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grashish
March 12th, 2008, 05:54 PM
PART A
TABLE OF CONTENTS
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 OFFER” 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.
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,
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 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 tradeable 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 OFFER” or “IPO”
GROWTH OF IPO’s IN INDIA
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.
The first public offer of securities by a company after its inception is known as Initial Public Offer
(IPO). Going public (or participating in an “initial public offer” 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 offer 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.
Most people label a public offer 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.
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.
PRICING OF ISSUE
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.
During the booming period stock market issues got oversubscribed beyond imagination. Number of
companies came in with stiff premium and faced investor resistance. This resulted in cautious
approach by the merchant bankers and underwriters for taking up underwriting of the future issues.
Thus pricing is most important and difficult aspects of IPO. However in the present scenario most of
the issues are priced by the book building method. Accurate pricing is essential for the success of
IPO.
BOOK BULIDING
THE LATEST AVTAAR OF PRICE DISOVERY
The basic motto of Book Building is that “the market knows the best”. Ever since SEBI allowed
companies with no profitability record to come up with IPO via Book Building route, there has been
a good rush of such issues.
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.
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, brouchers,
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.
The process of IPO is highly complex and its success is extremely important for the company. In
this process it is important that all the intermediaries should work cohesively and within a
framework of law. Any serious error by any intermediary can affect the IPO.
MERCHANT8 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.
Functions-Merchant banker can work as lead manager co lead manager investment banker
underwriter etc.
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.
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.
Informational Asymmetry-in general merchant bankers know the market better than the issuing
company. They would exploit the superior knowledge to under price issues. This makes their job
easier and helps them earn the goodwill of investors.
8 BROKERS
All the recognized stock exchange members are called brokers and thus any member of a
recognized stock exchange can become a broker to the issue.
The brokers can work as broker and underwriter or both. In India usually a broker not only does his
normal broking business buying and selling securities for brokerage but also works as an
underwriter. They can give underwriting commitment in accordance with their net worth. 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.
UNDERWRITERS8
The underwriter is the principle player in the IPO providing the firm with-
Reputation-as the underwriter is legally liable and because he has on going dealing with the
customers to whom he sells shares. The underwriter puts his reputation on the line.
Finding investors-the underwriter first puts together a syndicate of other underwriters to distribute
the shares. The syndicate finds investors willing to put their money into the company. This has
serious implications. Will the investors be institutional or private? Is the company widely held or are
the shares concentrated with just a few investors?
Experience-the underwriter knows the detail of the process better than any other participant since
issuing shares is one of their primary business functions. Underwriters are the ones who provide
proper guidance.
After market support-the underwriter protects investors and thus makes the offer more attractive.
It is important for the firm to have a clear understanding with the underwriter exactly how much
support he plans to provide if the IPO is not fully subscribed and accordingly his underwriting
commission is fixed.
Future services-a good relationship with an underwriter can save time and money in future dealings.
Pre offer assistance-the underwriter will conduct road shows with the company’s management
distribute the prospectus and marketing of the underwriters directly generates talk to potential
investors about appropriate pricing. Some part of the value that the potential shareholders attach to
shares.
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 lakhs 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.
Nature of Issue On amount Devolving on Underwriters On amounts subscribed by the public
Equity shares preference shares and Debentures 2.5% 2.5%
Issue amount upto Rs5 lakhs 2.5% 2.5%
Issue amount exceeding % 2.0% 1.0%
The fees for underwriter and broker are decided by the company within the maximum possible limit
as fixed by the SEBI.
DEPOSITORIES8
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.8
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.
ELIGIBILITY NORMS
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¬ crore 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 Authorised 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.
• 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.
• Dematerialisation 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
Public Offer of Small Unlisted Companies (Post-Issue Paid-Up Capital upto 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.
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.
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.
Eligibility norms for public issues/offers for sale by companies in the IT Sector
Eligibility norms were8 modified to provide that a company in the IT Sector going for IPO/offer for
sale shall have track record of distributable profits as per Section 205 of the Companies Act in three
out of five years in the IT business/from out of IT activities.
It can also access the market through the alternative route of8 appraisal and financing by a bank or
financial institution.
The same8 conditions would apply also to a listed company which has changed its name to reflect
activities in IT sector.
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. Normally in good times many companies are crowding at the same
time .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.
A question of Timing
Timing the issue is critical as it determines the success or failure of an issue to a great extent.
During 1995-96, Primary Market boom, there was a period during which there were two to three
issues in a day. This is a dangerous situation.
The ideal time for marketing an issue is a boom in the Secondary Market, peaceful socio-political-
economic environment and at least two days gap between two issues.
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 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 advertisements 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.
PRINTING STATIONERY-PROSPECTUS
The company has to print approved prospectus and provide enough copies to all intermediaries. If
any investor asks for a copy of prospectus it must be provided to him without any fees. Sufficient
quantities should be maintained at the registered office of the company and with the Lead
Managers.
