interview, “A crisis is a terrible thing to waste.”
Indeed, many market-leading companies were formed during
challenging economic times. Companies that undergo an effective
IPO readiness transformation during these tough times will be the first
to go public when markets reopen. Early signs suggest a shift toward
a new economic landscape favoring companies that offer innovative
and productive solutions for the changing environment. We look
forward to working with these pioneering companies in their
transformation from a private entity to a public enterprise.

IPO’S IN PAST RECENT YEAR’S
YEARS NO. OF IPO’S AMOUNT (CR. RS)
2003-04 19 3191.10
2004-05 23 14662.32
2005-06 76 10797.88
2006-07 76 23706.16
2007-08 84 41323.45
2008-09 21 2033.99
RECENT IPO DATA WITH BREAK-UP
YEAR FRESH CAPITAL OFFERS FOR SALE TOTAL

NO.OF AMOUNT NO.OF AMOUNT NO.OF AMOUNT
IPOs (Rs.crore) IPOs (Rs.crore) IPOs (Rs.crore)
2003-04 16 1813.42 5 1377.68 19 3191.10
2004-05 21 8099.59 9 6562.73 23 14662.32
2005-06 76 9130.21 11 1667.67 76 10797.88
2006-07 74 22745.44 12 960.72 76 23706.16
2007-08 82 38634.65 9 2688.81 84 41323.45
2008-09 21 1985.08 3 48.92 21 2033.99

PRICING OF ISSUE
CONTROLLER OF CAPITAL ISSUE

During the Controller of Capital Issue (CCI)
regime the issues were priced by the company
and approved by CCI. Generally the CCI was
very conservative and hardly allowed premium issues.
ARRIVAL OF SEBI
After the Arrival of SEBI free market policy is followed for pricing of
issue. Merchant Bankers are responsible for justifying the premium.
The company was allowed to give future profit projections. A
company can issue shares to applicants in the firm allotment category
at higher price than the price at which securities are offered to public.
Further, an eligible company is free to make public/rights issue in any
denomination determined by it in accordance with the Companies
Act, 1956 and SEBI norms.
DECIDING PREMIUM BY BID SYSTEM

Since year 2000 SEBI has changed pricing formula. The promoters
cannot give future projections and merchant banker alone cannot
decide the pricing of IPO. At present, 50%of the IPO is reserved for
the wholesale investors and 50% is for the small investor. The Lead-
Manager starts road show in consultation with Institutional Investors.
Then they call for bid at recommended prices. Once, bids are
received pricing is open for discussion. The mean bid price is
accepted and allocation is done.
BOOK BUILDING
THE LATEST AVTAAR OF PRICE DISOVERY
WHAT IS BOOK BUILDING?

Book Building is basically a capital issuance process used in Initial
Public Offering (IPO), which aids price and demand discovery. IT is a
process used for marketing a public offer of equity shares of a
company and is a common practice in most developed countries.
Book Building is so-called because the collection of bids from
investors is entered in a "book". These bids are based on an
indicative price range. The issue price is fixed after the bid closing
date.
PERSONS INVOLVED IN THE BOOK-BUILDING PROCESS

The principal intermediaries involved in the Book Building process are
the company; Book Running Lead Managers (BRLM) and syndicate
members who are intermediaries registered with SEBI and are
eligible to act as underwriters. Syndicate members are appointed by
the BRLM.
HOW IS THE BOOK BUILT?

A company that is planning an initial public offer appoints a category-I
Merchant Banker as a book runner. Initially, the company issues a
draft prospectus which does not mention the price, but gives other
details about the company with regards to issue size, past history and
future plans among other mandatory disclosures. After the draft
prospectus is filed with the SEBI, a particular period is fixed as the bid
period and the details of the issue are advertised. The book runner
builds an order book, that is, collates the bids from various investors,
which shows the demand for the shares of the company at various
prices. For instance, a bidder may quote that he wants 50,000 shares
at Rs.500 while another may bid for 25,000 shares at Rs.600.
Prospective investors can revise their bids at anytime during the bid
period that is, the quantity of shares or the bid price or any of the bid
options.
BASIS OF DECIDING THE FINAL PRICE

On closure of the book, the quantum of shares ordered and the
respective prices offered are known. The price discovery is a function
of demand at various prices, and involves negotiations between those
involved in the issue. The book runner and the company conclude the
pricing and decide the allocation to each syndicate member.
PAYMENT FOR THE SHARES

The bidder has to pay the maximum bid price at the time of bidding
based on the highest bidding option of the bidder. The bidder has the
option to make different bids like quoting a lower price for higher
number of shares or a higher price for lower number of shares. The
syndicate member may waive the payment of bid price at the time of
bidding. In such cases, the issue price may be paid later to the
syndicate member within four days of confirmation of allocation.
Where a bidder has been allocated lesser number of shares than he
or she had bid for, the excess amount paid on bidding, if any will be

refunded to such bidder. Advantage of the Book Building process

versus the Normal IPO marketing process
Unlike in Book Building, IPO’s are usually marketed at a fixed price.
Here the demand cannot be anticipated by the merchant banker and
only after the issue is over the response is known. In book building,
the demand for the share is known before the issue closes. The issue
may be deferred if the demand is less.
This process allows for price and demand discovery. Also, the cost of
the public issue is reduced and so is the time taken to complete the
entire process.
DIFFERENCE IN FIXED PRICE PROCESS AND BOOK BUILDING

PROCESS
Features Fixed price process Book building process
Pricing Price at which the Security Price at which the

is offered /allotted is Security will be offered
known in advance to the /allotted is not known in
investor. advance to the investor.
Only an indicative price
range is known.
Demand Demand for the Demand for the

securities offered is securities offered can be
known only after the known everyday as the
closure of the issue. book is built.

Guidelines for Issues to be made through 100% Book Building Route

SEBI had issued guidelines in October 1997 for book building which
were applicable for 100% of the issue size and for issues above
Rs.100 Crores. The guidelines were revised subsequently to reduce
the limit to issues of Rs.25 crores to encourage the use of this facility.
However, no issuer used this facility. SEBI modified the framework for
Book Building further in October 1999 to make it more attractive. The
modified framework does not replace the existing guidelines. The
issuer would have option to issue securities using book building
facility under the existing framework:
1. The present requirement of graphical display of demand at

bidding terminals to syndicate members as well as the investors
has been made optional.
2. The 15% reservation for individual investors bidding for up to
10 marketable lots may be merged with the 10% fixed price
offer.
3. Allotment for the book built portions shall be made in demat
form only.
4. The issuer may be allowed to disclose either the issue size or
the number of securities to be offered to the public.
5. Additional disclosure with respect to the scheme for making up
the deficit in the sources of financing and the pattern of
deployment of excess funds shall be made in the offer
document.

COST OF PUBLIC ISSUE.
The cost of public issue is normally between

8 and 12 percent depending on the size of
the issue and on the level of marketing
efforts. The important expenses incurred for
a public issue are as follows:
Underwriting expenses: The underwriting

commission is fixed at 2.5 % of the nominal value (including premium,
if any) of the equity capital being issued to public.
Brokerage: Brokerage applicable to all types of public issues of

industrial securities are fixed at 1.5% whether the issue is
underwritten or not. The managing brokers (if any) can be paid a
maximum remuneration of 0.5% of the nominal value of the capital
being issued to public.
Fees to the Managers to the Issues: The aggregate amount payable

as fees to the managers to the issue was previously subject to certain
limits. Presently, however, there is no restriction on the fee payable to
the managers of the issue.
Fees for Registrars to the Issue: The compensation to he registrars,

typically based on a piece rate system, depends on the number of
applications received, number of allotters, and the number of
unsuccessful applicants.

Printing Expenses: These relate to the printing of the prospectus,

application forms, broachers, share certificate, allotment/refund
letters, envelopes, etc.
Postage Expenses: These pertain to the mailing of application forms,

brochures, and prospectus to investors by ordinary post and the
mailing of the allotment/refund letters and share certificates by
register posts.
Advertising and Publicity Expenses: These are incurred primarily

towards statutory announcements, other advertisements, press
conferences, and investor’s conferences.
Listing Fees: This is the concerned fee payable to concerned stock

exchange where the securities are listed. It consists of two
components: initial listing fees and annual listing fees.
Stamp Duty: This is the duty payable on share certificates issued by

the company. As this is the state subject, it tends to vary from state to
state.

BRIEF NOTE ON INTERMEDIARIES

The following are the important intermediaries involved in the
process-
MERCHANT BANKERS
Eligibility criteria-SEBI issues an authorization letter to the finance
companies, which are eligible to work as merchant bankers. The
eligibility criteria depend on network and
infrastructure of the company. The company
should not be engaged in activities that are
banned for merchant bankers by SEBI. SEBI
issues authorization letter valid for 3 years
and the company has to pay necessary fees. Such merchant banker
can be appointed as lead manager for IPO. Responsibility-lead
managers are fully responsible for the content and correctness of the
prospectus. They must ensure the commencement to the completion
of the IPO. Certain guidelines are laid down in section 30 of the SEBI
act 1992 on the maximum limits of the intermediaries associated with
the issue.
GUIDELINES FOR LEAD MANAGERS BY SEBI
Size of the Issue No of Lead Managers
50 cr. 2
50-100 cr. 3
100-200 cr. 4
200-400 cr. 5
Above 400 cr. 1 or more as agreed by the board

The number of co managers should not exceed the number of lead

managers. There can be only 1 adviser to the issue. There is no limit
on the number of underwriters.
BROKERS
All the recognized stock exchange members are called brokers and A
broker offer marketing support, underwriting support, disseminates
information to investors about the issue and distributes issues
stationary at retail investor level. The brokers are governed by rules
of SEBI and the respective stock exchange. The brokers are key to
the success of the issue. The brokers appoint sub brokers who are in
direct contact with the investors.
UNDERWRITERS
The underwriter is the principle player in the IPO providing the firm
with- Reputation-as the underwriter is legally liable and because he
has ongoing dealing with the customers to whom he sells shares. The
underwriter puts his reputation on the line.
Underwriting involves a commitment from the underwriter to
subscribe to the shares of a particular company to the extent it is
under subscribed by the public or existing shareholders of the
corporate. An underwriter should have a minimum net worth of 20
lacs and his total obligation at any time should not exceed 20 times
his net worth. A commission is paid to the writers on the issue price
for undertaking the risks of under subscription. The maximum rate of
underwriting commission paid is as follows.

UNDERWRITING COMMISSION TABLE
Nature of Issue On amount Devolving on On amounts subscribed

Underwriters by the public
Equity shares 2.5% 2.5%
preference shares and
Debentures
Issue amount up to Rs5 2.5% 2.5%
lacs
Issue amount 2.0% 1.0%
exceeding %
The fees for underwriter and broker are decided by the company
within the maximum possible limit as fixed by the SEBI.
BANKERS TO THE ISSUE

Any scheduled bank registered with SEBI can be appointed as the
banker to the issue. They get fees on amount collected by them.
There are no restrictions on the number of bankers to the issue. The
main function of banker involves collection of duly filed application
forms with money (cheque/drafts) maintains a daily report,
transferring the proceeds to the share application money collected
with the application forms to the registrar.
REGISTRAR AND TRANSFER AGENTS

Registration with SEBI is mandatory to take on responsibilities as a
registrar or share transfer agent. The registrar provides administrative
support to the issue process. Each agent is registered with SEBI. Hey
have to maintain net worth and infrastructure criteria. They have to

renew their License periodically. He collects all application from the
bank and ensures reconciliation of funds and of application amount
and participates in process of basis of allotment. If the IPO is
oversubscribed they provide computerized program for allotment.
They manage refund orders and allotment letters. They provide the
final list of allotees to Lead Manager ROC and stock exchange. If the
company wants they also manage post issue IPO functions relating to
shareholders register for the company.
DEPOSITORIES
Since the year 2000 it’s compulsory that all fresh issue of shares
must be made only in the dematerialized format (DMAT). The
Depository institute issues unique number of every IPO or company,
when shares are allotted to the company/registrar provides
shareholders register to depository in electronic form. Thus
automatically all shareholders get allotment in their DMAT account.
LEGAL ADVISOR.
Normally the company for the purpose of IPO does this appointment.
He is responsible legal compliance of IPO process. There are other
intermediaries like Advertising Agents etc. but the company governs
their role.

