IPOS
CHAPTER I
INTRODUCTION
INTRODUCTION
Initial Public Offerings are very important, mainly because of India being a developing country and lot of growth in various sectors which leads a country to ultimate success. And when we talk about country’s growth which is dependent on the kind of work and how much importance to which sector is given. And when we say or talk about industries growth, which leads the economy of country, has to be balanced and given proper finance so as to reach the levels to fulfill the needs of the society. And industries, which have massive outflow of work and a big portfolio then its very difficult for any company to work with, limited finance and this is where IPO plays an important role.
This report talks about how IPO helps in raising fund for the companies going public, what are its pros and cons, and also it gives us detailed idea why companies go public. It gives us idea of how IPO is driven in the market and what are various factors taken into consideration before going for an IPO. And it also tells us how we can more or less judge a good IPO. It also gives us some idea about what are the expenses that a company undertakes during an IPO.
IPO has been one of the most important generators of funds for the small companies making them big and given a new vision in past and it is still continuing its work and also for many coming years.
OBJECTIVES OF THE STUDY
▪ To understand various dimensions and problems in IPO process and to suggest recommendations.
▪ To analyze the various IPOs and recommend others to invest in good initial public offerings after thorough research.
▪ To understand post IPO performance.
▪ To study the upcoming IPOs and suggest investors in investing these IPOs.
LIMITATIONS OF THE STUDY
➢ The study is limited to Initial Public Offerings in India.
➢ The study was carried out for a period of 45 days and due to paucity of time an in-depth study was not possible.
➢ The IPO market is a dynamic one. Therefore data related to last few months was only considered and interpreted.
➢ Secondary information may not be authentic.
METHODOLGY & PROCEDURE
➢ Data Collection
▪ The data collected was mainly secondary in nature and the sources were website and textbooks. Interacting with guide and other personalities also collected some primary data.
➢ Data Analysis
▪ The collected data was grouped under relevant headings. The various topics were then so arranged those give logical studies of the topics.
➢ Conclusions
▪ The suggestions and conclusions were made mainly based on the observations from the data collected.
SCOPE OF THE STUDY
The scope of the study is identified after and during the study is conducted. The study covers only the IPOs in India for the last two years. The study attempts to study the IPOs that have come up in the last two years and the IPOs that are expected to come up in the next one year.
CHAPTER II
REVIEW OF LITERATURE
A company can raise capital through issue of shares or debentures. The various types of issues are:
Public Issue, Rights Issue, Bonus Issue, Private Placement and Bought Out Deal
There can be two kinds of public issues, namely:
• Initial Public Offer (IPO)
• Further Public Offer (FPO)
Classification of Issues
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IPO
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. 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 issuer’s securities. The sale of securities can be through book building or normal public issue.
FPO
Further Public Offers are issued by companies or corporate bodies whose shares are already being traded in the capital market and they are issuing fresh shares either to fund the expansion of their existing business or to invest into other business activities.
Reasons for Going Public
▪ Raising funds to finance capital expenditure programs like expansion, diversification, modernization, etc.
▪ Financing of increased working capital requirements
▪ Financing acquisitions like a manufacturing unit, brand acquisitions, tender offers for shares of another firm, etc.
▪ Debt Refinancing
▪ Exit Route for Existing Investors
Advantages of Going Public
▪ Facilitates future funding by means of subsequent public offerings
▪ Enables valuation of company
▪ Provides liquidity to existing shares
▪ Increases the visibility and reputation of the company
▪ Commands better pricing than placement with few investors
▪ Enables the company to offer its shares as purchase consideration or as an exchange for the shares of another company
Disadvantages of Going Public
▪ Dilution of Stake makes co vulnerable to future takeovers
▪ Involves substantial Expenses
▪ Need to make continuous disclosures
▪ Increased regulatory monitoring
▪ Listing fees and Documentations
▪ Cost of maintaining Investor relations
▪ Takes substantial amount of management time and efforts
EVOLUTION AND GROWTH OF INDIAN PRIMARY MARKET
Early Liberalization Phase: 1992-1995 (Fixed Pricing)
The initiation of the process of reform in India also would not have been possible without changes in the regulatory framework. The New Economic policy (1991) led to a major change in the regulatory framework of the capital market in India. The Capital Issues (Control) Act 1947 was repealed and the Office of the Controller of Capital Issues (CCI) was abolished. The Securities and Exchange Board of India (SEBI), established in 1988 and armed with statutory powers in 1992, came to be established as the regulatory body with the necessary authority and powers to regulate and reform the capital market. SEBI came to be recognized as a regulatory body for the capital market after the abolition of the CCI. The control on pricing of capital issue has been abolished and easy access is provided to the capital market. Initial Public Issue caught the attention of general public only after the success of Reliance, when millions of small investors made huge returns which were unheard of till then. Dhirubhai Ambani was the first promoter who raised huge amounts through the public issue route to finance large facilities.
The issue process was smoothened, procedures were simplified and free pricing was allowed, although with certain restrictions, The Indian market had the concept of par value of equity shares, and anything above par was considered premium. The only companies that were allowed to come with premium issues were those, which had a three year profit-track record for the preceding five years. New companies without this record could float premium issues if their promoting companies had the same track record and they had to hold 50% of the post issue capital. Any new company floated by first generation entrepreneurs could only issue equity at par. There was no restriction about prices in a premium issue.
The offer was always at a fixed price, whether premium or par. The companies had to appoint intermediaries like merchant bankers, registrars, bankers etc. Merchant bankers had the responsibility of fixing the prices, in consultation with the company, carrying out with due diligence, preparing the prospectus (offer documents) etc. The prospectus had to be submitted to SEBI for getting scrutiny.
The trend continued in the early nineties as many large projects were launched after the economy was liberalised. Many of these companies came out with public issues and the retail participation increased dramatically. But many of the companies which raised money during this period just disappeared without a trace.
Late Liberalisation Period: 1996-2005 (Book Building)
The late nineties and the first few years of the current decade did not see much activity in the primary market even though we saw a huge bull run led by technology stocks at the turn of the decade. The bad experiences of retail investors kept them away from the market and made it difficult for companies to launch successful issues. The corporate sector was recovering from the damage caused by large capacity expansions and new projects set up in the nineties.
The dormant primary issues market came alive after 2003 mostly because of the divestment programme of the government. The issue of Maruti Udyog, through which the government sold part of its stake in the company, rekindled retail investor interest in the primary market. The issue was made at a very reasonable price and investors made very good returns immediately.
The year 2004 saw the primary market activity at its historic peak as some large private companies also came out with issues. Further divestment by the government; including the largest ever issue by an Indian company from ONGC, attracted more retail investors into the market. The IPO market continues to buzz in the current year as well. Taking advantage of the strength in the secondary market, many high profle companies are lining up to raise money from the market. The year started with the issue from Jet Airways which attracted a lot of interest from investors. As a result of tougher regulations, the quality of the issues has gone up substantially.
2006 onwards scenario:
India's IPO market emerged as the eighth largest with $7.23 billion (Rs 30,000 crore) in net proceeds through 78 public issues, global research and consultancy firm Ernst & Young said in its Global IPO report. Across the world, the companies raised $246 billion, up from $167 billion in 2005, through a total of 1,729 IPOs, led by Chinese companies at the top with net proceeds of $56.6 billion. However, the biggest number of IPOs came from the United States with 187 offerings, followed by Japan with 185 and China with 175 IPOs. According to the study, India's increasing number of larger deals has been driven by the growth of Indian corporations and their need for additional capital for potential acquisitions. In 2007 Indian IPOs continue to surge in numbers. Continued strength is expected in the real estate and energy sector. "The rapid growth in emerging market economies has resulted in a migration of capital from the developed economies into the emerging markets," E&Y said.
The localisation trend in India is evidenced by several billion-dollar IPOs hosted by Indian exchanges. In 2006, India's largest IPO, Reliance Petroleum raised $1.8 billion, followed by the oil production and exploration company, Cairn Energy, which raised $1.3 billion with both companies listing on domestic exchanges.
However, some Indian companies are also listing abroad, especially London, Singapore and Luxembourg, primarily for higher valuations and visibility, the report noted.
REGULATORY FRAMEWORK FOR IPOS
Eligibility Conditions for Companies Issuing Securities
The companies issuing securities offered through an offer document shall satisfy the following at the time of filing the draft offer document with SEBI and also at the time of filing the final offer document with the Registrar of Companies/ Designated Stock Exchange:
▪ Filing of offer document
No issuer company shall make any public issue of securities, unless a draft
Prospectus has been filed with the Board through a Merchant Banker, at least 30 days prior to the filing of the Prospectus with the Registrar of Companies (ROC):
Provided that if the Board specifies changes or issues observations on the draft Prospectus (without being under any obligation to do so), the issuer company or the Lead Manager to the Issue shall carry out such changes in the draft Prospectus or comply with the observation issued by the Board before filing the Prospectus with ROC.
▪ Companies barred not to issue security
No company shall make an issue of securities if the company has been prohibited from accessing the capital market under any order or direction passed by the Board.
▪ Application for listing
No company shall make any public issue of securities unless it has made an application for listing of those securities in the stock exchange
▪ Issue of securities in dematerialized form
No company shall make public or rights issue or an offer for sale of securities, unless:
a. The company enters into an agreement with a depository for dematerialization of securities already issued or proposed to be issued to the public or existing shareholders; and
b. The company gives an option to subscribers/ shareholders/ investors to receive the security certificates or hold securities in dematerialized form with a depository.
▪ IPO Grading
No unlisted company shall make an IPO of equity shares unless the following conditions are satisfied as on the date of filing of Prospectus with ROC:
a. The unlisted company has obtained grading for the IPO from at least one credit rating agency
b. Disclosures of all the grades obtained, along with the rationale/ description furnished by the credit rating agency(ies) for each of the grades obtained.
Eligibility Norms for IPO
An unlisted company may make an initial public offering (IPO) of equity shares only if: -
• The company has net tangible assets of at least Rs. 3 crores in each of the preceding 3 full years (of 12 months each), of which not more than 50% is held in monetary assets.
• The company has a track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for at least three (3) out of immediately preceding five (5) years.
• The company has a net worth of at least Rs. 1 crore in each of the preceding 3 full years (of 12 months each).
• In case the company has changed its name within the last one year, atleast 50% of the revenue for the preceding 1 full year is earned by the company from the activity suggested by the new name.
