Post on 03-Jun-2018
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 1/151
IPOPRESENTED BY
ASHISH BROWNE 11 ASHWINI CHUBE 19
SHAHIL PARI 23
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 2/151
FLOW OF PRESENTATION
• What is IPO?
• Reasons, Advantages and Disadvantages• Eligibility norms
• Promoters’ contribution
• Lock-in requirements
• Pre-issue obligations
• Prospectus
• Pricing
• Post issue obligations
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 3/151
FLOW OF PRESENTATION
• Book building
• Listing of the issue
• IPO financing
• Grey market
• Guidelines on advertisement• Green shoe option
• Case study
• Case study – Google IPO• Future opportunities
• India vs US
• Recommendations
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 4/151
INITIAL PUBLIC OFFERING
IPO" stands for an "initial public offering " of securities.The term is usually used when a business has decided to"go public" to raise substantial amounts of capital byoffering ownership interests in the company to thepublic at large.
The "securities" being offered can include:• Shares of stock in a company• Bonds• Notes
• Debentures• Limited partnership units• Other types of investments in a company etc.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 5/151
Debentures PreferenceShares
Fresh Issue– EquityShares
PublicBonds
PublicDeposits
LoansfromFIs &
Banks
Offerthrough
Prospectus
Offer forSale
PrivatePlacement
RightsIssue
FixedPrice
Process
BookBuilding
Process
METHODS OF RAISING CAPITAL
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 6/151
Pre issueshare capital
Promoter'sContribution Promoter's contribution
Rs. 200cr Rs. 100cr 50.00%
IPOpost issuecapital Promoter's contribution
Rs. 50cr Rs. 250cr 40.00%
OFS Post issue capital Promoter's contribution
Rs. 50cr Rs. 200cr 25.00%
IPO OFS post issue capitalpromoter'scontribution
Rs. 25crRs.
25cr Rs. 225cr 33.33%
A)
C)
B)
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 7/151
REASONS FOR GOING PUBLIC
• Raising funds to finance cap ex programs like expansion,
diversification, modernization.
• Financing of increased working capital requirements.
• Debt refinancing.
• Financing acquisitions like a manufacturing unit, brand
acquisitions.• Exit route for existing investors.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 8/151
• The number of PE equity-backed IPOs have beenon a rise — six in 2004, 17 in 2005 and 14 till now
in 2006
• The trend of PE backed IPOs will only increase asmost funds hold a minority stake in Indian
companies and cannot force an acquisition on theIndian promoter who is keen on growth
• Culturally, Indian companies are promoter-runand want to leave a legacy behind. We prefercompanies going public as it prevents businessesfrom switching hands too often
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 9/151
EXAMPLES: PE EXIT
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 10/151
ADVANTAGES
• Facilitates future funding
Enables valuation of the
company
• Provides liquidity to existing
shares.
• Increases visibility of the
company
• Commands better pricing
than placement with few
investors.
DISADVANTAGES
• Dilution of ownership stake
• Involves substantial expenses
• Need to make continuous
disclosures• Increased regulatory
monitoring
• Takes substantial amount ofmanagement time and
efforts.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 11/151
GLOBAL SCENARIO
Highlights of the IPO activity worldwide in2005:
• The capital raised around the world rose by one-third to $167 billion, the highest since 2000,while deal numbers remained steady at 1,537deals, compared to 1,516 in 2004.
• The biggest deal of the year was $9.2 billionlaunch of China Construction Bank (CCB),
China‟s largest IPO ever.• US achieved the highest amount of capital raised
in IPOs by any single country in the world.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 12/151
GLOBAL SCENARIO
Amount Mobilized through IPO's worldwide
86
132145
116
177
210
94
6650
124
167
0
200
400
600
800
1000
1200
14001600
1800
2000
FY 95 FY 96 FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05
Year
N o . o f I P O ' s
0
50
100
150
200
250
C a p i t a l R a i s e d
NO. OF IPO'S CAPITAL RAISED ($)
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 13/151
INDIAN SCENARIO
Amount Mobilized Through IPOs
42
37
28
20
36 37
60
5 4
77987911093613749343410391202272227190
10
20
30
40
50
60
70
FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 April '06 May '06
Year
N o . o f I s s u
e s
0
2000
4000
6000
8000
10000
12000
14000
16000
A m o u n t ( R s
. c r )
No. of Issues Amt. (Rs. Crore)
Source: SEBI Bulletin, June 2006
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 14/151
ELIGIBILITY NORMS FOR IPO
• The primary issuances are governed by SEBI in termsof SEBI (Disclosures and Investor protection) guidelinesunder SEBI Act,1992.
• In 2000, SEBI issued ―Securities and Exchange Boardof India (Disclosure and Investor Protection)/DIPGuidelines, 2000‖ which is compilation of all circularsorganized in chapter forms.
• SEBI has laid down eligibility norms for entitiesaccessing the Primary market through public issues.There is no eligibility norm for a listed company makinga rights issue as it is an offer made to the existingshareholders who are expected to know their company.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 15/151
ELIGIBILITY NORMS FOR IPO
• Dematerialized form
• Entry Norm I
• Entry Norm II
• Entry Norm III
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 16/151
The company shall meet the following requirements:
(a) Net Tangible Assets: At least Rs. 3 crores for 3 fullyears
(b) Distributable profits in atleast three years(c) Net worth of at least Rs. 1 crore in three years
(d) If change in name, atleast 50% revenue forpreceding 1 year should be from the new activity
(e) The issue size does not exceed 5 times the pre- issuenet worth
Entry Norm I
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 17/151
(a) Issue shall be through book building route, with atleast 50% to be mandatory allotted to the QualifiedInstitutional Buyers (QIBs)
(b) The minimum post-issue face value capital shall beRs.10 crore or there shall be a compulsory market-making for at least 2 yrs
Entry Norm II
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 18/151
(a) The “project” is appraised and participated to theextent of 15% by FIs/Scheduled Commercial Banks
(b) The minimum post-issue face value capital shall be Rs.10 crore or there shall be a compulsory market-making forat least 2 years
(c) The company shall also satisfy the criteria of having atleast 1000 prospective allotees in its issue
Entry Norm III
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 19/151
EXEMPTIONS FROM ELIGIBILITYNORMS
The following are eligible for exemption from entry norms:
(a) Private Sector Banks
(b) Public sector banks
(c) An infrastructure company whose project has beenappraised by a PFI or IDFC or IL&FS or a bank whichwas earlier a PFI and not less than 5% of the project costis financed by any of these institutions.
(d) Rights issue by a listed company
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 20/151
PROMOTERS‘ CONTRIBUTION
• Minimum requirement for calculating promoter‟scontribution:
Individuals – Rs. 25000 eachFirms – Rs. 1 lakh each
• Promoters should bring in full amount of contribution at
least one day prior to the opening of the public issue
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 21/151
PROMOTERS‘ CONTRIBUTION
• Minimum 20% of the post issue capital
• Requirement for Offer for Sale: Minimum 20% of postissue capital
• Exception:Equity acquired during preceding three years shall notbe considered for computation of promoterscontribution if it is:
o Acquired for consideration other than casho Resulting from a bonus issue out of revaluation
reserve
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 22/151
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 23/151
PRE-ISSUE OBLIGATIONS
1. Exercising of due-diligence
- Reasonable investigation to find all facts that would be of
material interest to an investor or acquirer of a business.- Full understanding ofDebtsPending and potential lawsuitsLeases
WarrantiesLong-term customer agreementsEmployment contractsCompensation arrangementsLitigations against the Company and/or Promoters
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 24/151
PRE-ISSUE OBLIGATIONS
3. Documents to be submitted - a. Memorandum of Understanding
Lead Manager has to enter into an MoU with the issuer specifying their mutual rights,liabilities and obligations relating to the issue.
b. Inter-se allocation of responsibility
An agreement between multiple Lead Managers to an issue.c. Due-diligence certificate
Inclusion of all suggestions and observations made by the Company Law Board inthe Offer Document.
