ipo

Description:As we all know IPO Initial Public Offering is the hottest topic in the current industry, mainly because of
India being a developing country and lot of growth in various sectors which leads a country to ultimate success. And when we talk about countrys growth which is dependent on the kind of work and how much importance to which sector is given. And when we say or talk about industries growth which leads the economy of country has to be balanced and given proper finance so as to reach the levels to fulfill the needs of the society. And industries which have massive outflow of work and a big portfolio then its very difficult for any company to work with limited finance and this is where IPO plays an important role. This report talks about how IPO helps in raising fund for the companies going public, what are its pros and cons, and also it gives us detailed idea why companies go public. How and what are the steps taken by the companies before going for any IPO and also the role of (SEBI) Securities and Exchange Board of India, what are primary and secondary markets and also the important terms related to IPO. It gives us idea of how IPO is driven in the market and what are various factors taken into consideration before going for an IPO. And it also tells us how we can more or less judge a good IPO. IPO has been one of the most important generators of funds for the small companies making them big and given a new vision in past and it is still continuing its work and also for many coming years.

TABLE OF CONTENTS

S.NO: Page No:

Description

Chapter-1 Introduction of the study Objectives of study Scope of the Study Statement of the Problem Research Methodology Chapter II Industry Profile Company Profile - HSE Chapter-III Literature Review y Initial Public Offering y Book-Building Process Chapter-IV IPO Valuation Muthoot Finance Ltd.

Data Interpretation Chapter-V Findings & Suggestions Limitations Conclusion Bibliography

ACKNOWLEDGEMENT

Learning exercises of this nature call for intelligence nourishment, professional help and encourage from many kinds.

I would like to acknowledge my sincere thanks to Mr.Sareshwar Reddy, Executive Director, Mr.Chandra Mouli,CEO and B.V.Ramana of Hyderabad Stock Exchange for allowing me to carry out my project in the organization and Mr.Malleshwar, Librarian of HSE for appraising my situation with necessary background and helping me to complete the project.

Firstly, my deepest gratitude to my professors, Mr.Shreehari and Mr.Prabhakar, Department of Management Studies, VIGNAN INSTITUTE OF TECHNOLOGY & AERONAUTICAL ENGINEERING, for their invaluable support and continuous guidance. I heartfelt thanks to all the authors of the various articles referred to by me as well as to all those people who shared their valuable time and knowledge with us.

This project would not be complete without thanking my college VIGNAN INSTITUTE OF TECHNOLOGY & AERONAUTICAL ENGINEERING for giving us an opportunity to have an enriching experience in terms of this project. I feel very grateful and wish to thank all those who have helped me in giving a productive shape to my ideas in the form of this project report.

EXECUTIVE SUMMARY

As we all know IPO Initial Public Offering is the hottest topic in the current industry, mainly because of India being a developing country and lot of growth in various sectors which leads a country to ultimate success. And when we talk about countrys growth which is dependent on the kind of work and how much importance to which sector is given. And when we say or talk about industries growth which leads the economy of country has to be balanced and given proper finance so as to reach the levels to fulfill the needs of the society. And industries which have massive outflow of work and a big portfolio then its very difficult for any company to work with limited finance and this is where IPO plays an important role. This report talks about how IPO helps in raising fund for the companies going

public, what are its pros and cons, and also it gives us detailed idea why companies go public. How and what are the steps taken by the companies before going for any IPO and also the role of (SEBI) Securities and Exchange Board of India, what are primary and secondary markets and also the important terms related to IPO. It gives us idea of how IPO is driven in the market and what are various factors taken into consideration before going for an IPO. And it also tells us how we can more or less judge a good IPO. IPO has been one of the most important generators of funds for the small companies making them big and given a new vision in past and it is still continuing its work and also for many coming years.

INITIAL PUBLIC OFFER

INTRODUCTION

Initial public offering (IPO), also referred to simply as a "public offering", is when a company issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded. In an IPO, the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market. Initial Public Offering (IPO) in India means the selling of the shares of a company, for the first time, to the public in the country's capital markets. This is done by giving to the public, shares that are either owned by the promoters of the company or by issuing new shares.

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

Once the book building is closed then the issuer as well as the book runner of the Initial Public Offering (IPO) evaluate the offers and then determine a fixed price. The offers for shares that fall below the fixed price are rejected. The successful bidders are then allotted the shares IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value.

Different kind of issues:(drawing) 1.Issues : Public Initial public offering Fresh issue Offer for sale Further public offering Fresh issue Offer for sale Rights preferential

Major reasons for listing IPO:

The increase in the capital:

An IPO allows a company to raise funds for utilizing in various corporate operational purposes like acquisitions, mergers, working capital, research and development, expanding plant and equipment and marketing. Liquidity:

The shares once traded have an assigned market value and can be resold. This is extremely helpful as the company provides the employees with stock incentive packages and the investors are provided with the option of trading their shares for a price. Valuation:

The public trading of the shares determines a value for the company and sets a standard. This works in favor of the company as it is helpful in case the company is looking for acquisition or merger. It also provides the share holders of the company with the present

value of the shares. Increased wealth:

The founders of the companies have an affinity towards IPO as it can increase the wealth of the company, without dividing the authority as in case of partnership.