• The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through offer document + firm allotment + promoters’ contribution through the offer document), does not exceed five (5) times its pre-issue networth as per the audited balance sheet of the last financial year.
PROCEDURE FOR IPOS
Fixed Pricing versus True Pricing (Book- Building)
The traditional method of doing IPOs is the fixed price offering. Here, the issuer and the merchant banker agree on an “issue price”. Then the investor has a choice of filling in an application form at this price and subscribing to the issue. Extensive research has revealed that the fixed price offering is a poor way of doing IPOs. Fixed price offerings, all over the world, suffer from `IPO underpricing'. In India, on average, the fixed-price seems to be around 50% below the price at first listing; i.e. the issuer obtains 50% lower issue proceeds as compared to what might have been the case. This average masks a steady stream of dubious IPOs who get an issue price which is much higher than the price at first listing. Hence fixed price offerings are weak in two directions:
▪ Dubious issues get overpriced and
▪ Good issues get under priced.
BOOK-BUILDING
A mechanism where, during period for which the IPO is open, bids are collected from investors at various prices which are above or equal to the floor price (the minimum price). The final price of the share is determined after the bid closing date, based on certain evaluation criteria.
The SEBI (Disclosure and Investor Protection) Guidelines, 2000, define the term `book-building' in a rather complex language as "a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built-up and the price for such securities is assessed for determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document.''
Book building process is a common practice used in most developed countries for marketing a public offer of equity shares of a company. However, Book building acts as scientific as well as flexible price discovery method through which a consensus price of IPO’s may be determined by the issuer company along with the Book Running Lead Manager (i.e. merchant banker) on the basis of feedback received from individual investors as well as most informed investors (who are institutional and corporate investors like, UTI, LICI, GICI, FIIs, and SFCI etc). The method helps to make a correct evaluation of a company’s potential and the price of its shares.
Book-Building Process
In simple terms, book-building is a mechanism by which the issue price is discovered on the basis of bids received from syndicate members/brokers and not by the issuers/merchant bankers.
An Issuer Company can issue capital through book building in following two ways:
75% Book Building process
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Under this type of public offer, the issue of securities has to be categorized into:
▪ Placement portion category
▪ Net offer to the public
The option of 75% Book Building is available to all body corporate that are otherwise eligible to make an issue of capital to the public. The securities issued through the book building process are indicated as 'placement portion category' and securities available to public are identified as 'net offer to public'. In this option, underwriting is mandatory to the extent of the net offer to the public. The issue price for the placement portion and offers to public are required to be same
100% of the net offer to the public through Book Building process - In the 100% of the net offer to the public, entire issue is made through Book Building process. However, there can be a reservation or firm allotment to a maximum of 5% of the issue size for the permanent employees, shareholders of the company or group companies, persons who, on the date of filing of the draft offer document with the Board, have business association, as depositors, bondholders and subscribers to services, with the issuer making an initial public offering.
The number of bidding centres, in case of 75% book building process should not be less than the number of mandatory collection centres specified by SEBI. In case of 100% book building process, the bidding centres should be at all the places where the recognised stock exchanges are situated.
Book Building Process in India
(1) The steps which are usually followed in the book building process can be summarized below:
The issuer company proposing an IPO appoints a lead merchant banker as a BRLM.
(2) Initially, the issuer company consults with the BRLM in drawing up a draft prospectus (i.e. offer document) which does not mention the price of the issues, but includes other details about the size of the issue, past history of the company, and a price band. The securities available to the public are separately identified as “net offer to the public”.
(3) The draft prospectus is filed with SEBI which gives it a legal standing.
(4) A definite period is fixed as the bid period and BRLM conducts awareness campaigns like advertisement, road shows etc.
(5) The BRLM appoints a syndicate member, a SEBI registered intermediary to underwrite the issues to the extent of “net offer to the public”.
(6) The BRLM is entitled to remuneration for conducting the Book Building process.
(7) The copy of the draft prospectus may be circulated by the BRLM to the institutional investors as well as to the syndicate members.
(8) The syndicate members create demand and ask each investor for the number of shares and the offer price.
(9) The BRLM receives the feedback about the investor’s bids through syndicate members.
(10) The prospective investors may revise their bids at any time during the bid period.
(11) The BRLM on receipts of the feedback from the syndicate members about the bid price and the quantity of shares applied has to build up an order book showing the demand for the shares of the company at various prices. The syndicate members must also maintain a record book for orders received from institutional investors for subscribing to the issue out of the placement portion.
(12) On receipts of the above information, the BRLM and the issuer company determine the issue price. This is known as the market-clearing price.
(13) The BRLM then closes the book in consultation with the issuer company and determine the issue size of (a) placement portion and (b) public offer portion.
(14) Once the final price is determined, the allocation of securities should be made by the BRLM based on prior commitment, investor’s quality, price aggression, earliness of bids etc. The bid of an institutional bidder, even if he has paid full amount may be rejected without being assigned any reason as the Book Building portion of institutional investors is left entirely at the discretion of the issuer company and the BRLM.
(15) The Final prospectus is filed with the registrar of companies within 2 days of determination of issue price and receipts of acknowledgement card from SEBI.
(16) Two different accounts for collection of application money, one for the private placement portion and the other for the public subscription should be opened by the issuer company.
(17) The placement portion is closed a day before the opening of the public issue through fixed price method. The BRLM is required to have the application forms along with the application money from the institutional buyers and the underwriters to the private placement portion.
(18) The allotment for the private placement portion shall be made on the 2nd day from the closure of the issue and the private placement portion is ready to be listed.
(19) The allotment and listing of issues under the public portion (i.e. fixed price portion) must be as per the existing statutory requirements.
(20) Finally, the SEBI has the right to inspect such records and books which are maintained by the BRLM and other intermediaries involved in the Book Building process
Pricing
Before establishment of SEBI in 1992, the quality of disclosures in the offer documents was very poor.
The main drawback of free pricing was the process of pricing of issues. The issue price was determined around 60-70 days before the opening of the issue and the issuer had no clear idea about the market perception of the price determined.
In Book Building the price is determined on the basis of demand received or at price above or equal to the floor price.
The Allotment Process through Book-building:
Step1-The Company will 'discover' its price
Earlier, the company determined a fixed price for the stock issue. The issue was marketed to the general public through advertisements and a media campaign.
Today, companies prefer a book building process. Book building is the process of price discovery. That means there is no fixed price for the share. Instead, the company issuing the shares comes up with a price band. The lowest price is referred to as the floor and the highest, the cap. Bids are then invited for the shares. Each investor states how many shares s/he wants and what s/he is willing to pay for those shares (depending on the price band). The actual price is then discovered based on these bids.
Step2-Players of the game
Three classes of investors can bid for the shares:
• Qualified Institutional Buyers: QIBs include mutual funds and Foreign Institutional Investors. At least 50% of the shares are reserved for this category.
• Retail investors: Anyone who bids for shares under Rs 50,000 is a retail investor. At least 25% is reserved for this category.
• The balance bids are offered to high networth individuals and employees of the company.
Individuals who apply for the IPO put in their bids.
The process is transparent. One can check on the issue subscription at the BSE and NSE Web sites.
After evaluating the bid prices, the company will accept the lowest price that will allow it to dispose the entire block of shares. That is called the cut-off price.
The process can be illustrated with an example:
Number of shares issued by the company = 100.
Price band = Rs 30 - Rs 40.
If individuals have bid for prices as follows:
|Bid |Number of shares |Price per share |
|1 |20 |Rs 40 |
|2 |10 |Rs 38 |
|3 |20 |Rs 37 |
|4 |30 |Rs 36 |
|5 |20 |Rs 35 |
|6 |20 |Rs 33 |
|7 |20 |Rs 30 |
The shares will be sold at the Bid 5 price of 20 shares for Rs 35.?
• Because Bidders 1 to 5 are willing to pay at least Rs 35 per share.
• The total bids from Bidders 1 to 5 ensure all 100 shares will be sold (20 + 10 + 20 + 30 + 20).
The cut-off price is therefore Bid 5's price = Rs 35.
Bidders 1 to 5 get allotments at that price. Bidders 6 and 7 don't get an allotment because their bids are below the cut-off price.
The bids are first allotted to the different categories and the over-subscription (more shares applied for than the shares available) in each category is determined.
Retail investors and high net worth individuals get allotments on a proportional basis.
If a retail investor has applied for 200 shares in the issue, and the issue is over-subscribed five times in the retail category, he qualify to get 40 shares (200 shares/5).
Sometimes, the over-subscription is huge or the issue is priced so high that the bidder can't really bid for too many shares before the Rs 50,000 limit is reached.
In such cases, allotments are made on the basis of a lottery.
If a retail investor has applied for 5 shares in an issue, and the retail category has been over-subscribed 10 times, the investor is entitled to half a share.
Since that isn't possible, it may then be decided that every 1 in 2 retail investors will get allotment. The investors are then selected by lottery and the issue allotted on a proportional basis among.
ILLUSTRATION EXPLAINING THE PROCEDURE OF ALLOTMENT
1. Total shares on offer@ Rs. 600 per share: 10 crore shares
2. Shares on offer for retail category: 2.5 crore shares
3. The total issue is over subscribed 4 times whereas the retail category is over subscribed 8.25 times
4. Issuer decides to fix the minimum application / bid size as 9 shares (falling within the range of Rs. 5000- 7000). Application can be made for a minimum of 9 shares and in multiples thereof.
Assume three retail investors A, B & C. A has applied for 81 shares. B has applied for 72 shares and C has applied for 45 shares. As per allotment procedure, the allotment to retail individual investors would be on proportionate basis i.e., at 1/8.25th of the total number of shares applied for. The actual entitlement shall be as follows:
|Sr. No. |Name of Investor |Total Number of shares applied |Total number of shares eligible to be allotted (No. of shares applied |
| | |for |for / 8.25) |
|1 |A |81 |81/8.25 = 9.82 shares rounded off to 10 shares |
|2 |B |72 |72/8.25 = 8.73 shares rounded off to 9 shares (i.e. minimum application |
| | | |size). |
|3 |C |45 shares |45/8.25=5.45 shares. |
| | | |Application liable to be rejected. (as the entitlement is less than the |
| | | |minimum application size). However, the successful applicants out of the|
| | | |total applicants shall be determined by drawal of lots. |
Reverse Book Building
Reverse book-building is a mechanism by which companies listed on a stock exchange can delist their shares. The reasons for delisting may be several and sometimes intentional.