4. List of promoters - A list of persons who constitute the promoters group and their individual share
holdings.
Size of the Issue Fees Rs.
Up to Rs.5 crores 10,000Rs.5 cr. To Rs.10 cr. 15,000
Rs.10 cr. To Rs.50 cr 25,000
Rs.50 cr. To Rs.100 cr 50,000
Rs.100 cr. To Rs.500 cr. 2,50,000
Above Rs.500 cr. 5,00,000
2. Payment of Requisite Fee
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 25/151
PRE-ISSUE OBLIGATIONS
Role in the pre-issue process :
- To maintain a standard of ―Due Diligence‖ - To draft and design Offer Document, Prospectus, statutory
advertisements.- To ensure compliance with stipulated requirements and completion of
prescribed formalities with the Stock Exchanges, RoC and SEBI.• The Lead Merchant Banker shall not act as a Registrar to an issue in
which it is also handling the post issue responsibilities.
Size of the Issue No. of Lead Managers
Less than Rs. 50 crores 2
Rs.50 crores to Rs.100 crores 3
Rs.100 crores to Rs.200 crores 4
Rs.200 crores to Rs.400 crores 5
Above Rs.400 crores 5 or more
5. Appointment of intermediaries
BRLM (Book Running Lead Manager) – A Merchant Bankerpossessing a valid SEBI registration.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 26/151
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 27/151
b. Registrar – He provides administrative support to the
issue process.
Functions:
• To make sure that the amount of shares outstanding in
the market matches the amount of shares authorized bythe company.• To finalize the list of eligible allottees after deleting the
invalid applications.• To ensure that the corporate action for crediting of
shares to the demat accounts of the applicants is doneand the dispatch of refund orders to those applicable aresent.
• To coordinate with the Lead Manager for follow-upactivities.
• E.g. Karvy Consultants.
PRE ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 28/151
c. Bankers to the issue
They open the Share Application Money Account(Escrow A/c) of the company. All the issue proceeds aretransferred only to this a/c. the co. cannot withdraw themoney from this a/c. till the entire process of allotmentand listing is completed.
• Bankers to the Issue are appointed in all the mandatorycollection centers.
• They help to get quick estimates of collection andadvising the issuer about closure of the issue.
• E.g. SBI, Kotak Mahindra Bank.
PRE ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 29/151
d. Underwriter to the issue.
- ―Underwriting is a contract wherein the underwriter(usually a merchant bank, broker or FI) agrees topurchase a certain number of shares in the event ofunder subscription of the issue.‖
- E.g. DSP Merrill Lynch, Enam Financial Consultants.
e. Syndicate Members
- The BRLM may appoint those intermediaries who areregistered with the Board and who are permitted to carry
on activity as an ‗Underwriter‘ as syndicate members.- The syndicate members are mainly appointed to collectand enter the bid forms in a book built issue.
PRE ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 30/151
f. Depository- Holds the security in electronic form on behalf of the
investor.
- Provides services related to transactions in securities.
- E.g. NSDL, CDSL
g. Brokers to the issue
- Any member of any recognized stock exchange can beappointed as a broker.
- Offers marketing support to the issue.
- Disseminates information to the investors about theissue.
PRE ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 31/151
h. Auditors to the issue
- The regular auditors of the co. can act in this capacity.
- They have to submit the Auditors‘ Report along with the
financial statements for inclusion in the Prospectus.
PRE ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 32/151
• Book Running Lead Managers
• 1. SBI Capital Markets Ltd.2. IL&FS Investsmart Ltd.
3. ICICI Securities Ltd.
• Registrar to the issue• 1. Karvy Computershare Pvt. Ltd.
Syndicate Members
• 1. ICICI Brokerage Ltd.
2. Kotak Securities Ltd.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 33/151
Statement of Inter se allocation
of Responsibilities among Lead Managers
S. N Activities Responsibilities Co-ordintors
1. Capital structuring with the relative components andformalities such as type of instruments etc.
SBI CAPS SBI CAPS
2. Due diligence of the Company‘s operations/
management/ business plans/ legal etc.SBI CAPS SBI CAPS
3. Drafting and Design of the offer document and ofstatutory advertisement including memorandum
containing salient features of the Prospectus. The
designated Lead manager shall ensure compliance
With Stipulated requirements and completion of
prescribed formalities with the Stock Exchanges
Registrar of Companies and SEBI.
SBI CAPS SBI CAPS
4. Drafting and approval of Issue and statutory publicitymaterial, etc.
SBI CAPS SBI CAPS
5. Drafting and approval of all corporate advertisement,brochure and other
SBI CAPS SBI CAPS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 34/151
Statement of Inter se allocationof Responsibilities among Lead Managers
S. N Activities Responsibilities Co-ordintors
6. Appointment of Registrar, Bankers and Advertising Agency
SBI CAPS SBI CAPS
7. Appointment of Printers SBI CAPS SBI CAPS
8.Marketing of the Issue, which will cover inter alia,·
•Formulating marketing strategies, preparation ofpublicity budget·
• Finalize media & PR strategy·
• Finalize centres for holding conferences forbrokers, press, etc.·
• Finalize collection centres·• Follow-up on distribution of publicity and issuematerial including application forms, RHP anddeciding on the quantum of the issue material.
SBI CAPS, IIL,
and ISEC
SBI CAPS
9. Finalizing the list of QIBs. Divisions of QIBs forone to one meetings, road show related activities
and order procurement
SBI CAPS, IIL,
and ISEC
ISEC
Statement of Inter se allocation of Responsibilities among
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 35/151
Statement of Inter se allocation of Responsibilities amongLead ManagersS. N Activities Responsibilities Co-ordintors
10. Finalizing pricing and allocation. SBI CAPS, IIL,
and ISEC
ISEC
11. Post bidding activities including management ofEscrow Accounts, co-ordination with Registrar andBanks, Refund to Bidders, etc.
SBI CAPS SBI CAPS
12. The Post-issue activities of the Issue will involve
essential follow-up steps, finalization of basis ofallotment/weeding out of multiple application,etc.
Major ones are :
• Listing of securities
• Dispatch of certificates and refunds
• The various agencies connected with the work
such as Registrars to the issue• Bankers to the issue and the bank handling
refund business
Lead Manager shall be responsible for ensuring
that these agencies fulfil their functions and
enable him to discharge this responsibilityThrough suitable agreements with the issuer co.
SBI CAPS SBI CAPS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 36/151
6. Registration of the Offer Document
a. 10 copies of the Draft Prospectus have to be filed with SEBI. Thedraft prospectus should be accompanied by
Due Diligence Certificate from BRLM. Statement of Inter-se allocation of responsibility
Copy of Memorandum of Understanding
b. SEBI makes a copy of the Draft Prospectus available to the publicon its website sebi.gov.in
c. SEBI reserves the right to make amendments to the DraftProspectus. This must be done within 21 days from the date offiling. Any person can make a complaint to SEBI about any non-disclosure or mis-statements in the draft prospectus. After the dueamendments have been made by the BRLM, a No ComplaintCertificate is issued.
PRE ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 37/151
7. Mandatory Collection Centers
The minimum no. of collection centers for an issue ofcapital shall be
- The 4 metropolitan cities viz. Mumbai, Delhi, Kolkata,Chennai.
- At all such places where stock exchanges are located, inthe region where the regd. office of the co. is situated.
8. Authorized Collecting Agents
- Shall collect applications along with application money.
- Deposit application in the Share Application Money Account of the designated banker to the issue.
PRE ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 38/151
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 39/151
PRE ISSUE OBLIGATIONS (cont..)
