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ipo in financial market

  1. 1. AProject ReportOnINITIAL PUBLIC OFFERDissertation submitted in partial fulfillment of theRequirements for the award of degree ofMASTER OF BUSINEES ADMINISTRATIONBYMOHD SHAREEFH. T. NO. 417109672033NIZAM INSTITUTE OF ENGINEERING ANDTECHNOLOGYMBA DEPARTMENTNEAR RAMOJI FILM CITY, DESHMUKHI,NALGONDA DIST - 508284.MBA (2009 -11)1
  2. 2. DECLARATIONI, MOHD SHAREEF student of MBA at NIZAM INSTITUTE OF ENGINEERING ANDTECHNOLOGY (DBM), Declare That the Project Report entitled “INITIAL PUBLICOFFER “in. INDIA BULLS SECURITIES LIMITED SECUNDERABAD isan original and bonafide work had done by me for the partial fulfillment of requirements forthe award of “Master of Business Administration” in Osmania UniversityThis bonafide work undertaken by me is original and is done for educationalpurpose and has not submitted to any other University or Institute for the award of any otherdegree or diploma.DATE:PALCE: MOHD SHAREEF2
  3. 3. ACKNOWLEDGEMENTI wish to express my sincere thanks to the management of INDIA BULLSSECURITIES LIMITED, for giving me this opportunity to do the project entitled “INITIALPUBLIC OFFER” in their esteemed organization.I thank to Dr., Principal of NIZAM INSTITUTE OF ENGINEERING ANDTECHNOLOGY (DBM), and Coded for his constant encouragement in completing thiswork.I am grateful to my guide Mr. Taherullh Shareef and also other faculty members inthe department for their support, co-operation, guidance and encouragement.Last but not least, I would like to express my heartfelt thanks to my parents, teachersand friends for their valuable support and encouragement throughout the course of theproject work in its proper outcome.Mohd shareef3
  4. 4. ABSTRACTREVIEW -1IPO’s are particularly suitable investments for anyone who is looking for a large amount ofgrowth in short period of time for their capital. Before utilizing an IPO investment though,considers performing an IPO valuation to ensure we are buying an investment that is worthweir capital.An evaluation is one of the most important steps we can possibly takewhen we are considering an investment in the open marketplace. During this phase of theinvestment process, look into a variety of different factors that can affect the financialsituation of the IPO we are interested in, this is an important step in how to IPO.As we are scouring financial statements representing the company we areinvesting in, should first analyze the value of the current assets of the company. Next, weshould analyze the value of the debt the company owes. Once we compare these two factors,we will understand where the company currently stands financially speaking.The best investments available are investments consisting of companies thathave far less debt than they do assets. If we can compare the assets of the company to itsdebt and find that the current sale price of the company is less than that difference of thesetwo sums, we can be certain that we are evaluating a very valuable investment.Of course, we should look into many other factors that can affect weirinvestments too. The amount of income the company is receiving on an ongoing basis is oneof the most important factors we can consider. We should also analyze the value of theexpenses the company is currently facing due to operating costs. As we compare the amountof income the company is pulling in compared to the amount of expenses it is paying out, wewill understand its current financial situation. As we probably already know, a company’sincome should far exceed the total expenses the company is experiencing each month andeach year.Another important factor we should take into consideration as we are looking at an IPOinvestment is the type of products and services the company offers. If, once we analyze the4
  5. 5. company’s current product presentations, we will understand the type of company we arelooking at. If we would buy the products the company is selling on our own, we can becertain that we are analyzing a high quality company.Even though the financial records of a company are often the most importantpieces of data we can analyze when we are looking at the company as an investment, lookinto other factors such as who the owners are of the company, the people releasing the IPO,the reasons why they are releasing the IPO to the public, and other factors that may affectthe value of weir investment in the future.As long as we take all these precautions into consideration as we are consideringinvesting into an IPO market, we will be investing into solid investments. As we performIPO valuation, dig as deep as we possibly can into the financial records in order to betterunderstand the many different aspects of the company. As long as we discover manydifferent instances that state the company is worth more than it is currently selling for, weare purchasing a very valuable company through the IPO offering we are looking at.ABSTRACTREVIEW -2Many companies try to raise capital for growth through a process called the Initial PublicOffer or IPO. Investing in these IPO’s can give us huge profits in short time frame.They aregreat wealth creator tools. At the same time they can wipe out wear investments equallyquickly. So the IPO’s are high risk, high return avenues of investment. There are alwaysitems to consider when investing in an IPO that can make them less risky.Why do Companies launch IPO’s?In the growth trajectory of any company there comes a time when it needs to make a hugeinvestment to grow to the next level. Whenever a company hits this point, it needs to look attwo options: raise debt through bonds where it will get the investment money, but it paysinterest and it needs to repay the debt eventually. Alternatively, go for an IPO where itdecides to share its profits in the coming years. Understanding this is very important wheninvesting in IPO’s; after all we will now become a part of its profits and losses.Understanding the Company PerformanceWe must first look at the company value in absolute terms and its value as per the IPO issuerates. The absolute company value is the difference between its asset value and debt.Typically, the asset value must be significantly higher than the debt to indicate that it is5
  6. 6. financially healthy. Besides, the IPO value must be less than its absolute value for us tomake decent listing gains.Apart from the company value, its annual performance too is a greatindicator. Some relatively new companies may not have a huge absolute value; howeverthey have good growth numbers in the past and show great promise for strong future growthtoo. In such cases, we can still invest with a long term view and its value is bound toincrease.On the side of caution, the thing that we need to look at is the legal problemsthat the company currently faces. If there are too many legal issues with it, it could be a veryrisky IPO to enter in. We are better off avoiding it till its legalities clear off and we can enterthe stock in secondary market.Finally, we need to look at the market position of the company. A marketleader or a big player is a relatively safer bet than someone at the bottom of the chain. It isnot to say that unknown companies will not grow or make profit, but they are always higherrisk investments. If were aim is to cut down risks, we should avoid such companies.Apart from these, we could also have current news, economic situation, etcthat could affect the stock listing and were potential gains. It is best to look at these on a caseby case basis that follow a general rule.In summary, if we are looking to reduce risk in IPO’s, we must look at items toconsider when investing in an IPO. Simple checks that can protect weir money.6
  10. 10. INDEXTOPIC PAGE NOChapter -1 11-201.1 Introduction to FINANCE1.2 Introduction to IPO1.3 Scope of the Study1.4 Objectives of study1.5 Need and importance of studyChapter-2 21-36Literature Review2.1 Decisions Involve In IPO2.2 Dimensions in IPO2.3 Concepts of IPOChapter-3 37-453.1 Company profileChapter-4 46-794.1 Data Analysis and Interpretations4.2 Research MethodologyChapter-5 80-835.1 Findings & Suggestion5.2 Conclusion5.3 Limitations of the Study5.4 Bibliography10
  12. 12. 1.1. INTRODUCTION:Finance is the science of funds management. The general areas of financeare business finance, personal finance, and public finance. Finance includes saving moneyand often includes lending money. The field of finance deals with the concepts of time,money, risk and how they are interrelated. It also deals with how money is spent andbudgeted.One facet of finance is through individuals and business organizations, whichdeposit money in a bank. The bank then lends the money out to other individuals orcorporations for consumption or investment and charges interest on the loans.The general areas of finance are1] Business finance which is used by companies2] Personal finance which is used by individuals3] Public finance which is used by governments.WHAT IS FINANCIAL MARKETFinancial Markets are place where financial instruments are made topurchase or sell indirectly through intermediaries. This may be a physical location (like theNYSE) or an electronic system (like NASDAQ). Much trading of stocks takes place on anexchange; still, corporate actions are outside an exchange, while any two companies orpeople, for whatever reason, may agree to sell stock from the one to the other without usingan exchange.Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade ona stock exchange, and people are building electronic systems for these as well, similar tostock exchanges.12
  13. 13. Financial markets can be domestic or they can be international.Types of financial marketsThe financial markets can be divided into different subtypes:A] Capital markets which consist of:1] Stock markets, which provide financing through the issuance of shares orcommon stock, and enable the subsequent trading thereof.2] Bond markets, which provide financing through the issuance of bonds, andenable the subsequent trading thereof.B] Commodity markets, which facilitate the trading of commodities.C] Money markets, which provide short term debt financing and investment.1.2 INTRODUCTION TO IPODefinition:Initial public offeringInitial public offering (IPO), also referred to simply as a "publicoffering" or "flotation," is when a company issues common stock or shares to the public forthe first time. They are often issued by smaller, younger companies seeking capital toexpand, but can also be done by large privately-owned companies looking to becomepublicly traded.In an IPO the issuer may obtain the assistance of an underwriting firm, which helps itdetermine what type of security to issue (common or preferred), best offering price and timeto bring it to market.13
