2. Any company making a public issue is required to file its prospectus
with the Securities and Exchange Board of India.
A prospectus can be of two types
Draft Offer Document
The Draft Offer Document must be filed with SEBI at least 21 days
before the company files it with the ROC/ Stock Exchange
Red Herring Prospectus
Red Herring Prospectus" is a prospectus which does not have details
of either price or number of shares being offered or the amount of
issue
3. • Description of the offering
• History of the business
• Description of management
• Price (Price Band)
• Issue open date – Issue Closing Date
• Minimum Subscription
• Use of proceeds
•Description of the underwriting
• Financial information
• Risks to buyers
The final prospectus must contain:
4. Functions of prospectus :
• It set out all the information that you must make public under the listing rules.
• It acts as a marketing tool for shares for the company for describing the company
and it’s prospective.
• It sets out the price of the company shares and how much capital you can raise
from the market.
5. IPO VALUATION
Factors to be considered
1. Financial Results:
Assets
Cost of capital
Historical & Projected growth rate of sales & earnings
Long term debt
Profit margins
General & admn. Expenses
2. Legal Considerations:
Environmental Issues
Patents, Trademarks
Legislation:-positive or negative
6. IPO VALUATION
Factors to be considered
3. The Company:
Cost of production
Experience and quality of management
Growth opportunities
Market share
Raw material suppliers
Scope of product line, new product development
4. Comparison with peers:
Market value of other listed companies
Comparison of P/E of listed co. with new co.
Future prospective in the specific sector
7. When demand of shares is more than supply of shares on an IPO
• Pro rata basis
• Green Shoe option
A provision contained in an underwriting agreement that gives the underwriter the
right to sell investors more shares than originally planned by the issuer.