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![FINAL PROSPECTUS
•Final Prospectus is called the offer document
•Post SEBI Clearance of offer documents through various stages
•After bids are received and share price is fixed, the RHP is populated with the
price figures and submitted again to SEBI.
• The only difference between the RHP and the final prospectus is that for
(i) price of share, (ii) number of shares to be issued and (iii) issue size
•The RHP has blanks which mostly look like this – [•].
•These blanks are filled in the final prospectus
56](https://image.slidesharecdn.com/group2ipo-fpo-160218173239/75/IPO-FPO-Book-building-process-56-2048.jpg)
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IPO/FPO : Book building process
- 1.
- 2. FINANCIAL MARKETS The securitiesmarket has two interdependent and inseparable segments, •The new issues (primary) market and •The stock (secondary) market PRIMARY MARKET provides the channel for creation and sale of new securities Whenever a new company wants to enter the market it has to first enter the primary market investors buy securities directly from the company issuing them SECONDARY MARKET deals in securities previously issued investors trade previously issued securities without the issuing companies' involvement 2
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- 5. What is anIPO? • The first sale of stock by a company to the public. •Process by which a private company can go public by sale of its stocks to general public. • It could be a new, young company or an old company which decides to be listed on an exchange and hence goes public • Investors can place requests to buy these shares and once done, the share gets listed in a registered stock exchange. 5
- 6. What is anFPO? •A Follow on public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations. YEAR NO. OF FPOs AMOUNT (Rs.crore) 2008-09 0 0.00 2009-10 5 21992.98 2010-11 5 13083.89 2011-12 1 4578.20 2013-14 2 7455.96 2014-15 0 0.00 6
- 7. REASONS FOR IPO •Toraise funds for financing capital expenditure needs like expansion diversification etc. •To finance increased working capital requirement •As an exit route for existing investors •For debt financing. 7
- 8. •Access to Capital •StockholderDiversification •Easier to raise new capital •Enhances liquidity •Establishes value for the firm •Builds Image of the Company •Signals from the Market •Other advantages: •Additional incentive for employees in the form of the companies stocks. This also helps to attract potential employees. •Window of opportunity. •It commands better valuation of the company. •Better situated for making acquisitions. ADVANTAGES 8
- 9. LIMITATIONS •Dilution •Loss of Flexibility •Accountability •PublicPressure •Adverse Selection •Self dealings •Inactive market low price •Control •Incur additional costs •Share of profits 9
- 10. IS GOING PUBLICRIGHT FOR YOUR COMPANY? •An attractive product or service, preferably one with a competitive advantage and sufficiently large market •An experienced management team • A positive trend of historical financial results •Favourable financial prospects •A well-thought-out, focused business plan •Strong financial, operational, and compliance controls 10
- 11.
- 12. Merchant Banker •Merchant bankercan work as lead manager, co-lead manager, investment banker, underwriter etc •LM gets the company shares to the right investors, sets the initial offer price, creates enthusiasm for the stock and creates the prospectus Pre issue activities: Due diligence of company’s operations/ management/ business plans/ legal etc Drafting and design of Offer documents, statutory advertisements Ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges Appointment of other intermediaries viz., Registrar, Printers, Advertising Agency and Bankers to the Offer Marketing of the offer 12
- 13. Post issue activities: •Managementof escrow accounts •Dispatch of refunds to bidders •Demat delivery of shares BOOK RUNNER: •The bookrunner is usually the lead manager •In charge of "keeping the book" which simply means keeping record of who bought shares for how much. 13
- 14. Underwriter •“Underwriting,” means anagreement with or without conditions to subscribe to the securities of the issuer company when the public investors are not subscribing it. •It involves a commitment from the underwriter to subscribe to the shares of a particular company to the extent it is under subscribed by the public or existing shareholders of the corporate. •An underwriter should have a minimum net worth of 20 lakhs and his total obligation at any time should not exceed 20 times his net worth. •A commission is paid to the writers on the issue price for undertaking the risks of under subscription 14
- 15. Syndicate Members •Commercial orinvestment banks responsible for underwriting IPO's •Co-book runners and sub-write the IPO •Work as intermediaries for Issuer Company and the buyers of the IPO stocks •Investors submit their bids for IPO shares through Syndicate Members appointed by the Issuer Company 15
