1.

1 AN OVERVIEW OF THE INDUSTRY Evolution

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meagre and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as " The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

Indian Stock Exchanges - An Umbrella Growth The Second World War broke out in 1939. It gave a sharp boom which was followed by a slump. But, in 1943, the situation changed radically, when India was fully mobilized as a supply base. On account of the restrictive controls on cotton, bullion, seeds and other commodities, those dealing in them found in the stock market as the only outlet for their activities. They were anxious to join the trade and their number was swelled by numerous others. Many new associations were constituted for the purpose and Stock Exchanges in all parts of the country were floated. The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940) and Hyderabad Stock Exchange Limited (1944) were incorporated. In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947, amalgamated into the Delhi Stock Exchnage Association Limited.

Post-independence Scenario
Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange was closed during partition of the country and later migrated to Delhi and merged with Delhi Stock Exchange. Most of the other exchanges languished till 1957 when they applied to the Central Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only Bombay, Calcutta, Madras, Ahmedabad, Delhi, Hyderabad and Indore, the well established exchanges, were recognized under the Act. Some of the members of the other Associations were required to be admitted by the recognized stock exchanges on a concessional basis, but acting on the principle of unitary control, all these pseudo stock exchanges were refused recognition by the Government of India and they thereupon ceased to function. Thus, during early sixties there were eight recognized stock exchanges in India (mentioned above). The number virtually remained unchanged, for nearly two decades. During eighties, however, many stock exchanges were established: Cochin Stock Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982), 2

and Pune Stock Exchange Limited Vadodara Stock Exchange Limited (at Baroda, 1990) and recently established exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one recognized stock exchanges in India excluding the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). Trading Pattern of the Indian Stock Market Trading in Indian stock exchanges are limited to listed securities of public limited companies. They are broadly divided into two categories, namely, specified securities (forward list) and non-specified securities (cash list). Equity shares of dividend paying, growth-oriented companies with a paid-up capital of atleast Rs.50 million and a market capitalization of atleast Rs.100 million and having more than 20,000 shareholders are, normally, put in the specified group and the balance in non-specified group. Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery transactions "for delivery and payment within the time or on the date stipulated when entering into the contract which shall not be more than 14 days following the date of the contract" : and (b) forward transactions "delivery and payment can be extended by further period of 14 days each so that the overall period does not exceed 90 days from the date of the contract". The latter is permitted only in the case of specified shares. The brokers who carry over the outstandings pay carry over charges (cantango or backwardation) which are usually determined by the rates of interest prevailing.

National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. Trading at NSE can be classified under two broad categories: (a) Wholesale debt market and (b) Capital market. Wholesale debt market operations are similar to money market operations 3

institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc. There are two kinds of players in NSE: (a) trading members and (b) participants. Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility.

Bombay Stock Exchange (BSE)

Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, now spanning three centuries in its 133 years of existence. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875.

BSE is the first stock exchange in the country which obtained permanent recognition (in 1956) from the Government of India under the Securities Contracts (Regulation) Act 1956. BSE's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized. It migrated from the open outcry system to an online screen-based order driven trading system in 1995. Earlier an Association Of Persons (AOP), BSE is now a corporatised and demutualised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). Today, BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in transaction numbers. The market capitalization as on December 31, 2007 stood at USD 1.79 trillion . 4

IPO In India
IPO means the new offer of a company's shares to the public in the country's capital markets. Initial Public Offer (IPO) in India is done through various methods like method of book building, method of fixed price or a mixture of both. During an Initial Public Offer (IPO) the shares are given to the public at a discount on the intrinsic value of the shares and this is the reason that the investors buy shares during the Initial Public Offering (IPO) in order to make profits for themselves. IPO in India is done through various methods like book building method, fixed price method, or a mixture of both. The method of book building has been introduced in the country in 1999 and it helps the company to find out the demand and price of its shares. A merchant banker is nominated as a book runner by the Issuer of the IPO. The company that is issuing the Initial Public Offering (IPO) decides the number of shares that it will issue and also fixes the price band of the shares. All these information are mentioned in the company's red herring prospectus. During the company's Initial Public Offering (IPO) in India, an electronic book is opened for at least five days. During this period of time, bidding takes place which means that people who are interested in buying the shares of the company make an offer within the fixed price band. Once the book building is closed then the issuer as well as the book runner of the Initial Public Offering (IPO) evaluate the offers and then determine a fixed price. The offers for shares that fall below the fixed price are rejected. The successful bidders are then allotted the shares. 5

IPO Market In India

The IPO Market in India has been developing since the liberalization of the Indian economy. It has become one of the foremost methods of raising funds for various developmental projects of different companies.

IPO Market in India - Overview

The IPO Market in India is on the boom as more and more companies are issuing equity shares in the capital market. With the introduction of the open market economy, in the 1990s, the IPO Market went through its share of policy changes, reforms and restructurings. One of the most important developments was the disassembling of the Controller of Capital Issues (CCI) and the introduction of the free pricing mechanism. This step helped in developing the IPO Market in India, as the companies were permitted to price the issues. The Free pricing mechanism permitted the companies to raise funds from the primary market at competitive price.

IPO Market in India - Regulations

The Central Government felt the need for a governed environment pertaining to the Capital market, as few corporate houses were using the abolition of the Controller of Capital Issues (CCI) in a negative manner. The Securities Exchange Board of India (SEBI) was established in the year 1992 to regulate the capital market. SEBI was given the authority of monitoring and regulating the activities of the bankers to an issue, portfolio managers, stockbrokers, and other intermediaries related to the stock markets. The effects of the changes are evident from the trend of the resources of the primary capital market which includes rights issues, public issues, private placements and overseas issues. 6

IPO Market In India - Glimpses

y y y y

The IPO Market in India experienced a boom in its activities in the year 1994. In the year 1995 the growth of the Indian IPO market was 32 % . The growth was halted with the South East Asian crisis. The markets picked up speed again with the introduction of the software stocks.

IPO Scams
IPO Scams are well structured game played by the absolute opportunists consisting of intermediaries, financiers and bank employees, who make a lot of money by controlling shares meant for retail investors in Initial Public Offer (IPO), as the per the statement of the Securities Exchange Board of India. In the last few years, the capital market in India went through a rapid transformation. The increased use of information technology and the integration of financial markets have stepped up the risk profile of the capital market. The two major IPO scams in the Indian Capital market were the Harshad Mehta scam in the year 1992 and the Ketan Parekh scam in the year 2001. The IPO Scams opened up the latent loopholes in the Indian capital market

IPO Scams - Causes

y

Two of the most common factors of the major IPO scams in India were the tacit consent of the banks and the poor surveillance techniques.

The Depository Participants must be provided the proof of identity and proof of address as a routine check for the opening demat accounts. This was not followed.

