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Final capital market Document Transcript

  • 1. A Project Report on “CAPITAL MARKET” Submitted toNARMADA COLLEGE OF MANAGEMENT, BHARUCH. Affiliated toGUJARAT TECHNOLOGICAL UNIVERSITY AHMEDABAD. In partial fulfillment of the Requirement for the degree ofMASTERS OF BUSINESS ADMINISTRATION Submitted To Ms. NILAM PANCHAL Submitted By RONAK PATEL (1120) AMAN PANCHAL(1106) MBA (Semester – 3) 1
  • 2. INTRODUCTIONA capital market is a market for securities (debt or equity), where businessenterprises (companies) and governments can raise long-term funds. It is definedas a market in which money is provided for periods longer than a year, as theraising of short-term funds takes place on other markets (e.g., the money market).The capital market includes the stock market (equity securities) and the bondmarket(debt). Financial regulators, such as the UKs Financial ServicesAuthority (FSA) or the U.S. Securities and Exchange Commission (SEC), overseethe capital markets in their designated jurisdictions to ensure that investors areprotected against fraud, among other duties.Broadly speaking the CAPITAL MARKET is classified in to two categories.They are the Primary market (New Issues Market) and the Secondary market (Old(Existing) Issues Market). This classification is done on the basis of the nature ofthe instrument brought in the market. However on the basis of the types ofinstitutions involved in capital market, it can be classified into various categoriessuch as the Government Securities market or Gilt-edged market, IndustrialSecurities market, Development Financial Institutions (DFIs) and Financialintermediaries. All of these components have specific features to mention. Thestructure of the Indian capital market has its distinct features. These differentsegments of the capital market help to develop the institution of capital market inmany dimensions. The primary market helps to raise fresh capital in the market. Inthe secondary market, the buying and selling (trading) of capital marketinstruments takes place. The following chart will help us in understanding theorganizational structure of the Indian Capital market. 2
  • 3. 1. Government Securities Market: This is also known as the Gilt-edged market. This refers to the market for government and semi-government securities backed by the Reserve Bank of India (RBI). 2. Industrial Securities Market: This is a market for industrial securities i.e. market for shares and debentures of the existing and new corporate firms. Buying and selling of such instruments take place in this market. This market is further classified into two types such as the New Issues Market (Primary) and the Old (Existing) Issues Market (secondary). In primary market fresh capital is raised by companies by issuing new shares, bonds, units of mutual funds and debentures. However in the secondary market already existing i.e old shares and debentures are traded. This trading takes place through the registered stock exchanges. In India we have three prominent stock exchanges. They are the Bombay Stock Exchange (BSE), the National Stock Exchange (NSE) and Over The Counter Exchange of India (OTCEI). 3 Development Financial Institutions (DFIs) : This is yet another importantsegment of Indian capital market. This comprises various financial institutions.These can be special purpose institutions like IFCI, ICICI, SFCs, IDBI, IIBI, UTI,etc. These financial institutions provide long term finance for those purposes forwhich they are set up. 4 Financial Intermediaries : The fourth important segment of the Indian capital market is the financial intermediaries. This comprises various merchant banking institutions, mutual funds, leasing finance companies, venture capital companies and other financial institutions.PRIMARY MARKETSecurities available for the first time are offered through the primary market. Theissuer may be a brand-new company or the one that has been in business for manyyears. The securities offered may be a new type for the issuer of additionalamounts of a securities used frequently in the past. In primary market funds aremobilized in the primary market through prospectus, right issue, and privateplacement 3
  • 4. Primary Market Company announces IPO and distributes forms Company announces IPO RESEARCHMr. A fills up form and submits Mr. B fills up form and submits itit to the company to the company Allotment Of Share Mr. A is allotted some shares @ Rs 95 per shareSecondary Market Mr. B is NOT allotted shares by the company. There were not enough shares to offer Mr. A sells some of his shares in the market (at a higher price, say Rs. 105). Mr. B buys some shares from the stock market through a broker at this price 4
  • 5. ROLE OF PRIMARY MARKET  The primary market provides the channel for sale of new securities.  Primary market provides opportunity to issuers of securities; Government as well as corporate, to raise resources to meet their requirements of investment and/or discharge some obligation.  They may issue the securities at face value, or at a discount/premium and these securities may take a variety of forms such as equity, debt etc. They may issue the securities in domestic market and/or international market.METHODS OF ISSUING SECURITIES IN THE PRIMARY MARKET ISSUES PRIVATE PUBLIC RIGHT BONUS PLACEME ISSUE ISSUE ISSUE NT INDIAN QUALIFIED INITIAL FURTHER PREFERE INSTITUTI DEPOSIT- PUBLIC PUBLIC -NTIAL ONAL ORY PLACEME OFFER OFFER ISSUE RECEIPT NT 5
  • 6. (a) Public issue:  When an issue / offer of securities is made to new investors for becoming part of shareholders’ family of the issuer it is called a public issue.  Public issue can be further classified into Initial public offer (IPO) and Further public offer (FPO). I. Initial public offer (IPO):  When an unlisted company makes either a fresh issue of securities or offers its existing securities for sale or both for the first time to the public, it is called an IPO.  This paves way for listing and trading of the issuer’s securities in the Stock Exchanges. II. Further public offer (FPO) or Follow on offer:  When an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, it is called a FPO.III Indian depository receipt (IDR):  IDRs are depository receipts denominated in Indian Rupees issued by a Domestic Depository in India.  IDRs represent a proportional ownership interest in a fixed number of underlying equity shares of the issuer company (known as “Deposited Shares”.) 6
  • 7.  An IDR is a mechanism that allows investors in India to invest in listed foreign companies, including multinational companies, in Indian rupees. (b) Rights issue (RI):  When an issue of securities is made by an issuer to its shareholders existing as on a particular date fixed by the issuer (i.e. record date), it is called an rights issue.  The rights are offered in a particular ratio to the number of securities held as on the record date. (C) Bonus issue:  When an issuer makes an issue of securities to its existing shareholders as on a record date, without any consideration from them, it is called a bonus issue. The shares are issued out of the Company’s free reserve or share premium account in a particular ratio to the number of securities held on a record date.(d) Private placement:  When an issuer makes an issue of securities to a select group of persons not exceeding 49, and which is neither a rights issue nor a public issue, it is called a private placement.  Private placement of shares or convertible securities by listed issuer can be of two types: (i) Preferential allotment:  When a listed issuer issues shares or convertible securities, to a select group of persons in terms of provisions of Chapter XIII of SEBI (DIP) guidelines, it is called a preferential allotment. 7
  • 8.  The issuer is required to comply with various provisions which inter‐alia include pricing, disclosures in the notice, lock‐in etc, in addition to the requirements specified in the Companies Act. (ii) Qualified institutions placement (QIP):  When a listed issuer issues equity shares or securities convertible in to equity shares to Qualified Institutions Buyers only in terms of provisions of Chapter XIIIA of SEBI (DIP) guidelines, it is called a QIP.SECONDARY MARKETOnce investors have purchased new issues they change hands in the secondarymarkets. This market is also known as the stock market. In India the secondarymarket consists of recognized stock exchanges operating under rules andregulations duly approved the government.ROLE OF SECONDARY MARKETSecondary marketing is vital to an efficient and modern capital market. In thesecondary market, securities are sold by and transferred from one investor orspeculator to another. It is therefore important that the secondary market be highlyliquid (originally, the only way to create this liquidity was for investors andspeculators to meet at a fixed place regularly; this is how stock exchangesoriginated, see History of the Stock Exchange). As a general rule, the greater thenumber of investors that participate in a given marketplace, and the greater thecentralization of that marketplace, the more liquid the market.Fundamentally, secondary markets mesh the investors preference for liquidity (i.e.,the investors desire not to tie up his or her money for a long period of time, in case 8
