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com
A
PROJEC
T
REPOR
T
T
G
U
I
D
E
"PROF
.
VAISH
AMPA
YAM"
ON
EMERGENCEOF
INITIALPUBLIC
OFFERSASAN
INVESTMENT
AVENUE
FOR
(A
NG
EL
BR
OK
IN
G
LI
MI
TE
D)
INPARTIAL
FULFILLMENTOFTHE
REQUIREMENTSOF
THE
TWOYEAR
FULLTIME
PGPM
PROGRAMME
(ST.MIRA
VISHWAKARMA
INSTITUTEOF
MANAGEMENT)
BY
KAVIT
A
TALES
ARA
MBA
SEMES
TERIII
OF
SM
VI
M
PU
NE
PROJEC
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summertraineeinAngelBrokingLtd
ACKNOWL
andtherebyfulfillingtherequirement
EDGEMEN
T
ofmyMBAcourse.Iwouldspecially
thank Mr. Sameer Amrute (Chief
Its a great privilegeTechnical Analyst) for giving me
that I have done myinputs on Technical Analysis. The
project in such a wellsuccess of any task lies in the
organized
Broking
Iwouldliketoexpressmy
deepsenseofgratitude
towardsallManagers,
Staff and workers and to all those
whodirectlyorindirectlyhelpedme
insuccessfulcompletionofproject.
KAVITA
TALESARA
(Co
St
Mira
Vishwakarma Institute
of Management, for
providing me with a
wonderful opportunity
2
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INDEX
SERIALNO.
1
3
.
4
.
5
.
6
.
7
.
Business Philosophy
Quality Assurance Policy.
CRM Policy.
Management of the company
Services of Angel Broking.
a. E Broking Services.
b. Investment Advisory
Portfolio Management
c. Services
8 What differentiates angel DP
. from
other DPs?
3
RESEARCHMETHODOLOGY
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2. GlobalI.P.OMarket
3. IndianI.P.OIndustry
5
4. OfferDocument
5. SEBIRequirementsforI.P.O
6. PhasesinI.P.O
6.1 ThepreI.P.O
TransformationPhase
6.2 I.P.OTransactionPhase
6.3 ThePostI.P.OTransaction
Phase
7 PricingofI.P.O
7.1Fixedpricemethod
7.2BookBuildingmethod
6
4
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1. Meaning
2. Eligibility criteria for
IPOS/FPOS
3. Trading Permission
4. Payment of Listing Fees
5. Compliance with Listing
Agreement
6. ProcedureandConditionsfor
Listing
7. ListingperformanceofCairn
IndiaLtd.
7.1Companybackground
7
7.2 ItsBusiness
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I
C
7.3
R
A
7.4
L
t
7.5
8.1 B
u
7.6
s
i
n
7.7
e
s
s
o
f
C
r
e
7.8
d
i
7.9
8.
R
a
t
i
n
atio
ns
8.12 Fin
din
gs
9
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
8.10
8.11
INDIANECONOMY
1. I
n
t
r
o
d
u
c
t
i
o
n
2. H
i
s
t
o
r
y
a
n
d
e
v
o
l
u
t
i
o
n
o
f
t
h
e
www.proje
ctsworlds.blogsp ot.com
www.projectsworlds.blogspot.com
CELLULARLTD.&SPICE
COMMUNICATIONSLTD.
1IdeaCellularLimited
2SpiceCommunicationsLimited
3RatiosAnalysis
4ListingofIPOs
5StockMarketPerformance
6Reasonsforpoorperformance
ofSpiceCommunicationsltdas
comparedtoIdeaCellularLtd.
10
11
RECENTNEWSONIPOS
12
FINDINGS&SUGGESTIONS
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13
14
15
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gives
brief
description
to
understand
the
Operations
&
Importance
of
IPOs
in
stock
Market.
The
chapter
on
introduction
explains
why
step-by-step
detail
of
have
conducted
the
how
whole
research.
The next chapter
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3. Factors affecting IPO
listingPrice.
4. Comparison between
INTRODUCTI
IPOsoftwocompanies
ON
fromthesamesectorfor
Asnowadays IPOs
feasible
investment
decision.
Thestudyhasbeencarriedoutfrom
thepointofviewofinvestorsaswell
as the issuing company. I have
focused on the factors which an
investorhastotakeintoconsideration
whilemakingfeasibleIPOdecision.
In the project, I have also
studiedtheListingPriceperformance
ofIPOswiththehelpofCairnIndia
Ltd.&ICRALtd.
In the process of study of
IPOsinbroadertermsIhavetaken
two companies from the telecom
sectori.e.IdeaCellularLtd&Spice
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offeringorpersonalizedtouchtoour
services. Angel is the only 100%
retailstockbrokinghouseofferinga
COMPA
gamutofretailcentricservices.
NY
PROFIL
1 Ebroking
E
2 InvestmentAdvisory
3 Portfolio
Management
ANG
Services
EL
BROK
4 WealthManagementServices
ING
5 CommoditiesTrading
LTD
AbouttheGroup:
ANGELGROUPCOMPANIES
has
always believed in
offering the best of
services to their
customers. Be it in
form of focused
researchorstateofthe
art technology or
customized product
M
e
m
b
e
r
o
n
t
h
e
B
S
E
a
n
d
D
e
p
o
s
i
t
o
r
y
Participant
AngelCapital&DebtMarketLtd.
with
AngelBrokingLtd.
CDSL
Membership
ontheNSE
Cashand
Futures&
Options
lds.blogs
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S
e
g
m
e
n
t
11
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3 Always deliver what we
promise.
4 Effective
management
cost
AngelCommodities
BrokingLtd. Member
ontheNCDEX&
QualityAssurancePolicy
MCX
They are committed to being the
AngelSecuritiesLtd.
Memberonthe leader In providing World Class
BSE
Product&ServicesWhichexceedthe
expectations of their customers
AchievedbyteamworkandAprocess
ofcontinuousimprovement.
Vision
ToProvideBest
ValueforMoneyto
CRMPolicy
InvestorsThrough
InnovativeProducts,
Trading/
Investment
Strategies,Stateof
theartTechnology
PurposeofitWearenotdoinghima
AndPersonalized
Service.
favourbygivingusanOpportunityto
doso.
BusinessPhilosophy
1 Ethical
Management:Thesenior
practices &managementofAngelBrokingLtd.
transparenc areasfollows:
y in all our
dealings.
1.Mr.DineshThakkar,
ChairmanandManagingDirector
2 Customer
interest
above
our
own.
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printmediaseveraltimes.
His
entrepreneurial spirit
inspiredhimtoexplore
anopportunityinretail
broking, a much
ignored sector at that
pointintime,sofaras
the clients were
concerned. Therefore,
what began as a mere
2.Mr.LalitThakkar,Director
Mr. Lalit Thakkar has been closely
associated with the group since its
inception and has been instrumental
insettinguptheOperationalandRisk
Management Processes. Though not
actively involved in the daytoday
operations,heishighlyrespectedby
the senior management and is often
consulted on important decisions of
theGroup.
dabbling in stocks to
make money for him
grew into a serious
business venture that
started20yearsago.
participants
market
He was the
stock
3.Mr.AmitMajumdar,
ExecutiveDirectorOperations&
RiskManagement
to
computerizehisoffice.
His opinions on the
stock market are
valuedandheisoften
sought by the media
for his comments on
markets, investment
strategies and the
Development&HR
4.Mr.Rajiv
Phadke,Executive
DirectorBusiness
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ofFinanceandOperations.Hetakes
careoftheEBrokingbusiness,which
comprisesofBusinessDevelopment,
ProductDevelopmentandOperations.
He is also actively involved in the
commercialaspectoftechnology.
Guaranty
6.Mr.NikhilDaxini,Executive
DirectorSalesandMarketing
Financials, Nagarjuna
functions:organization.HisforteinBusiness
Business DevelopmentOperationsincludesBusiness
and Human ResourceDevelopment,RiskManagement
Development.
andOperationsetc.Hehadearlier
beenassociatedwithHDFCBank
5.Mr.Vinay
Agarwal,
ExecutiveDirector
ECommerce
He is A Chartered
Accountant
by
qualification with 8
years of experience in
the field of Financial
Services.Hebeganhis
career with Angel
Group as a Business
Consultantintheareas
Ltd
7.Mr.KetanShah,Associate
DirectorIT
Mr.KetanShahistheHeadof
TechnologyfortheGroup.Hehasan
industryexperienceofmorethan18
yearsinvariousareasofBusiness
Operations.Heisinvolvedinthe
designingofITPoliciesand
Strategies.Healsolooksfor
Planning,Implementation,and
BudgetingofITrelatedservices.
Milestones
14
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ionof
Angel
December,1997
Capital
IncorporationofAngel
and
BrokingLtd.
N
Debt
Market
Ltd.
March,
2002
Web
enabled
Back
Office
software
develop
ed
Novemb
er,2002
First
ever
Investor
seminar
of
Angel
Group
April,2003Publicationoffirst
ResearchReport
r
a
t
A
p
October,2005Receivedthe
prestigious"MajorVolumeDriver"
awardforFY05March,2005Roll
outof25thbranch
March,2006Crossedthe100,000
markinuniquetradingaccounts
andcompletestherolloutof50th
branch
July,2006Formallylaunchedthe
PMSfunction
n
l
i
n
e
September,
2006
Commence
dMutual
Fundand
IPO
distribution
d"Major
Volume
Driver"
awardfor
FY06
December,
2006
Crossedthe
2,500mark
intermsof
business
associates.
March,
2007
Crossedthe
200,000
markin
unique
trading
accounts.
0
6
ServicesofAngelBroking:
R
e
c
e
i
v
e
EBroking
1 Ebrokingprovides4different
trading platforms suited to
differentindividualneeds
2 Multiple exchanges on a
singlescreen
3 HistoricalCharts&Technical
Tools
15
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ResearchHead.Theirvastexperience
1 Intraday Calls
&NewsFlash and expertise in spotting great
investmentsopportunitieshasalways
2 24 X 7 web
enabled Backbeenbeneficialforourclients.
office
BenefitsatAngel:
3 Online Fund
1 Expert Advice: Our expert
transferfacility
4 Auto payin of
shares.
investmentadvisorsarebased
at various branches across
Indiato provideassistancein
Investment
Advisory
To derive optimum
2 TimelyEntry&Exit: Our
professional guidance
andwillguide youtobook
and
advice.
timelyprofits.Theywillalso
Professional assistance
will always be
beneficial in wealth
onestocktoanotherduring
creation. Investment
variousmarketconditions.
decisions
without
expertadvicewouldbe
like treating ailment
without the help of a
doctor.