Numerous dematerialized accounts and bank accounts had been opened under false names and the IPO applications were made in non existing names.

IPO Scams - How it was done?

y

At first bank accounts were opened up in fictitious or "benami" names, which allowed these fictitious account holders to open demat accounts.

The master account holders, the person who had executed the planning acts as an intermediary on behalf of the financiers.

The shares acquired at the IPOs were disposed on the date of listing at a premium to get more than the amount of money invested.

The banks played an important part by means of opening bank accounts and giving loans to the fictitious entities for the purpose of earning fee income

Future of IPOs in India

The IPO industry in India has received a major boost in the current year especially with the emergence of Reliance Power IPO on 15th January 2008. Apart from Reliance Power, another IPO which brought in major capital is Kishore Biyani-led Future Group's financial services arm. This IPO has been a recipient of 17.36 crores equity shares as bidding as compared to 6,422,000 equity shares on offer. The public offerings of the IPO of Kishore Biyani-led Future Group's financial services arm are estimated to raise around Rs. 490 crores future capital. The price range fixed for the Equity shares of this IPO varies between Rs. 700 to Rs. 765. The subscription for the issue of this IPO was

opened from 11th January 2008 to 16th January 2008.

1.2 PROFILE OF THE COMPANY

ABOUT COMPANY

Religare is driven by ethical and dynamic process for wealth creation. Based on this, the company started its endeavor in the financial market.

Religare Enterprises Limited through Religare Securities Limited, Religare Finvest Limited, Religare Comdex Limited and Religare Insurance Advisory Services Limited provides integrated financial solutions to its corporate, retail and wealth management clients. Today, we provide various financial services which include Investment Banking, Corporate Finance, Portfolio Management Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, theres a lot more to come your way.

Religare is proud of being a truly professional financial service provider managed by a highly skilled team, who have proven track record in their respective domains. Religare operations are managed by more than 1500 highly skilled professionals who subscribe to Religare philosophy and are spread across its country wide branches.

Religare is a global financial services group with a presence across Asia, Africa, Middle East, Europe and the Americas. In India, Religares largest market, the group offers a wide array of products and services ranging from insurance, asset management, broking 10

and lending solutions to investment banking and wealth management. The group has also pioneered the concept of investments in alternative asset classes such as arts and film. With 10,000 plus employees across multiple geographies, REL serves over a million clients, including corporates and institutions, high net worth families and individuals, and retail investors.

VISION
To build Religare as a globally trusted brand in the financial services domain and present it as the Investment Gateway of India.

MISSION
Providing financial care driven by the core values of diligence and transparency.

BRAND ESSENCE
Religare is driven by ethical and dynamic processes for wealth creation.

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 PRODUCTS AND SERVICES

Religare Enterprises Limited group comprises of Religare Securities Limited, Religare Comdex Limited, Religare Finvest Limited and Religare Insurance Advisory Services Limited which deal in equity, commodity and financial services business.

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BRAND IDENTITY

The Name
Religare is a Latin word that translates as 'to bind together'. This name has been chosen to reflect the integrated nature of the financial services the company offers. The name is intended to unite and bring together the phenomenon of money and wealth to co-exist and serve the interest of individuals and institutions, alike.

The Symbol
The Religare name is paired with the symbol of a four-leaf clover. The four-leaf clover is used to define the rare quality of good fortune that is the aim of every financial plan. It has traditionally been considered good fortune to find a single four leaf clover considering that statistically one may need to search through over 10,000 three-leaf clovers to even find one four leaf clover. Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.

The first leaf of the clover represents Hope. The aspirations to succeed. The dream of becoming. Of new possibilities. It is the beginning of every step and the foundations on which a person reaches for the stars.

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The second leaf of the clover represents Trust. The ability to place ones own faith in another. To have a relationship as partners in a team. To accomplish a given goal with the balance that brings satisfaction to all not in the binding but in the bond that is built. The third leaf of the clover represents Care. The secret ingredient that is the cement in every relationship. The truth of feeling that underlines sincerity and the triumph of diligence in every aspect. From it springs true warmth of service and the ability to adapt to evolving environments with consideration to all. The fourth and final leaf of the clover represents Good Fortune. Signifying that rare ability to meld opportunity and planning with circumstance to generate those often looked for remunerative moments of success. Hope, Trust, Care, Good fortune. All elements perfectly combine in the emblematic and rare, four-leaf clover to visually symbolize the values that bind together and form the core of the Religare vision.

Accent usage
The diacritical tilde mark ( ) over the letter A in the Religare typeface indicates a palatal

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 STRUCTURE

Religare Enterprises Limited

Religare AMC Limited y Asset Management Business y Portfolio Management Religare Finvest Limited y Lending and Distribution business

Religare Insurance Broking Limited y Life Insurance Broking Business AEGON Religare Life Insurance Co. Ltd. y Non-Life Insurance Broking Business y Life Insurance Company, JV with Aegon(26%), Religare(44%), and Bennett & Coleman(30%) Religare Arts Initiative Limited Religare Macquarie Wealth Mgmt. Ltd. y Business of Art y JV with Macquarie for Wealth Management y Art Gallery Business y Art Advisory Religare Securities Limited y Retail Equity Broking y Online Investment Portal y Depository Services Religare Commodities Limited y Commodity Broking Business Religare Capital Markets Limited y PE and M&A Advisory y Institutional Broking y Investment Banking Religare Venture Capital Limited y Private Equity and Investment Manager

Vistaar Religare Capital Advisors Ltd. y JV with Vistaar Entertainment Ventures for film fund y India's first ever film fund Religare - Milestone y JV with Milestone Capital to manage a healthcare and education fund Religare Finance Ltd. y Capital Market Financing

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 MANAGEMENT PERSONNEL
y Board of Directors - Religare Enterprises Limited Mr. Sunil Godhwani Chairman and Managing Director, Religare Enterprises Limited

Mr. Sunil Godhwani, Chairman and Managing Director, Religare Enterprises Limited, is the driving force behind the company. A man with a vision to create a global business of excellence, he is the inspiration to all as he spearheads the companys management and global operations; strategizing and directing it through its next phase of growth. y Mr Shachindra Nath Group CEO y Mr. Anil Saxena Group CFO y Mr. Harpal Singh Non Executive Director y Mr. Deepak Ramchand Sabnani Independent Director y Ms. Kathryn Matthews Independent Director y Mr. Padam Bahl Independent Director y Mr. J. W. Balani Independent Director y Ms. Sunita Naidoo Independent Director y Mr. Stuart D Pearce Independent Director y Mr. R. K. Shetty Alternate to Mr. J. W. Balani y Capt. G. P. S. Bhalla Alternate to Mr. Deepak Sabnani

