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SYNOPSIS ON
INITIAL PUBLIC OFFERING
AT
HDFC BANK LIMITED
BY
MANPREET KAUR
H.T.NO: 1424-18-672-021
SYNOPSIS FOR THE PROJECT TO BE SUBMITTED FOR THE
AWARD OF THE
DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
By

DEPARTMENT OF BUSINESS MANAGEMENT


ST PIOUS X P.G (MBA) COLLEGE FOR WOMEN
(Affiliated To Osmania University)
NACHARAM
2018-2020
INTRODUCTION

An initial public offering (IPO), referred to simply as an "offering" or "flotation", is when a


company (called the issuer) 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.

An IPO 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.

Capital market is an essential pre-requested for industrial and commercial development of a


country. Capital market refers to the institutional arrangement which facilitates the
borrowings and lending of long term fund. In capital market we can divided into two parts
they are primary and secondary market. In primary market also known as new issue market.
It represents primary market where new securities i.e. shares or bonds that have never been
previously offered. The importance of this study is analyzing the IPO scrip’s during the year
2015 to 2017. This study based on differences of Issue price and LTP. In order to whether the
IPO’s are overpriced or under priced. The investor how get the gain or loss. The study
continued based on the only 2 parameters they are Issue price and LTP. The differences of
LTP & Issue price we can describe the scrip is overpriced or under priced. Not other
parameters considered. This study shows that sector wise scrip’s are overpriced or under
priced.
In this study find the IPO how gives the benefits and given the
guidelines and suggestions to the investor. Before selecting a company the investor should
think about the company. A good investor should diversify and reduces his risk by investing
in different securities. Primary market returns are very attractive in short period especially on
the day of listing. But investor in IPO’s should take wise decision in choosing the best
company.
Initial public offering (IPO) or stock market launch is a type of public offering in which
shares of a company are sold to institutional investors[1] and usually also retail (individual)
investors; an IPO is underwritten by one or more investment banks, who also arrange for the
shares to be listed on one or more stock exchanges. Through this process, colloquially known
as floating, or going public, a privately held company is transformed into a public company.
Initial public offerings can be used: to raise new equity capital for the company concerned;
to monetize the investments of private shareholders such as company founders or private
equity investors; and to enable easy trading of existing holdings or future capital raising by
becoming publicly traded enterprises.

After the IPO, shares traded freely in the open market are known as the free float. Stock
exchanges stipulate a minimum free float both in absolute terms (the total value as
determined by the share price multiplied by the number of shares sold to the public) and as a
proportion of the total share capital (i.e., the number of shares sold to the public divided by
the total shares outstanding). Although IPO offers many benefits, there are also significant
costs involved, chiefly those associated with the process such as banking and legal fees, and
the ongoing requirement to disclose important and sometimes sensitive information.

Details of the proposed offering are disclosed to potential purchasers in the form of a lengthy
document known as a prospectus. Most companies undertake an IPO with the assistance of
an investment banking firm acting in the capacity of an underwriter. Underwriters provide
several services, including help with correctly assessing the value of shares (share price) and
establishing a public market for shares (initial sale). Alternative methods such as the Dutch
auction have also been explored and applied for several IPOs.
OBJECTIVES THE STUDY:
1. The objective of doing this project is mainly to make a study of trends in primary market
from 2015-2019 with special reference to LTP (Last Traded Price) and Issue Price.
2. To examine the difference between LTP and Issue Price of various scraps in different
sectors.
3. To assess whether the Issue Price are overpriced or under priced based on difference
between LTP and Issue Price.
4. To examine gain or loss to the investor based on the above study.
SCOPE OF THE STUDY:

1) The study covers only NSE listed securities of primary market.


2) Only LTP and Issue price are taken into consideration for judging whether the scrip’s
are under priced or over priced not considering other parameters.
3) The study covers the period from year2015-2019 only
4) Study covers randomly selected scrip’s under various sectors.
METHODOLOGY OF THE STUDY:
The data collection methods include both primary and secondary collection methods.

Primary Data: This method includes the data collected from the personal
interaction with authorized members of HDFCBANK LIMITED.