  • 9. the investor needs it to deal with unforeseen circumstances) with the capital userspreference to be able to use the capital for an extended period of time.Accurate share price allocates scarce capital more efficiently when new projectsare financed through a new primary market offering, but accuracy may also matterin the secondary market because: 1) price accuracy can reduce the agency costs ofmanagement, and make hostile takeover a less risky proposition and thus movecapital into the hands of better managers, and 2) accurate share price aids theefficient allocation of debt finance whether debt offerings or institutionalborrowing.These are important institutions and segments in the Indian capital market.Financial Regulatory BodiesFinancial sector in India has experienced a better environment to grow with thepresence of higher competition. The financial system in India is regulated byindependent regulators in the field of banking, insurance, mortgage and capitalmarket. Government of India plays a significant role in controlling the financialmarket in India.Securities and Exchange Board of India (SEBI) is one of the regulatory authoritiesfor Indias capital market. • Securities and Exchange Board of India (SEBI) • National Stock Exchange • Bombay Stock Exchange (BSE) • Reserve Bank of India  SECRITIES & EXCHANGE BOARD OF INDIASecurities and Exchange Board of India (SEBI) was first established in the year1988 as a non-statutory body for regulating the securities market. It became anautonomous body in 1992 and more powers were given through an ordinance.Since then it regulates the market through its independent powers. 9
  • 10. Functions Of SEBI • Regulates Capital Market • Checks Trading of securities. • Checks the malpractices in securities market. • It enhances investors knowledge on market by providing education. • It regulates the stockbrokers and sub-brokers. • To promote Research and InvestigationSEBI In Indias Capital MarketSEBI from time to time have adopted many rules and regulations for enhancing theIndian capital market. The recent initiatives undertaken are as follows: • Sole Control on Brokers:Under this rule every brokers and sub brokers have to get registration with SEBI and any stock exchange in India. • For Underwriters:For working as an underwriter an asset limit of 20 lakhs has been fixed. • For Share Prices:According to this law all Indian companies are free to determine their respective share prices and premiums on the share prices. • For Mutual Funds:SEBIs introduction of SEBI (Mutual Funds) Regulation in 1993 is to have direct control on all mutual funds of both public and private sector. 10
  • 11.  BSE(BOMBAY STOCK EXCHANGE)The Stock Exchange, Mumbai, popularly known as "BSE" was established in1875 as "The Native Share and Stock Brokers Association". It is the oldest onein Asia, even older than the Tokyo Stock Exchange, which was established in1878. It is a voluntary non-profit making Association of Persons (AOP) and iscurrently engaged in the process of converting itself into demutualised andcorporate entity. It has evolved over the years into its present status as the premierStock Exchange in the country. It is the first Stock Exchange in the Country tohave obtained permanent recognition in 1956 from the Govt. of India under theSecurities Contracts (Regulation) Act, 1956.The Exchange, while providing an efficient and transparent market for trading insecurities, debt and derivatives upholds the interests of the investors and ensuresredresses of their grievances whether against the companies or its own member-brokers. It also strives to educate and enlighten the investors by conductinginvestor education program and making available to them necessary informativeinputs.A Governing Board having 20 directors is the apex body, which decides thepolicies and regulates the affairs of the Exchange. The Governing Board consistsof 9 elected directors, who are from the broking community (one third of themretire ever year by rotation), three SEBI nominees, six public representatives andan Executive Director & Chief Executive Officer and a Chief Operating Officer. 11
  • 12.  NSE(NATIONAL STOCK EXCHANGE)NSE was incorporated in 1992 and was given recognition as a stock exchange inApril 1993. It started operations in June 1994, with trading on the Wholesale DebtMarket Segment. Subsequently it launched the Capital Market Segment inNovember 1994 as a trading platform for equities and the Futures and OptionsSegment in June 2000 for various derivative instruments.NSE has been able to take the stock market to the doorsteps of the investors. Thetechnology has been harnessed to deliver the services to the investors across thecountry at the cheapest possible cost. It provides a nation-wide, screen-based,automated trading system, with a high degree of transparency and equal access toinvestors irrespective of geographical location. The high level of informationdissemination through on-line system has helped in integrating retail investors on anation-wide basis. The standards set by the exchange in terms of market practices,Products, technology and service standards have become industry benchmarks andare being replicated by other market participants. Within a very short span of time,NSE has been able to achieve all the objectives for which it was set up. It has beenplaying a leading role as a change agent in transforming the Indian Capital Marketsto its present form. The Indian Capital Markets are a far cry from what they used tobe a decade ago in terms of market practices, infrastructure, technology, riskmanagement, clearing and settlement and investor service.  RESERVE BANK OF INDIAReserve Bank of India is the apex monetary Institution of India. It is also called asthe central bank of the country. The bank was established on April1, 1935according to the Reserve Bank of India act 1934. It acts as the apex monetaryauthority of the country.The Central Office of the Reserve Bank has been inMumbai since inception. The Central Office is where the Governor sits and iswhere policies are formulated. Though originally privately owned, sincenationalization in 1949, the Reserve Bank is fully owned by the Government ofIndia.The preamble of the reserve bank of India is as follows: 12
  • 13. " regulate the issue of Bank Notes and keeping of reserves with a view tosecuring monetary stability in India and generally to operate the currency andcredit system of the country to its advantage."Central BoardThe Reserve Banks affairs are governed by a central board of directors. The boardis appointed by the Government of India in keeping with the Reserve Bank of IndiaAct.Local Boards • One each for the four regions of the country in Mumbai, Calcutta, Chennai and New Delhi • Membership • Consist of five members each • Appointed by the Central Government • For a term of four yearsFunctionsTo advise the Central Board on local matters and to represent territorial andeconomic interests of local cooperative and indigenous banks, to perform suchother functions as delegated by Central Board from time to time.INSTRUMENTS OF CAPITAL MARKETThe following instruments are being used for raising resources. 1. Equity shares 2. Preference shares 3. Non-voting equity shares 4. Cumulative convertible preference shares 5. Company fixed deposits 6. Warrants 7. Debentures/bonds 8. Secured premium notes (SPNs) 13
  • 14. 9. Euro convertible bonds (ECBs) / Global depository receipts (GDRs) INITIAL PUBLIC OFFERINGS (IPO)INTRODUCTIONAn initial public offering (IPO) referred to simply as an "offering" or "flotation," iswhen a company (called the issuer) issues common stock or shares to the public for thefirst 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 helpsit determine what type of security to issue (common or preferred), best offeringprice and time to bring it to market.An IPO can be a risky investment. For the individual investor, it is tough to predictwhat the stock or shares will do on its initial day of trading and in the near futuresince there is often little historical data with which to analyze the company. Also,most IPOs are of companies going through a transitory growth period, and they aretherefore subject to additional uncertainty regarding their future values.REASON FOR LISTINGWhen a company lists its shares on a public exchange, it will almost invariablylook to issue additional new shares in order at the same time. The money paid byinvestors for the newly-issued shares goes directly to the company (in contrast to alater trade of shares on the exchange, where the money passes between investors).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 neverrequired to repay the capital, but instead the new shareholders have a right to futureprofits distributed by the company and the right to a capital distribution in case ofdissolution. 14