- 16. Registrar •The registrar providesadministrative support to the issue process. •Each agent is registered with SEBI. •If the IPO is oversubscribed they provide computerized program for allotment. •They manage refund orders and allotment letters. ◦ Ensures that crediting of shares to the demat accounts of the applicants is done and the dispatch of refund orders to those applicable are sent. ◦ They provide the final list of allotees to Lead Manager, ROC and stock exchange. •The Lead manager coordinates with the Registrar to ensure follow up so that that the flow of all activities is maintained. 16
- 17. Bankers to theissue •Any scheduled bank registered with SEBI can be appointed as the banker to the issue. •The main function of banker involves ◦ The bank provides application forms to the investors. ◦ They accept duly filled forms with cheque/ drafts. ◦ They prepare collection reports and transfer funds and applications to the company/registrar. ◦ Transfer funds to Escrow accounts 17
- 18. SEBI ENTRY NORMSFOR AN IPO Entry Norm I (Profitability Route) a) Net tangible assets of at least Rs. 3 crore in each of the preceding three full years b) Distributable profits in at least three out of the preceding five years. c) Net worth of at least Rs. 1 crore in each of the preceding three full years. d) If there has been a change in the company’s name, at least 50% of the revenue for preceding one year should be from the new activity denoted by the new name e) The issue size should not exceed 5 times the pre-issue net worth 18
- 19. Alternative routes SEBI hasprovided the alternative route to the companies not satisfying any of the above conditions, for accessing the primary market, as under: Entry Norm II (QIB Route) • Issue shall be through book building route, with at least 50% of net offer to the public to be mandatory allotted to the Qualified Institutional Buyers (QIBs). • The company shall refund the subscription money if the minimum subscription of QIBs is not attained. •The minimum post-issue face value capital shall be Rs. 10 crore or there shall be compulsory market making for at least 2 years. OR 19
- 20. Entry Norm III(EN III): ‘Appraisal Route’. (a) The “project” is appraised and participated to the extent of 15% by FIs/Scheduled Commercial Banks of which at least 10% comes from the appraiser(s). In addition, at least 10 per cent of the issue size shall be allotted to QIBs, failing which the full subscription monies shall be refunded. (b) The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a compulsory market-making for at least 2 years. In addition to satisfying the aforesaid eligibility norms, the company shall also satisfy the criteria of having at least 1000 prospective allotees in its issue 20
- 21. Exemptions to certaincategory of entities from the eligibility norms The following categories of entities are eligible for exemption from entry norms: • Public Sector Banks • Private Sector Banks • An infrastructure company ◦ Whose project has been appraised by a Public Financial Institution (PFI) ◦ Not less than 5% of the project cost is financed by any of the PFI • Rights Issue by a listed company 21
- 22. A listed issuermaking a public issue (Further Public Offer i.e. FPO) is required to satisfy the following requirements: (a) 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. (b) The aggregate of the proposed issue and all previous issues made in the same financial year in terms of issue size does not exceed five times its pre-issue net worth as per the audited balance sheet of the preceding financial year. Any listed company not fulfilling these conditions shall be eligible to make a public issue (i.e. FPO) by complying with QIB Route as specified for IPOs i.e. issue shall be through book building route, with at least 75% to be mandatory allotted to the Qualified Institutional Buyers (QIBs). Norms for FPO’s 22
- 23. SEBI’S NEW E-IPORULES • SEBI approved norms for companies to launch their initial public offerings (IPOs) in an electronic form. • Will reduce the time taken between the share sale and the listing, enhance the reach of retail investors in the share sale, and reduce costs. • ASBA will be made mandatory for all categories of investors while applying for an IPO. • Time period for listing: T+6 compared to T+12 currently • These will come into effect on 1 January 2016. • Depository participants and RTAs (registrar and transfer agents) will also be able to accept IPO applications. 23
- 24. PROMOTER’S CONTRIBUTION • ForIPO by unlisted companies (IPO), minimum of 20% of the post issue capital of the Company • For FPO by listed companies, either to extent of 20% of the proposed issue size or to the extent of 20% of the post-issue capital. 24
- 25. LOCK-IN PERIOD • ForPromoters: • Lock-in for a period of 3 years from the date of allotment or from the date of commencement of commercial production, whichever is later 25
- 26. IPO PROCESS BOD APPROVAL FILINGDRHP WITH SEBI BEFORE 21 DAYS FROM REGISTERING WITH ROC APPLICATION WITH STOCK EXCHANGES AND REGISTERATION WITH ROC IPO GRADING (INDEPENDENT) FILING OF RHP WITH SEBI, ROC, STOCK EXCHANGES ROADSHOWS ESTIMATION OF PRICE BANDS BOOKBUILDING ISSUE TAKES PLACE ALLOTMENT FINAL PROSPECTUS SECONDARY MARKET/ LISTING WITH STOCK EXCHANGES 26
