Initial Public Offer: Project

PROJECT
Report
On
INITIAL PUBLIC
OFFER
Submitted in the partial fulfillment of two year full time

MBA programme
(2002-2004)
Submitted by: Submitted to:

Name: Anju Dwivedi Name: Ankita Chopra
Roll No.: 11/MBA/RDIAS/02 (Project Guide)
RUKMINI DEVI INSTITUTE OF ADVANCE STUDIES

ACKNOWLEDGEMENT
I would like to extend my heartfelt gratitude to all those people who
helped me in carrying out this project study. My special thanks and
gratitude goes to Ms. Ankita Chopra (faculty Member) RDIAS who
helped me in carrying out this project study, acting as a guiding
spirit behind the compiling of this report.
Anju Dwivedi
PREFACE
Project work is a part of our curriculum, which helps us to correlate our

theoretical concepts with practical experience. I prepared this report for my two
years of Master of Business Administration.
My topic of project on “INITIAL PUBLIC OFFER “.
Every company needs funds for its business. Funds requirement can be for short
term or for long term. To meet short-term requirements, the company may
approach banks; lenders & many even accept fixed deposits from
public/shareholders. To meet its long term requirements, funds can be raised
either through loans from lenders, banks, institutions etc,(which carry financial
burden) or through issue of capital. Capital can be raised through private
placement of shares, public issue, rights issue etc. Public issue means raising
funds from public. Promoters of the company may have plans for the company
which may require infusion of money. The main purpose of the public issue,
amongst others, is to raise money through public and get its shares listed at any
of the 3tilized3a stock exchanges in India. This is the market for long term
securities in the primary market segment, which is by far the most important
mode of issuing securities as compared to rights issue & private placement.
As a lot of IPO have been coming or about to come therefore I decided to
take this project.
The project covers details on IPO, Basics of IPO, Details of various IPO issued
recently and their analysis.
My study basically depends on the secondary information from various books
and other resources.
Table of Contents
Serial no. Topic
1. Introduction
 Definition of IPO
 Objective of Study
 Data Sources
 Structure of Study
2. Basics of IPO
 Advantages & Disadvantages of IPO

 Reasons for an IPO
 Procedure for getting into an IPO
 Things to be considered for IPO
3. Entry Norms For a Public Issue
 Listed Companies
 Unlisted Companies
 Key IPO Regulation
 Principle step in public issue
 Role of SEBI/Intermediaries in
Public Issue
4. Equity Issues
 Some earlier
Issues
 Recent Issues
(in detail)
5. An investing challenge in IPO

6. Changing trends in IPO
7. 2004-An year of IPO
8. Conclusion
9. Bibliography
INITIAL PUBLIC OFFER – AN INTRODUCTION
IPO is an acronym for Initial Public Offering.This is the first sale of
stock by a company to the public. A company can raise money by
issuing either debt (bonds) or equity. If the company has never
issued equity to the public, it’s known as an IPO.Companies fall into
two broad categories:
 A privately held company
 A Public company
There a lot of advantages and disadvantage relating to issue of equity
shares which is discussed in detail in the coming pages.
There are various reasons why company issue IPOs the most
important among them all is liquidity.
There is a systematic procedure for the issue of an IPO , which is
regulated by Security and Exchange Board of India (SEBI).

OBJECTIVE OF STUDY
As a lot of IPO have come in past few years and are still coming so I found to
take up this topic for my project.
In this project I have tried to give a detailed study related to Initial Public Offer. I
have tried to show the changing trend in the field of Initial Public Offer. The
position which Initial Public Offer had in the past few years is very different from
its present status.
In the past, Initial Public Offer where not very much entertained , but now we see
that they are welcomed and over subscribed many a times.
In the near future the condition is going to improve many a times since it is
beneficial both for investors and the company.
I hope this effort of mine will enrich the reader with the said topic only then the
real objective behind making this project will be fulfilled.
DATA SOURCES
My study basically depends on the secondary data sources.
The various sources of secondary data include the following:
 News Paper – Economic times.

 Magazines – Business Today and Business World.
 Articles
 Various Internet Sites.
STRUCTURE OF STUDY
The structure of study is carried out in the following format:
Starting with the Basics of Initial Public Offer.
Next we will cover Equity issues of fast few years.
Then we will take up Recent Initial Public Offers in detaiL.
After that we will move on to some analysis part of IPOs in which we
will see investing challenge related to IPO, Changing trend of IPOs,
what has changed in past few years till now.

BASICS OF INITIAL PUBLIC OFFER
IPO is an acronym for Initial Public Offering.
This is the first sale of stock by a company to the public. A company can raise
money by issuing either debt (bonds) or equity. If the company has never issued
equity to the public, it’s known as an IPO.
Companies fall into two broad categories:
• private
• public.
A privately held company has fewer shareholders and its owners don’t have to
disclose much information about the company. Anybody can go out and
incorporate a company: just put in some money, file the right legal documents,
and follow the reporting rules of your jurisdiction. Most small businesses are
privately held. It usually isn’t possible to buy shares in a private company. You
can approach the owners about investing, but they’re not obligated to sell you
anything.
Public companies, on the other hand, have sold at least a portion of themselves
to the public and trade on a stock exchange. This is why doing an IPO is also
referred to as “going public”. Public companies have thousands of shareholders
and are subject to strict rules and regulations. They must have a board of
directors and they must report financial information every quarter. In the United
States, public companies report to the SEC. In other countries, public companies
are overseen by governing bodies similar to the SEC. From an investor’s
standpoint, the most exciting thing about a public company is that the stock is
traded in the open market, like any other commodity. If you have the cash, you
can invest. The CEO could hate your guts, but there’s nothing he or she could do
to stop you from buying stock.