COMPANY BACKGROUND
Biocon is India's premier biotechnology company, established in 1978. Headquartered in Bangalore,
Biocon has evolved from an enzyme company to a fully integrated biopharmaceutical enterprise,
focused on healthcare. Biocon's success has been characterized by an enduring set of corporate
values based on innovation, integrity, strong leadership and social responsibility. As India's first and
leading biotechnology company Biocon extends its support to numerous community outreach and
corporate citizenship initiatives with special concentration in the areas of healthcare, education and
environment. Biocon aims to continuously create growth in different areas of the company and will
soon be the first company, globally to manufacture human insulin using a Pichia expression system.
In addition Biocon is positioned to be India's largest producer of human insulin and India's first
company to set up commercial production of monoclonal antibodies.
Size of issue-
The issue size includes 10,000,000 equity shares of Rs.5/-each at a price of Rs [270-315] in cash
aggregating to Rs [2700mn- 3150] mn. The issue constitutes 10% of the fully diluted post issue
paid up capital. The ceiling of allocation of equity share capital to various bidders is as follows:
Qualified Institutional Bidders 60%
Non Institutional Bidders 15%
Retail Individual Bidders 25%
Issue Price
The offer is being made through the 100% book building process. The price band was Rs [270-315].
The offer price was fixed at the higher end of the price band at Rs315 per share of Rs 5 each.
Competitive strengths-
Biocon Ltd is the largest biotechnology enterprise in India with presence in biopharmaceuticals,
enzymes, Custom research and clinical research activities. The company believes in non infringing
processes for the manufacture of products targeted at the therapeutic categories of cardiovascular,
immunosuppressant, anti-diabetics and oncology.
Allotment mode
Compulsory demat mode
Valuation
Biocon Ltd is the largest biotechnology enterprise in India with presence in biopharmaceuticals,
enzymes, Custom research and clinical research activities. Biocon is the largest Indian
Biotechnology company in terms of fiscal 2003 revenue according to India’s Association of
Biotechnology Led Enterprises. It is the first Indian Biotechnology company to come up with a public
issue.
The Total Consolidated Operating Income and Net Profit were Rs.2819.9 million and Rs422.3 million
respectively in fiscal 2003. In the first 9 months of fiscal year 2004 our Total Consolidated
Operating Income and Net Profit Rs.3977.4 million and Rs.949.4 million respectively
The scrip, currently available at the P/E of (23.1 – 26.9) x FY04P earnings of Rs11.7. The P/E is
relatively comparable to peer group P/E average of 25.1. Although Biocon is expensive at the
current price, it is a good buy taking into consideration its promising future prospects.
Scrip Details.
ISSUE ANALYSIS
Performance Eva
luation
Day One- 11 March 2004, Biocon Ltd. IPO gets oversubscribed
The long awaited issue of Biocon opened on 11 March. The issue got oversubscribed within five
minutes of the opening.This is the first issue by a biotechnology company; the company plans to list
on the BSE and NSE. Biocon had a fixed price band between Rs 270 and Rs 315 per equity share of
a face value of Rs 5, for its IPO with most of the bids being submitted at Rs 315, the upper end of
the price band.
ADDITIONAL INFORMATION
Shareholding pattern
Financials
(Rs.Crores) FY01 FY02 FY03 9MFYO4
Revenue 122.31 160.62 254.24 371.22
Other Income 0.21 3.33 0.76 0.66
Total Expenditure 91.1 124.91 189.99 253.77
PBIDT 32.49 40.02 65.53 118.68
Interest Expenditure 4.56 4.69 4.90 1.21
Depreciation 6.2 7.59 11.71 9.81
PBT 21.73 27.74 48.92 107.66
Tax- Current 3.56 4.04 8.90 20.17
Tax- Deferred 3.65 2.21 4.71 1.38
PAT 14.52 21.49 35.31 86.11
Share Capital 1.50 1.82 1.84 45.00
EPS (Rs.) at FV Rs. 5.0 48.40 59.04 95.95 9.57
EBIDTA Margin 26% 24% 26% 32%
Bio pharmaceuticals contribute 81% of total turnover, enzymes 12% and rest is contributed by
customized research. For the first 9 months of FY04, exports of biopharmaceuticals and enzymes
accounted for56% of the total turnover and grew sharply toRs.208.36 compared to Rs.110.08crs in
the previous full year, largely driven by exports to US and Europe. Better realization from export
resulted in operating margin growth of 7bps in 9MFY04 over
FY03. Robust product pipeline ensures sustenance of company’s high growth rate. It has
plannedRs.400crs expansion over next three years.
The current price of a Biocon Share is Rs503. The stock has risen by 188%. This shows that Biocon
is a good buy and good profitable company which is worth investing.
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 offer 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. 23,904 Crore 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 realise.
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 offer. 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.
Companies have been quick to take advantage of the investor interest in IPO’s, and banks, broking
houses, retail outfits, media houses and government companies such as NTPC and Power Finance
Corporation are lining up issues
Even mutual funds have got into the act, and are tailoring their offer 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 programmes, this is the time to make a dash for it.
BIBLIOGRAPHY
Books and Magazine-
Indian Capital Markets8
8 Financial management –Prasanna Chandra
Business World8
The Chartered8 Accountant-
Journal of Institute of Chartered Accountants in India
Study modules of ICAI
Prof.P.Jhabak
May 11th, 2008, 08:25 PM
HI,