  • 15. 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 arights issue, thereby again providing itself with capital for expansion withoutincurring any debt. This regular ability to raise large amounts of capital from thegeneral market, rather than having to seek and negotiate with individual investors,is a key incentive for many companies seeking to list.IPO MARKET IN INDIAThe IPO Market in India has been developing since the liberalization of theIndian economy. It has become one of the foremost methods of raising funds forvarious developmental projects of different companies. • IPO Market in India - OverviewThe IPO Market in India is on the boom as more and more companies are issuingequity shares in the capital market. With the introduction of the open marketeconomy, in the 1990s, the IPO Market went through its share of policy changes,reforms and restructurings. One of the most important developments was thedisassembling of the Controller of Capital Issues (CCI) and the introduction of thefree pricing mechanism.This step helped in developing the IPO Market in India, as the companies werepermitted to price the issues. The Free pricing mechanism permitted the companiesto raise funds from the primary market at competitive price. • IPO Market in India - RegulationsThe Central Government felt the need for a governed environment pertaining to theCapital market, as few corporate houses were using the abolition of the Controllerof Capital Issues (CCI) in a negative manner. The Securities Exchange Board ofIndia (SEBI) was established in the year 1992 to regulate the capital market. SEBIwas given the authority of monitoring and regulating the activities of the bankers to 15
  • 16. an issue, portfolio managers, stockbrokers, and other intermediaries related to thestock markets. The effects of the changes are evident from the trend of theresources of the primary capital market which includes rights issues, public issues,private placements and overseas issues. • IPO Market In India - Glimpses  The IPO Market in India experienced a boom in its activities in the year 1994.  In the year 1995 the growth of the Indian IPO market was 32 % .  The growth was halted with the South East Asian crisis.APPLYING FOR AN IPO IN INDIAWhen a firm proposes a public issue or IPO, it offers forms for submission to befilled by the shareholders. Public shares can be bought for a limited period onlyand as per the law, any IPO should be traded openly only for minimum 3 days and21 days maximum. For offers that are sponsored by financial institutions, theproposal should be traded for maximum 21 days and minimum 3 days.For offers that are sponsored by Indian financial institutions, the proposal shouldbe traded for maximum 10 days. The submission form should be duly filled up andsubmitted by cash, cheque or DD prior to the closing date, in accordance with theguidelines mentioned in the form. IPOs by investment firms generally entailcountersigned charges which signify a load to purchasers.THINGS TO CONSIDER BEFORE APPLYING FOR IPOS IN INDIAThere are certain factors which need to be taken into consideration before applyingfor Initial Public Offerings in India. They are:  Promoters, their reliability and past records  Firm producing or facilitating services  Product offered by the firm and its potential 16
  • 17.  Whether the firm has entered into a collaboration with technological firm  Status of the associates  Historical record of the firm providing the Initial Public Offerings  Project value and various techniques of sponsoring the plan  Productivity estimates of the project  Risk aspects engaged in the execution of the plan  Authority that has reviewed the planADVANTAGES OF IPOThe Advantages of IPO are numerous. The companies are launching more andmore IPOs to raise funds which are utilized for undertakings various projectsincluding expansion plans.IPO has a number of advantages. IPO helps the company to create a publicawareness about the company as these public offerings generate publicity byinducing their products to various investors. • The increase in the capital: An IPO allows a company to raise funds for utilizing in various corporate operational purposes like acquisitions, mergers, working capital, research and development, expanding plant and equipment and marketing. • Liquidity: The shares once traded have an assigned market value and can be resold. This is extremely helpful as the company provides the employees with stock incentive packages and the investors are provided with the option of trading their shares for a price. • Valuation: The public trading of the shares determines a value for the company and sets a standard. This works in favour of the company as it is helpful in case the company is looking for acquisition or merger. It also 17
  • 18. provides the share holders of the company with the present value of the shares. • Increased wealth: The founders of the companies have an affinity towards IPO as it can increase the wealth of the company, without dividing the authority as in case of partnership. DRAWBACKS OF IPOsIt is true that IPO raises huge capital for the issuing company. But, in order tolaunch an Initial Public Offering (IPO), it is also necessary to make certaininvestments.Setting up an IPO does not always lead to an improvement in the economicperformance of the company. A continuing expenditure has to be incurred after thesetting up of an IPO by the parent company.A lot of expenses have to be incurred in the form of legal fees, printing costs andaccounting fees, which are connected to the registering of an IPO. Such expensesmight cost hundreds of US dollars. Apart from such enormous costs, there areother factors as well that should be taken into consideration by the company whileintroducing an IPO.Such factors include the rules and regulations involved to set up public offeringsand this entire process on the other hand involve a number of complexities whichsometime require the services of experts in relevant fields.Some companies hire experts to do the needful to ensure a hassle-free execution ofthe task. After the IPO is introduced, the expenses become a routine in everyactivity involved.Besides, the CEO of the company would have to spend a lot of time in handling theSEC regulations or sometimes he hires experts to do the same. All these aspects, ifnot handled with efficiency, prove to be some major drawbacks related to thelaunch of IPOs.The launch of IPO also brings about shareholders of the company. Shareholders 18
  • 19. have ownership in the company. A major risk with shareholders is that, they cansell off their stocks any time they want, in case they see the price band of thestakes of that company is going down. This will lead to a further drop of the valueof shares in the market which in turn will decrease the overall value of thecompany.BUYING IPOBuying IPO needs sound knowledge about the capital market and its working. TheIPO helps the company to raise funds from the public by means of issuing shares tothe various investors.Buying IPO - OverviewBefore Buying IPO one must be sure what an IPO is. When an existing companyor a brand new company issue shares for the public to buy in the capital market forthe first time, the process is called Initial Public Offering (IPO). With this theshares of the company gets listed in the stock exchange. It is also referred to asgoing public as the company approaches the public for the funds.All companies need to raise funds for various operations and one of the bestoptions is raising funds through issue of shares. The investors are interested as theyearn dividends from the shares.Important considerations in Buying IPOWhile buying IPO, the investors must be careful about choosing the company asthere are numerous number of not-so-good companies. The investors must keepyour eyes and ears open. It is advised that the investors seek help fromprofessionals in this field rather than handling critical decisions on their own. CATEGORIES OF INVESTORSInvestors are broadly classified under following categories‐:(i) Retail individual Investor (RIIs)(ii) Non‐Institutional Investors (NIIs) 19
  • 20. (iii) Qualified Institutional Buyers (QIBs)  “Retail individual investor” means an investor who applies or bids for securities for a value of not more than Rs. 1, 00,000.  “Qualified Institutional Buyer” shall mean:a) A public financial institution as defined in section 4A of the Companies Act,1956;b) A scheduled commercial bank;c) A mutual fund registered with the Board;d) A foreign institutional investor and sub‐account registered with SEBI, other thana sub account which is a foreign corporate or foreign individual;e) A multilateral and bilateral development financial institution;f) A venture capital fund registered with SEBI;g) A foreign venture capital investor registered with SEBI;h) A state industrial development corporation;i) An insurance company registered with the Insurance Regulatoryand Development Authority (IRDA);j) A provident fund with minimum corpus of Rs. 25 crores;k) A pension fund with minimum corpus of Rs. 25 crores);l) National Investment Fund set up by resolution no. F. No. 2/3/2005‐DDII datedNovember 23, 2005 of Government of India published in the Gazette of India.” 20