ADVANTAGES AND DISADVANTAGES OF IPO
The decision to take a company public in the form of an initial public offering
(IPO) should not be considered lightly. There are several advantages and
disadvantages to being a public company, which should thoroughly be
considered. This memorandum will discuss the advantages and disadvantages of
conducting an IPO and will briefly discuss the steps to be taken to register an
offering for sale to the public. The purpose of this memorandum is to provide a
thumbnail sketch of the process. The reader should understand that the process
is very time consuming and complicated and companies should undertake this
process only after serious consideration of the advantages and disadvantages
and discussions with qualified advisors.
Advantages:
1. Increased Capital. A public offering will allow a company to raise capital
to use for various corporate purposes such as working capital,
acquisitions, research and development, marketing, and expanding plant
and equipment.
2. Liquidity. Once shares of a company are traded on a public exchange,
those shares have a market value and can be resold. This allows a
company to attract and retain employees by offering stock incentive
packages to those employees. Moreover, it also provides investors in the
company the option to trade their shares thus enhancing investor
confidence.
3. Increased Prestige. Public companies often are better known and more
visible than private companies, this enables them to obtain a larger market
for their goods or services. Public companies are able to have access to
larger pools of capital as well as different types of capital.
4. Valuation. Public trading of a company’’s shares sets a value for the
company that is set by the public market and not through more subjective
standards set by a private valuator. This is helpful for a company that is
looking for a merger or acquisition. It also allows the shareholders to know
the value of the shares.
5. Increased wealth. The founders of the company often have the sense of
increased wealth as a result of the IPO. Prior to the IPO these shares
were illiquid and had a more subjective price. These shares now have an
ascertainable price and after any lockup period these shares may be sold
to the public, subject to limitations of federal and state securities laws.
There are numerous disadvantages to going public.
1. Time and Expense. Conducting an IPO is time consuming and
expensive. A successful IPO can take up to a year or more to complete
and a company can expect to spend several hundreds of thousands of
dollars on attorneys, accountants, and printers. In addition, the
underwriter’’s fees can range from 3% to 10% of the value of the offering.
Due to the time and expense of preparation of the IPO, many companies
simply cannot afford the time or spare the expense of preparing the IPO.
2. Disclosure. The SEC disclosure rules are very extensive. Once a
company is a reporting company it must provide information regarding
compensation of senior management, transactions with parties related to
the company, conflicts of interest, competitive positions, how the company
intends to develop future products, material contracts, and lawsuits. In
addition, once the offering statement is effective, a company will be
required to make financial disclosures required by the Securities and
Exchange Act of 1934. The 1934 Act requires public companies to file
quarterly statements containing unaudited financial statements and
audited financial statements annually. These statements must also contain
updated information regarding nonfinancial matters similar to information
provided in the initial registration statement. This usually entails retaining
lawyers and auditors to prepare these quarterly and annual statements. In
addition, a company must report certain material events as they arise.
This information is available to investors, employees, and competitors.
3. Decisions based upon Stock Price. Management’’s decisions may be
effected by the market price of the shares and the feeling that they must
get market recognition for the company’’s stock.
4. Regulatory Review. The Company will be open to review by the SEC to
ensure that the company is making the appropriate filings with all relevant
disclosures.
5. Falling Stock Price. If the shares of the company’’s stock fall, the
company may lose market confidence, decreased valuation of the
company may effect lines of credits, secondary offering pricing, the
company’’s ability to maintain employees, and the personal wealth of
insiders and investors.
6. Vulnerablility. If a large portion of the company’’s shares are sold to the
public, the company may become a target for a takeover, causing insiders
to lose control. A takeover bid may be the result of shareholders being
upset with management or corporate raiders looking for an opportunity.
Defending a hostile bid can be both expensive and time consuming.
Once a company has weighed the advantages and disadvantages of being a
public company, if it decides that it would like to conduct an IPO it will have to
retain a lead underwriter to sell the securities, an attorney to assist in the
preparation of a registration statement, and auditors to prepare financial
statements.
REASONS FOR INITIAL PUBLIC OFFER
The main reasons for a company going to public:
• Because of the increased scrutiny, public companies can usually get better
rates when they issue debt.
• As long as there is market demand, a public company can always issue more
stock. Thus, mergers and acquisitions are easier to do because stock can be
issued as part of the deal.
• Trading in the open markets means liquidity. This makes it possible to
implement things like employee stock ownership plans, which help to attract
top talent.
Being on a major stock exchange carries a considerable amount of prestige. In
the past, only private companies with strong fundamentals could qualify for an
IPO and it wasn’t easy to get listed.
The Internet boom changed all this. Firms no longer needed strong financials and
a solid history to go public. Instead, IPOs were done by smaller startups seeking
to expand their business. There’s nothing wrong with wanting to expand, but
most of these firms had never made a profit and didn’t plan on being profitable
any time soon. Founded on venture capital funding, they spent like Texans
trying to generate senough excitement to make it to the market before burning
through all their cash. In cases like this, companies might be suspected of doing
an IPO just to make the founders rich. In VC talk, this is known as an exit
strategy, implying that there’s no desire to stick around and create value for
shareholders. The IPO then becomes the end of the road rather than the
beginning. How can this happen? Remember: an IPO is just selling stock. It’s all
about the sales job. If you can convince people to buy stock in your company,
you can raise a lot of money.

PROCEDURE FOR GETTING INTO IPO
The Underwriting Process
Getting a piece of a hot IPO is very difficult, if not impossible. To
understand why, we need to know how an IPO is done, a process
known as underwriting. When a company wants to go public, the first
thing it does is hire an investment bank. A company could
theoretically sell its shares on its own, but realistically, an investment
bank is required – it’s just the way Wall Street works. Underwriting
is the process of raising money by either debt or equity (in this case
we are referring to equity). You can think of underwriters as
middlemen between companies and the investing public. The biggest
underwriters are Goldman Sachs, Merrill Lynch, Credit Suisse First
Boston, Lehman Brothers and Morgan Stanley. The company and the
investment bank will first meet to negotiate the deal. Items usually
discussed include the amount of money a company will raise, the type
of securities to be issued, and all the details in the underwriting
agreement. The deal can be structured in a variety of ways. For
example, in a “firm commitment,” the underwriter guarantees that
buying the entire offer and then reselling to the public to raise a
certain amount. In a “best efforts” agreement, however, the
underwriter sells securities for the company but doesn’t guarantee the
amount raised. Also, investment banks are hesitant to shoulder all the
risk of an offering. Instead, they form a syndicate of underwriters.
One underwriter leads the syndicate and the others sell a part of the
issue. Once all sides agree to a deal, the investment bank puts
together a registration statement to be filed with the SEC. This
document contains information about the offering as well as company
info such as financial statements, management background, any legal
problems, where the money is to be used, and insider holdings. The
SEC then requires a “cooling off period,” in which they investigate and
make sure all material information has been disclosed. Once the SEC
approves the offering, a date (the effective date) is set when the stock
will be offered to the public. During the cooling off period the
underwriter puts together what is known as the red herring. This is
an initial prospectus containing all the information about the company
except for the offer price and the effective date, which aren’t known at
that time. With the red herring in hand, the underwriter and company
attempt to hype and build up interest for the issue. They go on a road
show – also known as the “dog and pony show” – where the big
institutional investors are courted. As the effective date
approaches, the underwriter and company sit down and decide on the
price. This isn’t an easy decision: it depends on the company, the
success of the road show, and most importantly, current market

conditions. Of course, it’s in both parties’ interest to get as much as
possible. Finally, the securities are sold on the stock market and the
money is collected from investors.

THINGS TO BE CONSIDER WHILE GOING FOR IPO
Let’s say you do get in on an IPO. Here are a few things to look out for.
NO HISTORY
It’s hard enough to analyze the stock of an established company. An IPO
company is even trickier to analyze since there won’t be a lot of historical
information. Your main source of data is the red herring, so make sure you
examine this document carefully. Look for the usual information, but also pay
special attention to the management team and how they plan to use the funds
generated from the IPO.
And what about the underwriters? Successful IPOs are typically supported by
bigger brokerages that have the ability to promote a new issue well. Be more
wary of smaller investment banks because they may be willing to underwrite any
company.
THE LOCKUP PERIOD
If you look at the charts following many IPOs, you’ll notice that after a few months
the stock takes a steep downturn. This is often because of the lockup period.
When a company goes public, the underwriters make company officials and
employees sign a lockup agreement. Lockup agreements are legally binding
contracts between the underwriters and insiders of the company, prohibiting
them from selling any shares of stock for a specified period of time. The period
can be anything from 3 to 24 months. 90 days is the minimum period stated

under Rule 144 (SEC law) but the lockup specified by the underwriters can last
much longer. The problem is, when lockups expire all the insiders are permitted
to sell their stock. The result is a rush of people trying to sell their stock to realize
their profit. This excess supply can put severe downward pressure on the stock
price.
FLIPPING
Flipping is reselling a hot IPO stock in the first few days to earn a quick profit.
This isn’t easy to do, and you’ll be strongly discouraged by your brokerage. The
reason behind this is that companies want long-term investors who hold their
stock, not traders. There are no laws that prevent flipping, but your broker may
blacklist you from future offerings or just smile less when you shake hands. Of
course, institutional investors flip stocks all the time and make big money. The
double standard exists and there is nothing we can do about it because they
have the buying power. Because of flipping, it’s a good rule not to buy shares of
an IPO if you don’t get in on the initial offering. Many IPOs that have big gains on
the first day will come back to earth as the institutions take their profits.
AVOID THE HYPE
It’s important to understand that underwriters are salesmen. The whole
underwriting process is intentionally hyped up to get as much attention as
possible. Since IPOs only happen once for each company, they are often
presented as “once in a lifetime” opportunities. Of course, some IPOs soar high