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CEO's Mr. Anuj Gulati

Chief Executive Officer Religare Health Insurance Co. Ltd. In his capacity of CEO, Anuj would be responsible for setting up this business and work towards making Religare as one of the dominant players in the Indian Health Insurance industry y Mr. Gagan Randev Chief Executive Officer Religare Securities Limited y Mr. Kamlesh Dangi Chief People Officer Religare Enterprises Limited y Mr. Kavi Arora Chief Executive Officer Religare Finvest Limited y Mr. Martin Newson Chief Executive Officer Religare Capital Markets y Mr. Rajiv Jamkhedkar Chief Executive Officer AEGON Religare Life Insurance Company Limited y Mr. Saurabh Nanavati Chief Executive Officer Religare Asset Management Company Private Limited y Mr. Vikas Agnihotri Chief Executive Officer Religare Macquarie Wealth Management Limited

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1.3 PROBLEMS OF THE COMPANY

1. Strategic alliances used as a marketing tool for the investors before the issue which did not continue after listing.

2. Companies used the names of reputed groups and institutional investors as a marketing tool, which later on served their connections with the companies after lock-in period.

3. Heavy premium charged on the issues but after listing these issued were being quoted at a price far discounted.

4. Delay in commercial rise due to number of factors. 5. Religare faces significant competition from companies seeking to attract clients financial assets, including traditional and online brokerage firms, mutual fund companies, etc, which are having a wide presence and strong brand name. 6. The Indian stock market is very volatile in nature and is capable of shedding or gaining several points in a single day. Unless and until the market stabilizes the investors will be very hesitant to invest in the market.

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1.4 COMPETITION INFORMATION

Religare Securities faces significant competition from companies seeking to attract client financial assets, including traditional and online brokerage firms, mutual fund companies and institutional players having wide presence and a strong brand name. They are;

y y y y y

India Infoline Ltd Motilal Oswal Securities Karvy Kotak Securities Ltd. ICICI Securities Ltd.

India Infoline Ltd India Infoline Ltd is listed on both the leading stock exchanges in India, the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE). The India Infoline group, comprising the holding company, India Infoline Ltd and its subsidiaries, straddles the entire financial services space with offerings ranging from Equity research, Equities and derivatives trading, Commodities trading, Portfolio Management Services, Mutual Funds, Fixed deposits and other small savings instruments to loan products and Investment banking. It also owns and manages the websites, www.indiainfoline.com and www.5paisa.com . IIFL is the institutional equities division of India Infoline Ltd.a listed multi-services financial company with a market capitalisation of US$400 million. With a team of 25 research analysts, a full-fledged sales and trading team, and an experienced investment banking team, IIFL is rapidly emerging as one of the premier institutional equities houses in India. Headquartered in Mumbai, IIFL has overseas offices in Singapore and Dubai. Amongst its other businesses, India Infoline is one of the leading players in the retail broking and insurance distribution, and is currently in the process of scaling up its non-

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banking financial services and wealth management franchises. The group has over 600 branches located all over India.

Motilal Oswal

Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit, with just two people running the show. It has established itself as the Best Local Brokerage House in India (Asia Money Brokers Poll 2005). Their Institutional Equity Division combines the efforts of the Research and Sales & Trading departments to best serve clients' needs. Consistent delivery of high quality advice on individual stocks, sector trends and investment strategy has established them as a reliable research unit amongst leading Indian as well as international investors. They have a diversified client base that includes retail customers (including High Net worth Individuals), mutual funds , foreign institutional investors, financial institutions and corporate clients. We are headquartered in Mumbai and as of March 31st, 2010, had a network spread over 584 cities and towns comprising 1,397 Business Locations operated by our Business Partners and us. As at March 31st, 2010, we had 6,21,215 registered customers.

Karvy

The birth of Karvy was on a modest scale in the year 1982. It began with the vision and enterprise of a small group of practicing Chartered Accountants based in Hyderabad, who founded Karvy. They started with consulting and financial accounting automation, and then carved inroads into the field of Registry and Share Transfers. Karvy has built a reputation as an integrated financial services provider, offering a wide spectrum of services for over 20 years.In 1982, a group of Hyderabad-based practicing Chartered Accountants started Karvy Consultants Limited with a capital of Rs.150, 000 offering auditing and taxation services initially. Later, it forayed into the Registrar and Share Transfer activities and subsequently into financial services.

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Kotak Securities Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and distribution arm of the Kotak Mahindra Group. Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate. Kotak Securities was set up in 1994. Kotak Securities is a corporate member of both The Bombay Stock Exchange and the National Stock Exchange of India Limited. They have been the first in providing many products and services which have now become industry standards. Some of them are: Facility of Margin Finance to the customers for online stock trading Investing in IPOs and Mutual Funds on the phone SMS alerts before execution of depository transactions Mobile application to track portfolio of your investments in stock market AutoInvest - A systematic investing plan in Equities and Mutual funds Provision of margin against securities automatically against shares in your Demat account

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ICICI Securities ICICI Securities, A subsidiary of ICICI Bank, was set up in February 1993 to provide investment-banking services to investors in India. As on date ICICI Bank holds 99.9% of the share capital of ICICI Securities. ICICI Securities Limited is Indias leading full service investment bank with a dominant position in all segments of its operations y y y Corporate Finance Fixed Income and Equities. ICICI provides multiple channels in banking like, which is unique feature. y y y y Internet Banking Mobile Banking ATM banking Phone Banking ICICI Securities is amongst the largest arranger of funds in Debt and Equity segments and also amongst the leading advisors in Mergers and Acquisitions

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1.5 SWOT ANAYSIS

STRENGTHS: y A wide geographic reach, growing clients, and a diversified portfolio of products and services. End September 2007, had six regional offices and 40 sub-regional offices across 392 cities and towns controlling 1,217 business locations (managed with business associates) all over India as well as a representative office in London. Also, has a regionfocused entrepreneurial management team leading 6,500 employees.
y

WEAKNESS:
y

The Securities and Exchange Board of India (Sebi) has taken actions (subject to final orders) against Religare Securities for price manipulation in certain scrips. The track record of listed group companies Fortis Financial Services and Fortis Healthcare has been far from encouraging. Proper execution and supportive economic

Products and service offered under three broad client-interface categories: Retail Spectrum, Wealth Spectrum and Institutional Spectrum. Retail Spectrum offers equity and commodity brokerage, personal financial services, internet trading and personal loans. Wealth Spectrum offers portfolio services (PMS), wealth advisory services and private client services. Institutional Spectrum offers institutional distribution and investment banking services. Increasing clients in both equity and commodity trading. Equity clients (including institutional clients) increased from 1,49,000 clients end March 2007 to 2,37,000 clients end September 2007, an increase of 59% over the six months. Also, clients in the commodity service jumped 54%, from 14,955 to 23,000. Online investment accounts surged 189%, from 11,600 to 33,500.

