Documente Academic
Documente Profesional
Documente Cultură
Name: - KAMBLE SOHAN Enrollment No: Name of the Guide: - Mr. NIKIL PATEL
DECLARATION
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submitted for the Degree of Master In Management Studies is my original work and the project has not formed the basis for the award of any degree, diploma, associate ship, fellowship or similar other titles. It has not been submitted to any other university or Institution for the award of any degree or diploma .
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ACKNOWLEDGEMENT
It is with real pleasure that, I record my indebtedness to my academic Guide, Mr. Nikil Patel for his counsel and guidance during the preparation of this project. I am grateful to Centre Head Mr. Praveen mohitkar
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CERTIFICATE
Certified that the project is a work done by Mr. Sohan Kamble during the period of his study under my guidance, and that the project has not previously formed the basis for the award of any degree, diploma, associates hip, fellowship or similar other titles and that it is an independent work done by his .
Place: Date:
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TABLE OF CONTENT
Chapter Content Page No.
(1)
Introduction
1.1 Initial public offering (IPO)
09-42
10-23
10-12 13-15 16-17 18-19 20-23
y y y y y
What is IPO? Reasons for Listing IPO Market in india IPO Allotment Status IPO Procedure
24-25 26-30
y y y y
1.4 Hypothesis
Past/ Present/ Future of IPO What are the Critical Areas to Focus
31-38
31-34 35-38
39-40
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1.6 Methodology
41-42
41 42
y y
(2)
43-54
44-51 52-54
(3)
55-71
56-58 59-71
72-74 75-76
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Table No.
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48 50 58
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Table No.
Page No.
Different Kind of Issue How To Listing An IPO IPO Process Book Building Process IPO Returns Global IPO Activity Global IPO Activity by Indust. Top Ten IPO in US
11 13 15 23 40 44 46 51
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Chapter (1)
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Part-1.1
INITIAL PUBLIC OFFERING (IPO)
Initial public offering (IPO), also referred to simply as a "public offering", is when a company issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand , but can also be done by large privately-owned companies looking to become publicly traded. In an IPO, the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offeri ng price and time to bring it to market.Initial Public Offering (IPO) in India means the selling of the shares of a company, for the first time, to the public in the country's capital markets. This is done by giving to the public, shares that are either owned by the promoters of the company or by issuing new shares. 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 them selves. 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
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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 comp any'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 makes 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
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IPOs can be a risky investment. For the indivi dual investor, it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a tra nsitory growth period, and they are therefore subject to additional uncertainty regarding their future value
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The existing shareholders will see their shareholdings dilu ted as a proportion of the company's shares. However, they hope that the capital investment will make their shareholdings more valuable in absolute terms. In addition, once a company is listed, it will be able to issue further shares via a rights issue, thereby again providing itself with capital for expansion without incurring any debt. This regular ability to raise large amounts of capital from the general market, rather than having to seek and negotiate with individual investors, is a key incentive for many companies seeking to list.
Liquidity: The shares once traded have an a ssigned market value and can be resold. This is extremely helpful as the company provides the employees with stock incentive packages and the investors are provided with the option of trading their shares for a price.
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Val ati
company and sets a standard. This works in favor of the company as it is helpful in case the company is looking for acquisition or merger. It also provides the share holders of the company with the present value of the shares.
Increased wealth: The founders of the companies have an affinity towards IPO as it can increase the wealth of the company, without dividing the authority as in case of partnership.
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evident from the trend of the resources of the primary capital market which includes rights issues, public issues, private placements and overseas issues. 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 s oftware stocks.
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India, the main governing body that determines such eligibility criteria and the IPO Allotment Status is the Securities and Exchange Board of India (SEBI).