IPO Market in India

The IPO Market in India has been developing since the liberalization of the Indian economy. It has become one of the foremost methods of raising funds for various developmental projects of different companies. The IPO Market in India is on the boom as more and more companies are issuing equity shares in the capital market. With the introduction of the open market economy, in the 1990s, the IPO Market went through its share of policy changes, reforms and restructurings. One of the most important developments was the disassembling of the Controller of Capital Issues (CCI) and the introduction of the free pricing mechanism. This step helped in developing the IPO Market in India, as the companies were permitted to price the issues. The Free pricing mechanism permitted the companies to raise funds from the primary market at competitive price. The Central Government felt the need for a governed environment pertaining to the Capital market, as few corporate houses were using the abolition of the Controller of Capital Issues (CCI) in a negative manner. The Securities Exchange Board of India (SEBI) was established in the year 1992 to regulate the capital market. SEBI was given the authority of monitoring and regulating the activities of the bankers to an issue, portfolio managers, stockbrokers, and other intermediaries related to the stock markets. The effects of the

changes are evident from the trend of the resources of the primary capital market which includes rights issues, public issues, private placements and overseas issues. The IPO Market in India experienced a boom in its activities in the year 1994. In the year 1995 the growth of the Indian IPO market was 32 %. The growth was halted with the South East Asian crisis. The markets picked up speed again with the introduction of the software stocks.

Objective of the Study:

To know the process of Valuation of IPOs To understand the Benefits to investor from IPOs To know regulatory consideration with IPO Methods of IPO process To do detail study of IPO ratings, performance tracker and basis of allotment.

Scope of the Study:

The scope of the study, by and large is very vast. It is very difficult to satisfy all the areas of IPO process and valuation methods. Therefore, an attempt is made to cover as much as possible included in the study.

Statement of the Problem:

Valuation of issue prices of Indian IPOs Valuation of Muthoot Finance Ltd. IPO using DCF Valuation

The impact of its performance in secondary market

RESEARCH METHODOLOGY

The research is exploratory research. The data is collected from various sources like Internet, Newspaper, Magazines, and Personals. Primary sources : Surveys through Hyderabad Stock Exchange. Secondary sources:

Study from books and articles Analysis of IPOs of various sectors Search from Various investor sites.

Chapter

INDUSTRY & COMPANY PROFILE

Indian Capital Market

A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money market). The capital market includes the stock market (equity securities) and the bond market (debt). Financial regulators: y Reserve Bank of India (RBI) y Securities and Exchange Board of India (SEBI) y Forward Markets Commission (India) (FMC) y Insurance Regulatory and Development Authority (IRDA) The capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties. Capital markets may be classified as primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere. There are 22 stock exchanges in India, the first being the Bombay Stock Exchange (BSE), which began formal trading in 1875, making it one of the oldest in Asia. Over the last few years, there has been a rapid change in the Indian securities market, especially in the secondary market. Advanced technology and online-based transactions have modernized the stock exchanges. In terms of the number of companies listed and total market capitalization, the Indian equity market is considered large relative to the countrys stage of economic development. The number of listed companies increased from 5,968 in March 1990 to about 10,000 by May 1998 and market capitalization has grown almost 11 times during the same period. The debt market, however, is almost nonexistent in India even

though there has been a large volume of Government bonds traded. Banks and financial institutions have been holding a substantial part of these bonds as statutory liquidity requirement. A primary auction market for Government securities has been created and a primary dealer system was introduced in 1995. There are six authorized primary dealers. Currently, there are 31 mutual funds, out of which 21 are in the private sector. Mutual funds were opened to the private sector in 1992. Earlier, in 1987, banks were allowed to enter this business, breaking the monopoly of the Unit Trust of India (UTI), which maintains a dominant position. Before 1992, many factors obstructed the expansion of equity trading. Fresh capital issues were controlled through the Capital Issues Control Act. Trading practices were not transparent, and there was a large amount of insider trading. Recognizing the importance of increasing investor protection, several measures were enacted to improve the fairness of the capital market.

securities and Exchange Board of India (SEBI):

The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992. The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as .. to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto

Establishment and incorporation of Board.

3. (1) With effect from such date as the Central Government may, by notification, appoint, there shall be established, for the purposes of this Act, a Board by the name of the Securities and Exchange Board of India. (2) The Board shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or be sued. (3) The head office of the Board shall be at Bombay. (4) The Board may establish offices at other places in India.

Management of the Board.

4. (1) The Board shall consist of the following members, namely:(a) a Chairman; (b) two members from amongst the officials of the 1[5][Ministry] of the Central Government dealing with Finance 2[6][and administration of the Companies Act, 1956(1 of 1956)]; (c) one member from amongst the officials of 3[7][the Reserve Bank]; (d) five other members of whom at least three shall be the whole-time members to be appointed by the central Government. (2) The general superintendence, direction and management of the affairs of the Board shall vest in a Board of members, which may exercise all powers and do all acts and things which may be exercised or done by the Board.

(3) Save as otherwise determined by regulations, the Chairman shall also have powers of general superintendence and direction of the affairs of the Board and may also exercise all powers and do all acts and things which may be exercised or done by that Board. (4) The Chairman and members referred to in clauses (a) and (d) of sub-section (1) shall be appointed by the Central Government and the members referred to in clauses (b) and (c) of that sub-section shall be nominated by the Central Government and the 4[9][Reserve Bank] respectively. (5) The Chairman and the other members referred to in clauses (a) and (d) of sub-section (1) shall be persons of ability, integrity and standing who have shown capacity in dealing with problems relating to securities market or have special knowledge or experience of law, finance, economics, accountancy, administration or in any other discipline which, in the opinion of the Central Government, shall be useful to the Board.

In the primary market securities are issued to the public and the proceeds go to the issuing company. Secondary market is term used for stock exchanges, where stocks are bought and sold after they are issued to the public.

PRIMARY MARKET :

The first time that a companys shares are issued to the public, it is by a process called the initial public offering (IPO). In an IPO the company offloads a certain percentage of its total shares to the public at a certain price. Most IPOS these days do not have a fixed offer price. Instead they follow a method called BOOK BUILDIN PROCESS, where the offer price is placed in a band or a

range with the highest and the lowest value (refer to the newspaper clipping on the page). The public can bid for the shares at any price in the band specified. Once the bids come in, the company evaluates all the bids and decides on an offer price in that range. After the offer price is fixed, the company allots its shares to the people who had applied for its shares or returns them their money.