IPO Grading
• Not mandatory
• But if opted:It is mandatory for the issuer to disclose allgrades obtained by it, including unaccepted grades,In the prospectus and abridged prospectus
• CRISIL, ICRA, etc. engaged in rating
S ll IPO h b d
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 40/151
Small IPOs may have to be rated
• BSE is learnt to be insisting that some smallercompanies get their issues rated. This was indicatedby merchant bankers handling the public issues ofsome small companies
• To check the fly-by-night companies
• The problem facing small companies is that there isno mechanism of credit enhancement, which makesit difficult for the issuer to improve on the rating.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 41/151
• CRISIL announced 2/5 grade for twocompanies — Shree Ashtavinayak CineVision and Minar International
• This grade indicates below averagefundamentals of these two IPOs.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 42/151
PROSPECTUS
“It is any document described or issued as
a prospectus and includes any notice, circular,
advertisement or other document inviting
deposits from the public or inviting offers fromthe public for the subscription or purchase of
any shares in, or debentures of, a body
corporate.”
SEBI Gu idel ines
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 43/151
CONTENTS OF PROSPECTUS
• General Information
- It consists of name , address, telephone no, fax no and email
address.
- Credit rating (in case of debenture issue)
• Capital Structure of the company
- Authorized issue and subscribed no. of instruments.
- Size of present issue.
a. Promoters contributionb. Firm allotment
c. Reservation for specified categories
d. Net offer to public
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 44/151
• Terms of Present Issue
- Authority of the issue
- Terms of payment
- Procedure and time for allotment and issue of certificates/refund
orders
• Particulars of the Issue
- Purpose of the Issue
- Project cost
- Means of financing
- Name of appraising agency if any
- Name of monitoring agency if any
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 45/151
• Company, Management and Project
- Promoters and their background
- Location of the project
- Infrastructure facilities
- Nature of products and services
• Financial information of Group Companies- Balance sheet data
- Profit and loss data
- Stock market quotation.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 46/151
• Basis of Issue Price
- Weighted Avg. Return on Net Worth in the last 3 yrs.
- In case of a new issue, EPS pre issue, P/E pre-issue
- Comparison of all accounting ratios with the companies of
comparable size.
• Outstanding Litigations or defaults- Whether all payments / refunds debentures, deposits of banks,
institutional dues etc. have been paid up to date.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 47/151
DISCLOSURES IN THE OFFER
DOCUMENT
• The risk factor shall appear in offer document asinternal risk and external risk.
• Whether the company proposes to raise fund for a
purpose like fixed assets creation and/or for rotationsuch as working capital etc. shall be disclosed clearly inthe offer document.
• One standard financial unit shall be used in the offer
document. (e.g. lakhs , thousands)
• The issuer company may include in the offer document,the financial statements prepared on the basis of morethan one accounting standards.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 48/151
OBJECTS of the issue
Particulars Rs. Mn
Setting up of infrastructure facility for Development Centre at Hyderabad 772.65
Setting up of infrastructure facility for Back up/ Disaster Recovery Centreat Bangalore
127.87
Establishing Overseas Marketing Offices 40.60
Expansion & upgradation of existing R & D facilities 220.25
Fund regional/global expansion & acquire & invest in strategic business 200.00
Meet working Capital requirement 284.48
Contingencies 104.11
General corporate purpose @
@ to be finalised after the net proceeds of the issue
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 49/151
Internal RISK FACTORS
• A complaint has been filed by the RoC, Andhra Pradesh against the Companyunder section 629A of the Companies Act, 1956 (the Act) for alleged non-compliance with the provisions of Sections 63, 68 and 628 of the Act
• The shares of Prism Foods Limited now known as Tanla Solutions Limitedwere under suspension from trading between December 08, 1999 and April 27,2000 while the Company was under the management of the former promoters.
• The ability to attract and retain skilled IT personnel,is important. Any inabilityon its part to attract the skilled personnel, may lead to a decline in the qualityof products and services offered, which could adversely affect its business andfinancial performance.
• Its business and the businesses of many of its customers are subject toregulation in the countries in which it operate.
• Top five customers contributed around 49% of its total consolidated revenuesof around Rs 871 million for the half year ended September 30, 2006.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 50/151
• Changes in technology may render our current technologiesobsolete or require us to make substantial new investments toseek to remain competitive.
• The valuations in the emerging internet/telecom industry arecurrently high and may not be sustainedin the future.
• We have not yet indentified the precise location of the premisesin Bangalore for the establishment of our backup/ disasterrecovery centre.
• The Company may fail in its endeavours to sell offshoredevelopment services to content providers,and mobile networkoperators including MVNOs.
• Any failures of the international mobile telecommunicationnetwork or the internet may reduce the use of the Company’sservices.
Internal RISK FACTORS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 51/151
• Our tax liability may increase and our profitability maybe reduced in the event of termination or reduction ofour tax incentives.
• An economic downturn may adversely impact our
operating results.
• Global competition is expected to intensify in thetelecom technology solutions markets.
• A significant change in the regulatory environment
• Revenues largely from the provision of products andservices that facilitate SMS usage by mobile telephone
subscribers.
external RISK FACTORS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 52/151
WHAT IS RED HERRING PROSPECTUS ?
• A preliminary prospectus issued by stock-underwriting
firms to measure investor interest in a prospective stock
offering. The document must contain a warning, printed in
red, that the document does not contain all the information
normally required by the stock exchange authority, and thatsome parts may be changed before the final prospectus is
issued to the public.
• It is understood that the document will be modified
significantly before the final prospectus is published.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 53/151
• It is a prospectus which does not have details ofeither price or number of shares being offered or the
amount of issue.
• Therefore, in case the price is not disclosed, thenumber of shares and the upper and lower price
bands have to be disclosed.
• On the other hand, an issuer can state the issuesize and the number of shares are determined later.
• The offer document filed with RoC on completion ofthe bidding process with the details of the final priceincluded is called a prospectus.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 54/151
CONTENTS OF RED HERRING PROSPECTUS
• Definitions & Abbreviations• Risk Factors & associated Management perceptions
• PART I – Capital Structure
– Terms & Particulars of Current Issue – Company Details
– Basis of Issue Price
– Any Litigations
• PART II
– Financial Information – Main provisions of AoA of Company
• PART III – Declaration
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 55/151
DISTINGUISH BETWEEN :
RED HERRINGDOCUMENT
FINAL PROSPECTUS
Offered to potential investorsBEFORE security is priced orfinalized
Offered to potential investors AFTER security is priced orfinalized
Called so because of thedisclaimer printed in red
Also referred to as Blackbecause of no such disclaimer
Mainly does not contain theissue size and price
Contains all informationincluding issue size & price
Subject to modifications beforefinalizing with SEBI
Is the final document, cannot bechanged
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 56/151
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 57/151
Rampant Bonus Issuances Make Cost Of A Single
Share A Few Paise For Many
• Promoters make bonus issues just a few months before IPO
• Parsvnath made 2 bonus issues in 6 months before IPO
• The average acquisition cost per share for Mr Pradeep Jain was amere 10 paise compared to the IPO price of Rs 300
• The promoters of Sun TV, for instance, gave themselves 30 bonusshares for every one share held just before the IPO
• In majority of the IPO‘s the promoters‘ gains were more than 50times or 5,000%. In a few instances though, the gains have been ashigh as 1,000 times or 1,00,000%. The best being a whopping gainof 17,124 times or 17,12,400%.
The Darker Side
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 58/151
The Darker Side• Investors have lost wealth to the tune of Rs 14,000
crore in about 60 companies listed in the past one
year as their share prices have fallen substantiallysince listing
• RPL, GTL Infrastructure, Tantia Construction, Inox
Leisure, ABG Shipyard, Plethico Pharmaceuticals,Royal Orchid and PVR are few examples ofcompanies whose stocks have lost ground but stillquoting above offer prices this phenomenon.