  14. 14. An IPO can be a risky investment. For the individual investor, it is tough to predict what thestock or shares will do on its initial day of trading and in the near future since there is oftenlittle historical data with which to analyze the company. Also, most IPOs are of companiesgoing through a transitory growth period, and they are therefore subject to additionaluncertainty regarding their future value. However, in order to make money, calculated risksneed to be taken.Reasons for listingWhen a company lists its shares on a public exchange, it will almostinvariably look to issue additional new shares in order to raise extra capital at the same time.The money paid by investors for the newly-issued shares goes directly to the company incontrast to a later trade of shares on the exchange, where the money passes betweeninvestors. An IPO, therefore, allows a company to tap a wide pool of stock market investorsto provide it with large volumes of capital for future growth. The company is never requiredto repay the capital, but instead the new shareholders have a right to future profits distributedby the company and the right to a capital distribution in case of dissolution.The existing shareholders will see their shareholdings diluted as a proportion of thecompanys shares. However, they hope that the capital investment will make theirshareholdings more valuable in absolute terms.In addition, once a company is listed, it will be able to issue further shares via a rights issue,thereby again providing itself with capital for expansion without incurring any debt. Thisregular ability to raise large amounts of capital from the general market, rather than havingto seek and negotiate with individual investors, is a key incentive for many companiesseeking to list.Introduction of IPO in context of Indian marketThe Indian primary market has come a long way particularly in the last decade afterderegulation of the Indian economy in 1991-92. Both the primary and secondary marketshave had their fair share of reforms, structural cum policy changes time to time. The mostcommendable being the dismantling of the Controller of Capital Issues (CCI) andintroduction of the free pricing mechanism. This changed the whole facet of Initial Public.14
  15. 15. Around 80 IPO’s made its entry into stock market in this year,which was never in the history of Indian capital market. Maximum number of issuesreceived enormous response from the investors. Coal India IPO which is raising around15,000 crores is making its entry into stock market in this October, it is considered to be thelargest IPO ever made in the Indian history. Many experts are viewing that it’s going tochange the Indian economic scenario.Industries raises finance from capital markets through various instruments like1] Equity finance2] Debt financeIPO’S comes under equity finance and debt finance. During the last decade,more than a third of the increase in net assets of large firms in Chile, South Korea, Malaysia,Mexico, Taiwan and Thailand has been secured through equity issuance. This patterncontrasts sharply with that of the industrial countries, in which equity financing during thesame period has accounted for less than 5 percent of the growth in net assets.Future of the capital marketIn the liberalized economic environment, the capital market is all set to play a highly criticalrole in the process of economic development. The Indian capital market has to arrange fundsto meet the financial needs of both domestic and foreign resources. What is more critical isthat the changed environment is characterized by cutthroat competition. Ability ofenterprises to mobilize funds at cheap cost will determine their competitiveness.Changes in the capital marketFour sets of changes in the Indian capital market can be identified which set the market ofthe twenty-first century different from what obtained earlier. These can be categorized asfollows:1] Introduction of new institutions2] Introduction of new instruments3] Changes in administrative control and regulatory framework15
  16. 16. 4] Some recent initiativesIntroduction of New InstitutionsThe composition of the Indian capital market has undergone a total change. Till very recenttimes, Bombay Stock Exchange dominated the capital market in India. The daily turnover onthe Bombay Stock Exchange (BSE) alone exceeded the total turnover of all other exchangesput together. The BSE with the monopolistic claw like control over the market was posing asevere constraint on the spread and diversification of the capital market culture. It wascontent with practicing non-transparent time and resource consuming trading practices thatfailed to evoke confidence among new investors, both in primary and secondary market. Itstrading practices were becoming somewhat totally out of tune with the ongoingcommunication revolution in India and worldwide. In response to this, the most importantare the OTCEI and NSE. What is more important is that the NSE has worked as a catalyst ofchange for other exchanges, which are introducing on-line trading systems.Along with NSE, mutual funds have also emerged in the country. Different types of mutualfunds catering to the needs of different types of investors have been set up in the country.The increasing growth of the capital market has witnessed the mergence of foreigninstitutional investors (FIIs) as significant players. Their sale and purchase decisions arealready having a significant impact on the market conditions.Along with these new players, a set of new supporting institutions have also emerged on thehorizon such as the Discount and Finance House of India, Securities Trading Corporation ofIndia, Stock Holding Corporation of India, settlement and depository systems, etc.Introduction of New InstrumentsAlong with new institutions, new instruments have emerged on the capital market. Theseencompass both the domestic instruments and foreign instruments. Many new instruments offinance have already been introduced in recent years. Still, the current intensity of the Indianfinancial market reveals that there is a tremendous scope to deploy new financinginstruments connected to equity, debentures, bonds, add-on products and derivatives. Thismay require appropriate changes in certain economic legislations and the will on the part of16
  17. 17. the Indian corporate enterprises to take risks and tune their decision-making to the investorpsychology and market preferences.Changes in Rules and RegulationsResponding to the changes in the environment, the administrative framework has alsoundergone a total overhaul. The earlier chains have been totally removed. The Controller ofCapital Issues has been done away with. The Indian capital market has been left free to findits own depth and strength. However, it is a paradox of a free market economy thatwhenever chains are removed effective watchdogs have to be employed. This latter functionhas now been entrusted to the Securities and Exchange Board of India. The SEBI in turn hasbeen laying down guidelines to be followed by different players in the different segments ofthe market.Some Recent Initiatives• Buy-back of shares by corporate has been permitted; this will enable the promotersof Indian companies to consolidate their positions.• Disclosure of end use of funds rose in public issue in annual statements; it willimpart transparency to the manner in which the funds raised from the public aredeployed. This will also impose greater accountability on companies.• One-time waiver of capital gains tax for corporatisation of stock broking tickets; thiswill result in speeding up the pace of professionalisation of stock broking operations,which will benefit investors.• Provision of nomination facility in share certificates; this will ease procedures fortransfer of shares in the names of the nominee in case of death of the shareholder.In short, the capital market has witnessed metamorphic changes in recent past and is all setto meet the varied needs of the changed liberalized economic environment.About Indian Brokerage IndustryIndian brokerage industry dates back to 1850s, but started growing strongly in the 1990s17
  18. 18. after the creation of the regulatory body, the Securities Exchange Board of India (SEBI)and incorporation of NSE. But competition is intense as there are far too many brokers -almost double the number of brokers in the US - competing for a much smaller market.The market is extremely fragmented with the top 5 firms accounting for only 14.6% of theturnover share during FY08.The brokerage market is largely retail and the retail investors arespread across the country (with majority from Mumbai). Online trading channels can play animportant part in catering to the regional spread and has indeed shown good growth (30.6%CAGR in number of internet enabled brokerage firms, 71.1% CAGR in number ofcustomers and 49.7%CAGR in share of total traded value since 2003). However, retailinvestors have shown an over whelming preference for non-delivery based trading (70.8% ofthe total cash market turnover during FY08). Intra-day trading makes physical distributionchannel necessaryBecause it offers high market data latency and proximity to trading advice of the brokers/Other investors. Growth in the number of sub-broker network reflects this (CAGR of46.1%from 150 in 1993 to 44,074 in 2008) as expansion of sub-brokerage network meansless capital outgo for the brokers.High competition has resulted in a steady compression of brokeragecommissions over the years and intensely since 2008 when Reliance Money, one of the newentrants with a massive physical distribution network, dropped it to extremely low levels.For a relatively young market, commissions are lower than even in the advanced markets. Inorder to improve profitability, top firms have been consciously trying to broaden theirportfolio of services. But this is likely not to pay high dividends over the short to mediumterm due to the economic, competitive and regulatory headwinds against these service lines.Overall, from here, the industry will likely traverse the following path:• Likely recovery of trading turnover in FY10.• Further consolidation of the market share of the top 100 brokers. Possible decline inthe number of brokers but increase in the number of sub-brokers.• Rise in market share of Reliance Money but muted industry profitability in the shortAnd medium term.• Gain in FII market share by few of the top domestic brokerages. Their success isLikely to draw in other players into this segment. Technology is a key success enablerFor this client category and the overall electronification of the industry will progress18
  19. 19. Rapidly over the next few years.Globalization and the Indian capital marketWith the gradual opening up of the Indian economy, increasing importance of foreignportfolio investment in the Indian markets and drastic reduction in import tariffs that hasexposed Indian companies to foreign competition, Indian capital market is acquiring a globalimage. Till recently, participants in the Indian capital market could largely afford to ignorewhat happened in other parts of the world. Share prices largely behaved as if the rest of theworld just did not exist.At present, in sharp contrast to recent past, Indian capital market responds to all types ofexternal developments, like US bond yields, the value of the peso or for that matter of anyother currency, the political situation in China, or new petrochemical capacity in SouthKorea, etc.In short, the Indian capital market is on threshold of a new era. Gradual globalization of themarket will mean four things, as follows:»The market will be more sensitive to developments that take place abroad.»There will be a power shift as domestic institutions are forced to compete with the FIIs whocontrol the floating stock and are in control of the GDR market.»Structural issues will come to the fore with a plain message: reform or despair.»The individual investor in his own interest will refrain from both primary and secondarymarket; he will be better off investing in mutual fund.1.2 OBJECTIVES OF THE STUDY1] To study in detail about the various methodologies that are involved in making an IPO,such as fixed price issues, book built issues.19
