15 CRITICAL REQUIREMENTS IN OFFER DOCUMENT RELEVANT

REGULATORY ASPECTS IN COMPANIES ACT 2013

Public Offer & Private Placement (Companies Act 2013)

• Any business cannot run without funds.• All subscribers should pay the value of

shares agreed to be taken by them.•  But this initial capital may not be

sufficient for running a business.

ISSUE OF SECURITIES BY PRIVATE COMPANIES

• A company can issue capital by issuing securities.

• There are separate legal methods for public and private companies for issuing securities.

• A Private Company may issue its securities:   i. By way of right or bonus issue; or   ii.Through private placement.

ISSUE OF SECURITIES BY PUBLIC COMPANIES

• A Public company may issue securities:     i. To public through prospectus i.e. “Public

Offer”.     ii. Through private placement;    iii.  Through right issue.• The term “public offer” includes “initial

public offer”; or “further public offer”; or “Offer for sale of securities to the public by an existing shareholder” through issue of a prospectus.

FUND RAISING OPTIONS

WHAT IS AN IPO – TO REFRESH

• Company issues its shares to the public for the first time.

•  Investors can place requests to buy these shares and once done, the share gets listed in a registered stock exchange .

• The company uses the share issue proceeds for its development/growth.

REASONS FOR IPOs

For Funding needs• Funding Capital Requirements for Organic

Growth• Expansion through Projects• Diversification• Funding Global Requirements• Funding Joint Venture and Collaborations

needs• Funding Infrastructure Requirements,

Marketing Initiatives .

REASONS FOR IPOs

Distribution Channels• Financing Working Capital Requirements• Funding General Corporate Purposes• Investing in businesses through other companies• Repaying debt to strengthen the Balance Sheet• Meeting Issue Expenses

For Non-funding Needs• Enhancing Corporate Stature• Retention and incentive for Employees through

stock options• Provide liquidity to the shareholders

SEBI ENTRY NORMS FOR AN IPO

Entry Norms I or EN I: 1. Net Tangible assets of atleast Rs. 3 crores

for 3 full years2. Distributable profits in atleast 3 years3. Net worth of atleast 1 crore in 3 years4. If there was a change in name, atleast

50% of the revenue in the preceeding year should be from the new activity

5. The issue size should not exceed 5 times the pre-issue networth of the company

• SEBI has provided 2 alternate routes to companies that do not satisfy the criteria for accessing the primary market. They are as follows:

Entry Norms II or EN II: • 1. Issue shall be only through the book building

route with atleast 50% allotted mandatorily to Qualified Institutional Buyers (QIBs)

• 2. The minimum post issue face value capital shall be Rs. 10 crores or there shall be a compulsory market-making for atleast 2 years 

OR

Entry Norms III or EN III: 

1. The “Project” is appraised and participated to the extent of 15% by FI’s/Scheduled Commercial Banks of which atleast 10% comes from the appraiser(s). 

2. The minimum post issue face value capital shall be Rs. 10 crores or there shall be a compulsory market-making for atleast 2 years 

3. In addition to the above mentioned 2 points, the company shall also satisfy the criteria of having atleast 1000 prospective allotees in future

Bylaws Related Regulatory bodies

• The Bylaws related regulatory bodies are as follows:

• Companies Act, 2013• Securities and Exchange Board• Securities Contract (Regulation) Act, 1956

SCRR RULE PRIOR AMENDMENTS

Provides that a company can get listed with just • 10 per cent holding with the public provided

the minimum net offer to the public is Rs 100 crore (Rs 1 billion),

• a minimum of 20 lakh (2 million) shares are offered to the public in an IPO through book-building method and allocation to qualified institutional buyers is 60 per cent of the size of an issue.

SCRR- AMENDMENT DATED 4.6.2010

• The minimum threshold level of public holding will be 25% for all listed companies.

• For new listing, if the post issue capital of the company calculated at offer price is more than Rs. 4000 crore, the company may be allowed to go public with 10% public shareholding and comply with the 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum.

SEBI allows free pricing of equity shares in an IPO

• Approval of RBI might be required for public issues by banks

• Issuer may mention floor price or price band in RHP OR• Issuer may announce floor price or price band at least 2

working days before bid opening in IPO and at least 1 day before bid opening in FPO in newspapers

• Cap on the price</= 120% of the floor price. i.e The spread between floor price & Cap price shall not be more than 20% (eg: 100-120)

• Floor Price/Final Price not to be less than face value

• Differential pricing is permissible in a public issue to retail individual investors and retail individual shareholders

• Retail investors can be offered shares at a discount to the price offered to other investor categories (Max discount can be 10%)

ALLOTMENT OF SECURITIES

• As per Listing Agreement, a company is required to complete allotment of securities offered to the public within 30 days of the date of closure of the subscription list.

• In case of Book Building issue, Allotment shall be made not later than 15 days from the closure of the issue failing which interest at the rate of 15% shall be paid to the investors.

Key terms used in an IPO

• Prospectus/ Offer Document- An offer document covers all the relevant information to help an investor to make his/her investment decision.

• "Draft Offer document" -The draft offer documents are filed with SEBI, at least 21 days prior to the filing of the Offer Document

• Red Herring Prospectus- is a prospectus which does not have details of either price or number of shares being offered or the amount of issue

• Abridged Prospectus- means contains all the salient features of a prospectus. It accompanies the application form of public issues.

• Shelf Prospectus- a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus

STEPS IN AN IPO PROCESS

PREPARATION OF REGISTRATION STATEMENT

GETTING THE PROSPECTUS READY

THE ROADSHOW

SEBI APPROVAL & GO AHEAD

DECISION ON PRICEBAND & SHARE NUMBER

AVAILABLE TO PUBLIC FOR PURCHASE

ISSUE PRICE DETERMINATION & SHARE ALLOTMENT

LISTING & REFUND

DIFFERENCE BETWEEN IPO IN INDIA & USINDIA US

1. In India the books are built directly by the companies.

1. The underwriter takes the shares on his books and then allots shares to the investors.

2. The book-building process is transparent. 2. The book-building process is confidential.

3. In India the book has to be open for a minimum of 5 business days and the period needs to be revised if the price band is revised.

3. The books can be closed or opened anytime.

4. In India the price band is fixed 4. The price band is soft – meaning the bidder can bid for a price outside the price band too .

5. Retail investors in India have to put in a cheque or block an equivalent amount corresponding to the IPO bid in their DEMAT accounts .

5. In abroad, neither category needs to pay any margin.

METHODS OF PUBLIC ISSUEIssue Type

offer Price Demand Payment Reservations

Fixed Price Issues

Price at which the securities are offered and would be allotted is made known in advance to the investors

Demand for the securities offered is known only after the closure of the issue

100 % advance payment is required to be made by the investors at the time of application.

50 % of the shares offered are reserved for applications below Rs. 1 lakh and the balance for higher amount applications.

Book Building Issues

A 20 % price band is offered by the issuer within which investors are allowed to bid and the final price is determined by the issuer only after closure of the bidding.

Demand for the securities offered , and at various prices, is available on a real time basis on the BSE website during the bidding period..

10 % advance payment is required to be made by the QIBs along with the application, while other categories of investors have to pay 100 % advance along with the application.

50 % of shares offered are reserved for QIBS, 35 % for small investors and the balance for all other investors.

BOOK-BUILDING METHOD• The Process: • The Issuer who is planning an offer nominates lead merchant banker(s) as 'book

runners'. • The Issuer specifies the number of securities to be issued and the price band for the

bids. • The syndicate members input the orders into an 'electronic book'. This process is

called 'bidding' and is similar to open auction. • The book normally remains open for a period of 5 days. • Bids have to be entered within the specified price band. • Bids can be revised by the bidders before the book closes. • On the close of the book building period, the book runners evaluate the bids on the

basis of the demand at various price levels. • The book runners and the Issuer decide the final price at which the securities shall

be issued.• Generally, the number of shares are fixed, the issue size gets frozen based on the

final price per share.• Allocation of securities is made to the successful bidders. The rest get refund orders

Bookbuilding and allotment of shares

FACE VALUE-10

Application Supported by Blocked Amount (ASBA)

• The system, which ensures that the applicant's money remains in his/her bank account till the shares are allotted, was introduced by Sebi for retail investors, corporate investors and HNIs.