SECONDRY MARKET:

Once the offer price is fixed and the shares are issued to the people, stock exchanges facilitate the trading of shares for the general public. Once a stock is listed on an exchange, people can start trading in its shares. In a stock exchange the existing shareholders sell their shares to anyone who is willing to buy them at a price agreeable to both parties. Individuals cannot buy or sell shares in a stock exchange directly; they have to execute their transaction through authorized members of the stock exchange who are also called STOCK BROKERS.

INTIAL PUBLIC OFFERING INTRODUCTION

Corporate may raise capital in the primary market by way of an initial public offer,

rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market.

An IPO is defined as an exercise 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.

The exercise refers the issue of shares to the public by the promoters of the company. The shares are made available to the investors at the face value of the share or with a premium as per the perceived market value of the share by the promoters.

Why Go Public ?

Going public (or participating in an "initial public offering" or IPO) is the process in which a business owned by one or several individuals is converted into a business owned by many. It involves the offering of part ownership of the company to the public through the sale of debt or more commonly, equity securities (stock).

Going public raises cash and usually a lot of it. Being publicly traded also opens many financial doors:

Because of the increased scrutiny, public companies can usually get better rates when they issue debt. As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of

the deal. Trading in the open markets means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent. Being on a major stock exchange carries a considerable amount of prestige. In the past, only private companies with strong fundamentals could qualify for an IPO and it was not easy to be listed. The internet boom changed all this. Firms no longer needed strong financials and a solid history to go public. Instead, IPOs were done by smaller startups seeking to expand their businesses. There is nothing wrong with wanting to expand, but most of these firms had never made a profit and did not plan on being profitable any time soon. Founded on venture capital funding, they spent like Texans trying to generate enough excitement to make it to the market before burning through all their cash. In cases like this, companies might be suspected of doing an IPO just to make the founders rich. This is known as an exit strategy, implying that there is no desire to stick around and create value for shareholders. The IPO then becomes the end of the road rather than the beginning.

Investors can apply for shares in an IPO in 4 different categories: 1. Retail Individual Investor (RII)

In retail individual investor category, investors can not apply for more than Rs two lakh (Rs 2,00,000) in an IPO. Retail Individual investors have an allocation of 35% of shares of the total issue size in Book Build IPO's. NRI's who apply with less than Rs 2,00,000 /- are also considered as RII category. 2. High Networth Individual (HNI)

If retail investor applies more than Rs 2,00,000 /- of shares in an IPO, they are considered as HNI. 3. Non-institutional bidders

Individual investors, NRI's, companies, trusts etc who bid for more than Rs 1 lakhs are known as Non-institutional bidders. They need not to register with SEBI like RII's. Non-institutional bidders have an allocation of 15% of shares of the total issue size in Book Build IPO's. 4. Qualified Institutional Bidders (QIB's)

Financial Institutions, Banks, FII's and Mutual Funds who are registered with SEBI are called QIB's. They usually apply in very high quantities. QIBs are mostly representatives of small investors who invest through mutual funds, ULIP schemes of insurance companies and pension schemes. QIB's have an allocation of 50% of shares of the total issue size in Book Build IPO's. In a book built issue allocation to Retail Individual Investors (RIIs), Non Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs) is in the ratio of 35:15: 50 respectively. QIB's are prohibited by SEBI guidelines to withdraw their bids after the close of the IPOs. Retail and non-institutional bidders are permitted to withdraw their bids until the day of allotment.

THE LIFE CYCLE OF AN IPO

The process flow of a 100% Book Building Initial Public Offer IPO. This process flow is just for easy understanding for retail IPO investors. The steps provided below are most general steps involve in the life cycle of an IPO. Real processing steps are more complicated and may be different. Please visit SEBI website, stock exchange website or consult an expert for most current information about IPO life cycle in Indian Stock market. 1. Issuer Company - IPO Process Initialization y Appoint lead manager as book runner. y Appoint registrar of the issue. y Appoint syndicate members. 2. Lead Manager's - Pre Issue Role - Part 1 y Prepare draft offer prospectus document for IPO. y File draft offer prospectus with SEBI. y Road shows for the IPO. 3. SEBI Prospectus Review y SEBI review draft offer prospectus. y Revert it back to Lead Manager if need clarification or changes (Step 2). y SEBI approve the draft offer prospectus, the draft offer prospectus is now become Offer Prospectus. 4. Lead Manager - Pre Issue Role - Part 2 y Submit the Offer Prospectus to Stock Exchanges, registrar of the issue and get it approved. y Decide the issue date & issue price band with the help of Issuer Company. y Modify Offer Prospectus with date and price band. Document is now called Red Herring Prospectus.

y Red Herring Prospectus & IPO Application Forms are printed and posted to syndicate members; through which they are distributed to investors.

5. Investor Bidding for the public issue y Public Issue Open for investors bidding. y Investors fill the application forms and place orders to the syndicate members (syndicate member list is published on the application form). y Syndicate members provide the bidding information to BSE/NSE electronically and bidding status gets updated on BSE/NSE websites. y Syndicate members send all the physically filled forms and cheques to the registrar of the issue. y Investor can revise the bidding by filling a form and submitting it to Syndicate member. y Syndicate members keep updating stock exchange with the latest data. y Public Issue Closes for investors bidding. 6. Lead Manager Price Fixing y Based on the bids received, lead managers evaluate the final issue price. y Lead managers update the 'Red Herring Prospectus' with the final issue price and send it to SEBI and Stock Exchanges. 7. Registrar - Processing IPO Applications y Registrar receives all application forms & cheques from Syndicate members. y They feed applicant data & additional bidding information on computer systems. y Send the cheques for clearance. y Find all bogus application.

y Finalize the pattern for share allotment based on all valid bid received. y Prepare 'Basis of Allotment'. y Transfer shares in the demat account of investors. y Refund the remaining money though ECS or Cheques. 8. Lead manager Stock Listing y Once all allocated shares are transferred in investors dp accounts, Lead Manager with the help of Stock Exchange decides Issue Listing Date. y Finally share of the issuer company gets listed in Stock Market.