  20. 20. 2] To study on various stages involved in the process of IPO such as issue pricing, issuestructuring, procedural requirements of an IPO etc.3] To study about RELIANCE POWER IPO and reasons for its failure.4] To study about COX&KING’S IPO and reasons for its success.1.3 SCOPE OF THE STUDY1] To make an initial public offer (IPO), the companies have to look into the various aspectslike what guidelines it has to follow, the procedure for coming to Public issue of shares forthe proposed objective.2] Scope of this project is limited to the guidelines and procedures for coming to an IPO.3] Scope is limited to mentioned companies which came for an IPO and their strengths andweaknesses for succeeding in an IPO.1.4 NEED FOR THE STUDY1] Study about IPO helps to know about the various procedures, requirements and need forthe company for making an IPO.2] The process made through the analysis of success and failure of various IPO’s helps toknow about the attitude of investors towards the issue made.20
  22. 22. 2.1 What are the decisions involved in making an IPOThe IPO decision depends on the following two stages the pre IPO stage andthe post IPO stage. The pre IPO stage relates to the timing of an IPO decision, while the postIPO stage is about continuance or discontinuance of the listed status. Timing of an IPO is astrategic, financial and merchant banking decision.• The strategic decision is to determine whether listing fits into the company’s overallstrategy and if so, whether the company is mature enough for it.• The financial decision to make is to decide whether a company needs the capitalproposed to be raised, how much is to be raised and how effectively it should bedeployed.• The merchant banking decision is made to determine the appropriate structure,pricing, timing and marketing strategy for the IPO.2.2 What are the dimensions in decisions involved in making an IPO?STATEGIC DIMENSIONStrategically speaking a company should go for an IPO only when it is mature enough for it.This depends on the following points:• Does the company need the IPO as a liquidity event for its existing investors? Inother words, are there no private exit options available so that the IPO can be pushedfurther into the future?• Has the company matured enough to unlock the value?• Is the company’s business model retail-oriented with a strong brand presence so as toidentify with the retail investor?22
  23. 23. • Is the company’s visibility in the market is sufficient enough for investors to perceiveits business model to the full extent and unlock value for its share holders through theIPO?Is the company confident of strong financial growth in the future so as to sustain thepressure of constant market validation after?The Financial DimensionThe next dimension of the IPO decision is a financial one. In capital intensiveindustries and large industries such as heavy engineering, automobiles, infrastructure andsome other industries the business model is so large that going public could becomeinevitable in order to maintain balance in the capital structure. They would require IPO andsome multiple rounds of offers after IPO to keep financing their growth and consolidation.Therefore, in such cases, IPO and public offers are more of financing decisions thanstrategic. The same is true of certain start-up businesses that need to look at an IPO more asa source of finance than as a strategic move.The second financial aspect relating to the IPO decision is to evaluate if unlocking valuethrough an IPO is the need of the hour or whether other options are available. Strategic saleof equity happens through the private window that realizes better value for the company thanan IPO since private investors offer valuations significantly higher than what the companygets from an IPO.The third aspect of the financial decision is to evaluate how much capital is proposed to beraised through the IPO and its deployment. Generally, IPO’s that have well laid outinvestment plans sell better than those that do not have convincing application for the funds.Investors need to be shown an investment avenue in the company that can generate theexpected return on their funds. Sometimes, the require of funds for the company could betoo large to be raised through an IPO without causing too much dilution of promoters stakes.At such times, the company has to formulate an ideal issue structure in consultation with themerchant banker and prune down the size of the issue if necessary.The Merchant Banking Dimension23
  24. 24. Lastly, the IPO is also driven by merchant banking considerations. Merchantbankers take a call on the IPO proposal based on the business plan and financial position ofthe company, expected future performance, prevailing conditions in the primary market,expected issue pricing, size of the offer and post issue capital structure. The key drivers forthe merchant banker are the market conditions, own placement strength and the main sellingpoints in the issue.On the other hand, if the promoters are bringing in additional contribution in theissue at the same issue price, it adds to the marketability of the issue. Usually in strongmarket conditions, merchant bankers tend to be aggressive and push companies to go public.The logic put forward in such times is that when there is money for the taking at goodpricing, issuers go ahead and make use of best opportunity even if they have no use of forthe funds right away.In depressed markets, it would be difficult for a company to plan an IPO and get agood pricing and response for the issue. It would even difficult in such a market to find amerchant banker who would be confident of selling the issue comfortably. Therefore, mostcompanies would defer their IPO plans even if they have matured enough and have arequirement for funds.To summarize and conclude the decision of IPO the following points are prominent.• Timing is an important criterion in the IPO decision.• The IPO decision should be taken considering the strategic, financial and merchantbanking considerations.• For certain projects and business, going public is an imperative. In such cases, theIPO should be structured to deliver the best results.2.3 Key Concepts in IPO• IPO- Initial Public Offer is the first public issue of fresh equity or convertibles by acompany due to which its share gets listed on the stock exchange.• Public Issue - An invitation by a company to public to subscribe to the securitiesoffered through a prospectus.24
  25. 25. • Offer for sale- An offer of securities by the existing share holders to the public forsubscription.• Rights Issue - An issue of cap ital under sub-section (1) of sec 81 of the companiesAct, 1956 to be offered to the existing shareholders of the company through a letterof offer.• Preferential Allotment- An issue of capital made by a body corporate in pursuanceof a resolution passed under sub-sec (1A) of sec 81 of the companies Act, 1956.• Private Placement- An offer made to select private investors known to the issuerthrough a private arrangement to the exclusion of the general public.• Lock-in- A specified time period during which shares are cannot be sold, transferredand pledged in any way.• QIBs- Qualified Institutional Buyers shall mean public financial institutions asdefined under sec 4A of companies Act, scheduled commercial banks, mutual funds,foreign institutional investors registered with SEBI, venture capital funds andinsurance companies registered with SEBI, provident funds and pension funds with aminimum corpus of Rs. 25 crore and state industrial development corps.PROCEDURE, PRICING, STRUCTURING AND REQUIREMENTS OFAN IPOPROCEDURE FOR MAKING AN ISSUEFor making an IPO the following procedure has to be followed1] Appointment of Lead Manager or Merchant Banker.2] Issue pricing3] Issue Structuring4] Other requirements that are needed.1] Appointment of Merchant Banker25
  26. 26. A] Merchant bankers with valid registration certificates from SEBI have been provided withstatutory exclusivity in managing public offers such as IPO, rights and secondary issues ofequity as well as issues of debt securities.B] Whenever there is an offer of securities to the public, the involvement of a merchantbanker is mandatory, subject to the minor exceptions. From a business perspective too, issuemanagement forms the biggest chunk of revenue for investment bankers in those years whenthe primary market for public flotation is very vibrant.C] In the overall process of issue management, the merchant banker plays a variety of rolesas an expert advisor to the management of the company, as an auditor who performs duediligence on the company, as an event manager and coordinator to ensure timely completionof the issue, as a watch dog for statutory compliance and as a person in fiduciary capacityfor the protection of the interests of investor.2] Issue PricingThe Securities and Exchange Board of India (SEBI) introducedfree pricing of shares for public offerings in 1992. As per the current guide lines (Disclosureand Investor Protection guide lines 2000), every company either unlisted or listed, which iseligible to make a public issue can freely price its shares.1] The first step in formulating an issue structure is pricing of the issue. This is oneimportant thing done by the merchant banker in public offering. Appropriate price can notonly ensure success of the issue but provide good returns to the prospective investors aswell. Therefore, proper issue pricing can be a win-win situation for the company andinvestor as well.2] The danger of overpricing is also an important consideration. If a stock is offered to thepublic at a higher price than the market will pay, the underwriters may have trouble meetingtheir commitments to sell shares. Even if they sell all of the issued shares, if the stock falls invalue on the first day of trading, it may lose its marketability and hence even more of itsvalue.3] Investment banks, therefore, take many factors into consideration when pricing an IPO,and attempt to reach an offering price that is low enough to stimulate interest in the stock,26
  27. 27. but high enough to raise an adequate amount of capital for the company. The process ofdetermining an optimal price usually involves the underwriters ("syndicate") arranging sharepurchase commitments from leading institutional investors.4] Pricing issue is done keeping in mind the qualitative features, and by using selectivemultiples as benchmarks than through the conventional approach of the discounted cashflow method. The usual parameters used are the Price to Earning Ratio and Price to Bookvalue Ratio. In addition to the above, the following points have to be kept in mind:• Projected earnings of the company cannot be used as a justification for the issueprice in the offer document.• The accounting ratios should be calculated after giving effect to the consequentincrease in capital on account of compulsory conversions outstanding, as well tosubscribe for additional capital shall be exercised.• Comparison of all the accounting ratios of the issuer company as mentioned3] Issue StructuringThe issue structure refers to the following points• The face value of the share, the premium thereon and the final price. In book builtissues, the final price is not done until after the bidding is over, but a floor price isdetermined.• The minimum amount of subscription per applicant and the maximum.• The terms of the issue with regard to payment of the offer price and eligibilitycriteria for applicants.• Firm allotments if any and any other details thereof, as per applicable DIP guidelines.• Net public offer.• Underwriting, either mandatory or discretionary.• Cost parameters for the issue and an acceptable issue budget.The issue size and structure is determined as follows:• The issue size = ‘promoters’ quota+ firm allotments + net public offer.27