• an authorisation to block his/her application money in the bank account for subscribing to the IPO.

• His/her bank account is debited only after the basis of allotment is finalised, or the IPO is withdrawn or fails.

• You can avail of ASBA only to subscribe to book-built public issues and a select few rights issues

MERCHANT BANKERS

• Merchant Bankers to the issue or Book Running Lead Managers (BRLM), syndicate members, Registrars to the issue, Bankers to the issue, Auditors of the company, Underwriters to the issue, Solicitors, etc. are the intermediaries to an issue.

• The issuer discloses the addresses, telephone/fax numbers and email addresses of these intermediaries.

• In addition to this, the issuer also discloses the details of the compliance officer appointed by the company for the purpose of the issue.

ROLE OF MERCHANT BANKERS• Deciding on the size and timing of a public issue in the light of the

market conditions. • Preparing the base of successful issue marketing from the initial

documentation to the preparation of the actual launch. • Optimum underwriting support. • Appointment of bankers and brokers as well as issue houses. • Professional liaison with share market functionaries like brokers,

portfolio managers and financial press for pre-selling and media coverage.

• Preparation of draft prospectus and other documents. • Wide coverage throughout the country for collection of applications. • Preparation of advertising and promotional material

TYPES OF INVESTORS

There are three kinds of investors in a book-building issue. • The retail individual investor (RII),• The non-institutional investor (NII) and • The Qualified Institutional Buyers (QIBs).

• Example

Origin of the Greenshoe

• The term "greenshoe" came from the Green Shoe Manufacturing Company (now called Stride Rite Corporation), founded in 1919.

• It was the first company to implement the greenshoe clause into their underwriting agreement.

Guidelines for exercising green shoe option• The guidelines require the promoter to lend his

shares (not more than 15% of issue size) which is to be used for price stabilisation to be carried out by a stabilising agent on behalf of the company.

GREEN SHOE OPTION Over-allotment option• The green shoe option allows companies to

intervene in the market to stabilise share prices during the 30-day stabilisation period immediately after listing.

• The green shoe option is also often referred to as an over-allotment provision.

• It allows the underwriting syndicate to buy up to an additional 15% of the shares at the offering price if public demand for the shares exceeds expectations and the stock trades above its offering price.

Process of a greenshoe option on over-allotment of shares.

• For instance, a company plans to issue 1 lakh shares, but to use the greenshoe option; it actually issues 1.15 lakh shares, in which case the over-allotment would be 15,000 shares.

• The 15,000 shares actually borrowed from the promoters with whom the stabilising agent signs a separate agreement.

• For the subscribers of a public issue, it makes no difference whether the company is allotting shares out of the freshly issued 1 lakh shares or from the 15,000 shares borrowed from the promoters.

• Once allotted, a share is just a share for an investor. For the company, however, the situation is totally different. The money received from the over-allotment is required to be kept in a separate bank account (i.e. escrow account)

Alibaba's Blockbuster IPO The e-commerce giant filed for an initial public offering in the United States

Four months later

it achieved the biggest market debut in history

In May

On Sept. 18

• the company priced its shares at $68 a pop, raising $21.8 billion

on Friday, Sept. 19 • the stock began trading at a stunning $92.70

Founder

Jack Ma

Alibaba's various ventures have made it arguably the largest e-commerce company in the world

Alibaba Group Holding Ltd's shares soared 38 percent in their first day of trading.

The stock opened at $92.70 - quickly rose to a high of $99.70 - close at $93.89. Some 271 million shares changed hands.

The pricing of the IPO raised $21.8 billion for Alibaba. underwriters also exercise their option for an additional 48 million shares, to bring the IPO's size to about $25 billion.At its closing share price, Alibaba has a market value of $231 billion, exceeding the combined MCAP of Amazon and eBay.Alibaba is valued at 39 times its estimated EPS for its current fiscal year, which ends in March.

offers payment services, logistics,

digital media and cloud computing.

over 302 million people who shop

online do so on an Alibaba site.

80 per cent of online sales in China

ALIBABA’s Green shoe option

• The greenshoe allowed Alibaba’s banks to buy the extra 48 million shares they sold to investors at the IPO price of $68.

• So Alibaba’s underwriters were able to use the overallotment option to increase the IPO size because of the high demand the first day of trading-- and make $39.2 million in fees just from the greenshoe, bringing their total to $300 million.

• They raked in $261.2 million after completing the IPO, according to a regulatory filing.

Role of the stabilising agent

• Starts its process only after trading in the share starts at the stock exchanges.

• In case the shares are trading at a price lower than the offer price, the stabilising agent starts buying the shares by using the money lying in the separate bank account.

• Puts the brakes on falling prices by buying the shares when others are selling and are handed over to promoters from whom they were borrowed.

• In case the newly listed shares start trading at a price higher than the offer price, the stabilising agent does not buy any shares.

The botched Facebook IPO

In May 2012 Facebook initial public offering

Initial share price at $38.00

continued to slide in subsequent weeks and months of TRADING

Facebook was down $4.00 per share and back to its issue price

after the company’s first full day of TRADING

Morgan stanley played a “stabilising agent” it was the firm's job to keep the shares above the offering price

Morgan Stanley

was the lead

investor

It had to dip into an emergency reserve of around 63 million Facebook shares—worth more than $2.3 billion at the offer price—to boost the price and create a floor around $38 a share

The underwriters have the extra shares available to either sell or buy for a period after the IPO. If demand is strong, they sell them like all the other shares. But if the stock price falls, they can buy them back, effectively creating a floor for the price.

In successful IPOs, the reserve, known as the "overallotment" or "green shoe," is used by underwriters to meet soaring demand but in this case, it was used to prop up Facebook's ailing share price..

Greenshoe option in action

• It is very common for companies to offer the greenshoe option in their underwriting agreement.

• In 2009, most realty companies in India, who were planning to raise funds from the primary market, had opted for green shoe option in their IPOs to stem volatility in share prices .

• Companies such as Sahara Prime City, DB Realty, Lodha Developers and Ambience had opted for the green shoe option, which helped them stabilise share prices in the event of extreme volatility or prices moving below offer price.

IPO STATISTICS

• The table below shows the number of IPO’s being conducted and the amount raised

CRITICAL DISCLOSURES IN OFFER DOCUMENT

1.Insustry Analysis

2. Risk Factors

3. Capital Structure

4. Object of Issue

5. Means of Finance

6. Basis of issue Price

7. Promoter’s Contribution

8. Lock-in Requirement

9. Management

10. Financial Details

11. Litigations

12. IPO Grading

13. Eligibility for the Issue

14. Allotment of shares

15. Safety net

JUST DIAL TBZIssue Open May 20, 2013 - May 22, 2013 Apr 24, 2012 - Apr 26, 2012 Issue Type 100% Book Built Issue IPO 100% Book Built Issue IPOIssue size 17,497,458 Equity Shares of Rs. 10 16,666,667 Equity Shares of Rs. 10Issue size Rs. 919.14 Crore Rs. 200.00 CroreFace value Rs. 10 Per Equity Share Rs. 10 Per Equity ShareIssue price Rs. 470 - Rs. 543 Per Equity Share Rs. 120 - Rs. 126 Per Equity Sharemarket lot 25 Shares 45 SharesMinimum Order Quantity

25 Shares 45 Shares

Listing at BSE, NSE, MCX-SX BSE, NSElead managers citi bank, morgan Stanley A. Avendus capital, IDFC

Listing Date: Wednesday, June 05, 2013 Wednesday, May 09, 2012

Issue Price: Rs. 530.00 Per Equity Share Rs. 120.00 Per Equity Share

ISSUE DETAILS

Tribhovandas Bhimji Zaveri Ltd• Incorporation : 1949

• Core Business : Gold jewellery, diamond-studded jewellery, Platinum jewellery and jadau jewellery.

• Location : 14 showrooms in 10 cities across 5 states.

• Award : 'Readers Digest Trusted Brand Asia' in the category of 'Jewellery Shop' in 2006, 2007 and 2008.