The reverse book building is an efficient price discovery mechanism of de-listing of securities, which is provided for capturing the sell orders on online basis from the shareholders through respective BRLM. In the reverse book-building scenario, the acquirer or promoter of a company offers to get back shares from the shareholders. It is a mechanism where, during the period for which the reverse book building is open, offers are collected at various prices, which are above or equal to the floor price from the share holders through trading members appointed by the acquirer or promoter of a company. The reverse book building price (i.e. final price/ exist price) is determined by BRLM in consultation with the acquirer or promoter of the company after the offer closing date in accordance with the SEBI (De-listing of Securities) Guidelines, 2003. which desires to get de-listed, in accordance to book building process. The offer price has a floor price, which is fixed for de-listing of securities below which no offer can be accepted. The floor price is the average of 26 weeks traded price quoted on the stock exchange where the shares of the company are most frequently traded preceding 26 weeks from the date of public announcement is made. There is no ceiling on the maximum price.
ROLE OF VARIOUS INTERMEDIARIES IN IPO
Intermediary’s help corporations design securities that will be attractive to investors, buy these securities from the corporations, and then resell them to savers in the primary markets.
Merchant Bankers/ Lead Manager
Merchant bankers play an important role in issue management process. Lead managers have to ensure correctness of the information furnished in the offer document. They have to ensure compliance with SEBI rules and regulations as also Guidelines for Disclosures and Investor Protection. To this effect, they are required to submit to SEBI a due diligence certificate confirming that the disclosures made in the draft prospectus or letter of offer are true, fair and adequate to enable the prospective investors to make a well informed investment decision. The role of merchant bankers in performing their due diligence functions has become even more important with the strengthening of disclosure requirements and with SEBI giving up the vetting of prospectuses. Their functions are:
▪ To act as intermediaries between the company seeking to raise money and the investors. They must possess a valid registration from SEBI enabling them to do this job.
▪ They are responsible for complying with the formalities of an issue, like drawing up the prospectus and marketing the issue.
▪ If it is a book building process, the lead manager is also in charge of it. In such a case, they are also called Book Running Lead Managers.
▪ Post issue activities, like intimation of allotments and refunds, are their responsibility as well.
Underwriters
Underwriters are required to register with SEBI in terms of the SEBI (Underwriters) Rules and Regulations, 1993. In addition to underwriters registered with SEBI in terms of these regulations, all registered merchant bankers in categories I, II and III and stockbrokers and mutual funds registered with SEBI can function as underwriters. Part III gives further details of registration of underwriters. In 1996-97, the SEBI (Underwriters) Regulations, 1993 were amended mainly pertaining to some procedural matters.
Bankers to an Issue
Scheduled banks acting as bankers to an issue are required to be registered with SEBI in terms of the SEBI (Bankers to the Issue) Rules and Regulations, 1994. These regulations lay down eligibility criteria for bankers to an issue and require registrants to meet periodic reporting requirements. Part III gives further details of registration of bankers to an issue.
Portfolio managers
Portfolio managers are required to register with SEBI in terms of the SEBI (Portfolio Managers) Rules and Regulations, 1993. The registered portfolio managers exclusively carry on portfolio management activities. In addition all merchant bankers in categories I and II can act as portfolio managers with prior permission from SEBI. Part III gives further details of the registration of portfolio managers.
Registrars to an Issue and Share Transfer Agents
Registrars to an issue (RTI) and share transfer agents (STA) are registered with SEBI in terms of the SEBI (Registrar to the Issue and Share Transfer Agent) Rules and Regulations, 1993. Under these regulations, registration commenced in 1993-94 and is granted under two categories: category I - to act as both registrar to the issue and share transfer agent and category II - to act as either registrar to an issue or share transfer agent. With the setting up of the depository and the expansion of the network of depositories, the traditional work of registrars is likely to undergo a change.
IPO Grading
IPO grading (initial public offering grading) is a service aimed at facilitating the assessment of equity issues offered to public. The grade assigned to any individual issue represents a relative assessment of the ‘fundamentals’ of that issue in relation to the other listed equity securities in India. IPO grading is positioned as a service that provides ‘an independent assessment of fundamentals’ to aid comparative assessment that would prove useful as an information and investment tool for investors. Moreover, such a service would 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.
IPO grade assigned to any issue represents a relative assessment of the ‘fundamentals’ of that issue in relation to the universe of other listed equity securities in India. This grading can be used by the investor as tool to make investment decision. The IPO grading will help the investor better appreciate the meaning of the disclosures in the issue documents to the extent that they affect the issue’s fundamentals. Thus, IPO grading is an additional investor information and investment guidance tool.
Credit Rating agencies (CRAs) like ICRA, CRISIL, CARE and Fitch Ratings who are registered with SEBI will carry out IPO grading. SEBI does not play any role in the assessment made by the grading agency. The grading is intended to be an independent and unbiased opinion of that agency. IPO grading is not mandatory but is optional and the assigned grade would be a one time assessment done at the time of the IPO and meant to aid investors who are interested in investing in the IPO. The grade will not have any ongoing validity.
SEBI GUIDELINES ON IPO GRADING
➢ No unlisted company shall make an IPO of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, unless the following conditions are satisfied as on the date of filing of Prospectus (in case of fixed price issue) or Red Herring Prospectus (in case of book built issue) with ROC:
• The unlisted company has obtained grading for the IPO from at least one credit rating agency;
• Disclosures of all the grades obtained, along with the rationale/description furnished by the credit rating agency(ies) for each of the grades obtained, have been made in the Prospectus (in case of fixed price issue) or Red Herring Prospectus (in case of book built issue); and
• The expenses incurred for grading IPO have been borne by the unlisted company obtaining grading for IPO.
Most of the market analysts have welcomed this move of SEBI as it will help the investors in a volatile market to know whether the merchant banker has carried the exercise in determining the price of an issue in a proper manner or not. It will also help the investors in knowing whether the price of the issue is justified or not. They even said that management of a good company will never get afraid of getting graded of their IPOs if they are good.
FEATURES OF IPO GRADING
IPO grading covers both internal and external aspects of a company seeking to make an IPO in general. The internal factors include competence and effectiveness of the management, profile of promoters, marketing strategies, size and growth of revenues, competitive edge, technology, operating efficiency, liquidity and financial flexibility, asset quality, accounting quality, profitability and hedging of risks. Among external factors, the key one is the industry and economic/business environment for the issuer. Here, it is important to note that internationally, the global rating agencies such as Standard & Poors and Moodys do not perform grading of IPOs at all. While Standard & Poors is the majority stakeholder in CRISIL Ltd, Moodys is the single biggest stakeholder in ICRA Ltd. Similarly, the third global player Fitch IBCA (which acquired another rating agency Dun & Bradstreet in 2000) also does not grade IPOs as yet. The IPO grading is indicated on a five point scale and a higher score indicating stronger fundamentals.
An IPO grading Scale
|IPO grade |Assessment |
|5/5 |Strong fundamentals |
|4/5 |Above average fundamentals |
|3/5 |Average fundamentals |
|2/5 |Below average fundamentals |
|1/5 |Poor fundamentals |
Data-flow diagram showing the entire IPO-grading procedure
[pic]
This process will ideally require 2-3 weeks for completion, so it may be a good idea for companies to initiate the grading process about 6-8 weeks before the targeted IPO date to provide sufficient time for any contingencies.
Cost Involved In IPO Grading
Though nothing has been declared officially but most of the credit rating has said that IPO-grading would not cost much to the issuers. They would be charging 10 basis points of the amount to be raised with a ceiling of about Rs 10-15 lakhs. Thus, even in the case of a mega IPO, there would be a cap on fees, he noted. Around 100 IPOs hit the market on an average every year. However, despite this seemingly big number, the total receipts for the entire rating industry on account of grading fees would be only about Rs 10-15 crore.
Benefits of IPO Grading
There are various positive sides of an IPO grading. The most significant factors that go in favor of IPO grading are:
(a) Professional and Independent Appraisal: IPO grading will create awareness about the fundamentals of the company’s IPO and will provide focused company information as a key input to prospective investors that will be helpful in taking an investment decision, in a manner similar to what a credit rating is for debt investors.
(b) Removal of Information Burden: Where disclosures of issues are large and complex, a service analyzing and interpreting these disclosures independently and quickly will be extremely useful in cutting through the clutter. Thus, the usefulness of IPO grading would be particularly high for small investors as it will serve as a guide about the company coming out with the issue.
(c) Impediment for Weak Companies: While fundamentally sound companies will gain from the market, companies whose fundamentals are not very strong will be impeded in building up speculative demand among investors. Such weak companies will need to offer pricing, which will adequately compensate investors for the risks they take. Therefore, IPO grading provides disincentives for weak companies planning to come to the market to raise easy capital.
(d) Improved Investors’ Sophistication: It is perceived that an independent and informed opinion on the fundamental quality of the company will bring about greater level of investor sophistication in a scientific manner. In fact, investors may take investment decisions in a better way on the basis of opinion of CRAs regarding IPO grading. However, the assessment is not a recommendation to buy or not buy a stock. It is, instead, a powerful tool to assist the investors in making up their mind about the quality of a company proposing to offer an IPO investment option.
CHAPTER III
INDUSTRY PROFILE
FINANCIAL MARKETS
Finance is the pre-requisite for modern business and financial institutions play a vital role in the economic system. It is through financial markets and institutions that the financial system of an economy works. Financial markets refer to the institutional arrangements for dealing in financial assets and credit instruments of different types such as currency, cheques, bank deposits, bills, bonds, equities, etc.
Financial market is a broad term describing any marketplace where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives. They are typically defined by having transparent pricing, basic regulations on trading, costs and fees and market forces determining the prices of securities that trade.
Generally, there is no specific place or location to indicate a financial market. Wherever a financial transaction takes place, it is deemed to have taken place in the financial market. Hence financial markets are pervasive in nature since financial transactions are themselves very pervasive throughout the economic system. For instance, issue of equity shares, granting of loan by term lending institutions, deposit of money into a bank, purchase of debentures, sale of shares and so on.
In a nutshell, financial markets are the credit markets catering to the various needs of the individuals, firms and institutions by facilitating buying and selling of financial assets, claims and services.