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IPO - PROCEDURE
IPOs generally involve one or more investment banks as "underwriters." The company offering its shares, called the "issuer," enters a contract with a lead underwriter to sell its shares to the public. The underwriter then approaches investors with offers to sell these shares. The sale (that is, the allocation and pricing) of shares in an IPO may take several forms. Common methods include:
y Best efforts contract y Firm commitment contract y All-or-none contract y Bought deal y Dutch auction y Self distribution of stock
A large IPO is usually underwritten by a "syndicate" of investment banks led by one or more major investment banks (lead underwriter). Upon selling the shares, the underwriters keep a commission based on a percentage of the value of the shares sold. Usually, the lead underwriters, i.e. the underwriters selling the largest proportions of the IPO, take the highest commissions up to 8% in some cases. Multinational IPOs may have as many as three syndicates to deal with differing legal requirements in both the issuer's domestic market and other regions. For example, an issuer based in the E.U. may be represented by the main selli ng
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syndicate in its domestic market, Europe, in addition to separate syndicates or selling groups for US/Canada and for Asia. Usually, the lead underwriter in the main selling group is also the lead bank in the other selling groups. Because of the wide array of legal requirements, IPOs typically involve one or more law firms with major practices in securities law, such as the Magic Circle firms of London and the white shoe firms of New York City. Usually, the offering will include the issuance of new shares, intended to raise new capital, as well the secondary sale of existing shares. However, certain regulatory restrictions and restrictions imposed by the lead underwriter are often placed on the sale of existing shares. Public offerings are primarily sold to institutional investors, but some shares are also allocated to the underwriters' retail investors. A broker selling shares of a public offering to his clients is paid through a sales credit ins tead of a commission. The client pays no commission to purchase the shares of a public offering; the purchase price simply includes the built -in sales credit. The issuer usually allows the underwriters an option to increase the size of the offering by up to 15% under certain circumstance known as the green shoe or over allotment option. The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it
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determine what type of security to issue (common or preferred), the best offering
1000
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Part 1.2
OBJECTIVES AND ROLE OF IPO
To get the knowledge of IPO. To analyze the returns of IPOs which were issued in the 1st quarter of 2007. To know the return of those IPOs for 1 month, 3 months, 6 months, and 1 year. To know the market rate of return for the same period. To know the procedure for calculating the Standard Deviation, calculating Sharpes Ratio & the abnormal return. Spread awareness about this process. Find out the companies which like to adopt this tech nique. Find out the factors which influence the IPO Listing Process. What the companies are looking from Open New IPOs in India? Analysis between Share Holder and IPO Companies Analysis of IPOs post/present/future Prospects Analysis of Auction, Pricing, Issued Price and Reverse IPOs.
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Part 1.3
ADVANTAGES & DRAWBACKS OF IPO
The Advantages of IPO are numerous. The companies are launching more and more IPOs to raise funds which are utilized for undertakings various projects including expansion plans. The Advantages of IPO is the primary factor for the immense growth of the same in the last few yea rs. The IPO or the initial public offering is a term used to describe the first sale of the shares to the public by any company. All types of companies with the idea of enhancing growth launch IPOs to generate funds to cater the requirements of capital for expansion, acquiring of capital instruments, undertaking new projects.
utilizing in various corporate operational purposes like acq uisitions, mergers, working capital, research and development, expanding plant and equipment and marketing.
Liquidity: The shares once traded have an assigned market value and
can be resold. This is extremely helpful as the company provides the employees
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with stock incentive packages and the investors are provided with the option of trading their shares for a price.
Valuation: The public trading of the shares determines a value for the
company and sets a standard. This works in favor of the company as it is helpful in case the company is looking for acquisition or merger. It also provides the share holders of the company with the present value of the shares.
towards IPO as it can increase the wealth of the company, without dividing the authority as in case of partnership .
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Drawbacks of IPOs
It is true that IPO raises huge capital for the issuing company. But, in order to launch an Initial Public Offering (IPO), it is also necessary to make certain investments. Setting up an IPO does not always lead to an improvement in the economic performance of the company. A continuing expenditure has to be incurred after the setting up of an IPO by the parent company. A lot of expenses have to be incurre d in the form of legal fees, printing costs and accounting fees, which are connected to the registering of an IPO. Such expenses might cost hundreds of US dollars. Apart from such enormous costs, there are other factors as well that should be taken into consideration by the company while introducing an IPO. Such factors include the rules and regulations involved to set up public offerings and this entire process on the other hand involve a number of complexities which sometime require the services of expert s in relevant fields. Some companies hire experts to do the needful to ensure a hassle -free execution of the task. After the IPO is introduced, the expenses become a routine in every activity involved. Besides, the CEO of the company would have to spend a lot of time in handling the SEC regulations or sometimes he hires experts to do the same. All these aspects, if not handled with efficiency, prove to be some major drawbacks related to the launch of IPOs. The launch of IPO also brings about shareholders of the company. Shareholders have ownership in the company. The primary owners of the company or the
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people holding maximum authority in the company cannot take decisions all by themselves once an IPO has been launched and shareholders have been formed. The shareholders have an active participation in every decision that is being taken even if they do not hold 50 percent share of the company. They have their individual demands to be met as they own a certain percentage of stakes in the company. The SEC regulations require notifications from the shareholders of the company, meetings, and also approvals from them while making important business decisions. A major risk with shareholders is that, they can sell off their stocks any time they want, in case they see the price band of the stakes of that company is going down. This will lead to a further drop of the value of shares in the market which in turn will decrease the overall value of the company.
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India Inc's fund raising via IPO in 2008 dips to 3-yr low- The Economic
Time
India Inc raises over Rs 45,000 cr in IPOs, follow-ons in 2007- The Hindu
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Part 1.4
PAST/ PRESENT/ FUTURE OF IPO
Indias rapid economic growth, robust corporate profit stability, and a four year bull run on Bombays Stock Exchange (BSE), continue to fuel India s strong IPO markets. Keen investor interest in Indias strong growth story has been real acted in the attractive valuations and key price/earnings multiples garnered by Indian companies, says R. Balanchine, IPO Leader, Strategic Growth Markets, Ernst & Young India. In 2006, Indias markets launched 78 IPOs and raised US$7.23 billion. Currently, Indias exchanges rank eighth in the world for numbers of IPOs and value in 2006. Despite a May 2006 market tumble that erased more than US$100 billion in valu e in the BSE and sparked concerns that the four -year Indian stock rally was over, Indian IPO activity quickly resumed its upward momentum. In 2006, Indias IPO market has been fairly broad-based, although energy companies dominated with more than 50% share of funds raised. In 2006, Indias largest IPO was petroleum rife nine company, Reliance Petroleum, which raised US$1.8 billion, followed by the oil production and exploration company, Cairn Energy, which raised US$1.3 billion. Real estate IPOs also generated stellar returns for investors.