• Revenue from Operations FY2011 : Rs 11,939.31 million

TBZ IPO HIGHLIGHTS

• TBZ came out with an initial public offer of 16,666,667 equity shares to raise Rs 210 crore .

• Proceeds usage- The company will use Rs 19.2 crore to finance the establishment of new showrooms and Rs 160.4 crore for the incremental working capital, mainly for inventory.

• Valuations - When compared with Titan Industries (Tanishq), the company's shares are being offered at a big discount.

• Business - Prior to IPO, In the last five years, TBZ's sales have more than quadrupled, while its net profit has become eight fold

TBZ IPO HIGHLIGHTS

• Positives- The company recorded an average sales growth of a robust 41 per cent between FY07 and FY11, while the operating profit margin (OPM) has improved from 6.2 per cent to 7.3 per cent in same period

• Concerns- Decline in the prices of gold and diamonds, no exact location mentioned for new stores

• Final outcome- "Glittering pedigree alone can't justify higher discounting."

JustDial Limited

• Incorporation : 1996• Core Business : Local Search Service Provider - Selling advertisement and qualified leads - Just dial is a 24/7 Free Search service on a

single national number 08888888888 - Provides reliable information about local

businesses, products and services to the users in over 2000 cities in India. 300 million customer base.

JUST DIAL IPO HIGHLIGHTS

• The Company Gets None of The Money- All the money raised in the IPO will go to pay existing shareholders, who will exit to the extent of 25% of the company’s shares.

• The US version of “Just Dial” is owned by promoters, not by Just Dial India- . The promoters and principal shareholders own shares in a company called JD Global, which has licensed the Just Dial brand from Just Dial India

JUST DIAL IPO HIGHLIGHTS

• Sequoia significantly lifts Just Dial Networth in July 2012 - Just Dial’s Networth was just over Rs 100 crs on March 31,2012 .

- It rose dramatically to over Rs 400 crs on December 31,2012 because Sequoia I & II each invested Rs 125.50 crs aggregating Rs 251 crs by subscribing for 2568243 shares each at Rs 488.66/share on July 21,2012

• Safety net• Final outcome- . The Rs.950-crore IPO, the biggest issue

so far in 2013, received bids for over 15.76 crore shares, as against 1.35 crore shares on offer

DISCLOSURE 1- Industry Analysis

JustDial• The Indian advertising industry- , India is the

14th biggest advertising market globally With a growing internet user base of over 200 million.

• Local Indian Search Market-online-offline

COMPETITIVE STRENGTHS

• First Mover Advantage in the Indian Local Search Market

• Strong Brand Recognition• Offer Attractive Value Proposition for SMEs • Experience and Expertise in Local Indian Markets • Efficient and Profitable Business Model• Advanced and Scalable Technology Platform • Multiple Platform Service on a Large Scale

DISCLOSURE 1- Industry Analysis

TBZ• Gems and Jewellery Industry in India- In FY 14, the Indian gems

and jewellery industry has contributed US$ 34,746.90 million.• Market size- FDI inflows from April 2000-June 2014 was Rs

2,154.55 crore . Domestic market size- Rs.251 crore in 2013.• Investments - Surat plans to house a world-class diamond bourse

that will offer a TRADING facility• Government initiatives- RBI has liberalised gold import norms

under the 80:20 rule.• Road Ahead- Exports from the gems and jewellery industry could

touch US$ 58 billion by 2015,

Competitive strength

• They Have a Long History and a Strong Brand Name

• Design, Innovation and Product Range• Well-Established Systems and Procedures• Expansion Experience • They have their our own Manufacturing Facilities • Experienced Management• Procurement Advantage

DISCLOSURE 2- RISK FACTORS

Risk FactorInternal Factor

(Specific to project and internal to the issuer company)

External Factor(Beyond the control of the issuer

company)

SEBI Requirements: Risk factors shall be determined on the basis of

their materiality. The Risk factors shall appear in the prospectus

in the following manner:• Risks envisaged by Management.• Proposals, if any, to address the risks.

JustDial Ltd

Internal Risk Factors• Controlled by Promoters and

Promoter Group after the Offer i.e 33.1% of outstanding Equity shares.

• Adapt to technological developments.

• Proper functioning of the company’s website.

• Reliability on telecommunications and information technology system

External Risk Factors• 1. Changing laws, legal

uncertainties, adverse application of tax laws and regulations.

• Sales of the Equity Shares by the Promoters may adversely affect the trading price of the Equity Shares.

• Failure to successfully adopt IFRS when required under Indian law could have a material adverse effect on stock price.

TBZ Ltd

Internal Risk Factors• No definitive expansion plans due to

low consumer sentiments.• Subject to decrease in value of gold

and diamonds which would reduce value of inventory.

• Adapt to changing consumer preferences.

• RBI has declared jewellers ‘high- risk’ accounts thus adversely affecting ability to obtain financing in a timely manner and on acceptable terms.

• Stringent regulatory curbs on gold imports, which included raising the import duty from 2 to 10 per cent.

External Risk Factors• Jewellery purchases are

discretionary and may be particularly affected by adverse trends in the Indian economy.

• The Indian retail jewellery industry is extremely competitive.

• Increases in the prices of gold and diamonds may have an adverse effect on the demand for jewellery, which may adversely effect their results of operations.

• Any increases in interest rates would have an adverse effect on the results of operations.

Our Opinion• Risk Factor should be carefully reviewed

before Investing.• TBZ is price sensitive and has higher risk of

operation than Justdial.• Justdial, leading e-business enjoys monopoly

on stock exchange.• Since their listing the share price of Justdial

has appreciated by 200% and TBZ by only 35%

DISCLOSURE 3- CAPITAL STRUCTURE

• SEBI Requirements: • (a) Authorized, issued, subscribed and paid up capital (Number of

instruments, description and aggregate nominal value)

• (b) Size of the present issue, giving separately promoters’ contribution, firm allotment/ reservation for specified categories and net offer to public. Name(s) of group companies to be given, in case reservation has been made for shareholders of the group companies; Applicable percentages may be given in case of book built issue.

• (c) Paid-up Capital: (i) After the issue. (ii) After conversion of securities (if applicable)

• (d) Share Premium Account (before and after the issue)

Just Dial – Capital Structure

Aggregate Value at Face Value

Aggregate Value at Offer Price

a AUTHORISED SHARE CAPITAL 100,000,000 Equity Shares 1,000,000,000 1,200,000 Preference Shares 12,000,000 total 1,012,000,000 b ISSUED, SUBSCRIBED AND PAID-UP

CAPITAL BEFORE THE OFFER

69,872,750 Equity Shares 698,727,500 c PRESENT OFFER IN TERMS OF THIS RED

HERRING PROSPECTUS

Offer for sale of 17,497,458 Equity Shares Of which- retail investors- 1,749,745 QIB’s-10,272,647 anchor investors- 3,936,925 non- institutional- 2,624,618

174,974,580 9,191,410,000

d SECURITIES PREMIUM ACCOUNT

before the offer 2,478,533,441 after the offer 2,478,533,441 E PAID-UP CAPITAL AFTER THE OFFER 69,872,750 Equity Shares 698,727,500

TBZ – Capital Structure

Aggregate Value at Face Value

Aggregate Value at Offer Price

a AUTHORISED SHARE CAPITAL 75,000,000 Equity Shares 750,000,000 b ISSUED, SUBSCRIBED AND PAID-UP

CAPITAL BEFORE THE OFFER

50,000,000 Equity Shares 500,000,000 c PRESENT OFFER IN TERMS OF THIS RED

HERRING PROSPECTUS

16,666,667 Equity Shares of which- retail investors- 3,476,385 QIB’s-7,515,990 anchor investors- 2,499,999 non-institutional- 3,174,293

166,666,670 2,000,000,000

d SECURITIES PREMIUM ACCOUNT

before the offer NIL after the offer NIL E PAID-UP CAPITAL AFTER THE OFFER 66,666,667 Equity Shares 666,666,670

Our Opinion• It gives information on how much does the company

wants to raise and how many shares are subscribed to after the IPO.