  • 21.  Investors who do not fall within the definition of the above two categories are categorized as “Non‐Institutional Investors”INTERMEDIARIES INVOLVED IN THE ISSUE PROCESSIntermediaries which are registered with SEBI are Merchant Bankers to the issue(known as Book Running Lead Managers (BRLM) in case of book built publicissues), Registrars to the issue, Bankers to the issue & Underwriters to the issuewho are associated with the issue for different activities. Their addresses,telephone/fax numbers, registration number, and contact person and emailaddresses are disclosed in the offer documents.  Merchant Banker:Merchant banker does the due diligence to prepare the offer document whichcontains all the details about the company. They are also responsible for ensuringcompliance with the legal formalities in the entire issue process and for marketingof the issue.  Registrars to the Issue:They are involved in finalizing the basis of allotment in an issue and for sendingrefunds, allotment etc.  Bankers to the Issue:The Bankers to the Issue enable the movement of funds in the issue process andtherefore enable the registrars to finalize the basis of allotment by making clearfunds status available to the Registrars.  Underwriters: 21
  • 22. Underwriters are intermediaries who undertake to subscribe to the securitiesoffered by the company in case these are not fully subscribed by the public, in caseof an underwritten issue.ISSUE REQUIREMENTSSEBI has laid down entry norms for entities making a public issue/ offer. The sameare detailed belowEntry Norms: Entry norms are different routes available to an issuer for accessingthe capital market.Entry Norm I (commonly known as “Profitability Route”)The Issuer Company shall meet the following requirements: • Net Tangible Assets of at least Rs. 3 crores in each of the preceding three full years. • Distributable profits in at least three of the immediately preceding five years. • Net worth of at least Rs. 1 crore in each of the preceding three full years • If the company has changed its name within the last one year, at least 50% revenue for the preceding 1 year should be from the activity suggested by the new name. • The issue size does not exceed 5 times the pre‐ issue net worth as per the audited balance sheet of the last financial year to provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters.SEBI has provided two other alternative routes to the companies not satisfying anyof the above conditions, for accessing the primary Market, as under:Entry Norm II (Commonly known as “QIB Route”) • Issue shall be through book building route, with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (QIBs). 22
  • 23. • The minimum post‐issue face value capital shall be Rs.10 crores or there shall be a compulsory market‐making for at least 2 yearsEntry Norm III (commonly known as “Appraisal Route”) • The “project” is appraised and participated to the extent of 15% by Financial Institutions / Scheduled Commercial Banks of which at least 10% comes from the appraiser(s). • The minimum post‐issue face value capital shall be Rs. 10 crores or there shall be a compulsory market‐making for at least 2 years.In addition to satisfying the aforesaid entry norms, the Issuer Company shall alsosatisfy the criteria of having at least 1000 prospective allotees in its issue.Certain category of entities which are exempted from the aforesaid entrynorms, are as under:(a) Private Sector Banks(b) Public sector banks(c) An infrastructure company whose project has been appraised by a PublicFinancial Institution or IDFC or IL&FS or a bank which was earlier a PFI and notless than 5% of the project cost is financed by any of these institutions.Besides entry norms, there are some mandatory provisions which an issuer isexpected to comply before making an issue  Minimum Promoter’s contribution and lock‐in:In a public issue by an unlisted issuer, the promoters shall contribute not less than20% of the post issue capital which should be locked in for a period of 3 years.“Lock‐in” indicates a freeze on the shares. 23
  • 24. The remaining pre issue capital should also be locked in for a period of 1 year fromthe date of listing.In case of public issue by a listed issuer [i.e. FPO], the promoters shall contributenot less than 20% of the post issue capital or 20% of the issue size.This provision ensures that promoters of the company have some minimum stakein the company for a minimum period after the issue or after the project for whichfunds have been raised from the public is commenced.  IPO Grading:IPO grading is the grade assigned by a Credit Rating Agency registered withSEBI, to the initial public offering (IPO) of equity shares or other convertiblesecurities.The grade represents a relative assessment of the fundamentals of the IPO inrelation to the other listed equity securities. Such grading is generallyAssigned on a five-point point scale with a higher score indicating strongerfundamentals and vice versa as below.IPO grade 1 ‐ Poor fundamentalsIPO grade 2 ‐ Below‐Average fundamentalsIPO grade 3 ‐ Average fundamentalsIPO grade 4 ‐ Above‐average fundamentalsIPO grade 5 ‐ Strong fundamentalsIPO grading has been introduced as an endeavour to make additional informationavailable for the investors in order to facilitate their assessment of equity issuesoffered through an IPO.Disclosure of “IPO Grades”, so obtained is mandatory for companies coming outwith an IPO. 24
  • 25. IPO Ratings, IPO Grading and IPO Ranking are among the few popularinputs investors uses before applying in initial public offerings IPO.IPO Ratings are provided by various financial institutions & independentbrokers. Few popular IPO Rating providers in India are Capital Market, MoneyControl, S P Tulsan’s IPO recommendations etc. IPO Grading is provided bySEBI approved rating agencies including CRISIL, CARE and ICRA.IPO Grading is designed to provide investors an independent, reliable andconsistent assessment of the fundamentals of IPO Issuer Companies. As IPOGrading is decided much earlier then the issue price or issue dates are finalize(usually on the IPO filing) and they just tell about the fundamentals of thecompany, investors should not consider them as Buy IPO or Skip IPOrecommendations.PRICING OF AN ISSUE(a) Who fixes the price of securities in an issue?Indian primary market ushered in an era of free pricing in 1992. SEBI does notplay any role in price fixation. The issuer in consultation with the merchant bankeron the basis of market demand decides the price.The offer document contains full disclosures of the parameters which are taken into account by merchant Banker and the issuer for deciding the price.The Parameters include EPS, PE multiple, return on net worth and comparison ofthese parameters with peer group companies. 25
  • 26. TYPES OF PRICING OF AN ISSUE TYPES OF PRICING OF AN ISSUE FIXED PRICE ISSUE BOOK BUILT ISSUEFixed Price Issue:When the issuer at the outset decides the issue price and mentions it in the OfferDocument, it is commonly known as “Fixed price issue”.Book built Issue:When the price of an issue is discovered on the basis of demand received from theprospective investors at various price levels, it is called “Book Built issue”. IPO PROCEDURE Appointment Procedure 1. Meeting of Board of Directors2. Appointing of Merchant Bankers- Specialized financial Consultancy who looks after Initial Public Offering 3. Appointing of Registrar and transfer agent done by Merchant Bankers 4. Banks- Appointed by Merchant Bankers 5. Appointing of Lawyer 26
  • 27. Real Procedure6. Book issued by Merchant bankers and submits it to SEBI which includes Reason of Issuing, no of Shares, Financial Condition of the company, current Business, Management, Growth in Sectors and Risk factor 7. Prospectus- Issued to stock Market and registrars 8.Printing Of Forms 9. Appointment of Brokers 10. Marketing & Advertising 11. Brokers Meeting in a Company 12. Road Shows or meetings 13. IPO starts 3-7 days opened 14. IPO closed Post IPO 15. Collection of Forms 16. Oversubscription or Under subscription 17. Allotment Of shares a. Pro data allotment b. lottery system 18. Issue of share certificate a. Letter of allotment b. Regret Letter 19. Refund cheque 20. Listing Of shares in NSE or BSEOFFER DOCUMENT‘Offer document’ is a document which contains all the relevant information aboutthe company, promoters, projects, financial details, objects of raising the money,terms of the issue etc and is used for inviting subscription to the issue being madeby the issuer. 27
  • 28. ‘Offer Document’ is called “Prospectus” in case of a public issue or offer for sale“Letter of offer” is an offer document in case of a Rights issue and is filed withStock exchanges before the issue opens.DIP- BIDDING RELATEDBIDDING PERIOD: OPENING/ CLOSING DATES:Bid to be open for at least 3 working days and not more than 7 working days,which may be extended to 10 working days, in case the price band is revised.REVISION OF PRICE BAND:Any revision in the price band to be widely disseminated by informing the stockexchanges, issuing press release and indicating on the website/terminals of thesyndicate members.BIDS:PLACING  Individual as well as QIBs to place their bids only through the designated brokers.  RII may bid at “cut of” price instead of writing the specific bid prices in the bid forms.  Bidding is permitted only if an electronically linked transparent facility is used. REVISION 28