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In the United States, during the dot -com bubble of the late 1990s, many venture capital driven companies were started, and seeking to cash in on the bull market, quickly offered IPOs. Usually, stock price spiraled upwa rds as soon as a company went public. Investors sought to get in at the ground-level of the next potential Microsoft and Netscape. Initial founders could often become overnight millionaires, and due to generous stock options, employees could make a great d eal of money as well. The majority of IPOs could be found on the NASDAQ stock exchange, which lists companies related to computer and information technology. However, in spite of the large amounts of financial resources made available to relatively young and untested firms (often in multiple rounds of financing), the vast majority of them rapidly entered cash crisis. Crisis was particularly likely in the case of firms where the founding team liquidated a substantial portion of their stake in the firm at or soon after the IPO (Mudambi and Treichel, 2005). This phenomenon was not limited to the United States. In Japan, for example, a similar situation occurred. Some companies were operated in a similar way in that their only goal was to have an IPO. Some stock exchanges were set up for those companies, such as Osaka Securities Exchange. Perhaps the clearest bubbles in the history of hot IPO markets were in 1929, when closed-end fund IPOs sold at enormous premiums to net asset value, and in 1989, when closed-end country fund IPOs sold at enormous premiums to net asset value. What makes these bubbles so clear is the ability to compare market
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prices for shares in the closed-end funds to the value of the shares in the funds' portfolios. When market prices are multiples of the underlying value, bubbles are likely to be occurring.
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Assuming a major hike in the Indian IPOs, the government has confirmed the opening of the Oil India IPO by March 2008. The IPO of Oil India Limited has been reported to raise Rs.1500 crores and will hit the capital market in March 2008.
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SEBI GUIDELINES
Filing of prospectus:
Prospectus to be filed with SEBI through Merchant Banker At least 30 days < filing with ROC SEBI may suggest changes < 30 days SEBI to consider only after approval from St.Ex
y Issuer is obligated y SEBI is not obligated
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Dematerialization of shares:
Agreement with Depository Present shares also to be in demat public may opt either physical or demat shares
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and IDFC
IPO Grading:
y No IPO unless; (as on the date of filing the prospectus with ROC): y Grading for IPO has been obtained from at least one agency y Grading and the rationale have been included in the prospectus
y
y No IPO, if there are any shares partly paid up as on the date of IPO y The Shares to be fully paid up or forfeited
Price Band:
y Price Band to be 20% y Max price can be 20% above the floor price y Board of directors may be authorized to fix the price
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Denomination of shares
y Denomination of the shares is not restricted y In case the issue price is <Rs.500, the Face Value shall be Rs.10/ y The Face Value may be less, where the issue price is Rs.500 or more y Full disclosure of the face value in offer document
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Part 1.5
More often than not, the pricing of any IPO is what influences the decision of any investor. The rating agencies, in this case, will not talk about ``what price'' and ``what time'' aspects of the offer. Given that the decision to invest or avoid investments in any IPO is most often a function of the pricing, the lack of this aspect in the present IPO grading system could make the whole process an unfinished task. Also, rating agencies (experienced in debt rating) could face trouble with rating the equities, which, unlike debt rating, is more dynamic and cannot be standardized. Further, IPO gra ding mechanism is a globally-unique initiative; it could increase the cost of raising capital in India and urge companies to seek capital overseas. Markets, in the short term, can be price -driven and not purely motivated by company fundamentals. That is to say that, at times, even good companies at a higher price could be a bad investment choice, while the not -as-good ones could be a steal at lower prices. Despite having disclaimers, a higher graded IPO may well tempt small investors into falsely believing that a high premium would come about on listing. Similarly, investors may get deluded by a low -graded IPO, which could become a `missed opportunity' in the future. The purpose of introducing grading, thus, might get defeated if it leads to a false sense of buoyancy or alarm among investors.
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Till such time the utility of the IPO grading system is unraveled, it is advisable for investors to use the grades only as an additional input to make an informed decision. Investors need to be convinced about the bu siness potential, pricing and valuations of an IPO, together with the grading, to make a final choice.
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Part 1.6
SOURCE OF DATA
Datas are the useful information or any forms of document designed in a systematic and standardize manner which are used for some further
proceedings. One of the important tools for conducting marketing research is the availability of necessary and useful data. Some time the data are available readily in one form or the other and some time the data are collected afr esh. The sources of Data fall under two categories, Primary Source and Secondary Sources.