3 DeRiskingPortfolio:A
diversifiedportfolioofstocks
isalwaysbetterthan
concentrationinasingle
stock.Basedonourresearch,
Research
Department
wediversifytheportfolioin
growthorientedsectorsand
stockstominimizetherisk
alwaysbeenourforte.
andoptimizethereturns.
Our
investment
advisorydepartmentis
backed
by
an
experience research
16
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returnsinthelongrun.
AngelGold:
FeaturesoftheAngelGold:
Inavolatilemarketit
isverydifficultforan
investor to pick up
value stocks which
will give decent
returnsinthelongrun.
We at Angel Gold
realizeyourneedfora
professional financial
advisorandhenceare
here to assist you in
making wise and
profitabledecisions.
Angelstronglybelieve
1 Apremiumserviceforclients
who need professional
guidance on long term
investments.
2 Minimum fund / portfolio of
Rs.1lacandmaximumofRs.
4laceligibleforAngelGold.
3 Appropriate risk profiling
before taking investment
decisions
4 Periodic group meetings and
seminarsinbranches.
5 Monthly Newsletter from the
deskofAngelGold.
6 Browser based backoffice
software.
Portfolio
Management
risk
Services:
Successful
investingin
CapitalMarkets
demandsever
moretimeand
expertise.
Investment
Managementis
anartanda
scienceinitself.
Professional
Investment
Management
Se
utionalinvestors.
rvi
Portfolio
ce
Management
Services(PMS)is
are
onesuchservice
no
thatisfast
lo
gainingeminence
ng
asaninvestment
er
avenueofchoice
the
forHighNet
pri
worthInvestors
vil
likeyou.PMSis
eg
asophisticated
investment
of
vehiclethatoffers
on
arangeof
ly
specialized
lar
investment
ge
strategiesto
ins
tit
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withcompetent
fund
ca
pit
ali
ze
on
op
po
rtu
nit
ies
in
the
ma
rk
et.
Th
e
Po
rtf
management,
dedicated
researchand
technology,
ensuresa
rewarding
experienceforits
clients.
AngelPMSbrings
withityearsof
experience,
expertise,research
andthebackingof
India'sleading
stockbroking
house.AtAngel,
experienced
portfolio
oli
managementisthe
difference.You
willenjoya
an
relationshipwitha
ag
portfoliomanager
em
equippedtodesign
ent
andimplementa
Se
portfolioaround
rvi
youruniqueneeds.
ce
Wewilladviseyou
co
onasuitable
productbasedon
bi
factorssuchas
ne
yourinvestment
horizon,return
expe
ctati
ons
and
risk
toler
ance
.By
entr
usti
ng
the
man
age
men
tof
your
Port
folio
sto
Ang
ity.
PrivateClientGroup
Angel offers personalized advisory
servicestoaffluentHNIinvestorsand
actively assists them in managing
their portfolio. PCG can seek
guidance on specific stocks in their
portfolioandcangetproactiveadvice
fortimelyexitandfreshinvestments.
Here we also design customized
productsandservicesforourclients
based on there risk profile, returns
need and time horizon. Our
experienced research team, indepth
analysisandcustomizedvalueadded
products and services give us an
immense advantage in assisting you
to generate wealth on a longer and
consistentbasis.Features
2. Minimum Portfolio size of
el,
you
can
enjo
y
con
veni
ence
with
out
com
pro
misi
ng
on
qual
eligibilityforPCG.
3. Portfoliosarecustomizedafter
a due discussion with clients
andourresearchteam.
4. Deployment of funds can
be among various
investing
avenues
availablewithusincluding
PMS, mutual fund,
advisory.
5. Meetings and oneto one
discussion with our fund
managers,
chief
Research
director.
18
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MCXandNCDEX
6.Special
Technicaland
Derivative
strategies.
3 Webbasedtradingplatform
4 Online daily, weekly and
monthlyresearchreports
Angel
offers
6 Individualclientattention
trading
opport
unities
in
commo
dities
market
throug
7 24*7onlinebackoffice
8 Training/educationfacilities/
conductofseminars
9 Digital contract notes cum
bill:Viewyouraccountsfrom
anywhere,anytime
10 Competitivebrokeragerates
11 Efficientriskmanagement
h its
DepositoryParticipant
vast
chainof AngelBrokingLtdhasstartedits
branch depository services by registering
with CDSL. There are various
es
spread
across
the
country efficientdepositoryprocess.
& state
of theWhatdifferentiatesangelDPfrom
otherDPs?
art
Sinceangelassociationisslated
trading
foralongtime,angelisina
platfor
muchbetterpositiontoknow
m.
yourrequirementregardingyour
1 Trading
onholdingandtransferof
securities.
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19
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oftheirdemataccount
alongwithvaluationof
holding.
Nophysical
2. Easiestfacility:Clientcan,
byusingthisfacility,
instructionsare
submittheirowndelivery
requiredforyoursell
instructionsontheinternet
obligations.Angelalso
withouttheinterventionof
offerstotheirclients
theirDP.Thisisinaddition
theautomatedpayin
toallthefacilitiesprovided
facilityfortradedone
undertheEasyfacility.
throughAngelBroking
Ltd/AngelCapital
andDeptMarketLtd.
Thetransaction
chargesthatarebeing
leviedbyusarethe
lowestintheindustry
asangelbelievein
providingquality
servicesatthemost
affordablecosts.
Clientshaveanoption
ofchoosingthe
productsofferedby
CDSL:
1. Easy
facility:
Clientwillenjoythefollowing
distinctivebenefitsbyregistering
withAngel:Noriskofloss,wrong
transfer,mutilationortheftofshare
certificates.Hasslefreeautomated
payinofclientsellobligationsby
theirclearingmembers,ABL/
ACDL
1 Reducedpaperwork.
2 Speedier settlement
process. Because of
faster transfer and
registration
of
securities in clients
Client
account, increased
can
liquidity of clients
view,
securities.
downlo
ad and
print
the
updated
holding
7 Zero upfront
payment.
8 No charges for
extra
transaction
statement &
holding
statement.
9 AllinonecombinedMonthly
BillcumTransactioncum
Holdingcumledger
statement.
20
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RESEARCH
METHODOLOGY
21
worlds.blo
www.projects gspot.com
www.projectsworlds.blogspot.com
them.Incaseofmyprojectthesourceof
ResearchMethodologydataisonlysecondarydata.
isoriginalcontribution
totheexistingstockofSecondaryDataCollection:
knowledgemakingfor
its advancement. It is
The secondary data was collected
thepuristoftruthwithwith the help of various websites,
the help of study. Injournals,magazines,newspapers and
short also covers theemployeesofthestockbrokingfirm.
systematic method ofThedatacollectedfromthewebsites
finding solution to awas good enough to be included in
problemisresearch.Itthestudyanalyzedandconcluded.
also covers the
systematic approachProspectus: For collecting relevant
concerning
abouttheIPOsIhavereferredtothe
generalization and theFinal Draft Prospectus from the
formulation of thewebsiteofSEBI.
theory.
Annual Report: Majority of
information gathered from data
Different
stagesexhibitedintheannualreportsofthe
involved in researchcompany. These include annual
consistsofenactingthereportsofthecurrentyear200607.
problem,formulatinga
I
hypothesis, collecting
N
the facts or data,
T
analyzingthefactsand
R
reaching
certain
O
conclusioneitherinthe
D
UCTION
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investments.Inprovidingan
efficientandrigorousprocessfor
intermediatingtheflowofasociety's
Anysectorthat
savingsintoproductiveuses,the
producesgoodsor
bankingandfinancialsystemisone
servicesiscalledas
ofthecoredeterminantsofthepace
realsector.For
ofacountry'seconomicdevelopment
producinggoodsor
andincreaseinthestandardsof
servicesfinanceis
livingofitscitizens.Furthermore,
required.Hencefor
thebankingandfinancialsystem
realsector,financial
mustfacilitatetransactionsinan
systemisrequired.
economybyensuringthattheycan
FinancialSystemisa
beeffectedsafelyandswiftlyonan
backboneofany
ongoingbasis.Thesignificanceof
economy.The
thefinancialsystemforaneconomy
financialsectorplays
animportantroleinthe
arisesfromatleastthreemajor
sources.First,itperformsvarious
economyofany
transformationfunctionsrelatingto
nation.Awell
intermediationoffundsinthe
regulatedandwell
economy.Secondly,itprovidesthe
developedfinancial
sectorisvitalto
mirrorimageoftheunderlyingreal
achievingthemost
economyandthebasicmacro
basicneedofefficient economicbalances.Thirdly,itisone
allocationofscarce industrywhosebasisofoperationis
underpinnedinpublictrust.
resources.
I
nanymarket
economy,thebanking
andfinancialsystem
playsakeyrolein
mobilizingasociety's
savingsandin
channelingthese
savingsinto
productiveusesand
F IN
AN
C IA
L S
YS
TE
M
u r i t ie
In s ti t u t io n sF /in
ed
i c i a l In s
an
tr u m e n
F in a n c i a l aMrai re ks e t
ts/Sec
23
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recordingamonetarytransaction.
Financial Institutions:Financial
intermediaries provide the link
between the financial and the real
variousrisks.
Financial
Instruments: As
savings are linked to
investments by a
variety
of
intermediaries
&
through a range of
complex instruments.
They are complex in
terms of the features
like maturity, return
Commercial
bills,
bills,
Shares,
Bonds etc. An
instrument
having
monetary value or
CAPITALMARKET
CapitalMarketisapartofFinancial
Market. Capital Market: Capital
marketisamarketforlongtermdebt
andequityshares.Inthismarket,the
capital funds comprising of both
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TheprimarymarketinIndiais
1
channel
totheissuepriceareasbelow:
This deals in those securities
public
whichareissuedtothepublicforthe
authorities
1 Longtermduration. subscriptionforthepurposeofraising
2 Mixtureof
capitalorfund.Secondarymarketis
ownership&debt
an equity trading avenue in which
instruments.
alreadyexisting/preissuedsecurities
CapitalMarketis
dividedintotwo
Markets:
in198182.Therewasadramaticrise
since the beginning of 1990s. The
newcapitalraisedrose199293andfurtherto
to Rs.20,000 crores in
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Rs.26,000 crores in
ofissuesisillustratedbelow:
(alsoknownasprivateshareholdingfamily.The
placements). While
publicandrightsissues
involve a detailed
procedure,
private
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issuercompanymakes
detaileddisclosuresas
pertheDIPguidelines
initsofferdocument
andoffers
itforsubscription.The 3
significantfeaturesare
illustratedbelow:
1
Initial Public
Offering (IPO)
is when an
unlisted
makes either a
fresh issue of
securities oran
offerforsaleof
existing
securities or
both for the
firsttimetothe
scenarioisallowedonlyifitis
made to satisfy listing or
continuouslistingobligations.