  • 29.  Investors shall have the right to revise their bids provided that QIBs shall not be allowed to withdraw their bids after closure of bidding.ROLE OF BIDDING CENTERS:  Accept bid-cum-application forms from investors along with cheque/demand draft.  Register bids (for all options) through online/offline terminals  Generate transaction registration slips (TRS) for each of the options.  Lodge bid-cum-applications with Escrow bankers.APPLICATIONS SUPPORTED BY BLOCKED AMOUNT (ASBA)ASBA means “Application Supported by Blocked Amount”. ASBA is anapplication containing an authorization to block the application money in the bankaccount, for subscribing to an issue.If an investor is applying through ASBA, his application money shall be debitedfrom the bank account only if his/her application is selected for allotment after theallotment is finalized, or the issue is withdrawn/failed.  DETAILED PROCEDURE OF APPLYING IN IPO THROUGH ASBAUnder ASBA facility, investors can apply in any public/rights issues by using theirbank account.Investor submits the ASBA form (available at the designated branches of the banksacting as self certified Syndicate Banks(SCSBs)) after filling the details like nameof the applicant, PAN, Demat account number, bid quantity, bid price and otherrelevant details of the application in the bidding platform. 29
  • 30. Investors shall ensure that the details that are filled in the ASBA form are correctotherwise the form is liable to be rejected. 30
  • 31. BOOK BUILDING PROCEDUREBook building is a process of price discovery. Book Building Process, withreference to the Issue, refers to the process of the collection of Bids on the basis ofthis Red Herring Prospectus within the Price Band. The Issue Price is finalisedafter the Bid/Issue Closing Date. The principal parties involved in the BookBuilding Process are:-1. The Company;2. The BRLMs;3. Syndicate Members who are intermediaries registered with SEBI or registered asbrokers with BSE/NSE and eligible to act as Underwriters.4. The SCSBs;5. The Escrow Collection Bank(s); and6. The Registrar to the Issue. 31
  • 32. STEPS INVOLVED IN BOOK BUILDING PROCESSNominate Book Runner↓Form Syndicate of Brokers, Arrangers, Underwriters, Financial Institutions,etc.↓Submit Draft Offer Document to SEBI without Mentioning Coupon Rate orPrice↓Circulate Offer Document among the Syndicate Members↓Ask For Bids on Price and Quality of Securities↓Aggregate and Forward All Offers to Book Runner↓Run the Book to Maintain a Record of Subscribers and Their Orders↓Consult With Issuer and Determine the Issue Price as a Weighted Average ofthe Offers Received↓Firm Up Underwriting Commitments↓Allot Securities among Syndicate Members↓Securities Issued and Listed↓Trading Commences on Exchanges 32
  • 33. GREEN SHOE OPTION: (For stabilising the post listing price)INTRODUCTIONGreen Shoe Option is a price stabilizing mechanism in which shares are issued inexcess of the issue size, by a maximum of 15%.From an investor’s perspective, an issue with green shoe option provides moreprobability of getting shares and also that post listing price may show relativelymore stability as compared to market volatility.REQUIREMENTS Shareholders’ approval for allotment of further shares to SA One BRLM to be appointed as SA Maximum shares that can be over-allotted – 15% of the issue size Disclosures of specified details in offer document Stabilisation mechanism available for 30 days after trading starts Shares to be transferred to lenders not later than 2 working days after the stabilising period – subject to the remaining lock-in SA to file daily & final report to SEs/SEBIALLOTMENT OF SHAREAfter the closure of the issue, for e.g. a book built public issue, the bids receivedare aggregated under different categories i.e., firm allotment, QualifiedInstitutional Buyers (QIBs), Non‐Institutional Buyers (NIBs), Retail, etc.The oversubscription ratios are then calculated for each of the categories as againstthe shares reserved for each of the categories in the offer document. Within each ofthese categories, the bids are then segregated into different buckets based on thenumber of shares applied for. 33
  • 34. The oversubscription ratio is then applied to the number of shares applied for andthe number of shares to be allotted for applicants in each of the buckets isdetermined. Then, the number of successful allottees is determined. This process isfollowed in case of proportionate allotment.Thus allotment to each investor is done based on proportionate basis in both bookbuilt and fixed price public issue is detailed below:In case of Book Built issue1. In case an issuer company makes an issue of 100% of the net offer to publicthrough 100% book building process— • Not less than 35% of the net offer to the public shall be available for allocation to retail individual investors; • Not less than 15% of the net offer to the public shall be available for allocation to non‐institutional investors i.e. investors other than retail individual investors and Qualified Institutional Buyers; • Not more than 50% of the net offer to the public shall be available for allocation to Qualified Institutional Buyers:2. In case of compulsory Book‐Built Issues at least 50% of net offer to public beingallotted to the Qualified Institutional Buyers (QIBs), failing which the fullSubscription monies shall be refunded.3. In case the book built issues are made pursuant to the requirement of mandatoryallocation of 60% to QIBs in terms of Rule 19(2)(b) of Securities Contract(Regulation) Rules, 1957, the respective figures are 30% for RIIs and 10% forNIIs. 34
  • 35. In case of fixed price issueThe proportionate allotment of securities to the different investor categories in afixed price issue is as described below:1. A minimum 50% of the net offer of securities to the public shall initially bemade available for allotment to retail individual investors, as the case may be.2. The balance net offer of securities to the public shall be made available forallotment to: • Individual applicants other than retail individual investors, and • Other investors including corporate bodies/ institutions irrespective of the number of securities applied for.TIME LIMIT FOR ALLOTMENT & INTEREST FOR DELAY  As far as possible allotment of securities offered to public shall be made within 15 days of the closure of public issue.  The company would need to pay interest at 15% p.a., if the allotment letters/ refund orders are not despatched within the aforesaid period.IPO REFUNDIPO Refund is disbursed by the merchant bankers to the applicants of InitialPublic Offerings.In India, these IPO Refunds are generally made through electronic clearingservices for pre-designated numbers of centres. The clearing houses that are alsoinvolved with the process of IPO Refund are controlled by the Apex Bank ofIndia, the Reserve Bank of India.The directives on the IPO Refund money are issued by the Securities andExchange Board of India (SEBI). The directives on the IPO Refund money are laiddown as per the "Disclosure and Investor Protection Guidelines, 2000" formulatedby the Securities and Exchange Board of India (SEBI). 35
  • 36. These IPO Refunds are also made by direct credit and real time gross settlement(RTGS), as per the laid down eligibility criteria of the applicant. For applications,which are made completely in the dematerialized form, the relevant details of bankaccount of the IPO applicant are taken from depositories.IPO GREY MARKETIPO Grey market is an unofficial market where IPO shares are bought and soldbefore they become officially available for trading on the stock exchange.IPO Grey Market is an over-the-counter market where dealers may execute ordersfor preferred customers as well as provide support for a new issue before it isactually issued.Grey market trading include trading (selling or buying) applications at certainamount and trading (selling or buying) allocated shares through IPO allotmentbefore they list on stock exchanges.Grey market trading is usually done among the small set of people who trust eachother as there is no official platform or rules define for these trading.Two popular terms used in IPO grey market are ‘Grey Market Premium and‘Kostak’. 36
  • 37. TERMS USED IN IPO GREY MARKET Grey market Kostak premium 1. Grey market premium (or grey market price)  It is a premium amount in rupees at which IPO shares are being traded in Grey Market before they get listed in stock exchange. Grey market premium can be in positive or in negative based on demand and supply of the stock.  Grey Market Premiums are also attached with words ‘Buyer or ‘Seller. They tell the price either at which buyers are willing to buy shares or the price at which sellers are willing to sell their IPO shares.1. Example: Mundra port and SEZ LimitedIssue Price: Rs 440 per equity shareGrey Market Premium: Rs 400 (Buyers)This means buyers are ready to buy Mundra Port shares at 440+400 = Rs 840.2. Example : SVPCL Limited Issue Price: Rs 45 per equity share Grey Market Premium: Rs -6 (Seller) 37