• Sebi forced key changes to Justdial IPO. Scaled-down valuations force company to sell 25%, instead of 10%

-Justdial intended to sell 10% in IPO -Was seeking valuations of about Rs 4,000 cr -Sebi questioned the bankers on valuations -Rule forces Justdial to sell 25% instead of 10% -Sebi also asked promoters to provide ‘safety net’ option -IPO is 75% QIB-backed based on profitability criteria

DISCLOSURE 4 – OBJECTS OF THE OFFER

• SEBI Requirements:

• The object of raising funds through the issue, that is whether for fixed asset creation and/ or for working capital or any other purpose, shall be disclosed clearly in the prospectus.

JUSTDIAL – OBJECTS OF THE OFFER

• To achieve the benefits of listing the Equity Shares on the Stock Exchanges and to carry out the sale of 17,497,458 Equity Shares by the Selling Shareholders.

• The listing of the Equity Shares will enhance their brand name.

• Providing liquidity to the existing shareholders. • Public market for the Equity Shares in India.

TBZ- OBJECTS OF THE ISSUE

• The Company intends to utilise the Net Proceeds for the following objects:

1. To finance the establishment of new showrooms; opening of 43 new showrooms by the end of Fiscal 2015.

2. To finance incremental working capital requirements; and

3. General corporate purposes.

DISCLOSURE 5- MEANS OF FINANCE

Just Dial- Issue proceeds utilization

• Selling 17.5 million shares priced between Rs 470-543 each, raising between Rs 822 to 950 crores from its issue.

• Already raised Rs 580 crore from Sequoia Capital, SAP Ventures, SAIF Partners, EGCS, and Tiger Global. These PE firms together hold close to 60% stake in the company. Company valuation at Rs. 2,600 crore.

• The net proceeds of the IPO would not come into the company, as it is an exit opportunity for the existing investors (16 per cent of the OFS by promoters and the remaining 84 per cent by PE Investors).

• Funds raised would not be used towards business development.

• Enhance the brand name and provide liquidity to the existing shareholders.

TBZ- Issue proceeds utilization

• Entire requirement of funds towards the objects of the Issue, other than working capital requirements, will be met from the Net Proceeds.

Utilisation of Net Proceeds- (In millions)sr.no particulars utilization of IPO

proceeds as on 31st march, 2013

1 To finance the establishment of new showrooms 191.94 2 To meet incremental working capital requirements 1,604.49 3 General corporate purposes 44.94 4 issue related expenses 158.6 total amount 2,000

Working Capital Requirement- TBZ

• Working capital requirements will be from banks loans and internal accruals.

Our Opinion

• Justdial IPO proceeds only beneficial to promoters as there is no fresh issue only existing shares are offered for sales. Nothing for the company.

• TBZ requires intensive WC in the ordinary course of its business from various banks and from its internal accruals.

• Dec 31 2011- WC funding from banks- Rs 1908.23 mn• Total WC requirement as of March 31, 2013 is estimated to be Rs.

5,875.6 mn• Loans sanctioned from SBI- Rs 1400 mn and from HDFC Bank – Rs 480

mn• 75% of the total working capital funding from the banks as of March 31,

2013 amounts to Rs. 1,867.55 mn.• Company requires additional WC primarily for financing the inventory in

the new showrooms that it is proposing to set up pursuant to this issue

DISCLOSURE 6 – BASIS OF THE ISSUE PRICE

• SEBI Requirements:

1. Earnings per share i.e. EPS pre-issue for the last three years (as adjusted for changes in capital);

2. P/E pre-issue 3. Average return on net worth in the last three years 4. Minimum return on increased net worth required to

maintain pre-issue EPS 5. Net Asset Value per share based on last balance sheet 6. Net Asset Value per share after issue and comparison

thereof with the issue price

TB Z- B A SIS FO R ISSU E P R IC E

• Quantitative Factors : 1. Basic and diluted EPS-Standalone

2. Basic and Diluted EPS- Consolidated

Period Ended Basic EPS(Rs.) Diluted EPS(Rs.) weight March 31, 2011 8.08 8.07 3 March 31, 2010 3.39 3.39 2 March 31, 2009 2.14 2.14 1 Weighted Average 5.53 5.52 December 31,2011 10.10 10.08

Period Ended Basic EPS(Rs.) Diluted EPS(Rs.) March 31, 2011 8.00 8.00 March 31, 2010 3.38 3.38 December 31,2011 10.06 10.04

3. P/E ratio in relation to the issue price of Rs.120 per equity share

4. Industry P/E*

particulars consolidated P/E

current P/E CMP

P/E ratio based on basic EPS for the year ended March 31, 2011 at the issue price

15x 31.23x 163

P/E ratio name of the company Face value of equity shares (rs)

current P/E

highest 39x Titan Industries Limited 1.00 46.81

lowest 7.63x Thangamayil Jewellery Limited 10.00 8.3

Industry P/E 18x 22.5

5. P/E ratio in relation to the cap price and floor price per equity share

6. Return on Networth (RoNW) – Standalone

Particulars consolidated P/E P/E ratio based on basic EPS for the year ended March 31, 2011 at the floor price

15x

P/E ratio based on basic EPS for the year ended March 31, 2011 at the cap price

15.62x

period ended RoNW(%)- standalone

Weight RoNW(%)- Consolidated

March 31, 2011 36.78 3 36.55 March 31, 2010 24.74 2 24.71 March 31, 2009 20.25 1 31.37 Weighted Average

30.01 32.06

December 31,2011

31.44 36.38

Net Asset Value • NAV (Consolidated) as at March 31, 2011 : ` 21.90 per Equity Share • NAV (Standalone) as at March 31, 2011 : ` 21.98 per Equity Share • NAV (Consolidated) as at December 31, 2011 : ` 32.08 per Equity Share • NAV (Standalone) as at December 31, 2011 : ` 32.13 per Equity

Share • Issue Price : ` 120 per Equity Share • NAV (Consolidated) after the Issue : ` 61.48 per Equity Share • NAV (Standalone) after the Issue : `61.5 per Equity Share

Note: (i) Net Asset Value per Equity Share (`) = Net worth as per statement of adjusted

assets and liabilities divided by the number of Equity Shares adjusted for the bonus issue on October 7, 2010. P/E ratio name of the

companyFace value of equity shares (rs)

current P/E

highest 39x Titan Industries Limited

1.00 46.81

lowest 7.63x Thangamayil Jewellery Limited

10.00 8.3

Industry P/E 18x 22.5

INDUSTRY P/E

7. Comparison with other listed companies

• Own manufacturing facility for diamond-studded jewellery.• Competition from few organised players and large number of

small unorganised players who capture 90% of the market.

Diluted EPS as of Mar 31, 2011 (Rs.)

P/E Ratio

RoNW (%)

NAV per Equity Share

Sales (Rs.` in million)

Tribhovandas Bhimji Zaveri Limited

8.07 36.78 21.98 11,939.31

PEERS Titan Industries Limited*

96.96 50.37 41.98 231.00 65,208.95

Gitanjali Gems Limited

22.84 14.29 10.03 265.88 51,224.72

Thangamayil Jewellery Limited

22.84 7.63 31.90 71.58 6582.68

Quantitative Factors :1) Earnings Per Share (“EPS”) As per the restated unconsolidated summary statements

As per the restated consolidated summary statements

Period Ended Basic EPS(Rs.) Diluted EPS(Rs.) weight March 31, 2010 2.93 2.93 1 March 31, 2011 4.75 4.6 2 March 31, 2012 8.93 7.78 3 Weighted Average 6.54 5.91 Nine month period ended December 31, 2012

7.19 6.89

Period Ended Basic EPS(Rs.) Diluted EPS(Rs.) weight March 31, 2010 2.74 2.74 1 March 31, 2011 4.72 4.57 2 March 31, 2012 9.37 8.13 3 weighted average 6.72 6.05

2) Price Earnings Ratio (“P/E” Ratio) P/E Ratio in relation to Price Band of Rs.470-543 per Equity

Shareparticulars P/E at the lower end

of Price Band (47 no. of times)

P/E at the higher end of Price Band (54.3 no. of times)