- 27. DUE DILIGENCE Due diligenceinvolves a detailed investigation by the company’s advisers into the company and its plans There are usually three main streams to due diligence: ◦ Legal due diligence ◦ Business due diligence ◦ Financial due diligence ◦ Debts ◦ Pending and potential lawsuits ◦ Leases ◦ Warranties ◦ Long-term customer agreements ◦ Employment contracts ◦ Compensation arrangements ◦ Litigations against the Company and/or Promoters 27
- 28. • The firstdocument filed by companies with SEBI and stock exchanges for approval • Contains all details about the company but does not include issue specific details like price band, issue size, number of shares being offered etc. • After reviewing, SEBI communicates their observations to the Company, which the company has to incorporate in the offer document. • SEBI typically requires a period of 30 days for processing a draft offer document. 28 DRAFT RED HERRING PROSPECTUS
- 29. • The draftoffer document is placed by SEBI on its website for public comments for a period of 21 days. • Once the merchant bankers clear the comments, they update the document and place it again with SEBI. • In most cases a second round of public and SEBI comments follows. • Once the SEBI is satisfied with all answers it issues a clearance card to the bankers. 29
- 30. IPO PROCESS BOD APPROVAL FILINGDRHP WITH SEBI BEFORE 21 DAYS FROM REGISTERING WITH ROC APPLICATION WITH STOCK EXCHANGES AND REGISTERATION WITH ROC IPO GRADING (INDEPENDENT) 30
- 31. IPO GRADING IPO gradingis the grade assigned by a Credit Rating Agency (CRAs) registered with SEBI • IPO grade 1 ‐ Poor fundamentals • IPO grade 2 ‐ Below‐Average fundamentals • IPO grade 3 ‐ Average fundamentals • IPO grade 4 ‐ Above‐average fundamentals • IPO grade 5 ‐ Strong fundamentals 31
- 32. IPO GRADING •A relativeassessment of the fundamentals of that issue in relation to the other listed equity securities in India •Intended to run parallel to the filing of offer document with SEBI and the consequent issuance of observations •It is mandatory •Can the issuer reject an IPO grade? •Bearing of the cost •Has been introduced as an endeavor to make additional information available for the investors in order to facilitate their assessment of equity issues offered through an IPO. 32
- 33. FACTORS CONSIDERED 33 •Business Prospectsand Competitive Position i. Industry Prospects ii. Company Prospects •Financial Position •Management Quality •Corporate Governance Practices •Compliance and Litigation History
- 34. IPO PROCESS BOD APPROVAL FILINGDRHP WITH SEBI BEFORE 21 DAYS FROM REGISTERING WITH ROC APPLICATION WITH STOCK EXCHANGES AND REGISTERATION WITH ROC IPO GRADING (INDEPENDENT) FILING OF RHP WITH SEBI, ROC, STOCK EXCHANGES 34
- 35. •Document which isplaced with SEBI after clearing all comments received from public and SEBI. •Significance: The merchant bankers can start advertising the issue. •The contents of this document, as approved by SEBI can be used as publicity material by merchant bankers to sell shares being offered in the issue. •It describes the issue (IPO) and the prospects of the company •You could think of the RHP as the SEBI approved version of the DRHP •It is called so because it contains a passage in red that states the prospectus is subject to change and no offer can be accepted at this stage. 35 RED HERRING PROSPECTUS
- 36. IPO PROCESS BOD APPROVAL FILINGDRHP WITH SEBI BEFORE 21 DAYS FROM REGISTERING WITH ROC APPLICATION WITH STOCK EXCHANGES AND REGISTERATION WITH ROC IPO GRADING (INDEPENDENT) FILING OF RHP WITH SEBI, ROC, STOCK EXCHANGES ROADSHOWS 36
- 37. •Management gets totravel all over to meet with investors and market the company •Research analysts meet with institutional investors 1 on 1 and tell them about the company, and sales teams at banks maintain close contact with investors and figure out what they think – do they like the sector? The company itself? What price will they pay? •Based on feedback from these meetings and their own internal valuations, banks set a price range for the offering. 37 ROADSHOWS
- 38. IPO PROCESS BOD APPROVAL FILINGDRHP WITH SEBI BEFORE 21 DAYS FROM REGISTERING WITH ROC APPLICATION WITH STOCK EXCHANGES AND REGISTERATION WITH ROC IPO GRADING (INDEPENDENT) FILING OF RHP WITH SEBI, ROC, STOCK EXCHANGES ROADSHOWS ESTIMATION OF PRICE BANDS 38
- 39. FACTORS DETERMINING PRICE •Financials of the Company – Net worth, EPS, profit margin. • Industry P/E Ratio. • Standing of the Company in the relevant industry • Future prospect of the Industry as well as the Company • Background of the promoters 39
- 40. Fixed price Issue: ◦Price is decided on the basis of firm’s value and the number of shares it wants to issue. ◦ Many other factors are considered such as demand and interest for the shares by the investors. ◦ Generally share is priced 10% - 20% below its estimated value. ◦ This is done to attract institutional investors. 40
- 41. IPO PROCESS BOD APPROVAL FILINGDRHP WITH SEBI BEFORE 21 DAYS FROM REGISTERING WITH ROC APPLICATION WITH STOCK EXCHANGES AND REGISTERATION WITH ROC IPO GRADING (INDEPENDENT) FILING OF RHP WITH SEBI, ROC, STOCK EXCHANGES ROADSHOWS ESTIMATION OF PRICE BANDS BOOKBUILDING 41
- 42.
