Professional Documents
Culture Documents
Prof. S.Visalakshmi,VIT
Offer for Sale Method:
Where the marketing of securities takes
place in bulk quantity to intermediaries such as
issue houses, stock brokers, and others, is a case
of offer for sale method.
Promoter places his shares with an investment
banker (bought out dealer or sponsor) who
offer it to the public at a later date
Hold on period is 70 days to more than a year
Prof. S.Visalakshmi,VIT
It consists of two stages: the first stage is
a direct sale by the issuing company to
the issue house and brokers at an agreed
price.
In the second stage, the intermediaries
resell the above securities to the ultimate
investors. The issue houses purchase the
securities at a negotiated price and resell
at a higher price. The difference in the
purchase and sale price is called turn or
spread.
Prof. S.Visalakshmi,VIT
Private Placement Method:
A method of marketing securities
where by the issuer makes the offer of a
sale to individuals and institutions
privately without the issue of a
prospectus.
Prof. S.Visalakshmi,VIT
Initial Public Offer Method:
The public made by a corporate entity
for the first time in its life is called I-P-O.
Securities are issued on the basis of
the orders placed.
Prof. S.Visalakshmi,VIT
E-IPO:
The issuing company would have the option
to issue securities to public either through the
on-line system of the stock-exchange or through
the existing banking channel.
For E-IPO the company should enter into
agreement with the stock-exchange(s) and the
stock-exchange would appoint SEBI registered
stockbrokers of the stock exchange to accept
applications.
Prof. S.Visalakshmi,VIT
The brokers and other intermediaries
are required to maintain records of
(a) orders received,
(b) applications received,
(c) details of allocation and allotment,
(d) details of margin collected and
refunded
(e) details of refund of application
money.
Prof. S.Visalakshmi,VIT
Right Issue Method:
Shares of an existing company are
offered to its existing shareholders.
Bonus Issue Method:
Accumulated reserves and surplus of
profits of a company are converted into
paid up capital, it takes the form of bonus
issue method.
Prof. S.Visalakshmi,VIT
Bought-Out Deals
Prof. S.Visalakshmi,VIT
Book Building Method:
The quantum and price of the securities to be issued will be
decided on the basis of the bids received from the prospective
shareholders by the lead merchant bankers is known as Book
Building Method.
Book building is an alternative to the fixed-price method of security
issue.The issue price is not fixed.
It is a process of offering securities at various bid prices from
investors.
The demand for the security is assessed and the price is discovered
based on bids made by investors.
Price discovery, therefore, depends on demand for the shares at
different prices.
The issuing company indicates the floor price but not the ceiling
price.
Prof. S.Visalakshmi,VIT
Steps in Book Building
1.The company appoints an issue manager (usually a
merchant banker) as book-runner.
2.The company issues a draft prospectus containing all
required disclosure.
3.The draft prospectus is filed with SEBI.
4.The issue manager (book runner) appoints syndicate
members and other registered intermediaries.
5. Price discovery begins through the bidding process.
6. At the close of bidding, book runner and company
decide the allocation and allotments
Prof. S.Visalakshmi,VIT
A Comparative Analysis
Fixed Price Issue Book-Building Issue
Prof. S.Visalakshmi,VIT
Other Key Decisive Criteria
Fixed Price Issue Book-Building Issue
Prof. S.Visalakshmi,VIT
Green Shoe Option (Over Allotment):
Prof. S.Visalakshmi,VIT