CLASSIFICATION OF FINANCIAL MARKETS
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Capital Market
The capital market is a market for financial assets which have a long or indefinite maturity. Generally, it deals with long term securities which have a period of above one year. In the widest sense, it consists of a series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities. As a whole, capital market facilitates raising of capital.
The major functions performed by a capital market are:
1. Mobilization of financial resources on a nation-wide scale.
2. Securing the foreign capital and know-how to fill up deficit in the required resources for economic growth at a faster rate.
3. Effective allocation of the mobilized financial resources, by directing the same to projects yielding highest yield or to the projects needed to promote balanced economic development.
Capital market consists of primary market and secondary market.
Primary market
Primary market is a market for new issues or new financial claims. Hence it is also called as New Issue Market. It basically deals with those securities which are issued to the public for the first time. The market, therefore, makes available a new block of securities for public subscription. In other words, it deals with raising of fresh capital by companies either for cash or for consideration other than cash. The best example could be Initial Public Offering (IPO) where a firm offers shares to the public for the first time.
Secondary market
Secondary market is a market where existing securities are traded. In other words, securities which have already passed through new issue market are traded in this market. Generally, such securities are quoted in the stock exchange and it provides a continuous and regular market for buying and selling of securities. This market consists of all stock exchanges recognized by the government of India.
Money Market
Money markets are the markets for short-term, highly liquid debt securities. Money market securities are generally very safe investments which return relatively low interest rate that is most appropriate for temporary cash storage or short term time needs. It consists of a number of sub-markets which collectively constitute the money market namely call money market, commercial bills market, acceptance market, and Treasury bill market.
Derivatives Market
The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets. A derivative is a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. The important financial derivatives are the following:
• Forwards: Forwards are the oldest of all the derivatives. A forward contract refers to an agreement between two parties to exchange an agreed quantity of an asset for cash at a certain date in future at a predetermined price specified in that agreement. The promised asset may be currency, commodity, instrument etc.
• Futures: Future contract is very similar to a forward contract in all respects excepting the fact that it is completely a standardized one. It is nothing but a standardized forward contract which is legally enforceable and always traded on an organized exchange.
• Options: A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date). Call options give the option to buy at certain price, so the buyer would want the stock to go up. Put options give the option to sell at a certain price, so the buyer would want the stock to go down.
• Swaps: It is yet another exciting trading instrument. Infact, it is the combination of forwards by two counterparties. It is arranged to reap the benefits arising from the fluctuations in the market – either currency market or interest rate market or any other market for that matter.
Foreign Exchange Market
It is a market in which participants are able to buy, sell, exchange and speculate on currencies. Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The forex market is considered to be the largest financial market in the world. It is a worldwide decentralized over-the-counter financial market for the trading of currencies. Because the currency markets are large and liquid, they are believed to be the most efficient financial markets. It is important to realize that the foreign exchange market is not a single exchange, but is constructed of a global network of computers that connects participants from all parts of the world.
Commodities Market
It is a physical or virtual marketplace for buying, selling and trading raw or primary products. For investors' purposes there are currently about 50 major commodity markets worldwide that facilitate investment trade in nearly 100 primary commodities. Commodities are split into two types: hard and soft commodities. Hard commodities are typically natural resources that must be mined or extracted (gold, rubber, oil, etc.), whereas soft commodities are agricultural products or livestock (corn, wheat, coffee, sugar, soybeans, pork, etc.)
INDIAN FINANCIAL MARKETS
India Financial market is one of the oldest in the world and is considered to be the fastest growing and best among all the markets of the emerging economies. The history of Indian capital markets dates back 200 years toward the end of the 18th century when India was under the rule of the East India Company. The development of the capital market in India concentrated around Mumbai where no less than 200 to 250 securities brokers were active during the second half of the 19th century. The financial market in India today is more developed than many other sectors because it was organized long before with the securities exchanges of Mumbai, Ahmadabad and Kolkata were established as early as the 19th century. By the early 1960s the total number of securities exchanges in India rose to eight, including Mumbai, Ahmadabad and Kolkata apart from Madras, Kanpur, Delhi, Bangalore and Pune. Today there are 21 regional securities exchanges in India in addition to the centralized NSE (National Stock Exchange) and OTCEI (Over the Counter Exchange of India).
However the stock markets in India remained stagnant due to stringent controls on the market economy that allowed only a handful of monopolies to dominate their respective sectors. The corporate sector wasn't allowed into many industry segments, which were dominated by the state controlled public sector resulting in stagnation of the economy right up to the early 1990s. Thereafter when the Indian economy began liberalizing and the controls began to be dismantled or eased out; the securities markets witnessed a flurry of IPO’s that were launched. This resulted in many new companies across different industry segments to come up with newer products and services.
A remarkable feature of the growth of the Indian economy in recent years has been the role played by its securities markets in assisting and fuelling that growth with money rose within the economy. This was in marked contrast to the initial phase of growth in many of the fast growing economies of East Asia that witnessed huge doses of FDI (Foreign Direct Investment) spurring growth in their initial days of market decontrol. During this phase in India much of the organized sector has been affected by high growth as the financial markets played an all-inclusive role in sustaining financial resource mobilization. Many PSUs (Public Sector Undertakings) that decided to offload part of their equity were also helped by the well-organized securities market in India.
The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange of India) during the mid 1990s by the government of India was meant to usher in an easier and more transparent form of trading in securities. The NSE was conceived as the market for trading in the securities of companies from the large-scale sector and the OTCEI for those from the small-scale sector. While the NSE has not just done well to grow and evolve into the virtual backbone of capital markets in India the OTCEI struggled and is yet to show any sign of growth and development. The integration of IT into the capital market infrastructure has been particularly smooth in India due to the country’s world class IT industry. This has pushed up the operational efficiency of the Indian stock market to global standards and as a result the country has been able to capitalize on its high growth and attract foreign capital like never before.
The regulating authority for capital markets in India is the SEBI (Securities and Exchange Board of India). SEBI came into prominence in the 1990s after the capital markets experienced some turbulence. It had to take drastic measures to plug many loopholes that were exploited by certain market forces to advance their vested interests. After this initial phase of struggle SEBI has grown in strength as the regulator of India’s capital markets and as one of the country’s most important institutions.
FINANCIAL MARKET REGULATIONS
Regulations are an absolute necessity in the face of the growing importance of capital markets throughout the world. The development of a market economy is dependent on the development of the capital market. The regulation of a capital market involves the regulation of securities; these rules enable the capital market to function more efficiently and impartially.
A well regulated market has the potential to encourage additional investors to partake, and contribute in, furthering the development of the economy. The chief capital market regulatory authority is Securities and Exchange Board of India (SEBI).
SEBI is the regulator for the securities market in India. It is the apex body to develop and regulate the stock market in India It was formed officially by the Government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by C B Bhave, SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad. In place of Government Control, a statutory and autonomous regulatory board with defined responsibilities, to cover both development & regulation of the market, and independent powers has been set up.
The basic objectives of the Board were identified as:
• To protect the interests of investors in securities;
• To promote the development of Securities Market;
• To regulate the securities market and
• For matters connected therewith or incidental thereto.
Since its inception SEBI has been working targeting the securities and is attending to the fulfillment of its objectives with commendable zeal and dexterity. The improvements in the securities markets like capitalization requirements, margining, establishment of clearing corporations etc. reduced the risk of credit and also reduced the market.
SEBI has introduced the comprehensive regulatory measures, prescribed registration norms, the eligibility criteria, the code of obligations and the code of conduct for different intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars, portfolio managers, credit rating agencies, underwriters and others. It has framed bye-laws, risk identification and risk management systems for Clearing houses of stock exchanges, surveillance system etc. which has made dealing in securities both safe and transparent to the end investor.
Another significant event is the approval of trading in stock indices (like S&P CNX Nifty & Sensex) in 2000. A market Index is a convenient and effective product because of the following reasons:
• It acts as a barometer for market behavior;
• It is used to benchmark portfolio performance;
• It is used in derivative instruments like index futures and index options;
• It can be used for passive fund management as in case of Index Funds.
Two broad approaches of SEBI is to integrate the securities market at the national level, and also to diversify the trading products, so that there is an increase in number of traders including banks, financial institutions, insurance companies, mutual funds, primary dealers etc. to transact through the Exchanges. In this context the introduction of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real landmark.
SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e.g. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 bases). SEBI has been active in setting up the regulations as required under law.
STOCK EXCHANGES IN INDIA
Stock Exchanges are an organized marketplace, either corporation or mutual organization, where members of the organization gather to trade company stocks or other securities. The members may act either as agents for their customers, or as principals for their own accounts.
As per the Securities Contracts Regulation Act, 1956 a stock exchange is an association, organization or body of individuals whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.
Stock exchanges facilitate for the issue and redemption of securities and other financial instruments including the payment of income and dividends. The record keeping is central but trade is linked to such physical place because modern markets are computerized. The trade on an exchange is only by members and stock broker do have a seat on the exchange.
List of Stock Exchanges in India
Bombay Stock Exchange
National Stock Exchange
OTC Exchange of India
Regional Stock Exchanges
1. Ahmedabad
2. Bangalore
3. Bhubaneswar
4. Calcutta
5. Cochin
6. Coimbatore
7. Delhi
8. Guwahati
9. Hyderabad
10. Jaipur
11. Ludhiana
12. Madhya Pradesh
13. Madras
14. Magadh
15. Mangalore
16. Meerut
17. Pune
18. Saurashtra Kutch
19. Uttar Pradesh
20. Vadodara
BOMBAY STOCK EXCHANGE
A very common name for all traders in the stock market, BSE, stands for Bombay Stock Exchange. It is the oldest market not only in the country, but also in Asia. In the early days, BSE was known as "The Native Share & Stock Brokers Association." It was established in the year 1875 and became the first stock exchange in the country to be recognized by the government. In 1956, BSE obtained a permanent recognition from the Government of India under the Securities Contracts (Regulation)Act,1956.
In the past and even now, it plays a pivotal role in the development of the country's capital market. This is recognized worldwide and its index, SENSEX, is also tracked worldwide. Earlier it was an Association of Persons (AOP), but now it is a demutualised and corporatised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).
BSE Vision
The vision of the Bombay Stock Exchange is to "Emerge as the premier Indian stock exchange by establishing global benchmarks."