- 43. PUBLIC OFFER Issue TypeOffer Price Demand Payment Reservations Fixed Price Issues Price at which the securities are offered and would be allotted is made known in advance to the investors Demand for the securities offered is known only after the closure of the issue 100 % advance payment is required to be made by the investors at the time of application. 50 % of the shares offered are reserved for applications below Rs. 1 lakh and the balance for higher amount applications. Book Building Issues A 20 % price band is offered by the issuer within which investors are allowed to bid and the final price is determined by the issuer only after closure of the bidding. Demand for the securities offered , and at various prices, is available on a real time basis on the BSE website during the bidding period.. 10 % advance payment is required to be made by the QIBs along with the application, while other categories of investors have to pay 100 % advance along with the application. 50 % of shares offered are reserved for QIBS, 35 % for small investors and the balance for all other investors. 43
- 44.
- 45. BOOK BUILDING PROCESS •Whenthe price of an issue is discovered on the basis of demand raised from the prospective investors at various price levels, it is called ‘Book built issue’. •It is a process undertaken by which a demand for the securities built up and the price for the securities is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. •This method provides an opportunity to the market to discover the price for securities. 45
- 46. THE PROCESS •The Issuerwho is planning an offer nominates lead merchant banker(s) as 'book runners'. •The Issuer specifies the number of securities to be issued and the price band for the bids. •The Issuer also appoints syndicate members with whom orders are to be placed by the investors. •The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to open auction. •The book normally remains open for a period of 5 days. •Bids have to be entered within the specified price band. 46
- 47. KEY TERMS 1 •Open Bookbuilding 2 •PriceBand 3 •Cut off Price 47
- 48. IPO PROCESS BOD APPROVAL FILINGDRHP WITH SEBI BEFORE 21 DAYS FROM REGISTERING WITH ROC APPLICATION WITH STOCK EXCHANGES AND REGISTERATION WITH ROC IPO GRADING (INDEPENDENT) FILING OF RHP WITH SEBI, ROC, STOCK EXCHANGES ROADSHOWS ESTIMATION OF PRICE BANDS BOOKBUILDING ISSUE TAKES PLACE ALLOTMENT 48
- 49. ALLOTMENT •Once the issuecloses for subscription, the BRLM along with the Issuer Company decide the final Issue Price for the share. •This price is determined based on the demand levels and the bids made by the investors in all categories. • The BRLM informs the Issue Price to the Registrar to the Issue who then prepares the ‘Basis of Allotment’ 49
- 50. Retail Investor applies for stocksfor a value of not more than Rs 200,000 total allotment has to be at least 35% of the total issue also have an option of applying at the cut-off price Non-Institutional Investor commonly referred to as high net- worth individuals applies for stocks for a value of more than Rs 200,000. total allotment has to be at least 15% of the total issue Qualified Institutional buyers institutional investors who posses the expertise and the financial muscle to invest in the securities market. Mutual funds, financial institutions, scheduled commercial banks, insurance companies, provident funds, state industrial development corporations Allotted not more than 50% of the total issue TYPES OF INVESTORS 50
- 51. BASIS OF ALLOTMENT •Allbids at and above the final Issue Price are aggregated under different categories such as firm allotment, QIBs, NIBs and Retail individual investors. •The ‘Over Subscription’ ratios for each of the categories as against the shares reserved for each category are calculated. •Within each of the categories, the bids are segregated into different segments based on the number of shares applied for. •The ‘Over Subscription’ ratio is then applied to the number of shares applied for in each segment, to find the number of shares to be allotted for applicants in each of the segments. 51
- 52.