• As many as 30 of the 60 new listings are currentlytrading below their respective offer prices
Company Price %Gain/loss
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 59/151
Company Price %Gain/loss
Issue Current
Deccan Aviation 148 132.55 -10.44
Solar Explosives 190 130.6 -31.26 Vikash Metal & Power 20 12.25 -38.75
Richa Knits 30 18.1 -39.67
Alps Industries 120 72.05 -39.96
Emkay Shares & Stock 120 72.05 -39.96 Jet Airways 1100 606.3 -44.88
Dynemic Products 35 19 -45.71
Powersoft Global Solutions 22 10.69 -51.41
Visa Steel 57 27.55 -51.67 Sakuma Exports 50 18.6 -62.8
Sree Sakthi Paper Mills 30 10.99 -63.37
Compulink Systems 60 17.2 -71.33
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 60/151
PRICING
• Companies are now allowed to freely price their issuesas per the latest SEBI guidelines.
• Price Band – It is a range and not an individual value.The lower limit of the price band is known as the floor
price and the upper limit is known as the cap price. Theissuer can mention a price band of 20% (cap in the priceband should not exceed 20% of the floor price).
• Cut-off price – it is the price ultimately decided by theBRLM and Investment Bankers. Assuming an individualinvestor does not want to go through the hassle of thebidding process, he may simply write in the applicationform ―cut-off‖.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 61/151
• Cut-off amount = no. of shares x cap price.
• The final pricing tends to focus on current market conditions and
specific demand for the offering at alternative price levels from theinvestors.
Minimum Subscription of 90% within 60 days
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 62/151
Denomination of Shares
• If issue price is more than Rs. 500 per share, the facevalue can be between Re.1 to Rs.10/- per share
• If issue price is less than Rs. 500 per share, the face valuehas to be Rs. 10/- per share
• Disclosure about the face value of shares should bemade in the advertisement, offer documents and inapplication forms in identical font size as that of issueprice or price band
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 63/151
TANLA
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 64/151
Qualitative factors
• Strength in established and proven telecomproducts and solutions
• Leading telecom companies as clients in
India as well as overseas
• Flexib le pr ic ing models
• End-to-end of fer ings
• Focus on R&D
Quantitative Factors
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 65/151
Year (Consolidated) EPS (Rs.) Weight
FY04 1.216 1FY05 2.56 2
FY06 8.87 3
Weighted Average 5.39
HY06 (end Sept. 30) 10.47
Year (Unconsolidated) EPS (Rs.) Weight
FY04 1.216 1
FY05 1.78 2
FY06 754 3
Weighted Average 4.57HY06 (end Sept. 30) 6.65
EPS of face value of Rs. 2/- each
Q
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 66/151
2. P/E in relation to Issue Price = 35.15
Issue Price = Rs. 265
Pre-Issue EPS = 7.54
P/E = Issue Price / EPS
RONW has been calculated as per the
following formula:• (Net Profit after tax)/(Net Worth excluding
revaluation reserve at the end of the year)
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 67/151
Year (Consolidated) RONW (%) Weight
FY04 51.38 1
FY05 44.77 2
FY06 69.51 3
Weighted Average 58.24
HY06 (end Sept. 30) 46.87
Year (Unconsolidated) RONW (%) Weight
FY04 51.38 1
FY05 35.76 2
FY06 70.17 3
Weighted Average 55.57
HY06 (end Sept. 30) 38.60
4 Minimum Return on total Net Worth after the Issue required toonso a e as s - 0
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 68/151
4. Minimum Return on total Net Worth after the Issue required tomaintain pre-Issue EPS of 8.87 is 94.99%
EPS ( Pre-Issue ) = 8.87
No. of shares ( Pre- Issue ) = 34.115 millionEquity Share Cap = Rs. 68.230 millionNo. of shares ( IPO ) = 15.885 millionEquity Share Cap = Rs. 31.770million
Total No. of shares = Rs. 50 million
Total Equity Share Cap = Rs. 100 million
Reserves & Surplus = Rs. 366.88 million
• EPS = PAT/ No. of shares
• EPS = New PAT / New no. of shares8.87 = New PAT / 50 mn
New PAT = 443.5 mnRONW (New) = 443.5 / 466.8
= 94.99%
HY 06
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 69/151
4. Minimum Return on total Net Worth after the Issue required to maintain pre-Issue EPS of 10.47 is 62.80%
EPS ( Pre-Issue ) = 10.47No. of shares ( Pre- Issue ) = 34.115 millionEquity Share Cap = Rs. 68.230 millionNo. of shares ( IPO ) = 15.885 millionEquity Share Cap = Rs. 31.770millionTotal No. of shares (Post Issue) = Rs. 50 millionEquity Share Cap (Post Issue) = Rs. 100 million
Reserves & Surplus = Rs. 733.593 million
• EPS = PAT/ No. of shares
• EPS = New PAT / New no. of shares10.47 = New PAT / 50 mn
New PAT = 523.5 mnRONW (New) = 523.5 / 833.593
= 62.80%
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 70/151
ANALYSIS / outlook
There are no comparable listed companies in India doing the same business asthat of Tanla.
Even though Tanla Solutions has shown 300%+ consolidated topline growthin 1 HY07 and 200% growth at bottomline we have assumed a modest
200% topline growth in our estimates for the full year. Based on this we have arrived At FY07 E EPS of Rs. 15.7 on diluted equity base of 50 mn shares
On this diluted EPS the stock is priced at 14.7x at the lower band and 16.9x atthe upper band.
We recommend to subscribe
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 71/151
Consolidated NAV (Rs.)
As on March 31, 2006 12.75
As on September 30, 2006 22.33
After issue 15.43
5. Net Asset Value (NAV) per Equity Share -
NAV has been calculated as per the following formula:(Net worth excluding revaluation reserve and preference share capital at the end of the
year)/(Total number of equity shares)
6. Comparison with Industry Peers -
The Company is in the business of providing telecom products and services, such asSMSC, Aggregator Services and Offshore development relating to the same. There areno comparable listed companies in India. Hence, comparison with industry peers is notapplicable.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 72/151
Year EPS (Rs.) WeightFY04 14.84 1
FY05 17.34 2
FY06 12.23 3
Weighted Average 14.37
EPS of face value of Rs. 10/- each
Quantitative Factors
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 73/151
2. P/E in relation to Issue Price = 2.125Issue Price = Rs. 26
Pre-Issue EPS = 12.23
P/E = Issue Price / EPS
RONW has been calculated as per the following formula:• (Net Profit after tax)/(Net Worth excluding revaluation reserve at the end
of the year)
Year (Unconsolidated) RONW (%) Weight
FY04 23.11 1
FY05 41.22 2
FY06 52.74 3
Weighted Average 43.96
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 74/151
4. Minimum Return on total Net Worth after the Issue required to maintain pre-Issue EPS of 12.23 is
EPS ( Pre-Issue ) = 12.23No. of shares ( Pre- Issue ) = 76.132 millionEquity Share Cap = Rs. 761.32 millionNo. of shares ( IPO ) = 71.5 millionEquity Share Cap = Rs. 715 million
Total No. of shares = Rs. 147.632 million
Total Equity Share Cap = Rs. 1,476.32 million
Reserves & Surplus = Rs. 2463.42 million
• EPS = PAT/ No. of shares
• EPS = New PAT / New no. of shares12.23 = New PAT / 147.632 mn
New PAT = 1805.539 mnRONW (New) = 18055.39/
= 69.149%
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 75/151
Consolidated NAV (Rs.)