Secondary Data: The secondary data collection method includes:


The lecturers delivered by the superintendents of respective departments.
The brochures and material provided by HDFCBANK LIMITED.
The data collected from the magazines of the NSE, economic times, NSE website, etc.
Various books relating to the investments, capital market and other related topics.
TOOLS USED FOR ANALYSIS:

1) TABULATION: A Table is a systematic arrangement of statistical data in rows and


columns. Rows are horizontal arrangements whereas columns are vertical. Tabulation is a
systematic presentation of data in a form suitable for analysis and interpretation.
The tables used are as follows:
a) One way table: It presents only one characteristic and hence in answering one or more
independent questions with regard to those characteristics.
b) Two-way table: It contains sub divisions of a total and is able to answer two mutually
dependent questions.
2) DIAGRAMETIC AND GRAPHICAL REPRESENTATION OF DATA: A picture
is worth a thousand words. The impression created by a picture has much greater impact
than any amount of detailed explanation. Statistical data can be effectively presented in
the form of diagrams and graphs. Graphs and Diagrams make complex data simple and
easily understandable. They help to compare related data and bring out subtle data with
amazing clarity.
The Diagram used are as follows:
a) Bar diagrams: Bar diagrams are used specifically for categorical data or series. They
consist of the group of equi-distant rectangles, one for each group or category of data
in which the values of magnitudes are represented by length or height of rectangles.
b) Sample Bar diagram: It is used of comparative study of two or more aspects of a
single variable or single category of data.
LIMITATIONS OF THE STUDY:

A good report sells the results of the study. But every project has its own limitations.
These limitations can be in terms of
1) The project doesn’t study the whole primary market due to time availability and
course requirement.
2) Project doesn’t consider whole issues under each sector due to time limitation. It
takes Into consideration randomly selected issues
3) Limited to a particular period: Data under consideration is taken from 2015-2019
Previous years are not taken into consideration.
4) Partial fulfillment: Project studied doesn’t fulfill all requirements because it does not
study the whole primary market due to time availability and course Requirement. It only
fulfills the partial requirement as it studies only certain important aspects of primary
market.
5) Approximate results: The results are approximated, as no accurate data is Available.
6) Study takes into consideration only LTP and issue prices and their difference for
Concluding whether an issue is overpriced or under priced leaving other.
7) The study is based on the issues that are listed on NSE only.
REVIEW OF LITERATURE

This project focuses on the relatively unexplored area of primary equity markets in India.
Its broad goal is to begin the process of understanding how and why primary markets
develop.
Primary markets are where the firms raise capital through the issuance of financial
securities traded after insurance. The research will examine the development of domestic
primary market, focusing on macro economic factors. With the abolition of Control over
Capital Issues prior approval of capital issue proposals by companies has been dispensed
with. The companies are required now to be fair and honest to the investing public by
disclosing all material facts along with the risk factors associated with their projects to the
public. The present practice of brochure which is circulated widely to the investors along
with application form has been replaced with abridged prospectus to be attached to the
New Issue application forms.

The word “market” can have different meanings but it is used most often as a catchall
term to denote both primary and secondary market. Infact primary market and
secondary market are both distinct terms that refers to the market where securities are
created and the one in which they are traded among investors respectively. Knowing the
functions of primary and secondary market is the key to understanding how stocks trade.
Without them, the stock market would be much harder to navigate and much less
profitable. We will help you to understand how these markets work and how they relate to
individual investors.
The primary market is that part of capital markets that deals with issuance of new
securities. Companies, government or Public sector institutions can obtain funding
through the sale of new stock or bond issue. This is typically done through a syndicate of
securities dealers .The process of selling new issues to the investors is called
Underwriting. In the case of new stock issue, this sale is called an IPO (Initial public
offering). Dealers earn a commission that is built into the price of the security, though it
can be found in the prospectus.
The market in which investors have the first opportunity to find a newly issued security.
After the first purchases, subsequent trading is said to occur in secondary market. The
primary market is where securities are created. It is in this market that firms sell (float)
new stock and bonds to the public for the first time. For our purposes, you can think of a
primary market as being synonymous with an IPO. Simply put, an IPO occurs when a
private company sells stocks to the public for the first time.