- 53. If at Rs.53, Number of shares to be allotted: 4,00,000 Number of shares bid for: 50,00,000 Thus, Oversubscription Ratio = (Number of shares bid for) / (Number of shares to be allotted) i.e. Oversubscription Ratio = 50,00,000/4,00,000 = 12.5 For an investor who applied for 255 shares will be allotted shares as follows: Number of shares allotted = (number of shares bid for)/ (oversubscription ratio) = 255/ 12.5 = 20.4 Thus, the investor will be allotted 20 shares. 53
- 54. Number of daysfor an investor to receive the refund order/allotment •Companies are required to finalize the basis of allotment -within 30 days from the closure of the issue in case of a fixed price issue -within 15 days from the closure of the issue in case of a book building issue or else they are liable to pay interest at the rate of 15%pa •The refund orders/allotment advice is dispatched within two working days of finalizing the basis of allotment 54
- 55. IPO PROCESS BOD APPROVAL FILINGDRHP WITH SEBI BEFORE 21 DAYS FROM REGISTERING WITH ROC APPLICATION WITH STOCK EXCHANGES AND REGISTERATION WITH ROC IPO GRADING (INDEPENDENT) FILING OF RHP WITH SEBI, ROC, STOCK EXCHANGES ROADSHOWS ESTIMATION OF PRICE BANDS BOOKBUILDING FINAL PROSPECTUS 55
- 56. FINAL PROSPECTUS •Final Prospectusis called the offer document •Post SEBI Clearance of offer documents through various stages •After bids are received and share price is fixed, the RHP is populated with the price figures and submitted again to SEBI. • The only difference between the RHP and the final prospectus is that for (i) price of share, (ii) number of shares to be issued and (iii) issue size •The RHP has blanks which mostly look like this – [•]. •These blanks are filled in the final prospectus 56
- 57. GUIDE TO UNDERSTANDAN OFFER DOCUMENT •Cover Page •Risk Factors •Introduction •About Us • Financial Statements •Legal and Other Information •Other regulatory and statutory disclosures •Offering Information •Other Information 57
- 58. IPO PROCESS BOD APPROVAL FILINGDRHP WITH SEBI BEFORE 21 DAYS FROM REGISTERING WITH ROC APPLICATION WITH STOCK EXCHANGES AND REGISTERATION WITH ROC IPO GRADING (INDEPENDENT) FILING OF RHP WITH SEBI, ROC, STOCK EXCHANGES ROADSHOWS ESTIMATION OF PRICE BANDS BOOKBUILDING ISSUE TAKES PLACE ALLOTMENT FINAL PROSPECTUS SECONDARY MARKET/ LISTING WITH STOCK EXCHANGES 58
- 59. LISTING •Listing agreement withthe stock exchange. •The Issuer Company needs to get its Red Herring Prospectus as well as the Basis of Allotment approved from the Stock Exchange with which it has entered into the Listing Agreement •The listing on the stock exchanges is done within 7 days from the finalization of the basis of allotment for the issue •Once the shares are listed, the investors can freely trade the securities of the Issuer Company. 59
- 60. GREEN SHOE OPTION •AGreen shoe is a clause contained in the underwriting agreement of an initial (IPO) that allows underwriters to buy up to an additional 15% of the company shares at the offering price •It used for price stabilisation to be carried out by a stabilising agent on behalf of the company. 60
- 61. GREEN SHOE OPTION Over-allotmentoption •Allows companies to intervene in the market to stabilise share prices during the 30-day stabilisation period immediately after listing. •The green shoe option is also often referred to as an over- allotment provision. •It allows the underwriting syndicate to buy up to an additional 15% of the shares at the offering price if public demand for the shares exceeds expectations and the stock trades above its offering price. 61
- 62. EXAMPLE For instance, acompany plans to issue 1 lakh shares, but to use the greenshoe option; it actually issues 1.15 lakh shares, in which case the over-allotment would be 15,000 shares. The 15,000 shares actually borrowed from the promoters with whom the stabilising agent signs a separate agreement. For the subscribers of a public issue, it makes no difference whether the company is allotting shares out of the freshly issued 1 lakh shares or from the 15,000 shares borrowed from the promoters. Once allotted, a share is just a share for an investor. For the company, however, the situation is totally different. The money received from the over-allotment is required to be kept in a separate bank account (i.e. escrow account) 62
- 63. How to applyfor an IPO? •To apply for an IPO, there are two options available - Offine - Online •Demat account is required for both the offline and online options so that the Stocks can be deposited in your account after allotment. 63
- 64. ASBA (Application Supportedby Blocked Amount) •In an endeavour to make the existing public issue process more efficient, SEBI introduced a supplementary process of applying in public issues, viz., the "Applications Supported by Blocked Amount (ASBA)" process. •ASBA is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. •If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn/failed. 64
- 65. •The investor continuesto earn interest on the application money as the same remains in the bank account, which is not the case in other modes of payment. •ASBA forms can be submitted only at the Self Certified Syndicate Banks (SCSBs). In case investor does not have an account with any of the SCSBs, then he can not make use of the ASBA. 65
- 66. ESCROW ACCOUNT •An escrowaccount is a temporary pass through account held by a third party during the process of a transaction between two parties. •Escrow Account is under the control of the Lead Manager(s) and the Registrar to the Issue, till the shares being issued are listed. •The applicants(Bidders) have to enclose cheques /demand drafts along with Bid- cum-Application Forms towards ‘MARGIN MONEY’ of their Bids. The margin money is deposited in the Escrow Account. 66
- 67. PARAMETERS TO JUDGEAN IPO • Promoters • Industry outlook • Business plans • Financials • Risk factors • Key names- lead manager and merchant banker • Pricing • Listing 67
- 68.