and keep soaring. But many end up selling below their offering prices within the
year. Don’t buy a stock only because it’s An IPO – do it because it’s a good
investment.
TRACKING STOCKS
Tracking stocks appear when a large company spins off one of its divisions into
a separate entity. The rationale behind the creation of tracking stocks is that
individual divisions of a company will be worth more separately than as part of
the company as a whole. From the company’s perspective, there are many
advantages to issuing a tracking stock. The company gets to retain control over
the subsidiary but all revenues and expenses of the division are separated from
the parent company’s financial statements and attributed to the tracking stock.
This is often done to separate a high growth division with large losses from the
financial statements of the parent company. Most importantly, if the tracking
stock rockets up, the parent company can make acquisitions with stock of the
subsidiary instead of cash. While a tracking stock may be spun off in an IPO, it’s
not the same as the IPO of a private company going public. This is because
tracking stock usually has no voting rights, and often there is no separate board
of directors looking after the rights of the tracking stock. It’s like you’re a second
class shareholder! This doesn’t mean that a tracking stock can’t be a good
investment. Just keep in mind that a tracking stock isn’t a normal IPO.
ENTRY NORMS FOR A PUBLIC ISSUE
(LISTING ELIGIBILTY IN INDIA)
Entry norms for a public issue are governed by the SEBI Guidelines,
(disclosure for investor and protection)guidelines2000.SEBI,Keeping in view
the objective of greater transparency,investor protection and development of
capital market, has from time to time amended the entry norms for
companies to come out with the public issue. Entry norms are categorised into
the following:
1)UNLISTED COMPANIES.
2)LISTED COMPANIES.
UNLISTED COMPANIES:
Unlisted companies are those public limited companies which are presently
not listed at any of the recognized stock exchanges in India. The shares of
such companies are therefore not traded at any of the stock exchanges in
India.Presently there are 2 options available for the unlisted companies to
come out with the public issue:
Ist Option:
1) It should have a track record of distributable profits for at least 3 out of
immediately preceding 5 years and
2) The pre issue net worth(ie: net worth before the issue)should be at least Rs
1 crore in 3 out of the 5 years, with the minimum net worth in the
immediately preceding 2 years.
The issue size (includes offer to public, firm allotment, promoters’s
contribution through offer document)should not exceed 5 times its pre issue
net worth as per the last available audited accounts.
2nd Option:
With the recent guidelines amended on August 4,2000 SEBI has amended the
second option available for an unlisted companies. Earlier the guidelines
stated that if the company is not able to satisy the ist option as mentioned
above, the company can come out with the public issue provided the project is
appraised by any bank or public finacial institution with atleast 10% of the
project cost financed by such appraiser.As per the recent guideline, if the
company is unable to satisfy the Ist option Or if the issue is more than 5 times
its pre issue networth, then the second option to come out with the issue is
through the book builiding process only.The issue can come out through the
book building process provided 60% of the issue size is allotted to the
qualified institutional buyers(QIB). If the company fails to allot 60%of the
issue size to QIB the entire money so received shall be refunded.
THREE YEARS OUT OF IMMEDIATELY PRECEDING FIVE YEARS means

3years audited accounts for aperiod of atleat 36 months are available for
computation of the minimum track record of 3 years of distributable profits.
LISTED COMPANIES:
Listed companies are those which are presently listed on any one or more
recogined stock exchanges in India. The secuirities of such companies are
traded on such stock exchanges where they are listed.
All listed companies can come out with further public issue provided the net
worth of the company after the proposed issue is less than 5 times the net
worth prior to the issue.In case the net worth is more than 5 times the net
worth prior to the issue, the company should comply with any of the options
as available for unlisted companies.
KEY IPO REGULATIONS:
(A) MINIMUM DILUTION REQUIREMENT:
1.Minimum Public offer of 10% of post IPO Capital.

2.Minimum public offer =2million shares.
3.Minimum IPO size =Rs 1,000 million.
4.Offer to be made mandatorily through book building.
5.Minimum 60%allotment to Qualified institutional buyers (QIBs)
(B) Minimum public offer can be from offer for sale.
BOOK BUILDING (IMP GUIDELINES)
(A) Bidding centers mandatory in 21 stock exchange centers.

(B) On line, real time graphical display of demand and price nat the
bidding terminals mandatory.
(C) Investor allotment:
60%to QIBs
15%to non institutional investors.
25% to retail investors.
PRINCIPAL STEPS/STAGES IN APUBLIC ISSUE
The issue of securities to members of the public through a prospectus involves

a fairly elaborate process, the principal steps are as follows;
1)Vetting of the prospectus:.

2)APPOINTMENT OF UNDERWRITERS;
3) APPOINTMENT OF BANKERS ;
4) APPOINTMENT OF REGISTRARS
5) APPOINTMENT OF BROKERS AND PRINCIPAL BROKERS
6) FILING OF THE PROSPECTUS WITH THE REGISTRAR OF

COMPANIES (RoC)
7) PRINTING AND DESPATCH OF PROSPECTUS AND APPLICATION
FORM
8) FILING OF INTIAL LISTING APPLICATION
9) PROMOTION OF THE ISSUE
10) STATUTORY ANNOUNCEMENTS
11) COLLECTION OF APPLICATIONS
12) PROCESSING OF APPLICATION
13)ESTABLISHING THE LIABILITY OF UNDERWRITERS
14)ALLOTMENT OF SHARES:
15)LISTING OF THE ISSUE:
16)ROLE OF THE MANAGER TO THE ISSUE:
ROLE OF SEBI/INTERMEDIARIES/PROMOTER’S
CONTRIBUTION IN A PUBLIC ISSUE:
In the year 1992,SEBI(Securities and exchange board of India) was formed

under the SEBI act 1992 with the prime objective of protecting the interests of
investors in securities, promoting the development of and regulating the
securities market and for matters connected therewith or incidental thereto.
The SEBI act came in to force on 30TH Jan 1992 and with its establishment, all
public issues are governed by the rules and regulations issued by SEBI.
SEBI was formed to promote fair dealing in issue of securities and to ensure
that the capital markets function eeiciently,transparently and economically in
the better interesets of both the issuers and the investors.
The promoters should be able to raise funds at arelatively low cost. At the
same time, investors must be protected from unethical practices and their
rights must be safeguarded so that there is a steady flow of savings in to the
market. There must be proper regulation and code of conduct and fair practice
by intermediaries to make them competitive and professional.
Since its formation, SEBI has been instrumental in bringing greater
transparency in capital issues.Under the umbrella of SEBI, companies issuing
shares are free to fix the premium provided adequate disclosure is in the
offer documents.
Many Intermediaries are involved in connection with the public issue.
Following are the intermediaries who have to be registered with SEBI and
must have valid certificate from SEBI to act as an intermediaries:
(1)Merchant bankers.
(2) Registrars and share certificate agents.
(3) Bankers to the issue.
(4) Underwriters.
(5) Stock brokers and sub brokers.
(6) Depositories.
PROMOTER’S CONTRIBUTION AND LOCK IN

REQUIREMENT:
Some specific provisions have been inserted with regard to the contribution of
the promoters in the capital of the company.
Promoters’s contribution should be a minimum 20%of the post issue capital.
In order to calculate the minimum20%, the following shares allotted to
promoters during the last 3 yrs before filing prospectus with SEBI will not be
included :
(1) Shares acquired for consideration other than cash and
revaluation of assets or capitalization of intangible assets.
(2) Shares allotted on account of bonus issue, out of
revaluation reserves or reserves without accrual of cash
resources.
(3) Shares allotted at aprice lower than the price at which
equity is being offered to public during the preceding one
year.(However,if the amount of difference is bought in by
the promoters it will be considered as promoter’s
contribution)
(4) Applications received for less han Rs 25000 per applicant
in case of each individual and Rs 1lakh from firms and
companies(not being business associates like dealers and
distributors)
(5) No specific witten consent has been obtained from the
respective shareholders for inclusion of their subscription
in the minimum promoter’s contribution subject to lock in.
In case of public issues by listed companies, the promoter,s
contribution should be either 20% of the proposed issue or
20%of the post issue capital.Also,if the promoter,s
contribution in such companies exceeds the 20%, then the
excess of 20%shall attract the provisions of the guidelines on
preferential allotment,if the issue price is lower than the price
as determined on the basis of said preferential guidelines.
LOCK IN REQUIREMENTS:
(1)The eligible promoters contribution is locked in for 3 years.