Rights Issue (RI) is when a
listed company which
proposes to issue fresh
securities to its existing
shareholders as on a record
date. The rights are normally
offeredinaparticularratioto
company
its
thenumberofsecurities held
priortotheissue.Thisrouteis
bestsuitedforcompanieswho
would like to raise capital
without diluting stake of its
existing shareholders unless
theydonotintendtosubscribe
totheirentitlements.
public. This4
A private placement is an
issue of shares or of
listing
and
convertible securities by a
trading of the
companytoaselectgroupof
issuers
securities.
Further
whichisneitherarightsissue
public offering
(FPO) is when
an
already
raiseequitycapital.Aprivate
listed company
placement of shares or of
makes either a
convertible securities by a
fresh issue of
securitiestothe
public or an
allotment.
A Qualified
Institutions
ofSEBI(DIP)guidelines.
Placement is a
private
placement of
equitysharesor
securities
convertible in
toequityshares
by a listed
company to
Qualified
Theo
retic
al
Back
grou
nd
on
I.P.O
Institutions
Buyers only in
terms
of
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27
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CONCEPT
OFIPO
1
IPOisan
acronymfor(Initial
PublicOffering).
12
13
TheInitialPublic
Offering or IPO
market as it is
known, received
16
a new lease of
lifeinFY99.
companysothatinvestorsknow
whetherthecompanies
agoodinvestmentornot.
Thispavesthewayforlistingin
stockexchangeinthefirstcase,
AnIPOiswhena
company makes
securitiesinthesecond.
either a fresh17
issueofsecurities
or an offer for
openingatmorethan3and10
sale of its
existing
securities to the
flockingtotheIPOmarketlike
neverbefore.Companies,which
first time. It
hadearliershiedawayfromthe
referstofirstsale
of stock by a
companyto
apublic.
satiatetheappetiteofinvestors.
Thestrengthof
14
IPO MEANS
of Indias economy, stock market,
GOING
PUBLIC
corporate profits, energy sector and
15
manyIPOexists.Topglobalprivate
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28
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FlextronicsSoftwareSystemsLtd
630
27.56
IBPCompanyLtd
620
357.01
580
82.36
550
9625
Company HCLTechnologiesLtd
DLFLtd
Priceearningratiobasedonoffer
price.
JetAirwaysLtd
BiggestIPOgainers
ICICIBankLtd
SunTVNetworksLtd Wecanconsidersomeofthestocks'
performancethatgotlistedinfiscal
TataConsultancyServicesLtd
(FY05)todate.
Oil&NaturalGasCorpLtd
PunjLloydLtd
BLKashyap&SonsLtd
AllcargoGlobalLogisticsLtd
UnityInfraprojectsLtd
AllotmentPrice
Indiabulls
19
NDTV
70
BhartiShipyard
66
AdvantaIndiaLtd
SobhaDevelopersLtd
29
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G
l
o
b
a
l
I
P
O
M
a
r
k
e
t.
BiggestIPOlosers
30
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Globalization
of
centofthetotalcapitalraisedbyall
regional
IPOs.
growth,
and
stringency of local
Germany, 4.8
regulatory framework,
allofwhichheightens
the ability of local
Hong kong,
3.5
UK, 6.3
Others, 32.8
Brazil, 6.7
exchanges to support
Russia, 11.6
India, 3.3
China, 13.4
US, 17.6
markets continue to
remainakeyroutefor
corporate's to raise
Hong kong
Germany
UK
Brazil
China
US
India
Others
biggest
momentum,
albeitwithsmallerdeal
I
n
d
u
s
t
r
y
I
.
P
.
O
Russia
nalysis.
31
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Document is the prospectus
and covers all relevant
information that will help the
prospectiveinvestortoarriveat
Ind
ian
I.P.
O
Ind
ust
ry 200
7
adecision.
The DraftOfferDocument
is, as the name suggests, the
initialdraftthathastobefiled
with the security & exchange
boardofIndia(SEBI)atleast21
daysbeforethecompanywants
togopublic.SEBImustsuggest
changesindraftofferdocument
which the issuer will have to
incorporate
Industrial
5%
offerdocument.
Red Herring
The
Tech/Communications
19%
Prospectusisadocumentthat
doesnotspecifytheexactprice
Financials
2%
Industrial
Tech/Communications
Basic Metals,
Consumer
Products/Services
Financials
through
an
advertisementadaypriortothe
OFFER
DOCUMENT:
The
openingoftheissue.
Offer
32
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bleassetsofnotless
thanRs3crores
2. AnetworthofRs1
croresormore
Importa
3. Enough money to
distribute as profits
forthreefullyears.
nce of a
Prospectus A
Prospectus is a
legal document
that
the
(DISCLOSURES
companies use
securities, they
areofferingfor
&
INVESTORPROTECTION)
to describe the
issue.
followduediligence&ensure
prospectus is a
document that
contains
SEBI.
information
that
3
the
investors needs
about
company.
theWHENACOMPANYCHANGES
ITSNAME:
1
SEBI
REQUIREMENTS
FORIPO:
ST
1 CONDITION:50%ofthe
revenue for the preceding year
shouldhaveaccruedforthenew
activity.
ND
down certain
norms
for
companies
making
CONDITION:Sizeofthe
an
identity.
offering to the
TheFortheinvestorsprotectionSEBIhas
company shouldgivenanimportantguidelinetothe
companythattheyshouldbegraded
have.
public.
1. Net fromtheCREDITRATING
tangi
AGENCIES.
E.g.ICRA,CRISIL,
etc.
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33
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IPOlast.
Transaction
phase
3
The PostIPO
transaction
phase
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parameters consideredRefrexRefrigeratorsLtd.IPO
beforefixingtheprice
2)BookBuildingMethod:
totheformer.
SEBIGuidelinesdefinesBook
Thereare3typeof
PricingoftheIPO
Buildingasaprocessundertakenby
which a demand for the securities
1) Fixedpricemethod proposedtobeissuedbyacorporate
2) Book Buildingbodyiselicitedandbuiltupandthe
method
price for such securities is assessed
3) EIPO
forthedeterminationofthequantum
1)Fixedprice
method:
issueradvertisement, document or
companyisallowedtoinformation memoranda or offer
An
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ofbiddingatcutoff.
Cutoffmeansthatthe
investorsarenotactive
bidders but they are
willing to accept
whatever price is
gettingarrivedatbased
on bidding done by
other persons. After
the bidding process is
complete, the cutoff
price is arrived and
shares are issued to
successfulapplicants.
Here the company
givesthepricebandin
which minimum and
maximumpricewillbe
mention. Here, the
investorhastojudgeto
which price they
should
apply.
Example: ABC co
fixespricebandofRs
20toRs25.
36
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orforavalueofnotmorethan
Rs.1,00,000.
PARTICIPANTSIN
ANI.P.O:
Threeclassesof
investorscanbidfor
shares:
The
bids
1. Qualified
clearlyvisiblefromcaseslikeMaruti
Institutional
issuewhichreceived4.80lakhbids,
Buyers: They
buy50%ofthe
issue. Out of
ONGCgot9lakhbids,TCSreceived
13.5lakhbids,NTPCreceived14.70
lakh bids and Reliance Petroleum
this50%,upto
received22lakhbidsallbytheQIB
5% has to beportion. Besides QIB for whom 60
allocated topercentoftheamountisreserved,the
mutualfunds.Itnumber of HNI and the Retail
includes
categorywhomakeupthebalance10
financial
and30percentisalsoincreasing.In
institutions
such
Commercial
purchaseIPOsthroughtheirregular
willneedtoactfasttotakeadvantage
2. Retail
onthemarket.Todothis,theyrequire
individual
businessesadditionally
hire marketers or
someone who canROLEOFLEADMANAGERIN
advertiseormarkettheIPO:
stock.
37
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Itisdifficultto
Mahindraamongothers.
priceanIPOtherefore
the role of lead
manager came into
existences.
The
their
accountability is also
very high. Remember
thattheleadmanagers
credibility could act
onlyasanindicatorto
theproposedissue,but
does not assure
success. For the
purpose of security,
one can look for
category one lead
managers for judging
ROLEOF
IPOsFOR
ISSUING
COMPANI
ES:
thequalityoftheissue
thatincludesMerchant,
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TheProsandConsforthe
Company
In general, companies
offer IPOs inorder to
raise money that they
need for business
expansion and new
business opportunities.
Pros
1. Going public raises cash
which is useful for Capital
Investmentaidinggrowth.They
canthenusethismoneytogrow
theirbusiness.
Many
companiestalent.
apotentialgainbuyingshares.If
the
company
withinterest
8. IPOsarealsoarelativelylow
riskforbusinessesandhavethe
have to repay
potentialforhugegainsandfor
their investors,
hugeopportunities.
unlikeinbusiness
Cons
loans,
which
needtoberepaid
39
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investorsstandtomakealotofprofit
1. It will be coming
under pressure toandveryquickly.
performconsistently
TheultimateWatchword
2. The decision
CaveatEmptor!BuyerBeware.This
makingmayslow
shouldbethewatchwordfor
down as the
investors.Anycompanymayoptfor
company may
anIPO.But,ultimatelyitisyour
have difficulties
hardearnedmoneythatisgetting
in getting the
divertedintounproductive
necessary
investments,whichmaynotgiveyou
shareholders
therequiredreturn
approval.
3. The costs ofFactorstokeepinmindbyan
compliance wouldinvestorbeforedecidingtoapplyto
increases costs andanIPO:
canbeaconstraint.
1
Trackrecordofthe
promoters:Backgroundand
ROLEOFIPOs
FORINVESTORS:
experienceofthepromoters,
themanagementteamand
theirexpertiseisoneofthe
may be undervalued.
mainfactorsthatneedtobe
Initially,tomakeIPOs
consideredastheywillbethe
onesresponsibleforthe
profitabilityofthecompany.
Issueswherepostissue
promotersholdingismore
This
to
than80%mayindicatealack
encourage investors,
ofliquidityinthestocksince
andinvestorswilloften
therearefewershareholders
buyIPOs,thinkingthat
tradingfewershares.Be
carefulofcompaniesthat
haveissuedsharesona
preferentialbasisto
promotersinhigh
helps
proportionate,
soasto
notbenefittotally.