BSE Management
Bombay Stock Exchange is managed professionally by Board of Directors. It comprises of eminent professionals, representatives of Trading Members and the Managing Director. The Board is an inclusive one and is shaped to benefit from the market intermediaries participation.
The Board exercises complete control and formulates larger policy issues. The day-to-day operations of BSE are managed by the Managing Director and its school of professional as a management team.
BSE Network
The Exchange reaches physically to 417 cities and towns in the country. The framework of it has been designed to safeguard market integrity and to operate with transparency. It provides an efficient market for the trading in equity, debt instruments and derivatives. Its online trading system, popularly known as BOLT, is a proprietary system and it is BS 7799-2-2002 certified. The BOLT network was expanded, nationwide, in 1997. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified.
BSE Facts
BSE as a brand is synonymous with capital markets in India. The BSE SENSEX is the benchmark equity index that reflects the robustness of the economy and finance. It was the –
• First in India to introduce Equity Derivatives
• First in India to launch a Free Float Index
• First in India to launch US$ version of BSE Sensex
• First in India to launch Exchange Enabled Internet Trading Platform
• First in India to obtain ISO certification for Surveillance, Clearing & Settlement
• 'BSE On-Line Trading System’ (BOLT) has been awarded the globally
recognized the Information Security Management System standard
BS7799-2:2002.
• First to have an exclusive facility for financial training
• Moved from Open Outcry to Electronic Trading within just 50 days
BSE with its long history of capital market development is fully geared to continue its contributions to further the growth of the securities markets of the country, thus helping India increases its sphere of influence in international financial market.
NATIONAL STOCK EXCHANGE OF INDIA LIMITED
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FI’s) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock Exchange in the country.
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000.
NSE GROUP
National Securities Clearing Corporation Ltd. (NSCCL)
It is a wholly owned subsidiary, which was incorporated in August 1995 and commenced clearing operations in April 1996. It was formed to build confidence in clearing and settlement of securities, to promote and maintain the short and consistent settlement cycles, to provide a counter-party risk guarantee and to operate a tight risk containment system.
NSE.IT Ltd.
It is also a wholly owned subsidiary of NSE and is its IT arm. This arm of the NSE is uniquely positioned to provide products, services and solutions for the securities industry. NSE.IT primarily focuses on in the area of trading, broker front-end and back-office, clearing and settlement, web-based, insurance, etc. Along with this, it also provides consultancy and implementation services in Data Warehousing, Business Continuity Plans, Site Maintenance and Backups, Stratus Mainframe Facility Management, Real Time Market Analysis & Financial News.
India Index Services & Products Ltd. (IISL)
It is a joint venture between NSE and CRISIL Ltd. to provide a variety of indices and index related services and products for the Indian Capital markets. It was set up in May 1998. IISL has a consulting and licensing agreement with the Standard and Poor's (S&P), world's leading provider of investible equity indices, for co-branding equity indices.
National Securities Depository Ltd. (NSDL)
NSE joined hands with IDBI and UTI to promote dematerialization of securities. This step was taken to solve problems related to trading in physical securities. It commenced operations in November 1996.
NSE Facts
• It uses satellite communication technology to energize participation from around 400 cities in India.
• NSE can handle up to 1 million trades per day.
• It is one of the largest interactive VSAT based stock exchanges in the world.
• The NSE- network is the largest private wide area network in India and the first extended C- Band VSAT network in the world.
• Presently more than 9000 users are trading on the real time-online NSE application.
Today, NSE is one of the largest exchanges in the world and still forging ahead. At NSE, we are constantly working towards creating a more transparent, vibrant and innovative capital market.
OVER THE COUNTER EXCHANGE OF INDIA
OTCEI was incorporated in 1990 as a section 25 company under the companies Act 1956 and is recognized as a stock exchange under section 4 of the securities Contracts Regulation Act, 1956. The exchange was set up to aid enterprising promotes in raising finance for new projects in a cost effective manner and to provide investors with a transparent and efficient mode of trading Modeled along the lines of the NASDAQ market of USA, OTCEI introduced many novel concepts to the Indian capital markets such as screen-based nationwide trading, sponsorship of companies, market making and scrip less trading. As a measure of success of these efforts, the Exchange today has 115 listings and has assisted in providing capital for enterprises that have gone on to build successful brands for themselves like VIP Advanta, Sonora Tiles & Brilliant mineral water, etc.
Need for OTCEI
Studies by NASSCOM, software technology parks of India, the venture capitals funds and the government’s IT tasks Force, as well as rising interest in IT, Pharmaceutical, Biotechnology and Media shares have repeatedly emphasized the need for a national stock market for innovation and high growth companies.
Innovative companies are critical to developing economics like India, which is undergoing a major technological revolution. With their abilities to generate employment opportunities and contribute to the economy, it is essential that these companies not only expand existing operations but also set up new units. The key issue for these companies is raising timely, cost effective and long term capital to sustain their operations and enhance growth. Such companies, particularly those that have been in operation for a short time, are unable to raise funds through the traditional financing methods, because they have not yet been evaluated by the financial world.
CHAPTER IV COMPANY PROFILE
ABOUT INDIABULLS
India bulls are India’s leading Financial Services and Real Estate company having over 640 branches all over India. Indiabulls serves the financial needs of more than 4,50,000 customers with its wide range of financial services and products from securities, derivatives trading, depositary services, research & advisory services, consumer secured & unsecured credit, loan against shares and mortgage & housing finance. With around 4000 Relationship Managers, Indiabulls helps its clients to satisfy their customized financial goals. Indiabulls through its group companies has entered Indian Real Estate business in 2005. It is currently evaluating several large-scale projects worth several hundred million dollars.
India bulls Financial Services Ltd is listed on the National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange. The market capitalization of India bulls is around USD 3,330 million (30th September 2007). Consolidated net worth of the group is around USD 950 million (30th September 2007). India bulls and its group companies have attracted more than USD 800 million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of India bulls are the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.
Business of the company has grown in leaps and bounds since its inception. Revenue of the company grew at a CAGR of 159% from FY03 to FY07. During the same period, profits of the company grew at a CAGR of 184%. Indiabulls
Abulls
Indiabulls became the first company to bring FDI in Indian Real Estate through a JV with Farallon Capital Management LLC, a respected US based investment firm. Indiabulls has demonstrated deep understanding and commitment to Indian
Real Estate market by winning competitive bids for landmark properties in Mumbai and Delhi.
Indiabulls is India’s leading Financial Services and Real Estate company having over 640 branches all over India. Indiabulls serves the financial needs of more than 4,50,000 customers with its wide range of financial services and products from securities, derivatives trading, depositary services, research & advisory services, consumer secured & unsecured credit, loan against shares and mortgage & housing finance. With around 4000 Relationship Managers, Indiabulls helps its clients to satisfy their customized financial goals. Indiabulls through its group companies has entered Indian Real Estate business in 2005. It is currently evaluating several large-scale projects worth several hundred million dollars.
Indiabulls Financial Services Ltd is listed on the National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange. The market capitalization of Indiabulls is around USD 3,330 million (30th September 2007). Consolidated net worth of the group is around USD 950 million (30th September 2007). Indiabulls and its group companies have attracted more than USD 800 million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.
Business of the company has grown in leaps and bounds since its inception. Revenue of the company grew at a CAGR of 159% from FY03 to FY07. During the same period, profits of the company grew at a CAGR of 184%.
Indiabulls became the first company to bring FDI in Indian Real Estate through a JV with Farallon Capital Management LLC, a respected US based investment firm. Indiabulls has demonstrated deep understanding and commitment to Indian
Real Estate market by winning competitive bids for landmark properties in Mumbai and Delhi
With a market value of Rs 29,000 crore and a net worth of Rs 8,000 crore, the eight-year-old Indiabulls group has sky-high ambitions. Property development and consumer finance are the current thrust areas. Retailing, insurance, banking, mutual funds, power and telecom are on the cards.
Chairman Sameer Gehlaut (34) and Co-founder Rajiv Rattan (35) are in build-up mode, but are the foundations strong enough.
February 2000: On a wintry morning in London, four gentlemen get into a huddle at the headquarters of Mittal Steel (now Arcelor-Mittal), the world’s largest steel manufacturer. It’s biting cold outside, but inside an air of warm optimism prevails.
Sameer Gehlaut and Saurabh Mittal, two of the co-founders of Indian stock broking upstart Indiabulls Financial Services Ltd (IBFSL), are in the last lap of negotiations for angel funding from steel baron Lakshmi N. Mittal (no relation to
Saurabh Mittal). Present at the meeting are Mittal’s son, Aditya Mittal, then Vice Chairman on the board of directors of LNM Holdings, and Rishi Khosla, Mittal’s fund manager.
The three promoters of Indiabulls (the third is Rajiv Rattan), all alumni of IIT Delhi, had mandated a Mumbai-based investment bank, Avendus Advisors, to scout around for an investor.
Gaurav Deepak, cofounder of Avendus, stumbles upon Khosla, who is sniffing for potential growth stories across the globe. Aditya Mittal and Gehlaut, from Mumbai, begin negotiations on the phone. Mittal obviously liked what he heard. The numbers—an investment of $1 million at Rs 5 per share—are agreed upon telephonically. The deal is signed in London.
“It was pure gut feel that made us invest in Indiabulls. We backed the individual after we were confident about his business plans (e-trade broking) and execution capabilities,” says Khosla. Adds Sameer Gehlaut, the “individual” Khosla is talking about, and the Founder & Chairman of the Indiabulls group: “Mittal Saab came in as an angel investor in Indiabulls perhaps after seeing the success of similar business models in the US, of firms like Charles Schwab and E-Trade.”
The Early Days, It’s an investment Mittal won’t forget in a hurry. For one, it was his first in India. More importantly, it’s yielded him returns of a phenomenal 100 times. ‘Of all our global investments, Indiabulls has given us the highest return,” beams Khosla. Mittal was back seven years later to put more money into the Indiabulls group.
The difference? He was now investing at not Rs 5 per share but at Rs 531 per share (via an issue of global depository receipts, or GDR’s). Mittal today has a net worth of Rs 1,200 crore in the group by virtue of LNM India Internet Ventures’ 1.85 per cent in flagship IBFSL and 1.60 per cent in a recently de-merged property
developer, IBREL. In addition, the global metals magnate has committed Rs 120 crore to a multi-project special economic zone (SEZ) that IBREL is putting up at Raigad in Maharashtra.