environment will be necessary to implement the aggressive growth plans across the financial spectrum

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OPPORTUNITIES: y Changing demographics with higher disposable income: - India is one of the fastest growing economies in the world. It has a large and rapidly growing middle class of 300 million people with increasing levels of discretionary income available for consumption and investment purposes. The options they have for investments are fixed deposits, post office deposits etc. This gives them a limited interest rate on their

THREATS:

Economic slowdown: - Terrorist attacks and other acts of violence or war, including those involving India or other countries could adversely affect national economy or world economy as a whole. Such act may also result in a loss of business confidence. This will result in an economic slowdown e.g. the 9/11 attack on the World Trade Centre, New York. Volatile movement in market indices: - The Indian stock market is very volatile in nature and is capable of shedding or gaining several points in a single day. Unless and until the market stabilizes the investors will be very hesitant to invest in the market. Stock market falls will have a cascading effect on the investors and economy of the country. Competition: Religare faces significant competition from companies seeking to attract clients financial assets, including traditional and online brokerage firms, mutual fund companies, etc, which are having a wide presence and strong brand name. As the company enters new markets, they are bound to face additional competition from those who have longer operating history have greater retail and brand presence than Indiabulls. If the company is unable to manage its business it might impede their competitive position and their profitability.

investment; where as the stock market provides a good y scope for making good returns. y Rapid penetration of internet and computers: Technology is vastly used in stock market trading. Now, with the use of the computers and internet the stock market trading has become fast. The traders can place orders through the internet and execute them. This saves the time of the investors, who earlier had to make calls y to their brokers in order to trade. The use of technology is influencing more people to invest in the stock market. y Market size and Characteristics: -India is a large and growing economy with rapidly expanding financial services sector. The sector has witnessed a transformation over the last decade as a result of the economic liberalization which started in 1991. India is the worlds 12th largest economy in dollar terms and the 4th largest in PPP terms. The projected growth rate of real GDP is greater than 9% per annum with higher growth in many sectors such as financial services. Indian financial sector presents a huge retail finance opportunity. Thus, Indian investors are getting attracted towards alternate investments such as the equity markets and are looking for newer financial products. y Diversified business model: -Religare and its

subsidiaries offer various financial services &

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Products ranging from debt , equity etc.

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2.1 OBJECTIVE OF THE STUDY

The main objective behind this study is to find out various ways of improving the current primary market situation. What needs to be done to make investors aware of the risks in investment, how the investments in primary market issues takes place and what investors feel about improving the quality of primary market issues are some of the sub objectives the research proposes to discover.

2.2 RESEARCH DESIGN

The objective of the study necessitated the design of the research to be conclusive and descriptive. This is instrumental to provide information of particular courses of action. Descriptive include : 1. Designing the methods of data collection. 2. Selection of sampling. 3. Analyze the data. 4. Reporting the findings In the project descriptive research was required to study the user characteristics of Religare Securities Limited and determine buyer perception of product features. Insight is also possible into the association of the different variable. Such information may be then be used for prediction purpose and findind out the conclusion.

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2.3 SCOPE OF STUDY

To analysis the Investors confidence in Primary market. To find out factors affecting Investors investment in Primary Market. We come to know the terms used in an Primary Market We come to know about the procedures involved in issuing security in Primary market. We are able to suggest the right steps to be taken while investing in primary market. To highlight the role of Sebi in the Primary Market

2.4 SAMPLING
An integral component of research design is the sampling plan. Specifically it addresses two questions: 1. Sample unit (whom to survey)-Deciding whom to survey requires that the Universe or boundaries of the market from which data is sought out then an Appropriate sample can be selected. In my study the people surveyed are the executives, customers and common people. 2. Sample size (how many to survey)-It depends more on the size of the Budget and the degree of confidence that the marketer want to place in the findings. The larger the sample the more like it the response will reflect the total universe under study .The sample size in this study includes 100 persons.

 SAMPLING TECHNIQUE
To carry out this project I have used non-probability sampling where the researcher selects the more accessible population members for whom to obtain information and the researcher uses his or her judgment to select the population members who are good sources of accurate information.

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 SOURCES OF DATA y PRIMARY DATA

The primary data collected through a questionnaire consisting of all type of questions like multiple choice and open ended questions .The questionnaire were supplemented by a interview and with tele communication to reach other conclusions. y SECONDARY DATA

The secondary data is collected through internet, journals, books newspapers and various other sources.

 TIME FRAME
It took 30 days to complete this project fully with all respects and according to the proper guidelines .

 PROBLEMS
The problems which an organization can face are:  Lack of efficient consultants and advisors.  Excessive competition.

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2.5 LIMITATIONS
The study could not be made that comprehensive due to the time constraints. Some customers to reveal some personal information relating to income etc. it might have happened that some more essential information could have been collected: 1. Time constraints. 2. Respondents were not cooperative. 3. Geographical selectivity in the studying limiting to Delhi city only. 4. People are not interested in giving personal information. 5. Misleading information with people about Religare Securities Ltd.

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CAPITAL MARKET

Capital Market is the backbone of any countrys economy. It facilitates conversion of savings to investments. Capital market can be classified as primary and secondary market. The fresh issue of securities takes place in primary market and trading among investors takes place in secondary market. Primary market is also known as new issues market. Equity investors first enter capital market through investment in primary market. These new securities issued in the primary market are traded in the secondary market. The secondary market enables participants who hold securities to adjust their holdings in response to changes in their assessment of risks and returns.

PRIMARY MARKET

The primary is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO).

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Features of Primary Market are:1. This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called New Issue Market (NIM). 2. In a primary issue, the securities are issued by the company directly to investors. 3. The company receives the money and issue new security certificates to the investors. 4. Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. 5. The primary market performs the crucial function of facilitating capital formation in the economy.

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METHODS OF ISSUING SECURITIES IN THE PRIMARY MARKET

Primarily, issues can be classified as a Public, Rights (for existing Companies) or Preferential Issue (also known as private placements). While public and rights issues involve a detailed procedure, private placements or preferential issues are relatively simpler.

Public issues can be further classified into Initial Public Offerings (IPO) and Further Public Offerings (FPO). In a public offering, the issuer makes an offer for new investors to enter its shareholding family. It then makes detailed disclosures as per the guidelines in its offer document and offers it for subscription. 32

Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer of sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuers securities.

A Further 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.

Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.

A Private Placement is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. A private placement of shares or of convertible securities by a listed company is generally known by name of preferential allotment. A listed company going for preferential allotment has to comply with the requirements contained in Chapter XIII of SEBI (DIP) Guidelines pertaining to preferential allotment in SEBI (DIP) guidelines

33

which interalia include pricing, disclosures in notice etc, in addition to the requirements specified in the Companies Act.

