Koti Project

8/6/2019 Koti Project

1/74

1. INTRODUCTION

IPO is the issues of shares by the companies when they want to go sfor

public for the huge amount of investment into the purpose of the company for achieving

the desired objective. The word IPO stands for Initial Public Offer and this is unique in

more ways than one since it permanently changes the profile of a company and the way

the promoters and the management need to think thereafter. The study on Assessment of

Investor risk in in IPO is concerned with to find investor risk prevailing in public

offerings.

MEANING:

Initial public offering (IPO), also referred to simply as a "public offering" or

"flotation," 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 offering

price and time to bring it to market.

1.1 NEED FOR THE STUDY

This study is useful to the investors in taking decisions relating to investments

in IPO.

Study about the IPO process which involves various procedures,

Requirements and need for the company for making an IPO.

The process made through the analysis of success and failure of various IPOs

makes clear about the investment decisions for the investor.

This study facilitates to know the growth of economy through IPOs for last

two decades.

1.1 OBJECTIVES OF THE STUDY

1


2/74

To know the number of IPO s in India and the funds generated by them since

2001.

To know the types of investors for selected IPOs.

To analyze the risk & return involved in each selected IPOs by using variance and

standard deviation.

To analyze the pre issue and post issue financial performance of each company.

To study the stock performance of selected 6 companies .

1.1 LIMITATIONS OF THE STUDY

Although initial public offers are issued by many companies, this study is

confined to a few companies only.

The project duration is not enough to get the thorough knowledge of IPO.

Because of time limitation the study consists of last three years data to compare

the IPO performance.

Due to confidentiality it is difficult to get in-depth data.

The project is prepared in limitation to the availability of data.

The study is restricted only to find out and compare risk and return of selected

companies.

INITIAL PUBLIC OFFERING

An initial public offering is the point at which a company ceases to be privately

held and becomes publicly held and IPO requires that a company become listed on a

stock exchange, and that its shares become publicity traded.

DEFINITION:

Abbreviation for Initial Public Offering. An IPO is a companys first sale of

stock to the public; also refer to as going to the public.

1


3/74

The flotation of private company on the stock exchange.

Companies fall into two broad categories:

private company

public companyPRIVATE COMPANY:

A privately held company has fewer shareholders and its owners don't

have to disclose much information about the company. Anybody can go out and

incorporate a company. It usually isn't possible to buy shares in a private company. We

can approach the owners about investing but they are not obligated to sell us anything.

PUBLIC COMPANY:

Public companies, on the other hand, have sold at least a portion of

themselves to the public and trade on a stock exchange. This is why doing an IPO is also

referred to as "going public."

Public companies have thousands of shareholders and are subject to strict

rules and regulations. They must have a board of directors and they must report financial

information every quarter. In the United States, public companies report to the Securities

and Exchange Commission (SEC). In other countries, public companies are overseen by

governing bodies similar to the SEC. From an investor's standpoint, the most exciting

thing about a public company is that the stock is traded in the open market, like any other

commodity.

REASONS FOR GOING TO THE PUBLIC:

Raising funds to finance capital expenditure programs like expansion,

diversification, modernization, etc.

Financing of increased working capital requirements.

Financing acquisitions like a manufacturing unit, brand acquisitions, tender offers

for shares of another firm etc.

Debit financing.

2


4/74

SIGNIFICANCE OF IPO:

SIGNIFICANCE TO THE COMPANY:

The costs of an initial public offering are small as compared to the costs of

borrowing large sums of money for ten years or more.

The capital raised never has to be repaid.

When a company sells its stock publicly, there is also the possibility for

appreciation of the share price due to market factors not directly related to the

company.

It allows a company to tap a wide pool of investors to provide it with large

volumes of capital for future growth.

SIGNIFICANCE TO THE SHAREHOLDERS:

The investors often see IPO as an easy way to make money.

One of the most attractive features of an IPO is that the shares offered are usually

priced very low and the companys stock prices can increase significantly during

the day the shares are offered.

The speculative investors are interested only in the short-term potential rather

than long-term gains.

BENEFITS THROUGH IPO:

Money non-refundable except in the case of winding up or buy back of shares.

No financial burden i.e. no fixed rate of interest payable. However, in order to

service the equity, dividend may be paid. Enhances shareholders value of the company performs well.

Greater transferability.

Training and listing of securities at stock exchanges.

Better liquidity of shares.

Enables valuation of the company.

1


5/74

Helps building reputation of promoters, company data products/services, provided

the company performs well.

LIMITATIONS OF IPO:

Dilution of ownership stake makes the company potential vulnerable for future

takeovers.

Involves substantial expenses ranging between 4% and 15% of the size of the

issue.

Several legal formalities.

Transparency requirements and public disclosure of information may lead to lack

of the privacy.

Continuous compliance of provisions of listing agreement and other legal

requirements.

Constant scrutiny of performance by investors.

May lead to takeover of company.

Securities of the company may be made subjective to speculative attacks.

There is no mandatory requirement of minimum promoters contribution

and lock in period in case of issues of securities by a company, which has been listed for

last three year track record of dividend payment, out of preceding five years. However,

promoters have disclosed the extent of their participation in the public/right issue.

Similarly in case of companies issues, that is, right-cum-public issues, differential pricing

is permissible, a justification for which must be given in the offer document. All

companies are required to convert their partly paid up shares into fully paid-up or forfeit

the same before making a public / rights issues.

FUNCTIONARIES OF IPO:

1


6/74

The functionaries in IPO are those concerned with the formation of joint

stock companies and the issue of their securities to the public. Public issue is essentially

an exercise involving active participation of number agencies.

The promoter, as a principal representative of the company, which is

making the public issue, should be clear in his mind about the number of agencies

involved and their respective roles in the entire exercise so as to be able to coordinate

effectively the efforts of these agencies.

These functionaries are:

PROMOTER:

The promoter is defined as a person (or persons, as the case may be) who

is in over-all control of the company, is instrumental in the formulation of a plan or

programme pursuant to which the securities are offered to the public and who is named in

the prospectus as promoter.

2


7/74

Promoter group includes the promoter, an immediate relative of the promoter

(i.e. spouse of that person, or any parent, brother, sister or child of the person or of the

spouse).

MANAGERS TO THE ISSUE:

Lead managers are independent financial institutions appointed by the

company going public. Companies appoint more than one lead manager to manage big

IPOs.They are known as book running lead manager and co book running lead

managers.

Their main responsibilities are to initiate the IPO processing, help

company in road shows, creating Draft offer document and get it approved by SEBI and

stock exchanges and helps the companies to list shares at stock market.

REGISTRAR:

Registrar of a public issue is a prime body in processing IPOs. They are independent

financial institutions registered with SEBI and stock exchanges.

GOVERNMENT STATUTORY /AGENCIES:

The various regulatory bodies related with the public issue are:

Securities Exchange Board of India

Registrar of companies

Reserve Bank of India (if the project involves foreign investment)

Stock Exchange where the issue is going to be listed

Industrial licensing authorities

BANKERS:

Bankers to the issue have the responsibility of collecting the application

money along with the application form. The bankers to the issue generally charge

commission besides the brokerage, if any. Depending upon the size of the public issue

more than one banker to the issue is appointed.

3


8/74

ADVERTISING AGENCY:

Advertising plays a key role in promoting the public issue. Hence, the past

track record of the advertising agency is studied carefully the issue. The advertising

agencies take the responsibility of giving publicity to the issue on the suitable media. The

media may be newspapers/ magazines/ hoardings/press release or a combination of all.

BROKER:

Any member of any recognized stock exchange can be appointed as broker to

the issue. Appointment of broker to the issue is not mandatory as per SEBI guidelines.

FINANCIAL INSTITUTIONS:

Financial institutions generally underwrite the issue and lend term loans to

the companies. Hence, normally they go through the draft of prospectus, study the

proposed program for public issue and approve them. IDBI, IFCI & ICICI, LIC, GIC and

UTI are the some of the financial institutions.

ISSUES IN PRIMARY MARKET

FINANCIALS OF IPOs

Primarily, issues can be classified as a Public, Rights or preferential issues

(also known as private placements). While public and rights issues involve a detailed

procedure, private placements or preferential issues are relatively simpler. The

classification of issues is illustrated below.

Public issues can be further classified into Initial Public offerings and further

public offerings. In a public offering, the issuer makes an offer for new investors to enter

its shareholding family. The issuer company makes detailed disclosures as per the DIP

guidelines in its offer document and offers it for subscription. The significant features and

figure are showed below.