2
increasetheir
stakeinthe
company.
Alsofindout
ifthisisan
offerforsale
oragenuine
InitialPublic
Offering.In
caseofoffer
forsale,the
ParticipationofVenture
Capitals&PrivateEequity
firms:Thiswouldindicate
theriskprofileofthe
companyandtheexpectation
oftheinstitutionfromthe
company.Incaseof
institution,lookfor
nationalizedbanksandall
Indialevelfinancial
institutionsuchasICICI,
issuing
companymay
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40
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thatgoesforapublicoffering
hastofilewiththeSEBI.The
prospectus has all the details
IFCIIDBIetc.
1
Financials:
TheCompanys
balancesheetis
a
very
2
important
document and
investors
should
lookatit
wayofcheckingthevaluation
carefully.
istolookatthePriceEarnings
Investors
shouldlookat
notjustthe
currentbalance
share(EPSwhichislistedin
sheetbutalso
thebalancesheet).P/Eofthe
thatofthelast
issueshouldbecomparedwith
threetofour
yearstogetan
othercompaniesinthatsector.
ideaofthe
Apartfromthesefiveimportant
company's
pointsotherfactorslikeamountto
growthand
bepaidonapplication,thelead
focus.
managersfortheissue,thestock
Prospectus:
exchangesthatissueplanstoliston
Investors
andthecurrentmarketsentiment
shouldreadtheareotherfactorstowatchoutfor.
prospectus for1
the company
carefully. The
prospectus
called as red
herring
prospectus is a
document that
every company
awards. The
andsoon.
agencies will
2
cover the
Estimate Profitability: If
projects of the
company for
which it is
seekingtoraise
funds from the
public. They
willrunacheck
on
the
promoters, the
financials of
thefirm,dothe
valuation, how
the issuer has
retiring highcost
utilized funds
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41
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themarketinwhichit
operateshastobeseen.
estimated
profitabilityof
thecompany.
1
5.)Marketshareorthe
projectedmarketsharevis
visdomesticcompetition.
Fundamentals Ifaninvestorhaveanswered
Beforeyestotheabovequestions,
Subscribing forinvestorsareontheirwayto
an IPO anmakingasmartinvestment.
investor should
study
the
fundamentals
Pricingisan
importantfactorand
the
needtobeconsidered
company. One
carefully.Tojustify
should not
pricing,Compare:
subscribeforan
1.)Thepricetoearningsratio
IPO
just
(thisispricethattheissueis
because the
offereduponearningsper
reason he is
share)whichwouldthrow
getting shares
lightonthepricingofthe
atlowerprices.
issue.
Heshouldlook
of
for following
things:
1.)
The
Businessofthe
Company.
2.)Growth
prospectsofthe
company.
2.)Operatingmargins(thisis
theincomefromoperationless
expensesfromoperation).
3.)Marketcapitalization(itis
thenumberofsharemultiplied
bythepriceatwhichitis
offered)withthecurrent
companiesinthesectorthat
3.)Thesector
arelistedinthemarket.
inwhich
TheProsandConsforthe
companyis
doingbusiness. Investor:
4)Thegrowth SimilarlyfortheInvestorthe
ofthecompany followingarethetwosidesofthe
inproportionto
thegrowthof coin.Theadvantagesforthe
Investorare
summarizedas
below:
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42
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1. Usually
IPOs
comewitharigorous
process of Book
buildingandrelevant
disclosures and risks
spelled out in the
pie.
4. Statistics: Of the 15 biggest
IPOsmadeafter1January2006,11
are still in the positive zone. The
four laggards are Cairn India,
Parsvanath, Lanco Infratech and
public
offerings make a
good opportunity to
make a profit
because they are so
inexpensive. In fact,
manyofthedotcom
millionaires of the
1990s made their
money
simply
throughIPOs.
3. The
retail
investors generally
have a proportion
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money.Theycanthen
usethismoneytogrow
their business. The
more their business
grows, in turn, the
highertheshareprices
grow and the more
moneyisgeneratedby
investors purchasing
shares.
6) RegulatoryNorms:
The quality of IPOs
has improved in the
past few years due to
tighterentrynormsand
better vetting, both at
Securities
and
Exchange Board of
India(SEBI)andatthe
two major stock
exchanges.
Since
5) Appr
eciation
10 companies were
in
forced to withdraw
Value.
theirissueplansbythe
By
stockexchangesand
offering
shares
to
investor
s,
compan
ystands
to bring
in a lot
of
44
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price track record
which can give an
SEBI.
Moreov
er,half
ofeach
issue
hasto
be
bought
by
instituti
onal
investor
s,who
indication of the
market perception of
thestock.
2. Companiesmightbe
doing an IPO to
provide an exit
strategy for the
founders. This implies
thatthepromotercant
create value for
shareholders or the
promoters dont see
growthinthebusiness.
runtheir
L
I
S
T
I
N
G
due
diligenc
eonthe
quality
ofthe
issuer
and
priceof
securitiestodealingsonarecognized
the
stockexchange.Thesecuritiesmaybe
issue.
Thepitfallsare:
1. A
institutions/corporations,
compan
municipalities,etc.
y
coming
outwith
Theobjectivesoflistingaremainly
to:
an IPO
1 Provideliquiditytosecurities;
has had
2 Mobilize savings
economicdevelopment;
no past
for
3 Protect interest
of investors by
ensuring full
disclosures.
smallcapcompanies.Alarge
cap company is a company
withaminimumissuesizeof
Rs. 10 crores and market
ELIGIBILITY
CRITERIA FOR
IPOs/FPOs
capitalizationofnotlessthan
Rs. 25 crores. A small cap
company is a company other
1. Companies
have
been
thanalargecapcompany.
classified as
large
cap
companies and
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45
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paidupnumberofequity
shares with the issue
1. In respect of Large
CapCompanies
1.
The
price).
2. In respect of Small Cap
Companies
minimum
1.
postissue
paidup
CompanyshallbeRs.3
capital of the
crores;and
applicant
2.
Theminimumissuesize
shallbeRs.3crores;and
3.
company
(hereinafter
2.
3.
Theminimumpostissue
referredtoas
capitalization of the
"the
CompanyshallbeRs.5
Company")
crores
shallbeRs.3
capitalization shall be
crores;and
calculated
The
minimum
issue size
shall be Rs.
10 crores;
and
The
by
The
minimum
income/turnover of the
Company should be Rs.
market
capitalization
(market
issuepaidupnumberof
minimum
of
preceding three 12
the
Company
shall be Rs.
monthsperiod;and
5.
Theminimumnumberof
publicshareholdersafter
theissueshallbe1000.
6.
25 crores
(market
capitalization
maybeconductedbyan
shall
be
independent team of
calculated by
Chartered Accountants
multiplying
or Merchant Bankers
thepostissue
appointed by the
Exchange,
financial institution or a
the cost of
scheduled commercial
whichwillbe
borne by the
company.
12months.
The
requirement
of a due
diligence
studymaybe
waived if a
orlds.blog
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46
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b)Theapplicant,promoters
and/orgroupcompanies,
shouldnotbeindefault
incomplianceofthelisting
agreement.
3. For all
compan
ies:
1) In respect of
SEBI(DisclosureandInvestor
therequirement
of
paidup
capital
and
market
Protection)Guidelines,2000.
Trading Permission
As
per
Securities
and
disclaimer
shares)
Basis
company
of
should
securities
the post issueAllotment
number
of
and
dispatch
of
Letters/Share
ofCertificates
and
Refund
issuerof
listing
permission
to
applied
for
listing
of
its
securities,
cannot
itExchange
proceedunder
Section
Board
22
of
India
of
the
Contracts
lds.blogs
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given hereunder:
SCHEDULE OF
LISTING FEES
FOR THE YEAR
2007-2008
Payment of
Listing Fees
Sr.
All companies
listed on the
Exchange have
No.
1
Particulars
InitialListingFees
to pay Annual
AnnualListingFees
Listing Fees by
(i)Companieswithpaidupcapital*uptoRs.5crores
(ii)AboveRs.5croresanduptoRs.10crores
year to the
Exchange as per
(iii)AboveRs.10croresanduptoRs.20crores
the Schedule of
Listing Fees
prescribed from
Companieswhichhavealistedcapital*ofmorethanRs.20cror
additionalfeeofRs.750/foreveryincreaseofRs.1croresorp
time to time.
4
Incaseofdebenturecapital(notconvertibleintoequityshares)o
The schedule of
thefeeswillbecharged@25%ofthefeespayableaspertheab
scales.
*includesequityshares,preference
2008, prescribed shares,fullyconvertibledebentures,
by the Governing partlyconvertibledebenture
Board of the
Exchange is
48
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other
things,
to
Distribution
Schedule
30,2007willattract file
impositionofinterest with the Exchange annually;
@12%perannum
to furnish financial results on
w.e.f.May1,2007.
a quarterly basis; intimate
promptly to the Exchange the
Compliance with
Listing Agreementhappenings which are likely
to
materially
affect
the
The
are
enter
into
anExchange
monitors
the
agreement
the
make
certainminimum
number
of
shareholders, etc.market.ListingofanIPOisvery
and
takes
penalimportantforanyinvestorsinceat
ofeithersellingitorholdingitin
companies.
After
the
completion of IPO
process, the next
step is the
allotmentofshares.
Aftertheallotment,
ListingperformanceofCairnIndia
Ltd.
with secondary
lds.blogs
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49
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andproductionassetsinIndiaforover
12 years in partnership with the
Government of India, state
Company
background:
CairnIndia(CIL)wasindustryparticipantssuchasONGC.
incorporated on 21A company trading on the Main
August 2006 tomarket of the London Stock
consolidate CairnsExchange in the year 1988. Cairn
business and interestsIndia is one of the few companies,
in India. CIL iswhich have been successful in
acquiringitsassetsanddiscovering reserves in the country
business
throughsince1985,inRajasthan,andnowhas
Edinburgh.
Its coreCambaybasinoffthewestcoastanda
areaoffocusisSouth22.5percentstakeinRavvaoiland
Asia:itholds materialgas field in the KrishnaGodavari
exploration
including
discoveries
18millionbarrels.CairnIndiaestimates
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50
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which
the
additional reserves of
fields
according
to
company's estimates.
Other fields outside
Rajasthan
are
estimatedtohavetotal
inplace reserves of
934millionbarrels.
IPOHighlights:
CairnIndia,oneofthe
most successful oil
exploration companies
in the country, has
z
e
o
f
t
h
e
i
s
s
u
e
r
a
launchedamegaIPO
oneofthebiggestever
primarymarkets.Cairn
538,470,588 equity
shares, including an
ri
).
fundthetotalexpenditureset
forthfor200709.