  28. 28. • Public offer = firm allotments + net public offer.Net public offer = issue size – promoters quota – firm allotment4] Other important requirementsA] Firm Allotments and ReservationsThese are novel concepts that help in pre-marketing of a sizeable part of issue therebybringing down the risk in the issue. In a firm allotment, a particular investor or category ofthem are approached in advance by the lead manager or the issuer of the company tosubscribe the issue on firm basis.The provisions on firm allotments and reservations in IPO are as given below:• The net public offer for issuing companies shall not be less than 25% of the post-issue capital, except in case of IT and infrastructure companies it can be 10%.• The issuer can make reservations on competitive basis or on firm basis for allotmentsto the permanent employees, shareholders of group companies, mutual funds, foreigninstitutional investors and banks.• All firm allotments which have not subscribed after filling the prospectus shall bebrought in before opening the issue and treated as preferential one.• All reserved categories can be adjusted with the net public offer as well.B] Differential Pricing and Price Band• Any unlisted company making an IPO for equity shares or convertibles may issuesuch securities to applicants in the firm allotment category at a price different fromthe price at which net offer to the public is made provided that the price at which thesecurity is offered to the applicant is higher than the price to the public issue made.• A justification has to be furnished in the offer document on the price differential forthe firm allotment category.28
  29. 29. • The issuer company can mention a price band of 20 %( the cap should not be morethan the floor by 20%) in the offer documents filed with SEBI and the actual pricecan be determined at a later date before filing the offer document with the ROC.C] Methodologies for Making IssuesUnder the DIP guide lines, it is possible to make an IPO in the form of a100% retail issue, a book built issue or as a bought out deal either for listing on the mainstock exchanges or on the OTC exchange. The different methods are explained as follows:100% Retail (Fixed Price) IssuesUnder this method, the issue is made by offering the same directly tothe investors from the public that could include the retail small investors as well as othercategories of investors. Using this method obviates the need to sell the issue initially to thewholesale investors and them in turn marketing it to retail investors. The main advantage ofthis system is that it is possible to get a wide dispersal of shareholding among the retailinvestors that would add depth to the trading in the stock after listing. Secondly, it does notrequire approaching QIB investors to subscribe to the issue, which could sometimes prove tobe difficult, as these investors need to be thoroughly convinced.On the other hand, small investors can be persuaded easily if a reasonable short-term marketopportunity is visible in the issue. Due to apparent inflexibility in a fixed price issue, it has alot of uncertainty attached to it in difficult market conditions. Therefore, after theintroduction of the book built system of making issues most companies prefer to use thatroute.1] Mandatory Conditions for a 100% Retail IssueA company can make an IPO of pure equity or convertibles only if it meets all of thefollowing conditions.• The company has net tangible assets of at least Rs.3 crore in each of the preceding 3full years, of which not more than 50% of the net tangible assets in mandatory assets.• The company has a track record of having profits distributable as dividends as perthe provisions of section 205 of the companies Act out of its normal business activity29
  30. 30. without reckoning extra-ordinary profits, for at least three out of the immediatelypreceding five years.• The company has a net worth of at least Rs one crore in each of the preceding three 3full financial years.• The aggregate size of the proposed issue and all previous issues made in the samefinancial year by the company does not exceed five times its pre-issue net worth asper the audited balance sheet of the last financial year.• In case the company has changed its name within the last one year, at least 50% ofthe revenue for the preceding 12 months is earned by the company from the activitysuggested by the new name.Additional ConditionsAn unlisted company not complying with any of the above conditions may make an IPO ofequity shares or convertibles only if it meets following conditions.a. The project has at least 15% participation by financial institutions of which atleast 10%comes from the appraisers. In addition to this at least 10% of theissue size is allotted to QIBs, failing which the full subscription monies shallbe refunded.b. The minimum post-issue nominal value of equity capital of the company shallbe RS. 10 crore.The mandatory conditions ensure that the company has a track record of at least 3 years withminimum net worth and profit record. This would ensure that paper companies couldn’t gopublic just after incorporation making tall claims of future business potential.2].Promoters ContributionSEBI has also introduced the concept of minimum promoters’ contribution to be present incompanies going public so that they become interested parties in preserving the interests ofthe shareholders. In terms of DIP guide lines, following are the main points that apply topromoters’ contribution in case of IPO’s:• In an IPO the promoters’ contribution shall not be less than 20% of the post-issue capital.• The 20% in case of IPO, shares acquired by the promoter with in thepreceding one year for a price less than the IPO price shall be ignored.30
  31. 31. • The minimum promoters’ contribution criterion does not apply to companieswith no promoters.Promoters’ contribution where required to be brought in the issue shall be brought in oneday before the issue opens.Book Built IssuesA book built mechanism allows the issuer company to make a public issue through theprocess of ‘price discovery’ rather than through a price that is fixed beforehand. Thismechanism, to a large extent, overcomes the deficiency in the fixed price mechanism of overpricing or under-pricing an issue. It however operates on the basis of a ‘floor price’, which isfixed by the company in consultation with the merchant banker.Companies now can make an issue to the extent of 100% or 75% of the net public offer asthey may decide, through the book built route. If the 75% route is followed, the priceapplicable to the balance 25% under the retail route would be the issue price under the bookbuilt portion. And under the 100% route, the entire issue happens through one biddingprocess applicable to both categories investors.Applicable Provisions for a Book-built IssueIn a book-built issue, reservation and firm allotment may be made only in respect ofpermanent employees of the issuer company/promoting company and share holders of thepromoting companies to the extent they permitted in the DIP guide lines.The other allocation norms for a 100% and 75% book-built issue are as listed below:• Not more than 50% of the net public offer shall be allocated to QIBs.• Not less than 25% of the net public offer shall be allocated to non-institutionalbidders.• Not less than 25% issue shall be available for allocation to retail investors.Lock-in of SharesLock-in of promoters’ shares and other share capital is also a novel concept brought in forthe purpose of preventing such shareholders in making unfair gains and exits from thecompany. The provisions are as follows:31
  32. 32. • The minimum promoters’ contribution of 20% shall be locked-in for 3 yrs from theallotment date.• Excess contribution by the promoters’ in an issue over what is required is shall belock-in for one year.• Firm allotments made in any issue shall be locked in for one year. The amountbrought in by promoters to make good under-subscribed portion of firm allotmentswould also be locked in for 3 years.• The entire pre-issue capital in case of an IPO shall be locked in for one year.Similarly, shares held by venture capitalists and shares held for more than one yearpreceding the IPO and are being offered for sale in the IPO are excluded from lock-inprovisions.D] Other Important Issue Requirements• All new issues shall be in dematerialized form can also be made through onlineinterface following the necessary guide lines.• The minimum application size shall be worth Rs. 2000. The maximum size of anapplication can be equal to the net public offer.• In an offer for sale, the entire subscription amount shall be brought in at the time ofapplication.• If there are calls on shares, they should be completed within 12 months of the issue.• Over-subscription of a maximum of 10% of the net offer to public can be retained.• Buy back arrangements can be made with a minimum period of 6 months and for amaximum of 1000 shares per allot tee.• Issues should be opened within 365 days from the date of SEBI approval or after 21days of filing with SEBI.• IPO shall be kept open for a min of 3 days and max of 10 working days.• Every company which has been subscribed by the investors and completedIssue successfully should get listed within 15days after the closure of the issue.1] The Stock Exchange Listing Agreement32
  33. 33. Compliance with the stock exchange’s listing guide lines under its listing agreement isalso important in order to be able to seek listing of shares pursuant to an IPO.The conditions for listing shares by an unlisted company pursuant to an IPO on the BSEare listed below:1. New companies can be listed on the exchange, if their issued and subscribedequity capital after the public issue is equal to or more than Rs. 10 crore. Inaddition to this, the company should have a post-issue net worth of Rs.20 crore.2. For new companies in high technology sectors, the following criteria will beapplicable.c. The total income/sales from the main activity should not be less than 75% ofthe total income during the two preceding years.d. The minimum post-issue paid-up capital should be Rs.5 crore.e. The minimum market capitalization should be Rs.50 cores.f. Post-issue net worth of Rs.20 crore.2] The conditions for listing on the NSE are given below:1. New companies can be listed on the exchange, if issued and subscribed capital after theissue is equal to or more than Rs. 10 crore and post-issue net worth of Rs. 20 crore.2. For new companies in knowledge based industries, the applicable capital criterion is Rs. 5crore with a minimum market capitalization of Rs. 50 crore. The total income/sales shouldnot be less than 75% of the total income during the immediately two preceding years.3. The applicant company should have a track record of three years of existence. If theapplicant is promoted by another company, that company should have the minimumstipulated existence.4. The application for listing in the case of an IPO shall be made within 6 months of theclosure of the issue.5. The project should have been appraised by specified agencies such as the all Indiafinancial institutions.Role of UnderwritersIPO’s generally involve one or more investment banks as "underwriters."The company offering its shares, called the "issuer," enters a contract with a lead underwriter33