The Underwriting Process: Getting a piece of a hot IPO is very difficult, if not impossible. To understand why, we need to know how an IPO is done, a process known as underwriting. When a company wants to go public, the first thing it does is hire an investment bank. A company could theoretically sell its shares on its own, but realistically, an investment bank is required - it is just the way Wall Street works. Underwriting is the process of raising money by either debt or equity (in this case we are referring to equity). You can think of underwriters as intermediaries between companies and the investing public. The company and the investment bank will first meet to negotiate the deal. Items usually discussed include the amount of money a company will raise, the type of securities to be issued and all the details in the underwriting agreement. The deal can be structured in a variety of ways. For example, in a firm commitment, the underwriter guarantees that a certain amount will be raised by buying the entire offer and then reselling to the public. In a best efforts agreement, however, the underwriter sells securities for the company but does not guarantee the amount rose. In addition, investment banks are hesitant to shoulder all the risk of an offering. Instead, they form a syndicate of underwriters. One underwriter leads the

syndicate and the others sell a part of the issue. Once all sides agree to a deal, the investment bank puts together a registration statement to be filed with the SEBI. This document contains information about the offering as well as company info such as financial statements, management background, any legal problems, where the money is to be used and insider holdings. The SEBI then requires a cooling off period, in which they investigate and make sure all material information has been disclosed. Once the SEBI approves the offering, a date (the effective date) is set when the stock will be offered to the public. During the cooling off period the underwriter puts together what is known as the red herring. This is an initial prospectus containing all the information about the company except for the offer price and the effective date, which are not known at that time. With the red herring in hand, the underwriter and company attempt to hype and build up interest for the issue. They go on a road show - also known as the "dog and pony show" - where the big institutional investors are courted. As the effective date approaches, the underwriter and company sit down and decide on the price. This is not an easy decision: it depends on the company, the success of the road show and, most importantly, current market conditions. Of course, it's in both parties' interest to get as much as possible. Finally, the securities are sold on the stock market and the money is collected from investors. As you can see, the road to an IPO is a long and complicated one. You may have noticed that individual investors are not involved until the very end. This is because small investors aren't the target market. They do not have the cash and, therefore, hold little interest for the underwriters. If underwriters think an IPO will be successful, they will usually pad the pockets of their favorite institutional client with shares at the IPO price.

IPO Advantages and Disadvantages

The decision to take a company public in the form of an initial public offering (IPO) should not be considered lightly. There are several advantages and disadvantages to being a public company, which should thoroughly be considered. The reader should understand that the process is very time consuming and complicated and companies should undertake this process only after serious consideration of the advantages and disadvantages and discussions with qualified advisors.

Advantages of going public:

Increased Capital

A public offering will allow a company to raise capital to use for various corporate purposes such as working capital, acquisitions, research and development, marketing, and expanding plant and equipment.

Liquidity

Once shares of a company are traded on a public exchange, those shares have a market

value and can be resold. This allows a company to attract and retain employees by offering stock incentive packages to those employees. Moreover, it also provides investors in the company the option to trade their shares thus enhancing investor confidence. Increased Prestige

Public companies often are better known and more visible than private companies, this enables them to obtain a larger market for their goods or services. Public companies are able to have access to larger pools of capital as well as different types of capital. Valuation

Public trading of a company's shares sets a value for the company that is set by the public market and not through more subjective standards set by a private valuator. This is helpful for a company that is looking for a merger or acquisition. It also allows the shareholders to know the value of the shares. Increased wealth

The founders of the company often have the sense of increased wealth because of the IPO. Prior to the IPO, these shares were illiquid and had a more subjective price. These shares now have an ascertainable price and after any lockup period, these shares may be sold to the public, subject to limitations of federal and state securities laws.

Disadvantages of going Public

Time and Expense

Conducting an IPO is time consuming and expensive. A successful IPO can take up to a year or more to complete and a company can expect to spend several hundreds of thousands of dollars on attorneys, accountants, and printers. In addition, the underwriter's fees can range from 3% to 10% of the value of the offering. Due to the time and expense of preparation of the IPO, many companies simply cannot afford the time or spare the expense of preparing the IPO. Decisions based upon Stock Price

Management's decisions may be effected by the market price of the shares and the feeling that they must get market recognition for the company's stock. Regulatory Review

The Company will be open to review by the SEBI to ensure that the company is making the appropriate filings with all relevant disclosures. Falling Stock Price

If the shares of the company's stock fall, the company may lose market confidence, decreased valuation of the company may affect lines of credits, secondary offering pricing, the company's ability to maintain employees, and the personal wealth of insiders and investors.

Vulnerability

If a large portion of the company's shares are sold to the public, the company may

become a target for a takeover, causing insiders to lose control. A takeover bid may be the result of shareholders being upset with management or corporate raiders looking for an opportunity. Defending a hostile bid can be both expensive and time consuming

Parameters to judge an IPO

Good investing principles demand that you study the minutes of details prior to investing in an IPO. Here are some parameters that should evaluate:

Promoters

Is the company a family run business or is it professionally owned? Even with a family run business what are the credibility and professional qualifications of those managing the company? Do the top-level managers have enough experience (of at least 5 years) in the specific type of business?

Industry Outlook

The products or services of the company should have a good demand and scope for profit.

Business Plans

Check the progress made in terms of land acquisition, clearances from various departments, purchase of machinery, letter of credits etc. A higher initial investment from the promoters will lead to a higher faith in the organization.

Financials

Why does the company require the money? Is the company floating more equity than required? What is the debt component? Keep a track on the profits, growth and margins of the previous years. A steady growth rate is the quality of a fundamentally sound company. Check the assumptions the promoters are making and whether these assumptions or expectations sound feasible.