P/E at the issue price of Rs. 530

Based on Unconsolidated EPS for the nine month period ending December 31, 2012

65.36 75.15 73.71

Based on Unconsolidated EPS for Fiscal 2012

52.63 60.8 59.35

Based on Unconsolidated Weighted Average EPS

71.86 83 81

particulars P/E at the lower end of Price Band (no. of times)

P/E at the higher end of Price Band (no. of times)

P/E at the issue price of Rs. 530

Based on consolidated EPS for fiscal 2012

50.16 57.95 56.56

Based on consolidated Weighted Average EPS

69.94 80.80 78.86

3) Return on Net Worth (RoNW) as per restated unconsolidated summary statements

As per the restated consolidated summary statements

• No Industry Peers

Period Ended RoNW (%) Weight March 31, 2010 29.39% 1 March 31, 2011 30.21% 2 March 31, 2012 48.93% 3 Weighted Average 39.43% Nine month period ended December 31, 2012

11.63%

period ended RoNW (%) weight March 31, 2010 28.88% 1 March 31, 2011 30.72% 2 March 31, 2012 51.09% 3 Weighted Average 40.59%

• 4) Net Asset Value (“NAV”) Per Equity Share after considering the increased share capital(1)

• Net Asset Value (after retrospective adjustment of

bonus issue and outstanding financial instruments) per Equity Share as of December 31, 2012 is ` 57.51 as per the restated unconsolidated summary statements.

• After the Offer: 76.18• Offer Price: 530

Our Opinion• Justdial company valued at post-IPO issue market cap of Rs

37.9 billion, which translates into an annualised FY13E P/B & P/E valuation of 8.1x and 52.3x respectively.

• JDL has a high cash conversion ratio (FCF/EBITDA - 92 percent over FY10-12), due to 100 percent pre-payment by paid advertisers and the low capex intensive nature of the business.

• Just dial’s IPO valuations are quite high as it is the only company in its industry which has got listed.

• Also its an offer for sale and not a fresh issue. Therefore technically there is no change in the networth as the promoters just wanted to exit from that stock.

• Taking that as an advantage the stock was listed at a premium whereas

• Considering the P/E valuation of TBZ on the upper end of the price band of Rs 126 the stock is priced at pre issue P/E of 9.39x on its annualised FY11 EPS of 13.42.

• Post issue, the stock is priced at a P/E of 12.52 on its annualised EPS of 10.06.

• Company which has peers like Titan and Gitanjali gems which although fall in the same sector aren't strictly comparable due to their size and reach.

• TBZ was trading at a discount on its debut. • Currently Justdial’s PE ratio is 100.3 whereas of TBZ it’s at 31.23x. the

issue price of TBZ was fixed at the lower band that is atRs.120 per share. The issue price of justdial was fixed at the upper band that is Rs. 530

DISCLOSURE 7- PROMOTER’S CONTRIBUTION

SEBI Requirements: In a public issue by an unlisted

company, the promoters shall contribute not less than 20% of the post issue capital.

The promoters shareholding after offer for sale shall not be less than 20% of the post issue capital.

• Just Dial- Promoter’s Contribution

• TBZ- promoter’s contribution

Shareholders Pre-issue(%) Post-issue(%)

Promoter & promoter group 37.2% 33.1% others 62.9% 41.8% public 25%

Shareholders Pre-issue Post-issue No.of

shares % No.of shares %

Promoter & promoter group

46,599,775 93.2 46,599,775 71

others 2,700,000 5.4 2,700,000 4 public 700,225 1.4 16,670,000 25 TOTAL 50,000,000 100 65,969,775 100

Current Shareholding PatternJUSTDIAL TBZ

Holder's Name No of Shares

% Share Holding

Holder's Name No of Shares

% Share Holding

Promoters 23149199 32.99% Promoters 49459775 74.13%

ForeignOcb 23469121 33.45% ForeignInstitutions 10916919 16.36%

ForeignInstitutions 21039574 29.98% GeneralPublic 3165156 4.74%

GeneralPublic 1803989 2.57% OtherCompanies 2825887 4.24%

OtherCompanies 298547 0.43% Others 167163 0.25%

NBanksMutualFunds 271066 0.39% ForeignNRI 137587 0.21%

Others 93947 0.13% NBanksMutualFunds 39748 0.06%

ForeignNRI 38843 0.06% FinancialInstitutions 7665 0.01%

FinancialInstitutions 4152 0.01%

Our Opinion-•  Just Dial contribution in Post-Issue Capital is 33.1% which is only

4% less than pre- Issue Capital of 37.2%. Wherein TBZ Promoter’s contribution in Post-Issue Capital is 71% which is only 20% less than pre- Issue Capital of 93.2%.

• Both companies promoter’s contribution after post-issue is more than 20% therefore both the companies are complying with the requirements of SEBI guideline.

• However Just dial is reducing promoter’s contribution by only 4% compare to 20% of TBZ. The promoter holding post issue is more in TBZ(70%) than in JUST DIAL (33%), which influences an investors confidence.

• More the promoter contribution the higher the trust of the promoters of the company in the company, but on the other hand it also indicates more control. SEBI has given the limit to promoter’s contribution of 75%.

• More the promoter contribution more is the benefit of dividend.

• Eg:- SUN group has promoter contribution of 75% and 200% dividend was declared on 5 paid up(2013), thus promoters earning more in this process.

DISCLOSURES 8- LOCK IN REQUIREMENTS

SEBI Requirements:

In case of any issue of capital to the public the minimum promoters’ contribution shall be locked in for a period of 3 years.

In case of a public issue by unlisted company, if the promoters’ contribution in the proposed issue exceeds the required minimum contribution, such excess contribution shall also be locked in for a period of (one year).

The entire pre-issue capital, other than that locked-in as minimum promoters’ contribution, shall be locked-in for a period of one year from the date of allotment (in the proposed public issue).

JUSTDIAL• 20.06% of the post-Issue shareholding of the

Company held by the Promoters and locked in for three years, the balance pre-Issue share capital of the Company will be locked in for a period of one year from the date of Allotment in this Issue.

• The details of the equity shares held by their promoters –

Date of Transaction and when made fully paid-up

Nature of Transaction

No. of Equity Shares

Face Value(Rs.)

Issue/ Acquisition Price per Equity Share (rs)

percentage of post-offer paid-up capital(%)

V.S.S Mani April 24, 2010

Bonus issue 11,948,430 10 - 17.08

Anita Mani April 24, 2010

Bonus issue 329,142 10 - 0.48

Ramani Iyer April 24, 2010

Bonus issue 855,080 10 - 1.22

V. Krishnan April 24, 2010

Bonus issue 855,233 10 - 1.22

Total 20.00

TBZ• In addition to the 20% of the fully

diluted post-Offer shareholding of the Company held by Promoters and locked in for three years.

• Accordingly, Equity Shares, aggregating up to 13,375,020 i.e 20.06 % of the post Issue capital of the Company held by the Promoter, shall be locked in for a period of three years from the date of Allotment in the Issue.

Date Of acquisition And allotment

Nature of Transaction

Nature of consideration

No. of Equity Shares

Face Value(Rs.)

Issue/ Acquisition Price per Equity Share (rs)

percentage of post-offer paid-up capital(%)

Shrikant Zaveri

October 7, 2010

Bonus issue Bonus issue in the ratio of 1:4*

10,545,730 10 - 15.82

Binaisha Zaveri

October 7, 2010

Bonus issue Bonus issue in the ratio of 1:4*

1,516,895 10 - 2.28

Raashi Zaveri

October 7, 2010

Bonus issue Bonus issue in the ratio of 1:4*

1,312,395 10 - 1.97

Total 13,375,020 20.06

OUR OPINION

Pursuant to the SEBI Regulations, an aggregate of 20% of the post-Issue Equity Share capital of the Company shall be locked in by the Promoter for a period of three years from the date of Allotment.

Accordingly, just dial locked in Equity Shares of 13,987,855 aggregating up to 20% of the post-Issue capital of the Company held by the Promoter, for a period of three years from the date of Allotment in the Issue.