Primary Dataactivities:
Filled the IPO Industry related questionnaire to managers of a select group of companies And Paper Conversation
Secondary Data- the secondary data was collected through the following:
Online Research material of the Various Financial Institution directly or indirectly involved with IPO, Secondary Data used in External Source of Information Like internet, magazine, paper cutting.
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OTHER SOURCE
Information Sources Information has been sourced from namely, books, newspapers, trade journals, and white papers, industry portals, government agencies, trade associations, monitoring industry news and developments, and through access to access to more than 3000 paid databases.
Analysis Method The analysis methods include the following: Ratio Analysis, Historical Trend Analysis, Linear Regression Analysis using software tools, Judgmental Forecasting and Cause and Effect Analysis etc.
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Chapter (2)
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Part 2.1
GLOBAL IPO MARKET
Accelerated globalization of capital continues to drive the record -setting world IPO markets of 20062007. Around the world, companies, investors, and stock exchanges think and act much more globally, often looking outside
past 18 months, key IPO trends refl ect the effects of globalization: flourishing stock
markets awash in liquidity, vibrant growth in the emerging markets, escalating rivalry between the worlds stock exchanges, the rise of more world -class financial centers, the boom in large listings on local exchanges, and the proliferation of capital-raising options, especially private equitys emergence as a key player behind so many large IPOs. In 2007, globalizing capital and a surge in IPO ready companies worldwide are broadening the horizons of the worlds financial markets
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GREATER CHINA
KEY TRENDS:
y Greater Chinas IPO markets launched mega IPOs in 2006, with larger
under Rule 144A. Driven by yet another year of rapid economic growth and robust secondary markets in 2006, Greater Chinas IPO market soared to an all-time high, with US$56.6 billion raised in 175 offerings. With conspicuous success, the Hong Kong Stock Exchange (HKSE) hosted privatizations of Chinas two largest state-owned banks including the worlds largest IPO ever, the Industrial and Commercial Bank of China (ICBC) with US$21.9 billion raised, and the second largest offering, Bank of China (BOC) which raised US$11 billion. The ICBC issuance was also the first time in China that shares were dual -listed.
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INDIA
KEY TRENDS:
y The strength of Indias economy, stock market, corporate profits, energy
exits.
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EUROPE
KEY TRENDS:
y Europes IPO markets rose to an all-time high in 2006, and remain high-fl
years in
y 2007 bolstered by beefy deals, cross-border listings in London, and private
equity.
y As the regions high-growth story, Russia drives European IPO activity. y London has become the top listings destination for cross -border issuers
AlterNet, and Deutsche Broses Entry Standard, are thriving with smallcap activity.
y The ballooning growth in European private equity is leading to more IPO
exits, and sizeable public-to-private transactions. Europes steady economic expansion, attractive stock prices relative to US peers, low interest rates, and vigorous secondary stock markets galvanized its IPO markets in 2006 and 2007. For the second year in a row, Europes exchanges attracted the most cross-border listings, especially Russian companies listing in London. Another key source of capital in Europe has been the large private equity firms.
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MIDDLE EAST
KEY TRENDS:
y After three years of record growth, most Middle East markets endured
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CIS/RUSSIA
KEY TRENDS:
y Russian IPO markets fl ourish in 2006 and 2007, particularly in the
in London.
y Russian companies face uncertainty ahead with 2008 presidential elections,
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AUSTRALIA
KEY TRENDS:
y Rising commodity prices and demand from Asia fuel thriving resources
months. As Australian stock markets rise for the fourth year in a row, Australias stable economy, record corporate profi ts and booming resources sector have led to an extraordinarily active IPO market. In 2006, Australia launched 173 IPOs, raising US$4.2 billion, with many listings in the resources and energy sector. The largest Australian IPO of 2006 was explosives maker Dyno Nobel worth US$800 million.
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UNITED STATES
KEY TRENDS:
y Robust US markets garner the highest number of IPOs in 2006 and
grow more liquid and better regulated. In the past 18 months, the vitality of the US stock market has whet investor appetite for risk, and spurred US-domiciled IPO numbers to record heights. Although some market watchers blame US regulations for the rise in non-US cross-border issuances, globalization of capital may be the primary force behind the trend as it has lead to stronger, more liquid, competitive markets worldwide. For a truly global company, a US listing is still seen as the gold standard with access to the deepest pool of strategic advantages. capital, a valuation premium, and
Part 2.2
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Various companies issuing upcoming IPOs in India as on 3rd December, 2008 are:
y
UTI Asset Management Company Ltd whose lead manager is Sbicap Securities Ltd.
y y
Madhana Industries Ltd whose lead manager is Edelweiss Securities Ltd. Pipavav Shipyard Ltd whose lead manager is Citigroup Global Markets India Pvt. Ltd.
Mahindra Holidays & Resorts India Ltd whose lead manager is HSBC Securities And Capital Markets India Pvt. Ltd.
y y
Gammon Infrastructure Projects Ltd whose lead manager is Sharekhan Ltd. Resurgere Mines & Minerals India Ltd whose lead manager is Motilal Oswal Securities Ltd.