SEBI AND IPO

ELIGIBILITY NORMS
FOR UNLISTED COMPANIES
It should have a pre issue network of a minimum amount of Rs1

crores in 3 out of the preceding 5 financial years. In addition the
company should compulsorily need the minimum network level
during the two immediately preceding years.
It should have a track record distributable profits as given in

section 205 of companies act 1956 for at least 3 years in the
preceding 5 years period.
The issue size (i.e. Offer + Form allotment + Promoters

contribution through the offer document) should not exceed an
amount equal to 5 times its pre issue worth.
FOR LISTED COMPANIES

It should have a track record distributable profits as given in
section 205 of companies act 1956 for at least 3 years in the
preceding 5 years period.
It should have a pre issue network of a minimum amount of Rs1

crores in 3 out of the preceding 5 financial years with the
minimum net Worth to be met during the immediately preceding
2 years.

SEBI NORMS
SEBI has come up with Investor Protection and

Disclosure Norms for raising funds through
IPO. These rules are amended from time to
time to meet with the requirement of changing
market conditions.
DISCLOSURE NORMS.
Risk Factor-The Company/Merchant Banker must specify the

major risk factor in the front page of the offer document.
General Risk.-Attention of the investor must be drawn on these
risk factors.
Issuers Responsibility-It is the absolute responsibility of the
issuer company about the true and correct information in the
prospectus. Merchant Banker is also responsible for giving true
and correct information regarding all the documents such as
material contracts, capital structure, appointment of
intermediaries and other matters.
Listing Arrangement- It must clearly state that once the issue is
subscribed where the shares will be listed for trading.
Disclosure Clause- It is compulsory to mention this clause to
distinctly inform the investors that though the prospectus is
submitted and approved by SEBI it is not responsible for the
financial soundness of the IPO.

Merchant Bankers Responsibility-Disclaimer Clause the Lead

Manager has to certify that disclosures made in the prospectus
are generally adequate and are in conformity with the SEBI
Guidelines.
Capital Structure- The Company must give complete
information about the Authorized capital, Subscribed Capital
with top ten shareholders holding pattern, Promoters interest
and their subscription pattern etc. Also about the reservation in
the present issue for Promoters, FII`s, Collaborators, NRI`s etc.
Then the net public offer must be stated very clearly.
Auditors Report- The Auditors have to clearly mention about the
past performances, Cost of Project, Means of Finance, Receipt
of Funds and its usage prior to the IPO. Auditor must also give
the tax-benefit note for the company and investors.
INVESTOR PROTECTION NORMS.
Pricing of Issue-The pricing of all the allocations for the present

issue must follow the bid system. The reservation must be
disclosed for different categories of investors and their pricing
must be specified clearly.
Minimum Subscription- If the company does not receive
minimum subscription of 90% of subscription in each category of
offer and if the issue is not underwritten or the underwriters are
unable to meet their obligation, then fund so collected must be
refunded back to all applicants.

Basis of Allotment- In case of full subscription of the issue, the

allotment must be made with the full consultation of the
concerned stock exchange and the company must be impartial
in allotting the shares.
Allotment/Refund- Once the allotment is finalized, the refund of
the excess money must be made within the specified time limits
otherwise the company must pay interest on delayed refund
orders.
Dematerialization of Shares-As per the provisions of the
Depositories Act, 1996, And SEBI Rules, now all IPO will be in
Demat form only.
Listing of Shares- It is mandatory on the part of the promoters
that once the IPO is fully subscribed, and then the underlying
shares must be listed on the stock exchange. This provides
market and exit routes to the investors.
The above are the major Guidelines for the Investor Protection and
Disclosure Norms. The SEBI has provided rules for every possible
situation.

SEBI GUIDELINES
IPO of Small Companies Public issue of less

than five crores has to be through OTCEI
(Over the Counter Exchange of India) and
separate guidelines apply for floating and
listing of these issues.
Public Offer of Small Unlisted Companies (Post-Issue Paid-Up

Capital up to Rs.5 crores) Public issues of small ventures which are
in operation for not more than two years and whose paid up capital
after the issue is greater than 3 crores but less than 5 crores the
following guidelines apply.
1. Securities can be listed where listing of securities is screen
based.
2. If the paid up capital is less than 3 crores then they can be
listed on the Over The Counter Exchange of India (OTCEI)
3. Appointment of market makers mandatory on all the stock
exchanges where securities are proposed to be listed.
SIZE OF THE PUBLIC ISSUE

Issue of shares to general public cannot be less than 25%of the total
issue. In case of IT, Media and Telecommunication sectors, this
stipulation is reduced subject to the conditions that
1. Offer to the public is not less than 10% of the securities issued.
2. A minimum number of 20 lakh securities is offered to the public
3. Size of the net offer to the public is not less than Rs.30 crores.
PROMOTERS CONTRIBUTION
1. Promoters should bring in their contribution including premium
fully before the issue
2. Minimum promoter’s contribution is 20-25% of the public issue.
3. Minimum lock in period for promoter’s contribution is five years.
4. Minimum lock in period for firm allotment is three years.
COLLECTION CENTERS FOR RECEIVING APPLICATIONS

1. There should be at least 30 mandatory collection centers, which
should include invariably the places where stock exchanges
have been established.
2. For issues not exceeding Rs.10 crores the collection centers
shall be situated at:-
The 4 metropolitan centers’ viz. Mumbai Delhi Calcutta
Chennai
All such centers where stock exchanges are located in
the region in which the registered office of the company
is situated.
REGARDING ALLOTMENTS OF SHARES

1. Net Offer the general public has to be at least 25% of the total
issue size for listing on a stock exchange
2. It is mandatory for a company to get its shares listed at the
regional stock exchange where the registered office of the
issuer is located.
3. In an issue of more than 25 crores the issuer is allowed to place
the whole issue by book-building.
4. Minimum of 50% of the Net Offer to the public has to be

reserved for the investors applying for less than 1000 shares.
5. There should be at least 5 investors for every 1 lakh equity
offered.
6. Quoting of PAN or GIR No. in application for the allotment of
securities is compulsory where monetary value of investment is
Rs.50000/- or above.
7. Indian development financial institutions and Mutual Fund can
be allotted securities up to 75% of the issue amount.
8. A venture capital fund shall not be entitled to get its securities
listed on any stock exchange till the expiry of 3 years from the
date of issuance of securities.
9. Allotment to categories of FIIs and NRIs/OCBs is up to
maximum of 24%, which can be further extended to 30% by an
application to the RBI-supported by a resolution passed in the
General Meeting.
TIMEFRAMES FOR ISSUE AND POST-ISSUE FORMALITIES
The minimum period for which the public issue is to be kept open is 3
working days and the maximum for which it can be kept open is 10
working days. The minimum period for right issue is 15 working days
and the maximum is 60 working days.
A public issue is affected if the issue is able to procure 90% of the
total issue size within 60 days from the date of the earliest closure of
the public issue.

1. In case of oversubscription the company may have he right

to retain the excess application money and allot shares more
than the proposed issue, which is referred to as “green-
shoe” option
2. Allotment has to be made within 30 days of the closure of
the Public issue and 42 days in case of Rights issue
3. All the listing formalities of a Public Issue have to be
completed within 70 days from the date of closure of the
subscription list.
DISPATCH OF REFUND ORDERS.

1. Refund orders have to be dispatched within 30 days of the
closure of the issue.
2. Refunds of excess application money i.e. non-allotted shares
have to be made within 30 days of the closure of the issue.
OTHER REGULATIONS
1. Underwriting is not mandatory but 90% subscription is
mandatory for each issue of capital to public unless it is
disinvestment where it is not applicable.
2. If the issue is undersubscribed then the collected amount
should be returned back
3. If the issue size is more than Rs500 crores, voluntary
disclosures should be made regarding the deployment of funds
and an adequate monitoring mechanism put in place to ensure
compliance.

4. There should not be any outstanding warrants for financial

instruments of any other nature, at the time of the IPO.
5. In the event of the initial public offer being at a premium and if
the rights under warrants or other instruments have been
exercised within 12 months prior to such offer, the resultant
shares will be not taken into account for reckoning the minimum
promoters contribution further, the same will also be subject to
lock-in.
6. Code of advertisement as specified by SEBI should be adhered
to
7. Draft prospectus submitted to SEBI should also be submitted
simultaneously to all stock exchanges where it is proposed to
be listed.
RESTRICTIONS ON ALLOTMENTS
1. Firm allotments to mutual funds, FII and employees are not
subject to any lock-in period.
2. Within 12 months of the public issue no bonus issue should be
made.
3. Maximum percentage of shares, which can be distributes to
employees cannot be more than 5% and maximum shares to
be allotted to each employee cannot be more than 200.

RELAXATION OF ENTRY NORMS FOR INFRASTRUCTURE

COMPANIES
With a view channelize greater flow of funds to infrastructure

companies, SEBI granted a number of relaxations to infrastructure
companies. These included:
Exemption from the requirement of making a minimum public

offer of 25 percent of securities and also from the requirement
of 5shareholders per Rs.1 lakh of offer made.
Exemption from the minimum subscription of 90 per cent
provided disclosure is made about the alternate source of
funding considered by the company, in the event of under-
subscription in the public issue.
Permission to keep the issues opens for 21 days to enable the
companies to mobilize funds.
Exemption from requirement to create and maintain a
debenture redemption reserve in case of debenture issues as
provided in the SEBI Disclosure & Investor Protection
Guidelines.

MARKETING OF IPO
The role of marketing, and particularly promotion, in the pricing and
trading of Securities is fairly limited
PRELIMINARY REQUIREMENTS
The company has to complete all legal requirements, appoint all
intermediaries and once they get SEBI card (approval), the process
of marketing of IPO can commence.
TIMING OF IPO
This the most important factor for the
success of IPO. If, secondary market is
depressed, if there is political unrest, if
serious international problems are prevailing
then it is considered to be negative factors
for timing of IPO’s. If these factors are
favorable then the Company must find out
about the timing of other prestigious IPO’s.
This year more than 29 companies are coming with IPO’s. Around
Rs.25, 000-30,000crore of capital is going to be raised this year.
Marketing initial public offers (IPO’s) through the secondary market

SEBI approved a proposal of marketing IPO’s through the secondary
market. It proposes to use the existing infrastructure of stock
exchanges (terminals, brokers and systems), presently being used for
secondary market transactions, for marketing IPO’s with a view to get

rid of certain inherent disadvantages faced by issuers and investors

like tremendous load on banking and postal system and huge costs in
terms of money and time associated with the issue process.
THE EFFECTS OF MARKETING ON IPO’S

An investment banker’s marketing campaign for an IPO is critical.
This campaign, as much as anything that precedes or follows it, will
determine the success or failure of the IPO. The key is to stimulate
investor demand for the stock so that, the demand will exceed the
supply. Through the marketing effort, the underwriter attempts to
create an imbalance in the supply/demand equation for the issue, so
that there are more buyers than sellers when the stock is finally
released for sale to the public.
The reputation of an investment banker could expand a firm’s

investor base at a lower cost than the firm can, since the promotional
efforts of an investment banker on behalf of the firm would be more
creditable. The efforts of an investment banker to promote an IPO
through increased media coverage will increase retail interest in that
stock.
The effects of an investment banker’s promotional efforts are not only

important for explaining the initial returns of some IPO’s, but also for
explaining the rankings of investment bankers

Promoting an issue sufficiently to insure a run

run-up
up in its early
ear
aftermarket prices attracts further investor interest catches the
interest of analysts and helps to maintain or expand the investor base
of the stock.
If the sole motivation of a road show were to sell IPO’s to their regular
institutional investors an
and
d if those investors were to hold onto these
stocks, then there would be no motivation for an investment banker to
do more than a minimal amount of promotion since there would be no
need to attract retail investors in early aftermarket trading.
MARKETING
PRESS CONFERENCE
Promoters and Lead Managers call for press conference in each
major investment center. Reporters are briefed about the issue. They
carry it as news-item
item in their papers.
INVESTORS CONFERENCE
The prospective investors are called by
invitation. The Promoters and Lead
Managers give presentations. They reply
to the questions of the investors to boost
their confidence.