Risk Factors

The offer documents will list our specific risk factors such as the companys liabilities, court cases or other litigations. Examine how these factors will affect the operations of the company.

Key Names

Every IPO will have lead managers and merchant bankers. You can figure out the track record of the merchant banker through the SEBI website.

Pricing

Compare the companys PER with that of similar companies. With this you can find out the P/E Growth ratio and examine whether its earnings projections seem viable.

Listing

You should have access to the brokers of the stock exchanges where the company will be listing itself

About Public Issues

Corporate may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both.

There are two types of Public Issues: Features: Pricing under fixed price process: Price at which the securities are offered or allotted is known in advance to the investor.

Pricing under book building process: Price at which securities will be offered or allotted is not known in advance to the investor. Only an indicative price range is known. Demand under fixed price process: Demand for the securities offered is known only after the closure of the issue. Demand under book building process: Demand for the securities offered can be known everyday as the book is built. Payment under fixed price process: Payment if made at the time of subscription wherein refund is given after allocation. Payment under book building process: Payment only after allocation.

SIGNIFICANCE OF IPO :

Investing in IPO has its own set of advantages and disadvantages. Where on one hand, high element of risk is involved, if successful, it can even result in a higher rate of return. The rule is: Higher the risk, higher the returns. The company issues an IPO with its own set of management objectives and the investor looks for investment keeping in mind his own objectives. Both have a lot of risk involved. But then investment also comes with an advantage for both the company and the investors. The significance of investing in IPO can be studied from 2 viewpoints for the company and for the investors. This is discussed in detail as follows:

SIGNIFICANCE TO THE COMPANY:

When a privately held corporation needs additional capital, it can borrow cash or sell stock to raise needed funds. Or else, it may decide to go public. "Going Public" is the best choice for a growing business for the following reasons:

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. This is seen as a

good opportunity by speculative investors looking to notch out some short-term profit. The speculative investors are interested only in the short-term potential rather than long-term gains.

THE RISK FACTOR:

Investing in IPO is often seen as an easy way of investing, but it is highly risky and many investment advisers advise against it unless you are particularly experienced and knowledgeable. The risk factor can be attributed to the following reasons:

UNPREDICTABLE:

The Unpredictable nature of the IPOs is one of the major reasons that investors advise against investing in IPOs. Shares are initially offered at a low price, but they see significant changes in their prices during the day. It might rise significantly during the day, but then it may fall steeply the next day.

NO PAST TRACK RECORD OF THE COMPANY:

No past track record of the company adds further to the dilemma of the shareholders as to whether to invest in the IPO or not. With no past track record, it becomes a difficult choice for the investors to decide whether to invest in a particular IPO or not, as there is basis to decide whether the investment will be profitable or not.

POTENTIAL OF STOCK MARKET :

Returns from investing in IPO are not guaranteed. The Stock Market is highly volatile. Stock Market fluctuations widely affect not only the individuals and household, but the economy as a whole. The volatility of the stock market makes it difficult to predict how the shares will perform over a period of time as the profit and risk potential of the IPO depends upon the state of the stock market at that particular time.

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:

y The fundamentals of the business y The policies and the objectives of the business y Their products and services y Their competitors y Their share in the current market y The scope of their issue being successful y It would be highly risky to invest without having this basic knowledge about the company.

There are 3 kinds of risks involved in investing in IPO:

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.

ANALYSING AN IPO INVESTMENT

POTENTIAL INVESTORS AND THEIR OBJECTIVES:

Initial Public Offering is a cheap way of raising capital, but all the same it is not considered as the best way of investing for the investor. Before investing, the investor must do a proper analysis of the risks to be taken and the returns expected. He must be clear about the benefits he hope to derive from the investment. The investor must be clear about the objective he has for investing, whether it is long-term capital growth or short-term capital gains. 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:

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.

IPO INVESTMENT STRATEGIES

Investing in IPOs is much different than investing in seasoned stocks. This is because there is limited information and research on IPOs, prior to the offering. And immediately following the offering, research opinions emanating from the underwriters are invariably

positive. There are some of the strategies that can be considered before investing in the IPO:

UNDERSTAND THE WORKING OF IPO: The first and foremost step is to understand the working of an IPO and the basics of an investment process. Other investment options could also be considered depending upon the objective of the investor.

GATHER KNOWLEDGE: It would be beneficial to gather as much knowledge as possible about the IPO market, the company offering it, the demand for it and any offer being planned by a competitor.

INVESTIGATE BEFORE INVESTING: The prospectus of the company can serve as a good option for finding all the details of the company. It gives out the objectives and principles of the management and will also cover the risks.

KNOW YOUR BROKER: This is a crucial step as the broker would be the one who would majorly handle your money. IPO allocations are controlled by underwriters. The first step to getting IPO allocations is getting a broker who underwrites a lot of deals. MEASURE THE RISK INVOLVED: IPO investments have a high degree of risk involved. It is therefore, essential to measure the risks and take the decision accordingly.

INVEST AT YOUR OWN RISK: Finally, after the homework is done, and the big step needs to be taken. All that can be suggested is to invest at your own risk. Do not take a risk greater than your capacity.

PRICING OF AN IPO

The pricing of an IPO is a very critical aspect and has a direct impact on the success or failure of the IPO issue. There are many factors that need to be considered while pricing an IPO and an attempt should be made to reach an IPO price that is low enough to generate interest in the market and at the same time, it should be high enough to raise sufficient capital for the company. The process for determining an optimal price for the IPO involves the underwriters arranging share purchase commitments from leading institutional investors. PROCESS:

Once the final prospectus is printed and distributed to investors, company management meets with their investment bank to choose the final offering price and size. The investment bank tries to fix an appropriate price for the IPO depending upon the demand expected and the capital requirements of the company. The pricing of an IPO is a delicate balancing act as the investment firms try to strike a balance between the company and the investors. The lead underwriter has the responsibility to ensure smooth trading of the companys stock. The underwriter is legally allowed to support the price of a newly issued stock by either buying them in the market or by selling them short.