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National Hydroelectric Power Corporation Ltd whose lead manager is Enam Securities Pvt. Ltd.
y y y y
Kiridyes and Chemicals Ltd whose lead manager is Centrum Capital Ltd. Neel Metal Products Ltd whose lead manager is ICICI Securities Ltd. Jhaveri Flexo India Ltd whose lead manager is SREI Capital Markets Ltd. Gokul Refoils And Solvent Ltd whose lead manager is Intensive Fiscal Services Pvt. Ltd.
y y
Pride Hotels Ltd. whose lead manager is Edelweiss Securities Ltd. Oil India Ltd. whose lead manager is Citigroup Global Markets India Pvt, Ltd.
Man Infraconstruction Ltd. whose lead manager is Kotak Mahindra Capital Company Ltd.
y y y y y y
Oswal Wollen Mills Ltd. whose lead manager is UTI Bank Ltd. TCG Lifesciences whose lead manager is Enam Securities Pvt . Ltd. Uma Precision Ltd. whose lead manager is Karvy Stock Broking Ltd. Future Ventures India Ltd. whose lead manager is Enam Securities Ltd. Alkali Metals Ltd. whose lead manager is Religare Securities Ltd. Multi Commodity Exchange India Ltd. whose l ead manager is JM Morgan Stanley Financial Services Pvt. Ltd.
y y
Cox & Kings (India) Ltd. whose lead manager is Enam Securities Ltd. Jaiprakash Power Ventures Ltd whose lead manager is Enam Securities Ltd.
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Aishwarya Telecom Ltd. whose lead manager is SREI Capital Markets Ltd.
y y y
ACME Tele Power Ltd. whose lead manager is Kotak Securities Ltd. RNS Infrastructure Ltd. whose lead manager is ICICI Securities Ltd. Midvalley Entertainment Ltd. whose lead manager is Religare Securities Ltd.
Ramsarup Lohh Udyog Ltd. whose lead manager is Microsec Capital Ltd. Edserv Soft at 20% lower circuit, witnesses 45 bulk deals Bharat Oman Refineries defers IPO Edserv witnesses 188 bulk deals, India Max sells 4 lk shrs Edserv IPO: Will 50% allotment to QIBs affect stock ahead? See FY09, FY10 EPS at Rs 15/sh: Edserv Softsystems EdServ Softsystems ends with 129% premium EdServ Softsystems lists at issue price of Rs 60 EdServ Softsystems to list on March 2 Crisil finds weak corporate governance structure in IPO cos BSNL\'s IPO plans still on cards: Scindia ING Vysya pays Rs 4 lakh to settle IPO case
y y y y y y y y y y y
Chapter (3)
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Part 3.1
LATEST NEWS IN IPO SECTOR
The IPO market in India has been growing at a massive pace for the past few years. With the advent of some leading IPOs in India, the country has become the largest IPO market across the globe so far. India has saved almost USD 3.3 billion proceeds in the global IPO market from eight deals of late. As has been estimated by Thomson Financial, the biggest contributor to these deals has been the USD 3 billion IPO of Reliance Power. The second largest IPO in India is Emaar MGF which is a USD 1.6 billion IPO. Emaar MGF has revised the price range for the Equity shares. Initially it was Rs 540 -630 per share which now costs Rs 530-630 per share. A report by Thomson Financial states that India has occupied 49.1 percent of the global IPO proceeds in the current year 2008 as compared to 3.7 percent in the year 2007. The global IPO market has deteriorated by 36.1 percent during the past one year.
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ONGC mulls IPO for Rs 12,440 cr plant, gives 19% stake to GAIL
ONGC is planning an initial public offering of its subsidiary, which is building Rs 12,440 crore petrochemical plant at Dahej in 2011, even as it agreed to give state gas utility GAIL India a 19 per cent stake in the mega project.
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Part 3.2
MAJOR PLAYER OF IPO IN INDIA
Some of the leading IPOs in India include Reliance Power Limited IPO, Tulsi Extrusions Limited IPO, Onmobile Global Limited IPO, EMAAR MGF IPO, Future Capital Holdings Limited IPO and many more. All these IPOs have opened their subscriptions in 2008. India has saved almost 3.3 billion proceeds in the global IPO market through eight deals which has made it the largest IPO market across the globe. Reliance Power IPO has been the biggest contributor in this regard The Initial Public Offering (IPO) is defined as the first set of stocks that are sold out by a company to the public in order to seek an expansion of the capital. The IPO is usually set up by the smaller or newly emerging companies but the large scale companies also go for it in order to become public ly traded. The issuer is faced with important considerations like the security of the issue, price band offered for the same and the time for sale. It is a risky affair for any individual investor as he or she does not have any clue regarding the performan ce of the shares on the first day of sale.