ROAD-SHOW
This is like the investors conference but normally is done abroad for
marketing ADR/GDR issues. It is an expensive process and requires
a lot of legal compliances. The company has to observe the rules of
the concerned country. However, road shows are becoming more
and more popular in India.
NEWSPAPER ADVERTISEMENT
The company releases statutory advertisement
advertisements
s in leading
newspapers. The company has to publish abridges prospectus in
leading newspapers. It is the responsibility of the promoters to ensure
that the issuing company and their group companies should not
release any commercial advertisement, which may influence the
investor’s decision for investment.

IPO GRADING
GRADING OF IPOS
Investment decisions in IPOs are becoming increasingly difficult,
given the flurry of public offers that hit the market these days.
Differentiating a good offer from a bad one, assessing the company
fundamentals and verifying the credentials are becoming more
complex. In this backdrop, the Securities and Exchange Board of
India's decision to make IPOs (initial public offers) grading by credit
rating agencies mandatory, is likely to provide some respite to retail
investors.
However, the rating is unlikely to throw much light for short-term

investors or traders seeking to make a quick buck from the
`listing gains'.
We take a look at what the grading system proposes to do and

what changes, if any, it is likely to bring in.
In a move, which does not appear to have any precedence

elsewhere in the world of capital markets, the SEBI has
introduced compulsory grading of initial public offers that will hit
the market from now on. Credit rating agencies such as the
CRISIL and ICRA will grade the various forthcoming IPOs on a
five-point scale from grade 5 (indicating strong fundamentals) to
grade 1 (indicating poor fundamentals).

This grading, which will be based on the agencies' assessment

of company fundamentals, will consider the following five
parameters — earnings per share, financial risks, accounting
quality, corporate governance and management quality. Thus,
the rating awarded to an IPO will mirror the company's general
health in terms of these qualitative and quantitative factors. The
IPO pricing, however, is not factored in for the purpose of
rating.
These ratings, apart from being available in the respective offer

documents of the companies, can also be viewed on the
respective rating agency's Web site.
For instance, a company X decides to tap the primary market

for raising capital. The rating agencies will now be required to
grade the company. This process will include market checks,
plant visits and practice of due diligence apart from studying the
other already-specified macro factors. At the end of the
process, say, X is awarded grade 1 (indicating poor
fundamentals). This would mean that the company is
fundamentally weak and investments in that company could be
risky. However, the rating does not go on to say whether such
an offer is to be avoided or not.
In a similar manner, if X gets a grade 5 (the highest one

possible), it does not mean a blanket approval from the rating
agency to invest in the public offer. It only means that X is
fundamentally sound on the basis of metrics used by the rating

agency.
Thus, in general, the grading process that has been introduced

is meant to make the retail investors aware of the health of the
company's business. It cannot be interpreted as a
recommendation to invest or avoid any offer that is so rated.
ADVANTAGES OF IPO GRADING
IPO grading, a hitherto optional exercise, has been made

compulsory to encourage only serious companies.
Over the long-term, it is likely to help SEBI regulate the IPO

market by helping it protect the investors from cases of
vanishing companies. The rating will also facilitate the not-so-
well known companies in tapping the primary market for capital.
Retail investors, on the other hand, stand to benefit the most.

The grading system that purports to give a professional
perspective of the company's fundamentals is likely to help
investors establish the credentials of the company they plan to
invest in.
Neutral agencies can be more objective in their evaluation of a

public offer compared to other market participants.

This apart, it is likely to help investors weed out companies with

poor fundamentals or those with a spurious background at the
preliminary stage itself.
DISADVANTAGES OF IPO GRADING
More often than not, the pricing of any IPO is what influences
the decision of any investor. The rating agencies, in this case,
will not talk about ``what price'' and ``what time'' aspects of the
offer.
Given that the decision to invest or avoid investments in any

IPO is most often a function of the pricing, the lack of this
aspect in the present IPO grading system could make the
whole process an unfinished task.
Rating agencies (experienced in debt rating) could face trouble

with rating the equities, which, unlike debt rating, is more
dynamic and cannot be standardized. Further, IPO grading
mechanism is a globally-unique initiative; it could increase the
cost of raising capital in India and urge companies to seek
capital overseas.
Markets, in the short term, can be price-driven and not purely

motivated by company fundamentals. That is to say that, at
times, even good companies at a higher price could be a bad

investment choice, while the not-as-good ones could be a steal

at lower prices.
Despite having disclaimers, a higher graded IPO may well

tempt small investors into falsely believing that a high premium
would come about on listing.
Investors may get deluded by a low-graded IPO, which could

become a `missed opportunity' in the future. The purpose of
introducing grading, thus, might get defeated if it leads to a
false sense of buoyancy or alarm among investors.
HIGHLIGHTS OF IPO GRADING:
Till such time the utility of the IPO grading system is unraveled,
it is advisable for investors to use the grades only as an
additional input to make an informed decision.
Investors need to be convinced about the business potential,
pricing and valuations of an IPO, together with the grading, to
make a final choice.
IPO grading is a welcome move from the regulator of the capital

market. It is going to bring better efficiency to the market. There
is a challenge for the investors to arrive at an informed
investment decision based on voluminous and complex
disclosure documents. Small investors will be the happier lot
with this decision because an independent, reliable and
unbiased assessment of the fundamentals of the issuer

company will facilitate an informed investment decision.
The major parameters to be considered by a rating agency for

the assessment include management quality, business
prospects, industry and company, financial performance,
corporate governance, project related factors, compliance track
record, litigation history and capital history. The grading
provides the investors an independent assessment of the
disclosures in the offer documents to the extent that they affect
the issuer’s fundamentals to take an informed decision. The
grading could be particularly useful for assessing the offerings
of companies accessing the equity markets for the first time
where there is no track record of their market performance.
Needless to say, the rating is not intended to comment on the

pricing of the issue nor would it purport to provide an
assessment of the market risk associated with the investment.
As in the case of rating of debt instruments, it is an additional
tool available to the investors to take an informed investment
decision.
The Disclosure for Investor Protection (DIP) guidelines has

come a long way from the initial days of Sebi, with the present
set of disclosure norms coupled with the IPO grading a
decidedly positive move. The disclosures in the offer
documents are as per Sebi DIP guidelines and currently there
are no assessments of quality especially on the management

bandwidth of the issuer. A proper assessment of the
management quality is very critical for the long-term
sustainability of a corporate entity in a highly competitive world.
Rating agencies have the expertise to do this job.
Issuers may be worried about a lower grading than expected

and also the additional cost and effort. However, this worry
would not last long because the issuers will soon realize that
the extra cost and effort put into grading is only going to benefit
them. Getting listed is a long process; it could take up to a year
or more depending upon the preparedness of the issuer. A
listed company has huge responsibilities to fulfill. A better
prepared issuer company could complete the IPO process
faster and will be in a better position to the meet the
expectations of the market. To become a successful listed
company, an unlisted company should act like a listed company
much before the IPO. It is better to be fully prepared before the
plunge than regretting after listing and exhibiting poor
performance.
The compulsory IPO grading will facilitate the issuer to become

a mature corporate citizen faster. Additionally, the grading will
help better quality issuers to benchmark themselves and project
their underlying strength better. A perceptional change from the
issuers is essential here.

Though there has been criticism initially from the intermediaries

involved in the IPOs, it is a matter of time before the merchant
bankers, brokers and investment advisors derive the benefits of
grading. For the merchant bankers, it will give additional
comfort to their due diligence responsibilities. IPO grading as
an investment guidance tool is going to be accepted sooner or
later. It will widen and deepen market participation and facilitate
the move towards a more mature equity IPO market.
Moreover, private equity investors, strategic investors,

institutional investors or any large investors can afford to
conduct third party due diligence on the issuer company before
taking an equity investment decision. The retail investor does
not have the privilege and hence this gap could be filled up with
compulsory IPO grading system.
This is a beginning and if there is a continuous effort to improve

the process of grading, this new development could
substantially benefit the retail investor.
No SEBI proposal has met with the kind of criticism as the

mandatory IPO grading one has. There is no body of research,
no world experience, no concept paper and no public debate to
justify it. And even the pilot voluntary grading exercise — which
did not see any company come forward and 19 small
companies were then forced to do this — did not validate the

concept in any manner. Instead of a detailed rationale even

now, there are only oral justifications.
Small investors demanded it: Who in the world would not say
yes to free actionable investment advice from experts? But are
investor associations even aware of the pitfalls of IPO grading,
and that what will be delivered is a subjective opinion, and that
too incomplete. In spite of disclaimers and education, most
small investors will only look at the grade digit; history tells us
so. As such, they will reject a low-grade IPO and invest in a
high-grade one. But if subsequently low-grade IPOs do well
after listing, they will complain about missed opportunities. The
fundamentals of a company can change dramatically after its
IPO. IPOs are all about the future; IPO grading is all about the
past. Incidentally, of the six graded IPOs that have hit the
market, five low-graded ones were handsomely over-
subscribed and have listed above their offer prices
Rating agencies are supposed to assess only the

fundamentals, but we know that even this is highly subjective.
The rating agencies themselves differ in skill sets. Worse, there
is no uniform grading methodology. Rating agencies would be
learning on the job and the market would have to bear the cost
of this. To avoid being seen as mark givers, rating agencies
have invented the concept of relative grading. The grades are
supposed to be a “relative comparison to the other listed
companies”. This presumes that all the three rating agencies
have already graded all listed stocks (over 2,500 at the least)
which they clearly have not. Are the rating agencies not
misguiding investors by calling absolute marks as relative
grades?
It is also interesting that grading will not get funded by the

Investor Protection Fund but by the companies. If the conflict is
now in-built, what use is the grading?
Vanishing companies scam: After a drought of nearly eight

years, an average of seven IPOs a month in the last year is no
deluge. A real potential flood has been avoided because we
now have stringent entry norms, there is better vetting of issues
by two national stock exchanges and by Sebi and there is a
provision for public comments. Most importantly, there is
compulsory participation of 50 per cent in an issue by QIBs who
are more discerning and better informed and whose response
to an issue holds cues for small investors. Rank bad IPOs, in
any case, are rejected by stock exchanges and/or Sebi and as
such cannot enter the market while overpriced IPOs are
rejected by the QIBs; more than 15 IPOs have met such fate.
The fear of another vanishing company scam is totally
unfounded.
Investors need crispier information: The real need is to

revisit the contents and format of the abridged prospectus. And
redesign the risk factors, which were introduced to highlight the
negatives, but have become a joke. Even after this, a further

condensed version of two to three pages would be welcome.
And that, in fact, should have been the task assigned to the
rating agencies, not that of grading. Grades influences
investment decision directly; a condensed summary does not.
Rating agencies could also be asked to do a forensic audit and
report instances of information gaps or wrong information
(based upon which the concerned merchant bankers should be
punished.). The information gathered during the grading due
diligence should also be included in the offer document.
With grading, we are taking the small investor away from the
stated objective of “informed decision making”. Equity is risk
capital, and investors should know about the company they
invest in. Protecting investor interests is also to ensure that they
are not guided by subjective, incomplete advice.