IPO PRICING DIFFERENCES:

It is generally noted, that there is a large difference between the price at the time of issue of an Initial Public Offering (IPO) and the price when they start trading in the secondary market. These pricing disparities occur mostly when an IPO is considered hot, or in other words, when it appeals to a large number of investors. An IPO is hot when the demand for it far exceeds the supply. This imbalance between demand and supply causes a dramatic rise in the price of each share in the first day itself, during the early hours of trading. UNDERPRICING AND OVER PRICING OF IPOS:

UNDERPRICING:

The pricing of an IPO at less than its market value is referred to as Under pricing . In other words, it is the difference between the offer price and the price of the first trade. Historically, IPOs have always been underpriced. Underpriced IPO helps to generate additional interest in the stock when it first becomes publicly traded. This might result in significant gains for investors who have been allocated shares at the offering price. However, under pricing also results in loss of significant amount of capital that could have been raised had the shares been offered at the higher price. OVERPRICING:

The pricing of an IPO at more than its market value is referred to as Overpricing . Even overpricing of shares is not as healthy option. If the stock is offered at a higher price than

what the market is willing to pay, then it is likely to become difficult for the underwriters to fulfill their commitment to sell shares. Furthermore, even if the underwriters are successful in selling all the issued shares and the stock falls in value on the first day itself of trading, then it is likely to lose its marketability and hence, even more of its value

PRINCIPAL STEPS IN AN IPO:

Approval of BOD : Approval of BOD is required for raising capital from the public.

Appointment of lead managers : The lead manager is the merchant banker who orchestrates the issue in consultation of company. the

Appointment of other intermediaries:

Co-managers and advisors Underwriters Bankers Brokers and principal brokers Registrars

Filing the prospectus with SEBI:

The prospectus or the offer document communicates information about the company and the proposed security issue to the investing public. All the companies seeking to make a public issue have to file their offer document with SEBI. If SEBI or public does not communicate its observations within 21 days from the filing of the offer document, the company can proceed with its public issue.

Filing of the prospectus with the registrar of the companies:

once the prospectus have been approved by the concerned stock exchanges and the consent obtained from the bankers, auditors, registrar, underwriters and others, the prospectus signed by the directors, must be filed with the registrar of companies, with the required documents as per the companies act 1956.

Printing and dispatch of prospectus:

After the prospectus is filed with the registrar of companies, the company should print the prospectus. The quantity in which prospectus is printed should be sufficient to meet requirements. They should also forward the same to the stock exchanges and brokers such that they receive them atleast 21 days before the first announcement is made in the news papers.

Filing of initial listing application:

Within 10 days of filing the prospectus, the initial listing application must be made to the concerned stock exchanges with the listing fees.

Promotion of the issue:

The promotional campaign typically commences with the filing of the prospectus with the registrar of the companies and ends with the release of the statutory announcement of the issue.

Statutory announcement:

The issue must be made after seeking approval of the stock exchange. This must be published atleast 10 days before the opening of the subscription list.

Collections of applications : The Statutory announcement specifies when the subscription would open, when it would close, and the banks where the applications can be made. During the period the subscription is kept open, the bankers will collect the applications on behalf of the company.

Processing of applications : Scrutinizing of the applications is done.

Establishing the liability of the underwriters:

If the issue is undersubscribed, the liability of the underwriters has to be established.

Allotment of shares : Proportionate system of allotment is to be followed.

Listing of the issue : The detail listing application should be submitted to the concerned stock exchange along with the listing agreement and the listing fee. The allotment formalities should be completed within 30 days.

BOOK BUILDING PROCESS

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.

Book building process:

Company plan an ipo via the book build route Appoint a merchant banker as book runner Issues a draft prospectus(containing all mandatory comp. disclosure other than price) Draft prospectus filed simultaneously with concerned authority(SEBI) Book runner appoints syndicates member and registered intermediaries to garner subscription Price discovery begins thought the bidding process At close of bidding, book runner and company decide upon the allocation and allotements

The Process:

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 the company concludes the final price at which it is willing to issue the stock and allocation of securities. Generally, the numbers of shares are 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. Book-building is all about letting the company know the price at which you are willing to buy the stock and getting an allotment at a price that a majority of the investors are willing to pay. The price discovery is made depending on the demand for the stock. The price that you can suggest is subject to a certain minimum price level, called the floor price. For instance, the floor price fixed for the Maruti's initial public offering was Rs 115, which means that the price you are willing to pay should be at or above Rs 115. In some cases, as in Biocon, the price band (minimum and maximum price) at which you can apply is specified. A price band of Rs 270 to Rs 315 means that you can apply at a floor price of Rs 270 and a ceiling of Rs 315. If you are not still very comfortable fixing a price, do not worry. You, as a retail investor, have the option of applying at the cut-off price. That is, you can just agree to pick up the shares at the final price fixed. This way, you do not run the risk of not getting an allotment because you have bid at a lower price. If you bid at the cut-off price and the price is revised upwards, then the managers to the offer may reduce the number of shares allotted to keep it within the payment already made. You can get the application forms from the nearest offices of the lead managers to the offer or from the corporate or the registered office of the company.

How is the price fixed?

All the applications received till the last date is analyzed and a final offer price, known as the cut-off price is arrived at. The final price is the equilibrium price or the highest price at which all the shares on offer can be sold smoothly. If your price is less than the final price, you will not get allotment. If your price is higher than the final price, the amount in excess of the final price is refunded if you get allotment. If you do not get allotment, you should get your full refund of your money in 15 days after the final allotment is made. If you do not get your money or allotment in a month's time, you can demand interest at 15 per cent per annum on the money due. How are shares allocated?