2


9/74

1

Issues


10/74

2

Private Placement


11/74

PUBLIC ISSUES: INITIAL PUBLIC OFFERING (IPO):

An Initial Public Offering(IPO) is when an unlisted company makes

either a fresh issue of securities or an offer for 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.

FOLLOW ON PUBLIC OFFERING (FPO):

AFollow on Public Offering(FPO) is when an already listed company

makes either a fresh issue of securities to the public or an offer for sale to the public,

through an offer document. An offer for sale in such scenario is allowed only if it is made

to satisfy listing or continuous listing obligations.

RIGHT ISSUES:

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.

3

PreferentialIssue

Private Placement

Follow on Public OfferingsInitial Public Offerings

QualifiedInstitutionsPlacement


12/74

PRIVATE PLACEMENT:

Private placementis an issue of shares or of convertible securities by a

company to a selected group of persons under Section 81 of the Companies Act, 1956

that is neither a rights issue nor a public issue. This is a faster way for a company to raise

equity capital.

PREFERENTIAL ISSUES:

A preferential issue is an issue of shares or of convertible securities bylisted 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. The issuer company has to comply with the Companies Act and

the requirements contained in Chapter pertaining to preferential allotment in SEBI (DIP)

guidelines which inter-alias include pricing, disclosures in notice etc.

QUALIFIED INSTITUTIONAL BUYERS(QIB):

A qualified institutions placement is a private placement of equity sharesor securities convertible into equity shares by a listed company to Qualified Institutions

Buyers

2


13/74

RISK ASSESSMENT

The possibility of buying stock in a promising start-up company and finding

the next success story has intrigued many investors. But before taking the big step, it is

essential to understand some of the challenges, basic risks and potential rewards

associated with investing in an IPO.

This has made Risk Assessment an important part of Investment Analysis.

Higher the desired returns, higher would be the risk involved. Therefore, a thorough

analysis of risk associated with the investment should be done before any consideration.

For investing in an IPO, it is essential not only to know about the working of

an IPO, but we also need to know about the company in which we are planning to invest.

Hence, it is imperative to know:

The fundamentals of the business

The policies and the objectives of the business

Their products and services

Their competitors

Their share in the current market

The scope of their issue being successful

It would be highly risky to invest without having this basic knowledge about

the company. Here are 3 kinds of risks involved in investing in IPO:

2


14/74

BUSINESS RISK:

It is important to note whether the company has sound business and management

policies, which are consistent with the standard norms. Researching business risk involves

examining the business model of the company.

FINANCIAL RISK :

Is this company solvent with sufficient capital to suffer short-term business setbacks? The

liquidity position of the company also needs to be considered. Researching financial risk

involves examining the corporation's financial statements, capital structure, and other

financial data.

MARKET RISK :

It would beneficial to check out the demand for the IPO in the market, i.e., the appeal of

the IPO to other investors in the market. Hence, researching market risk involves

examining the appeal of the corporation to current and future market conditions.

ELIGIBILITY NORMS, PRICING & STRUCTURING OFAN IPO

ELIGIBILITY NORMS FOR MAKING THESE ISSUES

2


15/74

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. The main entry norms for companies making a public issue (IPO or FPO)

are summarized as under:

ENTRY NORM I (EN 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

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

as under:

ENTRY NORM II (EN 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 (EN 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.

2


16/74

In addition to satisfying the aforesaid eligibility norms, the company shall also satisfy the

criteria of having at least 1000 prospective allotters in its issue

CATEGORY OF ENTITIES WHICH ARE EXEMPTED 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.

OTHER IMPORTANT ISSUE REQUIREMENTS:

All new issues shall be in dematerialized form can also be made through online

interface following the necessary guide lines.

The minimum application size shall be worth Rs. 2000. The maximum size of an

application can be equal to the net public offer.

In an offer for sale, the entire subscription amount shall be brought in at the time

of application.

If there are calls on shares, they should be completed within 12 months of the

issue.

Over-subscription of a maximum of 10% of the net offer to public can be

retained.

Buy back arrangements can be made with a minimum period of 6 months and for

a maximum of 1000 shares per allot tee.

2


17/74

Issues should be opened within 365 days from the date of SEBI approval or after

21 days of filing with SEBI.

IPO shall be kept open for a min of 3 days and max of 10 working days.

THE STOCK EXCHANGE LISTING AGREEMENT:

Compliance with the stock exchanges listing guide lines under its

listing agreement is also important in order to be able to seek listing of shares

pursuant to an IPO.

The conditions for listing shares by an unlisted company pursuant to an IPO on the

BSE are listed below:

1. New companies can be listed on the exchange, if their issued and subscribed

equity capital after the public issue is equal to or more than Rs. 10 crore. In

addition to this, the company should have a post-issue net worth of Rs.20

crore.

2. For new companies in high technology sectors, the following criteria will be

applicable.

a. The total income/sales from the main activity should not be less than 75%of the total income during the two preceding years.

b. The minimum post-issue paid-up capital should be Rs.5 crore.

c. The minimum market capitalization should be Rs.50 cores.

d. Post-issue net worth of Rs.20 crore.

THE CONDITIONS FOR LISTING ON THE NSE ARE GIVEN

BELOW:

1. New companies can be listed on the exchange, if issued and subscribed capital after the

issue is equal to or more than Rs. 10 crores and post-issue net worth of Rs. 20 crores.

2. For new companies in knowledge based industries, the applicable capital criterion is

Rs. 5 crore with a minimum market capitalization of Rs. 50 crore. The total income/sales

1


18/74

should not be less than 75% of the total income during the immediately two preceding

years.

3. The applicant company should have a track record of three years of existence. If the

applicant is promoted by another company, that company should have the minimum

stipulated existence.

4. The application for listing in the case of an IPO shall be made within 6 months of the

closure of the issue.

5. The project should have been appraised by specified agencies such as the all India

financial institutions.

ISSUE PRICING

The Securities and Exchange Board of India (SEBI) introduced free pricing

of shares for public offerings in 1992. As per the current guide lines (Disclosure and

Investor Protection guide lines 2000), every company either unlisted or listed, which is

eligible to make a public issue can freely price its shares.

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.

There are two types of issues one where company and LM fix a price (called fixed price)

and other, where the company and LM stipulate a floor price or a price band and leave it

to market forces to determine the final price (price discovery through book building

process).

Pricing issue is done keeping in mind the qualitative features, and by

using selective multiples as benchmarks than through the conventional approach of thediscounted cash flow method. The usual parameters used are the Price to Earnings Ratio

and Price to Book value Ratio. In addition to the above, the following points have to be

kept in mind:

Projected earnings of the company cannot be used as a justification for the issue

price in the offer document.

2


19/74

The accounting ratios should be calculated after giving effect to the consequent

increase in capital on account of compulsory conversions outstanding, as well to

subscribe for additional capital shall be exercised.

Comparison of all the accounting ratios of the issuer company as mentioned

above has to be made with the industry average and with the other companies.

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.

BOOK BUILDING METHOD OF IPO:Book Building is basically a capital issuance process used in Initial

Public Offer (IPO) which aids price and demand discovery. It is a process used for

marketing a public offer of equity shares of a company. It is a mechanism where, during

the period for which the book for the IPO is open, bids are collected from investors at

various prices, which are above or equal to the floor price. The process aims at tapping

both wholesale and retail investors. The offer/issue price is then determined after the bid

closing date based on certain evaluation criteria.

APPLICABLE PROVISIONS FOR A BOOK BUILDING ISSUE:

In a book-built issue, reservation and firm allotment may be made only in respect of

permanent employees of the issuer company/promoting company and shareholders of the

promoting companies to the extent they permitted in the DIP guide lines.

The other allocation norms for a 100% and 75% book-built issue are as listed below:

Not more than 50% of the net public offer shall be allocated to QIBs.

Not less than 25% of the net public offer shall be allocated to non-institutional

bidders.

THE PROCESS:

1


20/74

The Issuer who is planning an IPO nominates a lead merchant banker as a 'book

runner'.

The Issuer specifies the number of securities to be issued and the price band for

orders.

The Issuer also appoints syndicate members with whom orders can be placed by

the investors.

Investors place their order with a syndicate member who inputs the orders into the

'electronic book'. This process is called 'bidding' and is similar to open auction.

A Book should remain open for a minimum of 5 days.

Bids cannot be entered less than the floor price.

Bids can be revised by the bidder before the issue closes.

On the close of the book building period the 'book runner evaluates the bids on

the basis of the evaluation criteria which may include -

Price Aggression

Investor quality

Earliness of bids, etc.