METHODS OF FLOATING NEW ISSUES:

The various methods which are used in floatation of new securities in the new issue
market are
1)Public Issue / Offer through Prospectus
2) Offer for sale
3)Private Placement
4) Right Issues
5) Stock Exchange Pricing
6) Subscription by inside coteries

1) PUBLIC ISSUES: This is the most common method followed by joint stock
companies to raise capital through the issue of new securities. Under this method,
the issuing company directly offers to the general public or institutions a fixed
number of shares at a stated price through a document called prospectus.
The purpose of raising the new capital is to finance some capital expenditure,
it is usual for companies to issue a prospectus inviting the public to take up the new
securities. Legally no public limited company can raise capital from public without
issuing prospectus.
2) OFFER FOR SALE: Under this method the company sells the shares /securities to
the issue house / brokers at an agreed price . The issue house/brokers sell their shares
/ securities to the investors at a higher price.
The company is relieved from the problem of printing and advertisement of
prospectus and making allotment of shares . Offer for sale is not common in India
3) PRIVATE PLACEMENT: The promoters sell their shares to their friends , relatives
and well wishers to obtain the minimum subscription which is a precondition for issue
of shares to the public.
Once this precondition for issue of shares is met , the issue house/brokers buy
the securities out right with the intention of placing them with their clients afterwards.
The issue house/brokers maintain their own list of clients and through
customer contact sell the securities. The main disadvantage of this method is that the
securities are not widely distributed to the large section of investors.

4) RIGHT ISSUES: Rights issue is a method of raising funds in the market by an


existing company. A right means an option to buy certain securities at a certain
privileged price within a specified period.
Shares so offered to the existing shareholders are called Right shares. Right
shares are offered to the existing shareholders in a particular proportion to their
existing shareholders. The company should abide with section 81 of the companies
act.
If the shareholders fail to take the Right shares within a specified period, the
balance is to be equally distributed among applicants for additional shares. Any
balance still left over may be disposed off in the market.

5) STOCK EXCHANGE PLACING: this method has been discontinued in India due
to strict regulations and statutory rules for listing of securities. According to it, “A
company used to place its shares privately with the aid of brokers, and then secured
permission for dealing on stock exchange”. This method involved little cost but often
led to concentration of new shares in few hands.
6) SUBSCRITION BY INSIDE COTERIES: when a company goes to the new issue
market a certain percentage of the capital is kept in reserve for subscription by inside
coteries.
SEBI GUIDELINES FOR NEW ISSUE MARKET:

The SEBI guidelines for different category of companies are as follows


A) NEW COMPANY: A new company is a company which has not completed twelve
months of production and where the promoters do not have a track record. These
companies have to issue shares only at par.
B) PRIVATE AND CLOSELY HELD COMPANIES: These companies having a
track record of consistent profitability for last three years, are permitted to price their
issues freely.
C) EXISTING LISTED COMPANIES: The existing limited companies will be
allowed to raise fresh capital by freely pricing its shares provided the promoters
contribution is 50% on first 180 cores of issue.
D) DIFFERENTIAL PRICING: Issue to the public can be priced differentially as
compared to issue to right shareholders justification for the price difference should be
mentioned in the offer document.
E) LOCK IN PERIOD: Lock in period is five years for promoters contribution from the
date of allotment or from commencement of commercial production whichever is
later.

F) GUIDELINES FOR PUBLIC ISSUE:


 Every application should be accompanied with an abridged prospectus.
 The risk factors should be highlighted in the abridged prospectus.
 Company’s management, Past history and present business of the firm should
be highlighted in the prospectus.
 Justification for premium should be stated
 The public issues should be kept open for a minimum of three days and a
maximum of ten working days.
 The quantum of issue should not exceed the amount specified in the
prospectus
 Compliance report in the prescribed form should be submitted to SEBI within
forty five days from the date of closure of issue.
 The allotment of shares has to be made in multiples of tradable lots if the
minimum of subscription of ninety percent has not been received the entire
amount is to be refunded to the investors within 140 days.
 Underwriting has been made mandatory
 The gap between the closure date of various issues i.e. rights and public
should not exceed thirty days.