(2)The entire pre issue share capital , other than yhat locked in as
promoters contribution, shall be locked in for a period of 1year.
(3)All the securities issued on firm allotment basis shall be locked in
for a period of 1 year.
(4)The date of the lock in shall be reckoned from the date of
commencement of commercial production or the date of
allotment in the public issue,whichever is later.
Bankers to an issue
The post-issue Lead Merchant Banker shall ensure that moneys

received pursuant to the issue and kept in a separate bank (i.e.
Bankers to an Issue), as per the provisions of section 73(3) of the
Companies Act 1956, is released by the said bank only after the
listing permission under the said Section has been obtained from all
the stock exchanges where the securities was proposed to be listed
as per the offer document.
Advertisement stating that "the subscription to the issue has been

closed" may be issued after the actual closure of the issue.
Basis of Allotment
(In a public issue of securities, the Executive Director/Managing

Director of the Regional Stock Exchange along with the post issue
Lead Merchant Banker and the Registrars to the Issue shall be
responsible to ensure that the basis of allotment is finalised in a fair
and proper manner in accordance with the following guidelines:
Provided, in the book building portion of a book built public issue

notwithstanding the above clause, Clause 11.3.5 of Chapter XI of
these Guidelines shall be applicable.)
Proportionate Allotment Procedure
The allotment shall be subject to allotment in marketable lots, on a

proportionate basis as explained below:
a) Applicants shall be categorised according to the number of

shares applied for.
b) The total number of shares to be allotted to each category as a

whole shall be arrived at on a proportionate basis i.e. the total
number of shares applied for in that category (number of applicants
in the category x number of shares applied for) multiplied by the
inverse of the oversubscription ratio as illustrated below:
Total number of applicants in category of 100s - 1,500
Total number of shares applied for - 1,50,000
Number of times oversubscribed - 3

Proportionate allotment to category - 1,50,000 x 1/3
= 50,000
c. Number of the shares to be allotted to the successful allottees

shall be arrived at on a proportionate basis i.e. total number of
shares applied for by each applicant in that category multiplied
by the inverse of the oversubscription ratio. Schedule XVIII of
basis of allotment procedure may be referred to.
Number of shares applied for by - 100
each applicant
Number of times oversubscribed - 3
Proportionate allotment to each
successful applicant - 100 x 1/3 = 33
(to be rounded off to 100)
d. All the applications where the proportionate allotment works out

to less than 100 shares per applicant, the allotment shall be
made as follows:
i. Each successful applicant shall be allotted a minimum of 100

securities; and
ii. The successful applicants out of the total applicants for that
category shall be determined by drawal of lots in such a manner
that the total number of shares allotted in that category is equal
to the number of shares worked out as per (ii) above.
e. If the proportionate allotment to an applicant works out to a

number that is more than 100 but is not a multiple of 100 (which
is the marketable lot), the number in excess of the multiple of
100 shall be rounded off to the higher multiple of 100 if that
number is 50 or higher.
f. If that number is lower than 50, it shall be rounded off to the
lower multiple of 100. As an illustration, if the proportionate
allotment works out to 250, the applicant would be allotted 300
shares.
g. If however the proportionate allotment works out to 240, the
applicant shall be allotted 200 shares.
h. All applicants in such categories shall be allotted shares arrived
at after such rounding off.
i. If the shares allocated on a proportionate basis to any category
is more than the shares allotted to the applicants in that
category, the balance available shares for allotment shall be first
adjusted against any other category, where the allocated shares
are not sufficient for proportionate allotment to the successful
applicants in that category.
j. The balance shares if any, remaining after such adjustment shall
be added to the category comprising applicants applying for
minimum number of shares.
k. As the process of rounding off to the nearer multiple of 100 may
result in the actual allocation being higher than the shares
offered, it may be necessary to allow a 10% margin i.e. the final
allotment may be higher by 10 % of the net offer to public.
Reservation for Small Individual Applicants
The above proportionate allotments of securities in an issue that is

oversubscribed shall be subject to the reservation for small
individual applicants as described below:
a) A minimum 50% of the net offer of securities to the public shall

initially be made available for allotment to individual applicants who
have applied for allotment equal to or less than 10 marketable lots
of shares or debentures or the securities offered, as the case may
be.
b) The balance net offer of securities to the public shall be made

available for allotment to:
i) individual applicants who have applied for allotment of more than

10 marketable lots of shares or debentures or the securities offered
and ;
ii) other investors including Corporate bodies/ institutions

irrespective of the number of shares, debentures, etc. applied for.
c) The unsubscribed portion of the net offer to any one of the

categories specified in (a) or (b) shall / may be made available for
allotment to applicants in the other category, if so required.
Certificate Regarding Realisation of Stockinvests
The Post -Issue Lead Merchant Banker shall submit within two
weeks from the date of allotment, a Certificate to the Board
certifying that the stockinvests on the basis of which allotment was
finalised, have been realized.
SOME EARLIER ISSUES
Equity Issues of 2000
Name of Companies
 Hifunda.Com Limited
 Vijaya Bank Limited
 Creative eye Limited
 Balaji Tele Films Limited
 Synfosys Business Solutions
 IT&T Limited
 Vision Organics Limited
 Prosoft technologies
 Sequelsoft India Limited
 Andhra Bank
Name of Companies
 South Asia Petrochemicals

 D-Link (India) Limited
 Mid-Day Multimedia Limited
 Moschip Semiconductor Technology
Name of Companies
 Adlabs Films
 Canara Bank
 Allahabad Bank
 Union Bank of India
 I-Flex Solutions
 Punjab National Bank
 Bharati Tele Ventures
Name of Companies
 TV Today
 Indraprastha Gas
 India Over Seas Banki
 UCO Bank
 Maruti Udyog
Issue Issue
Company Sector Price Issue Size
Opens Closes
Rs 63 to Apr 21, Apr 28,

NDTV Media Rs 1.09 bn
Rs 70 2004 2004
Rs 255 - Apr 02, Apr 07,

ICICI Bank Banking Rs 35 bn
295 2004 2004
Rs 270 - Rs 2.7 bn - Rs Mar 11, Mar 18,

Biocon Ltd Pharma
Rs 315 3.15 bn 2004 2004
Rs 680 - Rs 97 bn - Rs Mar 05, Mar 13,

ONGC Energy
Rs 750 107 bn 2004 2004
Petronet Rs 13 - Rs Rs 3.4 bn - Rs Mar 01, Mar 09,

Energy
LNG 15 3.9 bn 2004 2004
Power Rs 14 - Rs Rs 812m - Rs Mar 01, Mar 08,

Power
Trading 16 928m 2004 2004
Feb 27, Mar 05,

GAIL Energy Rs 185* Rs 15.6 bn*
2004 2004
Bank of Feb 25, Mar 04,

Banking Rs 23 Rs 2.3 bn
Maharashtra 2004 2004
Feb 23, Feb 28,

CMC Ltd. Software Rs 475 Rs 1,852.5m
2004 2004
Feb 23, Mar 01,

IBP Co. Ltd. Energy Rs 620 Rs 3.6 bn*
2004 2004
Feb 20, Feb 27,
IPCL Petrochem Rs 170 Rs 10.1 bn*
2004 2004
Patni Rs 200 - Rs 3.7 - Rs Jan 27, Feb 05,