The book runner and the company conclude the final price at which it is willing to

issue the stock and allocation of securities.

Generally, the number of shares is fixed; the issue size gets frozen based on the

price per share discovered through the book building process.

Allocation of securities is made to the successful bidders.

Book Building is a good concept and represents a capital market which is in the

process of maturing.

1


21/74

DIFFERENCE BETWEEN SHARES OFFERED THROUGH BOOK

BUILDING AND OFFER OF SHARESTHROUGH NORMAL PUBLIC

ISSUE:

Features Fixed Price process Book Building processPricing Price at which the securities are

offered/allotted is known in

advance to the investor.

Price at which securities will be

offered/allotted is not known in advance to

the investor. Only an indicative price range is

known.

Demand Demand for the securities offered

is known only after the closure of

the issue

Demand for the securities offered can be

known everyday as the book is built.

Payment Payment if made at the time of

subscription wherein refund is

given after allocation.

Payment only after allocation.

ISSUE STRUCTURING

The issue structure refers to the following points

The face value of the share, the premium thereon and the final price. In book built

issues, the final price is not done until after the bidding is over, but a floor price is

determined.

The minimum amount of subscription per applicant and the maximum.

The terms of the issue with regard to payment of the offer price and eligibility

criteria for applicants.

Firm allotments if any and any other details thereof, as per applicable DIP guide

lines.

Net public offer.

Underwriting, either mandatory or discretionary.

1


22/74

Cost parameters for the issue and an acceptable issue budget.

THE ISSUE SIZE & STRUCTURE IS DETERMINED AS FOLLOWS:

The issue size = promoters quota+ firm allotments + net public offer.

Public offer = firm allotments + net public offer.

Net public offer = issue size promoters quota firm allotment.

ANANLYSING AN IPO INVESTMENT:

POTENTIAL INVESTORS AND THEIR OBJECTIVES:

The potential investors and their objectives could be categorized as:

INCOME INVESTOR:An income investor is the one who is looking for steadily rising profits that will

be distributed to shareholders regularly. For this, he needs to examine the

company's potential for profits and its dividend policy.

GROWTH INVESTOR:

A growth investor is the one who is looking for potential steady increase in

profits that are reinvested for further expansion. For this he needs to evaluate the

company's growth plan, earnings and potential for retained earnings.

SPECULATOR:

1


23/74

A speculator looks for short-term capital gains. For this he needs to look for

potential of an early market breakthrough or discovery that will send the price up

quickly with little care about a rapid decline.

DIMENSIONS IN DECISIONS INVOLVED IN MAKING AN

IPO

STRATEGIC DIMENSION:

Strategically speaking a company should go for an IPO only when it is

mature enough for it. This depends on the following points:

Does the company need the IPO as a liquidity event for its existing investors?

Has the company matured enough to unlock the value?

Is the companys business model retail-oriented with a strong brand presence so

as to identify with the retail investor?

Is the companys visibility in the market is sufficient enough for investors to

perceive its business model to the full extent and unlock value for its shareholders

through the IPO?

FINANCIAL DIMENSION:

The next dimension of the IPO decision is a financial one. In capital

intensive industries and large industries such as heavy engineering, automobiles,

infrastructure and some other industries the business model is so large that going public

could become inevitable in order to maintain balance in the capital structure. They would

require IPO and some multiple rounds of offers after IPO to keep financing their growth

and consolidation. Therefore, in such cases, IPO and public offers are more of financing

decisions than strategic.

The same is true of certain start-up businesses that need to look at an IPO more as a

source of finance than as a strategic move.

2


24/74

MERCHANT BANKING DIMENSION:

Merchant bankers take a call on the IPO proposal based on the

business plan and financial position of the company, expected future performance,

prevailing conditions in the primary market, expected issue pricing, size of the offer and

post issue capital structure. The key drivers for the merchant banker are the market

conditions, own placement strength and the main selling points in the issue. On the other

hand, if the promoters are bringing in additional contribution in the issue at the same

issue price, it adds to the marketability of the issue.

Timing is an important criterion in the IPO decision.

The IPO decision should be taken considering the strategic, financial and

merchant banking considerations.

For certain projects and business, going public is an imperative. In such cases, the

IPO should be structured to deliver the best results.

ROLE OF SEBI REGULATORY BODY

Up to 1992, the capital market was controlled by the controller of the capital issue

(CCI) formed under the capital issue controlled act. During that period, the

pricing of the capital issued was controlled by the CCI. The premium on issue ofthe equity shares issued through the primary markets was done in accordance with

the capital issued act.

The CCI guidelines were abolished with the introduction of securities &exchange

board of India (SEBI) formed under the SEBI act, 1992 with the prime objective

of protecting the interest of investors in securities, promoting the development

and regulating, the securities market and matters connected there with or

incidental there to.

The SEBI act came into force on 30 th January, 1992 and with its establishment, all

public issues are governed by the rules regulations issued by SEBI. SEBI was

formed to promote far dealing in issues of securities and to ensure that the capital

market functions efficiently, transparently economically in the interest of both the

issuer and the investors.

1


25/74

The promoters and investor must be protected from unethical practices and their

rights must be safeguarded so that there is a steadily flow of saving into the

market. There must be proper regulation and code of conduct and fair practice by

intermediaries to make them competitive and professional.

Since its formation, SEBI has been instrumental in brining grater transparency in

capital issues. Under the umbrella of SEBI, companies issuing shares are free to

fix the premium provided adequate disclosure is made in the offer document.

Focus being the greater investor protection, SEBI has become a vigilant

watchdog.

APPONTMENT OF MERCHANT BANKERS & OTHERINTERMEDIARIES:

Along with the Merchant Banker, other intermediaries are appoint

who are duly registered with the Board. The company first selects the Merchant

Banker(s) for handling the issue. The merchant Banker should have a valid SEBI

registration to be eligible for appointment. The criteria normally used in selection of the

Merchant Banker are:

Past track record in successfully handling similar issues.

Distribution network with institution and individual investors.

Trained manpower and skills for instrument designing and pricing.

General reputation the market.

Good rapport with other market intermediaries.

A Merchant Banker can associate with the issue in any of the following capacities:

Lead manager to the issue

Co-manager to the issue

Underwriter to issue

Advisor/consultant to the issue

SEBI has set certain limits on the maximum number of intermediaries

associated with the issue.

2


26/74

Size of the issue manager

Less than Rs 50 cr

Rs 50 cr to Rs 100 cr



Above Rs 400 cr

No of lead

2

3

4

5

No limit but subject to SEBI approval

The number of Co-Managers cannot exceed the number of Lead

Mangers appointed for that issue. There can be only one Advisor/Consultant to the issue.

There is no limit on the number of underwriters to the issue. There is no limit on the

number of underwriters to the issue. An associate company of the issuer company cannot

be appointed either as lead manager or CO-Manager to the issue. However they can be

appointed as underwriter or Advisor/ consultant to the issue. The other intermediaries

appointed are:

A. Registrar to the Issue

B. Bankers to the Issue

C. Debenture Trustees(if applicable)

D. Advertising Agencies

E. Printers of stationary

F. Underwriters to the IssueG. Brokers to the Issue

A.REGISTRAR TO THE ISSUE:

Registration with SEBI is mandatory for as Register and share Transfer

Agent. A category I Registrar can act as both Registrar to the issue and as a shareTransfer Agent. The minimum net worth requirement is Rs.6 lakhs for a category I

Registrar and Rs.3 lakh category II Registrar. In addition to net worth requirement, SEBI

also look at the infrastructure facilities before giving registration.

The promoter or director of the issuer company cannot act as a registrar to

the issue. If the number of applicants is more than the issuer company can appoint more

2


27/74

than one registrar registered with the board, in consultation with the Lead Merchant

Banker. The registrar is solely is responsible for the management of the issue

The Registrar provides administrative support to the issue process. The

company enters into an MOU with the Registrar to the Issue, which lays down the terms

and conditions of appointment. The main functions of the Registrar include.

Assist the Lead Manager in selection of the Bankers to the Issue and the

Collection Centers.

A. BANKERS TO THE ISSUE:

This was one capital market activity which lacked regulatory

clarity for a long time. The ambiguity arose, because it was unclear as to whether it was

RBI or SEBI which regulated public issue banking. An anomalous situation prevailed as

SEBI issued guidelines to the banks, while it had no means to ensure compliance of thesame. Though RBI had regulatory jurisdiction over the banks, compliance with the

provisions of the banking law and its own directives took precedence over enforcement

of SEBI guidelines. As a consequence, investors suffered from a spate of irregularities

involving refund orders, acceptance of late applications after the closure of issue,etc.