If corporate growth is expected at 15 per cent, financial services will grow at 30 per cent. And in the next 10 years we will grow 10 times in the consumer finance business from $3 billion to $30 billion (in market cap),” says Gehlaut, who after working with petroleum and energy giant Halliburton in the US came to India to start a mining and earth moving business. In October 1999, along with Rattan and Mittal, Gehlaut started Indiabulls after acquiring a Delhi brokerage.Analysts tracking the group expect these three companies to rack up total sales of roughly Rs 3,600 crore by the year ending March 2008, with profits of around Rs 1,500 crore and a net worth of a little over Rs 10,000 crore.
That would be a mind-boggling growth of 228 per cent in profits (at the group level) over the previous year. Significantly, broking, the business that Indiabulls started out with, will account for just 10 per cent of revenues.
That’s not bad going at all for an eight-year-young upstart. “We were extremely lucky to be at the forefront of the India growth story. We did not have much clarity when we started with the broking business. However, as we went about penetrating the retail market, we realized there was huge untapped potential in the consumer finance and real estate businesses,” says the 34-year-old Gehlaut. In real estate, IBREL has put together a land bank of 4,000 acres, at an acquisition cost of over Rs 2,250 crore. That makes it the country’s third-largest property developer, after DLF and Unitech—again, not bad for a company that came into being only six months ago.
[pic]Gagan Banga
The real estate push also gives Indiabulls an opportunity to diversify into another sunrise sector, that of organised retailing. Here, the promoters are exploring formats like hypermarkets and multiplex-cum-mall, and are busy acquiring properties for this purpose. Gehlaut has earmarked Rs 1,500 crore for this project, and has been busy acquiring land via auctions in cities like Madurai, Jodhpur, Hyderabad, Agra and Kanpur. “Financial services, real estate and retail are the key sectors for growth that will deliver double-digit growth over the next 20 years. Retail is a missing piece in our pie and we are seeing it as a definite business option as the sector coincides with the real estate story,” says Rattan, the 35-year-old CFO of the group, who worked as an operations manager for Schlumberger before confounding Indiabulls.
Indiabulls is also keen to merge with an existing bank by swapping shares, rather than applying for a new licenses or throwing its hat into the ring whenever a bank is put under moratorium by the Reserve Bank—the company had earlier unsuccessfully bid for United Western Bank.
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Divyesh Shah
Outside of financial services, Indiabulls will be one of the many firms keen to redevelop the slum of Dharavi. It also has telecom in its sights—it has applied for licenses for 22 circles, although operating these circles will be a strategic partner. For its Nashik SEZ, Indiabulls has also lined up a 500 MW power plant. For all these new ventures, the group will invest a little over Rs 4,500 crore over the next couple of years.
Such aggression, such risk taking, such haste haven’t been heard of in a long time—certainly not from an eight-year-young wannabe mega-corp. Are Gehlaut and company for real, and are they here to stay? These are questions that sections of the market have been pondering for some time now. Competitors who’ve been around for decades privately wonder how Indiabulls has been able to grow at such a heady pace; others can’t hide their awe about the group’s marquee of investors. Blame it on envy or competitive rivalry, but most of Indiabulls’ competitors in the broking space have few kind words for them—all of them in anonymous whispers, needless to say.
The charges range from an expertise in “managing the environment” to trading with investor money, without their knowledge. Says the promoter of a Mumbai brokerage: “At times they’ve got away with murder (figuratively, of course) courtesy their financial muscle power and close proximity to 10 Janpath (the residence of Sonia Gandhi, President of the Congress party and Chairperson of the ruling UPA).” Adds a fund manager: “Corporate governance levels are very low at the group. I wouldn’t touch the stocks with a barge pole.”
Reinforcing such theories are a couple of facts: Market regulator, the Securities & Exchange Board of India (Sebi), came after Indiabulls not once, not twice but three times. This, argue detractors, is evidence of the malpractices taking place at the group. However, on all three occasions, Indiabulls emerged unscathed, getting away with just a rap on the knuckles (see Run-ins with Sebi). In fact, during last year’s IPO scam, when Sebi ordered a ban on Indiabulls for allegedly trying to corner shares during allotment, the order was dust-binned in less than 24 hours. The company top brass was apparently able to convince Sebi that the IPO shares heaped in their accounts were those of clients.
[pic]
Rashesh Shah
As one market man points out: “The day after the order was passed the doors of Sebi were opened as early as 6:30 in the morning for them.” This proves that their connections with people in power are adequate to override the regulators, say the Let’s move on to the run-ins with Sebi. Consider the first one, during the penny stock scandal of 2005, when micro-cap stocks in the B2, S and Z categories were rigged up to ridiculous levels. Sebi came down on Indiabulls, amongst other brokerages, for contributing to the increase in turnover in a few penny stocks. This in turn could be construed as price manipulation by these brokerages. Indiabulls’ defence has been that it is not possible to keep a tab on such rogue clients, and the contribution to turnover from such stocks was a minuscule part of total turnover. However, since that scandal Indiabulls decided not to trade ever in such stocks; today they restrict themselves only to the large and mid caps in the A and B1 groups.
Road Ahead
Clearly, Gehlaut believes in being proactive in protecting the firm, with the benefit of hindsight. Consider, for instance, the charge of playing around with the portfolio of retail investors without their knowledge. No action was taken against Indiabulls but the dirt has stuck. Now, to counter such negative perceptions, the company records every single call that comes into its 400 broking branches nationwide.
“Some 6,000 lines are recorded and archived daily. It’s an expensive solution, which costs Rs 10 lakh per day,” says Gagan Banga, CEO, Indiabulls Credit Services. Shrugs Gehlaut. “Broking is a thankless business.” With new ventures likes consumer finance and real estate, broking has been relegated to the backburner. But he says he won’t let go of it, and the leadership status that he claims, with a 6 per cent market share. “It’s close to our hearts, it would be bad for the morale of the army if we lose on our home turf,” adds the Chairman.
In the IPO scam, Indiabulls officials explain that they arranged meetings in Kolkata between Sebi officials and 230 of the 559 clients from which it had received credits in its accounts. They also claim to have taken them to the residences of 30-40 of the clients. As for Mittal and the Farallon connection, Rattan and Gehlaut rubbish the link, although agreeing that Mittal’s presence in the US financial markets provides a huge leg-up when it comes to raising funds from international investors.
The clamour in some nooks of Dalal Street not withstanding, there are those who admire Indiabulls for the fire in their belly, their entrepreneurial skills and their execution capabilities. Says Rashesh Shah, CEO & Managing Director, Edelweiss Securities, a Mumbai based investment bank: “They entered the market when competition in retail broking was low. Retail broking is a high-risk, high-reward segment and they were aggressive in tapping that sector. Remember this was at a time when small players were shutting shop as they couldn’t come to terms with the sea change in the broking environment following the closure of regional stock exchanges, the abolition of badla (an indigenous form of carry-forward trading) and the introduction of screen-based trading. They saw the opportunity and capitalized by investing heavily in setting up broking facilities and that has paid off.” Adds Ambareesh Baliga, Vice President, Karvy Stock Broking: “Since the beginning they had strong system and processes in place. Their impressive back office operations provide them with an edge over other brokerages.”
Cautious, but Aggressive
In many ways Indiabulls is a business house that’s pretty much a typical one from the rest of the crowd (although Gehlaut quips: “We are the crowd; the only difference is that we are more efficient.”) For instance, the promoters don’t like putting big-ticket numbers in terms of investments for their proposed ventures; they don’t talk about acquisitions or joint venture partners, preferring to build rather than buy (although in insurance there’s a view that a partner may be needed, and in a proposed foray into institutional broking an acquisition may be considered); and they’re not taken in by the other flavors of the season—going international is not a priority, staying focused on the domestic consumption-oriented growth story is.
Couple the group’s aggression with the India growth story, and you have a business group that’s aiming for leadership status in each of its ventures; and one that believes in setting new standards and benchmarks. In insurance, for instance (where A.K. Shukla, a former Chairman of Life Insurance Corporation, has been roped in to head the foray), the plan is to break even in three years, something no private sector player has been able to do since the sector was opened up eight years ago.
As Rattan points out: “Our advantage will be our low operating costs, as we will be targeting the same customer in the securities business for our life insurance business.” And also for mutual funds. “By the fiscal year-end we will have 1 million customers in the securities business. If we can penetrate 30-40 per cent of that customer base with our new mutual fund products, then on day zero I will have a customer base of 3-4 lakh in the urban and semi-urban regions of the country,” adds Gehlaut.
The aggression, insists Gehlaut, is tempered with conservatism. “We take calculated risks. Being cautious (about capital) doesn’t mean we can’t be aggressive,” he points out. That attitude can be illustrated with the group’s approach to retail. It’s starting small, with a rollout of small formats in a few cities. “If those stores make profits we will scale up. If they don’t we will not hesitate to back out of the retail project,” says the Chairman. Adds Khosla (L.N. Mittal’s fund manager quoted earlier): “So far the group has diversified successfully, but if a project isn’t going to be viable, they won’t hesitate to book losses.”
Caution, however, doesn’t involve any compromise with speed. Standing atop the storey Jupiter Mills commercial complex that’s under development, Gehlaut takes in a bird’s eye view of the frenetic construction activity that’s under way in Central Mumbai. A few kilometers towards the suburb is another one of his properties, Elphinstone Mills, where IBREL will put up Mumbai’s tallest tower with all of 65-storeys. But Gehlaut is quick to focus on how fast work is taking place at Jupiter Mills. He points to an adjoining mill where a retail project is under way. Both mills were acquired at the same time, and it’s clear that the IBREL project has made rapid progress.
Completion is scheduled for April 2008. “By the next calendar year we will start receiving nearly Rs 1,100 crore of rent from the 3.5 million square feet of commercial space from the two mills (Jupiter and Elphin stone) in Mumbai,” says Banga, one of the group’s first employees. Knight Frank, a Mumbai based real estate consultancy, has valued the 3.5 million sq. ft of land at Rs 7,700 crore. Indiabulls had purchase the two mills for Rs 1,100 crore. That’s just the real estate activity under way in Mumbai. “In the next 24-36 months we will be ready with 50,000 apartments in Delhi and Chennai,” adds Banga. Says Nirmal Jain, Chairman & Managing Director, India Infoline, a Mumbai brokerage that started roughly around the same time Indiabulls did: “Along with their ability to raise capital, Indiabulls’ master stroke was to enter the real estate business at the right time.”