And TBZ locked in Equity Shares of 13,375,020 aggregating up to 20.06% of the post-Issue capital of the Company held by the Promoter, for a period of three years from the date of Allotment in the Issue

DISCLOSURE 9- MANAGEMENT

SEBI Requirements:

Name, age, qualifications, Director Identification Number, experience, address, occupation and date of expiration of the current term of office of manager, managing director, and other directors giving their directorships in other companies.

The nature of any family relationship between any of the directors.

Any arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which of the directors was selected as a director or member of senior management.

Details of service contracts entered into by the directors with the issuer company providing for benefits upon termination of employment and a distinct negative statement in the absence of any such contract

TBZ- MANAGEMENTNAME DESIGNATION Ajay Mehta Independent Director Binaisha Zaveri Whole Time Director Kamlesh Vikamsey Independent Director Niraj Oza Co. Secretary & Compl.

Officer Niraj Oza Secretary Prem Hinduja Chief Executive Officer Raashi Zaveri Whole Time Director Sanjay Asher Independent Director Saurav Banerjee Chief Financial Officer Shrikant Zaveri CEO

Justdial- ManagementNAME DESIGNATION B Anand Chairman(NonExe.&Ind.Director) Ramani Iyer Non Exe.Non Ind.Director Ravi Adusumalli Non Exe.Non Ind.Director Malcolm Monteiro Ind. Non-Executive Director

V S S Mani Managing Director

V Krishnan Non Ind.& Exe.Director

Sanjay Bahadur Ind. Non-Executive Director Shailendra Jit Singh Non Exe.Non Ind.Director

Our Opinion-• Shrikant Zaveri, Aged 52,TBZ CEO• Education : Matriculation• Experience : More than 30 years in jems

and jewellery industry.• He took over as the managing partner of

the business in 2001. • He was the founding member and

chairman of the Gems and Jewellery Trade Federation.

• He has been awarded the Retail Jeweller Award for lifetime achievement in the year 2007.

• Justdial founded by V.S.S Mani, MD & CEO• Education: Discontinued Bachelor’s degree

in Commerce after completing two years and undertook articleship under member of the Institute of Chartered Accounts of India.

• Experience :23 years of experience in the field of media and local search services.

• Co-founded Ask Me Services and has also worked with United Database India Private Limited. He is involved in the formulation of corporate strategy and planning, overall execution and management, and concentrates on the growth and diversification plans of Company.

(Both are dynamic and have the expertise in their respective fields)

Disclosure 10- Financial Details

SEBI Requirements-

• a) Stand-alone and consolidated financial statements of the issuer company in respect of the last completed accounting year

• b) For the period between the last date of the balance sheet and profit and loss account sent to the shareholders and up to the end of the last but one month preceding the date of the letter of offer following shall be furnished.

I. Working results of the issuer company under following heads: Sales, Other income, Estimated gross profit / loss, Provision for depreciation, Provision for taxes., Estimated net profit /loss

II. Material changes and commitments, if any affecting financial position of the issuer company

III. Week-end prices for the last four weeks of equity shares.

c) Stock market quotation of shares/ convertible instruments of the company (high/ low price in each of the last three years and monthly high/low price during the last six months).

d) Accounting and other ratios: EPS, Return on Net worth: Net Asset Value per share , on the basis of Indian Accounting Standards.

e) A Capitalisation Statement showing total debt, net worth, and the debt/equity ratios before and after the issue is made shall be incorporated. One standard financial unit shall be used in the Letter of Offer

f) A statement to the effect that the price has been arrived at in consultation between the issuer company and the Merchant banker.

g) Any material development after the date of the latest balance sheet and its impact on performance and prospects of the issuer company.

Just Dial - P&L at the time of the IPO

• NAV per share is the expression of the value of a company or fund per share.

• NAV rose sharply, 4 times to 60.4 during FY13. Post-issue the NAV has risen to 76.19 due to increase in assets to 7650 million in FY14 from 6074 million in FY13.

FY10 FY11 FY12 FY13 FY14(in ₹)

01020304050607080

10.53 15.13 15.87

60.4

76.19Net Asset value per share

Net Asset value per share

• The Company operates a prepaid revenue model and advances. Revenue from local search operations is derived from various service offerings to Small and Medium Enterprises (SMEs).

• Post issue the total income has increased by 33% in FY14.

FY10 FY11 FY12 FY13 FY140

1000

2000

3000

4000

5000

6000

1347.631876.6

2752.15

3764.11

5012.42

TOTAL INCOME

TOTAL INCOME

CAGR38.87%

in million₹

• Profit after tax for the year increased by 76.18% from `684.57 million in FY 2012-13 to `1,206.08 million in FY 2013-14.

• The pre-issue PAT growth stood at 35%.

FY10 FY11 FY12 FY13 FY14 -

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

193.25 288.25

505.81

684.57

1,206.08

Profit After Tax

Profit After Tax

CAGR58.06%

• The Company’s (EBITDA) margin stands at 30.83% of the total income in the year ended March 31, 2014.

• CAGR of 47% is recorded.

FY10 FY11 FY12 FY13 FY14 -

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

1,600.00

303.70

453.87

672.30

1,007.19

1,421.98

EBITDA

EBITDA

CAGR47.1%

• Networth rose dramatically in FY 2012 as SEQUIOA INVESTED HEAVILY in The business.

• There is no significant changes in the networth of the company as it was an offer for sale and not an fresh issue

FY10 FY11 FY12 FY13 FY14 -

10.00

20.00

30.00

40.00

50.00

60.00

34.89 35.77

49.92

25.72* 25.14

Return on Networth

Return on Networth

In Percentage%

TBZ - P&L at the time of the IPO

• The increase in revenue primarily pertains to full year of operations of new showrooms added during the previous year.

• The increase is also attributed to higher sales emanating from the addition of new showrooms.

FY10 FY11 FY12 FY13 FY140

3000

6000

9000

12000

15000

18000

21000

8825.2

11944.613870.8

16642.2

18309.5999999999

TOTAL INCOME

TOTAL INCOME

CAGR20%

• The Company witnessed a decline in PAT of 35.23% as compared to the previous year. The drop in the PAT margin was due to higher interest costs on account of gradual phasing out of low-cost gold loan model.

• Post issue the company’s PAT increased by 50%in the FY13.

FY10 FY11 FY12 FY13 FY14 -

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

169.40

404.20

571.90

850.00

550.60

Profit After Tax

Profit After Tax

CAGR34%

• The Company has witnessed a 9.88% decline in EBITDA in 2013-14. The decline is attributed to reduction in Gross Profit margins and increase in overheads on account of addition of new showrooms.

• Post issue in FY13 the ebitda declined to 23% as compared to 44% pre issue

FY10 FY11 FY12 FY13 FY14 -

200.00 400.00 600.00 800.00

1,000.00 1,200.00 1,400.00 1,600.00 1,800.00

474.70

873.20

1,236.70

1,531.00 1,393.40

EBITDA

EBITDA

CAGR31%

• The Company’s networth increased as on 31st March, 2013-2014.

• The company reported losses in FY14 thus impacting the return on networth.

• The returns networth declined from 29.8% to 12.8% in FY14.post issue returns have not been attractive so far

FY10 FY11 FY12 FY13 FY14 -

5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 50.00

28.20

45.30 42.40

29.80

12.80

Return on Networth

Return on Networth

Our opinion- Comparing Justdial &TBZ• At the time of the issue TBZ’s PAT was more

than Just dial which is reverse in current scenario. Just dial went for the IPO in 2011 while TBZ in 2012 and Just dial has increased its PAT 4 times since the time of the issue while TBZ is still having problems to make it a multiple of 2 since the time of issue.

• As per quarter results 30 June 2014, Just dial has PAT of 341.5 million ₹ while TBZ has a PAT of 116.98 million ₹. TBZ s suffering from high debt levels due to stoppage of the gold-loan scheme. The finance cost have shot up by 47% in the FY14.

• Just Dial is growing at a much faster rate than TBZ and is good to invest, but in the long run TBZ would prove to be a good investment as gold prices are starting to drop.

Why Higher Growth?

• JUST launched more than 10 new products in the ‘Search Plus’, which currently has 85,000 sign-ups (12,500 in restaurants, 20,000 in grocery, 20,000 in healthcare and balance in other categories).