The banker to the issue also performs the fallowing functions:

Open the shares Application Money Account of the company. All the issue

proceeds are transferred only to this account. The company cannot withdraw

the money from this account till the entire process of allotment and is

completed. Refund of application money to unsuccessful applicants.

Acceptance of money payable on allotment and on calls.

A. DEBENTURE TRUSTEES:

The Debenture Trustees are required to obtain a Certificate of Registration

from SEBI. The SEBI (Debenture Trustee) Regulations,1993 provides for the following

responsibilities for the debenture trustees.

Call for periodical repots the company.

A. UNDERWRITERS TO THE ISSUE:

The SEBI (Underwriters) Rules, 1993 define underwriting as an

agreement, with or without conditions to subscribe to the securities of a body

2


28/74

corporate, when the existing shareholders of such body corporate or the, when the

existing shareholders of such body corporate or the public do not subscribe to the

securities offered to them.

SEBI registered Merchant Banker:

Members of any Stock Exchange and holding SEBI registration.

Registration as underwriter under SEBI (Underwriters) Rules, 1993.

E.BROKER TO THE ISSUE:

Any member of any recognized stock exchange can be appointed

as Broker to the Issue. Appointment of is not Broker to the Issue mandatory as per SEBI

guidelines. The information regarding the brokers to the issue and the rate of brokeragepayable is to be mentioned in the prospectus. The brokers often appoint sub-brokers to

assign them in their work. They share the

Brokerage earned with their sub-brokers. The main functions of the brokers to

the issue are:

Offer marketing support for the issue.

Providing for distribution of issue stationery at the retail investor level.

Disseminate information to the investors about the issue.

Extend underwriting support to the issue.

Provide advance market intelligence on the expected response to the issue.

F.ADVERTISING AGENCIES:

The success of many a public issue can be attributed to savvy

advertising campaign. The role of advertising agency is of crucial importance in

determining the fate of the issue. Based on their presentations and further consultations

with the lead manager, the advertising agency is selected. The main functions of the

advertising agency are as follows:

Devising of advertising and publicity strategy.

Designing and running the advertising campaign.

Designing the corporate brochure and publicity material.

Drafting and distribution of press releases.

2


29/74

Arranging press conference and road shows.

Maintaining media relations to ensure adequate press coverage for the issue.

PRE-ISSUE OBLIGATIONS:

The company selects the investment Banker(s) for handling the

issue. The lead merchant banker should maintain a standard of due diligence that

he would satisfy himself about all the aspects of offering, Veracity and adequacy

of disclosure in the offer documents. The merchant banker is also liable even after

the completion of issue process.

The following documents should be submitted along with the offer

document by the lead Manager:

Memorandum of understanding (MOU)

Inter-Allocation of Responsibilities

Due Diligence Certificate

Undertaking List of promoters Group

PROCEDURAL ASPECTS OF AN ISSUE:

1. The first task is to hold a Board Meeting to consider the proposal for a public

issue, authorize the managing director to do all tasks relating to this issue and

including expenses for the issue.

2. On the appointed day, the EGM is held and the shareholders pass a special

resolution under section 81(1A) of the companies Act authorizing the company to

make public issue.

3. Before embarking on an IPO, the first task is to identify the good merchant banker

who can be appointed as lead manager for the issue. The details of the companys

1


30/74

project or fund raising plan are discussed with the merchant banker. After the

discussion the company finalizes the appointment and enters into a memorandum

of understanding with the lead manager.

4. The LM immediately on being appointed starts a due diligence on the company.

Usually they go through the all documents and certificates and every relevant

information for the issue.

5. In parallel, the LM starts preparation of the draft prospectus or offer document.

All disclosure requirements and DIP guide lines have to be filled in.

6. The LM advises the company in the appointments of other intermediaries for the

issue. These are the registrar to the issue, bankers to the issue, the printer and

advertising agency. The registrar and bankers have to be registered with SEBI.

7. The LM also draws up the issue budget estimated to be spent on the issue. The

main components of these are fees for LM, underwriters, registrar and banker,

brokerage, postage, stationery, issue marketing expenses and statutory costs.

8. The draft prospectus is finalized by the LM in all respects in consultation with the

management and placed before the board of directors for the approval so that it

can be issued for filing. The draft prospectus has to be accompanied by the

memorandum of understanding signed by the LM with the company.

9. Simultaneously, the company has to make listing applications to all stock

exchanges where the shares are proposed to be listed accompanied by at least 10

copies of the draft prospectus. And that prospectus has to be made available to the

public by the LM. The LM should also obtain and furnish to SEBI, an in-principle

listing approval of the SE within 15 days of filing the draft offer documents with

them.

2


31/74

10. The company has to enter into a tripartite agreement with the registrar and all

depositories-(presently NSDL or CDSL) for offering the facility of offering the

shares on dematerialized mode. Investors have to be given the facility to receive

allotments through any one of the depositories or in physical mode according to

option.

11. Within 21 days, SEBI would come out with their observations on the prospectus.

The SE would also vet any changes to be made to the prospectus. The LM has to

file a certificate with SEBI that all amendments and suggestions made by the

SEBI have been incorporated in the offer document.

12. Once the draft prospectus is ready in its final form, a board meet has to be held to

approve the filing of the same with ROC after being signed by all the directors.

13. This filing should be accompanied by all the material contracts pertaining to the

issue and the company and all other documents listed in the prospectus.

14. The marketing of the issue is usually co-coordinated by the LM with the

advertising agency.

15. Advertisements are regulated by DIP guidelines and the rules of the stock

exchange.

16. The mandatory collection centers are finalized as per the SEBI guidelines in

consultation with the bankers and the LM.

17. The LM and the printer finalize the dispatch schedule to all SE, SEBI, collection

centers, investor associations, brokers and underwriters.

18. The marketing should be completed one week before the opening of the issue.

POST ISSUE OBLIGATIONS:

1


32/74

1. In issues wherein there is more than one LM, it is usual to entrust the entire post-

issue responsibility to one LM in inter-se allocation.

2. There are two reports that are required to be furnished to SEBI by the post-issue

LM in the case of an IPO in the retail route in the prescribed form

3. The main task of the post-issue LM is to coordinate the process of collection of

subscription figures from the bankers to the issue, processing of applications by

the registrar, dispatch of allotment letters and refund orders to all applicants with

in time.

4. The issue is to be closed on the earliest closing date; the LM should ensure that

issue is fully subscribed before announcing closure.

5. In the case of devolved issues, the LM shall ensure that the underwriters honor

their commitments within 60 days from the date of closure of issue.

6. The LM has to ensure that all issue proceeds are kept in separate bank accounts as

provided in the companies Act and the funds are released to the company only

after obtaining listing approvals from the respective stock exchanges.

7. The LM has to release an advertisement announcing the closure of the issue on

the last day.

8. The responsibility of finalizing the basis of allotment in a fair and proper manner

lies with the executive director of the designated stock exchange along with the

post-issue LM and the registrar.

9. The post issue LM shall ensure that the demat credit and refund orders to the allot

tees is completed within two working days after the basis of allotment is done.

10. The LM is responsible for following duties.

a. Refund of subscription money to all non-allot tees.

b. Refund of excess application money to all.

1


33/74

c. Attending to all investors grievances.

d. Sanction of listing and trading permission by the stock exchanges.

e. Filing of return of allotment with ROC.

3.1 INDUSTRY PROFILE

ABOUT INDIAN BROKERAGE INDUSTRY:

Indian brokerage industry dates back to 1850s, but started growing

strongly in the 1990s. After the creation of the regulatory body, the Securities Exchange

Board of India (SEBI) and incorporation of NSE. But competition is intense as there are

far too many brokers almost double the number of brokers in the US - competing for a

much smaller market. The market is extremely fragmented with the top 5 firms

accounting for only 14.6% of the turnover share during FY08.

The brokerage market is largely retail and the retail investors are

spread across the country (with majority from Mumbai). Online trading channels can play

an important part in catering to the regional spread and has indeed shown good growth

(30.6% CAGR in number of internet enabled brokerage firms, 71.1% CAGR in number

of customers and 49.7%CAGR in share of total traded value since 2003). However, retail

investors have shown an over whelming preference for non-delivery based trading

(70.8% of the total cash market turnover during FY08). Intra-day trading makes physical

distribution channel necessary .Because it offers high market data latency and proximity

to trading advice of the brokers/Other investors. Growth in the number of sub-broker

1


34/74

network reflects this (CAGR of 46.1%from 150 in 1993 to 44,074 in 2008) as expansion

of sub-brokerage network means less capital outgo for the brokers.