As on March 31, 2006 18.30
After issue 22.0
5. Net Asset Value (NAV) per Equity Share -
NAV has been calculated as per the following formula:(Net worth excluding revaluation reserve and preference share capital at the end of
the year)/(Total number of equity shares)
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 76/151
EPS P/E ROANW% BV/ Sh M P P/BV
DCB 12.23 2.125 52.74 18.3 26* 1.42
Bank of Rajasthan 2.8 13.6 4.6 31.7 37.05 1.16
IndusInd Bank Ltd 0.2 - 27 29.8 43.4 1.45
Jammu & Kashmir Bank Ltd 35.3 11.1 10.2 371.1 574.65 1.54
Karur Vyasa Bank Ltd 37.9 7.3 16.6 242.4 286.45 1.18
Karnataka Bank 14.1 8 16.9 91.6 127.55 1.39
Yes Bank Ltd 2.3 39.9 14.1 21.2 142.05 6.70
* Issue price
Market price (MP) as on 16th Dec 06 - BSE
6. Comparison with Industry Peers -
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 77/151
POST ISSUE OBLIGATIONS
1. Monitoring Reports – It starts with a closure of thesubscription lists. Within 3 days of the closure of theissue, the invt. banker is required to inform SEBIwhether the issue has been subscribed to at least 90%
of the total amt. in his Monitoring Report.
2. Processing of Applications – The Registrar to the issuewould have to determine the no. of successfulapplicants, after the receipt of the application formsfrom the collecting banks. He would have to scrutinizeall applications, to check for multiple applications &rejections; also to see whether the applications arecomplete in all respects.
POST ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 78/151
• Underwriters
o The lead Merchant Banker satisfies himself that theissue is fully subscribed before announcing closure ofthe issue.
o Lead Merchant Banker ensures that the underwriters
honor their commitments within 60 days from the dateof closure of the issue.
o If the issue is not subscribed upto 90%, the underwritersshall have to bring-in the shortfall within 60 days of the
closure of the issue.
o If an issue is not subscribed to 100%, the underwritersare obligated to take-up the unsubscribed portion.
POST ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 79/151
Bankers to an issue
The Lead Merchant Banker ensures that moneys received pursuant to the issue and kept in a separate
bank
It is released by the said bank only after the listing permission has been obtained from the stock
exchanges.
• Advertisement
o Lead Merchant Banker ensures the release ofadvertisement within 10 days of completion of various
activities in 1 English National Daily, 1 Hindi Nationalpaper and a Regional paper
o Closure of issue
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 80/151
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 81/151
• Proportionate Allotment Procedure:
o Allotment shall be on proportionate basis within thespecified categories,
o It is rounded off to the nearest integer
POST ISSUE OBLIGATIONS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 82/151
METHOD OF PROPORTIONATE BASIS OF ALLOTMENT
• Bidders categorized acc. to no. of equity shares appliedfor.
• Total equity shares allotted to each category = (No. ofbidders in category x no. of equity shares applied for byeach bidder) x inverse of over-subscription ratio.
• No. of equity shares allotted to successful bidder = total
number of Equity Shares applied for by each Bidder inthat category x the inverse of the over-subscription ratio.
ILLUSTRATION
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 83/151
TOTAL SHARES OFFERED @rs.600 10crore
Shares on offer for retail category 2.5crore
The total issue was oversubscribed by 4 timesRetail category 8.25 times
Minimum application bid is 9 shares and multiple thereof
NO. NAME No. of shares
applied
Eligible to be alloted
1 A 81 81/8.25=9.82
Rounded off to 10shares
2 B 72 72/8.25=8.73
Rounded off to
9 shares
3 C 63 63/8.25=7.63
ISSUE DETAILS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 84/151
Sr no Particulars Issue details
1 Issue size 200 crores equity shares
2 Allocation to QIB(50%) 100 crores equityshares
Of which
a) reservation to mf(5%) 5 crores equity shares
b)balance for all QIBincluding MF s
95 crores equity shares
3 No of QIB applicants 10
4 No of shares applied for 500 crores equity shares
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 85/151
DETAILS OF ALLOTMENT
TOQIBBIDDERS/APPLICANTS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 86/151
Type of
QIB
bidders
Shares
bid for Allocation of 5
crores shares to
MFs
proportionately
Allocation ofBalance 95 crores
shares to
QIBs proportionately
Aggregate
allocation
to MFs
(I) (II) (III) (IV) (V)
A1 50 0 9.60 0
A2 20 0 3.84 0
A3 130 0 24.95 0
A4 50 0 9.60 0
A5 50 0 9.60 0
MF1 40 1 7.48 8.48
MF2 40 1 7.48 8.48
MF3
80
2
14.97
16.97
MF4 20 0.5 3.74 4.24
MF5 20 0.5 3.74 4.24
500 5 95 42.42
TOQIBBIDDERS/APPLICANTS (No. of equity shares in crores)
SUMMARY
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 87/151
• Due Diligence
• Preparation of theProspectus /InformationMemorandum
• Arranging FirmAllotments
• Statutory approvals
• Liaising with Ratingagencies / DebentureTrustee / StockExchange
• Press and Brokerconferences
• IPO Funding
• Printing & Distributionstationery
• Roadshows
• Press
• Brokers
• Institutional Investors
• Retail Investors
• One to One meets
• Analyst meets
• NRI Investors
• Investor identification
• Research Reports
• Consortium formation
• Legal due diligence
• Documentation andDisbursement
• Finalizing Basis ofAllotment
• Documentationwith depositories
• Credit intoinvestor accounts
• Listing approvalsfrom the stock
exchanges
• Post issueresearch support
PRE ISSUE MARKETING POST ISSUE
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 88/151
BOOK BUILDING
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 89/151
BOOK BUILDING
“ A process undertaken by which a demand forthe securities proposed to be issued by a bodycorporate is elicited and built up and the price for
such securities is assessed for the determination of
the quantum of such securities to be issued bymeans of a notice, circular, advertisement,document or information memoranda or offerdocument.”
SEBI Guidelines
• It refers to the collection of bids from investors,hi h i b d i di ti i
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 90/151
which is based on an indicative price range.
• Investors may be Retail Bidders, Non-InstitutionalBidders or Qualified Institutional Bidders (QIBs)
• Bids are collected at various prices, which are above
or equal to the floor price.
• The offer/issue price is then determined after the bidclosing date based on certain evaluation criteria.
• The basic motto of book building is that the marketknows the best.
FIXED PRICE ISSUE VS BOOK BUILDING
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 91/151
FIXED PRICE ISSUE VS. BOOK BUILDING
Features Fixed Price Process Book Building Process
Pricing
Price at which the securities
are offered/allotted is known
in advance to the investor.
Price at which securities will be
offered/allotted is not known in
advance to the investor. Only an
indicative price range is known.
Demand
Demand for the securities
offered is known only after
the closure of the issue
Demand for the securities offered
can be known everyday as the
book is built.
Payment
Payment made as and when
the calls are made.
Payment at the time of
subscription.
TYPES OF BOOK BUILDING
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 92/151
TYPES OF BOOK BUILDING
• 75% Book Building process
In the 75% book building exercise, 75% of the IPO will bethrough book building and 25% will be through a Fixed Priceissue.
• 100% Book Building process
Option available only if the issue size is above Rs. 25 crores.
Book building is for the portion other than the promoters'
contribution.
75 % BOOK BUILDING
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 93/151
75 % BOOK BUILDING
• The option of book-building shall be available to all bodycorporate which are otherwise eligible to make an issue ofcapital to the public.
• The issuer company shall have an option of either reserving
the securities for firm allotment or issuing the securitiesthrough book-building process.
• The requirement of minimum 25% of the securities to be
offered to the public shall also be applicable
• In case the book-building option is availed of, underwritingshall be mandatory to the extent of the net offer to the public.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 94/151
• On receipt of the information, the Book Runner and theissuer company shall determine the price at which thesecurities shall be offered to the public.