GUIDE TO UNDERSTAND AN OFFER DOCUMENT:
This section basically tries to tell the reader about the structure of
presentation of the content in the Offer Document. This is with a view to
help the reader navigate through the content of an offer document.
A. COVER PAGE
The Cover Page of the offer document covers full contact details of the
issuer company, lead managers and registrars, the nature, number,
price and amount of instruments offered and issue size, and the
particulars regarding listing. Other details such as Credit Rating, IPO
Grading, if opted for, risks in relation to the first issue, etc are disclosed if
applicable.
B. RISK FACTORS
Here, the issuer’s management gives its view on the Internal and
external risks faced by the company. Here, the company also makes a
note on the forward looking statements. This information is disclosed in
the initial pages of the document and it is also clearly disclosed in the
abridged prospectus. It is generally advised that the investors should go
through all the risk factors of the company before making an investment
decision.
C. INTRODUCTION
The introduction covers a summary of the industry and business of the
issuer company, the offering details in brief, summary of consolidated
financial, operating and other data.
General Information about the company, the merchant bankers and their
responsibilities, the details of brokers/syndicate members to the Issue,
credit rating (in case of debt issue),debenture trustees (in case of debt
issue), monitoring agency, book building process in brief and details of
underwriting Agreements are given here. Important details of capital
structure, objects of the offering, funds requirement, funding plan,
schedule of implementation, funds deployed, sources of financing of
funds already deployed, sources of financing for the balance fund
requirement, interim use of funds, basic terms of issue, basis for issue
price, tax benefits are covered.
D. ABOUT US
This presents a review of on the details of the business of the company,
business strategy, competitive strengths, insurance, industry-regulation
(if applicable), history and corporate structure, main objects, subsidiary
details, management and board of directors, compensation, corporate
governance, related party transactions, exchange rates, currency of
presentation dividend policy and management's discussion and analysis
of financial condition and results of operations are given.
E. FINANCIAL STATEMENTS
Financial statement, changes in accounting policies in the last three
years and differences between the accounting policies and the Indian
Accounting Policies (if the Company has presented its Financial
Statements also as per Either US GAAP/IAS are presented.
F. LEGAL AND OTHER INFORMATION

Outstanding litigations and material developments, litigations involving
the company and its subsidiaries, promoters and group companies are
disclosed. Also material developments since the last balance sheet date,
government approvals/licensing arrangements, investment approvals

(FIPB/RBI etc.), all government and other approvals, technical

approvals, indebtedness, etc. are disclosed.
G. OTHER REGULATORY AND STATUTORY DISCLOSURES

Under this head, the following information is covered: authority for the
Issue, prohibition by SEBI, eligibility of the company to enter the capital
market, disclaimer clause, disclaimer in respect of jurisdiction,
distribution of information to investors, disclaimer clause of the stock
exchanges, listing, impersonation, minimum subscription, letters of
allotment or refund orders, consents, expert opinion, changes in the
auditors in the last 3 years, expenses of the issue, fees payable to the
lead managers, fees payable to the issue management team, fees
payable to the registrars, underwriting commission, brokerage and
selling commission, previous rights and public issues, previous issues
for cash, issues otherwise than for cash, outstanding debentures or
bonds, outstanding preference shares, commission and brokerage on,
previous issues, capitalization of reserves or profits, option to subscribe
in the issue,purchase of property, revaluation of assets, classes of
shares, stock market data for equity, shares of the company, promise
vis-à-vis performance in the past issues and mechanism for redressal of
investor grievances.
H. OFFERING INFORMATION
Under this head, the following information is covered: Terms of the
Issue, ranking of equity shares, mode of payment of dividend, face value
and issue price, rights of the equity shareholder, market lot, nomination
facility to investor, issue procedure, book building procedure if
applicable, bid form, who can bid, maximum and minimum bid size,
bidding process, bidding bids at different price levels, escrow

mechanism, terms of payment and payment into the escrow collection

account, electronic registration of bids, build up of the book and revision
of bids, price discovery and allocation, signing of underwriting
agreement and filing of prospectus with SEBI/ROC, announcement of
statutory advertisement, issuance of confirmation of allocation
note("can") and allotment in the issue, designated date, general
instructions, instructions for completing the bid form, payment
instructions, submission of bid form, other instructions, disposal of
application and application moneys, interest on refund of excess bid
amount, basis of allotment or allocation, method of proportionate
allotment, dispatch of refund orders, communications, undertaking by
the company, utilization of issue proceeds, restrictions on foreign
ownership of Indian securities, etc.
I. OTHER INFORMATION
This covers description of equity shares and terms of the Articles of
Association, material contracts and documents for inspection,
declaration, definitions and abbreviations, etc.

CASE STUDY ON IPO
“FUTURE CAPITAL HOLDINGS LTD”
SECTOR: Financial Retail / Advisory Services.

ABOUT THE COMPANY: Future Capital Holdings Ltd the financial
arm of the Future Group, the parent of India's largest listed retailer
Pantaloon Retail India Ltd, deals in private equity and consumer
finance - and is developing malls, and townships. Its $850 million
domestic Kshitij Fund is building 11 malls in tier II cities, and the
$350 million Horizon Fund is building at least four mixed-use
townships. The company's $400 million in division funds buy
stakes in consumer businesses. Future Capital also plans to
launch a $350 million fund to build hotels.
THREE PRIMARY LINES OF BUSINESS ARE:
o Investment Advisory and Asset Management.
o Retail financial services.
o Research.
OBJECTS OF THE ISSUE :

Achieve the benefits of listing on the Stock Exchanges.
Expansion of its retail financial services business.
To meet the future capital requirements.
General corporate purposes.
MERCHANT BANKER: Kotak Mahindra Capital Company Limited,
Enam Securities, J.M.Financial Consultants & UBS Securities
India Private Limited.

ISSUE SIZE: Public Issue of 6,422,800 Equity Shares of Rs.10

each of Future Capital Holdings Limited (The "Company" Or The
"Issuer") for cash at a price of Rs.765 per equity share of Rs.10
each including a share premium of Rs.755 per Equity share
aggregating Rs.49, 134.42 Lacs. The issue constitutes 10.16% of
the post issue paid-up capital of the company. Issue Price Rs.765
Per Equity Share of Face value of Rs.10 each. The issue price is
76.50 times the face value.
Date of listing: 01/02/2008.
Price on Listing : 1044 on BSE/ 1081 on NSE.
Other Information:
• Open - 11 Jan.
• Close - 16 Jan.
• Issue Type -100% Book Building Issue.
• Maximum Subscription Amount for Retail: Rs 100,000/-
• Listing - BSE, NSE.
• Registrar -In time Spectrum Registry Limited.
• Minimum and maximum shares for retail category - 1 lot - 8
shares and 16 lots - 128 shares.
• Minimum and maximum amount for retail category - 1lot - Rs
6120 and 16 lot - Rs 97920 @ cut off.
• Application Multiple - 8 and in multiples there off starting with
at least 8 shares
• Cheque In Favor Of - "Escrow Account - FCH Public Issue -
Resident" For Retail category.

Subscribe Statistics:
The Issue received 1138493 applications for 846511648 equity
shares resulting in 131.7979 times subscription. The details of the
applications received in the Issue from Qualified Institutional
Buyers, Non-Institutional, Retail Individual Investors are as under
(Before technical rejections):
FUTURE CAPITAL SUBSCRIPTION DETAIL
Category No. of Applications No. of Shares Subscription
Retail Bidders 1135843 100327656 52.0685
Non 2286 49995104 77.84

Institutional
Bidders
Qualified 364 696188888 180.6556
institutional
Bidders
TOTAL 1138493 846511648 131.7979
The Basis of Allocation to the categories namely Retail Individuals

Bidders, Non-Institutional Bidders and QIB Bidders was finalized in
consultation with the Bombay Stock Exchange Limited ("BSE") on
January 28, 2008.
ALLOCATION TO RETAIL INVESTORS:
The Basis of Allocation to the Retail Investors, who have bid at cut-off or
at the Issue Price of Rs 765 per Equity Share, was finalized in
consultation with BSE. The category was over subscribed 50.759 times.
The total number of shares allotted in this category is 1926840 Equity
Shares.

ALLOCATION TO NON INSTITUTIONAL INVESTORS:
The Basis of Allocation to the Non institutional, who have bid at the
Issue Price of Rs.765 per Equity Share, was finalized in consultation
with BSE. The category was subscribed 75.874734 times. The total
number of shares allotted in this category is 642280 Equity Shares.
ALLOCATION TO QIB BIDDERS:
Allocations to QIBs have been done on a proportionate basis in

consultation with the BSE. As per the SEBI guidelines, Mutual Funds
were initially allotted 5% of the quantum of shares available 192684 and
other QIBs and unsatisfied demands of Mutual Funds were allotted the
remaining available shares 3660996 on proportionate basis. The
sectoral cap and other limits applicable to the holding of shares in
company have been taken into account while allotting shares. Mutual
Funds were allotted 5.00 % for QIB segment and other QIB applicants
were allotted 95.00 % of the shares for QIB segment.
VALUATION:
The company is addressing two major financial service businesses with

high growth potential — investment advisory services and consumer
credit — with an experienced management team at the helm. While the
business undoubtedly offers huge room for scalability, earnings visibility
is extremely low at this juncture. Capital Market points out that the
Future Capital Holdings’ major revenue(76% of the total revenue) comes
from the advisory business and the majority of the investment advice is
in the real estate and hospitality sector. The risk comes from the fact that
these sectors are cyclical in nature.

A nascent consumer credit business, untested business model of

offering unsecured credit at the point of consumption, high dependence
on group companies for business volumes and high competition from
private banks and NBFCs peg up risks associated with this investment.
The asking price for the offer is stiff, offering little margin of safety on
execution.
At Rs 765, the higher end of the price band, the offer values the entire
business at a price-book value (P/BV) of about 6.6 times. Assuming an
asset-based valuation for the advisory business (at 15 per cent of
expected assets), the consumer credit business alone is being valued at
4.5-5 times book value post-IPO. Entrenched peers in banking/financial
services with similar opportunities for growth — India bulls Financial,
ICICI Bank and IDFC — are available at comparable valuations. Future
Capital reported a total income of Rs 31.3 crores and a net loss of Rs 12
crores on consolidated operations for the six months ended September
2007; the present financials do not offer scope for a meaningful PE
computation.

“RELIANCE POWER LTD “
Sector: Power
About the Company: Reliance Power (RPL), part of the Reliance Anil
Dhirubhai Ambani Group (R-ADAG) company, a unit of India's second-
biggest utility by market value, is engaged in the construction and
development of various gas- and coal-based thermal power projects and
hydroelectric power projects in various parts of the country.
Reliance Power won rights to develop a 4,000-MW mega power project

at Sasan in the central state of Madhya Pradesh in June. Its parent,
Reliance Energy, is building a 1,200-MW power plant at Rosa in
northern Uttar Pradesh state.
The 4,000-MW project is expected to be the largest pit-head coal-fired

power project at a single location in the country and is scheduled to be
commissioned during the XI Plan. At the same time, the company
expects to complete the Rosa Phase-I, 600-MW coal-fired project in
Uttar Pradesh, now under construction, by March 2010. The Rosa
Phase II (600-MW expansion project) is scheduled to be commissioned
by September 2010. The other identified projects are located in Western
Region (12,220 MW), Northern region (9,080 MW) and North-Eastern
region (2,900 MW). It is also making a big foray into the hydro power
projects in Arunachal Pradesh. The power projects include six coal-fired
projects (10,620 MW) to be fuelled by reserves from captive mines and
supplies from and abroad, two gas-fired projects (10,280 MW) to be
fuelled primarily by reserves from the Krishna Godavari Basin off the
East Coast and four hydro power projects (3,300 MW), three of them in
Arunachal Pradesh and one in Uttarakhand.

Objects of the Issue:
Achieve the benefits of listing on the Stock Exchanges.

Raise capital to fund subsidiaries to part-finance the
construction and development costs of certain of 12 power
generation projects currently under various stages of
development.
General corporate purposes.
Merchant Banker: Kotak, UBS, ABN AMRO, Deutsche, Enam, ICICI

Securities, JM Financial and J.P. Morgan.
Issue size: Public Issue of 260,000,000 Equity Shares of Rs.10 each of

RELIANCE POWER LIMITED (("RELIANCE .POWER" OR THE
"COMPANY" OR THE "ISSUER") for cash at a price of Rs. . 440* per
equity share of Rs.10 each including at a discount of Rs.20 per Equity
share aggregating Rs. 115,632 MILLION. The issue constitutes 11.5% of
the post issue paid-up capital of the company. Issue Price Rs.440 Per
Equity Share of Face value of Rs.10 each.

Price on Listing: 547.80 on BSE/ 530 on NSE.
Other Information:
• Open - 15 Jan
• Close - 18 Jan
• Issue Type -100% Book Building Issue
• Issue Size - 1,300,000,000 Equity Shares of Rs.10 each.
• Issue Price - Rs 405/- to Rs 450/- per Equity share

• Maximum Subscription Amount for Retail - Rs 100,000/-

• Minimum and Maximum Order Quantity -
• Listing - BSE, NSE
• Application Multiple - 15 and in multiples there off starting with at
least 15 shares.
• Registrar - Karvy Computershare Pvt Ltd
The Issue received 48, 02,930 applications for 1599, 71, 29,272 equity
shares resulting in 61.52 times subscription. The details of the
applications received in the Issue from Qualified Institutional Buyers,
Non-Institutional, Retail Individual Investors are as under (Before
technical rejections):
RELIANCE POWER SUBSCRIPTION DETAIL
Category No. of No of Shares Subscription

Applications
Qualified 446 11299720185 82.6
Institutional
Buyers
Non 21592 . 3706983112 162.59
Institutional
Investors
Retail 4780891 958425975 14.01
Individual
Investors

January 28, 2008.