  • 38. This means sellers are ready to sell SVPCL shares at the discount of Rs 6. i.e. 45-6 =Rs 39. 2. Kostak (or price of application)  It is the premium amount in rupees at which IPO applications are being traded in IPO Grey Market. Usually ‘Kostak value is defined as the premium of a maximum lot retail application in an IPO.  Kostak price is important mostly before issue is close for subscription and final bidding status is available to the IPO investors. Very few IPOs applications are traded after final bidding status is available to the investors.  ‘Kostak is especially for people who do not want to take risk with IPO allotment or listing gains. Example: BGR Energy Limited Issue Price: Rs 480 Per Equity Share (at upper band) Lot Size: 14 Grey Market Premium: Rs 350 to Rs 360 Kostak (Rs 100000): Rs 2500 to Rs 2600 This means BGR applications of Rs 1 lakh are being traded in IPO Grey Market at Rs 2500 to Rs 2600. Even though the Grey Market Premium of this IPO is around 75% of the issue price, the ‘Kostak is just 5% of the application amount. This is because Grey Market traders are assuming that the issue will highly oversubscribe and there will not be firm allotment even for retail investors who will apply full Rs 1 lakh. They are assuming one out of two people will get allotment and thus Rs 2 lakh investment will give them approximate Rs 5000 return. This way they are ready to buy 1 lakh application for Rs 2500. 38
  • 39. HOW GREY MARKET WORKS?Approach 1: Trading IPO Allocated shares in grey market: • Investor applies for shares through an IPO. They take a financial risk as there are chances that they may not get allocated any share or they receive the shares but shares may list below the issue price. Lets call them ‘Sellers. • There are few other people in the market who think that the share values more then its issue price. They start collecting these shares even before they are allocated by the issue registrar through IPO allotment process or before shares are in the stock market legally for sell through stock exchanges. Lets call then ‘Buyers. • Buyers contact the grey market dealers and place the order to buy IPO share at certain premium. • The grey market dealer contact sellers who applied in the IPO and ask them if they are willing to sell their IPO shares (if they receive allotment) at certain premium at this time. • If the sellers like the premium and they are not willing to take risk of stock market listing, they may sell the IPO shares to the grey market dealer and book the profit. At this time the seller has to finalize the deal with the grey market dealer at a certain price. • Grey market dealer get the application detail from seller and send a notification to the buyer that he bought a certain number of shares from the sellers in grey market. • Allotment is done and sellers may or may not receive allotment of shares. • If shares are allocated to the investor, either he may get call from the dealer to sell them at certain price or to transfer allocated shares to some demat account. • In case of selling the shares, settlement is done based on the profit or loss and the grey market premium at which buyers and sellers made a deal.• If no shares are allocated to the sellers the deal get cancelled without anysettlement. 39
  • 40. Approach 2: Trading IPO Applications in grey market: • Investor applies for shares through an IPO. They take a financial risk as there are chances that they may not get allocated any share or they receive the shares but shares may list below the issue price. Lets call them ‘Sellers. • There are few other people in the market who think that the share values more then its issue price. They start collecting these shares through grey market dealers much before the shares are even allocated. Lets call then ‘Buyers. • Buyers decide the price of the application based in various assumptions and market conditions. They give an offer to the sellers that they are willing to buy an IPO Application (without knowing that how many shares will get allocated) at certain premium. • To avoid the risk of allocation seller may sell their application at certain premium to the buyer through grey market dealer. • This kind of trading is call application trading or ‘kostak. In case of ‘Kostak seller need not to worry about the share allotment in IPO. He receives the allotment or not he will get the premium at which he sold his IPO allocation. • Grey market dealer get the application detail from seller and send a notification to the buyer that he bought an IPO application at certain premium from the sellers in grey market. • Allotment is done by the issue registrar. The application seller sold may or may not receive allotment of shares. • If shares are allocated to the sold application, either seller may get call from the dealer to sell them at certain price or to transfer allocated shares to some demat account. • In case of selling the shares, settlement is done based on the profit or loss. • If no shares are allocated to the sellers the deal is over without any settlement. The seller still gets his premium as he sold his application. 40
  • 41. RECENT TRENDSeveral factors are converging in 2012 to help the capital markets stabilize afterexperiencing significant volatility last year. Although some issues remain uncertain— particularly Europe’s financial struggles — several areas of the market arerebounding and gaining momentum. Here are seven capital market trends Kimco iswatching in 2012, and how we see them impacting retail real estate throughout theyear.1. Spreads will continue to compress in the unsecured bond market. Theunsecured bond market experienced an enormous amount of volatility in 2011.Spreads compressed significantly in the first half of the year, then widened asconcerns about Europe’s debt crisis mounted — in Kimco’s case to in excess of300 basis points over 10-year paper. The bond market was extremely weak overthe summer, until late September when Deutsche Bank sold 1.5 billion euros inunsecured bonds. Since then, the market has been open. Volatility remains,although we’ve seen spreads start to compress again. Even at spreads of 200-250basis points, with the 10-year bond trading somewhere around 2 percent, you’restill looking at 10-year financing in the low 4 percent area for a company like ours.That’s pretty attractive debt that is easy to access, so the unsecured bond market isclearly open and available. As we look into 2012, we expect to see further spreadcompression as we get more clarity around the European financial crisis and U.S.economic recovery. This should create opportunity for all REITs toopportunistically tap the unsecured bond market.2. U.S. corporate bond sales in 2012 will continue to rebound. Issuers arecontinuing to lock in decreasing yields on investment-grade corporate bonds,which have fallen to 3.54 percent, near the record low 3.45 percent reached August4. IBM, Procter & Gamble, and Petroleo Brasileiro SA led January with $10.5billion of offerings combined, while AT&T and Freeport led February with $3billion each of offerings. In addition, investors are more confident that Europe’sfinancial struggles won’t derail U.S. economic recovery. And the Federal OpenMarket Committee announced last month it will keep short-term interest rates at0.0 percent to 0.25 percent through at least late 2014. These factors are makingcorporate bond yields attractive, and indicate the market for new corporate bondissues should remain quite active in 2012.3. More U.S. banks will repair their balance sheets and improve their liquiditypositions. Capital is increasingly available within the commercial banking system 41
  • 42. for companies with solid credit. Kimco’s new $1.75 billion unsecured revolvingcredit facility is an example. We had decided to renew our $1.5 billion unsecuredrevolving U.S. credit facility a year early. Demand was tremendous when we wentto market in summer 2011 looking for a five-year facility. We quickly hadcommitments from 28 banks totaling over $2.8 billion — $1 billion more than wehad requested. This included commitments from European lenders, includingDeutsche Bank, UBS, and RBS, all of which made fairly large commitments to ourrevolver. On the pricing front, we negotiated a borrowing spread of 105 basispoints over LIBOR, one of the tightest spreads in the industry, and about 100 basispoints tighter than spreads 12 months prior. So for solid credits, there is the abilityto access significant amounts of medium-term capital at very low costs.4. The commercial mortgage-backed securities (CMBS) market will beavailable in 2012. Insurance companies were a great source of financing for theright properties in 2011. We’re cautiously optimistic the CMBS market will beopen in 2012, with many insurance companies having a lot of money to put towork. Remember, the market overheated by the summer of 2011, and then closeddown for a little while. But securitizations are getting done, and we’re starting tosee deal flow. In addition, banks have opened up. With Treasuries as low as theyare — yields on 10-year Treasury notes remain around 2 percent — there is clearlyaccess to capital within the mortgage market.5. It’s uncertain how long the spread differential between the bank andunsecured bond markets will last. The spreads in the bank market aresignificantly tighter than spreads in the unsecured bond market. For instance, for afive-year unsecured paper, the spread differential between a bank and an unsecuredbond loan is between 100 and 150 basis points. You would think after all thetrouble banks have endured, there wouldn’t be that much difference. And if theunsecured bond market ostensibly has so much capital available, maybe thepositions would be reversed. Nevertheless, this is an opportunity to take advantageof the disconnect between the bank and the bond market today — while it lasts.6. Equity markets should remain open in 2012. The equity markets are open forcompanies with stories that include a fairly quick, accretive use of proceeds. Sowe’re more cautious about the equity markets going forward. Kimco’s capital planas we continue into 2012 is to avoid the common equity markets, and instead lookat our assets where we can recycle capital, sell assets we want to move —particularly those outside the retail sector –, and use those proceeds to further ourinvestment in our core shopping center business. 42