• The issue price for the placement portion and offer to thepublic shall be the same.
• On determination of the issue price within two day,thereafter the prospectus shall be filed with the Registrarof Company.
• One day prior to the opening of the issue to the public,
Book Runner shall collect from the institutional buyersand the underwriters the application forms along with theapplication moneys to the extent of the securitiesproposed to be allotted to them / subscribed by them.
• The issuer company shall open two different accounts forll ti f li ti f th i t l t
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 95/151
collection of application moneys, one for the private placementportion and the other for the public subscription.
# Escrow Account :- Account opened with an Escrow CollectionBank and in whose favor the Bidder will issue Cheques or draftsin respect of the Bid Amount when submitting a Bid.
• Allotments for the private placement portion shall be made on
the second day from the closure of the issue.
• However, to ensure that the securities allotted under placementportion and public portion are pari passu in all respects, theissuer company may have one date of allotment which shall bethe deemed date of allotment for the issue of securities through
book building process.
100% BOOK BUILDING PROCESS
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 96/151
• Issue of capital shall be Rs.25 crores and above.
• Reservation or firm allotment to the extent of percentage specified inthese Guidelines shall not be made to categories other than thecategories mentioned below:
• Book Building shall be for the portion other than the promoterscontribution
(a) ‗permanent employees of the issuer company and in the case of anew company the permanent employees of the promotingcompanies';
(b) ‗shareholders of the promoting companies in the case of a newcompany and shareholders of group companies in the case of anexisting company‘ on a ‗firm allotment basis‘.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 97/151
• The primary responsibility of building the book shall be that ofthe Lead Book Runner.
• The Book Runner's may appoint those intermediaries who areregistered with the Board and who are permitted to carry onactivity as an ‗Underwriter‘ as syndicate members.
• In case of an under subscription in an issue, the shortfall shallhave to be made good by the Book Runner's to the issue.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 98/151
BOOK BUILDING PROCESS
1 Company plans an IPO via book building Route
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 99/151
1. Company plans an IPO via book building Route.
2. Appointment of Lead Managers/merchant bankers as a book runners
3. Preparation of a draft prospectus (containing all mandatory companydisclosers other than price)
4. Draft prospectus filed simultaneously with (SEBI)
- Any modification to be incorporated.
5. Applications from the public to bid.
- Advt. in not less than 3 newspapers
The advertisement shall also contain the following:
- The date of opening and closing of the bidding.- The names and addresses of the syndicate members as well as
the bidding terminals for accepting the bids.- The method and process of bidding.
6. Procedure for bidding:
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 100/151
1) Bid shall be open for at least 5 days.
2) Bidding shall be permitted only if an electronically linked transparentfacility is used.
3) The ‗syndicate members‘ shall be present at the bidding centers so
that at least one electronically linked computer terminal at all thebidding centers is available for the purpose of bidding.
4) The number of bidding centers shall not be less than thef f
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 101/151
number of mandatory collection centers specified in theseGuidelines.
5) Individual as well as institutional investors shall place their bidsonly through the ‗syndicate members‘ who shall have theright to vet the bids.
6) The investors shall have the right to revise their bids.
Revised Bid must only be made on that Revision Form.
1. Bid or the revise Bid should not be less than the FloorPrice or higher than the Cap Price.
2. Non-institutional and QIB Bidders can not bid at cut-offprice.
7. Price discovery begins through the bidding process.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 102/151
1) The Lead Manager and the Underwriter play an important role in theprice determination of the issue.
2) The following accounting ratios may be given as the basisfor issue price:
- EPS, pre-issue, for the last three years
(as adjusted for changes in capital).
- P/E, pre-issue and comparison thereof with industry P/Ewhere available (giving the source from which industry P/Ehas been taken).
- Average return on net-worth in the last three years.
- Net-Asset Value per share based on last balance sheet.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 103/151
3) On closure of the book, the quantum of sharesordered and the respective prices offered are known.
4) The price discovery is a function of demand at variousprices.
5) The book runner and the company conclude the
pricing and decide the allocation
8.Refund of application money with in 15 days.
9. Allotment of shares within 30 days.
10. Listing on the stock exchanges.
• Illustration:
• Book Building and Price Discovery
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 104/151
• Book Building and Price Discovery
Process
• Bidders can bid at any price within the priceband. For instance, assume a price band ofRs. 20 to Rs. 24 per share, issue size of
3,000 equity shares and receipt of five bidsfrom bidders. The illustrative book as shownbelow shows the demand for the shares of the
issuer company at various prices and iscollated from bids received from variousinvestors.
Invest Bid Bid Price Cumulative Subscripti
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 105/151
Invest
ors Bid
Qty
Bid Price
(Rs.) Cumulative
Quantity Subscripti
on
A 500 24 500 16.67%
B 1,000 23 1500 50.00%
C 1,500 22 3,000 100.00%
D 2,000 21 5,000 166.67%
E 2,500 20 7,500 250.00%
The Issuer, in consultation with the BRLMs, will finalise the issue price at or below such cut-offprice, i.e., at or below Rs. 22. All bids at or above this issue price and cut-off bids are valid bidsand are considered for allocation in the respective categories.
LISTING OF THE ISSUE
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 106/151
LISTING OF THE ISSUE
• Company executes a Listing Agreement with the StockExchanges before formal trading can begin. The Listing
Agreement requires the company to make certaindisclosures and perform certain deeds.
• The information disclosures relate to Annual Reports,periodic Financial Statements, Dividends, Rights Issue,bonus shares and other relevant information deemed
essential for shareholders.
QUALIFICATION FOR LISTING ON NSE
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 107/151
1. Paid up capital
- Paid up capital of the applicant should not be less than10 crores.
2. Three yrs background of the;
a) The applicant
b) The promoters/promoting company
3. Has not been offered to the Board for Industrial andFinancial Reconstruction.
4. The net worth of the company has not been wiped out.
5. The company has not received any winding up petitionby the court.
6. Track record of the directors of the company.
LISTING PROCEDURE
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 108/151
LISTING PROCEDURE
• Initial discussions - Authorized persons of the concerned issuer should hold discussionswith NSE personnel regarding various requirements to be fulfilled bythe issuer.
• The approval of Memorandum and Articles of Association should be
submitted by the issuing company to the stock exchange.
• Approval of draft prospectus -Issuer shall file draft prospectus with the NSE. In case NSE is notthe regional stock exchange, then the draft prospectus should befiled simultaneously with the NSE, when the same is filed with the
Regional Stock Exchange pertaining to the issue, for perusal ofNSE.
• Submission of application – Issuers desiring to list new securities on
the NSE shall make an application for admission of their securitiest d li th NSE i th f ib d i thi d
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 109/151
to dealings on the NSE in the forms prescribed in this regard.
• The listing fees depend on the paid up share capital of your
company
Particulars Amount ( Rs. )
Initial Listing Fees 7,500
Annual Listing FeesCompanies with paid up share and/or debenture capital:Of Rs.1 crore 4,200
Above Rs.1 crore and up to Rs.5 crores 8,400 Above Rs.5 crores and up to Rs.10 crores 14,000 Above Rs.10 crores and up to Rs.20 crores 8,000
Above Rs.20 crores and up to Rs.50 crores 42,000 Above Rs.50 crores 70,000
Companies which have a paid up capital of more than Rs. 50 crores will pay additionallisting fees of Rs. 1400 for every increase of Rs. 5 crores or part thereof in the paid upshare/debenture capital
Indicative Time Schedule
Activities Responsibility Date
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 110/151
1 Finalize Fund Raising & related matters Company/Investment Banker
X - 30
2 Board meeting for Fund Raising/Appointment of
Merchant Bankers
Company X - 30
3 Company to provide Information for Due Diligence/Offer Document preparation to Inst Banker
Company X - 30
4 Receive Appraisal report Company X - 25
5 To keep first draft of Project Report / Offer Document
ready.