  34. 34. to sell its shares to the public. The underwriter then approaches investors with offers to sellthese shares.The sale of shares in an IPO may take several forms. Common methods include:• Best efforts contract• Firm commitment contract• All-or-none contract• Bought deal• Dutch auction• Self distribution of stockIn the business of initial public offering, the underwriting contract is thecontract between the underwriter and the issuer of the common stock. The following types ofunderwriting contracts are most commonA] In the firm commitment contract the underwriter guarantees the sale of the issued stock atthe agreed-upon price. For the issuer, it is the safest but the most expensive type of thecontracts, since the underwriter takes the risk of sale.b] In the best efforts contract the underwriter agrees to sell as many shares as possible at theagreed-upon price.c] Under the all-or-none contract the underwriter agrees either to sell the entire offering or tocancel the deal.d] Stand-by underwriting, also known as strict underwriting or old-fashioned underwritingis a form of stock insurance: the issuer contracts the underwriter for the latter to purchase theshares the issuer failed to sell under stockholders subscription and applications.E] Procedural Aspects of an Issue1. The first task is to hold a Board Meeting to consider the proposal for a public issue,authorize the managing director to do all tasks relating to this issue and includingexpenses for the issue.34
  35. 35. 2. On the appointed day, the EGM is held and the shareholders pass a special resolutionunder section 81(1A) of the companies Act authorizing the company to make publicissue.3. Before embarking on an IPO, the first task is to identify the good merchant bankerwho can be appointed as lead manager for the issue. The details of the company’sproject or fund raising plan are discussed with the merchant banker. After thediscussion the company finalizes the appointment and enters into a memorandum ofunderstanding with the lead manager.4. The LM immediately on being appointed starts a due diligence on the company.Usually they go through the all documents and certificates and every relevantinformation for the issue.5. In parallel, the LM starts preparation of the draft prospectus or offer document. Alldisclosure requirements and DIP guide lines have to be filled in.6. The LM advises the company in the appointments of other intermediaries for theissue. These are the registrar to the issue, bankers to the issue, the printer andadvertising agency. The registrar and bankers have to be registered with SEBI.7. The LM also draws up the issue budget estimated to be spent on the issue. The maincomponents of these are fees for LM, underwriters, registrar and banker, brokerage,postage, stationery, issue marketing expenses and statutory costs.8. The draft prospectus is finalized by the LM in all respects in consultation with themanagement and placed before the board of directors for the approval so that it canbe issued for filing. The draft prospectus has to be accompanied by the memorandumof understanding signed by the LM with the company.9. Simultaneously, the company has to make listing applications to all stock exchangeswhere the shares are proposed to be listed accompanied by at least 10 copies of thedraft prospectus. And that prospectus has to be made available to the public by theLM. The LM should also obtain and furnish to SEBI, an in-principle listing approvalof the SEBI within 15 days of filing the draft offer documents with them.10. The company has to enter into a tripartite agreement with the registrar and alldepositories-(presently NSDL or CDSL) for offering the facility of offering theshares on dematerialized mode. Investors have to be given the facility to receiveallotments through any one of the depositories or in physical mode according tooption.35
  36. 36. 11. Within 21 days, SEBI would come out with their observations on the prospectus. TheSEBI would also mention any changes that are to be changed in the prospectus. TheLM has to file a certificate with SEBI that all amendments and suggestions made bythe SEBI have been incorporated in the offer document.12. Once the draft prospectus is ready in its final form, a board meet has to be held toapprove the filing of the same with ROC after being signed by all the directors.13. This filing should be accompanied by all the material contracts pertaining to the issueand the company and all other documents listed in the prospectus.14. The marketing of the issue is usually co-coordinated by the LM with the advertisingagency.15. Advertisements are regulated by DIP guidelines and the rules of the stock exchange.16. The mandatory collection centers are finalized as per the SEBI guidelines inconsultation with the bankers and the LM.17. The LM and the printer finalize the dispatch schedule to all SE, SEBI, collectioncenters, investor associations, brokers and underwriters.18. The marketing should be completed one week before the opening of the issue.F] Post-Issue Procedures1. In issues wherein there is more than one LM, it is usual to entrust the entire post-issue responsibility to one LM in inter-se allocation.2. There are two reports that are required to be furnished to SEBI by the post-issue LMin the case of an IPO in the retail route in the prescribed form.3. The main task of the post-issue LM is to coordinate the process of collection ofsubscription figures from the bankers to the issue, processing of applications by theregistrar, dispatch of allotment letters and refund orders to all applicants with in time.4. The issue is to be closed on the earliest closing date; the LM should ensure that issueis fully subscribed before announcing closure.5. In the case of devolved issues, the LM shall ensure that the underwriters honor theircommitments within 60 days from the date of closure of issue.6. The LM has to ensure that all issue proceeds are kept in separate bank accounts asprovided in the companies Act and the funds are released to the company only afterobtaining listing approvals from the respective stock exchanges.36
  37. 37. 7. The LM has to release an advertisement announcing the closure of the issue on thelast day.8. The responsibility of finalizing the basis of allotment in a fair and proper manner lieswith the executive director of the designated stock exchange along with the post-issue LM and the registrar.9. The post issue LM shall ensure that the demat credit and refund orders to the allottees is completed within two working days after the basis of allotment is done.10. The LM is responsible for following duties.a. Refund of subscription money to all non-allot tees.b. Refund of excess application money to all.c. Attending to all investors grievances.CHAPTER -337
  38. 38. Company profileIntroductionIndiabulls is India’s leading Financial, Real Estate and Power Company with a widepresence throughout India. They ensure convenience and reliability in all their products andservices. Indiabulls has over 640 branches all over India. The customers of Indiabulls aremore than 4,50,000 which covers from a wide range of financial services and products fromsecurities, derivatives trading, depositary services, research & advisory services, consumersecured & unsecured credit, loan against shares and mortgage & housing finance. Thecompany employs around 4000 Relationship managers who help the clients to satisfy theircustomized financial goals. Indiabulls entered the Real Estate business in the year 2005 withits group of companies. Large scale projects worth several hundred million dollars areevaluated by them.Indiabulls Financial Services Ltd is listed on the National Stock Exchange (NSE),Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The market38
  39. 39. capitalization of Indiabulls is around USD 2500 million (29thDecember, 2006). Consolidatednet worth of the group is around USD 700 million. Indiabulls and its group companies haveattracted USD 500 million of equity capital in Foreign Direct Investment (FDI) since March2000. Some of the large shareholders of Indiabulls are the largest financial institutions of theworld such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and FarallonCapital.Growth of IndiabullsYear 2000-01:One of India’s first trading platforms was set up by Indiabulls Financial Services Ltd. withthe development of an in-house team.Year 2001-03:The service offered by Indiabulls was increased to include Equity, F&O, Wholesale Debt,Mutual fund, IPO Financing/Distribution and Equity Research.Year 2003-04:In this particular year Indiabulls ventured into Distribution and Commodities Tradingbusiness.Year 2004-05:• This was one of the most important years in the history of Indiabulls. In this year:• Indiabulls came out with its initial public offer (IPO) in September 2004.• Indiabulls started its Consumer Finance business.• Indiabulls entered the Indian Real Estate market and became the first company tobring FDI in Indian Real Estate.• Indiabulls won bids for landmark properties in Mumbai.Year 2005-06:In this year the company acquired over 115 acres of land in Sonepat for residentialhome site development. The world renowned investment banks like Merrill Lynch andGoldman Sachs increased their shareholding in Indiabulls. It also became a market leader insecurities brokerage industry, with around 31% share in Online Trading. The world’s largest39
  40. 40. hedge fund, Farallon Capital and its affiliates committed Rs. 2000 million for Indiabullssubsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance Ltd. In thesame year, the Steel Tycoon Mr. L N Mittal promoted LNM India Internet venture Ltd.acquired 8.2% stake in Indiabulls Credit Services Ltd.Year 2006-07:In this year, Indiabulls Financial Services Ltd. was included in the prestigiousMorgan Stanley Capital International Index. Indiabulls Financial Services Ltd. was benefitedwith the Farallon Capital agreeing to invest Rs. 6,440 million in it. The company alsoreceived an “in principle approval” from Government of India for development of multiproduct SEZ in the state of Maharashtra. Indiabulls Financial Services Ltd acquired 100% ofthe equity share capital of Noble Realtors Pvt. Ltd. Noble Realtors is a Company engaged inthe business of construction and development of real estate projects. Indiabulls Real EstateBusiness was demerged to become a separate entity called Indiabulls Real Estate Ltd. TheBoard of Indiabulls Financial Services Ltd., Resolved to Amalgamate Indiabulls CreditServices Ltd and demerge Indiabulls Securities Limited.Year 2008-09:Several developments across its group companies have propelled indiabullsforward and are expected to continue to power the rise of this conglomerate. Indiabullsfinancial services limited has recently signed a joint venture agreement with sogecap, theinsurance arm of Society General for its upcoming life insurance venture. At the same timeit has also signed a Memorandum of understanding with MMTC.On the asset management front, the company has received formal approvaluhby7hbfrom SEBI and is expected to shortly launch its first NFO.Indiabulls enter in toPublic issue for his Indiabulls power Ltd.Promoters for IndiabullsSameer Gehlaut, Rajiv Rattan and Saurabh Mittal are the promoters of IndiabullsFinancial Services Limited. While Sameer Gehlaut will have a 23.0% stake in the companypost the IPO, Rajiv Rattan and Saurabh Mittal will have a post issue holding of 11.5% and40