• The initial response to JD Search Plus has been encouraging, with recordings of more than 1,000 orders per day in order food, 250+ doctor’s appointment per day and 350+restaurant table bookings per day.

• Management guided that it plans to incur one-time ad spends to create a viral impact for these recent launches. Company plans to start monetizing certain recent product launches in FY15

• Financial Front: JD has a high cash conversion ratio (FCF/EBITDA - 92 percent over FY10-12), due to 100 percent pre-payment by paid advertisers and the low capex intensive nature of the business.

• Growth front: As the business model continues to move more towards non-linearity through increased penetration in the high growth internet and mobile internet platform, JD should see expansion of operating margins and strong growth in earnings.

• As the Company has no debt on its Balance Sheet, there is no interest burden on the Company which makes it more attractive for investment

DISCLOSURE 11 - LITIGATIONS

SEBI Requirements-

• Outstanding litigations involving the promoter and group companies

1] All pending litigations in which the promoters are involved, defaults to the financial institutions/ banks,, shall be listed in the prospectus together with the amounts involved and the present status of such litigations/ defaults. The likely adverse effect of these litigations/ defaults, etc. on the financial performance of the issuer company shall also be mentioned.

2] Further, the cases of pending litigations, defaults, etc. in respect of companies/ firms/ ventures with which the promoters were associated in the past but are no longer associated shall also be disclosed in case their name(s) continues to be associated with particular litigation(s).

TBZ

• Litigation against the Company

• Litigation against Subsidiaries

SR. NO.

NATURE OF CASES

NO. OF OUTSTANDING CASES

AMOUNT INVOLVED (IN MILLION)

1 Property Proceedings

1 Not ascertainable

2 Labour Proceeding 1 Not ascertainable

3 Tax Proceeding

4 4.98

SR. NO.

NATURE OF CASES

NO. OF OUTSTANDING CASES

AMOUNT INVOLVED (IN MILLION)

1 Tax Proceeding

1 0.19

• Litigation against Directors

• An adverse outcome in any of these proceedings may affect the reputation and standing and could have an adverse effect on business, financial condition and results of operations.

SR. NO.

NAME OF DIRECTORS

NO. OF OUTSTANDING CASES

AMOUNT INVOLVED (IN `MILLION)

1 Ajay mehta 2 Not ascertainable

JUST DIAL

• Litigations Against the Company

NATURE OF LITIGATION

NUMBER OF OUTSTANDING LITIGATION

AMOUNT INVOLVED (RS. IN MILLION)

Criminal Cases 3 - Civil Cases 3 0.2 Consumer Complaints 14 1.9 Income Tax 8 14.8 ESI Act 1 6.5 Employees Compensation Act

1 0.2

Notices 66 15.7 Other Proceedings 1 - Past penalties 1 0.2

• Litigations against the DirectorsNAME OF DIRECTOR

NATURE OF LITIGATION NUMBER OF LITIGATION

AMOUNT INVOLVED (RS. IN MILLIONS)

V.S.S. Mani

Consumer Complaint 2 1.1 Criminal Cases 3 - Income Tax 2 1.6 Notices 3 2.7

Sanjay Bahadur Consumer complaints 1 0.8 Criminal Cases 1 - Excise cases 2 -

Ramani Iyer Consumer Complaints 1 0.8 Criminal Cases 1 -

V. Krishnan Consumer Complaints 1 0.8 Criminal Cases 1 -

Ravi Adusumalli Consumer Complaints 1 0.8 Criminal Cases 1 -

B. Anand Consumer Complaints 1 0.8 Criminal Cases 1 -

Malcom Monterio Consumer Complaints 1 0.8 Criminal Cases 1 -

Shailendra Jit Singh Consumer Complaints 1 0.8 Criminal Cases 1 -

OUR OPINION-

• TBZ’S promoters are not involved in any litigation. Also the total number of litigations and the risk of business getting affected is far less.

• Ajay Mehta is involved in a criminal case for obtaining ammonia at a discount. The matter is still pending.

• In the case of justdial a number of litigations against the company and the promoters have been filed involving cheating etc

• Thus on comparison , based on the number of litigations and their grievousness Company TBZ holds a better stand than that of Just Dial and hence would be fair enough to invest into TBZ on this basis .

DISCLOSURE 12: IPO GRADING• SEBI Requirements-

• No unlisted company shall make an IPO of equity shares or any other security which may be converted into or exchanged with equity shares at a later date.

(i) the unlisted company has obtained grading for the IPO

from at least one credit rating agency;

(ii) disclosures of all the grades obtained, along with the rationale/ description furnished by the credit rating agency(ies) for each of the grades obtained, have been made in the Prospectus (in case of fixed price issue) or Red Herring Prospectus (in case of book built issue); and

(iii) the expenses incurred for grading IPO have been borne by the unlisted company obtaining grading for IPO.)

JUSTDIAL• CRISIL has assigned CRISIL IPO grade ‘5/5’

• This grade indicates that the fundamentals of the IPO are strong relative to other listed equity securities in India.

• Just Dial- the first phone-based search engine in India.• The assigned grade takes into account Just Dial’s huge

local search database (9.0 mn products and service providers), and a business model, difficult to replicate.

• Its search volume has grown multi-fold courtesy quick service, relevant search results, updated database and technology, leading to a strong brand image.

• It has successfully grown its paid campaigns by more than four times over FY09-12 to 171,000 in end-FY12 (195,100 in 9MFY13) and enjoys 100% advance payments from its clients, who are mostly micro, small and medium enterprises (MSMEs).  

• Maintaining management bandwidth to oversee the growth will be a challenge, in the expansion in US and Canada through a different promoter entity.

• Just Dial has grown its revenues at a four-year CAGR of 39% to ₹2,621 mn in FY12 and improved its PAT margin to 20% in FY12 from 2.4% in FY08.

• Accordingly, RoE improved to 53.6% in FY12 from 6.7% in FY08. It reported EPS of ₹9.4 in FY12. The company is debt-free with a negative working capital cycle

TBZ• CRISIL has assigned a CRISIL IPO grade of ‘3/5’

• This grade indicates that the fundamentals of the IPO are average relative to other listed equity securities in India.

• The grade factors in the resilience of demand for gold jewellery in India despite a significant rise in gold prices, 28% y-o-y in 2011, which has added shine to TBZ’s top line. Compared to other gold jewellery players, TBZ’s revenue mix leans towards higher-margin diamond jewellery.

• The grade is restrained by competition is likely intensify following planned expansions by regional/traditional players. TBZ too plans to expand to 22 stores by end-FY13 at a faster-than-ever pace, which could throw up execution challenges even though its strategies are in place.

• Opening of new stores will also put pressure on profitability due to higher marketing expenses and working capital requirement.

• Tribhovandas Bhimji Zaveri brand being used by other Zaveri family members, the risk of brand dilution cannot be ignored, especially if they underperform on quality.

• TBZ’s revenues increased at 40% CAGR between FY08 -11 to Rs 11.9 bn, largely driven by branch additions and a steady increase in gold prices.

• A higher proportion of diamond-studded jewellery has supported 6-7% EBITDA margin in a competitive market. EBITDA increased at a CAGR of 52% over FY08-11. During the same period, PAT increased at a CAGR of 74% and was Rs 394 mn in FY11.

Our Opinion-• An IPO grade of 5/5 makes just dial IPO very

attractive to invest.

• Rating is not a signal to buy or sell a company. It just gives the overview of the business.

• Just Dial displays a strong fundamentals and TBZ holds relatively weaker fundamentals. Hence it would better to invest in a company which holds strong fundamentals there by making Just dial viable for Investment.

• But we do feel a 5/5 rating was a very high and overvalued rating whereas TBZ was given a fair rating.

DISCLOSURE 13- ELIGIBILITY FOR THE ISSUE

SEBI Requirements :

• An unlisted company needs to satisfy following criteria to be eligible for making a public issue:

a) Net tangible assets of at least Rs 3 crore for three 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 per cent of revenue for

preceding one year should be from the new activity e) The issue size should not exceed five times the pre-

issue net worth f) SEBI also provides alternate routes to the companies

not satisfying any of the above parameters, for accessing the primary market.