Investment Banker X - 5
6 To finalize Project Report/ Offer document Investment Banker X
7 Appointment of Registrars, Printers, Bankers ,Underwriters and Ad Agency to the issue
Investment Banker& Company
X
8 Signing of Annual accounts for March 2006 Company/Auditors X
9 Receive Auditors report & tax Benefits Company/Auditors X+10
10 Due Diligence & Finalize Offer Document Investment Banker X + 12
11 Receive solicitors comments on draft offer document Investment Banker X + 22
12 File Draft Prospectus with Securities and Exchange Boardof India/ Stock Exchanges
Investment Banker X + 25
Activities Responsibility Date
13 Receive Stock exchange comments/ approval on Offer Investment Banker X + 60
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 111/151
13 Receive Stock exchange comments/ approval on OfferDocument
Investment Banker X + 60
14 Freeze marketing plan Investment Banker /Company / Ad Agency
X + 70
15 Receives SEBI's final clearance Investment Banker X + 80
16 Board meeting and filing prospectus with ROC Company X + 100
17 Receive clearance from Registrar of companies Company / InvestmentBanker
X + 101
18 Printing of Prospectus and Application Forms Investment Banker /
Printer
X + 102
19 Circulation of Prospectus and Application Forms, Marketing ofIssue, Hold Press and Broker conference/ Release of statutoryadvertisements
Investment Banker /Company / Ad Agency
X + 107
20 Road Shows complete Investment Banker /Company / Ad Agency
X + 110
21 Public issue opens Investment Banker X + 125
22 Public issue closes Investment Banker X + 132
23 Finalize Basis of Allotment/ Credit of shares into demataccounts/ Listing of shares on stock exchanges
Investment Banker /Company / Registrar
X + 142
24 File Reports with SEBI Investment Banker X + 150
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 112/151
IPO Financing
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 113/151
IPO Financing
• IPO financing provides leverage to makelarge size applications in public issues
• IPO financing is nothing but marginfinancing in primary market
• The financier finances the remainingamount
• If the margin for a particular IPO is set at 20%, theapplication size would be four times bigger than the
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 114/151
pp ggapplication that could have been made by the investorwith his/her own money
Own Investment Through IPOFinancing
Investor‘s Funds (Rs.) 10,00,000 10,00,000
Financing (Rs.)* 0 40,00,000
Application Size (Rs.) 10,00,000 50,00,000
No. of shares applied (Issue Price Rs.100/each)
10,000 50,000
No. of times oversubscribed 10 10
Allotment (No. of shares) 1000 5000
Interest @ 15% (3 months) Nil 1,50,000
Total cost of acquisition per share 100 130
Price after 3 months 175 175
Gains 75000 135000
• Most of the issues have received very good over-subscription andshares have yielded handsome post-listing gains. The higher allotmentsthrough IPO financing route have added significantly to the investors‘
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 115/151
g g g ywealth
• Like any other leveraging tool, IPO financing also has its drawbacksand an investor need to take a calculated call. The superior returnsthrough IPO financing would depend completely on the premise that thelisting price or post listing price of the scrip is higher than the acquisitioncost of shares allotted in an IPO
• over subscription allotment acquisition cost per share
• So, in case a public issue gets huge over subscription, theacquisition cost can be really high leaving little room forappreciation
• Also, in case a public issue is not priced attractively, thesame can change the entire dynamics leading to financialloss
GREY MARKET
G k t i th ffi i l t di i
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 116/151
• Grey market is the unofficial trading in acompany‘s share before it starts trading on the
stock exchange after an IPO
• Before the issue opens for trading, a buyeragrees to buy certain shares of the IPO at afixed price from some other party
• This price is based on the likely opening price
• Participants of grey market
GUIDELINES ON ADVERTISEMENT
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 117/151
• Truthful, clear, concise matter and understandablelanguage.
• Statements considered misleading
• Should not use celebrities, models, fictional characters,
landmarks or caricatures• Not to appear in form of „crawlers‟
• In case of Television ads
o Risk factors should not be scrolled
o Advise to refer to Red Herring Prospectus
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 118/151
• Financial data for past three years• Print size not to be less than 7
• Compulsory mention of risk factors
• No advertisement regarding subscription status during
period of subscription.• No corporate advertisement of issuer company shall be
issued after 21 days of the filing of the offer documentwith the Board till the closure of the issue.
Green shoe option
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 119/151
p
• Green shoe option means an option of allocatingshares in excess of the shares included in thepublic issue
• Green Shoe‖ comes from the name of company― The Green Shoe Company Ltd‖
• Green Shoe is a clause contained in theunderwriting agreement of IPO
• It allows to buy upto 15% of additional shares atthe offering price as per the demand
• Shares purchased by a stabilizing agent
Green shoe option
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 120/151
• The equation appears to be : - – Total Shares 10000000
– Additional Share( 15% ) 1500000
– Net 11500000
– If after 30 days share price falls below theissue price stabilizing agent buys shares from
market and increased the price. – If share price is above issue price the
stabilizing agent has no role to play.
p
HOW DOES IT WORK?
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 121/151
ISSUER CO.
BRLMs
STABILISING AGENT
GSO BANK A/C GSO DEMAT A/C
SHARE PRICE < ISSUE PRICE
BUYS SHARES
PROMOTERS /LENDERS
Green shoe option
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 122/151
• From an investor‘s perspective, an issuewith green shoe option provides moreprobability of getting shares
• Post listing price may show relatively morestability as compared to market.
p
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 123/151
CASE STUDY
About Parsvanath Developers
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 124/151
• One of north India‘s leading real estatedevelopment companies
• Began operations by marketing real estateprojects and from 1990 began constructing
• Currently has a land bank of 108.7mn sq ftspread across 41 cities in 14 states.
• Of which it has 3.5mn sq ft development space
• Main business operations are in the north Indiaregion ; majority from NCR region.
p
Objectives
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 125/151
j
• The objects of the issue are to meet the cost ofdevelopment and construction of some of projects.
• PDL plans to raise proceeds through the public issue tofinance the its 11 projects, which would cost thecompany around Rs14.3bn.
• Rs10.9bn would be raised from the issue, the remainingportion of through internal accruals.
• Balance funds to be utilized for generalcorporate purposes including brand building
exercises and strengthening of our marketingcapabilities.
Issue Details Of Parsvnath Developers IPO
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 126/151
Issue Size 33,038,000 shares
Issue Type 100 % Book Building
Face Value Rs 10 each
Price Range Rs.250 to Rs.300
Market Lot multiples of 20 equity shares
Minimum Order Quantity 20 equity shares
IPO Market Timings 10.00 a.m. to 5.00 p.m.
Issue Period The offer is open from November 6 to 10 2006
Book Running Lead Managers
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 127/151
Registrar to the issue.
ISSUE STRUCTURE
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 128/151
Total IPO of 36325800 equity shares of Rs. 10 each
Issue shares of 33238000.
Equity shares
Green shoe option of 3087800 Equityshares
33038000 Equity shares 200000(employees)
Retail
9911400
HNI
3303800
QIBs
19822800
QUALIFIED INSTITUTIONAL BUYERS
Who can apply Public Financial Institutions ,etc.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 129/151
Who can apply Public Financial Institutions ,etc.
Basis of allocation proportionate
Percentage of offer Size 60% of the net offer to Public
Number of Equity shares
available for allocation
19,822,800 Equity Shares
Minimum Bid Such number of Equity Shares Shares in multiples of 20 Equity Shares
so that
the Bid Amount exceeds
Rs 100,000
Maximum Bid Such number of EquityShares in multiples of 20
Equity Shares so that the Bid does not exceed the
Net Issue, subject to applicable limits
Allotment Mode Compulsory in Dematerialized mode
Margin money
10% of Bid Amount
NON-INSTITUTIONAL INVESTORS
Who can apply Resident Indian individuals, HUF, companies, corporate
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 130/151
bodies, NRI’s, Societies and trust, etc.