High competition has resulted in a steady compression of brokerage

commissions over the years and intensely since 2008 when Reliance Money, one of the

new entrants with a massive physical distribution network, dropped it to extremely low

levels. For a relatively young market, commissions are lower than even in the advanced

markets. In order to improve profitability, top firms have been consciously trying to

broaden their portfolio of services. But this is likely not to pay high dividends over the

short to medium term due to the economic, competitive and regulatory headwinds against

these service lines.

Likely recovery of trading turnover in FY10.

Further consolidation of the market share of the top 100 brokers. Possible

decline in the number of brokers but increase in the number of sub-brokers.

Rise in market share of Reliance Money but muted industry profitability in the

short and medium term.

Gain in FII market share by few of the top domestic brokerages. Their success is

likely to draw in other players into this segment. Technology is a key success

enabler for this client category and the overall electrification of the industry will

progress rapidly over the next few years.

2


35/74

INDIAN FINANCIAL SYSTEM:

3

INDIAN FINANCIAL SYSTEM

ney Market Capital Market

anizedor

Unorganizedsector

Sub market

Call moneymarket

Treasury billmarket

Commercial bill

Certificates ofde ostit

Governmentsecurities market

Industrialsecuritiesmarket

Gilt edgedsecuritiesmarket

Merchantbanking

leasing

Venturecapital

Mutualfunds

Developmentbanks

Financialservices

Primary/newissue market

Secondary

market

IDBI

IFCI

ICICI

UTI

factoring


36/74

FINANCIAL MARKET:

Financial Markets are place where financial instruments are made to

purchase or sell indirectly through intermediaries. This may be a physical location (like

the NYSE) or an electronic system (like NASDAQ). Much trading of stocks takes place

on an exchange still, corporate actions are outside an exchange, while any two companies

or people, for whatever reason, may agree to sell stock from the one to the other without

using an exchange.

Trading of currencies and bonds is largely on a bilateral basis, although

some bonds trade on a stock exchange, and people are building electronic systems for

these as well, similar to stock exchanges.

Financial markets can be domestic or they can be international.

TYPES OF FINANCIAL SYSTEM:

The financial markets can be divided into different subtypes:

A] Capital markets which consist of:

1] Stock markets, which provide financing through the issuance of shares or

common stock, and enable the subsequent trading thereof.

2] Bond markets, which provide financing through the issuance of bonds, and

enable the subsequent trading thereof.

B] Commodity markets, which facilitate the trading of commodities.

C] Money markets, which provide short term debt financing and investment.

2


37/74

INTRODUCTION OF IPO IN THE CONTEXT OF INDIAN

MARKET:

The Indian primary market has come a long way particularly in the

last decade after deregulation of the Indian economy in 1991-92. Both the primary and

secondary markets have had their fair share of reforms, structural cum policy changes

time to time. The most commendable being the dismantling of the Controller of Capital

Issues (CCI) and introduction of the free pricing mechanism. This changed the whole

facet of Initial Public.

Around 80 IPOs made its entry into stock market in this year,

which was never in the history of Indian capital market. Maximum number of issues

received enormous response from the investors. Coal India IPO which is raising around15,000 crores is making its entry into stock market in this October, it is considered to be

the largest IPO ever made in the Indian history. Many experts are viewing that its going

to change the Indian economic scenario.

Industries raises finance from capital markets through various instruments

like

1] Equity finance

2] Debt finance

IPOS comes under equity finance and debt finance. During the

last decade, more than a third of the increase in net assets of large firms in Chile, South

Korea, Malaysia, Mexico, Taiwan and Thailand has been secured through equity

issuance. This pattern contrasts sharply with that of the industrial countries, in which

equity financing during the same period has accounted for less than 5 percent of the

growth in net assets.

CHANGES IN THE CAPITAL MARKET:

Four sets of changes in the Indian capital market can be identified

which set the market of the twenty-first century different from what obtained earlier.

These can be categorized as follows:

1


38/74

1] Introduction of new institutions

2] Introduction of new instruments

3] Changes in administrative control and regulatory framework

4] Some recent initiatives

INTRODUCTION OF NEW INSTITUTIONS:

The composition of the Indian capital market has undergone a total

change. Till very recent times, Bombay Stock Exchange dominated the capital market in

India. The daily turnover on the Bombay Stock Exchange (BSE) alone exceeded the total

turnover of all other exchanges put together. The BSE with the monopolistic claw like

control over the market was posing a severe constraint on the spread and diversification

of the capital market culture. It was content with practicing non-transparent time and

resource consuming trading practices that failed to evoke confidence among new

investors, both in primary and secondary market. Its trading practices were becoming

somewhat totally out of tune with the ongoing communication revolution in India and

worldwide. In response to this, the most important are the OTCEI and NSE. What is more

important is that the NSE has worked as a catalyst of change for other exchanges, which

are introducing on-line trading systems.

Along with NSE, mutual funds have also emerged in the country.

Different types of mutual funds catering to the needs of different types of investors have

been set up in the country. The increasing growth of the capital market has witnessed the

mergence of foreign institutional investors (FIIs) as significant players. Their sale and

purchase decisions are already having a significant impact on the market conditions.

Along with these new players, a set of new supporting institutions have

also emerged on the horizon such as the Discount and Finance House of India, Securities

Trading Corporation of India, Stock Holding Corporation of India, settlement and

depository systems, etc.

INTRODUCTION OF NEW INSTRUMENTS:

Along with new institutions, new instruments have emerged on the

capital market. These encompass both the domestic instruments and foreign instruments.

Many new instruments of finance have already been introduced in recent years. Still, the

2


39/74

current intensity of the Indian financial market reveals that there is a tremendous scope to

deploy new financing instruments connected to equity, debentures, bonds, add-on

products and derivatives. This may require appropriate changes in certain economic

legislations and the will on the part of the Indian corporate enterprises to take risks and

tune their decision-making to the investor psychology and market preferences.

CHANGES IN RULES & REGULATIONS:

Responding to the changes in the environment, the administrative

framework has also undergone a total overhaul. The earlier chains have been totally

removed. The Controller of Capital Issues has been done away with. The Indian capital

market has been left free to find its own depth and strength. However, it is a paradox of a

free market economy that whenever chains are removed effective watchdogs have to be

employed. This latter function has now been entrusted to the Securities and Exchange

Board of India.

3.2 ORGANIZATION PROFILE

Angel Broking's tryst with excellence in customer relations began in 1987.

Today, Angel has emerged as one of the most respected Stock-Broking and Wealth

Management Companies in India. With its unique retail-focused stock trading business

model, Angel is committed to providing Real Value for Money to all its clients.

The Angel Group is a member of the Bombay Stock Exchange (BSE),

National Stock Exchange (NSE) and the two leading Commodity Exchanges in the

country: NCDEX & MCX. Angel is also registered as a with CDSL.

MILE STONES OF ANGEL BROKING LTD:

December - 1997 Angel Broking Ltd incorporated as a wealth management, retail

and corporate broking firm.

3


40/74

November - 1998 Angel Capital and Debt Market Ltd. incorporated as a member

of NSE.

March - 2002 Angel Broking develops web-enabled back office software to

maximize its operational efficiency.

November - 2002 Angel Broking successfully conducts its first Investor Seminar

to increase investor awareness.

April - 2003 Angel Broking publishes its first research report.

April- 2004 Angel Broking expands its basket of services by establishing the

Commodity Broking division.

September - 2004 Angel Broking launches Online Trading Platform facilitating

easy and hassle-free trading for its customers.

October- 2005 Angel Broking wins the prestigious Major Volume Driver Award

by BSE for 2004-2005.

March-2006 Angel Broking on expansion drive crosses 1,00,000 mark in unique

trading accounts.

July- 2006 Angel Broking launches Portfolio Management Services (PMS).

Septembe-2006 Angel Broking commences distribution of Mutual Funds andIPOs.

October- 2006 Angel Broking bags the coveted Major Volume Driver Award by

BSE for 2005-2006.

December -2006 Angel Broking expands its network by creating 2500 business

associates .

ANGEL PRESENCE:

Nation wide network of 21 regional hubs

Haspresence in 124 cities

Has morethan 6800 sub brokers & business associates

Has more than 5.9 lakh clients

VISION:

1


41/74

To provide best value for money to investors through innovative products,

trading/investments strategies, state of the art technology and personalized service.