  41. 41. 10.1% respectively. All the three promoters of the company are engineering graduates whileSaurabh Mittal is a management graduate as well.ABOUT THE COMPANYINDIA BULLSIndia bulls Group is one of India’s top Business houses with businesses spread overReal Estate, Infrastructure, Financial Services, Securities and Power sectors. The groupcompanies are listed on important Indian and Overseas markets. India bulls has beenconferred the status of a “Business Super brand” by The Brand Council, Super brands India.India bulls Financial ServiceIndia bulls Financial Services is an integrated financial services powerhouseproviding Consumer Finance, Housing Finance, Commercial Loans, Life Insurance,Asset Management and Advisory services. India bulls Financial Services Ltd isamongst 68 companies constituting MSCI - Morgan Stanley India Index. India bullsFinancial is also part of CLSA’s model portfolio of 30 Best Companies in Asia. Indiabulls Financial Services signed a joint venture agreement with Toecap, the insurancearm of Society General for its upcoming life insurance venture. India bulls FinancialServices in partnership with MMTC Limited, the largest commodity tradingcompany in India, is setting up India’s 4th Multi-Commodities Exchange.India bulls Real Estate LimitedIndia bulls Real Estate Limited is India’s third largest property company withdevelopment projects spread across residential projects, commercial offices, hotels, malls,and Special Economic Zones (SEZs) infrastructure development. India bulls Real Estatepartnered with Carillon Capital Management LLC of USA to bring the first FDI into realestate. India bulls Real Estate is transforming 14 million sq ft in 16 cities into premiumquality, high-end commercial, residential and retail spaces. India bulls Real Estate hasdiversified significantly in the following business verticals within the real estate space: RealEstate Development, Project Advisory & Facilities Management: Residential, Commercial(Office and Malls) and SEZ Development. Power: Thermal and Hydro Power Generation.India bulls Securities Limited41
  42. 42. Indiabulls Securities Limited is India’s leading capital markets company with all-India Presence and an extensive client base. India bulls Securities possesses state of the arttrading platform, best broking practices and is the pioneer in trading product innovations.Power India bulls, in-house trading platform, is one of the fastest and most efficient tradingplatforms in the country. India bulls Securities Limited is the first and only brokerage houseto be assigned the highest rating BQ – 1 by CRISIL.The company through various types of brokerage accounts provides product andservices related to purchase and sale of securities listed in NSE and BSE. It also providesdepository services, equity research services, mutual fund, and IPO distribution to its clients.The company provides these services through on-line and off-line distribution channel.The Team:Indiabulls Securities Ltd, main strength lies in its formidable team. This teamcomprising highly qualified and experienced personnel has been responsible for the overallmanagement of the company and has provided direction in diverse areas of businessstrategy, operating management, regulatory reporting, human resources development andproduct development.Indiabulls Group entities in India• Indiabulls Capital Services Ltd.• Indiabulls Commodities Pvt. Ltd.• Indiabulls Credit Services Ltd.• Indiabulls Finance Co. Pvt. Ltd• Indiabulls Housing Finance Ltd.• Indiabulls Insurance Advisors Pvt. Ltd.• Indiabulls Resources Ltd.• Indiabulls Securities Ltd.• Indiabulls Power Ltd.42
  43. 43. Senior Vice PresidentYuv Raj SinghRegional ManagerDashmeet SinghBranch ManagerSenior Sales ManagerSujeet Roy ChowdarySujeet Roy ChowdarySupport SystemVishalSales FunctionSubrotRM/SRMSatish KumarSARMRajaLocal ComplianceOfficerCharyBack OfficeExecutiveIfran KhanDealerBadri Nath43
  44. 44. Mission statement: To establish a base of 1 million satisfied customers by 2010. They willcreate this by being a responsible and trustworthy partnerCorporate action: An Approach to Business that reflects Responsibility, Transparency andEthical Behavior. Respect for Employees, Clients & Stakeholder groupsIndiabulls financial service offers:1] SME finance2] Mortgage loans3] Commercial vehicle loans4] Farm equipment loans5] Commercial credit loans6] Loan against shares and7] Third part distribution of insurance products.Broking: Equity, Derivatives, Commodities, Currency Derivatives.Distribution: Mutual funds, IPO’s, Home loans, Insurance.Companies History in IndiaIn 1999, three IIT-Delhi alumni Sameer Gehlaut, Rajiv Rattan and SaurabhMittal acquired Orbis; a Delhi based stock broking company. Weng entrepreneur SameerGehlaut established Indiabulls in 2000, after acquiring orbis Securities, a stock brokeragecompany in Delhi. The group started its operations from a small office near Hauz Khas bus44
  45. 45. terminal in Delhi. The office had a tin roof and two computers. The idea of leveragingtechnology for trading stocks led to the creation of India bulls Incorporated on 10th January2000, it was converted into a public limited company on 27th February 2004.The company had achieved the distinction of becoming only the secondbrokerage firm in India to be granted this consent. The challenges facing it were immensenot least of all the mind set of investors who were called to make the big leap fromtraditional stock trading to a completely online interface. Having overcome this resistance,the company later expanded its service portfolio to include equity, F&O, wholesale debt,mutual fund distribution and equity research.In 2003/04, India bulls ventured into insurance distribution and commodity trading. Itsuccessfully floated its IPO in September 2004 and in the same year entered the consumerfinance segment. Real estate, the new sunrise industry, was the next frontier for India bulls.In 2004/05, it entered this sector. But it wasn’t just real estate that was booming.Opportunities were opening up in retail and infrastructure as well. To cement its position inthe Indian business and industry firmament,India bulls acquired Pyramid Retail In 2007 and marked its presence in the power sector bylaunching India bulls PowerRecent DevelopmentsSeveral developments across its group companies have propelled India bulls forward and areexpected to continue to power the rise of this conglomerate.India bulls Financial Services Limited has recently signed a joint venture agreement withToecap, the insurance arm of Society General (Soigné) for its upcoming life insuranceventure.At the same time it has also signed a Memorandum of Understanding with MMTC, thelargest commodity trading house in India, to establish a Commodities Exchange with 26%Ownership held by MMTC.On the asset management front, the company has received formal approval from SEBI and isexpected to shortly launch its first NFO.45
  46. 46. Board of directorsFollowing Is the List of Members as On November -4, 2009Mr. Samper Gelato Chairman & CEOGagman Bang Executive DirectorRajiv Rattan CEOShams her Singh DirectorAishwarya Katoch DirectorKaran Singh DirectorPrem Prakash Mird Director46
  47. 47. Saurabh K Mittal Executive DirectorCHAPTER-4DATA ANALYSIS AND INTERPRETATION47
  48. 48. DATA ANALYSIS AND INTERPRETATION OF TWO COMPANIESIPO’S1] RELIANCE POWER IPO2] COX&KING’S IPO4.1COMPANY – RELIANCE POWER LIMITEDCOMPANY PROFILEReliance Power Limited is under the Anil Ambani Group and itis involved in the business of developing large and medium size power projects. Thecompany was incorporated in January 1995 as Bawana Power Private Limited and changedits name to Reliance Delhi Power Private Limited in February 1995. Later, it changed itsname to Reliance EGen Private Limited in January 2004, to Reliance Energy GenerationLimited in March 2004, and to Reliance Power Limited in July 2007.Reliance PowerLimited has plans developing around thirteen large and medium sized power projects. The48
  49. 49. projects that are being developed by Reliance Power Limited are located in southern India,western India, north- eastern India and northern India. The total installed power generationcapacity of all the thirteen power projects would be around 28,200 MW.A] Reliance Power will have a diversified project portfolio in terms of geography, fuel mixand technology.B] Along with its subsidiaries, it is presently developing 13 medium and large-sized powerprojects with a combined planned installed capacity of 33,480 MW.C] Nine of the proposed thirteen projects are coal-fired or gas-based and two of those havefuel security; the rest are yet to be finalized for such huge capacity, fuel linkage is ofparamount importance. It is presently dealing with Mundra, Sesan and Krishna patnampower projects. Total project outlay is 1, 12,127 crores and post IPO net worth of 13,707crores. The company website identifies project sites broadly to be located in western India(12,220 MW), northern India (9,080 MW) and northeastern India (4,220 MW) and southernIndia (4,000 MW). They include six coal-fired projects (14,620 MW) to be fueled byreserves from captive mines and supplies from India and abroad, two gas-fired projects(10,280 MW) to be fueled primarily by reserves from the Krishna Godavari basin (the "KGBasin") off the east coast of India, and four hydroelectric projects (3,300 MW), three ofthem in Arunachal Pradesh and one in Uttarakhand.Projects under Development• Rosa stage -2• Butubori power project• Sesan UMPP• Krishnapatnam UMPP• Tilaiya UMPP• Chithrangi Power Project• Gas Based Power Project• TATO HEPP• SIYOM HEPP• Urthing Soba HEPP• Other Hydro Electric Power Projects49
  50. 50. • Kalai-2 HEPP• Amulin HEPP• Emini HEPP• Mithundan HEPPProject going on all over India50
  51. 51. CHAIRMANS PROFILEAnil D. Ambani son of LATE.SHRI Dhirubhai Ambani Regarded as one of the foremostcorporate leaders of contemporary India, Shri Anil D Ambani, 48, is the chairman of alllisted companies of the Reliance ADA Group, namely, Reliance Communications, RelianceCapital, Reliance Energy and Reliance Natural Resources limited.He is also Chairman of the Board of Governors of Dhirubhai Ambani Institute ofInformation and Communication Technology, Gandhi Nagar, Gujarat.Till recently, he also held the post of Vice Chairman and Managing Director of RelianceIndustries Limited (RIL), India’s largest private sector enterprise.Anil D Ambani joined Reliance in 1983 as Co-Chief Executive Officer, and was centrallyinvolved in every aspect of the company’s management over the next 22 years.He is credited with having pioneered a number of path-breaking financial innovations in theIndian capital markets. He spearheaded the country’s first forays into the overseas capital51
  52. 52. markets with international public offerings of global depositary receipts, convertibles andbonds. Starting in 1991, he directed Reliance Industries in its efforts to raise over US$ 2billion.ABOUT THE ISSUEAnil Ambani- owned Reliance Power Ltd’s mega initial public offer(IPO) was opened for subscription on 15th January 2008 to raise Rs 11,500 crore. Thecompany proposed to issue 26 crore equity shares of Rs. 10 each, includingpromoters’ contribution of 3.2 crore shares allotted at the IPO price. The balance 22.8 croreequity shares constituted the net issue to the public. The price band for the book buildingwas Rs 405 to Rs 450 for every fully paid up share of Rs 10 each. The issue was managed byUBS, ABN AMR, JPMorgan, Deutsche Bank, Enam Securities, ICICI Securities, JMFinancial, and Kotak Mahindra Capital. Macquarie and SBI Capital Markets are co-managers. This was the largest IPO ever.Reliance Power IPO AnalysisPrice Band: Rs. 405 - 450 per shareIssue opened between: January 15 - 18, 2008Book Running Lead Managers:52
  53. 53. Kotak,UBS,EnamsecuritiesTo List on: NSE and BSEMarket Cap post-listing: Rs. 1017 billion or $25.7 billion (based on the cap price)With the high promoter holding of around 90% post-listing is a positive,it has been viewed negatively from the point of view of minority shareholders, since thelatter will enter the company @ Rs450 per share vis-à-vis promoters average cost of Rs16.92per share.Given the long gestation period of projects, which are likely to getcommissioned from FY10 onwards, we have considered non-earnings related valuationparameters. The valuation of the IPO in terms of price/book (7.4x FY08E) appearsexpensive NTPC (2.8x) and Tata Power (4.5x).The issue appears expensive, also on the basis of asset valuation in FY13. Itis only on the basis of FY17 estimates, that the issue looks attractive. The aggression andtrack record of the promoter group in shareholder wealth creation in all itsbusinesses including telecommunications, power distribution, financial services andentertainment is likely to have a positive rub-off effect on this IPO as well.BOARD OF DIRECTORS:NAME DESIGNATIONANIL DHIRUBHAI AMBANI Chairman/ChairpersonS.L RAO DirectorYOGENDER NARAIN DirectorK.H.MANKAD Whole time DirectorJ.L.BALAJI DirectorV.K.CHATURVEDI Director53