As per regulations, at least 25 per cent of the shares on offer should be set aside for retail investors. Fifty per cent of the offer is for qualified institutional investors. Qualified Institutional Bidders (QIB) is specified under the regulation and allotment to this class is made at the discretion of the company based on certain criteria. QIBs can be mutual funds, foreign institutional investors, banks or insurance companies. If any of these categories is under-subscribed, say, the retail portion is not adequately subscribed, then that portion can be allocated among the other two categories at the discretion of the management. For instance, in an offer for two lakh shares, around 50,000 shares (or generally 25 per cent of the offer) are reserved for retail investors. But if the bids from this category are received are only for 40,000 shares, then 10,000 shares can be allocated either to the QIBs or non-institutional investors. The allotment of shares is made on a pro-rata basis. Consider this illustration: An offer is made for two lakh shares and is oversubscribed by three times, that is, bids are received for six lakh shares. The minimum allotment is 100 shares. 1,500 applicants have applied for 100 shares each; and 200 applicants have bid for 500 shares each. The shares would be allotted in the following manner: Shares are segregated into various categories depending on the number of shares applied for. In the above illustration, all investors who applied for 100 shares will fall in category A and those for 500 shares in category B and so on. The total number of shares to be allotted in category A will be 50,000 (100*1500*1/3). That is, the number of shares applied for (100)* number of applications received (1500)* oversubscription ratio (1/3). Category B will be allotted 33,300 shares in a similar manner.

Shares allotted to each applicant in category A should be 33 shares (100*1/3). That is, shares applied by each applicant in the category multiplied by the oversubscription ratio. As, the minimum allotment lot is 100 shares, it is rounded off to the nearest minimum lot. Therefore, 500 applicants will get 100 shares each in category A total shares allotted to the category (50,000) divided by the minimum lot size (100).

In category B, each applicant should be allotted 167 shares (500/3). But it is rounded off to 200 shares each. Therefore, 167 applicants out of 200 (33300/200) would get an allotment of 200 shares each in category B. The final allotment is made by drawing a lot from each category. If you are lucky you may get allotment in the final draw. The shares are listed and trading commences within seven working days of finalization of the basis of allotment. You can check the daily status of the bids received, the price bid for and the response from various categories in the Web sites of stock exchanges. This will give you an idea of the demand for the stock and a chance to change your mind. After seeing the response, if you feel you have bid at a higher or a lower price, you can always change the bid price and submit a revision form. The traditional method of doing IPOs is the fixed price offering. Here, the issuer and the merchant banker agree on an "issue price" - e.g. Rs.100. Then one has the choice of filling in an application form at this price and subscribing to the issue. Extensive research has revealed that the fixed price offering is a poor way of doing IPOs. Fixed price offerings, all over the world, suffer from `IPO under pricing'. In India, on average, the fixed-price seems to be around 50% below the price at first listing; i.e. the issuer obtains 50% lower issue proceeds as compared to what might have been the case. This average masks a steady stream of dubious IPOs who get an issue price which is much higher than the price at first listing. Hence fixed price offerings are weak in two directions: dubious issues get overpriced and good issues get underpriced, with a prevalence of under pricing on average. What is needed is a way to engage in serious price discovery in setting the price at the IPO. No issuer knows the true price of his shares; no merchant banker knows the true price of the shares; it is only the market that knows this price. In that case, can we just ask the market to pick the price at the IPO? Imagine a process where an issuer only releases a prospectus, announces the number of shares that are up for sale, with no price indicated. People from all over India would bid to buy shares in prices and quantities that they think fit. This would yield a price. Such a procedure should innately obtain an issue price which is very close to the price at first listing -- the hallmark of a healthy IPO market.

Recently, in India, there had been issue from Hughes Software Solutions which was a milestone in our growth from fixed price offerings to true price discovery IPOs. While the HSS issue has many positive and fascinating features, the design adopted was still riddled with flaws, and we can do much better

Players:

Co-managers and advisors Underwriters Lead managers Bankers Brokers and principal brokers Registrars & Stock exchanges.

PO Valuation & Data Interpretation

Initial Public Offering 2011

This IPO report provides information about the IPO's came in to India stock market in year 2011. The report tells the amount raised by companies through public offerings in primary stock market in 2011. Summary of IPO market activities: * Partial data. Financial Year: 2011 Total Issue Succeeded: 21 Total Issue Failed: 1 Total Money Raised: 3,316.89 (cr

COMPANY BACKGROUND:

COMPANY FINANCIALS: Balance sheet Income statement Other statement

Risks

Downturn in Gold prices A significant rise in gold prices along with the increase in loan requirement by customers has boosted Muthoot Finance's AUM. Any sharp fall in gold prices could pose challenges. However, Muthoot Finance has a comfortable LTV ratio in line with other gold financing NBFCs ranging from 60-85%, which helps it to combat the downside in gold prices. Also, the shorter tenure of gold loans (usually ranging from three to six months) offers flexibility of resetting the LTVs. Business Concentration in the Southern India Muthoot Finance derives 98% of revenues from the gold loan business. Also, it is expected to remain concentrated in South India, which accounts for 75% of AUM for the short to medium term despite aggressive growth plans in the northern and western states. Royalty Payment to Promoters The company has a royalty clause which is not implemented yet, in favour of promoters for allowing the company to use the Muthoot trademarks, which is fixed at 1% of the annual income, subject to a maximum of 3% of annual profit.

Regulatory Hitches The impact of the State Money Lenders Act for NBFCs, the decision on which is awaited from the Supreme Court, could not only adversely affect Muthoot Finance's lending rates but also increase its operational expenditure, given the requirements (under the act) of registering all establishments with state authorities and complying with state regulations. The decision of the Supreme Court regarding this issue remains a sensitive factor for the company.