MOTTO:

To have complete harmony between quality-in-process and continuous

improvement to deliver exceptional service that will delight our Customers and Clients.

BUSINESS PHILOSOPHY:

Ethical practices & transparency in all our dealings

Customers interest above our own

Always deliver what we promise

Effective cost management

VALUES:

Integrity

Team Work

Quality Mindset

Entrepreneurship

Service Orientation

Passion & commitment

ANGEL GROUP COMPANIES:

COMPANY NAME MEMBERSHIPAngel Broking Ltd Member on the BSE &depository participant

with CDSL

Angel Capital &Debt Market Ltd Member on the NSE Cash and Future&

option

Angel Commodities Broking Ltd Member on the NCDEX & MCXAngel Securities Ltd Member on the BSE

ACHIEVEMENT:

2


42/74

Angel was awarded the coveted the Major Volume Driver trophy from BSE for the

Year 2004-2005, 2005 -2006 & 2006 -2007.

ORGANIZATIONAL STRUCTURE:

KEYPERSONNEL:

NAME DESIGNATION

Dinesh Thakkar Chairman and Managing Director

Sachinn R. Joshi Chief Financial Officer and Executive

1


43/74

Director

PramathuChowksey

Regional Head of Indore

HitungshuDebnath

Head of Distribution & WealthManagement Services

Santanu Syam Head of Retail Operations

Dinesh Thakkar Board of director

Sachinn R. Joshi Board of director

PRODUCTS OF ANGEL BROKING LTD:

On line trading

IPO advisory

Commodities

DP services

Portfolio Management services

Mutual funds Quality assurance

BENIFITS AT ANGEL:

Investment in companies that have a strong competitive advantage over their

peers

Well laid-out investment philosophy

Pro-active management of funds

Dedicated Relationship Manager

Quarterly newsletter from fund management team

1


44/74

Committed parentage

Minimum Investment:Rs.5Lacs and Multiples of Rs 1 thereof

Mode- Either Cheque payment or Stock Transfer or combination thereof.

3.3 STUDY ORGANIZATION

Data collected by financial manager.

In this organization to studied the organization structure and also how the

company staff members are dealing with their customers.

In this organization members had given data as per my requirements to complete

the project.

At the time of project duration know the trading of shares and learn the

maintained by the customers for trading of time.

3.4 METHODS ADOPTED WITH DETAILS PROCEDURE

The study covers the calculation of variance and standard deviation in order to find

out at what percentage of risk is involved in a particular company and how much does the

company generates returns. These analysis facilitates the investor to take investment

decision before investing in a particular company.

SOURCES OF DATA

The data needed for the project was collected from the following.

Primary data

Secondary data

1


45/74

PRIMARY DATA:

Primary data will be collected by interviewing the officials of ANGEL

BROKINGLIMITED in IPO and due diligence process of client companies.

The daily experience, observation and knowledge gained out of full

work time at ANGELBROKINGLIMITED was recorded separately.

The theoretical knowledge gained out of the primary and secondary sources of data, and

the practical knowledge gained out of working at ANGEL BROKING LIMITED was

then be integrated to prepare an in-depth and comprehensive report , which would

address the topic from both theoretical and practical point of view.

SECONDARY DATA:

Review of literature

Information secured from web sites

Magazines and journals

4

2


46/74

4.1 NUMBER OF IPOs AND FUNDS GENETARED

THROUGH IPOs IN INDIA SINCE 2001Table: 4.1.1 Number of IPOs & Funds Generated through IPOs in India

2

S.NO YEAR No.of IPOs FUNDSGENERATEDRs(crores)

1 2001-2002 7 12022 2002-2003 6 1039

3 2003-2004 21 3434

4 2004-2005 23 13,7495 2005-2006 79 10,936

6 2006-2007 77 28,504

7 2007-2008 85 42,595

8 2008-2009 49 34,3069 2009-2010 56 71,000

10 2010-2011may 72 67,608.6


47/74

Fig: 4.1.1 Number of IPOs in India

INTERPRETATION:

The above bar diagram reveals the number of IPOs in India since

2001.The X-axis represents the year and the data on Y-axis represents number of

IPOs .The number of IPOs steadily increasing upto 2005-2006. But in 2006 there was a

fall in IPOs and from 2007 there was a drastic increase in Indian IPOs.

GRAPHICAL REPRENSENTATION OF FUNDS GENERATED

THROUGH IPOs IN INDIA

Fig: 4.1.2 Funds generated through IPOs in India

INTERPRETATION:

The above bar diagram shows the funds generated through public

offerings in India since 2001.Funds generated from IPOs are steadily increasing from

2001 to 2007 ,during the period the share market operations was fine.During 2008-2009

there was a sudden fall in IPOs due to the economic crisis and international market trend

has been forcing thread both primary and secondary market.But now there is a

considerable increase in IPOs investment in India in 2010.

4. 2. TYPES OF INVESTORS & THEIR

SUBSCRIPTION FOR EACH SELECTED IPO

EXCEL INFOWAYS LIMITED

Incorporated in 2003, Excel Infoways Ltd is an ISO 27001:2005 certified

Company. Excel Infoways Limited is a leading customer contact centre providing Voice

3


48/74

Based Services in the areas of Collections, Telemarketing and Customer Care. Excel

Infoways offer a range of customer care services including outbound sales and

Marketing, voice, email response, real-time chat, knowledge management, and eCRM

architecture.

OBJECTS OF THE ISSUE:

1. To achieve the benefits of listing on the Stock Exchanges

2 .To raise capital to:

setting up New Facilities

Strategic Investments / Joint Ventures

General Corporate Purpose

Issue Related Expenses.

ISSUE DETAILS: IssueOpen: Jul 14, 2009 - Jul 17, 2009

IssueType: 100% Book Built Issue IPO

IssueSize: 5,667,000 Equity Shares of Rs. 10

IssueSize: Rs. 48.17 Crore

FaceValue: Rs. 10 Per Equity Share

IssuePrice: Rs. 80 - Rs. 85 Per Equity Share

MarketLot: 80 Shares MinimumOrderQuantity: 80 Shares

ListingAt: BSE, NSE

ISSUE SUBSCRIPTION DETAILS:

Table:4.2.1 issue subscription details of Excel Infoways

2


49/74

Fig:4.2.1 Investors subscription for Excel Infoways

INTERPRETATION:

Excel Infoways Ltd IPO closed for subscription and got a decent response from

investors especially NII investors. Excel Infoways Ltd IPO subscribed 1.97 times on its

closing day. Excel Infoways has received bids for 1, 11,42,480 shares as against issue

size of 56,67,000 shares. Retail quota of the issue subscribed 2.6438 times and QIB's

subscribed 0.4896 times.

RAJ OIL MILLS LIMITED

Incorporated in 2001, Raj Oil Mills Ltd is in the business of manufacturing and

processing of coconut, groundnut, mustard, and soya bean oil. Raj Oil Mills is the oldest

(founded in 1943) and the most successful oil production company in India. Company's

products are sold fewer than three brands i.e. Cocoraj, Guinea and Raj. These brands

are in existence for more than 5 decades.

OBJECTS OF THE ISSUE:

The objects of the Issue are to achieve the benefits of listing on the Stock

Exchanges & to raise capital

1. For setting up of facilities at Manor, district Thane.

2

Number of Times Issue is Subscribed (BSE + NSE)

As on Date & Time

QualifiedInstitutional Buyers

(QIBs)

NonInstitution

alInvestors

(NIIs)

RetailIndividua

lInvestors

(RIIs)

Total

Shares Offered /Reserved

2,833,500 850,0501,983,45

0 5,667,000

Day 1 - Jul 14, 200917:00 IST

0.0000 0.1098 0.1208 0.0600

Day 2 - Jul 15, 200917:00 IST

0.0000 0.3875 0.1263 0.1000

Day 3 - Jul 16, 200917:00 IST

0.1729 1.0512 0.2121 0.3200

Day 4 - Jul 17, 200917:00 IST

0.4896 5.3072 2.6438 1.9700
http://en.wikipedia.org/wiki/Initial_public_offeringhttp://en.wikipedia.org/wiki/Initial_public_offering


50/74

2. For setting up of Crushing unit of 200 TPD for Sesame and Mustard at Bagru,

district Jaipur.