- 69. MANPASAND BEVERAGES LTD. Incorporatedin 1997 Promoter : Mr. Dhirendra Singh It is a Gujarat based fruit drink manufacturing company, with a major focus on mango flavor based juice drinks. Flagship brand “Mango Sip” 69
- 70. The objects ofthe Issue are: •Setting-up of a new manufacturing facility in the state of Haryana; •Modernization of existing manufacturing facilities i.e. Vadodara 1 Facility and Varanasi Facility; •Setting-up of a new corporate office at Vadodara; •Repayment/prepayment of certain borrowings availed by the Company; and •General corporate purposes. 70 OBJECTS OF THE OFFER
- 71. •Highly Dependent onOne Brand •Falling Rural Income – Negative for the Company •Unfavorable movement in the raw material 71 RISK AND CONCERNS
- 72. INVESTMENT RATIONALE •Strong Presencein Underpenetrated Semi Urban and Rural Market •Wide distribution network will help in fast penetration of products •Manufacturing Capacity Expansion to meet the Increasing Demand •Debt-free Operations post IPO 72
- 73. Company Name ManpasandBeverages Ltd. Issue Open June 24, 2015 to June 26, 2015 Price Band Rs. 290 to Rs. 320 Bid Lot 45 Equity Shares and in multiples of 45 Equity Shares thereafter. The Offer Public issue of 1.25 – 1.38 crore Equity Shares (Comprising of fresh issue) Issue Size Rs. 400 Crore IPO Process 100% Book Building Face Value Rs. 10.00 IPO Grading NA Exchanges NSE & BSE BRLM Kotak Mahindra Capital Company Limited, IIFL Holdings Limited, ICICI Securities Limited Registrar Karvy Computershare Private Limited Issue Snapshot 73
- 74. Category Allocation IssueSize (in Crs) QIB 75% Rs. 300 Crs. NIB 15% Rs. 60 Crs. Retail 10% Rs. 40 Crs. Total 100% Rs. 400 Crs. Issue Break up: 74
- 75. Issue Subscription Detail Numberof Times Issue is Subscribed (BSE + NSE) As on Date & Tim e QIB NII RII Total Shares Offered / Reserved 4,137,931 2,068,966 1,379,310 7,586,207 Day 1 - Jun 24, 20 15 17:00 IST 0.0000 0.0000 0.3100 0.0600 Day 2 - Jun 25, 20 15 17:00 IST 0.4500 0.0500 0.5600 0.3600 Day 3 - Jun 26, 20 15 19:50 IST 1.9800 0.3800 1.1600 1.4000 75
- 76. LISTING DAY TRADINGINFORMATION BSE NSE Issue Price: Rs. 320.00 Rs. 320.00 Open: Rs. 291.00 Rs. 300.00 Low: Rs. 286.00 Rs. 285.70 High: Rs. 341.90 Rs. 342.60 Last Trade: Rs. 326.85 Rs. 327.75 Volume: 1,578,793 4,876,093 76
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Editor's Notes
- #5 A company can issue capital by issuing securities. A Public company may issue securities: i. To public through prospectus i.e. “Public Offer”. ii. Through private placement; iii. Through right issue. The term “public offer” includes “initial public offer”; or “further public offer”; or “Offer for sale of securities to the public by an existing shareholder” through issue of a prospectus. There are separate legal methods for public and private companies for issuing securities. A Private Company may issue its securities: i. By way of right or bonus issue; or ii.Through private placement.
- #6 It involves the offering of part ownership of the company to the public through the sale of equity securities (stock).
- #7 RECENT FPOs by co.