A. Allocation to Retail Investors:
The Basis of Allocation to the Retail Individual Investors, who have bid at
cut-off or at the Issue Price of Rs.450 per Equity Share, was finalized in
consultation with BSE. The category was oversubscribed 13.572340
times. The total number of shares allotted in this category is 6, 84,
00,000 Equity Shares to 41, 73,929 successful applicants.
B. Allocation to Non Institutional Investors:
The Basis of Allocation to the Non institutional Investors, who have bid
at the Issue Price of Rs.450 per Equity Share, was finalized in
consultation with BSE. The category was subscribed 159.556149 times.
The total number of shares allotted in this category is 2, 28, 00,000
Equity Shares to 11,862 successful applicants.
C. Allocation to QIB Bidders:
Allocation to QIBs has been done on a proportionate basis in

consultation with BSE. As per the SEBI guidelines, Mutual Funds were
initially allotted 5% of the quantum of shares available (68, 40,000) and
remaining available shares (12, 99, 60,000) on proportionate basis.
VALUATION:
RPL is part of the Reliance Anil Dhirubhai Ambani (Reliance ADA) group
and was established with the purpose of developing, constructing and
operating power projects domestically and internationally. The company
is currently in the process of developing 13 medium and large sized
power projects with a combined planned installed capacity of 28,200

MW. The identified project sites are located in western India (12,220
MW), northern India (9,080 MW) and northeastern India (2,900 MW) and
southern India (4,000 MW). They include 7 coal-fired projects (14,620
MW) to be fueled by reserves from captive mines and supplies from
India and abroad, 2 gas-fired projects (10,280 MW) to be fueled primarily
by reserves from the Krishna-Godavari Basin off the east coast of India,
and 4 hydroelectric projects (3,300 MW), three of them in Arunachal
Pradesh and one in Uttarakhand.
The Indian power sector has robust growth prospects with a large
demand and supply deficit. With various proactive reforms in the power
sector encouraging private-sector participation in all the three core
segments of generation, transmission and distribution, players such as
RPower, who will be the face of the group for power generation, will be
able to capitalize on strong growth opportunities in the country.
Project portfolio and its customers are well diversified. The locations of
all the 13 projects are either near the load centre or fuel source. Fuel
required is also diversified.
Has no power project in operation and its first power generation unit, the
Phase I of the 600-MW Rosa Power project, will go on stream only in
December 2009. Unless there is any inorganic expansion, there will not
be any operating revenue or cash flow from the core business of power
generation.
Ahead of the IPO, all the listed stocks in the power generation sector
have been re-rated based on the expected price of RPower. The offer
price band stands at Rs 405 to Rs 450. The discount of Rs 20 for retail

investors and part payment of the issue price (Rs 115 on application and
balance on call) is a sweetener. With no financial track record and no
operational income expected to be generated till December 2009, when
the first unit of Rosa I is expected to go on stream, the RPower scrip
could end up with high volatility on news flow on the implementation of
its various projects and winning of new projects.. At higher price band,
RPower will have a market capitalization of Rs 101700 crores compared
with NTPC's current market capitalization of Rs 221630 crores. While
RPower has plans to implement 28,200-MW capacity with no assured
returns in many projects and little experience in large project execution,
NTPC already has 27,904-MW capacity with plans to set up additional
22,100 MW. Most of NTPC’s projects enjoy assured returns and it has
one of the best track records of power-project execution. In the long run,
RPower has many execution risks to contend with. But in the short term,
the market seems willing to ignore all that.

“BANG-OVERSEAS LTD”
Sector: Textiles and Garments.
About the Company: Incorporated in the year 1992 Bang Overseas

Limited is presently providing fashion fabrics and meeting ready to wear
requirements of our customers in apparel, textile and retail segment.
Bang Overseas Limited started business from trading in textile and since
1998. Bang Overseas Limited started ready-to-wear men’s segment in
2000 by outsourcing manufacturing process with our experience in
designing fabrics and in turn selling to various international brands. Bang
Overseas Limited launched ready-to-wear men’s garments under its
brand name 'Thomas Scott' in 2002.
Objects of the Issue :
• Setting up retail outlets across India and brand

building.
• Setting up a new apparel manufacturing unit.
• Warehousing and Logistic facilities.
• For general corporate purposes.
Merchant Banker: Almondz Global Securities Limited (Formerly Allianz

Securities Limited)

Bang Overseas Limited ("Bang Overseas” Or the "Company" Or The
"Issuer") for cash at a price of Rs. 207 per equity share of Rs.10 each
including a share premium of Rs. 197 per Equity share aggregating Rs.

724.5 Million. The issue constitutes 25.81% of the post issue paid-up
capital of the company. Issue Price Rs.207 per Equity Share of Face
value of Rs.10 each. The issue price is 20.70 times the face value.
Price on Listing : 207 BSE/ 250 on NSE.
Other Information:
• Open - 28 Jan
• Close - 31 Jan
• Issue Size - 3,500,000 Equity Shares Of Face Value Rs.10 Each
• Issue Size in Rs - 72 Crores
• Issue Price - Rs 200/- to Rs 207/- Per Equity Share
• Maximum Subscription Amount for Retail Investor: Rs 100,000/-
• Registrar - Karvy Computershare Private Limited
• Minimum and maximum shares for retail category - 1 lot -30
shares and 16 lot - 480 shares.
• Minimum and Maximum amount for retail category - 1 lot - Rs 6210
and 16 lot - Rs 99360 @ cut off.
least 30 shares
• Cheque In Favor Of - "Escrow Account - BOL Public Issue - R" For
Retail category

The Issue received 4780 applications for 3,966,170 equity shares

resulting in 1.13 times subscription. The details of the applications
received in the Issue from Qualified Institutional Buyers, Non-
Institutional, Retail Individual Investors are as under (Before technical
rejections):
BANG OVERSEAS LTD SUBSCRIPTION DETAIL
Category No. of No. of Subscription (No. of

Applications Shares Times)
Qualified 3 1939980 1.14
Institutional
Buyers
Non 15 666720 1.3
Institutional
Investors
Retail 4733 1257260 1.05
Individual
Investors
Employees 29 102210 1.02
Total 4780 3966170 1.13

February 12, 2008.

A. Allocation to Employees:
The Basis of Allocation to the Employees, who have bid at cut-off or at

the Issue Price of Rs. 207/- per Equity Share, was finalized in
consultation with BSE. The category was oversubscribed 1.0221 times.
The total number of shares allotted in this category is 100,000 Equity
Shares to 29 successful applicants.
B. Allocation to Retail Investors:
cut-off or at the Issue Price of Rs.207/- per Equity Share, was finalized in
times. The total number of shares allotted in this category is 1190000
Equity Shares to 4612 successful applicants.
C. Allocation to Non-Institutional Investors:
cut-off or at the Issue Price of Rs. 207/- per Equity Share, was finalized
in consultation with BSE. The category was under-subscribed 1.307294
times. The total number of shares allotted in this category is 510000
D. Allocation to QIB’S:

consultation with BSE. As per the SEBI guidelines, there were 85,000
equity shares reserved for Mutual Funds category. Since no applications
were received from Mutual funds, the spillover portion has been added

to all other QIBs and other QIBs were allotted the remaining available
shares (1,700,000) on proportionate basis.
VALUATION:
BOL has a domestic market bias and is, therefore, relatively less
exposed to rupee fluctuations and export slowdown, problems that are
plaguing most other textile companies.
The company started its garments business in 2002. Till then, it was
predominantly a trader in imported fabric. The company sells men’s
clothing under the brand “Thomas Scott” through a network of multi-
brand outlets, departmental stores such as Shoppers’ Stop and Globus
and 12 exclusive outlets.
A growing share of garments in the revenue mix has significantly

improved profitability. Revenues and profits have grown at a stupendous
pace since 2005. The company ended fiscal 2007 with revenues of close
to Rs 100 crores. Garments currently account for about 40 per cent of
revenues.
Through the proceeds of the offer, the company will expand its garments
capacity six-fold to more than 7 million pieces a year and expand its
retail chain to 100 stores. The fresh capacity is expected to come on
stream by September 2008. The company expects to add an additional
88 stores by June 2009; 41 will be company-operated and the remaining
franchisee-run.
The additional garment capacity will likely feed its expanding retail
operations. and will also help it cater to increasing demand from apparel

retailers. BOL is also to foray into women’s wear with a line of clothing
— Miss Scott.
While these moves can help boost margins and profits in the long-term,
there are execution risks, especially when it comes to the retail
business.
At the upper end of the price band of Rs 200-Rs 207, the offer is valued
at close to 20 times the company’s annualized FY 08 per-share
earnings, on a fully expanded equity base. The company is in its infancy,
and with an insufficient track record in the branded retail business, there
could be execution risks to its expansion plans. If it manages to execute
its capacity addition and retail expansion plans successfully, the
valuation is likely to be at more attractive levels on a forward basis.
Given the turbulence in the markets, however, staying invested with
better-established players may be a more appropriate strategy.

“ J.KUMAR INFRAPROJECTS LIMITED”
Sector: Construction/Infrastructure.
About the Company: J Kumar Infraprojects is a civil engineering and

infrastructure development company with primary focus on development
of roads, flyovers, bridges, railway over bridges, irrigation projects,
commercial and residential buildings, railway buildings, sports
complexes and airport runways. It deals in transportation, engineering,
civil construction, irrigation projects and piling work using hydraulic piling
rigs. The company also undertakes the design and construction of
flyover projects to the client's specified requirements on turnkey basis.
J. Kumar Infraprojects has been most active in Mumbai, Pune,

Aurangabad and Vidharbha region of Maharashtra.
• Purchase of Capital Equipments.

• Funding Working Capital Requirement.
• General Corporate Purposes.
Merchant Banker: Anand Rathi Securities Limited
Issue size: Public Issue of 65,00,000 Equity Shares of Rs.10 each of J.

KUMAR INFRAPROJECTS LIMITED (THE "COMPANY" OR THE
"ISSUER") for cash at a price of Rs.110 per equity share of Rs.10 each
including a share premium of Rs.100 per Equity share aggregating Rs.
7,150,00 LACS. The issue constitutes 30.40% of the post issue paid-up
capital of the company. Issue Price Rs.110 Per Equity Share of Face
value of Rs.10 each. The issue price is 11 times the face value.