• The alternative conditions are as follows:

a) Issue shall be made through book-building route, with at least 50 per cent to be mandatory allotted to the 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 two years.

TBZ• The Company is eligible for the Issue in accordance with Regulation 26 (1) of the

SEBI Regulations as explained under the eligibility criteria calculated in accordance with financial statements under Indian GAAP:

• It has net tangible assets of at least ` 30 million in each of the preceding three full years (of 12 months each), of which not more than 50% are held in monetary assets.

• The Company has a track record of distributable profits for at least three of immediately preceding five years on a standalone basis, and has net profits on a consolidated basis for Fiscals 2010 and 2011.

• The Company has a net worth of at least ` 10 million in each of the three preceding full years (of 12 months each);

• The aggregate of the proposed Issue and all previous issues made in the same financial years in terms of the issue size is not expected to exceed five times the pre-Issue net worth of the Company; The Company has not changed its name in the last one year

• They are complying with Regulation 26(2) of the SEBI Regulations and at least 75% of the Offer is proposed to be Allotted to QIBs and in the event we fail to do so, the full application monies shall be refunded to the Bidders.

• Non-Institutional Bidders and Retail Individual Bidders will be allocated not more than 15% and 10% of the Offer, respectively

• Hence, they are eligible for the Offer under Regulation 26(2) of the SEBI Regulations.

• The Company shall ensure that the number of prospective Allottees to whom the Equity Shares will be allotted shall not be less than 1,000 failing which the entire application money shall be refunded.

JUSTDIAL

DISCLOSURE 14- ALLOTMENT OF SHARE

• Sebi Requirement• For book building process:• Qualified institutional buyers – at least 50%

of the net issue being allotted. However upto 5% of the net QIB portion shall be available for allocation proportionately to mutual funds only.

• Non institutional bidders – not less than 15% of the net issue or the net issue less allocation to QIBs and retail institutional bidders.

• Retail individual investors - Not less than 35% of the net issue or the net issue less allocation QIBs and non institutional bidders.

JUSTDIAL

• At least 75% of the Offer shall be Allotted on a proportionate basis to QIBs.

• The Offer received 155,879 applications for 158,800,243 Equity Shares resulting in 9.08 times subscription.

• Public offer -17,497,458 equity shares • Price -₹ 530 per equity share for QIB and

non institutional bidders • Price - ₹ 483 per equity share for retail

individual bidders aggregating up to rs. 9,191.41 million (the "offer").

• A discount of rs. 47 per equity share has been offered to retail individual bidders

TBZ ALLOTMENT OF SHARES

• Not more than 50% of the Issue was allocated on a proportionate basis QIB.

• Public issue - 16,666,667 equity shares • Price -₹120 per equity share aggregating to

rs. 2,000 million (the "issue"). • The Issue received 7,252 applications

for 19,474,470 equity shares resulting in 1.17 times subscription

OUR ANALYSIS

• The justdial IPO was a successful one as it got oversubscribed by 9.09 times.

• Nonetheless, TBZ was fairly oversubscribed by 1.17% as it received 7,252 bid applications as compared to 155,879 applications in justdial.

• The overall investor participation was seen much more higher for just dial as compared to TBZ.

• When an issue is oversubscribed shares are being alloted on proportionate basis and lottery system is used.

DISCLOSURE15- SAFETY NET

Why a safety net?• Out of 117 scripts listed during 2008 to

2011 , 72 were trading below the Issue price after 6-months of their listing.

• The sentiments of the investors would get affected and they may lose confidence in the capital market.

• So to protect the interest of RII’s safety net was introduced in 2012.

Safety Net Trigger

• In cases where the price of the shares depreciate by more than 20% from the issue price for a period of 3 months from the date of listing.

Illustration-1 • Assume listing price for share is Rs. 100 and

market index on listing date is 1000.• After 3 months, volume-weighted average

market price of the shares is Rs. 79 (drop of 21%) and the market index is 1000 (drop of 0%). The Safety Net provision will trigger since relative fall of 21% (21%-0%) is more than 20%

trigger level.

Safety Net Trigger

• The 20% depreciation in share price shall be considered over and above the general fall, if any, in market index.

Illustration-2 • Assume listing price for share is Rs. 100 and

market index on listing date is 1000. • After 3 months, volume-weighted average

market price of the shares is Rs. 79 (drop of 21%) and the market index is 900 (drop of 10%).

• The Safety Net provision will not trigger since relative fall of 11% (21%-10%) is less than 20% trigger level

 JUSTDIAL SAFETY NET

• Retail investors that apply for less than 200,000 rupees worth shares get a safety net.

• After 180 days, if the volume weighted average price (VWAP) for the previous 60 days is less than the retail issue price, the promoter brothers will buy the shares from you and return your money if you want.

AFTER LISTING

• The ‘safety net’ option for Just Dial Ltd was redundant in less than two months of listing.

• Over 95 per cent of the retail investors, who had received allotment through the IPO, had exited, Following a sharp 40 per cent run-up in the share price of the company since its listing.

• The company released nearly Rs 80 crore from

its escrow as the safety net was not exercised.

Recent developments

• In sep 2013, Sebi decided to let go of a proposal to introduce a safety net for retail investors in IPO’s due to the stiff resistance by investment bankers.

• A new price stabilising mechanism will be introduced on the lines of market- making.

• Two new conditions for the offer documents to get cleared- discount to peer group prices and a special discount for retail investors

DLF CASE- INADEQUATE DISCLOSURE IN IT’S IPO

• DLF has estimated it may face a financial liability of up to Rs 100 crore for the various legal cases.

• In 2011, A Delhi-based businessman, Kimsuk Krishna Sinha, had alleged that the KP Singh-controlled company had intentionally made a false statement.

• The Sebi investigation shows that Sudipti Estates is part of the DLF group.

• A criminal liability can be imposed on DLF

THE VERDICT• Investors dumped DLF shares after market regulator Securities and

Exchange Board of India (Sebi) barred the company and its six executives from accessing capital markets for 3 years.

• The STOCK fell as much as 24.2 percent intraday on 13th october 2014.

• Brokerages believe this SEBI order banning DLF is a big negative development and may impact FUND raising plans and listing of REITs but they are hopeful of some resolution.

• finally, SEBI took a swift decision and acted as a regulator and gave a clear signal to all the others that such misleading disclosures in the prospectus will not be tolerated

THE BOTCHED FACEBOOK IPO

In May 2012 Facebook initial public offering

Initial share price at $38.00

continued to slide in subsequent weeks and months of TRADING

Facebook was down $4.00 per share and back to its issue price

after the company’s first full day of TRADING

This led to shares being traded roughly flat on its first day, it fell by 50% in its first four months of public trading

Facebook's management and investment bankers were sharply criticized by investors

for dramatically

raising both the price and the size of the company's IPO at the 11th hour

Morgan Stanley cut Facebook’s future revenue estimates before Facebook increased its initial share price from $34 to $38 per share

pulled this move to tip insiders off to sell their shares on the first day of trading, knowing that they would be bought up by eager retail investors looking to invest in Facebook.

lawsuit filed against Morgan Stanley

For simultaneously tipping off insiders to sell their shares while pumping up retail investor demand for Facebook

The suit claims that financial information in Facebook’s

May 9th disclosure “were untrue statements of material

fact”information which would have been helpful in making INVESTMENT decisions after the company’s IPO.

RECOMMENDATIONS

• Money can be made in IPOs, but the focus should shift from the QUICK BUCK to the long-term outlook.

• One should not put all their faith in IPO document, and should never skip reading the disclosures mentioned in IPO documents.

• Also reading the projected accounting figures carefully.

• Investors should be cautious while investing .

• Investors in IPOs should look at the growth the company and the industry in which it is operating in.

• “STAY AWAY FROM TIPS”

CONCLUSION

• Disclosures say a lot about the company bringing the IPO.

• The above mentioned disclosures are very critical for the investor’s point of view.

• A rosy picture of the company on paper is not always the real situation

Example-Facebook IPO.

Therefore , invest in an IPO only after analyzing its disclosures well

• Thank you