Software
Computer Rs 230 4.3 bn* 2004 2004
* Based on the floor price

RECENT ISSUES
Gas Authority of India

Issue Summary
 Type Offer for sale by the book-building

route
 Min. subscription 30 shares
 Size Rs 15.6 bn (based on floor price)
 Lead Managers HSBC Securities and Capital

Markets (India), ICICI Securities
 Floor Price Rs 185
 Listing BSE, NSE and Delhi Stock Exchange
 Face value Rs 10 per share.
 Promoters Government of India
 Shares on offer 84.6 million shares
 Promoters
post issue holding 57.4%
 Issue Opens February 27, 2004
 Issue Closes March 5, 2004

Issue Structure
Employees QIBs Non- Retail Portion

Institutional
Investor
No. of shares Maximum of Maximum of Minimum of Minimum of 20.1
4.2 m 40.2 m 20.1 m shares m shares
shares shares
% offered from Net Maximum Maximum Minimum 25% Minimum 25%
public offer 5% 50%
Minimum 30 equity Rs 50,001 Rs 50,001 30 equity shares
Bid/Application size shares
In multiples of 30 shares 30 shares 30 shares 30 shares
Maximum Not Not Not exceeding Not exceeding Rs
Bid/Application size exceeding exceeding the size of the 50,000
5% of the the size of offer
offer. the offer
Background
Background
Government of India established GAIL in 1984 in order to
develop the pipeline infrastructure in different parts of the
country. It is the largest natural gas transmission company
in India and operates a pipeline network of around 4,600
kms across the length and breadth of the country. GAIL
currently transports 63 million metric standard cubic
meters per day (mmscmd) of natural gas, representing
approximately 90% of the total amount of gas being
transported through pipelines in India. It has ventured into
other related businesses such as upstream activities of
production and exploration and petrochemicals. It has 7
plants for processing of natural gas to produce LPG
(liquefied petroleum gas), thereby adding synergistic value
to the profile.
Business
Sale of natural gas is the company’s principal business contributing
around 70% to the topline. The company has 7 plants for processing
of natural gas to produce LPG, which is sold to domestic as well as
industrial consumers. It has also entered into joint ventures to market
CNG (compressed natural gas) in cities like Delhi and Mumbai. GAIL
operates a petrochemical complex located along the Hazira-Bijapur-
Jagdishpur (HBJ) pipeline, with a production capacity of 260,000
tonnes per annum (tpa). Further, GAIL has ventured into
telecommunications business with Gailtel having a reach of 8,000
kms, providing commercial bandwidth to customers. It also has a
12.5% stake in Petronet LNG, whereby it has a take-or-pay obligation
of 60% of the regasified natural gas and 100% transmission rights.
With the growing demand of natural gas in the country, it makes
business sense for GAIL to acquire a stake in the company.
Segmental Contributions
Segment Revenues % of gross sales
Natural Gas 6136 68.6%

Sale of LPG 1556 14.1%
LPG Transmission 1884 2.3%
Polymers 7814 9.6%
Others* 4412 5.4%
Total 81802 100.0%
 others include pentane, propane, butene and telecom
Reasons to apply
Share Holding
(%) Pre-Offer Post-Offer

GOI 67.35 57.35
Public 32.65 42.65
Valuation and Comments

 Since GAIL has a unique business model, comparative
valuations are not possible. At the floor price of Rs 185, the
stock is trading at a P/E multiple of 9.5x its estimated FY04
earnings and a price to book value of 2.1x FY04E. Overall, we
believe that entry barriers are very high and long-term
growth potential continues to remain promising. Therefore,
positives seem to outweigh risks from the long-term
perspective.
Oil and Natural Gas Corporation Ltd.
Issue Summary
 Type Offer for sale by the book-building route
 Size Rs 97 bn to 107 bn
 Lead Managers JM Morgan Stanley, DSP Merrill Lynch,

Kotak Mahindra Capital Company
 Price Rs 680 to Rs 750 per share
 Listing BSE, NSE, Delhi Stock Exchange
 Shares on offer 142.6 m shares
 Promoters post
issue holding 74.1%
 Issue Opens March 5, 2004

Issue Structure
Employees Existing QIBs Non- Retail

Shareholders Institutional Portion
Investors
Number of shares Maximum Maximum of Maximum Minimum of Minimum of
of 14.3 m 14.3 m shares of 57.04 28.52 m 28.52 m
shares m shares shares shares
% offered from Net Maximum Maximum Maximum Minimum Minimum
public offer 10% 10% 50% 25% 25%
Minimum 10 equity 10 equity Rs 50,001 Rs 50,001 10 equity
Bid/Application Size shares shares shares
In multiples of 10 shares 10 shares 10 shares 10 shares 10 shares
Maximum Not Not exceeding Not Not exceeding Not
Bid/Application Size exceeding 10% of the exceeding the size of exceeding Rs
10% of the offer the size the offer 50,000
offer of the
offer
Background
Oil and Natural Gas Corporation (ONGC) is an integrated oil and gas
company engaged in the business of exploration, development and
production of crude oil and natural gas and the production of value-
added products such as LPG, naphtha and SKO (superior kerosene
oil). ONGC is also the largest oil and gas company in India as
measured by total proved reserves and production. It is one of the
‘Navratna’ PSUs with a GOI stake of 74.1% (post issue).
Business
ONGC accounts for nearly 85% of domestic crude and natural gas
supply in India. ONGC’s domestic production was approximately 154.8
m barrels of oil and approximately 19.5 BCM (billion cubic meters) of
natural gas in 9mFY04 (nine months ended December 2003). Sale of
crude is the principle business of the company accounting for 67.6% of
revenues. ONGC is engaged in exploration and production activities in
eight foreign countries through its subsidiary ONGC Videsh (OVL). OVL
has targeted 20 MT (million 43tili) of oil equity by the end of year
2010. The company is also engaged in the refinery business through
its subsidiary MRPL, in which it holds a 71.6% stake. It is all set to
enter the retail arena with a license to set up 1,100 retail outlets,
thereby it a truly integrated oil and gas company.
Promoters
ONGC is a flagship integrated oil and natural gas company with a GOI
holding of 74.1% (post-issue). The company was set up primarily for
the purpose of oil and gas exploration and production of value-added
products such as LPG, naphtha and SKO.
Sector
In India, oil and natural gas production is largely dominated by two
major PSUs, namely, ONGC and Oil India (OIL). ONGC accounts for
approximately 84% of the domestic supply while OIL and other
small and private players account for the rest.
Domestic supply of crude and natural gas production
Company Crude mmbbl) (%) Natural gas (bcm (%)