Valuations: Balance Sheet Valuation: Discounted Cash Flow Valuation: Growth Rate: Reinvestment Rate: Forecasting Free Cash Flows: Cost of Equity (Re): Cost of Debt (Rd): Weighted Average Cost Of Capital (WACC): Present Value: Terminal Value: Perpetuity Growth Model: Muthoot Finance Ltd.- IPO:

NSE Data: BSE Data: Muthoot Finance Ltd Performance:

Findings:

According to my study the investment done in the securities by the investors is mainly done only by the image of the company but not on the basis of the fundamental analysis.

EPS is the money that is left over after a company pays all of its debt so, higher the EPS the better it is.

A low P/E is generally considered good because it may mean that the stock price has not risen to reflect its earning power. A high P/E, on the other may reflect an overpriced stock or decreasing earnings.

A Beta of 1 indicates that the Securitys price will move with the market. A Beta of less than 1 means that security will be less volatile than the market. A Beta of greater than 1 indicates that the security price will be more volatile than the market.

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. This is seen as a good opportunity by speculative investors looking to notch out some short-term profit. The speculative investors are interested only in the short-term potential rather than long-term gains. According to my study most probably, listing price is more compare to allotment price.

Suggestions:

The investment in IPO can prove too risky because the investor does not know anything about the company because it is listed first time in the market so its performance cannot be measure.

On the other hand it can be said that the higher the risk higher the returns earned. So we can say that the though risky if investment is done then it can give higher returns as well.

For example- we can take the example of Reliance power. The Investors invested in huge amounts with the faith that they will get good returns but nothing happened so when the IPO got listed. So one should think and invest in IPO

Primary market is more volatile than the secondary market because all the companies are listed for the first time in the market so nothing can be said about its performance.

If higher risk is taken, it is always rewarded with the higher returns. So higher the risk the more the returns rewarded for it.

We can fairly predict the future, but cant make it happen as it is.

Limitations:

The study was limited to the information willingly shared by the authorities and clients of Hyderabad Stock Exchange Ltd.

Considerable information has been extracted from the financial statements and documents.

Most of the strategies discussed in this report use the tools and techniques of fundamental analysis, whose main objective is to find the worth of a company.

In quantitative analysis, a company is worth the sum of its discounted cash flows. In other words, it is worth all of its future profits added together. Some qualitative factors affecting the value of a company are its management, business model, industry, and brand name.

The time period for doing this project report containing 45days only and collecting data for completing report are the limitations

Conclusion:

1.An IPO is the first sale of stock by a company to the public.

Broadly speaking, companies are either private or public. Going public means a company is switching from private ownership to public ownership.

Going public raises cash and provides many benefits for a company. The dot-com boom lowered the bar for companies to do an IPO. Many startups went public without any profits and little more than a business plan.

Getting in on a hot IPO is very difficult, if not impossible.

The process of underwriting involves raising money from investors by issuing new securities.

Companies hire investment banks to underwrite an IPO. The road to an IPO consists mainly of putting together the formal documents for the SEBI and selling the issue to institutional clients.

The only way for you to get shares in an IPO is to have a frequently traded account with one of the investment banks in the underwriting syndicate

Bibliography:

Books:

Prasanna Chandra,3 rd Edition, Investment Analysis and Portfolio Management,

Tata McGraw-Hill. Frank J. Fabozzi, Pamela Peterson Drake, Capital Markets, Financial Management and Investment management. M Y Khan Financial Management.

Internet:

www.bseindia.com www.nseindia.com www.sebi.com www.chittorgarh.com www.questgroup.in

www.muthootfinance.com www.moneycontrol.com www.wikipedia.com www.economictimes.indiatimes.com www.icharts.in

5. OBJECTIVE OF THE STUDY

To know the process of Valuation of IPOs To understand the Benefits to investor from IPOs To know regulatory consideration with IPO Methods of IPO process To do detail study of IPO ratings, performance tracker and basis of allotment.

Conclusions: An IPO is the first sale of stock by a company to the public. Broadly speaking, companies are either private or public. Going public means a company is switching from private ownership to public ownership. Going public raises cash and provides many benefits for a company. The dot-com boom lowered the bar for companies to do an IPO. Many startups went public without any profits and little more than a business plan. Getting in on a hot IPO is very difficult, if not impossible. The process of underwriting involves raising money from investors by issuing new securities.

Companies hire investment banks to underwrite an IPO. The road to an IPO consists mainly of putting together the formal documents for the SEBI and selling the issue to institutional clients.

Suggestions: The investment in IPO can prove too risky because the investor does not know anything about the company because it is listed first time in the market so its performance cannot be measure. On the other hand it can be said that the higher the risk higher the returns earned. So we can say that the though risky if investment is done then it can give higher returns as well. For example- we can take the example of Reliance power. The Investors invested in huge amounts with the faith that they will get good returns but nothing happened so when the IPO got listed. So one should think and invest in IPO. Primary market is more volatile than the secondary market because all the companies are listed for the first time in the market so nothing can be said about its performance. If higher risk is taken, it is always rewarded with the higher returns. So higher the risk the more the returns rewarded for it. We can fairly predict the future, but cant make it happen as it is.

Limitations: The study was limited to the information willingly shared by the authorities and

clients of Hyderabad Stock Exchange Ltd. Considerable information has been extracted from the financial statements and documents. Most of the strategies discussed in this report use the tools and techniques of fundamental analysis, whose main objective is to find the worth of a company. In quantitative analysis, a company is worth the sum of its discounted cash flows. In other words, it is worth all of its future profits added together. Some qualitative factors affecting the value of a company are its management, business model, industry, and brand name. The time period for doing this project report containing 45 days only and collecting data for completing report are the limitations

Books: Prasanna Chandra, 3 rd Edition, Investment Analysis and Portfolio Management, Tata McGraw-Hill. Frank J. Fabozzi, Pamela Peterson Drake, Capital Markets, Financial Management and Investment management. M Y Khan Financial Management.