Basis of allocation Proportionate
Percentage of offer
Size
Minimum 10% of Net offer
Number of Equity
shares available for
allocation
Minimum of 3,303,800 equity shares.
Minimum Bid Such number of Equity Shares in multiples of 20 Equity
Shares so that the Bid Amount exceeds Rs 100,000
Maximum Bid Such number of Equity Shares in multiples of
20Equity Shares so that the Bid does not exceed the
Net Issue, subject to applicable limits
Allotment Mode Compulsory in Dematerialized mode
Margin money 100% of Bid Amount
RETAIL INDIVIDUAL
Who can apply Individuals Including NRI‟s and HUFs.
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 131/151
pp y g
Basis of allocation Proportionate.
Percentage of offer
Size
Minimum 30% of the net offer to Public.
No. of Eq.shares
available forallocation.
Minimum of 9,911,400 Equity Shares
equity shares.
Minimum Bid 20 equity shares
Maximum Bid Such number of Equity Shares in multiples of 20
Equity Shares so that the Bid Amount does notexceed Rs. 100,000
Allotment Mode Compulsory in Dematerialized mode
Margin money 100% of Bid Amount
Capital Structure
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 132/151
• Authorised Capital: 20,000,000 shares of Rs 10each
• Equity shares outstanding prior to issue:
148,370,400 shares• Equity shares outstanding after the issue:181,608,400 shares
• (Excluding the green shoe option)
• Equity shares outstanding after the issue:184,696,200• (Including the green shoe option)
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 133/151
SOURCE:INDIAINFOLINE
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 134/151
SOURCE:INDIAINFOLINE
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 135/151
Subscription details Times
Qualified institutional buyers 81.45
Non institutional investors 100.43
Retail individual investors 10.94
Employee Reservation 2.67
Total 61.84
GREENSHOE OPTION OF Parsvanth
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 136/151
• Stabilizing Agent (J M Morgan Stanley Private
L imited )
• Greenshoe lender (by Parasnath and Associates
Pvt L td, one of the promoters .)
• Greenshoe transferor
• GSO Bank account.
• GSO Demat account
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 137/151
• After allocation, the Stabilising Agent shall transfer the Over-All t t Sh f th GSO D t A t t th
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 138/151
Allotment Shares from the GSO Demat Account to therespective depository accounts of successful Bidders.
• For the purpose of purchasing the Equity Shares, theStabilizing Agent shall use the funds lying to the credit ofGSO Bank Account.
• If at the end of the Stabilisation Period, the number of shareslying in the GSO Demat Account are less than the borrowedshares, then Green Shoe Transferor shall (within five days ofthe end of the Stabilisation Period) transfer the deficit shares tothe GSO Demat Account.
• The Equity Shares transferred by the Green Shoe Transferor
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 139/151
shall be returned by the Stabilising Agent to the Green Shoe
Lenders in final settlement of Equity Shares borrowed, beingcredited into the GSO Demat Account.
• Upon the return of Equity Shares to the Green Shoe Lenders
the Stabilizing Agent shall close the GSO Demat Account.
PRIME RISK FACTORS
• Fluctuations in economic and market conditions
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 140/151
• Significant fluctuations in market value of undeveloped land,
developed land and constructed inventories• Periodic significant variations in revenues which are recognized
on basis of „Percentage of Completion Method‟ of accounting
on the based on our management‟s estimates of the project cost.
• Pending matters relating to alleged non-payment of stamp dutyand income tax against the company.
• Current projects‟ total saleable area based on management
estimates
• Results may be affected by highly fragmented and competitiveindustry and increased competitive pressure
PRIME RISK FACTORS
• failure to purchase any strategically located land might lead to
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 141/151
p y g y g
failure of the entire project.
• Necessary to sustain growth• Risk of withdrawal of certain tax benefits which are already
availed
• Risk of significant increases in prices or shortage of
building materials.• Delay in the completion of the project would result into
penalty
• Adjusting construction methods to different geographies
• Obtaining the necessary construction materials andlabour in sufficient amounts and on acceptable terms
• Obtaining necessary governmental approvals and thebuilding permits under unfamiliar regulatory regimes
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 142/151
building permits under unfamiliar regulatory regimes
• Attracting potential customers in a market in which we
do not have significant experience; and• Cost of hiring new employees and increased
infrastructure costs
• Loss of Key Managerial Personnel
• Risk in case of Third Party Contract• Changes in Regulatory Development Laws of SEZs
• No insurance cover for certain projects in the realestate business and construction business
•
Dependency various sub-contractors or specialistagencies to construct and develop projects.
SUMMARY OF THE Parsvanath IPO
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 143/151
• The cut-off price announced by Parsvanath for its
IPO was Rs. 300 per share.• Parsvanath share listed on Nov 30 2006• At the issue price of Rs 300, the size of the offering
amounts to Rs 991.14 crore. This includes the green
shoe option of Rs 92.63 crore.• The IPO was oversubscribed 61.84 times and over205.53 crore shares bids were received.
• The Parsvanath listing has added some Rs 100 billionto India's market capitalization, which stands at 500
billion.
Basis of allotment
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 144/151
Category No. of Applications
No. of EquityShares Applied For
Retail Investors 579,258 107,587,525
Non-InstitutionalInvestors 2,853 322,545,080
Qualified InstitutionalBuyers 433 1,613,238,080
Employee 404 538,940
Total 5,82,948 2,04,39,09,625
GLOBAL IPOs - GOOGLE
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 145/151
• The Google IPO : mired in controversy
• Google went public on August 19, 2004.
• Criticisms against the IPO :
- Google‘s Dual Share System2 classes of shares – One, having Super Majority Voting Rights andthe other having Ordinary Voting Rights.
- Google‘s founders, Larry Page and Sergey Brin ,violated SEC norms
by breaking the ―quiet period‖.
• Inspite of these criticisms, the IPO roped in $ 1.4 bn for Google andput the company‘s valuation at $ 30 bn.
DUTCH AUCTION MODEL
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 146/151
- Potential investors make bids for the shares of a company at a price
of their choice.
- At the close of the auction, the bids are arranged in descendingorder of bid prices.
- Clearing Price : Highest price at which the firm can sell all its pre-specified number of shares.
- Dutch Auction vs. Book Building : Underwriter does not have anysay in the pricing of the issue or in the allocation of shares topotential investors.
HOW DUTCH AUCTION HELPED GOOGLE
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 147/151
• The share price was determined by the Demand-Supply economics
through a transparent process by the investors.
• This is where the Dutch model scores over traditional models, as itdoesn‘t allow ― First-Day Pop ―.
• First-Day Pop is that situation wherein, the stock on the very first
day of trading on the markets, witnesses an increase of more than30%.
• The Clearing Price was set at $ 85 and the share closed on the firstday of trading at $ 100 i.e. an increase of 18 %.
FUTURE OPPORTUNITIES
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 148/151
• Companies with total issues of over Rs 55,000crore• Stability in market• Follow-on public issues (FPOs) largely from
public sector banks
INDIA vs US
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 149/151
Basis India US
Pricing Price Band No price band
Quotas Retail, QIB‟s,NIB‟s
No quotas
Book Building/Fixed price
75% or 100%book building
100% book building
Disclosures Reactive Proactive
Time gapbetween closureof issue andallotment
10 days Less than 3 days
MajorParticipants
QIB‟s, RetailInvestors
Pension funds and mutualfunds
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 150/151
8/11/2019 Ipo Shahil Final
http://slidepdf.com/reader/full/ipo-shahil-final 151/151
Thank you !!!