ONGC* 207.3 83.6 26.4 84.1
OIL 22.3 9.0 1.7 5.6
Others 18.4 7.4 3.2 10.3
 includes share of production sharing agreements
Traditionally, domestic oil industry had been regulated with regard to

pricing and allocation to such an extent that the oil and gas prices
along with the allocation of crude being explored domestically, was
decided by the government.
India imports 70% of the crude requirements from abroad. Significant

industrial activity in the Indian economy over the past decade has
resulted in strong increase in energy consumption, which has led to
opening up of the sector in phases by the GOI. As a result, the GOI
implemented the new exploration and licensing program (NELP) in
order to encourage private participation through competitive bidding in
exploration fields. Currently, the GOI has allowed 100% FDI (foreign
direct investment) in the upstream activities through automatic route.
The introduction of NELP has brought about some interest in the
exploration activities with private and foreign entities such as Reliance
Industries, Cairn Energy and Niko resources being granted licenses.
The recent dismantling of APM (administered price mechanism) has

proved to be a boon for the companies engaged in the upstream
activities. These companies can now negotiate at international crude
prices unlike the prices set by the Government before April 2002.
However, the GOI has a major say in the allocation of crude to other oil
PSUs thereby limiting the negotiating power of companies such as
ONGC and OIL.
Currently, with growing demand, major oil PSUs like GAIL and IOC are
venturing into exploration activities and HPCL all set to explore with its
subsidiary Prize Petroleum, thereby raking in the benefits of
integration.
With the growing demand for energy, demand for alternative fuels such
as LNG, CNG and CBM (coal bed methane) is likely to rise. ONGC has
been awarded CBM fields during the fourth round of NELP and plans to
start commercial production in 1QFY05.
Gas consumption
Country Consumption (bcm) % share

USA 616.2 25.6
Russian federation 372.7 15.5
UK 95.4 4.0
Germany 82.9 3.5
Japan 79.0 3.3
Canada 72.6 3.0
India 26.0 1.1
Although, coal and crude oil form a major part of the primary energy
consumption in India, this is largely due to the fact that other sources
of energy have been relatively untapped. Natural gas, as a source of
primary energy accounts for a meager 8%. This could largely be
attributed to supply constraints. However, Petronet LNG importing gas
and Shell setting up its terminal at Hazira, along with recent gas finds
by Reliance and ONGC have come as an encouraging development,
which are likely to change the dynamics of energy consumption in the
long run.
Share Holding

GOI 84.11 74.11
IOC 9.61 9.61
GAIL 2.4 2.4
Public 3.88 13.88
Comparative valuation and Comments

The above valuations give an overview of the super normal
margins enjoyed by ONGC vis-à-vis IOC, HPCL and BPCL.
Although not equally comparable to ONGC, the comparison
holds water given the fact that it is now venturing into the
retail segment of the business, which has by far, been the forte
of these oil marketing PSUs. Going forward, we believe ONGC
shall benefit from integration and expansion. Also, with almost
50% of the fields granted to ONGC under NELP, there is
enough potential for the company to grow in the business
straddle. Perhaps the apprehensions are susceptibility to
volatile crude prices, government intervention and large-scale
capital expenditure plans for the next five years. Overall,
positives seem to outweigh negative from a long-term
perspective.
IBP Co. Limited
Issue Summary
 Type Offer for sale by the book-building route

 Size 3.6 bn (based on floor price)
 Lead Managers Kotak Mahindra Capital Company Ltd.,

ICICI Securities Ltd.
 Floor Price Rs 620
 Listing BSE, NSE, Calcutta, Ahmedabad, Delhi,

Gauhati and Madras Stock Exchanges
 Face value Rs 10 per share
 Promoters Indian Oil Corporation Ltd

.
 Shares on offer 5.76 million
 Promoterspost
issue holding No change
Issue Structure
QIBs Non- Retail Investor*
Institutional
Investor
No. of shares Maximum of Minimum of Minimum of 1.44 m
2.88 m shares 1.44 m shares shares
% of total size 50% 25% 25%
Minimum Rs 50,001 Rs 50,001 10 equity shares
Bid/Application
size
In multiples of 10 shares 10 shares 10 shares
Maximum Not exceeding Not exceeding Not exceeding Rs 50,000
Bid/Application the size of the the size of the
size offer offer
Background
Indo-Burma Petroleum Company Limited (IBP), earlier a pure GOI
entity, is now a 53.6% subsidiary of India’s largest marketing and
refining major, the Indian Oil Corporation. Although IOC controls
the company, it is indirectly a GOI company as the former is a state
controlled company. IBP is one of the major petroleum marketing
companies with a diverse portfolio ranging from transportation fuels
like motor spirit (MS), high-speed diesel (HSD) to lubricants, LPG
and naphtha. IBP has a wide network base spanning across the
length and breadth of the country with 2,524 retail outlets selling
petroleum products, 378 Superior kerosene Oil (SKO) and Light
Diesel Oil (LDO) and 69 LPG distributorships. It also has a dominant
presence in industrial explosives business with an 18% market
share in that spectrum along with its cryogenic business.
Business
IBP is primarily a petroleum marketing company with a portfolio of a
number of petroleum products ranging from transportation fuel, such as
motor spirit and high speed diesel, to lubricants, LPG and naphtha. The
company derives almost 99% of its revenues from the petroleum
products with the balance being contributed by the explosives and
cryogenics businesses. IBP has a market share of 7.3% in motor spirit
business and 7.2% in case of high- speed diesel. The table below gives
an idea about the break up of the revenues of the company along with
the petroleum products.
Business segments
Petroleum Products
FY03 9mFY04
(Rs m) Size % Size %
Petroleum 86,375 98.7% 74,916 99.0%
Products
Explosives 969 1.1% 672 0.9%
Cryogenics 187 0.2% 117 0.2%
Total 87,531 100.0% 75,705 100.0%
FY03 9mFY04
(Rs m) Size % Size %
MS 21,910 25.4% 20,651 27.6%
HSD 55,583 64.4% 48,233 64.4%
SKO 5,775 6.7% 4,113 5.5%
Lubricants 1,793 2.1% 1,274 1.7%
Others* 1,314 1.5% 645 0.9%
Total 86,375 100.0% 74,916 100.0%
 Other products include CNG, furnace oil, light diesel oil and
LPG
Promoters
IBP was an independent PSU until February 2002, post which IOC
acquired 33.6% stake from the Government of India (GOI). IOC, as per
the applicable laws and provisions, acquired another 20% in the company
through an open offer to the public, thus gaining a majority stake of
53.6%. IOC is the world’ 17th largest petroleum company and India’s only
Fortune 500 listed company. It has a presence across the petroleum
sector, with 10 refineries accounting for a combined capacity of 49.3
million metric 52tili per annum (MMTPA) and cross-country crude and
product pipelines with a combined capacity of 52.75 MMTPA. It has an
international presence in the lubricants market and has also forayed into
the Sri Lankan retail sector to push its petrol products.
Sector
The petroleum sector in India has undergone major changes over the
past few years with the GOI dismantling the Administered Price
Mechanism (APM) in 2002. The sector has historically witnessed growth
rates in line with the GDP rate of the country. Over the last 15 years, the
CAGR of petroleum products has been approximately 5.5% compared to
a 5.9% GDP CAGR.
The sector basically can be divided into two spectrums: upstream, i.e.,
exploration and production and downstream, I .e., refining and
marketing. Over the years, Oil and Natural Gas Corporation (ONGC) and
Oil India Ltd. (OIL) have dominated the upstream activities with ONGC
accounting for 80% of the domestic crude supply. The downstream
players are IOC, BPCL, HPCL, which are into refining as well as marketing
of petroleum products along with IBP (a pure marketing company) and
Reliance Industries (which until recently was not allowed to foray into the
marketing segment). Internationally, oil majors have presence in each
and every segment of the petroleum sector. In order to avail of the
benefits of synergies, the Indian scenario has witnessed major
consolidations and acquisitions in the recent past.
Refining capacity
Capacity MMTPA
IOC* 49.3
HPCL 13
BPCL* 20
MRPL 9.69
Until recently, the petroleum sector has been dominated by the public
sector undertakings. Now, with the recent announcements by the GOI to
allow 100% foreign direct investment through the automatic route and
private participation, the dynamics are likely to change, at least on the
marketing front. Currently, India is a surplus producer of refinery
products and therefore, foreign participation is less likely to come up in
the refining business.
*IOC owns 7 refineries and has 3 refineries under its management
control
*BPCL refining capacity includes KRL and NRL
Shareholding Pattern

