This document provides an overview of the IPO and FPO process in India. It defines IPO as the first sale of stock by a company to the public and FPO as when an already listed company makes a fresh issue of securities or an offer for sale. The key steps in the IPO process are Board approval, filing documents with SEBI and exchanges, IPO grading, setting the price band, book building, allotment and issuing the final prospectus. Intermediaries that help facilitate the process include merchant bankers, underwriters, syndicate members, registrars and bankers to the issue. The document also outlines SEBI regulations around eligibility criteria, minimum public shareholding and lock-in periods for IPOs and
This presentation is on Security Exchange Board (SEBI) which gives the brief about the SEBI with its objective, function, details about the chairman, rules
WHAT IS INSIDER TRADING???
Insider trading is dealing in securities of a listed company by any person who has knowledge of material “inside” information which is not known to the general public.
WHO IS INSIDER???
Insider is the person who is “connected” with the company , who could have the unpublished price sensitive information or receive the information from somebody in the company.
CONNECTED PERSON WITH DETAILED CLARIFICATION
Any person who is or has been associated with company, in any manner, during the six months prior to the concerned act:
An immediate relative to the connected person.
A banker of the company.
An official of stock Exchange or of clearing corporation.
A holding/associate/subsidiary company.
WHAT INCLUDES TRADING ?
WHO ARE INSIDER TRADERS?
Corporate officers, directors ,and employees who traded the corporations securities after learning of significant, confidential corporate developments.
Friends, business associates, family members and employees of law, banking and brokerage firms who were given such information to provide services to the corporation whose securities they traded.
GOVERNING REGULATIONS
Securities & Exchange Board Of India Act,1992
SEBI (Insider Trading) Regulations,1992
SEBI (PIT) (Amendment) Regulations,2002
SEBI (PIT) (Amendment) Regulations,2003
SEBI (PIT) (Amendment) Regulations,2008
SEBI (PIT) (Amendment) Regulations,2011
HISTORY BEHIND INSIDER TRADING IN INDIA
Insider trading in India was unhindered in its 130 year old stock market till about 1970.
In 1979,the Sachar Committee recommended amendments to the companies Act,1956 to restrict prohibit the dealings of employees. Penalties were also suggested to prevent the insider trading.
In 1989 the Abid Hussain Committee recommended that the insider trading activities may be penalized by civil and criminal proceedings and also suggested the SEBI formulate the regulations and governing codes to prevent unfair dealings.
UNPUBLISHED PRICE SENSITIVE INFORMATION
REGULATORY ASPECTS OF PROHIBITION OF INSIDER TRADING
SEBI prohibition of Insider Trading regulation 1995.
Section 11(2) E of companies act 1956 prohibits the insider trading.
WHY THERE IS NEED FOR PROHIBITION OF INSIDER TRADING???
As per SEBI the Prohibition of Insider Trading is required to make securities market:
Fair and Transparent.
To have a Level Playing Field for all the participants in the market.
For free flow of information and avoid information asymmetry.
CASE STUDY
HLL – BBLIL MERGER CASE
HLL-BROOKBOND LIPTON INDIA LTD
The case primarily involves 4 pa
This presentation is on Security Exchange Board (SEBI) which gives the brief about the SEBI with its objective, function, details about the chairman, rules
WHAT IS INSIDER TRADING???
Insider trading is dealing in securities of a listed company by any person who has knowledge of material “inside” information which is not known to the general public.
WHO IS INSIDER???
Insider is the person who is “connected” with the company , who could have the unpublished price sensitive information or receive the information from somebody in the company.
CONNECTED PERSON WITH DETAILED CLARIFICATION
Any person who is or has been associated with company, in any manner, during the six months prior to the concerned act:
An immediate relative to the connected person.
A banker of the company.
An official of stock Exchange or of clearing corporation.
A holding/associate/subsidiary company.
WHAT INCLUDES TRADING ?
WHO ARE INSIDER TRADERS?
Corporate officers, directors ,and employees who traded the corporations securities after learning of significant, confidential corporate developments.
Friends, business associates, family members and employees of law, banking and brokerage firms who were given such information to provide services to the corporation whose securities they traded.
GOVERNING REGULATIONS
Securities & Exchange Board Of India Act,1992
SEBI (Insider Trading) Regulations,1992
SEBI (PIT) (Amendment) Regulations,2002
SEBI (PIT) (Amendment) Regulations,2003
SEBI (PIT) (Amendment) Regulations,2008
SEBI (PIT) (Amendment) Regulations,2011
HISTORY BEHIND INSIDER TRADING IN INDIA
Insider trading in India was unhindered in its 130 year old stock market till about 1970.
In 1979,the Sachar Committee recommended amendments to the companies Act,1956 to restrict prohibit the dealings of employees. Penalties were also suggested to prevent the insider trading.
In 1989 the Abid Hussain Committee recommended that the insider trading activities may be penalized by civil and criminal proceedings and also suggested the SEBI formulate the regulations and governing codes to prevent unfair dealings.
UNPUBLISHED PRICE SENSITIVE INFORMATION
REGULATORY ASPECTS OF PROHIBITION OF INSIDER TRADING
SEBI prohibition of Insider Trading regulation 1995.