3. To meet margin money for Working Capital Requirements.

4. For Brand Promotion and Expansion of Marketing & Distribution Network.

5. For setting up of Research and Development facilities.

ISSUE DETAILS:

IssueOpen: Jul 20, 2009 - Jul 23, 2009




FaceValue: Rs. 10 Per Equity Share IssuePrice: Rs. 100 - Rs. 120 Per Equity Share

MarketLot: 50 Shares

MinimumOrderQuantity: 50 Shares

ListingAt: BSE, NSE


Table: 4.2.2 issue subscription details of Raj Oil Mills


As on Date & Time

QualifiedInstitutiona

l Buyers(QIBs)

NonInstitutional Investors

(NIIs)

RetailIndividualInvestors

(RIIs)

Total

Shares Offered / Reserved 4,750,000 1,425,000 3,325,000 9,500,000Day 1 - Jul 20, 200917:00 IST

0.0000 0.0000 0.0080 0.0000

Day 2 - Jul 21, 2009

17:00 IST

0.0000 0.0000 0.0245 0.0100

Day 3 - Jul 22, 200917:00 IST

0.0000 1.4808 0.0606 0.2400

Day 4 - Jul 23, 200917:00 IST

0.7543 3.9764 0.7668 1.2400

Fig:4.2.2 Investors subscription for Raj Oil Mills

1


51/74

INTERPRETATION:Raj Oil Mills Ltd had opened for subscription with an initial public offering of

95,00,000 equity shares. It received bids for 1,17,99,000 shares as against its issue size of

95,00,000 shares and was subscribed 1.24 times . Retail quota of the issue subscribed

0.7668 times and QIB's subscribed 0.7543 times. Non Institutional supported the issue on

the last day to get subscribed fully; their portion subscribed nearly 4 times.

NHPC LIMITEDIncorporated in 1975, NHPC Limited (Formerly known as National

Hydroelectric Power Corporation Ltd.) is a Govt. of India's Enterprise. NHPC is a

hydroelectric power generating company dedicated to the planning, development and

implementation of an integrated and efficient network of hydroelectric projects in India.

They execute all aspects of the development of hydroelectric projects, from concept to

commissioning.

ISSUE DETAILS:

IssueOpen: Aug 07, 2009 - Aug 12, 2009


IssueSize: 1,677,374,015 Equity Shares of Rs. 10

IssueSize: Rs. 6,038.55 Crore





ListingAt: BSE, NSE

1


52/74


Table:4.2.3 issue subscription details of NHPC


As on Date & Time

Qualified

Institution

al Buyers

(QIBs)

Non

Institution

al

Investors

(NIIs)

Retail

Individual

Investors

(RIIs)

Employee

Reservatio

ns

Total

Shares Offered / Reserved981,263,7

99

163,543,9

66

490,631,9

00

41,934,35

0

1,677,374,0

15

Day 1 - Aug 07, 200917:00 IST

6.0057 0.0062 0.0952 0.0002 3.5400

Day 2 - Aug 10, 2009

19:00 IST6.1474 0.1521 0.4929 0.0689 3.7600

Day 3 - Aug 11, 2009

17:00 IST9.4851 2.4331 1.2507 0.2229 6.1600

Day 4 - Aug 12, 2009

17:00 IST29.1608 56.7 074 3.8730 0.5697 23.7400

Fig:4.2.3 Investors subscription for NHPC

INTERPRETATION:

NHPC Ltd received an overwhelming response from investors, getting

subscriptions of over 23.62 times the shares on offer. The issue received bids for a total

of 3,961.68 crore shares against an issue size of 167.73 crore shares with the total number

of bids received at the cut-off price standing at 160.74 crore shares .NII supported the

issue on the last day to get subscribed fully; their portion subscribed 56.7074 times.

DEN NETWORKS LIMITED

Incorporated in 2007, Den Networks Limited is one of the largest national

cable television companies in India engaged in the distribution of analog and digital cable

television services. They launched their digital cable television services in February 2008

1


53/74

under the brand Digitally. Den Networks currently provide cable television services in

the National Capital Region of Delhi and the states of Uttar Pradesh, Rajasthan,

Maharashtra, Gujarat, Karnataka, Haryana, Madhya Pradesh and Kerala.

OBJECTS OF THE ISSUE:1. To invest in the development of cable television infrastructure and services;

2. To invest in the development of cable broadband infrastructure and services;

3. To invest in acquisition of content and broadcasting rights;

4. To repay certain loans availed by the Company;

5. Fund expenditure for general corporate purposes.

ISSUE DETAILS:

IssueOpen: Oct 28, 2009 - Oct 30, 2009








ListingAt: BSE, NSE


Table: 4.2.6 issue subscription details of Den Networks


As on Date & Time

Qualified

Institutional Buyers

(QIBs)

Non

Institution

al

Investors

(NIIs)

Retail

Individu

al

Investors

(RIIs)

Employee

Reservatio

ns

Total

Shares Offered /

Reserved9,454,980 1,975,000

5,925,00

0250,000

17,604,98

0

1


54/74

Day 1 - Oct 28, 2009

17:00 IST0.2484 0.0003 0.0345 0.0000 0.1500

Day 2 - Oct 29, 2009

17:00 IST0.3387 0.1558 0.0494 0.0126 0.2200

Day 3 - Oct 30, 200917:00 IST

1.0004 4.1244 0.0963 0.6809 1.0400

Fig:4.2.6 Investors subscription for Den Networks

INTERPRETATION:

Den Networks L td had opened for subscription with an initial public

offering of 17,604,980 equity shares. QIB's subscribed 1.0004 times Non Institutional

supported the issue on the last day to get subscribed fully their portion subscribed 4 .1244

times and Retail quota of the issue subscribed 0.0963 times.

4. 3. CALCULATION OF RETURN

Table: 4.3.1 CALCULATION OF RETURN FOR EXCEL INFOWAYS LTD:

Year

openingshare price(p0)

ClosingShareprice(p1) P1-Po

P1 PO

Return = ------------ * 100PO

2009 77.35 72.13 -5.22 -6.74852010 47.15 45.59 -1.56 -3.3086

2011may

38.35 34.83 -3.52 -9.1786

Total Return -19.2358Average Return -6.41193

Fig:4.3.1Excel Infoways Ltd returns

INTERPRETATION:

2


55/74

In all the years it has negative returns and there was no purchases made by

the investors because of negative returns.There is a fall down in the stock price from

2009 to 2010 and there by 2011.

Table: 4.3.2 CALCULATION OF RETURN FOR RAJ OIL MILLS LTD:

Year

opening

share price

(p0)

Closing

Share

price(p1) P1-Po

P1 PO

Return = ------------ * 100

PO

2009 85.24 73.90 -11.34 -13.3036

2010 56.775 53.925 -2.85 -5.0198

2011

may

35.99 33.07 -2.92 -8.1134

Total Return -26.4368

Average Return -8.8123

Fig:4.3.2 Raj Oil Mills ltd returns

INTERPRETATION:

In all the years it has negative returns and there was no purchases made by

the investors because of negative returns.There is a fall down in the stock price from

2009 to 2010 and there by 2011.

Table: 4.3.3CALCULATION OF RETURN FOR NHPC LTD :

Year

opening

share price

(p0)

Closing

Share

price(p1) P1-Po

P1 PO

Return = ------------ * 100

PO

1


56/74

2009 34.83 33.39 -1.44 -4.13444

2010 31.225 30.61 -0.6150 -1.9696

2011

may

25.54 24.78 -0.7600 -2.9757

Total Return -9.0797

Average Return -3.0266

Fig:4.3.3.NHPC Ltd returns

INTERPRETATION:

In all the years it has negative returns and there was no purchases made bythe investors because of negative returns.There is a fall down in the stock price from

2009 to 2010 and there by 2011.

4.3.6(a) COMPARISON OF AVERAGE RETURNS FOR 6 SELECTED

COMPANIES:

Company Name Average Returns

Excel Infoways Ltd -6.41193Raj Oil Mills Ltd -8.8123NHPC Ltd -3.0266

Fig: 4.3.6(a) avg return of 6 companies

INTERPRETATION:

From the above graph the Globus Spirits Ltd got positive

returns of 10.63 as compared with the other companies. Rest of the companies has

negative returns due market price fluctuations

3


57/74

4.4 CALCULATION OF VARIANCE& STANDARD DEVIATION

FORMULAS:-

1. Variance = (R- ) 2/N

Where,

R= Return,

= Average Return.