Promoter (IOC) 53.6 53.6
President of India (through MOPNG) 26.0 NIL
Public 20.4 46.4
Total 100 100

Comparative Valuation and Comments
IBP HPCL BPCL

Current price (Rs) 718 466 467
Price to earnings (x) 9.9 12.6 13.6
Price to book value (x)* (P/BV) 2.7 2.1 2.6
Operating margin (%)* (OPM) 2.2 5.5 5.3
Net profit margin (%)* (NPM) 1.6 2.8 2.4
 IBP Ltd. Is trading at a price to book value multiple of 2.7x its

9mFY04 estimates. Its competitors although trading in the same
range, should get higher valuations as compared to IBP given the
fact that HPCL and BPCL have a more attractive business model,
given their refining capacities and also their nationwide reach. HPCL
and BPCL have 4,729 and 4,562 retail outlets as compared to 2,524
retail outlets of IBP. It has to be understood that given the
dynamics of the sector, it is the volumes that shall drive growth in
the future and HPCL and BPCL are in a better position vis-à-vis IBP
to exploit the circumstances.
 However, over the longer term, it is likely that IOC merges IBP with
itself. Then the dynamics of the overall entity changes. But until
then, on a standalone basis, there are other better opportunities.
ICICI Bank Limited
Issue Summary
 Type 100% book-building public issue
 Min. subscription Not announced
 Size Rs 35 bn, including a green

shoe option of Rs 4.5 bn
 Lead Managers DSP Merrill Lynch, JM Morgan

Stanley, Kotak Mahindra Capital
 Price band Rs 255 to 295
 Listing NSE and BSE
 Face value Rs 10
 Promoters NA*
 Shares on offer 119 m based on a issue size of Rs
 bn and a price of Rs 295
 Promoters post
issue holding NA*
 Issue Opens April 2, 2004.
 Issue Closes April 7, 2004
• over 70% stake held by Foreign investors
Issue Structure
QIBs Non- Retail
Institutional Investor
Investor
Total value To a limit of At least Rs At least Rs
Rs 13725 m 6862.5 m 6862.5 m
Minimum < Rs 50,000 < Rs 50,000 Not
Bid/Application announced
size
Maximum Not Not exceeding Rs 50,000
Bid/Application exceeding the size of the
size the size of offer
the offer
Background
ICICI Bank, post its merger with the parent ICICI, has
emerged as the second largest bank in the country after SBI in
terms of asset size. The bank is a professionally managed
entity and provides a range of corporate and retail banking
services. ICICI Bank also prides itself as the first universal
bank in the country due to the fact that it provides a wide
variety of services. It is also the first Indian bank to offer
Internet banking and also the first to get listed on the NYSE. At
the end of FY03, the bank had an ATM network of over 1,500
ATMs and 540 branches spread across the country.
Business
ICICI Bank, post its merger with parent ICICI, is the second
largest bank in the country with a strong presence in the retail
segment. The full effect of the merger (completed in FY02) was
seen in FY03. The bank has been trying to shed its image as a
corporate banker and is aggressively targeting the retail segment
for growth (more so out of compulsion), at the same time
reducing its exposure to the corporate segment.
Promoters
ICICI Bank is a professionally managed entity that was created
post the merger of the erstwhile ICICI Limited with its subsidiary
ICICI Bank. Due to the merger with its parent, the shareholding
of ICICI Bank has changed significantly and foreign investors now
have over 73% stake in the bank. Government controlled entities
own over 15% stake in ICICI Bank, while other Indian entities
hold the rest of the stake. This means that there is no defined
promoter entity for ICICI Bank and the functioning of the bank is
in the hands of a professional team of managers.
Objects of the issue

The objects of the issue are to provide capital for
• executing the bank’s business strategy, including growth in

its retail portfolio,
• international expansion,
• investment in its insurance subsidiaries, and
• other general corporate purposes.
Shareholding
(%) Pre-Offer Post-Offer*

Foreign investors 73.1
Government controlled shareholders 15.0
Others 11.9
Total 100.0
• No details available
At a price of Rs 275 (average of Rs 255 and Rs 295), the

adjusted price to book ratio (based on FY04E NPA figures) of
the bank stands at 2.8x. ICICI Bank has emerged as the most
aggressive player in the retail segment, being the dominant
player in most of the sub segments. Having said that, the
bank’s performance continues to be plagued by very large
levels of NPAs. Its aggressive retail foray has also led to
unprecedented delinquency rates in the same. We believe that,
due to these concerns, at Rs 275 the valuation of the stock
seems a bit aggressive on a relative basis. However, investors
need to keep in mind the fact that the bank has significant
room for improvement, which could justify to an extent the
aggressive valuations. Post the capital infusion the aspect to
watch out for will be the bank’s NPA management strategies.
Biocon Limited
Issue Summary
 Type Public Issue100% Book Building
 Size Rs 2.7 bn – 3.15 bn
 Lead Managers DSP Merrill Lynch, Kotak

Mahindra Capital
Co, HSBC Securities
 Price band Rs 270 to Rs 315
 Listing BSE & NSE
 Promoters Kiran Mazumdar Shaw, Glentec

International
 Shares on offer 10 mn shares
 Promoters post
issue holding 61.53%
 Issue opens March 11, 2004

Issue Structure
QIBs Non- Retail Portion

Institutional
Investor
No. of shares 6 milliion 1.5 million 2.5 million
% offered from 60% Minimum 15% Minimum 25%
Net public offer
Minimum more than Rs more than Rs 50 equity
Bid/Application 50,001 50,001 shares
size
Maximum Not Not exceeding Not exceeding
Bid/Application exceeding the the issue size Rs 50,000
size issue size
Background
Biocon is India’s largest Biotechnology company with presence

in biopharmaceuticals, enzymes, custom research and clinical
research. It was established in the year 1978 to form a joint
venture with Biocon Biochemicals Limited, an Ireland based
company, to manufacture and export certain enzymes for the
brewing industry. Unilever eventually acquired Biocon
Biochemicals. The company came into its current form in 1999
when the promoters of company exercised their right of first
refusal to purchase Unilever’s interest in Biocon.
Business
The major source of revenue for Biocon is Statins, which
constituted 55% of its consolidated revenues in the first nine
months of FY04. Statins inhibits the excess production of bad
cholesterol in the liver. Biocon is also into manufacturing API’s
for immuno suppressants, anti diabetics, neutraceuticals, and
other biopharma products. Enzymes also form a substantial
portion of revenue for the company, though its share in
revenue has come down in last few years. The basic business is
based on fermentation process, which requires highly
technological skills. Statins (Lovastatin, Simvastin, Pravastatin,
and Atorvastatin) are the main products of Biocon and
constitute 67% of the company’s revenues. Almost 82% of the
statins made by the company are exported. Biocon has
patented process relating to manufacture of lovastatin and
simvastatin. These drugs are cholesterol-reducing molecules,
which belong to cardiovascular therapeutic segment, one of the
fastest growing segments in pharma industry. The total market
size of statins is about US$ 22 bn and is likely to grow at a rate
of 18% in FY05. Presence of the company in this high growth
segment is the key to its future growth.
Biocon also has patented a process technology PlaFactor for

fermentation to manufacture immunosuppressants, another
growth area where the company has strong focus. The
company started as an enzyme manufacturer and diversified to
biopharma, but enzymes still form a substantial portion of its
revenues. Another focus area for the company has been anti-
diabetics.
The company has also established facilities for custom research

and clinical research services. Syngene, a 99.99% subsidiary of
the company, designs and manages research projects for
multinational pharmaceuticals and biotechnology companies
In clinical research, Biocon’s other 100% subsidiary –