A Qualified Institutions Placement is a private placement of equity shares or securities convertible in to equity shares by a listed company to Qualified Institutions Buyers only in terms of provisions of Chapter XIIIA of SEBI (DIP) guidelines. The Chapter contains provisions relating to pricing, disclosures, currency of instruments etc.

DEPOSITORY
Depository is an organization where the securities of an investor are held in electronic form through the medium of Depository Participants (DPs). It enables surrender and withdrawal of securities to and from the depository through the process of demats and remats. Maintains investors holdings in electronic form. Effect settlement of securities traded in depository made on the stock exchanges. Carries out settlement of traders not done on the stock exchanges (off-market trades)

At present, India has only two depositories:(i) National Securities Depositories Ltd(NSDL) (ii)Central Depositories Ltd(CDSL)

34

NATIONAL SECURITIES DEPOSITORIES LIMITED (NSDL)

Although India had a vibrant capital market which is more than a century old, the paperbased settlement of trades caused substantial problems like bad delivery and delayed transfer of title till recently. The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL, the first depository in India.

It is an organisation promoted bylOBI, UTI and National Stock Exchange of India Ltd. The aim is to provide facilities for holding and handling securities in electronic form. Subsequently; SBI (acquired a 4.76 per cent in NSDL). HDFC. bank, Deusche bank, Dena Bank, Canara Bank, Global Trust Bank, Standard Chartered bank, Citibank NA and HSBC have acquired stake in NSDL. It commenced its operations in November 1996. Its headquarter is situated at Mumbai. It is holding and handling securities in electronic form. It facilitates faster settlement cycles. It provides services related to transactions in securities. It interfaces with the investors through its agents called depository participant (DPs). As a depository, NSDL (i) acts as a custodian as well as legally transfer beneficial ownership, (ii) reduces settlement risk by minimizing the paper work involved in trading, and settling and transferring securities.

CENTRAL DEPOSITORY SERVICES LIMITED (CDSL)

It is the second depository in the country, after NSDL. It is promoted by the Bombay Stock Exchange (BSE), Bank of India, Bank of Baroda, HDFC Bank, State bank of India. The functions rendered by this depository is almost similar that of the NSDL. CDSL received the certificate of commencement from SEBI in Feb, 1999. All leading stock exchanges like the National Stock Exchange, Calcutta Stock Exchange , Delhi Stock Exchange etc have established connectivity with CDSL. As at the end of Dec 2004, over 4900 issuers have admitted their securities into the CDSL system.

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ELIGIBILITY NORMS FOR MAKING ISSUES

SEBI has laid down eligibility norms for entities accessing the primary market through public issues. There is no eligibility norm for a listed company making a rights issue, as it is an offer made to the existing shareholders who are expected to know their company. There are no eligibility norms for a listed company making a preferential issue. However for Qualified Institutions placement (QIP), only those companies whose shares are listed in NSE or BSE and those who are having a minimum public float as required in terms of the Listing agreement, are eligible. The main entry norms for companies making a public issue (IPO or FPO) are summarized as:

ENTRY NORM I: The Company shall meet the following requirements: (a) Net Tangible Assets of at least Rs. 3 crores for 3 full years. (b) Distributable profits in at least three years. (c) Net worth of at least Rs. 1 crore in three years. (d) If change in name, at least 50% revenue for preceding 1 year should be from the new activity. (e) The issue size does not exceed 5 times the pre- issue net worth.

To provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters, SEBI has provided two other alternative routes

36

to company not satisfying any of the above conditions, for accessing the primary Market, as under:

ENTRY NORM II: (a) Issue shall be through book building route, with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (QIBs). (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. OR ENTRY NORM III: (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). (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

37

CATEGORY OF ENTITIES WHICH ARE EXEMPETED FROM THE AFORESAID ELIGIBILITY NORMS

SEBI (DIP) guidelines have provided certain exemptions from the eligibility norms. The following are eligible for exemption from entry norms: (a) Private Sector Banks (b) Public sector banks (c) An infrastructure company whose project has been appraised by a PFI or IDFC or IL&FS or a bank which was earlier a PFI and not less than 5% of the project cost is financed by any of these institutions. (d) Rights issue by a listed company.

RETAIL INVESTOR DEFINED Individual investors who buy and sell securities for their personal account and not for another company or organization. They are also known as Individual investors" or "Small investors. Retail individual investor means an investor who applies or bids for securities of or for a value of not more than Rs. 1, 00,000. He can bid in a book-built issue for a value not more than Rs. 1, 00,000.

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PROMOTER DEFINED 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 programmed pursuant to which the securities are offered to the public and those named in the prospectus as promoters(s). It may be noted that a director / officer of the issuer company or person, if they are acting as such merely in their professional capacity are not be included in the definition of a promoter.

'Promoter Group' includes the promoter, an immediate relative of the promoter (i.e. any spouse of that person, or any parent, brother, sister or child of the person or of the spouse). In case promoter is a company, a subsidiary or holding company of that company; any company in which the promoter holds 10% or more of the equity capital or which holds 10% or more of the equity capital of the Promoter; any company in which a group of individuals or companies or combinations thereof who holds 20% or more of the equity capital in that company also holds 20% or more of the equity capital of the issuer company. In case the promoter is an individual, any company in which 10% or more of the share capital is held by the promoter or an immediate relative of the promoter' or a firm or HUF in which the 'Promoter' or any one or more of his immediate relative is a member; any company in which a company specified in (i) above, holds 10% or more, of the share capital; any HUF or firm in which the aggregate share of the promoter and his immediate relatives is equal to or more than 10% of the total, and all persons whose shareholding is aggregated for the purpose of disclosing in the prospectus "shareholding of the promoter group".

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PRICING AND ALLOTMENT OF ISSUE Indian primary market ushered in an era of free pricing in 1992. Following this, the guidelines have provided that the issuer in consultation with Merchant Banker shall decide the price. There is no price formula stipulated by SEBI. SEBI does not play any role in price fixation. The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. FIXED PRICE OFFERS An issuer company is allowed to freely price the issue. The basis of issue price is disclosed in the offer document where the issuer discloses in detail about the qualitative and quantitative factors justifying the issue price. The Issuer company can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the Draft offer documents filed with SEBI and actual price can be determined at a later date before filing of the final offer document with SEBI/ROCs.

PRICE DISCOVERY THROUGH BOOK BUILDING PROCESS Book Building means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and 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 price for securities.

40

Book building is a process of price discovery. Hence, the Red Herring prospectus does not contain a price. Instead, the red herring prospectus contains either the floor price of the securities offered through it or a price band along with the range within which the bids can move. The applicants bid for the shares quoting the price and the quantity that they would like to bid at. Only the retail investors have the option of bidding at cut-off. After the bidding process is complete, the cut-off price is arrived at on the lines of Dutch auction. The basis of Allotment is then finalized and letters allotment/refund is undertaken.