  • 43. 7. European markets hang in the balance. Naturally, a big question is: What willhappen in Europe and how will it affect banks and economies worldwide? Marketsentiment has vacillated in recent weeks as Greece struggles to come to anagreement on financial reforms. A Greek default will impact bond issuances insovereign countries, including Italy, Spain, and Portugal. A liquidity injection bythe European Central Bank could help stabilize the countries. Although Europe isnot moving as quickly as some would like, the issues are clearly on the table andsome level of resolution will happen during 2012. If there is a resolution in Europewith which people can get comfortable, we believe risk appetites in the U.S. creditmarket will improve.The capital markets operated fairly well through 2011, and we expect to see themremain open as we continue into 2012. We feel very good about our balance sheettoday, and are squarely focused on continuing to improve our balance sheetmetrics, including net debt to recurring EBITDA and fixed charge coverage. Two-and-a-half years ago, Kimco’s net debt to recurring EBITDA was more than 8.3times on a recurring basis. Today, it’s around six times.Looking ahead, we have $460 million of perpetual preferred stock with a couponof 7.75 percent that will be callable in October. We recently announced the newissuance of $400 million of perpetual preferred stock at a coupon of 6 percent. Wewill use the proceeds from this offering partially towards calling the higher couponperpetual preferred stock when it becomes available. This is a savings of 175 basispoints, or almost 2 cents per share on an FFO basis.We also have approximately $300 million of bonds that will mature between late2012 and January 2013. Depending on spread compression, there’s also anopportunity to pre-fund some of those maturing bonds to lower our overall capitalcost and improve our coverage ratios. 43
  • 44. HDFC Bank Limited (BSE: 500180, NSE: HDFCBANK, NYSE: HDB) is anIndian financial services company based in Mumbai, Maharashtra that wasincorporated in August 1994. HDFC Bank is the fifth or sixth largest bank in Indiaby assets and the second largest bank by market capitalization as of February 24,2012. The bank was promoted by the Housing Development Finance Corporation,a premier housing finance company (set up in 1977) of India. As on October 2012,HDFC Bank has 2,544 branches and over 10,000 ATMs, in 1,399 cities in India,and all branches of the bank are linked on an online real-time basis. As of 30September 2008 the bank had toTal assets of Rs.1006.82 billion. For the fiscal year2010-11, the bank has reported net profit of 3,926.30 crore (US$714.59 million),up 33.1% from the previous fiscal. Total annual earnings of the bank increased by20.37% reaching at 24,263.4 crore (US$4.42 billion) in 2010-11. HDFC Bank isone of the Big Four banks of India, along with: State Bank of India, ICICI Bankand Punjab National Bank.HistoryHDFC Bank was incorporated in 1994 by Housing Development FinanceCorporation Limited (HDFC), Indias largest housing finance company. It wasamong the first companies to receive an in principle approval from the ReserveBank of India (RBI) to set up a bank in the private sector. The Bank startedoperations as a scheduled commercial bank in January 1995 under the RBIsliberalisation policies.Times Bank Limited (owned by Bennett, Coleman & Co./The Times Group) wasmerged with HDFC Bank Ltd., in 2000. This was the first merger of two privatebanks in India. Shareholders of Times Bank received 1 share of HDFC Bank forevery 5.75 shares of Times Bank.In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branchesto more than 1,000. The amalgamated bank emerged with a base of about Rs.1,22,000 crore and net advances of about Rs.89,000 crore. The balance sheet sizeof the combined entity is more than Rs. 1,63,000 crore. Current Price % Face Market CapCompany (Rs) Change Volume Equity Value (Rs Cr)HDFCBank 662.35 -1.07 42714 472.34 2 1,56,427.20 44
  • 45. 45
  • 46. SBI provides a range of banking products through its vast network of branches inIndia and overseas, including products aimed at non-resident Indians (NRIs). TheState Bank Group has the largest banking branch network in India. SBI has 14local head offices situated at Chandigarh (Punjab & Haryana), Delhi, Lucknow(Uttar Pradesh), Patna (Bihar), Kolkata (West Bengal), Guwahati (North EastCircle), Bhubaneswar (Orissa), Hyderabad (Andhra Pradesh), Chennai (TamilNadu), Trivandrum (Kerala), Bengaluru (Karnataka), Mumbai (Maharashtra),Bhopal (Madhya Pradesh) & Ahmedabad (Gujarat) and 57 Zonal Offices that arelocated at important cities throughout the country.SBI is a regional banking behemoth and is one of the largest financial institutionsin the world. It has a market share among Indian commercial banks of about 20%in deposits and loans. The State Bank of India is the 29th most reputed company inthe world according to Forbes. Also, SBI is the only bank featured in the coveted"top 10 brands of India" list in an annual survey conducted by Brand Finance andThe Economic Times in 2010.History 46
  • 47. The roots of the State Bank of India lie in the first decade of 19th century, whenthe Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June1806. The Bank of Bengal was one of three Presidency banks, the other two beingthe Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras(incorporated on 1 July 1843). All three Presidency banks were incorporated asjoint stock companies and were the result of the royal charters. These three banksreceived the exclusive right to issue paper currency in 1861 with the PaperCurrency Act, a right they retained until the formation of the Reserve Bank ofIndia. The Presidency banks amalgamated on 27 January 1921, and the re-organized banking entity took as its name Imperial Bank of India. The ImperialBank of India remained a joint stock company.Pursuant to the provisions of the State Bank of India Act of 1955, the ReserveBank of India, which is Indias central bank, acquired a controlling interest in theImperial Bank of India. On 30 April 1955, the Imperial Bank of India became theState Bank of India. The government of India recently acquired the Reserve Bankof Indias stake in SBI so as to remove any conflict of interest because the RBI isthe countrys banking regulatory authority.In 1959, the government passed the State Bank of India (Subsidiary Banks) Act,which made eight state banks associates of SBI. A process of consolidation beganon 13 September 2008, when the State Bank of Saurashtra merged with SBI.SBI has acquired local banks in rescues. The first was the Bank of Behar (est.1911), which SBI acquired in 1969, together with its 28 branches. The next yearSBI acquired National Bank of Lahore (est. 1942), which had 24 branches. Fiveyears later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had beenestablished in 1916 in Gwalior State, under the patronage of Maharaja Madho RaoScindia. The bank had been the Dukan Pichadi, a small moneylender, owned bythe Maharaja. The new banks first manager was Jall N. Broacha, a Parsi. In 1985,SBI acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was theacquirer as its affiliate, the State Bank of Travancore, already had an extensivenetwork in Kerala. Current Market Price % Face Cap (RsCompany (Rs) Change Volume Equity Value Cr)SBI 2,090.90 0.06 276818 671.04 10 1,40,307.75 47
  • 48. ICICI Bank was established in 1994 by the Industrial Credit and InvestmentCorporation of India, an Indian financial institution, as a wholly ownedsubsidiary. The parent company was formed in 1955 as a joint-venture of theWorld Bank, Indias public-sector banks and public-sector insurance companies toprovide project financing to Indian industry. The bank was initially known as theIndustrial Credit and Investment Corporation of India Bank, before it changed itsname to the abbreviated ICICI Bank. The parent company was later merged intoICICI Bank.ICICI Bank launched internet banking operations in 1998.ICICIs shareholding in ICICI Bank was reduced to 46 percent, through a publicoffering of shares in India in 1998, followed by an equity offering in the form ofAmerican Depositary Receipts on the NYSE in 2000. ICICI Bank acquired theBank of Madura Limited in an all-stock deal in 2001, and sold additional stakes toinstitutional investors during 2001-02.In the 1990s, ICICI transformed its business from a development financialinstitution offering only project finance to a diversified financial services group,offering a wide variety of products and services, both directly and through anumber of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become thefirst Indian company and the first bank or financial institution from non-Japan Asiato be listed on the NYSE.In 2000, ICICI Bank became the first Indian bank to list on the New York StockExchange with its five million American depository shares issue generating ademand book 13 times the offer size. 48