2. Standard Deviation = varianceTable: 4.4.1CALCULATION OF RISK FOR EXCEL INFOWAYS LTD :-

Year Return(R)

AVG Return

( ) R- (R- ) RISK2009 -6.7485 -6.41193 -0.3366 0.1133 0.033662010 -3.3086 -6.41193 3.1033 9.6305 3.1033

2011 may -9.1786 -6.41193 -2.7667 7.6546 2.7667

Variance 5.7995

Standard Deviation 2.4082

Fig: 4.4.1 risk of Excel Info ways Ltd

INTERPRETATION:

In the year 2009 the company has low risk 7.65 than the

following 2 years. It is increased to 9.63 in the year 2010 but now it is reduced to 7.65 as

compared to previous year.

Table: 4.4.2. CALCULATION OF RISK FOR RAJ OIL MILLS LTD :-

Year Return(R)

AVG Return

( ) R- (R- ) RISK

1


58/74

2009 -13.3036 -8.8123 -4.4913 20.1718 4.4913

2010 -5.0198 -8.8123 3.7925 14.3831 3.7925

2011 may -8.1134 -8.8123 0.6989 0.4885 0.6989

Variance 11.6811


Fig:4.4.2 risk of Raj Oil Mills Ltd

INTERPRETATION:

In the year 2009 the company has highest risk 20.17 as

compared to the next 2 years. But the amount of risk is reduced to 0.4885 in the year2011 due high market performance.

Table: 4.4.3 CALCULATION OF RISK FOR NHPC LTD:-

Year Return(R)

AVG Return

( ) R- (R- ) RISK2009 -4.1344 -3.0266 -1.1078 1.2272 1.1078

2010 -1.9696 -3.0266 1.0570 1.1172 1.05702011 may -2.9757 -3.0266 0.0509 0.0026 0.0509

Variance 0.7823


Fig: 4.4.3 risk of NHPC Ltd

INTERPRETATION:

2


59/74


compared to the next 2 years. But the amount of risk is reduced to 1.11 in the year 2010

and in the year 2011 in has negligible risk due higher market performance.

Table: 4.4.4. CALCULATION OF RISK FOR GLOBUS SPIRITS LTD :-

Year Return(R)AVG Return

( ) R- (R- ) RISK2009 32.8550 10.6335 22.2215 493.7951 22.2215

2010 3.5669 10.6335 -7.0666 49.9368 7.0666

2011 may -4.5214 10.6335 -15.1549 229.6710 15.1549

Variance 257.8010


Fig:4.4.4 risk of Globus Spirits Ltd

INTERPRETATION:

In the year 2009 the company has high risk 493.79 than the

following 2 years. It is decreased to 49.93 in the year 2010 but now it is increased to

229.67 as compared to previous year.

Table: 4.4.5. CALCULATION OF RISK FOR EURO MULTIVISON LTD :-

1


60/74

Year Return(R)

AVG Return

( ) R- (R- ) RISK

2009 -27.1217 -14.3191 -12.8026 163.9066 12.80262010 -3.2632 -14.3191 11.0559 122.2329 11.0559

2011 may -12.5724 -14.3191 1.7467 3.0510 1.7467

Variance 96.3968


Fig :4.4.5 risk of Euro Multivision Ltd

INTERPRETATION:


compared to the next 2 years. But the amount of risk is reduced to 3.0510 in the year

2011 due high market performance.

Table: 4.4.6. CALCULATION OF RISK FOR DEN NETWORKS LTD:-

Year Return(R)AVG Return

( ) R- (R- )RISK

2009 -0.5033 -7.7569 7.2536 52.6147 7.25362010 -8.9365 -7.7569 -1.1796 1.3915 1.1796

2011 may -13.8309 -7.7569 -6.0740 36.8935 6.0740

Variance 30.2999

1


61/74


Fig:4.4.6 risk of Den Networks Ltd

INTERPRETATION:

In the year 2009 the company has high risk 52.61 than the

following 2 years. It is decreased to 1.3915 in the year 2010 but now it is raised to 36.89

as compared to previous year.

Table 4.4.6(a) COMPARISON OF AVERAGE RISKS FOR 5 SELECTED

COMPANIES:

Company Name Average Risk

Excel Infoways Ltd 2.4082Raj Oil Mills Ltd 3.4178

NHPC Ltd 0.8845

Globus Spirits Ltd 16.0562Euro Multivision Ltd 9.8182

Den Networks 5.5045

Fig:4.4.6(a) Avg Risk of 6 companies

INTERPRETATION:

2


62/74

From the above graph Globus Spirits Ltd faced high risk than the other

companies it has the risk about 16.0562, the second higher riskier company is Euro

Multivision Ltd and in has the risk of 9.81.

4.4.6(b) COMPARISON OF RISK & RETURN FOR 6 SELECTED COMPANIES:

COMPANY AVERAGE RISKS AVERAGE RETURNS

Excel Infoways Ltd 2.4082 -6.41193

Raj Oil Mills Ltd 3.4178 -8.8123

NHPC Ltd 0.8845 -3.0266

Globus Spirits Ltd 16.0562 10.6335

Euro Multivision Ltd 9.8182 -14.3191

Den Networks 5.5045 -7.7569

Fig:4.4.6(b) Avg risk& return of 6 companies

INTERPRETATION:

From the above graph the inference drawn is that Globus spirits has high

risk and high return as compared to other companies. but the remaining companies have

negative returns and higher amount of risk .Thus Globus Spirits company Proved the

investment philosophy low risk low return & high risk high return.

3


63/74

4.5. PRE ISSUE & POST ISSUE FINANCIAL

PERFORMANCETale: 4.5.1 .PRE ISSUE & POST ISSUE FINANCIAL PERFORMANCE OF EXCEL

INFOWAYS LTD :Particulars Pre issue Post issue

2007 2008 2009 2010 2011EPS 30.04 9.26 9.51 6.53 6.72

ROE 102.19 47.65 32.78 16.75 12.66

NPM 77.71 61.88 79.02 66.79 69.74

P/E 0.00 0.00 0.00 6.1 -8.5

Fig :4.5.1 Excel infoways Ltd financial performance

INTERPRETATION:

Excel infoways, a bpo company follows less volume and high margin business

model.in 2009, due to slow down in world economy there is fall in sales of the

company.later,the companys sales are revived.but,there is no considerable sales and

profit growth.it may be difficult for the company to sustain high-margins in a

increasingly competitive market.

Tale: 4.5.2. PRE ISSUE & POST ISSUE FINANCIAL PERFORMANCE OF RAJOIL MILLS LTD :

Particulars Pre issue Post issue2007 2008 2009 2010 2011

EPS 9.82 11.17 8.66 9.97 5.64

ROE 41.83 29.52 17.92 14.99 14.99

GPM 12.21 14.88 13.40 13.75 7.58

P/E 0.00 0.00 0.00 7.5 -5.54

Fig :4.5.2 Raj Oil Mills Ltd financial performance

INTERPRETATION:

1


64/74

Raj oil mills, offers an eclectic mix of branded oils, ranging from pure coconut

oil to a variety of cooking oils ensuring the satisfaction of its ever-expanding customer

base. The companys revenue is expanding over the years. But due to hike in input costs

and competition, its margins are shrinking. Pricing power of the company plays important

role in pricing the stock.

Table: 4.5.3. PRE ISSUE & POST ISSUE FINANCIAL PERFORMANCE

OF NHPC LTD :


EPS 13.57 0.90 0.96 1.70 1.76

ROE 7.52 6.57 6.40 9.50 8.98

NPM 52.00 33.75 33.35 42.73 43.93

P/E 0.00 0.00 0.00 18.9 14.16

Fig :4.5.3 NHPC Ltdfinancial performance

INTERPRETATION:

NHPC,a PSU gaint from the govts table is growing its sales, but failed to

deliver to meet the guidance.executional delays,land acquisiton hurdles,local oppositions

are impediments to the companys growth.it is enjoying healthy margin and having

ambitious plans.

Table: 4.5.4. PRE ISSUE & POST ISSUE FINANCIAL PERFORMANCE

OF GLOBUS SPIRITS LTD :


2


65/74

EPS 13.57 0.90 0.96 1.70 1.76

ROE 40.90 34.95 24.26 26.15 17.95

NPM 52.00 33.75 33.35 42.73 43.93

P/E 0.00 0.00 0.00 9.4 10.46

Fig:4.5.4 Globus spirits Ltd financial performance

INTERPRETATION:

In the above chart x- axis represents the percentages of ratios and the

data on y- axis represents the years. There is a decrease in all ratios as compared to 2007.

Thus the financial performance of the company is not well after public issue .with the

increasing consumption of alcohol, its sales are raising. Its margins als

Documents

Koti Project