  54. 54. SHAREHOLDING PATTERN OF RELIANCE POWERHolders Name No of Shares % Share HoldingPromoters 2032000000 84.78%General Public 189394359 7.90%ForeignInstitutions 89934206 3.75%Other Companies 37277971 1.56%Financial Institutions 36956145 1.54%Banks and Mutual Funds 7953273 0.33%Foreign NRI 3284046 0.14%TOTAL 100%SUBSCRIPTION DETAILSReliance Power Initial Public Offering has closed with 73 timesoverbooking as against the released shares on January 18 breaking over all records in theIndian stock history as bourses informed media.The retail investor’s quota was subscribed by 15 times. Anil Ambani backedReliance Power Ltd has raised nearby $180 billion (Rs.7, 52,000 crores) for its shares worthoffered price of $2.9 billion {Rs.122crore}. For making better comfort to retail investors,Reliance Anil Dhirubhai Ambani Group, ADAG has provided two options to them, eitherthey can submit the entire price (Rs.430) of the asking lot or they can only deposit the one-quarter price (Rs.115) of the asking shares. The rest price of the shares can be submittedafter getting the allotment of the shares.Besides, R-Power has also provided a subsidy of Rs.20 for each share ofReliance Power IPO to the retailers. Thus the retailer investors have submittedapproximately Rs. 50,000crores collectively. Several public sector banks have alsosubscribed the offer joylessly tremendously. Punjab National Bank, State Bank of India,Bank of India and Indian Overseas Bank put in bids worth Rs 1,500-2,000 crore. ReliancePower had offered a total of 228-milion equity shares with face value of Rs.10 each in theprice band of Rs.405-450 for the public through 100% book-building process. It has targetedto collects much as Rs 11,700-crore from this offer, which has now gone beyond Rs.75, 000-crore from this collected money.54
  55. 55. The total collected price has been more than that of the combinedmarket capitalization of companies listed in Portugal and the Czech Republic as Bloomberg.ALLOTMENT DETAILSOver 41.7 lakh successful bidders in the retail category will get around 15shares each while approximately 4.5 lakh retail investors who bid for less than 225 shareswould not get any shares according to the allocation as approved.The excess application money of approximately Rs one lakh crore receivedfrom the investors is being refunded to the investors. Post allotment Reliance Power hasapproximately 42 lakh shareholders.LISTING DETAILSListing Date: Monday, February 11, 2008BSE ScripCode:532939NSE Symbol: RPOWERListing In: A GroupSector: Power - Generation and SupplyISIN: INE614G01033Issue Price: Rs. 450.00 Per Equity ShareFace Value: Rs. 10.00 Per Equity ShareTABLE -1LISTING DAY TRADING INFORMATIONBSE NSEIssue Price: Rs. 450.00 Rs. 450.00Open: Rs. 547.80 Rs. 530.00Low: Rs. 355.05 Rs. 355.30High: Rs. 599.90 Rs. 530.00Last Trade: Rs. 372.50 Rs. 372.30Volume:63,882,239 134,392,54455
  56. 56. CHART – .1ISSUE PRICE OF RELIANCE POWER IPOINTERPRETATIONThe above bar diagram shows the issue price of Reliance Power IPO inboth BSE and NSE. X-axis represents the exchanges traded {i.e. BSE AND NSE} and Y-axis represents issue price amount {i.e. 450 in both exchanges}.56
  57. 57. CHART -2LISTING DAY OPENING PRICE OF RELIANCE POWER IPOINTERPRETATIONThe above chart shows the listing day opening price of RELIANCEPOWER IPO. Here X- axis represents exchanges traded and Y-axis represents the openingprice in both the exchanges. {I.e. Rs 547.80 in BSE and Rs530 in NSE].It opened at apremium in both the exchanges as there was more demand among the investors.57
  58. 58. CHART-3LISTING DAY LOW PRICE OF RELIANCE POWER IPOINTERPRETATIONThe above chart shows the listing day low price ofRELIANCE POWER IPO. Here X- axis represents exchanges traded and Y-axis representsthe listing day low price in both the exchanges. {I.e. Rs 355.05 in BSE and Rs355.30 inNSE].It’s because of heavy selling pressure created by the investors as they want to comeout of the stock with profits.58
  59. 59. CHART-.4LISTING DAY HIGH PRICE OF RELIANCE POWER IPOINTERPRETATIONThe above chart shows the listing day low price of RELIANCEPOWER IPO. Here X- axis represents exchanges traded and Y-axis represents the listingday high price in both the exchanges. {I.e. Rs 599.90 in BSE and Rs530 in NSE].59
  60. 60. CHART-5LAST TRADE OF RELIANCE POWER IPO ON LISTING DAYINTERPRETATIONThe above chart shows the listing day low price ofRELIANCE POWER IPO. Here X- axis represents exchanges traded and Y-axis representsthe last trading price of reliance power on listing day in both the exchanges. {I.e. Rs 372.50in BSE and Rs372-30 in NSE].60
  61. 61. ConclusionThe stock which has been issued for a price of Rs450 has been listed at Rs 372 in both theexchanges which are 18% lower than its issue price. It has made its opening at Rs 547.80 inBSE and Rs 530 in NSE AND AN INTRADAY LOW OF Rs355.05 in BSE and Rs 355.50in NSE.The intraday high of the stock is Rs 599.90 in BSE and Rs 530 in NSE.The volumeswere above 6 lakhs in BSE and ABOVE 14 lakhs in NSE.The data clearly shows that thestock made a flop show in its listing day although people were expecting it to be listeddouble the issue price. This clearly tells that Reliance POWER IPO is failed at its entry intostock market.Performance of Reliance Power Stock after IPOReliance Power IPO which was listed on Feb 11th2008 has been showingpoor performance since its listing. The company’s IPO has been closed 73 timesoverbooking and raised around 7, 52000 crores against its issue of equity shares worth 122crores1] The listing price was around Rs 372 in both BSE and NSE which is approximately 18%lower than its issue price; considerably the stock price has been declining after this.Taking the failure of the IPO into consideration Reliance Power Ltdhas announced that the Board of Directors of the Company at its meeting held on February24, 2008, has approved a proposal for issuing free bonus shares to all categories ofshareholders, excluding the promoter group (comprising of Reliance Energy Ltd. and theADA Group), in the ratio of 3 shares for every 5 shares held, subject to necessary approvals.The proposed bonus offering will result in reduction of the cost of Reliance Power shares is61
  62. 62. Rs 269 per share for retail investors and Rs281 per share for other investorsIn a related development, Mr. Anil D Ambani, Chairman, Reliance ADAGroup, on February 24, 2008 simultaneously announced a voluntary contribution of 2.6% ofhis shareholding in Reliance Power to Reliance Energy Ltd., to protect the Company fromany dilution of its existing 45% stake in Reliance Power, as a result of the bonus proposal.Accordingly, Reliance Energy’s stake in Reliance Power will be maintained at the existinglevel of 45%, and the revised shareholding pattern of Reliance Power will be as follows:-----------------------------------------------Previous Existing-----------------------------------------------Anil D Ambani 45% 40%Reliance Energy 45% 45%Public shareholders 10% 15%-----------------------------------------------The reduction of Mr. Ambani’s shareholding in Reliance Power by 5% from45% to 40%, represents a contribution of nearly Rs 5,000 crore (US$ 1.2 billion) by him, infavor of nearly 6 million investors in Reliance Energy and Reliance Power. Even afterthis, there was no improvement; the share price fell to Rs 235 on the day of listing of bonusshares. This even made loss to investors who bought bonus shares as they could get theshares at lower price in exchanges.Reliance Power Limited Key Recent DevelopmentsMay 03, 2010: India Awards Four Ultra Mega Power ProjectsJan 29, 2010: Reliance Power Reports Net Profit of INR1.33 Billion in Q3 Fiscal 2010Jan 18, 2010: Indian Supreme Court to Resume the Case on Reliance Powers 7,840 MWGas-Fired Power Project62
  63. 63. Jan 17, 2010: The 4,000 MW UMPP to Get a Separate Transmission Link In AndhraPradesh, IndiaDec 28, 2009: Reliance Power Commissions Rosa Thermal Power PlantBalance Sheet of Reliance Power LimitedBalance Sheet of Reliance Power ------------------- in Rs. Cr. -------------------Mar 06 Mar 07 Mar 08 Mar 09 Mar 1012 mths 12 mths 12 mths 12 mths 12 mthsSources Of FundsTotal Share Capital 0.05 200.04 2,259.95 2,396.80 2,396.80Equity Share Capital 0.05 200.04 2,259.95 2,396.80 2,396.80Share Application Money 102.36 0.00 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves -0.15 0.02 11,282.72 11,396.01 11,669.24Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Net worth 102.26 200.06 13,542.67 13,792.81 14,066.04Secured Loans 0.00 0.00 0.00 0.00 0.00Unsecured Loans 0.00 0.00 0.00 0.00 0.00Total Debt 0.00 0.00 0.00 0.00 0.00Total Liabilities 102.26 200.06 13,542.67 13,792.81 14,066.04Mar 06 Mar 07 Mar 08 Mar 09 Mar 1012 mths 12 mths 12 mths 12 mths 12 mthsApplication Of FundsGross Block 66.77 67.27 67.41 78.18 81.16Less: Accum. Depreciation 0.76 1.00 1.06 1.58 2.40Net Block 66.01 66.27 66.35 76.60 78.76Capital Work in Progress 35.86 53.57 61.14 55.84 55.30Investments 0.01 41.28 8,489.75 6,282.71 7,213.04Inventories 0.00 0.00 0.00 0.00 0.00Sundry Debtors 0.00 2.25 0.00 0.00 0.00Cash and Bank Balance 0.58 0.72 361.11 14.37 98.21Total Current Assets 0.58 2.97 361.11 14.37 98.21Loans and Advances 0.35 40.68 4,988.93 7,407.58 1,656.40Fixed Deposits 0.00 0.05 0.05 0.06 0.00Total CA, Loans & Advances 0.93 43.70 5,350.09 7,422.01 6,754.61Deffered Credit 0.00 0.00 0.00 0.00 0.00Current Liabilities 0.53 3.53 423.86 43.05 33.60Provisions 0.02 1.25 0.79 1.30 2.0863
  64. 64. Total CL & Provisions 0.55 4.78 424.65 44.35 35.68Net Current Assets 0.38 38.92 4,925.44 7,377.666,718.93Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00Total Assets 102.26 200.04 13,542.68 13,792.81 14,066.03Contingent Liabilities 0.70 9.03 8.57 8.13 0.00Book Value (Rs) -19.22 10.00 59.92 57.55 58.69Future Growth Estimates of the CompanyThe company made a net profit of 33 billion in FY2010.The revenue isgenerated through Rosa phase 1 project which had a capacity to produce 300 MW.Thecompany is preparing to produce above 2800 MW in FY2012.It gets its amount invested inall its projects and enormous profits after second half of 2020 decade. It aims an EPS ofRs42 by that time whereas its present EPS is 1.42 and the company could generate 33,800MW by that time. Investors who think to invest in this share should wait until that time toreap good profits. At resent the stock is quoting at Rs 158 with 52 week high of around Rs190 and Low of Rs 135 in both the exchanges. The company is facing competition frompublic enterprises like Power Grid Corporation, private enterprises like Adani power, JSWpower etc. Reliance Power is also planning to set up gas-based projects in full steam and hasplans to add 10,000 MW capacity in the future. With this, the companys total generationcapacity from all sources of energy would touch 35,000 MW by 2017.64
  65. 65. 4.2 Company – COX & KING’SCompany Profile- COX &KING’S is an U.K based organization founded by COX in 1763in Yorkshire, it has been operating in subcontinents and is one of the most recognizedholiday brands today. The principal services offered by the company are:• Destination Management• Outbound Tourism• Business Travel• Incentive & Conference Solutions• Domestic Holidays• NRI• Trade Fairs• Foreign Exchange65