HoldingsLimitedpartofthe
developmentoftheRajasthan
development of other
producingfields.
CairnIndiaLtdIPODetail:
D
e
p
e
n
d
i
n
g
IssueOpen:
December1
IssueType:
100%Book
PublicOffer)
IssueSize:
328,799,67
FaceValue:
Rs10/
IssuePrice:
Rs160/toR
51
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Pvt.
35Shares
MarketLot:
Minimum Order
Quantity:
Maximum
4
5
35Shares
Rs100,000/
Subscription
Amount
Tuesday,
January
9,2007
for
BSE,NSE
RetailInvestor: DSPMerrill
Lynch
Listing:
Limited,
LeadManager: ABN
AMRO
Securities
(India),
6
7
Registrar:
JMMorgan
Cairn India Stanley
Limited Listing Bigshare
Date:
Services
over
in in the secondary
subs
BSEScript crib
Code:532792
ed
NSESymbol: 1.3
CAIRN
time
Listedin:A son
Group
the
ISIN:
ope
INE910H010
ning
17
day
ICICIDirect
ScriptCode: indi
cati
CAIIND
fu Sensex plummeting by
ng
inve
Responseto
stor
theIPO:
conf
The
iden
IPO of Cairn
ce
India was
n 400pointshowever,the
daissue received a strong
m response from foreign
eninstitutional investors
ta (FIIs).Therewerebids
ls, for 42 crores shares
as against the quota of
sh 19.72 crores shares for
ar QIBs.Amajorchunkof
es the subscription has
g come from qualified
ot institutional buyers,
tr investment
bankers
as involvedwiththeoffer.
he
d
52
w
.projectswo ot.com
w
rlds.blogsp
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othereasonofpoorresponsefrom
investors,itslistingpricewaseven
All the
bids were from FIIs
and none from banks,
belowthemarketprice.Thereare
severalreasonsforthepoor
response:
financial institutions
ReasonsforPoor
Subscription&Poor
Listing:
TheCairnIndiaIPO
receivedapoor
responsefromthe
investorsnotgetting
fullysubscribed.Duet
productionsharing
tosellallthecrude
transportthecrudeallthewayto
to the government
Mangaloreandifitisrequiredto
nominated
setuptheevacuationpipeline.In
company MRPL
anycase,thediscoveredreserves
areofa'waxy'kindandmayfetch
option of selling
processing.Prices.Thecompany
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waxycrudeoilwouldrequirehot
water injection technique that is
is required the
supplythewholeof
its production to a
company
designated by the
government,inthis
case MRPL. The
purchase
price
wouldbebasedon
a basket of prices
of crude oils of
different standards,
to be agreed
between the buyer
and seller only
before six months
likelytoaddtotheoverallcostof
production. The oil from
Rajasthanwasthickandwaxyand
specialheatedpipelineswouldbe
neededtotransportitmaynotbe
easy to extract oil from the
Rajasthan [Largest reserve] and
many incur additional expenses
Ontheotherhand,thewaxycrude
oil would get lower realization.
The company expects realization
of around 510% discount to
Brent. However, it could be
relatively much lower at a
discountof1020%goingbythe
prevailingtrendinthemarket.
pricemaybelower
valuationsofstateownedONGC
projections by the
company.
statedinvariousresearchreports
it.
The
production of such
[CLSA,ShareKhan,JMMorgan
Stanley], the offer price was
expensive.
6. And finally, and the most
important, investors were
shatteredbythe800pointfallin2
days.Thelackofinvestorinterest
fortheCairnIndiaIPOcanalso
be attributed to the sharp
correction in the market on
Monday. Brokers
saidadownturnin
themarkettendsto
especially among
ofsmallerissuesof2006,which
shortterm
investors. This is
times.Analystswerealsobullish
because if market
ontheissuebeforeitssubscription
is subdued at the
ofIPOs,therisein
issuegottremendousresponseon
reflectonthefinalday.The
checked.
7. Low
over
subscription
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includeawriteoffoftheunsuccessful
explorationcostofRs236.73croreon
15 wells digged in Rajasthan block
prior to the successful discovery of
the Mangala oil field. On a
comparative valuation basis, at the
upper end of the price band CIL is
offeredatdoublethevaluationofthe
stateowned Oil & Natural Gas
Corporation(ONGC).So,wecansay
that the issue of cairn India is
expensive.
Findings:
subscription
numbersduetoall
issuegotlistedata
mentionedreasonsirrespectiveof
price.
Valuations:
CairnIndiaIPOaprudentinvestor
Based
the
consolidated financials
Cairnindiawillstartcomingonly
after2009,Sotheinvestorsshould
endedDecember2005,
whichhadaffecteditslisting.
on
standsatRs92crores,
including onetime
income of Rs 230
crore. Also the
(CreditRatingAgency).
Listingperformance
ofICRALtd
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3
BusinessofCredit
RatingCompanys
(ICRA)
portfolioinunratedbonds.
4
Thefollowingfactors
governtherating
business:
1
Creditratingis
mandatory for
issuance of
debt
instruments by
ratednonSLRsecurities.
Nongovernment
PFs,
Superannuationfunds,Gratuityfunds
can only invest in bonds issued by
public
financial
institutions,
listed
exchanges
market.In200506,96.25%oftheRs
herethatinIndia;onlyabout10per
whichimplyhugepotentialforrating
agenciesinthedaysahead.
AbouttheCompany
listed.
ICRALtd.isone
amongstthefourcredit
ratingagenciesinIndia
providingawide
structuredfinance.
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BusinessofICRA
rangeofproductsandThe company is primarily
engaged in the business of
services. They were
providing rating and grading
establishedin1991as
services and research based
acreditratingagency
information services. It rates
by a consortium of
rupee-denominated
debt
financial/investment
instruments issued by entities
institutions,
including
Corporates,
commercialbanksandNBFCs, Financial Institutions,
financial
servicesPublic
companies.Itoperatesand
Sector
Municipalities,
as a professionallyothers.
managed commercialstructured
entity with thecredit,
objective
Undertakings
It
also
finance,
project
among
rates
line
of
finance,
maximizing
owned
it subsidiaries, it provides-
subsidiaries, namely,
service:
This
IMaCS, ICTEAS and Consulting
segment contributes 18% to
ICRAOnline.IMaCS
the revenue stream. In this
provides management
space the growth has been
consulting services.
secular at 28% till FY06. But,
ICTEAS is into
in the current year the
providing business
growth has been nearly flat.
solutions
and
IMaCS, a wholly owned
computer aided
subsidiary
provides
engineering services.
management
consultancy
ICRA
Online
services to clients based on
provides mutual fund India and abroad under five
based information business
areas
services
and infrastructure,
outsourcingservices.
banking
and
namely,
energy,
insurance,
corporate
Information
technology
advisory
government.
IMaCS
clientsFY06
include
FIs,
and
currently
manufacturing
organizations,
service
management,
management
and
analytics.
The
andclients
multilateral
agencies.
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grading
of
small
scale
BP
Lubricants
Judge
and
Technical
Staffing. Majority
portion
of
business
involved.
Besides
services
also
This
segment
is
small
of
business,
contributes
which
close
to 3% to the top
line.
Here,
the
growth is sedate
even on a lower
base.
In
space,
this
ICRA
provides Grading
Services
in
relation
to
construction
realty
developers,
healthcare
Outsourcing
Fund
services:
aggregation
and
small
business,
segment
and
due
to
of
low
ICRA
provides
Also
services
Investors
ICRA
mutual
Online
information
management
Moodys
companies/entitie
s,
Mutual
based services.
Information
services:
and
Service.
monitors
funds
to
rated
the
by
maritime
institutions,
equity shares and
of
India).
ICRA
outsourcing
enhancingshareholdervaluethrough
assignments
of pursuingstrategiesthatincreasethe
other profitability and return on equity.
any
BusinessStrategy
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withMoodysGroupMoodysIndia,
whichispartoftheMoodysGroup,
ICRAplanstoexpand
ICRA.Further,thecompanyprovides
core
MoodysInvestorsService.
and
3 Richdatabaseandresearchsupport
strategic relationship. itsproductsandservicesportfolio
Toincreaseits market
4 Product and service innovation.
share ICRA plans to
The company believes that part of
concentrate
on
their success lies in their ability to
providing high quality successfully introduce new products
competencies
visibility, financeratings,issuerratings,mutual
intermediaries.
& andprojects.
5 Demonstrated track record of its
rating.ICRAbelievesthatforratings
Competitive
Strengths(Reasons
forgood
Subscription)
1 Oneofthefewcredit betweentheactualperformanceofthe
rating agencies in
ratingsitassignsandwhattheratings
India.
themselves convey. Since 2001, the
2 Close association
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issuesizeatthehigherpricebandis
demonstratea
at Rs 85.17 crore. It is also an
relativelylower
likelihoodofdefault associate of Moodys Investors
andahigherdegreeof
stabilitywithgreater Services. Moody has 29% stake in
resiliencetochange.
ICRAIPO
ICRA Limited has
entered the capital
markets with a issue
of 25.81 Lac Equity
IssueSize:
BookBuilding
2.5mEquityShares
PriceBand: Rs.275Rs.330
IssueOpens:d_
March20,2007
IssueCloses: March23,2007
MinimumBidLot: 20Equity
Sharesatapriceband sharesandin
of Rs. 275330.The Multiplesof20thereafter
company
entered Listing:
BSE&NSE
SBICapital
equity LeadManagers
KotakMahindra
sharesofRs10each, Co.Ltd.
Capital
forcash,atapriceto
Registrar:
IntimeSpectrum
be decided through a RegistryLimited.
2,581,100
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ICRAwouldbethe
secondcompany
goingforlisting
(amongthefours).
Mostoftheexpertshad
recommendedtheICRAIPOdueto
theirfollowingreasons:
Objectiveofthe
Issue
1 The objects of the
offer are to achieve
Experts/Company
Result
ICRAisanexcellentissue.
thebenefitsoflisting
on
the
exchanges
stock
and
Reasons
Thepricebandis
reasonable;counterdemand
isgood.Themain
provide liquidity to
existing shareholders
advantagetothecompany
andemployees.
isthatSebihasmaderating
compulsoryforthedebt
RSIyer
3 Toavailthelisting
benefits.
(KRChoksey)
(Prabhudas
issues.Investorsmust
Apply
ManishBhatt
subscribetoissue.