PRICE BAND The red herring prospectus may contain either the floor price for the securities or a price band within which the investors can bid. The spread between the floor and the cap of the price band shall not be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price. The price band can have a revision and such a revision in the price band shall be widely disseminated by informing the stock exchanges, by issuing press release and also indicating the change on the relevant website and the terminals of the syndicate members. In case the price band is revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding thirteen days.

It may be understood that the regulatory mechanism does not play a role in setting the price for issues. It is up to the company to decide on the price or the price band, in consultation with Merchant Bankers. 41

The basis of issue price is disclosed in the offer document. The issuer is required to disclose in detail about the qualitative and quantitative factors justifying the issue price.

ALLOTMENT OF ISSUE All allotments are done fair and there cannot be any discretion in the allotment process. Prior to the SEBI Circular on DIP Guidelines dated September 19, 2005, the allotment to the Qualified Institutional Buyers (QIBs) was on a discretionary basis. This however has been amended and all allottees are allotted shares on a proportionate basis within their respective categories.

In a book built issue allocation to Retail Individual Investors (RIIs), Non Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs) is in the ratio of 35:15:50 respectively. In case the book built issues are made pursuant to the requirement of mandatory allocation of 60% to QIBs in terms of Rule 19(2)(b) of SCRR, the respective figures are 30% for RIIs and 10% for NIIs. This is a transitory provision pending harmonization of the QIB allocation in terms of the aforesaid Rule with that specified in the guidelines.

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IPO AS AN INVESTMENT AVENUE FOR RETAIL INVESTORS

Investing in IPO is an easy, low-risk way to make an average of 2-3% return in 20-30 days, assuming market does not fall in between allotment and listing. A 2-3% return can seem very low on a nominal basis, but when you calculate the annualized return it becomes very attractive. Investors can make an annualized return of about 30%, on an average, easily by investing in quality IPOs. In fact Investors have made an annualized return of over 100% in a few IPOs. IPO as an investment class offers good returns and no other similar risk reward structure will give as much returns.

Investing in the issues of primary market has its own benefit and drawbacks. Some of the key benefits are: * It is safer to invest in the primary markets than in the secondary markets as the scope for manipulation of price is smaller. * The investor does not have to pay any kind of brokerage or transaction fees or any tax such as service tax, stamp duty and STT. * No need to time the market as all investors will get the shares at the same price. Some of the major drawbacks are as following: * In case of over subscription, the shares are allotted in proportionate basis. Thus, small investors hardly get any allotment in such a case. * Money is locked for a long time and the shares are allotted after a few days where as in case of purchase from the secondary market the shares are credited within three working days. 43

There are several strategies, methods or tools in the assessment of IPOs. There is no best strategy and investment in an IPO should be viewed on a case-to-case basis. The popular investment strategies are as follow:1. Buy and Hold: This is the most conservative and most fish patient way to trade stocks. But it may also be the most efficient. Investors simply choose quality IPOs or blue chip stocks and hold them for many years. Long-term investors dont worry about market fluctuations because they figure that their stocks will have time to recover from a down market. The investor believes that in the long run the company will outperform the market as the fundamentals of the company is sound. He also saves on broker commissions because he isnt paying for frequent transactions. Drawback of this strategy is that choosing the right time to sell investments can be tricky. One can counter this problem somewhat by knowing in advance when he will need the money.

2. Short-term Trading: This method is a favorite for people looking to make a quick buck. Basically, it involves applying for the IPO and then swiftly selling stocks on the listing day to capitalize on volatile market. Day traders can win or lose a fortune in a single day. The problem with short-term trading is that over-all investor is bound to lose money in the long run. Many investors new to the stock-picking scene believe that there is some infallible strategy that, once followed, will guarantee success. But it is not so and there is no foolproof system for picking stocks! 44

LEARN BEFORE YOU LEAP INTO THE IPO MART

An investor needs to be careful while investing in IPOs. In the world of IPO investing, the most critical aspect is to read up as much as you can about the issue. Do not treat the abridged prospectus as just an application form. However badly designed and difficult it may be to read, the prospectus is still a treasure-trove of information.

An investor who is considering a leap into the IPO market must go through the following list of dos and don'ts.

Check out...

1. The promoters' background: This is by far the most important element. However good the product, technology or market, it is the promoters who run the company. Find out about their track record, their other interests, performance of other group companies and the relationship between these companies.

2. The company's balance sheet: If you want to be an investor, it's time to start reading and understanding a balance sheet. Pay attention to the top-line and the bottom-line, major variances; but most importantly, consider carefully the extraordinary items and notes to accounts. It's quite possible for a company to derive its revenues not from its main business, but from smart accounting entries.

45

3. Risk factors: Though risk factors are not very clearly spelt out, a careful reading would still give enough information of the downsides. Try to do an impact analysis of the critical risk factors.

4. Shareholding pattern: It is important to know who the major shareholders of the company are and what their shareholding pattern will be after the issue. A huge promoter stake is not too desirable. If a company has institutional investors as its shareholders, it means that a lot of due diligence has already been done on the company. Try to find out at what prices these pre-issue allotments have been made, and to whom and when.

5. Value, not price or par: An offering at the face value of Rs. 10 is not necessarily cheap. The "par value" system often gives you the impression that no premium is being charged. But it's possible that such issues may not even be worth the par value; in such cases, the par pricing could actually mean an inherent premium. Also, beware of another malaise: of some companies who offer shares by reducing par value to make their offer prices look more attractive.

7. The issue objective and corporate actions: You certainly couldn't have forgotten the huge incidence of "vanishing" companies which, in fact, were cases of "vanishing" funds. It is important to find what the company plans to do with the issue funds. Is the issue for general corporate purposes, or to finance a new project or for an expansion/diversification project? Or is it for retiring debt? Look carefully at all corporate actions like dividends, bonus issues and mergers/acquisitions. 46

8. Compliance record and litigations: Find out whether group companies have been diligent in filing their returns to various bodies such as the stock exchanges and registrar of companies. The prospectus will disclose all major litigation cases filed against the company's directors and promoters, as well as against group companies. Avoid companies that are deeply mired in litigations.

9. Dues and disciplinary action: Check for outstanding dues and defaults to lenders and depositors. Indian promoters do have a reputation for defaulting, many times "willfully". It is also important to see if there have been any disciplinary actions taken by SEBI, stock exchanges and other regulatory body against the company or its directors/promoters.

10. Underwriters and investment bankers: Underwriters add to the issue's strength. An underwritten issue today does not denote weakness requiring an underwriting support, it shows that there are intermediaries who after assessing the risks have decided to back the issue. Also, before investing in an issue, look at the names of its investment bankers and check out their past track record.