- #9 Access to Capital: The principal motivation for going public is to have access to larger capital. A company that does not tap the public financial market may find it difficult to grow beyond a certain point for want of capital. Stockholder Diversification: As a company grows and becomes more valuable, its founders often have most of its wealth tied up in the company. By selling some of their stock in a public offering, the founders can diversify their holdings and thereby reduce somewhat the risk of their personal portfolios. Easier to raise new capital: If a privately held company wants to raise capital a sale of a new stock, it must either go to its existing shareholders or shop around for other investors. This can often be a difficult and sometimes impossible process. By going public it becomes easier to find new investors for the business. Enhances liquidity: The stock of a closely held firm is not liquid. If one of the holders wants to sell some of his shares, it is hard to find potential buyers-especially if the sum involved is large. Even if a buyer is located there is no establishes price at which to complete the transaction. These problems are easily overcome in a publicly owned company Establishes value for the firm: This can be very useful in attracting key employees with stock options because the underlying stock have a market value and a market for them to be traded that allows for liquidity for them. Image: The reputation and visibility of the company increases. It helps to increase company and personal prestige. Signals from the Market: Stock prices represent useful information to the managers. Everyday, investors render judgment about the prospects of the firm. Although the market may not be perfect, it provides a useful reality check.
- #10 Dilution: When a company issues shares to public, existing shareholders suffer dilution of their proportionate ownership in the firm. Loss of Flexibility: The affairs of a public company are subject to fairly comprehensive regulation. Hence, when a non-public company is transformed into a public company there is some loss of flexibility. Accountability: Understandably, the degree of accountability of a public company is higher. It has to explain a lot to its investors. Public Pressure: Because of its greater visibility a public company may be pressurized to do things that it may not otherwise do. Adverse Selection: Investors, in general, know less than the issuers about the value of companies that go public. Put differently, they are potential victims of adverse selection. Aware of this trap, they are reluctant to participate in public issues unless they are significantly underpriced. Hence, a company making an IPO typically has to underprice its securities in order to stimulate investor interest and participation. Self dealings: The owner’s managers of closely held companies have many opportunities for self-transactions, although legal they may not want to disclose to the public. Inactive market low price: If a firm is very small and its shares are not traded frequently, then its stock will not really be liquid and the market price may not be truly representative of the stocks value. Control: Owning less than 50% of the shares could lead to a loss of control in the management. Costs: a public company has to incur recurring costs for providing investors with periodical reports, holding shareholder meetings communicating with institutional investors and financial analysts, and fulfilling various statutory obligations, like filing quarterly reports with the Securities and exchange Board of India. These reports can be costly especially for small firms Profits: The profit earned by the company should be shared with its investors in the form of dividend.
- #11 Firms no longer needed strong financials and a solid history to go public. Instead, IPOs were done by smaller startups seeking to expand their businesses. Though some companies may not currently meet all of these criteria, investors may perceive these companies as having enormous potential for growth due to the other favourable characteristics they possess (e.g., a product or service that is highly visible, unique, or of interest to the public and capable and committed management).
- #12 BRLM- can also be underwriter, separate slide. Registrar - Lead Manager co-ordinates with Registrar, collects application from bank braches, etc, finalizes list of eligible allottees, solve investor queries, time deadlines, BID finalizing, Syndicate/broker – member of Stock exchange, receives bid application form and uploads to electronic book of stock exchange. Submits the bid and cheque to banker. Underwriter – Hard underwriting (Guarantee at beginning to provide stipulated amount to issuer, high risk) and soft underwriting(Guarantee after pricing process is complete, lower risk. Also an option for FORCE MAJEURE (Act of God) Clause if factors beyond control. QIB - are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. (Mutual Funds, Insurance Companies, Pension and Provident Fund > 25 Crores, FIIs, Cut off – the price at which the shares r issued. Decided by issuer in consultation with Lead Manager. RHP - financial data for a company for the past five years, information on the management team, and a description of a company's target market competitors, growth strategy, prospectus explains the company’s competitive strengths, strategy and market opportunity Red Because – it states company will not sell shares before approved by SEBI.
- #13 Ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, RoC and SEBI including finalization of Prospectus and RoC filing
- #15 Security to the issuer of the IPO If the assured shares are not subscribed to, underwriters buy all the remaining shares in d IPO and resell them Lead manger can also be the underwriter
- #17 The Lead manager coordinates with the Registrar to ensure follow up so that that the flow of applications from collecting bank branches, processing of the applications and other matters till the basis of allotment is finalized, dispatch security certificates and refund orders completed and securities listed
- #19 Pt 1 /a :-Net tangible assets of at least Rs. 3 crore in each of the preceding three full years of which not more than 50% are held in monetary assets. However, the limit of 50% on monetary assets shall not be applicable in case the public offer is made entirely through offer for sale. http://www.sebi.gov.in/faq/pubissuefaq.pdf
- #22 http://www.caclubindia.com/articles/sebi-dip-guidelines-for-public-issue-17598.asp http://www.bsepsu.com/indian-primary-cp.asp#Eligibility Norms for IPOs and FPOs
- #24 Right now, only brokers and exchanges can accept applications. So the new rules will help in enhancing the reach of public issues,” Sinha said.