As Indiabulls moves into larger-scale, high growth areas, the mother business of securities isn’t being given the short shrift. Divyesh Shah, CEO, ISL (the to-be-soon demerged securities firm), says a portfolio management scheme (PMS) is on the cards. For this, ISL’s base of six lakh customers along with its 400 offices in 200 cities will provide it with a head start. A foray into institutional broking might just take off too.
“We want PMS to account for 20 per cent of our securities business, which will grow by 40 per cent in the next two years. For our institutional business we may take the inorganic route,” adds Shah. “When we began we were clear that we couldn’t beat the Merrill Lynchs and Morgan Stanleys of the world.
RULES & BY-LAWS OF EXCHANGE
A Stock Exchange is recognized only after the govt. is satisfied that its rules and By-Laws confirm to the conditions prescribed for ensuring for dealing and protection to investors.
The rules of exchange are related in general to
➢ The constitution of the exchange
➢ The powers of the management of its governing body and its constitution
➢ The admission for membership
➢ The qualification for membership
➢ The expulsion suspension and readmission of member
CHAPTER V
DATA ANALYSIS
&
INTERPRETATION
BSE IPO Index
Initial Public Offerings (IPOs) are a great opportunity for promoters to sell shares at a very high price and for the investing public to make some listing gains if possible. Buying a stock that has just got listed after an IPO is a foolish idea. The BSE IPO index has performed badly since its launch on 24 August 2009. The index closed at 1947.54 on the day of its launch. By the end of December 2010, exactly 16 months after its launch, the BSE IPO index was at 1,908.90, down almost 40 points. In the same period, the Sensex is up by 28%.
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The Bombay Stock Exchange (BSE) launched the BSE IPO index to track the value of the companies listing subsequent to a successful completion of an IPO. The index currently has 72 companies. But this figure is continually changing, depending on how many companies are listed, as an IPO company is kept on the index only for two years.
Interpretation
In the above sales Analysis we can see the ratio from August 2009 to April 2010 the index remained almost constant with minimum and negligible fluctuations but from April 2010 to December 2010 we can see a considerable price in the index.
IPO Monthly Trends
|Month |Jan-11 |
|Indian Oil |20000 |
|Sail |18000 |
|ONGC |15000 |
|Jindal Power |7200 |
|Sterlite Energy |5100 |
|Reliance Infratel |5000 |
|Power Grid |4000 |
|Lodha Developers |2500 |
|Embassy Property Developments |2400 |
|Gujarat State Petroleum |2050 |
|Lavasa Corporation |2000 |
|Emaar MGF Land |1600 |
|BPTP |1500 |
|Hindustan Copper |1500 |
|L&T Finance Holdings |1500 |
|Ambience |1293 |
|Avantha Power & Infrastructure |1250 |
|Ind-Barath Power |1140 |
|Kalpataru |1008 |
|Raheja Universal |864 |
[pic]
Interpretation
In the above graph we can see that the highest performance was recorded by the Indian oil company followed by SAIL and ONGC performance of Jindal Power, Sterlite Energy, Reliance Infratel was acceptable the performance by Ind-Barath, Kalpataru, Raheja Universal Power can be said to be underprivileged.
TOP IPO GAINER
|Name of the issue |Book Running Lead |Issue Size |Total Subscription |Issue |Current Price |% chg |
| |Manager | | |Price | | |
| | | | |(Rs.) | | |
|ASTER SILICATES |Saffron,Capital Advisors|53.1 |4.68 |118 |49 |-58 |
| |Pvt Ltd | | | | | |
|TIRUPATI INKS |Ashika Capital Ltd |51.5 |9.2 |43 |19.95 |-54 |
|TARAPUR TRANSFORMERS |Comfort Securities Pvt |63.75 |1.65 |75 |35.75 |-52 |
| |Ltd | | | | | |
|CANTABIL RETAIL INDIA |Spa Merchant Bankers Ltd|105 |1.98 |135 |92.55 |-31 |
|PARABOLIC DRUGS |Avendus Capital Pvt Ltd |200 |1.03 |75 |55.35 |-26 |
|MICROSEC FINANcCIAL SERVICES |SBI Capital Markets Ltd |147.5 |11.99 |118 |89.1 |-24 |
|RAMKY INFRASTRUCTURE |Enam Securities Pvt Ltd |530 |2.73 |450 |356.25 |-21 |
|INDOSOLAR |Enam Securities Private |357 |1.43 |29 |23.3 |-20 |
| |Limited | | | | | |
|NITESH ESTATES |ICICI Securities |405 |1.13 |54 |43.55 |-19 |
|ENGINEERS INDIA | IDFC Capital Pvt Ltd |959.35 |13.35 |290 |350.25 |21 |
|OBEROI REALTY |Kotak Mahindra Pvt Ltd |1028.61 |10.12 |260 |295.4 |14 |
CHAPTER VI
FINDINGS, SUGGESTIONS & CONCLUSION
FINDINGS
• IPOs have fared very badly in the last one year in spite of a drastic increase in the number of IPOs compared to 2009.
• The BSE IPO index has performed badly since its launch on 24 August 2009. The index closed at 1947.54 on the day of its launch.
• By the end of December 2010, exactly 16 months after its launch, the BSE IPO index was at 1,908.90, down almost 40 points. In the same period, the Sensex is up by 28%.
• The total no of companies coming for IPO have increased in 2010 compared to 2009. There were 65 IPOs that were listed in 2010 as compared to only 17 IPOs in 2009.
• 2009 was mostly affected by recession and companies were not coming for IPOs due to lack of investor confidence.
• Of the 65 companies that have come for IPO, only 21 companies are not trading at a profit while 43 companies are now trading at a loss.
• Close to 100 companies are in the pipe line to raise money through IPOs in the coming months.
SUGGESTIONS
▪ Looking at the historical trends, Investors should be cautious while investing in Initial Public Offerings.
▪ Investors in IPOs should look at the growth the company and the industry in which it is operating in.
▪ Investors should also look at the overall market conditions before investing in an IPO.
▪ Investors should come out of the opinion that all the IPOs will be traded at a premium.
▪ For companies, Book-building is preferred over the fixed price method in IPOs, because the allotment of shares is generally done at a price determined by the lead merchant banker and issuer within the price band. Since QIBs are the dominant players and bid at somewhat higher prices within the band, the issuer and merchant banker fix the price at the higher end such that retail investors have to accept it.
▪ The grading process will not take into account price valuation, a key parameter in any stock investment decision. The market does not work on fundamentals. A good company is a bad investment at a high price. The small investors, for whom the grading exercise is basically meant, would despite disclaimers expect a high graded IPO to quote above the offer price. The whole purpose of grading an IPO would be defeated if it cannot help an investor decide what stock to choose and at what price.
CONCLUSIONS
Companies should be careful while going for an IPO as well as after the IPO process. The essential points to take care of to see that IPOs are successful and investors benefit from investing in the IPOs include:
1. The underwriter is focused on your industry: The IPO marketplace is a crowded marketplace and the significant sums you are spending for professional advice to go public need to be targeted to a firm with real expertise in your industry. Partial evidence of appropriate expertise would be having an analyst devoted to your industry.
2. The market relies heavily on analyst projections and recommendations: Specifically, the underwriting firm's analyst in your industry must: Have the capacity to cover your company with sufficient attention; Understand your company, customers, and competition; and Indicate sincere commitment to covering your company.
3. Due to the importance of a successful road show, the underwriter must have the ability and contacts to identify the right investor groups for your presentation and get them committed to attend. References from previous IPO successes are essential.
4. There must be sufficient evidence of being able to build a quality "book" of potential orders for your stock.
5. There should be a history regarding the ability to identify the right offer price and size.
6. Finally, but rarely understood by many companies, there must be significant aftermarket support in terms of maintaining and supporting trading in the stock, providing subsequent research reports on the company, and continuing institutional exposure to the company.