Price on Listing: 100 on BSE / 109 on NSE.
Other Information:
• Open - 18 Jan
• Close - 23 Jan
• Issue Size - 65,00,000 Equity Shares Of Rs. 10/- Each
least 55 shares.
The Issue received 12,238 applications for 1, 30, 96,660 equity shares
rejections):

J.KUMAR INFRAPROJECTS LTD. SUBSCRIPTION DETAIL
Category No. of Applications No. of Subscription

Shares
Qualified 11 8833990 2.8
Institutional
Buyers
Non 40 848980 0.9
institutional
Investors
Retail Individual 12134 3210190 1.46
Investors
Employees 53 203500 1.01

January 28, 2008.

the Issue Price of Rs.110/- per Equity Share, was finalized in
times. The total number of shares allotted in this category is 2, 00,000
B. Allocation to Retail Individual Investors:
times. The spillover portion to the extent of 99870 equity shares has

been added to this category. The total number of shares allotted in this
category is 2304870 Equity Shares to 10954 successful applicants.
consultation with BSE. The category was undersubscribed 0.894317
times. As per the Red Herring Prospectus, the spillover portion to the
extent of 99870 equity shares has been added to the Retail Individual
Investors category. The total number of shares allotted in this category is
845130 Equity Shares to 38 successful applicants.

consultation with NSE. As per the SEBI guidelines, Mutual Funds were
remaining available shares (29, 92,500) on proportionate basis.
VALUATION:
JKI, a construction company with operations in Maharashtra, focuses on

building roads, flyovers, buildings and piling works. The offer proceeds
(Rs 72-78 crores) are to be utilized for purchasing capital equipment and
for working capital requirements. At the offer price band, the market
capitalization of the company’s stock would be Rs 228-248 crores.
JKI, although incorporated in 1999, started operations in 2005 and saw a

huge jump in revenues in 2006. This was after one of the promoter
group companies — J. Kumar & Co. — transferred certain assets as well

as a contract license for public works department. JKI’s revenue grew
from Rs 3 crores in FY-05 to Rs 112 crores in FY-07. The company’s
current order-book of Rs 461 crores provides earnings visibility over the
next couple of years. However, the annual growth over 2006 and 2007,
afforded by a low base, is unlikely to repeat itself.
The present infrastructure boom in the country provides ample room for
small players such as JKI to share a part of the order flow pie. However,
JKI’s current business model depends more on the local municipal and
metropolitan development authority’s (in Maharashtra) than on the
‘infrastructure spending’ in the country. While this strategy is likely to
fetch steady revenues in the medium term, the growth opportunity
appears relatively less as infrastructure players moving to high-end
segments could be better options from an investment perspective. The
company’s valuation can, therefore, at best be at a discount to other
infrastructure players.
Concentration of work in a single State also poses the risk of slowdown

if the State spending declines. The company has also not stated any
plans of moving to locations outside of Maharashtra.
The asking price of Rs 110-120 appears stiff, given the present size of
the company and the large number of unorganized players in the
contracting space. Limited geographical presence, significant expansion
in equity and low visibility for growth over the long term are also limiting
factors for this company. However, given that the overall prospects for
the company’s business appear good, investors can take a second look
at the stock post-listing, if its valuation dips due to broad market factors.

At the offer band, the IPO is priced at 19-21 times it’s per share earnings
of FY 2007 on a pre-issue equity base. Post-issue, the price-earnings
multiple is 14-16 times the annualized earnings for FY-08. Similar sized
peers are at a discount to this valuation.

“CORDS CABLE INDUSTRIES LTD”
Sector Cables (Power).
About the Company: Cords Cable Industries Limited is in the business

of providing cost-effective and quality solutions for various electrical
connectivity requirements. Established in 1987 Cords has developed a
wide range of specialized cables to address the specific requirements of
industries involving modern process technologies, instrumentation and
communication demanding the highest standards of precision and
reliability, and household users seeking products with assured quality
and safety.
Some of its products include: LT control cables, LT power cables,

instrumentation cables, thermocouple extension cables, compensating
cables, coaxial cables, telephone cables, panel wires / household wires
& networking cables.
CCIL currently manufactures cables up to 1.1 kv at their manufacturing

facility in Chopanki, Rajasthan for various applications and caters to the
requirements of industries in steel, power, chemical, cement, fertilizer,
refineries. The main raw materials used are copper, aluminium, PVC
resin, XLPE, GI wire, aluminium tapes, and thermo couple.
• Setting up of production facilities.

• Working capital requirements.
• General Corporate Purposes.
Merchant Banker: Collins Stewart Inga Private Limited

Issue size: Public Issue of 30, 85,000 Equity Shares of Rs.10 each of
CORDS CABLE INDUSTRIES LIMITED (THE "COMPANY" OR THE
4164.75 LACS. The issue constitutes 26.38% of the post issue paid-up
capital of the company. Issue Price Rs.135 per Equity Share of Face
value of Rs.10 each. The issue price is 13.50 times the face value.
Price on Listing: 130 on BSE
Other Information:
• Open - 21 Jan
• Close - 24 Jan
• Issue Size - 35,00,000 Equity Shares Of Rs. 10/- Each
• Registrar - Intime Spectrum Registry Ltd
least 50 shares

• Cheque In Favor Of - "Escrow Account - CCIL Public Issue - R"

For Retail category.
The Issue received 10564 applications for 14278550 equity shares

rejections):
CORDS CABLE INDUSTRIES LTD SUBSCRIPTION DETAIL

Shares
Qualified 30 10291900 6.8271
Institutional
Buyers
Non- 65 1435450 3.174
Institutional
Investors
Investors
Employees 13 70900 1.0129

February 5, 2008.

the Issue Price of Rs. 135/- per Equity Share was finalized in
The total number of Equity Shares allotted in this category is 70000

B. Allocation to Retail Investors:
The Basis of Allocation to Retail Individual Investors, who have bid at

cut-off or at the Issue Price of Rs. 135/- per Equity Share, was finalized
in consultation with BSE. The category was oversubscribed 2.3019
times. The total number of Equity Shares allotted in this category is
1055252 Equity Shares to 8232 successful applicants.
C. Allocation to Non Institutional Investors:
The Basis of Allocation to Non-institutional Investors, who have bid at

the Issue Price of Rs. 135/- per Equity Share, was finalized in
The total number ol Equity Shares allotted in this category is 452248
D. Allocation to QIB Bidders:

consultation with BSE. As per the SEBI (Disclosure and Investor
Protection) Guidelines, 2000, Mutual Funds were initially allotted 5% of
the quantum of shares available (75375) and other QIBs and unsatisfied
demands of Mutual Funds were allotted the remaining available shares
(1432125) on proportionate basis.

VALUATION:
In the business of manufacturing cables, CCIL offers a proxy exposure

to the ongoing infrastructure and power growth story. Robust growth in
sales and bottom-line, diverse revenue mix, established clientele and the
proposed entry into HT (high tension) power, rubber and specialty
cables segment, suggest good prospects for the company.
CCIL has a diversified clientele and product portfolio. Its current order-
book, with the major portion leaning towards power sector (about 48 per
cent), is spread across sectors such as cement, refineries and
petrochemicals and steel.
The company may be able to further extend its reach to sectors such as
railways, shipping and wind power after the proposed expansion of its
capacity and the addition of new products. On the product front, it offers
an extensive range of high quality control and instrumentation cables,
power cables and special cables for oil wells. The company plans to
utilize proceeds from the issue towards setting up of production facilities.
About Rs 6 crores from the proceeds will be diverted towards working
capital requirements.
The demand for cables is set to increase significantly, given the ongoing
capex in power and infrastructure and strong growth in industries such
as metro rail, shipping and aviation. In the price band of Rs 125-135, the
stock would be valued at about 12-13 times its likely FY-08 per share
earnings on a diluted equity base.
The stock is currently available at a P/E of 11x to 12x on the lower and
upper price bands respectively of its FY 08E EPS of Rs.11.72. The

margins shown by CCIL is one on the higher side while comparing it to

its peer group with OPM being at 15% & NPM at 8%.
The company has shown excellent growth rate in the last few years &
with the upward trend in its user industries, we expect the growth to
continue. One of the key concerns is that currently the user industry is
on uptrend. A slowdown can hit CCIL’s fortunes. The industry is
currently trading at a P/E of 22x, which leaves enough room for upside
potential. The company has plans of introducing new products in the
product line which will boost the revenues.

“K N R Constructions Limited”
Sector: Construction – Medium/Small.
About the Company: Incorporated in 1995, KNR Constructions Ltd an

infrastructure project development company providing engineering,
procurement and construction services across various fast growing
sectors; viz., roads & highways, irrigation and urban water infrastructure
management. KNR Constructions Ltd. has in the past executed
infrastructure projects independently as well as through joint ventures.
Currently, most of the road projects under execution are with its joint
venture partner, Patel Engineering Limited with whom it has business
association for the past 7 years. As on June 30, 2007, it has 24 projects
on hand across various states in India covering Uttar Pradesh, Madhya
Pradesh, Assam, Andhra Pradesh, Karnataka, and Tamil Nadu.
• Further Equity investment in BOT projects

• Purchase of capital equipment.
• For meeting working capital requirement.
• For general corporate purposes.
Merchant Banker: AXIS BANK Limited.

KNR CONSTRUCTIONS LIMITED (THE "COMPANY" OR THE
1338.68 MILLION. The issue constitutes 28.00% of the post issue paid-

up capital of the company. Issue Price Rs.130 per Equity Share of Face
value of Rs.10 each. The issue price is 17 times the face value.
Other Information:
• Open - 24 Jan
• Close - 29 Jan
• Issue Size - 7,874,570 Equity Shares Of Face Value Rs.10 Each
• Registrar - Intime Spectrum Registry Limited
least 35 shares
• Cheque In Favor Of - "ESCROW ACCOUNT - KNR IPO -
RESIDENT" For Retail category

The Issue received 5948 applications for 9729195 equity shares

rejections):
K.N.R. CONSTRUCTION LTD SUBSCRIPTION DETAIL
Category No. of No. of Equity Subscription

Bids/Applications Shares (no. of times)
bidders
Non- 28 3683995 3.1754
Institutional
bidders
Qualified 22 5317445 1.375
Institutional
Buyers
Employee 51 82845 0.5918
bidders

February 08, 2008.
The Basis of Allocation to the Retail Investors, who have bid at cut-off or
at and above the Issue price of Rs.170/- Equity Share, was finalized in
consultation with BSE. The category was subscribed 0.234841 times.
The total number of equity shares allotted in this category is 635740.

The Basis of Allocation to the Non-Institutional Investors, who have bid

at cut-off or at the Issue Price of Rs.170/- per Equity Share, was
finalized in consultation with BSE. The category was
subscribed1.430179 times. The total number of equity shares allotted in
this category is 2561340 including Spill over from Employee Category
(37620 Equity Shares) and Retail Category (1363535 Equity Shares) to
successful applicants.
C. Allocation to Employees:
The Basis of Allocation to the Employee Category, who have bid at cut-
off or at and above the Issue price of Rs.170/- Equity Share, was
finalized in consultation with BSE. The category was subscribed 0.5917
times. The total number of equity shares allotted in this category is
82,845. The unsubscribed portion (57,155 shares) of Employee
Category is added to QIB and HNI Category Respectively.
D. Allocation to QIB's:

consultation with BSE. As per the SEBI guidelines, Mutual Funds were
initially allotted 5% of the quantum of shares available (193,365) other
QIBs and unsatisfied demands of Mutual Funds were allotted the
remaining available shares (4401280) on proportionate basis. The total
number of equity shares allotted In this category is 4594645 including
spill over from Employee Category (19535 Equity Shares) and Retail
Category (707830 Equity Shares) to successful applicants.

VALUATION:
The Company has strong execution of infrastructure development

projects capabilities which requires significant amount of technical
expertise and skill. It also has the requisite pre-qualification to bid for
such projects, which is based on past experience of execution of similar
projects and financial strength.
The company has a team of qualified and experienced employees, who

have qualities to meet requirements of the clients and the technical skills
of the various projects that we undertake. The management team which
is led by managing director, has over three decades of experience in the
construction industry, has expertise and experience in the road
construction sector. On a consolidated basis, its operating income,
EBIDTA and PAT have grown at a CAGR of 58.38%, 111.88% and
108.22% over FY05 to FY07. The government is giving special
importance to the industry so as to maintain 9% plus economic growth
rate, which required large investments in infrastructure segments. As
outlined in approach paper to 11th plan, the investment in infrastructure
will need to increase by 6% points in average gross domestic investment
rate from 29.1% to 35.1% of GDP needed to accelerate GDP growth
rate from 7% to 9%, about half should be in infrastructure.
Shares of KNRCL are available at price to earnings (P/E) multiple of

16.76x at the floor price and 17.75x at the cap price based on earnings
per share (EPS) for FY 2007. The valuation of KNECL seems to be
attractive when compared with its peers, MSK Projects India, Madhucon
Projects, Patel Engineering and Sadbhav Engineering which were
trading at P/E multiple of 17.70x, 31.50x, 39x, and 40.80

“ONMOBILE GLOBAL LIMITED”
Sector: Telecom Software.
About the Company: In the Year 2000 OnMobile Global Limited

Incubated at Infosys. OnMobile Global Limited provides value-added
telecommunications software products and services for
telecommunications and media companies primarily in India. It offers a
range of applications that are delivered by its carrier customers to their
end-user subscribers.
The company's products include ring back tones, voice portals, ring tone
downloads, subscription manager, contests, music messaging, on-
device client software, mobile radio, voice mail, voice short messaging
service, and missed call alerts, which enable subscribers to personalize
their mobile phones.
It also delivers interactive media solutions to media companies, such as

tele-voting, interactive programming, and mobile auditioning; and to
marketing companies for mobile adverting and lead generation. In
addition, the company provides a range of mobile commerce solutions,
which enable subscribers to buy movie tickets, railway tickets, top up
their pre-paid mobile phone cards, and pay bills using their mobile
phones. Further, it offers MMP2500, a multi-model platform that
combines speech, text, and touch input with graphics, text, and audio
output to deliver enhanced applications and services. The company is
based in Bangalore.