ICRAlookstobegood
Apply
issue,atanattractiveprice
issueistoprovidean
exit route to the
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investorstoICRA,aleadingprovider
ofinvestmentinformationandcredit
ratingservicesinIndia.Everytypeof
Lilladher)
SPTulsian
(Investment
Advisor)
portionwassubscribed72timesand
retailinvestorsat54times.
ResponsetoIPO
ICRAIPO
oversubscribed75
times.
It was a magnificent
response
from
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2. Further,atleast15%oftheoffer
shallbeavailableforallocationona
SubscriptionDetails proportionate basis to non
institutionalbiddersandatleast35%
Investors
whereinupto50%of Registry.
the offer shall be
allotted
on
proportionate basis to
qualified institutional
buyers(QIBs).Further,
5%oftheQIBportion
shall be available for
allocation to mutual
funds only and the
remainingQIBportion
shall be available for
allocation to the QIB
bidders
including
ReasonsforGoodListing
1.Oneofthefewcreditrating
agenciesinIndia.
ICRAisoneofthefourcreditrating
agencies in India. It is primarily
engagedinthebusinessofproviding
rating, grading and research based
information services. Infiscal 2006,
volume of debt rated by ICRA was
Rs138949croreandthenumberof
published issuers rated by them
outstanding
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theUS,ICRAssubsidiary,ICTEAS
has initiated the process for
as onMarch31,2006
were 398. It enjoys
strong market position
forcreditratingsinthe
incorporatingasubsidiaryintheUS.
Withtheproposedimplementationof
BaselIInorms,thecompanyexpects
the requirement for rating loan
entity.
forratingsstemsfromthedeveloping
2.Expansiontodrive
debt market, increasing leverage of
growth.
ICRAplanstoexpandcorporates and increasing capital
business by using itsrequirements of banks and financial
coreinstitutions. Grading of equity
competencies andissuances, which is currently
strategic relationship.voluntary,ifmadecompulsory,could
brand
intermediaries.
&4.IndustryDrivers
ToDemandforratingservicesisderived
expand its presence infrom the overall resource
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6.CloseAssociationwithMoodys
Group.
MoodysIndia,whichispartofthe
MoodysGroup,isthepromoterand
5.Strongdatabaseand
holds29%inthecompany.Moodys
keytoproduct
innovationwilladdto Investor services, which is an
revenue.
internationalcreditratingagency,has
Indepthknowledgeinentered into Technical Services
several
supplemented
knowledge
management systemscompany.ICRAalsoprovidescertain
has enabled ICRA tooutsourcingservicestoMoodys.
create a rich database7.StrongMarketPositioning.
to address to varied
Valuations
present
portfolio.
product
18xannualizedFY07Eearnings(post
issue)ascomparedtoCRISILwhich
is trading at 21xsubsidiaries,particularlyits
FY07E
annualized
EPS.
ICRAs
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outsourcing division,
are in initial stages
and
FY06
consolidated numbers
donotfullyreflectthe
currentlytradingat39.67xitsCY06
EPS of Rs 55.33. The EBIDTA
marginofICRAislowerat33.5%,
compared to 41.2 % in case of
CRISIL.
like ofRs18.12.TheMoodyspatronage,
going
forward.
There is only one
listed company, the
leader CRISIL. The
rating business may
not attract more
playersinfuture,due
to high reputation of
existing
players,
especially CRISIL
and ICRA. It can be
observed that the
other
business
segmentofICRAwill
contribute
Findings:
From the above IPO, we can
concludethatlistingofICRALtd
wasabovetheissuepricedueto
its strong fundamentals & above
mentioned reasons So, before
going for ICRA IPO a prudent
investor should aimed at long
termreturnsaswellasexpecting
goodlistinggains.So,Bymaking
a thorough analysis of the
company, its fundamentals, its
unique position in the business,
financials& its valuations
investorsshouldhaveinvestedin
theIPO
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INDIAN
ECONOMY
In1991,the
Historyandevolutionofthe
telecommunicationssector:
GovernmentofIndia
PhaseITakeoffPhase
initiatedaseriesof
Priorto1991,thetelecommunications
comprehensive
industryinIndiawasstateowned.In
macroeconomicand
structuralreformsto
processofintroducingprivatesector
promoteeconomic
participation
in
the
stabilityandgrowth. telecommunicationssectorbyinviting
bidsfromIndiancompanieswithno
Thekeypolicy
reformsthatwere
morethan49%foreignownershipfor
initiatedbythe
Governmentwere
focusedon
metropolitan
deregulatingcertain
industrysectors,
acceleratingforeign
investmentand
In
implementinga
1999,
Circles.
the
The
National
privatizationprogram NTP1999)wasannouncedbythe
fordisinvestmentin
Governmenttoaddressthedifficulties
publicsectorunits.
67
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withinspecifiedshortdistancecalling
areasinwhichtherelevantsubscriber
isregistered.InOctober2003,TRAI
PhaseIIHigh
GrowthPhase
recommendedtotheGovernmentthat
applicable
to
the
India)
telecommunications
equityofthecompany.
service providers to
limitedThekeyreasonsforthesignificant
growthintheindustryinthelast
mobilityservicesusingphaseofgrowthwere:
Wireless Local Loop1
CPP effect on the usage
provide
2
Intensified
4
Introductionofmicroprepaid
competition due to
plans;and
theentryofReliance
5
Introduction of extended
Televentures
validitycards.
Limited;
3
Introduction of
schemes
like
Monsoon Hangama
byReliance;
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consumers.Disposableincomeshave
risenbyaCAGRof10%overthelast
tenyears,resultinginanincreasein
TELECOM
INDUSTRY
GROWTH
DRIVERS
economic
mobile
telecommunications
industryisexpectedto
continue to enjoy
growth in terms of
EconomicResearch(NCAER),the
numberofhouseholdsinthemiddle
income,highincomeandrich
categories is expected to increase to
approximately37million,21million
and 23 million, respectively, by
financial year 2007 from
approximately24million,14million
and 12 million, respectively, in
financialyear2002assummarizedin
thediagrambelow:
the
purchasing power of
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withahigherpropensitytospendwith
increasing disposable income and
withincreasingtrendawareness.
Set out below are details of the
demographicageprofileinIndiafor
Thissignificant
theperiod2001to2010.
improvementin
affluencecoupledwith
thegrowingworking
populationisexpected
tobeoneofthekey
driversforincreased
mobile
telecommunication
penetrationinthe
future.
1 Favourable
Demographics
inIndia.
The
favourable
demographicprofileof
Indiaasreflectedinthe
increase in the
serviceoriented
sectors, leading to an
groupbetween1544
mobile
telecommunications
for
services.
telecommunications
servicessincethis age
group is associated
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Thecontributionofthe
serviceoriented
sectors to the Indian
GDP has increased
significantlyinthepast
five decades. Service
oriented
sectors
contributed
service
providers.
1 Fall in incremental capital
expenditure per subscriber
andeconomiesofscale.
technologyenabled
servicesinthelasttwofuture.
decades.Thisshouldin
turn lead to increased
demand for mobile
telecommunications
services.
1 Increase in prepaid
subscribers through micro
prepaid and extended
validitycards
willbeadriverforfuture
growth.
1 Declining
Currentgrowthinthesubscriberbase
tariffs and
ismainlyattributabletogrowthinthe
reduced
handset costsnumber of prepaid subscribers. The
haveenhanced
growth in this segment is primarily
subscriber
due to lower entry costs for
growth.
Tariffs have beensubscribers and the availability of
decliningoverthepastproducts and services. From the
subscribers
areofferingsofmicroprepaidplansand
they
pose
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regulatoryregimehasfosteredhealthy
competition in addition to allowing
significantFDIparticipationofupto
1 Increasing
demand for74% ownership in telecom
valueadded companies.Theseregulatorychanges
telecommunic
andrefinementsinrecentyearshave
ationsservices.
brought greater clarity to existing
As
the
rules and procedures enabling the
telecommunications
operators to focus on improving
needs of subscribers
network
quality
and
become increasingly
telecommunications services. This
sophisticated, we
situation has also made it easier for
expect increased
companiesoperatinginthissectorin
demand for value
India to raise financing and other
added data services
funding on more attractive terms
such as music
giventhegreaterpredictabilityofthe
messaging and voice
operational environment. Since the
recognition products.
regulatoryframeworkis anevolving
This trend will be
processwithintheindustry.
enhanced by the
development
and
mobile
The
urbanandruralareasandhighcapital
intensity of providing last mile
connectivity to fixedunremunerativetoprovidefixed
linesubscribers makes
it
economically
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lineservicestoalarge
section
of
the
population.Inaddition,
the value proposition
of
wireless
connection
is
significantly higher to
atelecomsubscriberas
compared to a fixed
line service. This
mobilityadvantagehas
expanded the market
for
the
entire
telecommunications
industry. We believe
increased spending
power and changing
demographicprofileof
the population in
favour of the younger
generation have also
contributed to the
growth of wireless
industry.
1 InternationalLongDistance
("ILD")
Stateowned Videsh Sanchar Nigam
Limited(VSNL)hadtheonlyILD
licenceinIndiauntilApril2002the
Government decided to open up the
ILDsegmenttocompetitionwithout
any restriction on the number of
operators. Thus, the monopoly of
VSNLended.DataAccess,Reliance
Infocomm and Bharti Televentures
applied and were issued licences
shortly after the Government issued
the detailed guidelines and licence
conditionsinJanuary2002.Reduced
tariffs, increased globalization,
growth in outsourcing based
industries and increased penetration
have fuelled the growth in usage
minutesintheILDsegmentoverthe
pastyears.
1 National Long Distance (
NLD)
NLDserviceswereastatemonopoly
untilmid2002,withBSNLbeingthe
1 Wireline
players
Government decided to open up the
including Reliance
NLDsegmenttocompetitionwithout
Infocomm, Bharti
any restriction on the number of
players.
IncreasedhasfuelledgrowthinNLDsegment.
competitionowingtoa
Telecomindustryisoneofthe
LowerSo,
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SpiceCommunicationsLtd.
telecom companies
also present a good
opportunity for the
investment since they
are the main growth
driversintheindustry.
However in the same
telecom industry the
performance of the
IPO of Idea cellular
Ltd.
&
Spice
Communications Ltd.
aredifferent.So,even
inthesamesectorthe
investor
analyze
should
the
Fundamentals of the
companies separately
to estimate the future
prices of the stock.
Below lies the
comparisonofIPOsof
Idea Cellular Ltd. &
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n
l
e
ComparisonofIPOs
ofIdeaCellularLtd.
&Spice
CommunicationsLtd.