RECENT TRENDS AND DEVELOPMENTS IN NEW ISSUE


MARKET:
The recent economical changes i.e. privatization, liberalization, foreign private
participation, disinvestment in public sector have given a new direction to the capital market.
The number of issues made and the amount of capital raised from the market has been
phenomenal in the last decade. The public sector organizations like financial institutions,
public sector undertaking have started dominating the primary market. In 1996-97, all public
financial institutions including IDBI, IFCI, ICICI and many public sector backs have
mobilized resources through public issue route. There is a major decline in the equity at
premium issues over the years.
CAPITAL MOBILISED THROUGH DEBT: the late 90’s have witnessed the bent of
capital market for the issue of debt as that period is characterized with high interest rates and
negative returns from the secondary market.
MUTUAL FUNDS: New mutual funds were set up during the last decade. Many investors
are turning towards mutual funds to take the advantage of expertise in investments and
lowering of investment risk.
SEBI has dispensed with the requirement of a minimum promoters contribution and lock
in for listed companies with a three year dividend track record in the past five years
The lock in period for employees in their stock option schemes was withdrawn but
lock in will still apply to any preferential allotment made to promoters. The pricing of such
issues would be based on market prices.
The market reforms include the introduction of electronic trading with the setting up
of OCTEI and NSE.th process of Book building was encouraged and IPO through Book
building has picked up.
COMPANY PROFILE

HDFC Bank is India's largest private sector bank with total assets of Rs. 5,946.42 billion
(US$ 99 billion) at March 31, 2014 and profit after tax Rs. 98.10 billion (US$ 1,637 million)
for the year ended March 31, 2014.HDFC Bank currently has a network of 3,839 Branches
and 11,943 ATM's across India.

History
1955
The Industrial Credit and Investment Corporation of India Limited (HDFC) incorporated at
the initiative of the World Bank, the Government of India and representatives of Indian
industry, with the objective of creating a development financial institution for providing
medium-term and long-term project financing to Indian businesses. Mr.A.Ramaswami
Mudaliar elected as the first Chairman of HDFC Limited.
HDFC emerges as the major source of foreign currency loans to Indian industry. Besides
funding from the World Bank and other multi-lateral agencies, HDFC was also among the
first Indian companies to raise funds from international markets.

HDFC Bank was originally promoted in 1994 by HDFC Limited, an Indian financial
institution, and was its wholly-owned subsidiary. HDFC's shareholding in HDFC Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering
in the form of ADRs listed on the NYSE in fiscal 2000, HDFC Bank's acquisition of Bank of
Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by
HDFC to institutional investors in fiscal 2001 and fiscal 2002. HDFC was formed in 1955 at
the initiative of the World Bank, the Government of India and representatives of Indian
industry. The principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian businesses.

In the 1990s, HDFC transformed its business from a development financial institution
offering only project finance to a diversified financial services group offering a wide variety
of products and services, both directly and through a number of subsidiaries and affiliates like
HDFC Bank. In 1999, HDFC become the first Indian company and the first bank or financial
institution from non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context of the
emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of HDFC and HDFC Bank formed the view that the
merger of HDFC with HDFC Bank would be the optimal strategic alternative for both
entities, and would create the optimal legal structure for the HDFC group's universal banking
strategy. The merger would enhance value for HDFC shareholders through the merged
entity's access to low-cost deposits, greater opportunities for earning fee-based income and
the ability to participate in the payments system and provide transaction-banking services.
The merger would enhance value for HDFC Bank shareholders through a large capital base
and scale of operations, seamless access to HDFC's strong corporate relationships built up
over five decades, entry into new business segments, higher market share in various business
segments, particularly fee-based services, and access to the vast talent pool of HDFC and its
subsidiaries.