• Achieve the benefits of listing on the Stock Exchanges.

• Purchase equipment for company's office at Bangalore,
Mumbai, Delhi and various customer sites.
• To meet the long term working capital requirements of the
Company.
• For general corporate purposes
Merchant Banker: ICICI Securities Limited & Deutsche Equities Private

India Limited
Issue size: Public Issue of 1, 09, 00,545 Equity Shares of Rs.10 each of
ONMOBILE GLOBAL LIMITED (THE "COMPANY" OR THE "ISSUER")
for cash at a price of Rs.440 per equity share of Rs.10 each including a
share premium of Rs.430 per Equity share aggregating Rs. 47962.39
Lacs. The issue constitutes 18.99% of the post issue paid-up capital of
the company. Issue Price Rs.440 Per Equity Share of Face value of
Rs.10 each. The issue price is 44 times the face value.
Other Information:
• Open - 24 Jan
• Close - 29 Jan

• Issue Size - 10,900,545 Equity Shares Of Face Value Rs.10

Each
• Minimum and Maximum amount for retail category - 1 lot - Rs
6300 and 14 lot - Rs 94500 @ cut off.
• Application Multiple - 15 and in multiples there off starting with
at least 15 shares
• Cheque In Favor Of - "Escrow Account - OnMobile Public Issue
- R" For Retail category.
The Issue received 37,738 applications for11, 83, 43,547 equity shares
rejections):

ONMOBILE GLOBAL LTD SUBSCRIPTION DETAIL

Shares
Qualified 94 11,22,35,550 17.16
institutional
Buyers
Non 128 24,20,830 2.21
Institutional
Investors
Retail Individual 37,516 36,87,167 1.12
Investors

February 08, 2008.
Equity Shares to 36,462 successful applicants.
consultation with BSE. The category was oversubscribed 2.195630


consultation with NSE. As per the SEBI guidelines, Mutual Funds were
remaining available shares (62, 13,311) on proportionate basis.
VALUATION:
OnMobile Global (OnMobile) was promoted in September 2000 by

OnMobile Systems, Inc (OMSI) and Arvind Rao, a B Tech from IIT
Mumbai and management graduate from Wharton school, University of
Pennsylvania, and Chandramouli Janakiraman, a B Tech and a former
Infosys Technologies employee, to develop telecommunication software
platforms and applications for the mobile telecommunications industry.
Initially, it was incorporated as Onscan Technologies India The name
was changed to OnMobile Asia Pacific in April 2001 and to OnMobile
Global in August 2007.
The customer base includes all the major telecom operators in India and
more than 10 international telecom operators in over eight countries
including Optus in Australia, Banglalink in Bangladesh, Maxis in
Malaysia, and BTEL and Indosat in Indonesia. In addition, markets
products and services to media companies such as AOL, Disney, ESPN,
India Today Group digital, Star India and Nokia.

Due to competitive industry dynamics, mobile tariffs have been falling

and there has been pressure on the average revenue per subscriber
(ARPU) of telecom operators. Thus, telecom operators would be looking
for more VAS revenue at very little incremental capital expenditure. This
is a potential lever to counter the trend of falling ARPUs. It will result in
decent growth opportunity for OnMobile as VAS will have higher growth
trajectory on lower base and increasing acceptability
Its weaknesses are More than 80% of the revenue from just five largest
customers (major telecom service providers), constituting less than 10%
of total customers, in the six months ended September 2007. The loss of
any major customer or decrease in the volume of work from them or dip
in revenue sharing may adversely impact revenue and profitability.
Revenue grew at a CAGR of 99% and net profit at a CAGR of over

100% over the three-year period ended March 2007. However, operating
profit margin has been declining over the couple of years though is still
decent at above 40%. Performance improved significantly in the six
months ended September 2007, achieving revenue of Rs 112.51 crores
(82% of the revenue in FY 2007) and net profit of Rs 30.52 crores (87%
of net profit realized in FY 2007). Share of revenue with telecom
operators is about 20% on an average ranging between 15%-40%.
Overseas revenue was about 9.1% of total revenue in H1 of FY 2008 as
against 5.1% in FY 2007.
On annualized EPS of Rs 10.2 in the six months ended September 2007

on post-issue equity capital of Rs 60.09 crores, the P/E works out to
41.8 – 44.3 at the price band of Rs 425 – Rs 450. The trailing 12-month
(TTM) P/E of Tanla Solutions (broadly providing similar services outside
India) is 20.5.

“NATIONAL HYDROELECTRIC POWER CORPORATION LTD”
Sector: power sector
About the Company:
Incorporated in 1975, NHPC Limited (Formerly known as National

Hydroelectric Power Corporation Ltd.) is a Govt. of India's Enterprise.
NHPC is a hydroelectric power generating company dedicated to the
planning, development and implementation of an integrated and efficient
network of hydroelectric projects in India. They execute all aspects of the
development of hydroelectric projects, from concept to commissioning.
NHPC have developed and constructed 13 hydroelectric power stations

and their total installed capacity is currently 5,175 MW. This includes two
power stations with a combined capacity of 1,520 MW, constructed and
operated through our Subsidiary, NHDC. Company's power stations and
hydroelectric projects are located in the North and North East of India, in
the states of Jammu & Kashmir, Himachal Pradesh, Uttarakhand,
Arunachal Pradesh, Assam, Manipur, Sikkim and West Bengal.
Company generated 14,813.16 MUs of electricity in Fiscal 2008.
Presently, they are engaged in the construction of 11 additional

hydroelectric projects, which are expected to increase total installed
capacity by 4,622 MW. Further eight projects, including one joint venture
project, with an anticipated capacity of 5,751 MW, are currently awaiting
sanction from the CCEA. NHPC have obtained ISO 18001:2000, ISO
9001:2000 and ISO 14001:2004 certifications from the Bureau of Indian
Standards.

a) Utilize the proceeds to part finance the construction and

development cost of certain of Identified projects namely
Subansiri Lower, Uri – II, Chamera – III, Parbati – III,
Nimoo Bazgo, Chutka and Teesta Low Dam – IV Use the
proceeds for future growth opportunities.
b) Use the proceeds for future growth opportunities.
c) For General Corporate Purpose.
Merchant Banker:
1. Enam Securities Private Limited 2. Kotak Mahindra Capital Company

Limited 3. SBI Capital Markets Limited
Issue size:
Public issue of 1,67,73,74,015 equity shares of Rs. 10 each (the “equity
shares”) for cash at a price of Rs. [•] per equity share of NHPC limited
(“NHPC”, “our company” or “the issuer”) aggregating Rs. [•] crores (the
“issue”). The issue comprises a fresh issue of 1,11,82,49,343 equity
shares by NHPC (the “fresh issue”) and an offer for sale of 55,91,24,672
equity shares by the president of India acting through the ministry of
power, government of India (the “selling shareholder”) (the “offer for
sale”). The issue comprises a net issue to the public of 1,63,54,39,665
equity shares (the “net issue”) and a reservation of 4, 19, 34,350 equity
shares for subscription by eligible employees.
Date of listing: September 01, 2009
Price on Listing: Rs. 39.00(BSE) Rs. 42.00(NSE)

Other Information:
»» Issue Open Aug07,2009-Aug12,2009

»» Issue Type: 100% Book Built Issue IPO
1,677,374,015 Equity Shares of
»» Issue Size: Rs. 10
»» Issue Size: Rs. 6,038.55 Crores
»» Face Value: Rs. 10 Per Equity Share
»» Issue Price: Rs. 30 - Rs. 36 Per Equity Share
»» Market Lot: 175 Shares
»» Minimum Order Quantity: 175 shares
»» Listing At: BSE, NSE
Subscribe Statistics
NATIONAL HYDROELECTRIC POWER CORPORATION LTD

SUBSCRIPTION DETAIL
VALUATION:
NHPC Limited was incorporated by the Government of India in the year

1975. NHPC is a hydroelectric power generating company committed to
the planning, development and implementation of an integrated and
efficient network of hydroelectric projects in India. NHPC is involved in
all the activities right from commencement to development of
hydroelectric projects. The company has experience in the design,
development, construction and operation of hydroelectric projects,
executing and managing all aspects of projects, from front-end
engineering design to commissioning, operation and maintenance.
NHPC has selective undertaken projects in alliance with state
governments where there is high hydro potential and thus tend to enjoy
location and operational advantage. NHPC has constructed and
developed 13 hydroelectric power stations with a capacity of 5,175 MW.
The current total generation capacity of the company is 5,134.2 MW,

taking into account total installed capacity of of the Loktak and Tanakpur
power stations (combined capacity of 1,520 MW) constructed and
operated through its subsidiary NHDC. The company’s power stations
and hydroelectric projects are located predominantly in the North and
North East of India. In FY09 the company and its subsidiary sold
14,587.88 MUs and 2,345.01 MUs of electricity, respectively. Currently
the company is involved in the construction of 11hydroelectric projects,
which are expected to increase its total installed capacity by 4,622 MW.
The company is also awaiting the government approval of five projects
with an anticipated capacity of 4,565 MW and for certain joint venture
projects within anticipated capacity of 2,166 MW.
NHPC is one of the largest hydro power generator in India

account to 14% of total hydro capacity in India.
150bps increase in ROE from 14% to 15.5% under new CERC

norms for FY2009-14.
The Government has estimated the total investment potential of
the sector at Rs 9,000 bn for a specified period up to fiscal year
2011.
NHPC has strong operating efficiency as reflected in average

capacity index of 93.61% for 2008-09.
Being a mini ratna the company can enter into greater autonomy
to undertake new projects without GoI approval subject to
investment ceiling of Rs 500 cr.

NHPC has got into long term power purchase agreements for
major portion of capacity under construction.
NHPC has strong in-house design and engineering team.

IPO SCAM
IPO SCAMS – OVERVIEW
IPO Scams are well structured game played by the absolute

opportunists consisting of intermediaries, financiers and bank
employees, who make a lot of money by controlling shares\ meant for
retail investors in Initial Public Offer (IPO), as the per the statement of th
In the last few years, the capital market in India went through a rapid
transformation. The increased use of information technology and the
integration of financial markets have stepped up the risk profile of the
cap
The two major IPO scams in the Indian Capital market were the Harshad
Mehta scam in the year 1992 and the Ketan Parekh scam in loopholes in
the Indian capital the Securities Exchange Board of India. capital market.
2001. The IPO Scams opened up the latent market.
IPO SCAMS - CAUSES

• Two of the most common factors of the major IPO scams in India
were the tacit consent of the banks and the poor surveillance
techniques.
• The Depository Participants must be provided the proof of identity
and proof of address as a routine check for the opening Demat
accounts. This was not followed.
• Numerous dematerialized accounts and bank accounts had been
opened under false names and the IPO applications were made in
non existing names.