Don't be guided by 1. Market prospects: Any prospectus will describe the market potential in superlative terms. Do not be misled by those numbers mentioned in the offer document.

2. The brands or corporate image: First of all, remember that you are investing in the company, not in a brand. A company may have a hugely popular brand, but may be 47

bleeding financially. Moreover, a high-flying company may still be a risky or losing proposition if its issue has been aggressively priced.

3. Hype or loose talk: In buoyant times, the capital market is frequently the subject of discussion at parties. Do not be influenced by this. Besides, there may also be tones of uninformed advice that will come to you from friends and relatives.

4. Greed: Do not bet your last penny on new issues. Do not borrow money or sell other assets or worse, divert your business funds into new issues.

5. SEBI approval: The approval of an IPO by the markets regulator is not a certificate of good quality. Most guidelines are very straight-jacketed. It's all too easy for companies to comply with these guidelines, at least on paper, if not in spirit.

An investor must remember that equity, by its very nature, is a risk-laden instrument: it is because of this very fact it holds the promise of higher rewards. Is should not be misconstrued as "guaranteed return products". You can only minimise your risks, and that can be done by sticking to good companies.

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INVESTOR DECISIONS IN PRIMARY MARKET

The responses given by the investors in the part I of questionnaire designed for the survey, decisions taken by the individuals for investing in primary market, are summarized as below.

49

1. The decision based on, investment in listed companies with good current market price, received the following responses:

Weights given 1.00 (least agree) 2.00 (some what agree) 3.00 (agree moderately) 4.00 (agree to a great extent) 5.00 (strongly agree) Total

No. of respondents 17 10 16 20 37 100

Percentage 17.0 10.0 16.0 20.0 37.0 100.0

17% 37% 10% 1.00 2.00 3.00 4.00 5.00 16% 20%

Interpretation - From the 73 (73%) responses generated for weights 3, 4 and 5, indicate that the investors agree that current market price is an important indicator before investing in new issues. 50

2. The decision of investment based on advice from the broker, received the following responses:

Weights given 1.00 (least agree) 2.00 (some what agree) 3.00 (agree moderately) 4.00 (agree to a great extent) 5.00 (strongly agree) Total

No. of respondents 31 18 27 13 11 100

Percentage 31.0 18.0 27.0 13.0 11.0 100.0

11% 13% 31% 1.00 2.00 3.00 4.00 5.00 27% 18%

Interpretation - The responses generated for the weights 3, 4 and 5 indicate that 51 (51%) of investors depend on the investment advice from the broker for investing in primary market. 51

3. Personal analysis is the self-evaluation of the information contained in the offer document by the investors. The decision of investment based on personal analysis generated the following responses:

Weights given 1.00 (least agree) 2.00 (some what agree) 3.00 (agree moderately) 4.00 (agree to a great extent) 5.00 (strongly agree) Total

No. of respondents 8 12 17 23 40 100

Percentage 8.0 12.0 17.0 23.0 40 100.0

8% 12% 40% 1.00 2.00 3.00 4.00 5.00 17% 23%

Interpretation- The 80 (80%) responses generated for weights 3, 4 and 5 together indicate that investors do personal analysis of the offer document before investing in the issue. 52

4. The distribution of investors who may sell shares after allotment is made is as given below:

Weights given 1.00 (least agree) 2.00 (some what agree) 3.00 (agree moderately) 4.00 (agree to a great extent) 5.00 (strongly agree) Total

No. of respondents 27 13 23 18 19 100

Percentage 27.0 13.0 23.0 18.0 19.0 100.0

19%

27% 1.00 2.00 3.00 4.00

18% 13% 23%

5.00

Interpretation - 60 respondents (60%), have indicated that they may sell shares after allotment in the primary market issues.

53

5. The distribution of investors, using analysts recommendations, privately circulated, published or broadcasted is given as below:

Weights given 1.00 (least agree) 2.00 (some what agree) 3.00 (agree moderately) 4.00 (agree to a great extent) 5.00 (strongly agree) Total

No. of respondents 17 12 23 26 22 100

Percentage 17.0 12.0 23.0 26.0 22.0 100.0

22%

17% 12% 1.00 2.00 3.00 4.00 5.00

26% 23%

Interpretation- The responses generated for the weights 3, 4 and 5 together indicate that 71 respondents (71%) use analyst recommendations for the investment decisions in the primary market investments.

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FACTORS AFFECTING PRIMARY MARKET ISSUES

Respondents gave ranks from 1 (most important) to 7 (least important) on various factors affecting the primary market issues. These ranks were summarized and also tabulated according to the respondents responses.

1. Issue price

Ranks given to issue price by respondents:

1.0 32

2.0 21

3.0 17

4.0 11

5.0 6

6.0 5

7.0 8

Ranks given to issue price by respondents

35 30 25 20 15 10 5 0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 21 17 11 8 6 5 32

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Interpretation- 81 (81%) respondents gave issue price the first four ranks indicating that its an important factor affecting primary market situation. 2. Information availability

Ranks given by various respondents based on information availability are given as below:

1.0 21

2.0 20

3.0 17

4.0 14

5.0 16

6.0 6

7.0 6

Ranks iv n y vari s r spondents ased on information availability

25 21 20 15 10 6 5 0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 6 20 17 14 16

Interpretation- 72 (72%) respondents have indicated that they would rank information availability in the first four ranks. Thus, indicating that information availability is an important factor affecting primary market issues.

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3. Market price immediately after listing of securities and within the first week

The combined ranks given to market price after listing are given as below:

1.0 15

2.0 17

3.0 19

4.0 16

5.0 13

6.0 11

7.0 9

The co bined ranks given to listing

20 18 16 14 12 10 8 6 4 2 0 19 17 15 16

arket price after

13 11 9

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Interpretation - 67 (67%) respondents gave market price after listing as an important factor affecting primary market condition based on the first four ranks assigned by them.

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4. Liquidity after listing

The ranks given by respondents for liquidity after listing are as below:

1.0 11

2.0 13

3.0 17

4.0 17

5.0 20

6.0 11

7.0 11

Ranks given by respondents for liquidity after listing

25 20 20 15 11 10 5 0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 13 11 11 17 17

Interpretation- 58 (58%) respondents gave first 4 ranks to liquidity after listing as a factor affecting primary market.

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5. Secondary market situation

The rankings given by respondents to secondary market situation as a factor affecting primary market are as given below:

1.0 14

2.0 18

3.0 16

4.0 15

5.0 15

6.0 11

7.0 11

The rankings given by respondents to secondary arket situation

20 18 16 14 12 10 8 6 4 2 0 18 16 14 15 15 11 11

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Interpretation - 63 (63%) respondents ranked secondary market in the first four ranks, as a factor affecting primary market.