In October 2001, the Boards of Directors of HDFC and HDFC Bank approved the merger of
HDFC and two of its wholly-owned retail finance subsidiaries, HDFC Personal Financial
Services Limited and HDFC Capital Services Limited, with HDFC Bank. The merger was
approved by shareholders of HDFC and HDFC Bank in January 2002, by the High Court of
Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and
the Reserve Bank of India in April 2002. Consequent to the merger, the HDFC group's
financing and banking operations, both wholesale and retail, have been integrated in a single
entity.
Board of Directors

Mr. K. V. Kamath, Chairman

Mr. Dileep Choksi

Mr. Homi R. Khusrokhan

Mr. V. Sridar

Mr. Alok Tandon

Ms. Chanda Kochhar,


Awards – 2018
HDFC Bank

 Ms. Chanda Kochhar received an honorary Doctor of Laws from Carleton University,
Canada. The university conferred this award on Ms. Kochhar in recognition of her pioneering
work in the financial sector, effective leadership in a time of economic crisis and support for
engaged business practices.
 Ms Chanda Kochhar featured in The Telegraph (UK) list of '11 most important women in
finance'.
 HDFC Bank has been recognised as one of the 'Top Companies for Leaders' in India in a
study conducted by Aon Hewitt.
 IDRBT has given awards to HDFC Bank in the categories of 'Social Media and Mobile
Banking' and' Business Intelligence Initiatives'.
 HDFC Bank won the award for the Best Bank - Global Business Development (Private
Sector) in the Dun & Bradstreet - Polaris Financial Technology Banking Awards 2014.

HDFC Bank, India’s largest private sector bank, today announced the launch of India’s only
credit card with a unique transparent design and a distinctive look. The ‘HDFC Bank Coral
American Express Credit Card’ is the latest addition to the Bank’s exclusive ‘Gemstone
Collection’ of credit cards.

Speaking at the launch, Mr. Rajiv Sabharwal, Executive Director, HDFC Bank said, "At
HDFC Bank, it is our constant endeavour to deliver innovative, powerful and distinctive
value propositions to our discerning customers. We are delighted to launch the ‘HDFC Bank
Coral American Express Credit Card’, the only card in the country with a youthful,
transparent design. Aimed at providing significant lifestyle benefits, this card re-affirms our
commitment to bring forth innovative services to our customers. We are also introducing a
host of exciting privileges including an introductory extended credit period offer and bonus
reward points on online transactions. We believe this card will be yet another compelling
addition to our Gemstone collection of credit cards."
BIBLIOGRAPHY

(b) Arwah Arjun Madan (2003), „Investments in IPOs in the Indian Capital
Market‟,Bimaquest-Vol. 3, No. 1, Page 24-34

(c) Anand Adhikar (2010) “New Listings” Business Today, Vol.19, No.23, Page 94-95.

(d) Jignesh B. Shah and Smita Varodkar , November (2015) “Capital Market: Trends in
India and abroad – impact of IPO Scam an Indian Capital Market”, published in the
Souvenir, All India Accounting Conference, November (2015)

(e) Jagannadham Thunuguntla (2011) “IPOs: More Misses Than Hits”, Dalal Street
Investment Journal, Vol.26. No. 9, Page. 69.

(c) Madhumita Gosh (2011) “IPOs: More Misses Than Hits”, Dalal Street Investment
Journal, Vol. 26.
No. 9, Page 70.

(d) Mahesh Nayak (2010) „Of Primary Concerns‟ Businessworld, Vol. 30, No. 25, 2-8,
Page 30-36.

(e) Prithvi Haldea, (2011) “IPOs: More Misses Than Hits”, Dalal Street Investment
Journal, Vol. 26.
No. 9, Page 67.

(f) Sunil Damania (2011) “Primary Issues” Dalal Street Investment Journal, Vol. 2No. 9,
Page No. 3.

(g) http://www.investopedia.com/

(h) http://investor.sebi.gov.in/

(i) http://www.bseindia.com/

(j) http://www.nseindia.com/

(k) www.icicibank.com

(l) http://www.siliconindia.com/news/business/10-Largest-IPOs-in-India-nid-107376-
cid-3.html

(m) http://www.rrfinance.com/htm/ipo.html