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Reliance Power Limited. Reliance Power IPO was issued on 15th January, 2008 and closed on 18th January, 2008. Reliance Power Limited Company is planning to generate capital worth Rs. 11, 700 crores through the IPO. This makes it the largest IPO in the country as on 17th January, 2008. The price band of the equity shares of Reliance Power IPO has been fixed at Rs. 405- 450 per equity share. The total size of Reliance Power IPO is around 26 crores equity shares. Reliance Power IPO will be listed on the National Stock Exchange (NSE) and also on the Bombay Stock Exchange (BSE). The lead bankers of Reliance Power IPO are Enam Securities, Kotak Mahindra Capital Co, ABN Amro Rothschild, ICICI Securities, JP Morgan Chase & Co, UBS AG and Deutsche Bank AG. The main objective of Reliance Power IPO is that the proceeds from the issue will be used to fund the power generation projects that the company plans to carry out.
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BGR Energy System (India) Ltd. is engaged in the business of producing and selling different kinds of equipments, services and systems for power, refinery, gas & oil, and petrochemical industries .BGR Energy IPO was issued on 5th December, 2007 and closed on 12th December, 2007. The total size of BGR Energy IPO is 9,136,000 equity shares of Rs. 10 each. Out of the total number of equity shares around 500,000 has been reserved for the employees of the company and about 8,636,000 have been issued to the public. The price band of BGR Energy IPO has been fixed between Rs. 425 and Rs. 480. BGR Energy IPO was listed on the National Stock Exchange (NSE) and also on the Bombay Stock Exchange (B SE). The registrar of BGR Energy IPO was Intime Spectrum Registry Ltd. The lead managers of BGR Energy IPO were CLSA India, SBI Capital Markets, UBS Securities India, and Kotak Mahindra Capital. The minimum order quantity for BGR Energy IPO was fourteen sh ares. The maximum amount for subscription in BGR Energy IPO for the retail investor was Rs. 100,000.
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year 2006, for the purpose of expanding the company and setting up theater screens in different locations. The Cinemax India IPO was launched with the purpose of utilizing the funds for meeting the requirements of the capital expenditure of establishing 19 new theater screens throughout the country, at an estimated cost of Rs 110.69 crores. The proceeds from the IPO would also be used for the general corporate purposes which include acquisitions.Cinemax India has filed its red herring prospectus with the Securities and Exchange Board of India (SEBI). Some the places where the Cinemax India is planning to set up theaters are Kolkata, Pune, Guwahati, Nasik, Panipat, Hyderabad, Ahmedabad, Siliguri, Bangalore, Indore, Nagpur, Faridabad, Ghaziabad, Ludhiana and Mumbai. Cinemax India is one of the leading exhibition theater chains in India. It is operating in several locations throughout the country. All together in the year 2006 it had 33 screens in 10 different locations. Cinemax India is a part of the Kanakia Group. In the year 2006, the total annual income was Rs 438.60 million and the net profit was Rs 67.64 mill ion.
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2007 a week after the opening of the DLF IPO. ICICI Bank raised Rs. 10,000 crores from investors from its Initial Public Offerings (IPO). ICICI Bank's domestic issue is part of a USD 5 billion capital raising program. ICICI IPO offered discount rates to its retail investors. The subscriptions of ICICI IPO closed on 22nd June 2007. One of the chief focuses of ICICI IPO was to generate interest among the retail investors keeping in view the prevailing market price of around Rs. 903. The ICICI Bank IPO has reportedly crossed the expected subscription amount by 10.5 times. The public offerings of the bank were subscribed by 11.5 times. ICICI Bank has planned up to elevate another USD 2.5 billion from the issue of American Depository Receipts. ICICI Bank has also decided to raise money by selling off the shares of its investment company for insurance business. This selling off of shares of the investment company of ICICI Bank will be cleared by RBI and IRDA. In 2007, ICICI Bank has got the approval from the Foreign Investment Promotion Board (FIPB) to sell up to 24 percent equity in the ICICI investment company. The international investors will be endowed with 5 percent equity from ICICI Bank. The bank has also deci ded for a shifting of its assets in other subsidiaries namely ICICI Prudential Life Insurance, ICICI Lombard General Insurance and ICICI Prudential Asset Management.
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1907 as a part of the Swadeshi Movement in I ndia. Indian Bank IPO was issued in February 2007, almost 100 years after the bank was established. The issue of Indian Bank IPO was opened on 5th February, 2007 and closed on 9th February 2007. The size of the Initial Public Offering (IPO) of Indian Bank was 85,950,000 equity shares. It was done through 100 percent book building and had a face value of Rs.10. The retail segment was given 23,206,500. The price range varied from Rs.77 to Rs.91 and the tick size was Re.1. The minimum number of shares to be pu rchased was kept at 75. The retail investors were given the maximum subscription amount of Rs.100,000. The total size of Indian Bank IPO was estimated to be around Rs.782 crores.