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6. Lead managers image

The ranks given by the respondents to lead managers image as a factor affecting primary market situation are as below:

1.0 8

2.0 14

3.0 14

4.0 16

5.0 13

6.0 17

7.0 18

The ranks given by the respondents to lead anagers i age

20 18 16 14 12 10 8 6 4 2 0 16 14 14 13 17 18

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Interpretation - The first four ranks were given to lead managers image by 52 (52%) respondents.

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7. Regulatory environment

The ranks given by the respondents to the regulatory environment, as a factor affecting primary market, are given as below:

1.0 11

2.0 11

3.0 12

4.0 10

5.0 14

6.0 20

7.0 22

The ranks given by the respondents to the regulatory environ ent

25 20 20 15 11 10 5 0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 11 14 12 10 22

Interpretation - 44 (44%) respondents to regulatory environment gave the top four ranks. 56(56%) respondents gave the last three ranks to the regulatory environment as a factor affecting primary market situation

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FINDINGS:
In the first part of the study, the decisions taken by small investors while investing in equity primary markets were studied. The decisions studied were investment in listed companies with good current market price, investment based on the advice from the broker, personal analysis of the offer document, selling shares after allotment and using analysts recommendations in investment decisions. The following information was found during first phase of study:

1. 73% of investors indicated that current market price is important. 2. 51% investors use investment advice from the broker. 3. 80% of the investors do personal analysis of the offer document before investing. 4. 60% indicated that they may sell shares after allotment. 5. 71% investors use analysts recommendations in the investment decisions.

This indicates the importance given to current market price, personal analysis and analysts recommendations.

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In the second part of the study, factors affecting primary market situation are studied. These factors are issue price, information availability, market price after listing, liquidity after listing, secondary market situation, lead managers image and regulatory environment. The following information was found during the second phase of study:

1. The issue price emerges as one of the important factor affecting primary market issues with 81% of respondents giving first four ranks to issue price. 2. 72% respondents gave first four ranks to information availability as a factor affecting primary market situation. 3. 67% of respondents gave market price after listing as an important factor affecting primary market condition.

4. 58% respondents gave liquidity as a factor affecting primary market condition. 5. 63% of the respondents ranked secondary market situation as an important factor affecting primary market situation. 6. 52% of the respondents ranked lead managers image as an important factor affecting primary market situation. 7. 44% of the respondents ranked regulatory environment as an important factor affecting primary market situation.

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RECOMMENDATIONS

1. INFORMATION RELATED MEASURES i. ii. iii. iv. v. vi. Latest and easy availability of information Public information should be available Education of investors Transparency in the system Improve awareness of investors in the primary market Sensitive information should be made available to everyone at the same time

2. SCANDALS i. ii. iii. iv. No scandals Regulation to control scandals Prevent corporate frauds Bogus companies not to be allowed to raise funds

3. PROMOTERS i. ii. iii. iv. v. Strict action against cheaters Moral character of Board of Directors to be checked Only experienced promoters should be allowed More transparency in activities Dishonest promoters not to be allowed to raise funds 64

vi.

Disclosure of loans taken from various sources

4. PUBLIC i. ii. iii. More active investor associations to be provided Public consciousness development is important Understanding the riskiness associated with investment in shares

5. RELATIONSHIP WITH SHAREHOLDERS i. ii. iii. iv. Provide better service Investors to have a say in decision making process Better communication between top management and shareholders Shareholders interest to be considered while companies take decisions

6. REGULATIONS i. ii. iii. iv. Tighter regulations Stable companies allowed to enter market Market price control Companies with good image of disclosures only to be allowed

7. GOVERNMENT i. ii. Improve infrastructure Improve economic condition

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iii. iv. v.

Abolish taxes on investment in shares Promote and attract investors Consumer friendly enactments are necessary

8. INTERMEDIARIES i. ii. iii. iv. Improve faith in brokers Honesty and fair dealing in brokers should be encouraged Lower brokerage Improve relationships with customers

10. MARKETS i. ii. iii. iv. v. vi. vii. Improve trust of small investors Transparency of markets Volatility to be checked Better IPO Grading mechanism Market vigilance is important Proper audit of exchanges should take place Liquidity should be improved

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QUESTIONNAIRE

Dear respondent, your valuable time and effort in filling this questionnaire are highly appreciated. The information collected through this questionnaire will be used for academic purpose only.

Personal details: Name: ________________________ Occupation: ____________________ Age: _______

PART I: Decisions. Given below are some of the decisions taken by the individuals for investing in primary market. If you strongly agree put a tick () under 5 and if you least agree put a tick () under 1. Points 2, 3 and 4 refer to various levels of agreement starting from somewhat agree, agree moderately and agree to a great extent. Please tick relevant box as per your choice. I request you to tick only one box per decision.

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Decision 1. I invest in primary market issues of listed companies with good current market price.

[ ] [ ] [ ] [ ] [ ]

2. Investment decision is based on advice from the broker.

[ ] [ ] [ ] [ ] [ ]

3. I invest in shares based on personal analysis.

[ ] [ ] [ ] [ ] [ ]

4. I sell shares after allotment.

[ ] [ ] [ ] [ ] [ ]

5. I use analysts recommendations either privately circulated, published or broadcasted.

[ ] [ ] [ ] [ ] [ ]

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Part 2: Factors affecting equity primary market issues. Please rank the following factors in the order of decreasing importance, 1 highest and 7 lowest.

Factors a. Issue price b. Information availability c. Market price immediately after listing d. Liquidity after listing e. Secondary market situation f. Lead managers image g. Regulatory environment

Rank ____ ____ ____ ____ ____ ____ ____

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Part 3: Revival measures What important measures need to be undertaken to strengthen primary market situation? a. _______________________________________________________ b. _______________________________________________________ c. _______________________________________________________ d. _______________________________________________________ e. _______________________________________________________

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BOOKS:
Bhalla V. K., Security Analysis And Portfolio Management, 8th Edition, S. Chand & Company Ltd. Chandra Prasanna, Investment Analysis And Portfolio Mangement, 2nd Edition, TMH Publishing Company Limited. Pandey I. M., Financial Management, 9th Edition, Vikas Publishing House Pvt. Ltd.

NEWSPAPERS:
Who will protect the small investor, Economic Times, 11th July, 2003 Who cares for small investors?, Economic Times, 10th Jan, 2005 Small investors don't get share of pie, Asian Age, 5th Feb, 2006 SEBI moves to protect small investors, The Hindu 18 March, 2004

INTERNET: http://www.nseindia.com http://www.sebi.gov.in http://www.investor.sebi.gov.in http://www.bseindia.com http://www.religare.in www.google.com www.wikipedia.org http://investopedia.com 71

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