ANNEXURES
Annexure -1: Initial Public Offerings in 2009-2010
|Equity |Issue Price |Current Price |%Gain/Loss |Month |
|MOIL |375 |435.15 |16.04 |Dec-10 |
|Punjab & Sind |120 |118.85 |-0.96 |Dec-10 |
|Claris Life |228 |192.95 |-15.37 |Dec-10 |
|RPP Infra Proj |75 |57.3 |-23.6 |Dec-10 |
|A2Z Maintenance |400 |300.7 |-24.83 |Dec-10 |
|Gravita India |125 |224.4 |79.52 |Nov-10 |
|Coal India |245 |310.15 |26.59 |Nov-10 |
|Career Point |310 |363.85 |17.37 |Oct-10 |
|Va Tech Wabag |1310 |1507.45 |15.07 |Oct-10 |
|Tecpro Systems |355 |353.5 |-0.42 |Oct-10 |
|Oberoi Realty |260 |245.9 |-5.42 |Oct-10 |
|Ashoka Buildcon |324 |285.1 |-12.01 |Oct-10 |
|Electrosteel St |11 |9.17 |-16.64 |Oct-10 |
|Bedmutha Ind |102 |82.25 |-19.36 |Oct-10 |
|Eros Intern |175 |136.9 |-21.77 |Oct-10 |
|Prestige Estate |183 |140.5 |-23.22 |Oct-10 |
|Ramky Infra |450 |307 |-31.78 |Oct-10 |
|Orient Green |47 |30 |-36.17 |Oct-10 |
|BS TransComm |248 |125.9 |-49.23 |Oct-10 |
|Microsec Fin |118 |52.15 |-55.81 |Oct-10 |
|Cantabil Retail |135 |54.05 |-59.96 |Oct-10 |
|Sea TV Network |100 |36.8 |-63.2 |Oct-10 |
|Commercial Eng |127 |45.4 |-64.25 |Oct-10 |
|Gyscoal Alloys |71 |22.9 |-67.75 |Oct-10 |
|Tirupati Inks |43 |13.6 |-68.37 |Oct-10 |
|Gujarat Pipavav |46 |58.15 |26.41 |Sep-10 |
|Indosolar |29 |22.05 |-23.97 |Sep-10 |
|Midfield Ind |133 |79.8 |-40 |Aug-10 |
|Prakash Steelag |110 |125.85 |14.41 |Aug-10 |
|Bajaj Corp |660 |490.3 |-25.71 |Aug-10 |
|Hindustan Media |166 |172.55 |3.95 |Jul-10 |
|Parabolic Drugs |75 |53.7 |-28.4 |Jul-10 |
|Technofab Engg |240 |171.35 |-28.6 |Jul-10 |
|Aster Silicates |118 |34.65 |-70.64 |Jul-10 |
|Mandhana Ind |130 |267.75 |105.96 |May-10 |
|Talwalkars Fitn |128 |228.8 |78.75 |May-10 |
|SJVN |26 |21.95 |-15.58 |May-10 |
|Jaypee Infra |102 |67.9 |-33.43 |May-10 |
|Nitesh Estates |54 |31.35 |-41.94 |May-10 |
|Tarapur Trans |75 |27.8 |-62.93 |May-10 |
|Persistent |310 |436.05 |40.66 |Apr-10 |
|Shree Gan Jewel |260 |188.6 |-27.46 |Apr-10 |
|Pradip Oversea |110 |68.95 |-37.32 |Apr-10 |
|Intrasoft Tech |145 |82.3 |-43.24 |Apr-10 |
|Goenka Diamond |135 |70.8 |-47.56 |Apr-10 |
|ARSS Infra |450 |685.2 |52.27 |Mar-10 |
|United Bank |66 |92.65 |40.38 |Mar-10 |
|DQ Entertain |80 |88.9 |11.13 |Mar-10 |
|ILandFS Trans |258 |272.75 |5.72 |Mar-10 |
|Man Infra |252 |193.85 |-23.08 |Mar-10 |
|Texmo Pipes |90 |40.9 |-54.56 |Mar-10 |
|Jubilant Food |145 |562 |287.59 |Feb-10 |
|Thangamayil |75 |161.5 |115.33 |Feb-10 |
|Infinite Comp |165 |199 |20.61 |Feb-10 |
|VasconEngg |165 |124.05 |-24.82 |Feb-10 |
|Hathway Cable |240 |148 |-38.33 |Feb-10 |
|Syncom Health |75 |40.7 |-45.73 |Feb-10 |
|DB Realty |468 |191.15 |-59.16 |Feb-10 |
|Emmbi Polyarns |45 |15.8 |-64.89 |Feb-10 |
|Aqua Logistics |220 |34.4 |-84.36 |Feb-10 |
|Godrej Proper |490 |599.2 |22.29 |Jan-10 |
|DB Corp |212 |244.2 |15.19 |Jan-10 |
|MBL Infra |180 |200.05 |11.14 |Jan-10 |
|JSW Energy |100 |90.1 |-9.9 |Jan-10 |
|Cox & Kings |330 |487.6 |47.76 |Dec-09 |
|Astec Life |82 |55.85 |-31.89 |Nov-09 |
|Den Networks |195 |159.25 |-18.33 |Nov-09 |
|IndiaBPower |45 |26.4 |-41.33 |Oct-09 |
|Thinksoft |125 |79 |-36.8 |Oct-09 |
|EuroMult |75 |21.05 |-71.93 |Oct-09 |
|Pipavav |58 |80.3 |38.45 |Oct-09 |
|Oil India |1050 |1309.35 |24.7 |Sep-09 |
|Globus Spirits |100 |157.45 |57.45 |Sep-09 |
|Jindal Cotex |75 |106.85 |42.47 |Sep-09 |
|NHPC |36 |26.9 |-25.28 |Sep-09 |
|Adani Power |100 |122.25 |22.25 |Aug-09 |
|Raj Oil Mills |120 |39.75 |-66.88 |Aug-09 |
|Excel Infoways |85 |39.7 |-53.29 |Jul-09 |
|Mahindra Holida |300 |367.7 |22.57 |Jun-09 |
|Rishabhdev Tech |33 |5.3 |-83.94 |Mar-09 |
Annexure -1: Upcoming IPOs (2010 Filings with SEBI)
|Company Name |Date of Filing |
|Lokmat Media |Dec-10 |
|Max Flex and Imaging System |Dec-10 |
|Modern Tube Industries |Dec-10 |
|Net Alter Software |Dec-10 |
|Olympic Cards |Dec-10 |
|Onelife Capital Advisors |Dec-10 |
|PTC India Financial Services |Dec-10 |
|Reid and Taylor India |Dec-10 |
|Sabari Inn |Dec-10 |
|Shree Hanuman Sugar and Industries |Dec-10 |
|VRL Logistics |Dec-10 |
|Bharatiya Global Infomedia |Nov-10 |
|Brooks Laboratories |Nov-10 |
|Gemini Engi-Fab |Nov-10 |
|Lovable Lingerie |Nov-10 |
|Palco Recycle Industries |Nov-10 |
|Plastene India |Nov-10 |
|Readymade Steel India |Nov-10 |
|Semantic Space Technologies |Nov-10 |
|Emaar MGF Land |Oct-10 |
|Endurance Technologies |Oct-10 |
|Innoventive Industries |Oct-10 |
|Marck Biosciences |Oct-10 |
|Micromax Informatics |Oct-10 |
|Muthoot Finance |Oct-10 |
|Nimbus Communications |Oct-10 |
|Pride Hotels |Oct-10 |
|Scotts Garments |Oct-10 |
|Shipping Corporation of India |Oct-10 |
|Sonear Industries |Oct-10 |
|Tara Health Foods |Oct-10 |
|Tara Jewels |Oct-10 |
|Tijaria Polypipes |Oct-10 |
|Unijules Life Science |Oct-10 |
|Vaswani Industries |Oct-10 |
|Aanjaneya Lifecare |Sep-10 |
|AGS Transact Technologies |Sep-10 |
|Blend Financial Services |Sep-10 |
|Fineotex Chemical |Sep-10 |
|Hindustan Copper |Sep-10 |
|IOT Infrastructure and Engergy Services |Sep-10 |
|Kalpataru |Sep-10 |
|L and T Finance Holdings |Sep-10 |
|Lavasa Corporation |Sep-10 |
|Midvalley Entertainment |Sep-10 |
|Paramount Printpackaging |Sep-10 |
|PG Electroplast |Sep-10 |
|Rama Medicares |Sep-10 |
|Sanghvi Forging and Engineering |Sep-10 |
|Servalakshmi Paper |Sep-10 |
|Shilpi Cable Technologies |Sep-10 |
|Sudar Garments |Sep-10 |
|SVEC Constructions |Sep-10 |
|Timbor Home |Sep-10 |
|Betul Oil (DRHP) |Aug-10 |
|Birla Pacific Medspa |Aug-10 |
|Dev Procon |Aug-10 |
|Future Ventures India |Aug-10 |
|Galaxy Surfactants |Aug-10 |
|Omkar Speciality Chemicals |Aug-10 |
|Punjab and Sind Bank |Aug-10 |
|A2Z Maintenance and Engineering Services |Jul-10 |
|Embassy Property Developments |Jul-10 |
|Entertainment World Developers |Jul-10 |
|Jain Infraprojects |Jul-10 |
|Milestone Capital Advisors |Jul-10 |
|NKG Infrastructure |Jul-10 |
|Rajputana Stainless |Jul-10 |
|RPP Infra Projects |Jul-10 |
|Shekhawati Poly-yarn |Jul-10 |
|SRS |Jul-10 |
|Tunip Agro |Jul-10 |
|Virgo Engineers |Jul-10 |
|VMS Industries |Jul-10 |
|Ind-Barath Power Infra |Jun-10 |
|Planet 41 Mobi-Venture |Jun-10 |
|Greatship ( India) |May-10 |
|One97 Communications |May-10 |
|C Mahendra Exports |Apr-10 |
|Claris Lifesciences |Apr-10 |
|ICOMM Tele |Apr-10 |
|JP Infrastructure |Apr-10 |
|Raheja Universal |Apr-10 |
|Ravi Kumar Distilleries |Apr-10 |
|Shirdi Industries |Apr-10 |
|You Broadband and Cable India |Apr-10 |
|Acropetal Technologies |Mar-10 |
|Avantha Power and Infrastructure |Mar-10 |
|Commercial Engineers and Body Builders Co |Mar-10 |
|Genus Paper Products |Mar-10 |
|Gujarat State Petroleum Corporation |Mar-10 |
|RDB Rasayans |Mar-10 |
|Rushil Décor |Mar-10 |
|SEL Textiles |Mar-10 |
|Asian Business Exhibition and Conferences |Feb-10 |
|Inventure Growth and Securities |Feb-10 |
|Mittal Corp |Feb-10 |
|Jindal Power |Jan-10 |
|Neptune Developers |Jan-10 |
BIBLIOGRAPHY
BOOKS
1. Khan M. Y .and Jain. P.K (2009). Financial management. Pearson publications
2. Meir Kohn, “Financial Institutions and Markets”, 2009 2nd Ed. Oxford University Press.
3. Khan. M.Y., “Financial Services”, 2010, 5th Ed. Tata McGraw-Hill, Pvt. Ltd., New Delhi.
4. Gordon and Natarajan, “Financial Markets and Services’, 2009, HPH, 7th Ed. Mumbai.
5. Avadhani. V.A., “Financial Services in India”, 2009, 1st Ed. HPH.
6. Vasant Desai, “Financial Markets and Financial Services”, 2009, HPH, 1st Ed., Mumbai.
WEBSITES
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Project Summary
The capital market is the market for securities, where companies and the government can raise long term funds. The capital market includes the stock market and the bond market. Financial regulators ensure that investors are protected against fraud. The capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded.
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. 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 issuer’s securities. The sale of securities can be through book building or normal public issue.
The study covers the Primary Markets with IPOs in particular. The study attempts to study the advantages and disadvantages of IPOs. The study collects most of the information from different secondary resources apart from primary information by discussing with different managers and customers who do online trading. The study covers only the IPOs in India. The study attempts to study the IPOs that have come up in the last few years and the IPOs that are expected to come up in the next one year.
The study is limited to Initial Primary Offerings in India. The study was carried out for a period of 45 days and due to paucity of time an in-depth study was not possible. The IPO market is a dynamic one. Therefore data related to last few months was only considered and interpreted.
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ISSUER
BOOK RUNNING LEAD MANAGERS
UNDERWRITERS
MERCHANT BANKERS
MUTUAL FUNDS
STOCK BROKERS
I N V E S T O R S
MFs Financial Foreign Financial NRIs Corporations HNIs Retail Investors
Institutions Institutions
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