1 Idea Cellular
Limited
r
i
v
ISSUEDETAILS
PriceBand
t
Rs6575
e
NetIssueSize
Rs20,750million
L
GreenShoeOption Rs3,187.5million
i
IssueSizewith
Rs23,937.5million
m
GreenShoeOption
MinimumBid
Quantity
MaximumBid
(Retailers)
90
t
e
d
100,000
.
2 D
LeadManagers
1 J
M
o
r
g
a
n
S
t
a
M
e
r
r
i
l
l
L
y
n
3 U
4 C
t
e
75
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e
d
REGISTRARTO
THEISSUE
ObjectiveoftheIssue
1 B
i
g
s
h
a
r
e
S
e
r
v
i
c
e
s
Inaddition,Companyexpecttoderive
thebenefitsfromthelistingofequity
shares,whichwouldprovideliquidity
toEquitySharesissuedinconnection
withourESOS,whichtheyintendto
issuetotheiremployees,inaddition
to providing a currency for
acquisitions.
Background
basedservicesintheGujarat.In1996,
thenamewaschangedtoBirlaAT&T
CommunicationsLtdafteritbecamea
IndustriesandAT&TCorporation.In
2000,thecompanymergedwithTata
thebasedservicesintheDelhicircle.At
licensefortheMadhyathistime,theIdeabrandwasalso
Pradesh (includingcreated.Itisnowisthesixthlargest
Chattisgarh)circleandwireless operator in India with an
changed the name to8.5%
BirlaTataAT&TLtd.
In the same year, it
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MumbaiandthecategoryCCircleof
Bihar.Itranksamongstthetopthree
circles
(Maharashtra, Uttar
Pradesh
(West),
Madhya
Pradesh,
Haryana,
Gujarat,
Kerala,
Andhra
Pradesh,
Delhi,
Himachal Pradesh ,
Rajasthan , Uttar
Business
Idea cellular Ltd are
amongst the leading
mobile operators and
currentlyoperatein11
Circles
comprise
which
one
metropolitan Circle,
three category A
Circles,
particularly
Mumbai is theshouldreducetheiroperatingcosts
commercial capital of
Indiaandalsobecause
of the community of
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Issue)
1 Spice
ObjectsoftheIssue
Communicatio
TheobjectsoftheIssueareto
nsLimited
achievethebenefitsoflistingon
ISSUEDETAILS
PriceBand
NetIssueSize
MinimumBid
Quantity
MaximumBid
theStockExchangeandtoraise
fundsfor
Rs4146
(1) Part payment of our long term
debt,
113,111,111Equity
(2) Payment for NLD/ILD license
Shares.
fees,
(3) Meet our capital expenditure
requirements,
90(4) For other general corporate
purposesand
(5) MeettheexpensesoftheIssue.
100,000
(Retailers)
PurposeofIssue
Expansion
78
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LeadManagers
1
Business
EnamFinancial
Spice Communications Ltd are the
Consultants
PrivateLimited second largest cellular services
UBS Securitiesprovider in Punjab and fifth largest
India Private
cellular services provider in
Limited.
Karnataka, measured by the total
Registrarstothe
Issue
1
number of subscribers. On a
combined basis, Company has a
Karvy
market share of 14.49% in these
Computershare
PrivateLimited states,measuredbythetotalnumber
of subscribers. Their customer base
Background
79
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services.
To match the
OurPromotersareMr.Dilip
ModiandModiWellvest
PrivateLimited.
quantitative
analysisisfruitfulinpreparingplans
variables.
companies. It reflectsRatioanalysisisextremelyhelpfulin
thefinancialefficiencyproviding valuable insight into a
&financialpositionofcompanys
a company. Ratio
80
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financial
picture. GrossProfitMargin
24
Ratios provide an
easywaytocompare
present performance
NetProfitMargin
of businesses. Ratios
depict the areas in
which a particular
DebtorTurnoverRatio
22.1
FixedAssetTurnoverRatio
0.71
CurrentRatio
2.04
DebtEquityRatio
1.26
business
competitively
advantaged
or
disadvantaged
through comparing
ratios to those of
other
businesses
OperatingProfitMargin
lds.blogs
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81
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OperatingProfitMargin:Asitcan
be seen there is 12% difference in
InterestCoveringRatiooperating profit margin of both the
Companies.Itmeansascomparedto
ReturnOnInvestment
ReturnOnNetworth
DividendYield
GrossProfitMargin: Thereisvast
difference of 12% in gross profit
margin of both the companies. As
The ratios of Idea gross profitindicates thedifference
Cellular Ltd should between Sales and Cost of
becomparedwithits Production,themarginindicatesthe
competitor
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AverageCollectionPeriod=
360/22.1
360/13.56
=
16da
ys.
NetProfitMargin:As
NetMarginofboththe
=
27da
ys
considerable
difference of 4%, it
means Idea Cellular AsaveragecollectionperiodofIdea
Ltd is effectivelyCellular Ltd is less than Spice
managing all itsCommunications Ltd, it means the
Administration,Sellingquality of debtors Spice
&
DistributionCommunicationsLtdisnotasgoodas
Ltdwhichisduetothefactthatthe
fixed asset employed by Spice is
DebtorsTurnover
Ratio:
liabilities
83
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differenceof5%,itmeansthatIdea
CellularLtdisgettingmorereturnson
totalcapitalemployedascomparedto
Spice Communications Ltd which is
givinglessreturnsi.e.18%.Soitis
efficientlymanagingitsassets.
Return on Net Worth: As Idea
CellularLtdisearningveryaverage
returns on its Equity Share Capital,
turnover,
successful
ways. It providesof
the
the
firm
and
future
to
make
projection
analysis
is
very
analyze
the
past performance
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84
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CutoffPrice
75
SharePriceafterthree
monthsfromlisting.
Ason13 June2007
Rs111.60
th
concentrates on
the inter%Gain
48.8%
relationship
among the
figures
appearing in the
StockMarketPerformance
financial and
accounting
statements.
ListingofIPOs
ListingDate
46
IdeaCellularLtd
Idea
Cellular
Ltd
Ason19
Rs50.10
8.91%
140
120
115.7
124.95
124.6
123.95
121.55
100
Price
80
89.85
91.15
60
40
20
0
l
h
M
pr
A
y
a
MonthWise
o
b
er
t
O
c
Septembe
8 5
worl l gpt.com
www.projects ds.b o so
127.3
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SpiceCommunicationsLtd.
Spice
Communicatio
ns Ltd
Index
-Sensex
60.65
20000
18000
16000
14000
60
13159.55
12000
Price
Market Prices
62
10000
8000
6000
4000
2000
0
58
56
55.65
54
55.85
54
52
50
July
h
r
August
September
c
a
Month Wise
Month-Wise
86
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October
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reflectionofthefundamentalsofany
Inde
xcompany,
so the fundamental
Sen
differences can be evident from the
sex
share prices ofIdea CellularLtd.&
18000
SpiceCommunicationsLtd
17500
Market Price
17000
16500
Reasonsforpoorperformanceof
SpiceCommunicationsltdas
comparedtoIdeaCellularLtd.
16000
15500
15000
14500
14000
1 FinancialPerformance
13500
July
inthepast.AsofJune30,2006,ithad
MonthWise
the
has underperformed
lds.blogs
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87
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1 PromotersGroups
positiveinthefuture.
Theirfailuretodoso
maymateriallyaffect
theirbusiness,
SpiceCommunicationsLtdCertain
of their Promoter Group companies
haveincurredsignificantlossesinthe
past. Some of their Promoter Group
companiesalsoincurredlossesinthe
prospects,financial
conditionandresultsof
lastthreefiscalyears.
Idea Cellular Ltd is the part of the
operations.
nameinthemarket.
1 Listing
EPSofIdeaCellular
Ltdis1.10&P/E
Spice does not meet the eligibility
Ratiois114.70.
criteria for listing of their Equity
EPS OF Spice
SharesonNSEastheiraccumulated
CommunicationsLtdis
lossesexceedstheirnetworth.Dueto
1.25 as EPS is in
this, company withdrew the
negative so the P/E
applicationforlistingonNSEunder
Ratio is zero. Since
theletterdatedApril10,2007.Their
EPS measures the
inability to list on the NSE may
earnings which the
adversely affect the liquidity and
company is providing
tradabilityoftheirEquitySharesand
onthemoneyinvested
thecompanycannotassureinvestors
in business, it is
thattheirfailuretolistEquityShares
indicating that Ideas
financial position ison the NSE will have an adverse
sound.IncaseofSpiceaffect on their liquidity or
communications ltd.,marketabilityoftheirEquityShares.
losses & negativeButthereisnoproblemwithideaasit
islistedonbothBSE&NSE.
losses is presenting
unfavourable position
in
front
shareholders.
of
88
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www.projectsworlds.blogspot.com
of
thesestateswillremainatthecurrent
Operation
SpiceCommunicationslevel or that they will be able to
arearegionalplayerinsuccessfully compete with other
the cellular servicesserviceproviders.OnothersideIdea
industry
serviceCirclesinIndiacoveringalargepart
Communications
rely
Inthepast,theyvolumeoftheirminutesofusagemay
lost key corporatehaveamaterialadverseeffectonour
clients, particularly inbusiness, financial condition and
the Karnataka market,results of operations. On other hand
primarily due to ourIdeahasastrongbaseofcustomersas
lack of coverage init is spread all over India. Idea has
certain
customersascompared
to its competitor like
SpiceCommunications
Ltd.
89
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1 J
U
D
G
I
N
G
I
P
O
S
:
R
A
T
I
N
G
C
O
S
T
R
E
A
D
C
A
U
T
I
O
U
S
L
RECENT
NEWSIN
Y
I.P.O
2
0
J
U
N,
2
0
0
7.
agenciesseetherisksinvolvedinthe
There is anewratingproduct.Legaldisclaimers
difference in the newaresuretobeattachedalongsidethe
equityratinglandscaperatingreportwhichtheyareexpected
unlike what thetoputoutsayingthattheyhavedone
practice has been inthebestbasedonthedatatheyhave
ratingdebt.Itmaywellbeenprovidedwith.Afterall,itisnot
bethatafirmwhichisthattheywerekeenonthisproduct,
aggrieved with thefully aware as they are of the
ratingassignedtoitbyreputationrisksassociatedwithsuch
one agency may wellratings.Therevenuesarentalsovery
approach
anotherpromising,atleasttostartwith.But
lds.blogs
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90
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FILTERS
ON
IPOS.
product
should
evolve.Ifitdoes,
Indianrating
agencieswillbe
closelywatched.