IPO SCAMS - HOW IT WAS DONE
At first bank accounts were opened up "benami" names, which allowed

these fictitious account holders to open demat accounts.
The master account holders, the person who had executed the planning
acts as an intermediary on behalf of the financiers. The shares acquired
at the of listing at a premium to get more than the amount of money
invested. Investing in fictitious or IPO’s were disposed on the date
The banks played an important part by means of opening bank accounts
and giving loans to the fictitious entities for the purpose of earning fee
incomes. IPO’s are the key stone in the financial structure of the venture
industries. But the recent paucity of IPO’s has caused alarm for the
venture industry & has intensified a continuing shakeout among the
venture capitalist firms. It is good times ahead for early bird investors. If
the current government has its way, we might go from a complete death
Of IPO’s & follow on issues market with the government both in listed
and unlisted space the numbers are staggering.
Dalal Street likes noise & India could stand apart with some very good
paper hitting the market but the most important will be what this move
does for the government. The performance of Indian government goes
ahead with reform plan. to a flood of new paper hitting the being a large
owner of equities market depends upon a lot how the SEBI has agreed
to dispose of pending proceedings against Mr Gautam Zhaveri for his
involvement in the IPO scam of 2003 04, following settlement of the Mr
Zhaveri, who applied for the consent order, paid Rs 2.7 crores towards
settlement, including a disgorgement amount of Rs 2.36 crores,
settlement charges of Rs 23.6 lakh, compounding charges of Rs 9 lakh
and legal charges of lakh. The applicant (Zhaveri) had been proceeded
against for irregular dealings in shares issued through IPOs, and for

cornering shares meant for retail investors, making unlawful profits from
the shares upon their listing. Case through a consent order. 2003- Rs 1
SEBI had banned the apply market; initiated adjudication proceedings
against him, prosecution proceedings in the ACMM court in Mumbai
under the Companies Act; and a protest petition before the CBI court for
non-filing of charge sheet against the SEBI’s consent order disposes of
all these pending proceedings. SEBI will file an application for
withdrawal of its protest application at the CBI special court, and shall
not oppose compounding of prosecution in the ACMM court, the
Regulator said in its consent order. SEBI said it would also drop
proceedings against Pratik Stock Vision Pvt Ltd in the matter of carry
forward transactions in the shares of Global Tele applicant offered to
settle the case, offering Rs 1.25 towards settlement charges applicant
from dealing in the securities applicant. Tele-systems Ltd in 2000
charges.

SURVEY ANALYSIS
1. What is your age?
25 years and below 25-40 years
40-60 years Retired
PARTICULARS RESPONSE
25 years and below 11

25-40 years 16
40-60 years 12
Retired 11
Total 50
Below 25
25-40
40-60
Above 60
Out of the responded most of them almost 32% of them were from 25-40
25
age group. Fewer almost 22%
22% were there from age group of below 25
and above 65 years almost on retirement age.

2. Which is your preferred area of investment?
Share /equity Gold Real estate
Mutual funds Banks Other
Share 8
Gold 11
Real estate 10
Mutual Funds 6
Banks 12
Other 3
Total 50
Share
Gold
Real Estate
Mutual Funds
Banks
Others
Most of the responded around 24%

24% were preferring in traditional
investment avenue of banks and gold and fewer in share market

3. Do you invest in Equity shares?
YES 40
NO 10
total 50
No No, 20%
Yes Yes, 80%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
From the survey conducted of 50 people, about 80% of them invest in

Equity shares. So there is a huge market available for targeting those
80% where the products available

4. For what term you invest your money?
Less than 1 year 27
2-5 year 14
More than 5 year 9
total 50
More than 5 years 18%
2 - 5 years 27%
Less than 1 yes 55%
0% 10% 20% 30% 40% 50% 60%
When asked about their investment period, 55% people invest for less
than 1 year and 27% of them invest for 2 – 5 yrs, which means majority
of them invest for a short term period and only 18% invest for a long
term i.e., more than 5 yrs.

5. Approximately how much is your portfolio worth?
More than 10 lacs 14%
5 - 10 lacs 20%
2 - 5 lacs 25%
Less than 2 lacs 41%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
LESS THAN 2 LACS 20
2-5 LACS 13
5 TO 10 LACS 10
MORE THAN 10 LACS 7
total 50
As the response from the survey states that 41% holds less than 2 Lacs
portfolio and only 14% shows more than 10 lacs portfolio which shows
people are cautious about their investment in stock market considering
the risk and volatility it has.

6. How can you describe your equity investment experience?
Limited
Moderate
Extensive
Particulars Response
Limited 15
Moderate 24
Extensive 11
Total 50
Limited
Moderate
Extensive
Out of the surveyed almost 50% responded had moderate experience in

stock market.30%
.30% of them had limited experience in stock market.

7. How much time do you give to Investment options & related reading
every day?
Particulars Response
LESS THAN 10 MINUTES 20
10-30 15
30-60 9
MORE THAN 1 HOUR 6
TOTAL 50
More than 1 hour 12%
30 - 60 mins 18%
10 - 30 mins 30%
Less than 10 mins 40%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Generally people spend less than 10 minutes on stock reading, may be

because they are not trader or having other business to do. 12% of
responded spend more than 1 hour which indicate they might be regular
investor in market.

.
8. Do you know about IPO?
Yes No
Yes 23
No 27
Total 50
Yes
No
Almost 46% responded knows about IPO and rest have no idea.

9. From where you got the knowledge of IPO and other investment
options?
WEBSITES 7
BROKER 15
STUDY 8
MARKET 17
OTHERS 3
TOTAL 50
Others 5%
Market 35%
Study 16%
Broker 29%
Websites 15%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Information investor and trader generally obtain from market about

equity as 35% from surveys indicate it. 29% get news and information
from their own broker. Rest of them gets information from websites,
study and other sources. Website may play major role in future as
internet user are increasing in millions per year in India
CONCLUSION & RECOMMENDATIONS
CONCLUSION:
The Indian initial public offer (IPO) market has always had more than its
fair share of doomsayers Right from the Maruti issue, which pundits
decried as being overpriced, to the ONGC and TCS issues, where the
huge sizes of the offerings drew predictions of calamitous effects on the
secondary markets, the opinions of the “experts” have proved to be wide
off the mark.
Not only did the mega issues sail through, but the secondary markets
proved to be far more resilient than anybody had anticipated. The data
show that as much as Rs. 2033.99 Crores has been raised from the
primary market in the current calendar year, making it obvious that the
Indian investor has far more appetite for equities than most people
realize.
Most of the money has been raised by big companies with a long-term
track record. A substantial number of issues—barring that of TCS—also
happened during the early part of the year, before the markets got the
shivers. The heavy oversubscriptions in many cases can also be traced
to the availability of bank finance for IPO investment.
Nevertheless, there is no denying the enormous interest retail and other
investors have shown in the primary market, perhaps even more so than
in the secondary one. This interest has been sustained despite the lack
of bounce in the secondary market and is not confined to the big issues;
even smaller issues have sailed through with large oversubscriptions.

If investors are gung-ho about IPO’s, there are several reasons for it.
Unlike earlier IPO booms, this one is being driven by a much better
quality of offering. Missing in action so far are the fly-by-night operators
of the 1990s who made public offers only to collect the money and
vanish. Next, most recent IPO’s have resulted in gains on listing for the
investor. The listing gains have probably initiated a kind of virtuous
cycle, tempting investors who have already made money to return to the
primary market.
There is also reason to believe that companies are pricing their issues
less aggressively this time, either due to general concerns about a
volatile market, or because of a deliberate effort to leave something on
the table for all investors. DQ Entertainment (International) Ltd and
NMDC Limited are lining up issues. Even mutual funds have got into the
act, and are tailoring their offerings to match current market fancies—
mid-cap funds, dividend yield funds, and what-have-you. If the
government wants to get some money into its kitty through
disinvestment programmers, this is the time to make a dash for it

RECOMMENDATIONS:
After making the project, I would like to say SEBI is playing very
important role in regulating the risk and financial aspects of the
investors. Also the DIP guideline is framed in such a manner, which can
be understood by any individual. Overall the process and the various
intermediaries, which are involved in IPOs or initial public offering, are
doing very important task.
I found the following points very important from the investor point of view
while doing this project:
• The IPOs should be consumer friendly: Any investor should be able

to analyze the IPO in its simplest form and should be able to
understand of whether to apply for it or not.
• IPOs should be graded which is already started. But I think such kind
of grading is not enough because it doesn’t give enough information
about the company; it only says what the level of grade that a
company deserves is.
• I would suggest shortening the time between application and

allocation or listing. We know SEBI and other intermediaries has done
great job in doing so in the past, but looking at the current scenario
we think it’s very important to do so. This would help investor in
investing the same money in other IPOs if he is not allotted shares in
that particular company.

BIBLIOGRAPHY:
BOOKS AND MAGAZINE:-
Indian Capital Markets

Financial management –Prasanna Chandra
Ncfm module: financial market’s
Initial public offerings- richard p. Kleeburg
Dalal street journal’s “stock market book
Ipo-conepts and experience-arindam banerjee
Ipo markets-prospectives and experience-vandana shajan
WEBSITES:-
www.business.mapsofindia.com/ipo-india/
www.moneycontrol.com
www.domain-b.com
www.sebi.gov.in
www.investopedia.com
www.chittorgarh.com/ipo/

REFERENCE
PADMASHREE DR. D.Y.PATIL UNIVERSITY DEPARTMENT OF
BUSINESS MANAGEMENT.
“A survey on people preferences about Investment & IPO”
This research is being done for academic purpose only. All the
information provided shall be kept confidential.
Name:
1. What is your age?
25 years and below 25-40 years

40-60 years Retired
2. Which is your preferred area of investment?
Share /equity Gold Real estate

Mutual funds Banks Other
3. Do you invest in Equity shares?
Yes No

4. For what term you invest your money?
Less than 1 year
1-5 year
For more than 5 year
5. Approximately how much is your portfolio worth?

Less than 2 lacs 2-5 lacs
5-10 lacs more than 10 lacs
6. How can you describe your equity investment experience

7. Limited Moderate Extensive
7. How much time do you give to Investment options & related

reading every day?
less than 10 minutes 10-30 minutes

30-60 minutes more than 60 minutes
8. Do you know about IPO?

Yes No
9. From where you got the knowledge of IPO and other investment
options?
Websites `
Broker
Study
Market Other

Final Ipo of Nitin

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Final Ipo of Nitin

Uploaded by

Copyright:

Available Formats

INTIAL PUBLIC OFFERING IN INDIA

“INITIAL PUBLIC OFFERING (IPO) IN INDIA”

Dissertation Submitted to the

MBA-COR-FIN-(Roll No: 0801093)

Ms. Mamta Dhankute

Department of Business Management

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 1

I hereby declare that the dissertation “INITIAL PUBLIC OFFERING

MBA-COR-FIN-(Roll No: 0801093)

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 2

This is to certify that the dissertation entitled “INITIAL PUBLIC

(Ms. Mamta Dhankute)

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 3

In the first place, I thank Ms. Mamta Dhankute, Lecturer, Department

I would be failing in my duty if I do not acknowledge with a deep

MBA-COR-FIN-(Roll No: 0801093)

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 4

1 Financial markets and IPO 16

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 5

16 Survey report 139

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 6

PARTICULARS PAGE NO.

Recent IPO Data With Break-Up 50

Difference In Fixed Price Process And Book 54

Underwriting Commission Table 60

Future Capital Subscription Detail 93

Reliance Power Subscription Detail 98

Bang Overseas Ltd Subscription Detail 104

J. Kumar Infraprojects Ltd. Subscription Detail 110

Cords Cable Industries Ltd Subscription Detail 116

K.N.R. Construction Ltd Subscription Detail 122

On mobile Global Ltd Subscription Detail 128

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 7

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 8

ASBA Application Supported by Blocked

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 9

When a business entity needs money the general course of action

Raising money through IPO is a very complex process. It requires

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 10

OBJECTIVES OF THE STUDY

To analyze and evaluate the complex IPO process

To study and incorporate the legal requirements of an IPO

SEBI Norms and Guidelines

Various aspects of IPO like cost, Involvement of intermediaries,

Pricing of an issue through the Book-Building Method

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 11

Secondary data would consist of widely available resources like

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 12

1. “INITIAL PUBLIC OFFERINGS” BY RICHARD P. KLEEBURG 3RD

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 13

2. “DALAL STREET JOURNAL’S “STOCK MARKET BOOK”

This book provides an insight into some of the aspects of secondary

3. “IPO: CONCEPTS AND EXPERIENCES - BY ARINDAM

One of the striking features that makes any capital market an

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 14

booming capital market that increases the overall market

4. “IPO MARKETS: PERSPECTIVES AND EXPERIENCES BY -

This book provides detailed analysis by focusing majorly on

5. “NCFM MODULE: FINANCIAL MARKET’S”

A VALUABLE INPUT HAS BEEN TAKEN FROM THE BOOKS

DR, D. Y.PATIL UNIVERSITY, DEPT. OF BUSINESS MANAGEMENT 15

FINANCIAL MARKETS AND THE IPO

The Financial Market is an amorphous set of players who come

As such, Financial Markets are functionally classified as having two