  • 49. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved themerger of ICICI and two of its wholly owned retail finance subsidiaries, ICICIPersonal Financial Services Limited and ICICI Capital Services Limited, withICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bankin January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, andby the High Court of Judicature at Mumbai and the Reserve Bank of India in April2002.In 2008, following the 2008 financial crisis, customers rushed to ATMs andbranches in some locations due to rumors of adverse financial position of ICICIBank. The Reserve Bank of India issued a clarification on the financial strength ofICICI Bank to dispel the rumors.ICICI Bank Limited (NSE: ICICIBANK, BSE: 532174, NYSE: IBN) is an Indiandiversified financial services company headquartered in Mumbai, Maharashtra. Itis the second largest bank in India by assets and third largest by marketcapitalization. It offers a wide range of banking products and financial services tocorporate and retail customers through a variety of delivery channels and throughits specialized subsidiaries in the areas of investment banking, life and non-lifeinsurance, venture capital and asset management. The Bank has a network of 2,883branches and 10021 ATMs in India, and has a presence in 19 countries, includingIndia.The bank has subsidiaries in the United Kingdom, Russia, and Canada; branches inUnited States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and DubaiInternational Finance Centre; and representative offices in United Arab Emirates,China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Thecompanys UK subsidiary has established branches in Belgium and Germany. Current Market Price % Face Cap (RsCompany (Rs) Change Volume Equity Value Cr)Axis BankLtd. 1,265.35 0.84 142755 414.53 10 52,452.55 49
  • 50. Axis Bank Limited (BSE: 532215, LSE: AXBC) is an Indian financial servicesfirm headquartered in Mumbai, Maharashtra. It had begun operations in 1994, afterthe Government of India allowed new private banks to be established. The Bankwas promoted jointly by the Administrator of the Specified Undertaking of theUnit Trust of India (UTI-I), Life Insurance Corporation of India (LIC), GeneralInsurance Corporation Ltd., National Insurance Company Ltd., The New IndiaAssurance Company, The Oriental Insurance Corporation and United IndiaInsurance Company UTI-I holds a special position in the Indian capital marketsand has promoted many leading financial institutions in the country. As on the yearended 31 March, 2012, Axis Bank had an operating revenue of 134.37 billion anda net profit of 42.42 billion. Axis Bank (erstwhile UTI Bank) opened itsregistered office in Ahmedabad and corporate office in Mumbai in December1993. The first branch was inaugurated in April 1994 in Ahmedabad by Dr.Manmohan Singh, then the Honorable Finance Minister. The Bank, as on 31stMarch, 2012, is capitalized to the extent of Rest. 4.132 billion with the publicholding (other than promoters and GDRs) at 54.08%. Current Market Price % Face Cap (RsCompany (Rs) Change Volume Equity Value Cr)Axis BankLtd. 1,265.35 0.84 142755 414.53 10 52,452.55 50
  • 51. Industrial Finance Corporation of India (IFCI) was established by government ofIndia in the year 1948. During this period there were no commercial bank thatprovided long-term industrial finance and even merchant bankers and underwritingfirms were almost non-existent.IFCI was established with an intention to provide long-term finance needs of theindustrial sector. It got listed in the year 1993 changing its status from statutorycorporation to a company.Until the establishment of ICICI in 1956 and IDBI in 1964, IFCI remained solelyresponsible for implementation of the government’s industrial policy initiatives. Itmade a significant contribution to the modernization of Indian industry, exportpromotion, import substitution, pollution control, energy conservation andgeneration through commercially viable and market- friendly initiatives. Somesectors that have directly benefited from IFCI include: • Agro-based industry (textiles, paper, sugar) • Service industry (hotels, hospitals) • Basic industry (iron & steel, fertilizers, basic chemicals, cement) • Capital & intermediate goods industry (electronics, synthetic fibres, synthetic plastics, miscellaneous chemicals) and Infrastructure (power generation, telecom services)It has subsidiaries namely IFCI Financial services, Asset Care Enterprise,Foremost Factors, IFCI Venture Capital Funds are among others. 51
  • 52. It has reputed clients namely Ranbaxy Laboratories, Jaypee Group, Lanco, Emaar,Adani Group, JSW energy, Bhushan Power and Steel etc.MilestonesIFCI has provided financial assistances of Rs 462 billion to 5707 concerns since itsinception.IFCI assistance has enabled to create production capacities of 6.5 million spindlesin the textile industry, 14,953 MW of electricity, 32.8 million tpa of petroleumrefining, 8 port projects, 66 telecom projects and 1 bridge project., 59.3 million tpaof cement are among various projects to whom its has given financial assistance.IFCI has founded and developed various institutions namely ICRA for creditassessment rating, Tourism Finance Corporation of India (TFCI) for promotion ofthe hospitality industry, are among others.Products and servicesProject Finance- It provides short term, medium term loans and long term loans toconcerns for expansion, technology up-gradation, R&D expenditure, and for otherfinancial purposes. It caters to segments like PSUs, infrastructure projects,manufacturing facilities, promoter funding etc.Nodal Agency- It has formed nodal agency for monitoring of sugar developmentfund (SDF) loans.Corporate Advisory Services- It provides advisory services such as investmentappraisal, project conceptualization, assistance in legal documentation, etc 52
  • 53. Change company Sales Current (%) P/E Ratio Market 52-Week (Rs.Million Cap. ) Price (Rs.Million) High/Low SBI 1065214.5 2090.9 0.06 9.53 1403087.65 2475/1576 Bank Of Baroda 296737.24 723.2 -0.58 5.67 297324.43 881/606 PNB 364280.31 740 0.78 5.14 250992.23 1091/659 Canara Bank 308506.22 429.55 -1.15 6.06 190290.65 566/306 Bank Of India 284806.66 271.5 0.48 5.45 155781.37 408/254 IDBI 233699.3 102.4 -0.05 6.26 130910.01 122/77Union Bank Of India 211442.78 225.2 -0.66 6.09 123983.64 274/150 Oriental Bank 158148.85 312.9 -0.78 6.95 91292.07 336/190 Indian Bank 122313.23 184.15 3.6 4.33 79142.15 265/152 Syndicate Bank 152683.52 120.2 0.67 4.66 72354.38 128/67 Allahabad Bank 155232.78 134.9 0.48 3.95 67453.53 211/103 Corporation Bank 130177.84 403.15 1.43 3.9 59718.31 528/336 Indian Overseas Bank 178970.84 74.8 -0.33 5.79 59615.47 119/66 Andhra Bank 113387.28 103.1 -0.29 4.34 57692.74 139/79CentralBank of India 191494.99 73.6 -0.27 8.04 54178.09 112/62 UCO Bank 146323.72 71.4 0.49 4.51 47460.45 95/45 Dena Bank 67941.28 104.65 0.24 3.98 36633.62 116/48Bank of Maharashtra 72139.64 55 1.1 6.3 32427.56 59/38 Vijaya Bank 79881.25 55.25 0.18 5.07 27378.53 69/44 StateBank Bikane&Jai 62913.58 390.15 -0.2 3.65 27310.5 470/302St.Bk of Travancore 68287.62 512.35 0.57 4.48 25617.5 671/451 State Bank Of Mysore 50784.31 526.05 3.47 5.97 24619.03 601/408 United Bank 79610.93 67.1 0.68 3.49 24223.03 87/46Punjab & Sind Bank 64745 65.55 -2.38 4.03 15352.33 95/56 Bank of Punjab 3285.97 44.05 0 0 4625.25 0/0 Change P/E company Sales Current (%) Ratio Market 52-Week (Rs.Million ) Price Cap.(Rs.Million) High/LowIDFC 60943.2 161.55 2.54 15.39 244613.4 169/90Power FinanceCorp 130174.9 180.6 -1.23 6.06 238394.3 224/131Rural Electn. Corp 103375.9 219.45 -0.61 6.44 216697.9 251/142IFCI 27556.8 28.6 1.6 5.83 32542.15 49/20Haryana Finanl. 168.57 24.65 0 0 9552.07 25/25 53
  • 54. CorpTourism FinanceCorp 1292.71 23.5 1.08 3.42 1896.84 29/18Guj. State Fin.Corp 262.39 3.63 -4.72 0 323.48 2-AprKamalakshi FinCorp 2.2 0 0 0 NA 0/ Change P/E company Sales Current (%) Ratio Market 52-Week (Rs.Million ) Price Cap.(Rs.Million) High/LowHDFC Bank 272863.5 662.35 -1.07 26.71 1565527 673/400ICICI Bank 335426.5 1018.55 -0.66 15.87 1174398 1102/641Axis Bank 219946.5 1265.35 0.84 11.6 540187.1 1309/785Kotak Mahindra Bank 61802.36 626 0.3 40.99 465587.3 652/418Indusind Bank 53591.93 384.6 2.92 19.73 180690.7 387/222Yes Bank 63073.58 419.45 0 13.33 149595.9 430/231Federal Bank 55583.92 468.75 1.48 9.49 80178.52 495/322Centurion Bk of Punj 12685.3 41.4 0 52.93 78932.68 43/41ING Vysya Bank 38568.08 459.65 -0.36 13.29 70046.19 480/276J&K Bank 48355.77 1321.85 1.17 6.84 64080.38 1433/645Karur Vysya Bank 32703.73 459.05 1.57 8.95 49238.43 482/322Bank of Raj 13594.89 212.1 0 0 34222.35 214/207South Indian Bank 35834.25 22.6 -1.74 6.8 30198.6 28/20Karnataka Bank 31128.77 155.8 2.26 8.24 29337.82 159/64City Union Bank 16967.74 50.25 -0.2 8.63 25750.1 54/34Standard Chartered 79432.33 102.9 0.24 1.42 24696 109/72Devp Credit Bank 7169.69 44.4 1.37 14.45 10687.76 52/31Lakshmi Vilas Bank 15192.56 81.3 0.43 8.22 7930.06 105/69Dhanlakshmi Bank 13936.54 62.7 6.81 0 5338.05 79/42United Western BankLtd 4866.15 25.9 0 0 1392.59 54
  • 55. BIBLIOGRAPHY • The Economic Times • Marketing management (Philip Kotler) • Standard Chartered RHP WEBOGRAPHY 1. 2. 3. 4. 5. 6. 7. 8. 9. 55