Indian Bank has more than 22,000 employees . The Indian Bank has 1411 branches spread all across the country. Indian Bank offers diversified banking services and has three subsidiary companies. The foreign branches of Indian Bank are set up in Singapore and Colombo
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Kingfisher till date has not launched any IPO, but has expressed its wish to
launch one soon. This IPO would be used to fund its aggressive expansion plans in India. The accumulated corpus would be utilized to fund its airline business and to payoff debt for its acquired liquor company Shaw Wallace & Company. The brand Kingfisher is being owned by the business conglomerate United Breweries Group. The brand is being used for two business entities - Airlines and Alcoholic Beverage. The Airlines operates under the name of "Kingfisher Airlines" and the alcoholic beverage segment manufactures "Beer" and "Mineral Water" under the same brand name. Till now the company has not launched any IPO to fund its aggressive expansion plans, but plans to launch it in near future to raise capital. Dr Vijay Mallya is the Chairman and CEO of both the segments. The Chief of the United Breweries Holding Ltd (UBHL), Mr Vijay Mallaya, said that the group would come up with an Initial Public Offering in 2008 and would raise a total corpus of US$ 400 million. The Initial Public Offering of the Kingfisher Airlines would target a corpus of US$ 200 million and the rest would be raised thro ugh the IPO of the liquor business.Kingfisher Airline IPO, to be issued for the first time in the year 2008, to finance the airline's expansion and funding of A380s air fleet.
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the company in order to fulfill various objectives such as to meet the company's requirement for working capital and to purchase equipments.KNR Constructions Ltd. was incorporated in 1995 and the company is engaged in the business of infrastructure project development. The company provides services of construction, engineering and procurement for various sectors like irrigation, highways & roads, and management of the infrastructure of urban water. As on 30th June 2007, KNR Constructions Ltd. had around twenty four projects in the various states of India that included Assam, Tamil Nadu, Uttar Pradesh, Karnataka, Andhra Pradesh and Madhya Pradesh. The issue of KNR Constructions Ltd. IPO was opened on 24th January and closed on 29th January, 2008. The total number of shares issued by KNR Constructions Ltd for its KNR Constructions Ltd. IPO is 7,874,570 equity shares at the face value of about Rs. 10 each. The company plans to raise through KNR Constructions Ltd. IPO around Rs. 142 crores from the Indian capital market. KNR Constructions Ltd. IPO has been listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The lead manager of KNR Constructions Ltd. IPO is Axis Bank Limited. The registrar of KNR Constructions Ltd. IPO is Intime Spectrum Registry Limited.
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issued on 31st January, 2008 and it closed on 6th February, 2008. The various objectives of issuing Manjushree Extrusions Ltd IPO by the company were to use the proceeds to expand the operations of the company and also to meet t he requirement of the working capital. The lead manager of Manjushree Extrusions Ltd IPO was Centrum Capital Limited. The registrar of Manjushree Extrusions Ltd IPO was Alpha Systems Private Limited and it was listed on the Bombay Stock Exchange (BSE). The total size of the equity share of Manjushree Extrusions Ltd IPO was around Rs. 23.07 crores. The face value of per equity share of Manjushree Extrusions Ltd IPO was Rs. 10. The maximum amount of subscription by the retail investor was around Rs. 100,000 in Manjushree Extrusions Ltd IPO. Manjushree Extrusions Ltd was incorporated on November 13th, 1987 and it is engaged in the production of plastic packaging items like containers and jars. Manjushree Extrusions Ltd manufactures products for multinational companies in various sectors like food processing, pharmaceutical, agrochemicals and FMCG. The net profit of Manjushree Extrusions Ltd came to Rs. 112.42 lacs in 2004 - 2005. In 2005- 2006 this figure stood at Rs. 137.11 lacs and in the following year, 2006-2007, this figure increased to Rs. 282.32 lacs.
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The Maruti IPO has set a price range of Rs. 125 per share above the Floor price of Rs. 115. The subscription for Maruti IPO opened on June 12, 2003 and closed on June 19, 2003. The response to Maruti IPO was overwhelming within the subscription period, which led to an over-subscription of the public offerings of Maruti by more than ten times. The government decided to shell out 85 percent shares of IPO to the noninstitutional investors and 15 percent shares to the non-institutional high networth individuals. Consequently, government would get Rs.993 crores for 7.94 crores shares. But SEBI recommended that 60 percent can be given to the institutional investors but at least 40 percent should be allotted for the retail investors as well. The government has allotted 60 percent shares to the retail investors and 40 percent shares to the institutional investors. The shares were allotted to the individuals on a pro rata basis. The IPO of Maruti is claimed to be one of the biggest capital market transactions in recent years in India and also the largest Book Built IPO that has been implanted in India till date. Maruti IPO received more than 300,000 applications which is a record in the history of IPO in India. The majority of applicants to these comprise of the Indian retail investors. They received the allotments on the basis of the price range already fi ed by the government. A huge number of institutional investors also paid a lot of importance in investing in Maruti.