1 M
A
R
K
E
T
TIMES
NEWS
NETWOR
K
(WEDNE
SDAY,
MAY 09,
2007)
Theissueofimplementingcircuit
filterswhenastockdebutsonthe
bourseshasbeenhangingfirefor
sometimenow.TheSecuritiesand
S
E
E
N
ExchangeBoardofIndia(Sebi)had
recentlyproposedintroducinga
maximumupperlimitonstockson
dayoneoftheirtradingsession,post
N
O
T
demerger,amalgamation,andcapital
reduction,schemeofarrangements
andrevocationofsuspension.Ithas,
R
E
sofar,keptawayfromnewofferings.
A
D
suchstocksonthefirstdayof
Therearenocircuitfiltersappliedto
trading,whichhasoftenresultedin
massivevolumesandswingsinthe
F
O
pricemovement.
marketregulatorhasindicatedthat
C
I
Interestingly,whilethe
itwillatonepointincludeIPO
listingsinthisbracket,merchant
R
C
bankersareoftheviewthatsucha
U
I
quantumofretailinterestinIPOs.
stepwillleadtoafallinthe
Thisisapartfromthefactthatit
wouldaffectthenaturalprice
discovery
firstday,headded.
mechanism.
Inthecurrentcalendar
Sebimightbe
year,morethan30stockshavemade
concernedwith
theirdebutontheboursesandmostof
checkingpriceriseon themhavewitnessedextremevolatility
thefirstday,butitis ondayone.Intherecentpast,stocks
alsoafactthattheday likeICRA,GlobalBroadcastNews,
ofdebutseesmany
MindTreeConsulting,TanlaSolutions,
genuineinvestors
PochirajuIndustries,PyramidSaimira,
exitingthecounterto AkrutiNirmanandRedington(India),
cashinonlisting
amongothershavelistedonthestock
gains,saysa
exchanges.Alltheabovementioned
merchantbankerwith stocksgainedintherangeof20%to
adomesticfirm.
70%onthedayoflisting.
Retailinvestorswho Interestingly,accordingtoasectionof
borrowmoneyto
industryparticipants,theregulators
investinsharesarethe worryalsostemsfromthefactthatthe
oneswhotrytobook firstdaywitnesseshugetrading
listinggains.Inreality, activityalbeitwithadismaldelivery
theyhavenooption
basedvolume.Daytradersareseen
buttoselliftheywant activeinalmostallthestockswhen
tomakemoney.Such
genuineinvestorswill
theydebut.Daytradersarethe
spoilsportwhodealinbulk
beaffectedifcircuit
filtersare
91
implementedonthe
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discoverymechanism,tothecurrent
bookbuilding system. There has
quantityonthefirst
dayandjackupthe
prices.Suchbulkdeals
createanartificial
imagethatthereis
hugedemandforthe
stockandhenceone
seeslargeamountof
buyordersonthefirst
day,saystheresearch
headofabrokerage
house.Hefurtheradds
thatifthedaytraders
arekeptatbayonthe
firstday,thenmore
thanhalfofthe
problemwouldbe
solved.However,he
didaddthatoperators
dobecomeactive
whenthestockgets
listed
circumscribed.
1 OPEN
Merchantbankersusuallyhave
AUCTION
MAY
strongreasonstojustifytheprice
DECIDE IPO
band,butempiricalevidence
PRICE
suggeststhatmostoftheIPOsare
1
OCT,
eitherunderpricedoroverpriced.
2007.
Wehavecomealong Thishasbeenvalidatedbythefact
wayfromthedaysof thatmoststockseventuallyclosed
fixed price IPOs muchhigherthantheirissueprice
where the investor rightonthefirstdayordropped
reallydidnothavea sharply.
replace book-
task. Globalexperience
92
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institutional buyer. Prithvi
Haldea of Prime Database
price(auctionmethod).
Theauction
mechanismworkswell
becausetheinvestoris
inthedrivingseat,not
themerchantbankeror
theissuer.Potential
said.
Open auction has become the
preferred way to discover the
price in Japan and France,
among other countries. In the
US, the concept was
pioneered by venture
capitalist Bill Hambrecht and
oversubscriptionis
takencareofbypro
rataallotmentof
shares.
auction method,
the issuer gets
for shares,
institutional
investors get
offered by a
qualified
appositetomovetoanauctionsystem
surroundingsomehighprofileDutch
price. Thissystem
auctionIPOs(Google,forexample),
takescareofthe
aspirationsoftheretail methodofchoiceintheUSandother
investorasnormally
they givethelowest
efficiency.Thebottom
line,therefore,isthat
theIndianinvestoris
auction.Theymightusethiscontrol
tomaximizeproceedsorto
nowsmartenoughto
lds.blogs
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93
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undersubscription or underpricing.
Potential bidders actually may be
persuade investors to
evaluate an issue
carefully and arrive at
a more accurate
aftermarket value. In
an auction, investors
are likely to end at a
less favourable price
than they might in a
more
controlled
environment
that
reluctanttoparticipatebecauseofthe
risksassociatedwithalargenumber
of possible entrants. For the issuer,
multiple bidders could elevate the
risksbyleadingtoinaccuratepricing,
significantaftermarketvolatility,and
unpredictable bidder participation.
Thismayexplainwhysomeauctions
are conducted by invitation only.
Hence,abalancedapproachwouldbe
requiredbeforewedecidetopresson
thebuttontoaccepttheauctionbased
pricingmodelincaseofIPOs.
will
profits
Contrary to popular
perception,openingan
auctionuptoagreater
number of potential
bidders does not
reduce the risk of
lds.blogs
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94
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verynecessarytostudythe
1 ThoughIPOis
consideredasa
safeinvestment
avenuebutitis
veryimportantto
makethorough
fundamentalstudy
ofanyIPObefore
takingthe
decision.As
sometimesa
fundamentally
strongcompany
maynotprovide
goodreturnsdue
tosomereasonsas
incaseofCairn
IndiaLtd.
2 Beforetaking
an
IPO
investment
decision it is
95
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issuingcompany,relevantindustry&
economicconditions.
CONCLUSION
Investment in
IPOs is growing day
bydaysinceitallows
retailinvestortoinvest
in challenging Equity
Market at lower risk.
So, it is always
considered as a safe
investmentavenue.But
afterdoingthisproject
I understood that
before investing in an
IPOthereshouldbea
detailed study of the
IPO. So, an investor
shouldconsideranIPO
inaveryrationalway
aftermakingadetailed
study of the IPO
96
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1 Financialjournalslike
BIBLIOGRAPHY
www.angeltrade.com
1. Chartered Financial
Analyst.
2. The
Chartered
Accountant(ICAI July
2006.
3. Advancedge.
www.walletwatch.com
www.icicidirect.com
www.moneypore.com
www.moneycontrol.co
m
www.wikipedia.com
www.nseindia.com
www.sebi.gov.in
www.bseindia.com
www.sharekhan.com
www.krchoksey.com
www.siptech.com
www.thehindubusiness
.com
97
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www.projectsworlds.blogspot.com
r
t
h
e
C
o
m
p
a
n
APPLICATION FORM FOR
RESIDENT INDIAN PUBLIC i
AND NRIs/OCBs/FIIs (ON e
REPATRIATION/NON
s
REPATRIATION
ANNEXURE
BASIS)
GLOBSYN
TECHNOLOGIE
S LIMITED
(
I
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Address :
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DATE
[]
[]
Cash
Cheque
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DD
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IN WORDS
----------------------------------
TEAR HERE
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Public Issue of 36,93,600 Equity Shares of Rs.10/- each for cash at a premium
OFFER OP
Tuesday,F
OFFER CL
of Rs.10/- each for cash at a premium of Rs.30/- Per EQUITY SHARE (PRICE
Tuesday,F
SUB-BROKER'S
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Ltd
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4-1
suc provisions of
Type of Instrument
To Be drawn in
Favour of:
Cheques/Drafts
Stockinvest
the
les Companies
The Board of
Directors
APPL
ICATI
ON
MUS
T BE
MAD
er you to place
100
4,000
200
8,000
12,00
0
16,00
0
20,00
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OF
300
100
EQUI
SHA
RES
AND
IN
MUL
TIPL
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100
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AFTE
R
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PAYAB
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APPLI
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For
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Do my/our
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MINI
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Off authorize
payabl
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the allotted/trans
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for Equity
FOR
CATIO
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of may be
sai ferred to
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ILL
US
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TO AVOID REJECTION
PLEASE
ALL
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WITH
INSTRUCTIONS
UNDER
"GENERAL
INSTRUCTIONS" OF THE
FORM,
MORE
SPECIFICALLY
FILL UP THE
FOLLOWING
1)
APPLICATION
IN
PAN/GIR NO.
IF
YOU
APPLY
FOR
5) ME
NTI
ON
AG
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1300
SHARES
AND ABOVE.
6)
3) BANK
POWE
4)
LUTION TO
BE
ENCLOSED
WHEREVER
APPLICABLE.
REFER TO
INSTRUCTIO
NS ON
STOCKINVESTMENT
CAREFULLY
99
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e
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INVESTMENT
DETAILS
In Figures
[ ] Cheque/DD
c
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___________________
a
c
PAYMENT DETAILS
In Words
u
n
t
o
100
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Bank Name
_____________
Branch _____
City ________
Type of Acco
[]
A/c No._____
(Refer instru
DATE:
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STATUS (Please Tick)
[2]
Hindu
Family(HUF)
NAME OF FATHER/HUSBAND
_____________________________
_________________
[3]
[4]
[5]Bank and FI
_____________________________
____________________
(In Block Letters)
Body
Corporate/Company
[6]
Mutual Fund
NRI
OCB/FII
(Non-
repatriable)
[7]
NRI
_____________________________ (repatriable)
_____________________________
Specify)
____________
_____________________________
_______________PIN
CODE__________________
Undivided
OCB/FII
[8]Others
(PI.
Others
Service
Retired
Business
Housewife
Professional
Farmer
(Please
Student specify)
only)
SECOND APPLICANT
Age
Age
SECOND APPLICANT
THIRD APPLICANT
PAN/GIR No.
(For 1300 Shares or more)
(Refer instruction No. b10)
Tick
Tick
Tick
()
()
()
Not assessed
Not assessed
Not assessed
Applied not
allotted
I.T Circle/Ward/District
(Refer Instruction No. b10)
Number of
Shares
I/We the
undersigned,
request delivery
of Equity
Shares of
Globsyn
Technoiogies
Limited
under the offer
in electronic
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ctswo
rlds.bl
ogsp
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