Section 11(2) E of companies act 1956 prohibits the insider trading.
WHY THERE IS NEED FOR PROHIBITION OF INSIDER TRADING???
As per SEBI the Prohibition of Insider Trading is required to make securities market:
Fair and Transparent.
To have a Level Playing Field for all the participants in the market.
For free flow of information and avoid information asymmetry.
CASE STUDY
HLL – BBLIL MERGER CASE
HLL-BROOKBOND LIPTON INDIA LTD
The case primarily involves 4 pa
Though the nature of financial system continues to change in order to reflect the demands/needs/priorities of the society at large, there will continue to be a wide breadth of opportunities available for those looking to pursue a financial career on Wall Street. From investment banking to private equity to research, there are numerous careers available for those willing to venture to the East Coast.
There are however, certain skill sets and knowledge bases that remain critical to your successful performance in each of the prospective careers. This guide seeks to match the relevant skill sets and knowledge bases to the given Wall Street career in addition to providing you with a general overview of the respective career path.
Furthermore, in addition to the pertinent technical skills and knowledge, Wall Street employers look for ‘fit’ in their potential employees. This means that they are looking to understand why it is that you are uniquely qualified to work in their environment.
Now more than ever, each future worker on Wall Street must differentiate themselves in order to gain an edge in the hypercompetitive recruitment process that defines Wall Street. This means not only possessing the humility, integrity, and tireless work ethic which characterizes the American Spirit, but ultimately mastering the skill sets and knowledge bases required by the given career.
It is our sincere hope that this document may guide your efforts in determining your career path on Wall Street and the acquisition of its respective compulsory knowledge and competencies.
Critical IPO disclosures in a prospectus and comparison of JustDial and TBZ IPOtwinkle Chhadwa
This PPT describes everything about IPO's and their regulations. It highlights the key part of an ipo prospectus i.e Disclosures. We have critically analysed 15 disclosures along with SEBI requirements. For this purpose we have taken two companies JustDial and TBZ IPO's and have compared them.Also supported by various casestudies such as DLF, Facebook, Alibaba etc.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
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What website can I sell pi coins securely.DOT TECH
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Who is a pi merchant?
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where can I find a legit pi merchant onlineDOT TECH
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BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
This presentation poster infographic delves into the multifaceted impacts of globalization through the lens of Nike, a prominent global brand. It explores how globalization has reshaped Nike's supply chain, marketing strategies, and cultural influence worldwide, examining both the benefits and challenges associated with its global expansion.
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Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
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Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
2. FINANCIAL MARKETS
The securities market 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
5. What is an IPO?
• 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 an FPO?
•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
•To raise 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
•Stockholder Diversification
•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
10. IS GOING PUBLIC RIGHT 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
12. Merchant Banker
•Merchant banker can 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:
•Management of 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 an agreement 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 or investment 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 provides administrative 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 the issue
•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 NORMS FOR 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 has provided 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 certain category 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 issuer making 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-IPO RULES
• 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
• For IPO 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
• For Promoters:
• 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
FILING DRHP 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 diligence involves 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 first document 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 draft offer 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
FILING DRHP 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 grading is 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 relative assessment 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 Prospects and Competitive Position
i. Industry Prospects
ii. Company Prospects
•Financial Position
•Management Quality
•Corporate Governance Practices
•Compliance and Litigation History
34. IPO PROCESS
BOD APPROVAL
FILING DRHP 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 is placed 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
FILING DRHP 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 to travel 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
FILING DRHP 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
FILING DRHP 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
43. PUBLIC OFFER
Issue Type Offer 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
45. BOOK BUILDING PROCESS
•When the 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 Issuer who 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
48. IPO PROCESS
BOD APPROVAL
FILING DRHP 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 issue closes 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
stocks for 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
•All bids 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
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 days for 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
FILING DRHP 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 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
57. GUIDE TO UNDERSTAND AN 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
FILING DRHP 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 with the 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
•A Green 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-allotment option
•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, a company 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 apply for 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 Supported by 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 continues to 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 escrow account 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 JUDGE AN IPO
• Promoters
• Industry outlook
• Business plans
• Financials
• Risk factors
• Key names- lead manager and merchant banker
• Pricing
• Listing
67
69. MANPASAND BEVERAGES LTD.
Incorporated in 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 of the 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 on One Brand
•Falling Rural Income – Negative for the Company
•Unfavorable movement in the raw material
71
RISK AND CONCERNS
72. INVESTMENT RATIONALE
•Strong Presence in 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 Manpasand Beverages 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
75. Issue Subscription Detail
Number of 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
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.
It involves the offering of part ownership of the company to the public through the sale of equity securities (stock).
RECENT FPOs by co.
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.
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.
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).
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.
Ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, RoC and SEBI including finalization of Prospectus and RoC filing
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
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
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
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
Right now, only brokers and exchanges can accept applications. So the new rules will help in enhancing the reach of public issues,” Sinha said.
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/
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.
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
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.
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.
Anything which does not form part of the RHP cannot be used in road shows, commercials or in any other form of advertising.
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.
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
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.
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.
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.
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.
(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’
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