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The subscription of Power Grid Corporation of India IPO was opened from
10th September 2007 to 13th September 2007. The price range of Power Grid Corporation of India IPO was between Rs. 44 and Rs. 52. The proceeds from Power Grid Corporation IPO were submitted to the National Investment Fund (NIF). Citigroup, Kotak and Enam were the lead managers for the Power Grid Corporation IPO. Karvy Computershare private limited was the registrar for the Power Grid Corporation IPO. In the year 2006, Power Grid Corporation of India Limited (PGCIL) reported a 28 percent jump in the net profit which amounted to Rs 1,009 crores. The company launched their IPO in 2007 and the subscription was opened from 10th September 2007 to 13th September 2007. The shares of the IPO of Power Grid Corporation of India had a price range of Rs. 44 to Rs. 52 per share. The funds raised from Power Grid Corporation IPO were submitted to the National Investment Fund (NIF). The lead managers of the IPO of Power Grid Corporation include Kotak, Citigroup and Enam. Power Grid Corporation of India (PGCIL) raised a capital of Rs 6,000 crores through the IPO. The proceeds from the IPO will be used to set up branches in almost 12 countries across the globe. A unit will be set up in China in order to provide consultancy services, accomplish several projects and operate transmission lines and grid network..
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the petrochemical segment of the legendary Indian business conglomerate, Reliance Industries Limited. The Mukesh Ambani led Reliance Petroleum Limited plans to expand its present petrochemical business. The pr ice band for the Reliance Petroleum IPO was fixed between Rs 57 and Rs 62 per equity share and it raised Rs 6,000 crores. The main purpose of launching the Reliance Petroleum IPO was to fund its refinery project, which would be operational by the end of 2 008. This refinery project of Reliance Petroleum would be an export oriented oil refinery in the special economic zone, annexed to its Jamnagar refinery in Gujarat. The said refinery would have a capacity of 580,000 barrels of crude oil per day. Further, it would also utilize a part of the accumulated fund for the setting -up of a polypropylene plant which would have a production capacity of 900,000 tons per annum. The Reliance Petroleum IPO was launched on 13th April 2006 and the bidding was closed on 20th April. The price band for the Reliance Petroleum IPO was fixed between Rs 57 and Rs 62 per equity share. This Initial Public Offering of the Reliance Petroleum raised Rs 6,000 crores. The Reliance Petroleum IPO issued 45 crores equity shares and raised Rs 2,790 crores at the upper end of the price band. The Reliance Petroleum IPO was very popular amongst retail investors, Petroleum IPO .
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(TSL) which is engaged in taking up turnkey projects in the systems of bulk material handling. The total size of the issue of Techpro Systems IPO will be around Rs. 250 crores approximately. Techpro Systems IPO will be launched by the company Techpro Systems (TSL) and the total size of the issue will be worth about Rs. 250 crores approximately. Techpro Systems (TSL) plans to enter the Indian capital market with its Techpro Systems IPO which will be a book built issue. Techpro Systems IPO will consist of 7,300,000 equity shares and it will comprise of around 22.33% of the paid- up post issue capital of Techpro Systems (TSL). The company has filed with SEBI its Draft Red Herring Prospectus in order to issue Techpro Systems IPO. The lead arrangers of Techpro Systems IPO are SBI and Kotak. Techpro Systems IPO is expected to be issued in the last week of January, 2008. Techpro Systems IPO will ensure that the company will have enough funds to take up developmental work and also to expand its operations. Techpro Systems (TSL) is engaged in undertaking projects of turnkey in systems bulk material handling that includes handling raw material systems for cement plants, power, and steel. Techpro Systems (TSL) manufactures various equipments like feeders, crushers, and screens and it also sets up conveyor systems.
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Chapter (4)
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MAJOR FINDINGS
y It can be observed that out of 24 companies, only 10 companies have given
for 1 month.
y As far as 3 months & 6 months returns are concerned, 15 companies have
year.
y Market return indicates that, 11 companies had given positive return for 1
month.
y months Market rate of return was positive for 21 companies. y Market return was positive for 6 months for all 24 companies. y For 1 year, all 24 companies were able to give positive returns. y Only 5 companies were able to give positive returns for all the periods. y If date of listing is concerned then, ICRA Ltd offered highest rate of return
at 143.41%.
y Highest rate of return was offered by ICRA Ltd. For one month and 3
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y S.D. was lowest for Oriental Trimex Limited at 2.14, 1.62, 2.55, 3.88 for
at 131.39
y For 1 year, Orbit Corporation Limited had highest S.D. at 225.71%. y Also, Orbit Corporation Limited has offered highest return for 6 month and
1 year.
Conclusion
IPO is used by a company to raise its funds. The extra amount obtained from public may be invested in the development o f the company, although it costs a little to a company but it gives a way to get more money for long term investments.
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Chapter (5)
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Special Thanks to: Wikipedia, the free encyclopedia.htm http://www.google.com http://www.economywatch.com/business -and-financial/IPO-industry http://www.fibre2fashion.com/IPO-article
Grading of IPOs- The Hindu Business Line Biggest IPO in Indias -Capital market History Business management article Business News Newswire Global_IPO_Trends_2007 -Report by Ernst & Young India IPO, IPOs India News Market News - Economic Times
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