  66. 66. • InsuranceC&K designs travel packages for both individuals and groups, for theirdomestic and international leisure travel.1] The company makes travel arrangements for corporate clients to cater to their businessmeetings, conferences, events, and as an incentive for their employees and business partners.2] The company also provides value-added services, such as customizing travel plans forNRI customers, travel arrangements for Trade Fairs and providing private air charterservices. Besides, C&K offers travel-related foreign exchange and payment solutions.3] The company is one of the first travel companies in India to be granted a license as anAuthorized Dealer - Category -2, under the new licensing regime.4] Within Leisure Travel, the company has three sub-segments, Outbound Travel, InboundTravel and Domestic Travel. The Inbound Travel business represents destinationmanagement services that cover all aspects of ground tour arrangements required by touroperators across the world. The Domestic and Outbound Travel businesses include theselling of holiday packages for travel in India and overseas, respectively. Under CorporateTravel, a full range of business travel services, through a team of dedicated relationshipmanagers, is offered.In India, C&K has been operating since 1905 and has 255 points of presence,covering 164 locations, through a mix of branch sales offices, franchised sales shops,General Sales Agents (Gas) and Preferred Sales Agents (Pass). The company has 14 branchsales offices located in Mumbai, New Delhi, Chennai, Kolkata, Bangalore, Hyderabad,Ahmadabad, Jaipur, Kochi, Pune, Nagpur and Goa. Besides, it also operates through 56franchised sales shops spread across India. The company has a global presence, withoperations in 19 countries (besides India) through subsidiaries, branch offices andrepresentative offices (in the UK, Australia, New Zealand, Japan, US, UAE, Singapore andHong Kong). Over the period of FY2006-09, the company has made 6 acquisitions, and itwill continue to explore various opportunities for inorganic growth in the future.66
  67. 67. FOUNDER’S PROFILECox was born in Yorkshire in 1718. His father, Joshua, had made a good living as a lawyerand had moved from his birthplace in Clent in Worcestershire to Yorkshire. He then boughtan estate near Quarley in Hampshire. There is little documentary evidence of the early life ofRichard Cox, although he must have received an excellent education after which he cameinto the service of the English General, Lord Ligonier, as a clerk in the early 1740s. He wasclearly exceptionally good at making important contacts with all echelons of the army andsociety, and in 1747 he married Caroline Codrington, daughter of Sir William Codringtonwho was an established military figure.Cox’s career really took off when Lord Ligonier led the Flanders campaigns of the War ofthe Austrian Succession. In one letter sent back to London, Richard Cox makes a demandthat “suitable winter provisions and housing should be made available for the three Englishcompanies” and he became ever increasingly entwined with the organization of provisionsand the general welfare of the troops. Ligonier, in turn, thought the world of his beloved Mr.Cox, making him his private secretary in the late 1740s. Ligonier went on to become theColonel of the First Foot Guards (Grenadier Guards) in 1757, and rewarded Richard Coxwith the post of military agent after the incumbent died in May 1758. Thus was born Cox &Co, the forebear of Cox & Kings.Company Overview67
  68. 68. Cox and Kings (C&K) is a global tour operator, deriving around 90% of its revenues fromthe leisure segment. The company has a strong presence in the emerging and developedmarkets, and offers travel, forex and visa services. The company is1] Well-positioned to gain market share on the back of a strong brand franchise and apresence across the value-chain: C&K has a history of over 250 years, making it one of theoldest travel brands in the world. Over the years, the company has built a strong brandfranchise for itself in overseas markets as well as in India. The travel market is highlyfragmented, with a large number of travel agents catering to most of the demand. C&Ksstrong brand, coupled with services across the value-chain would act as a key driver ingarnering a higher market share in the future.2] C&Ks focus on emerging markets to help garner higher growth: C&K derives overhalf of its earnings from the emerging markets and is focused on increasing its presence inother high growth geographies mainly the Middle-East and South-East Asia. The company ispoised to benefit from a strong growth in demand for outbound and inbound services inthese areas, enabling it to achieve a high growth rate in the future.3] Tourism industry (especially in emerging markets) to witness robust growth:According to WTTC (World Travel and Tourism Council) estimates, the world travel andtourism industry is expected to clock a CAGR of 4% over FY2009-2019E. The growth rateis expected to be much higher in the case of emerging markets, mainly India, the Middle-East and South-East Asia. According to WTTC estimates, the tourism industry in India, theMiddle-East and South-East Asia is likely to witness a CAGR of 8% over FY2009-2019E.4] Outlook and Valuation: Over FY2006-09, C&Ks Revenues and PAT have witnessed aCAGR of 65.6% and 80.7%, respectively; these, however, have also been aided by the fiveacquisitions it has made across the globe since 2006. Going ahead C&Ks Top-line PAT towitness a CAGR of 27.4% and 37.7% over FY2009-11E, respectively On the lower andupper end of the price band, the stock would quote at 16.5x and 17.3x its post dilutedFY2011E estimates, respectively.AWARDS & RECOGNITION:68
  69. 69. Over the years Cox & Kings has been conferred with numerous awards thatstand testimony to its excellent service.1] "Most admired tour operator 2010" awarded by SATTE (2010)2] “First Runner Up” in the Best Large Tour Operator category awarded by the TelegraphUltra Travel luxury survey UK 2010.3] “First Runner Up” in the Favorite Tour Operator category awarded by Condé NastTraveller Readers’ Choice Awards (2010).4] “Best Domestic Tour Operator” awarded by the Abacus TAFI TravelBiz Monitor Awards(2009).5] “Best Inbound Tour Operator” awarded by the Abacus TAFI TravelBiz Monitor Awards(2009).6] “The Number One Brand in India” based on a survey conducted by research agency,TNS and co-funded by Media magazine, ranking it 152 amongst the top 1,000 brands in theAsia Pacific region - Australia, China, India, Japan, Hong Kong, Korea, Malaysia,Singapore, Taiwan and Thailand.ISSUE DETAILSIssue Open: Nov 18, 2009 – Nov 20, 2009Issue Type: 100% Book Built Issue IPOIssue Size: 18,496,640 Equity Shares of Rs. 10Issue Size: Rs. 584.49 – 610.39 CroreFace Value: Rs. 10 per Equity ShareIssue Price: Rs. 316 – Rs. 330 per Equity ShareMarket Lot: 20 Shares69
  70. 70. Minimum Order Quantity: 20 SharesListing At: BSE, NSELead Manager- India Infoline LimitedObjects of the Issue:The objects of the Issue are to achieve the benefits of listing on the StockExchanges & to raise capital to:1. Repayment of Loans;2. Acquisitions & Other Strategic Initiatives;3. Investment in Overseas Subsidiaries;4. Investment in Corporate Office & Upgrading our existing Operations;5. General Corporate Purposes.Shareholding Pattern of Cox and King’sHolders Name No of Shares % Share HoldingPromoters 26475348 42.08%ForeignInstitutions 13935398 22.15%ForeignPromoter 13565532 21.56%NBanksMutualFunds 4218609 6.70%General Public 1767002 2.81%OtherCompanies 1454667 2.31%Foreign Companies 760648 1.21%Financial Institutions 342479 0.54%Foreign Industries 205424 0.33%Foreign NRI 118992 0.19%Others 78843 0.13%Total100%SUBSCRIPTION DETAILS70
  71. 71. Cox and Kings IPO closed for subscription and got a decent response from investorsespecially QII investors. Analysts said that it is a good issue for long term investors. TheIPO has got subscribed by over 6 times. Retail segment though did not get fully subscribed.At the close of the day,QII segment got subscribed by 9.95 timesNII segment got subscribed by 10.7 timesRetail segment got subscribed by 0.98 timesEmployee reservation got subscribed by 0.10 times.The figures above suggest that it has got good response from theentire investors segment, which made the company to go forward through the issue. Manyexperts suggested this IPO as the company got huge potential to grow.AllotmentA person who applied for 6 shares got one share of Cox & King’sLISTING DETAILSListing Date: Friday, December 11, 2009BSE Scrip Code: 533144NSE Symbol: COX&KINGSListing In: B Group of SecuritiesSector:ISIN: INE008I01018Issue Price: Rs. 330.00 Per Equity ShareFace Value: Rs. 10.00 Per Equity ShareTABLE -3LISTING DAY TRADING INFORMATION OF COX & KING’S IPOBSE NSEIssue Price: Rs. 330.00 Rs. 330.00Open: Rs. 304.10 Rs. 343.20Low: Rs. 304.10 Rs. 343.20High: Rs. 433.45 Rs. 433.90Last Trade: Rs. 426.05 Rs. 425.40Volume: 16,954,687 29,896,72871
  72. 72. CHART -6ISSUE PRICE OF COX AND KING’S IPOINTERPRETATIONThe above bar diagram shows the issue price of COX & KING’S IPO inboth BSE and NSE.x-axis represents the exchanges traded { i.e. BSE AND NSE} and Y-axis represents issue price amount { i.e. Rest 330.00 in both exchanges }72
  73. 73. CHART -7IPO LISTING DAY OPEN PRICE OF COX & KING’SINTERPRETATIONThe above chart shows the listing day opening price of COX & KING’SIPO. Here X- axis represents exchanges traded and Y-axis represents the opening price inboth the exchanges. {I.e. Rs 304.10 in BSE and Rs 343.20in NSE].73
  74. 74. CHART -8LISTING DAY LOW PRICE OF COX & KING’S IPOINTERPRETATIONThe above chart shows the listing day opening price of COX & KING’SIPO. Here X- axis represents exchanges traded and Y-axis represents the listing day’s lowprice in both the exchanges. {I.e. Rs 304.10 in BSE and Rs343.20in NSE].74
  75. 75. CHART -9CHART SHOWING LISTING DAY HIGH PRICELISTING DAY HIGH PRICE OF COX & KINGS433.2433.3433.4433.5433.6433.7433.8433.9434bse nseSeries1INTERPRETATIONThe above chart shows the listing day high price of COX & KING’S stock.Here X- axis represents exchanges traded and Y-axis represents the last traded price of COX& KING’S IPO on listing day in both the exchanges. {I.e. Rs 433.45 in BSE and Rs433.90in NSE].75
  76. 76. CHART -10LAST TRADED PRICE OF COX & KING’S IPO ON LISTING DAYINTERPRETATIONThe above chart shows the listing day opening price of COX & KING’SIPO. Here X- axis represents exchanges traded and Y-axis represents the last traded price ofCOX & KING’S IPO on listing day in both the exchanges. {I.e. Rs 426.05 in BSE andRs426 and 425.40 in NSE].ConclusionFrom the data and interpretation it can be analyzed that the stock is listed ata premium of around 30%.This shows that the IPO of the company is success, with volumesof above 16 lakes in BSE and above 29 lakhs in NSE.76
  77. 77. Performance of Cox & King’s Stock after Its IPOCOX & KING’S IPO which was listed on 11 thDECEMBER 2009has been showing consistent performance till now. The listing price of COX & KING’S wasRs426 and 425 in both BSE and NSE.52 week high of the stock is Rs 530 and its low isRs364.There has been an increase in FII’S investments in the company after its listing whichwas a huge success.Balance Sheet of Cox & King’s77
  78. 78. 78Mar 06 Mar 07 Mar 08 Mar 09 Mar 1012 mths 12 mths 12 mths 12 mths 12 mthsSources Of FundsTotal Share Capital 5.44 5.44 27.93 27.93 62.92Equity Share Capital 5.44 5.44 27.93 27.93 62.92Share Application Money 0.00 0.00 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 48.52 69.60 120.23 157.75 636.02Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Net worth 53.96 75.04 148.16 185.68 698.94Secured Loans 45.75 27.21 50.24 82.63 145.67Unsecured Loans 18.59 30.00 71.30 102.02 90.00Total Debt 64.34 57.21 121.54 184.65 235.67Total Liabilities 118.30 132.25 269.70 370.33 934.61Mar 06 Mar 07 Mar 08 Mar 09 Mar 10