- #25 The promoter has been defined as a person or persons who are in over-all control of the company, who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public In case of an IPO, the promoters have to necessarily offer at least 20 per cent of the post issue capital. In case of public issues by listed companies, the promoters shall participate either to the extent of 20 per cent of the proposed issue or ensure post-issue share holding to the extent of 20 per cent of the post-issue capital. - See more at: http://taxguru.in/company-law/all-about-initial-public-offerings-ipos-in-brief.html#sthash.jTPP8F9m.dpuf http://www.forum.charteredclub.com/threads/minimum-promoters-contribution-as-per-sebi-act-1992.2126/
- #27 The board of directors approves the proposal to raise capital from the public and authorises the managing director (or a board committee) to do all the tasks relating to the public issue. 2. The company convenes a meeting to seek the approval of shareholders The company appoints a merchant banker as the lead manager (LM) to the issue. The LM carries out due diligence to check all relevant information, documents, and certificates for the issue.
- #28 The LM carries out due diligence to check all relevant information, documents, and certificates for the issue. The company, advised by the LM, appoints various intermediaries such as the registrar to the issue, the bankers to the issue, the printers, and advertiser
- #29 The LM prepares the draft prospectus in consultation with management and seeks the approval of the board. 21 days during which time anyone can post his comments / grievance to SEBI about the document and / or the company.
- #32 The grade represents a relative assessment of the fundamentals of that issue in relation to the other listed equity securities in India. Such grading is generally assigned on a five-point point scale with a higher score indicating stronger fundamentals and vice versa as below.
- #36 Anything which does not form part of the RHP cannot be used in road shows, commercials or in any other form of advertising.
- #46 In a Dutch auction the price of an item is lowered, until it gets its first bid and then the item is sold at that price.
- #47 Fixed price : 3-10 days Book building – 3-7 days Extendable 3 days for revision of price band subject to the total bidding period not exceeding thirteen days
- #48 In book-built issues, it is mandatory to have an online display of the demand and bids during the bidding period. This is known as open book system.
- #62 Before investing in an IPO, we go through the offer document of the company to know more about it. A listed company is legally bound to abide by commitments made in the document. Besides providing information about the company's competitive strengths, industry regulation, corporate structure, main objects, subsidiary details, risk factors, etc, the offer document also mentions a technical word called Green shoe option.
- #64 Offline : You can get the application form for the IPO from different investment consulatant, brokers,banks or some other sources. You need to fill the application from and submit the money at the designated bank. In the offline option if the stocks are not allotted to you then a check would be sent to your address as the refund money. Online : This is the much convenient option to apply for an IPO.For this you just need to have a demat account with online trading access. You just need to choose the IPO to invest in and with few clicks you can apply for the IPO of your choice. If the stocks are not allotted to you during the allotment of shares then the money will be credited back to your account electronically. This is much preferred option for individual retail investors as it avoids the lengthy paperwork involved in the process.
- #66 Self Certified Syndicate Bank (SCSB): SCSB is a bank which offers the facility of applying through the ASBA process. A bank desirous of offering ASBA facility shall submit a certificate to SEBI, for inclusion of its name in SEBI's list of SCSBs. The said list will be displayed by SEBI on its website at www.sebi.gov.in. ASBAs can be accepted only by SCSBs, whose names appear in the list of SCSBs displayed in SEBI's website. On inclusion in the list of SCSBs, a bank shall commence its activities as an SCSB w.e.f. the 1st or 15th of a month, whichever is earlier, from the date of such inclusion. It shall then be deemed to have entered into an agreement with the issuer and shall be required to offer the ASBA facility to all its account holders for all issues to which ASBA process is applicable.
- #67 (after the 1st point) In Book Building method, Lead Manager(s), Registrar to the Issue, Syndicate Members [SMs] and the Issuer Company open a bank account normally titled ‘Escrow Account — . . . . . . . . . . . . . Public Issue’
- #69 This presentation demonstrates the new capabilities of PowerPoint and it is best viewed in Slide Show. These slides are designed to give you great ideas for the presentations you’ll create in PowerPoint 2010! For more sample templates, click the File tab, and then on the New tab, click Sample Templates.