Clinigene, has been established to carry out Phase I, Phase II
and Phase III clinical trials. It is also establishing a disease
profile database focused on India for further studies in clinical
research.
Objects of the Issue

The company intends to 61tilize the funds raised towards its
expansion plans and funding of new projects. The proceeds
will be used for setting up new facilities to augment the
capacities for submerged fermentation and chemical synthesis
operations. The company expects the expansion plan to cost Rs
4.1 bn and any further requirements would be met through
internal accruals.
Sector
The global pharmaceutical industry had a size of US$ 401 bn in
2002 and over the period 2000-2002, the industry has clocked
a CAGR of 12%. In terms of market share, the share of the
North American region stands at nearly 51%. Europe is the
next largest, accounting for 25% of total global sales. The table
below indicates region wise sales break-up globally. It also
indicates the growth in the respective regions.
Region 2000 2001 2002 CAGR 2000-2002

North America 153 182 204 15.4%
Europe 76 88 102 19.6%
Japan 52 48 47 -4.6%
Rest of the world 38 47 48 27.9%
Total 317 364 401 12.4%
The global pharmaceutical markets can be divided mainly on

the basis of regulated and unregulated/semi-regulated
markets. As far as the unregulated/semi-regulated markets like
India are concerned, the entry barriers are minimal due to low
regulatory barriers with respect to intellectual property rights
(IPRs). These markets do not recognize product patents and
hence are a huge market for copied variants of drugs that have
been patented in regulated markets. India is a semi-regulated
market. The Indian pharma market is worth US$ 5 bn
and has been growing at a rate of 8% over the last 3-
4 years.
Due to the lack of IPRs, Indian companies have become very

adept at reverse engineering and have managed to make
copycat versions of already patented drugs. This has led to a
situation where these companies have, through reverse
engineering managed to get a toehold in the global generic
pharmaceutical market. The generic pharmaceutical market
mainly refers to the market for drugs whose patents have
expired or have been invalidated in the regulated markets. The
global generics market is estimated to be at US$ 38 bn.
Shareholding
Category Pre-Offer Post-Offer

Promoters 68.4% 61.5%
Relatives of Promoters 0.8% 0.7%
Holding of Directors 0.3% 0.4%
Employees 7.8% 7.0%
Venture Capital Funds 12.4% 11.1%
Others 10.3% 9.3%
Alloted to the pursuants of Public Offer - 10.0%
Total 100% 100%
At Rs 315 the stock of the company will be at 27.3x FY04

earnings. At this price it seems that the stock is priced
aggressively as of now. Since, there are no biotech companies
with such a business model it is hard to compare. But, looking
at the business fundamentals and the growth expected in the
biotech industry this stock can be a good investment
opportunity for investors looking to invest for long term for the
period of 3-5 years. Overall positives seems to outweigh
negatives from a longer term perspective.
Power Trading Corporation

Issue Summary
 Type Public Issue
 Size Rs 812 m to Rs 928 m
 Lead Managers SBI Capital Markets Ltd and

ENAM Financial Consultants Pvt
Ltd
 Floor Price Rs 14 to Rs 16
 Listing BSE & NSE
 Promoters NTPC, NHPC, PFC and Power

Grid
 Shares on offer 58 m shares
 Promoters post
issue holding 32%
 Issue Opens March 1, 2004
QIBs Non- Retail

Institutional Portion
Investor
No. of shares Maximum Maximum of Maximum
of 29 m 14.5 m shares of 14.5 m
shares shares
Maximum % 50% 25% 25%
offered from Net
public offer
Minimum Rs 50,001 Rs 50,001 200 shares
Bid/Application
size
Maximum Not Not exceeding Not
Bid/Application exceeding the issue size exceeding
size the issue Rs 50,000
size
*4,99,990 Shares reserved for permanent employees of the
company
Background
The Government of India in the year 1998 issued the Mega Power
Policy under which large projects (over 1,000 MW) were
proposed to be set-up. Mega power projects (MPPs) were
provided various fiscal incentives and the projects were
structured to sell power to multiple states at cheaper rates due to
economies of scale. Since multiple states were involved, PTC was
incorporated on April 16, 1999. The company was started with
the objective of carrying on the business of purchase of
electricity from state power utilities, licensees, generating
companies, independent power producers, captive power plants.
And in the process, selling the same to the state power utilities,
licensees, bulk consumers, whether in private and public sector
in India and abroad.
Objective of the issue

The issue will help company to build the long term capital base
as the company needs to maintain funds equivalent to one
month of its purchase value for the short term and five month
purchase reserves for the longer term.
Business
PTC buys power from power plants in a surplus location and sells
it to an entity in deficit states. So, skill set is required to identify
potential buyers and sellers of power at a particular point of time.
The company’s marketing department maps the power deficit and
power surplus pockets of the country on the continuous basis. The
price is negotiated, which is acceptable to both the parties (buyer
and the seller). Thereafter, PTC facilitates the physical transfer of
power from the seller to the buyer by arranging the transmission
lines by contacting various zones. PTC charges a traction margin
for the services provided that can be determined either as a fixed
amount per kWh (kilowatts per hour) of power traded or as a
percentage of cost of power traded. It helps both consumers as
well as the producer in the sense that producers can operate at
full capacity by entering into power purchase agreement with PTC
which in turn also reduces the cost of power produced due to
economies of scale for consumers.
Promoters
The Indian power sector giants like NTPC, NHPC PFC and Power
Grid have promoted PTC. The pre issue holding of the
promoters in the company stood at around 52%, which will be
reduced to 32% post issue.
Sector
The recent Electricity Act has proposed significant policy
decisions that could reform the Indian power sector over the
long term. Licensing norms for entering generation and T&D
(transmission and distribution) business of power have been
eased. Under APDRP (Accelerated Power Development &
Reform Program), as a one-time measure, SEB (State
Electricity Boards) dues to the central utilities are to be
converted into state backed bonds. In exchange, the states
have to give an undertaking that SEB will not incur losses and
T&D losses will be checked in a time bound manner. Though
the generation capacity has increased from mere 1,300 MW at
the time independence to around 108,000 MW, supply has
failed to meet demand. The gap between supply and demand of
power has widened over time, with a reported energy gap of
8.8% and peak demand shortage of 12.2% in FY03.
The government plans to add 150,000 MW of generation

capacity over the next decade (including 100,000 MW thermal
capacity and 50,000 MW hydro capacity) in order to bridge the
current demand-supply gap. This is almost 1.5x current
capacity. Also, if India has to achieve a consistent 7% GDP
growth, power generation has to grow by 8%-9% per annum.
Thus, demand is not an issue in this industry. However, poor
health of the SEBs has kept both private and public
investments away for some time now. While it is clear that
power sector is a sunrise industry in India going forward, the
pace of the growth depends largely on power sector reforms.
Shareholding
Category Pre-Issue Post-Issue

Power Grid Corporation Ltd 13.1% 8%
NTPC 13.1% 8%
NHPC 13.1% 8%
Power Finance Corporation 13.1% 8%
Tata Power 16.4% 10%
Damodar Valley Corporation 10.9% 7%
Other financial institutions 20.3% 12%
Public (including reservation) - 39%
Total 100.0% 100%
The comparative valuation study is not appropriate due to the
company’s unique business model. However, we believe that the
barriers to entry in this business are extremely low and more
importantly, it could face competition from power generation
companies in the future. As a result, PTC is at a disadvantage.
While potential is high, considering the low value-add in the
business and the lack of control over the buyer/seller, risks seem
to outweigh growth prospects. The P/E ratio at Rs 16 works out
to be 4.5x, 68tilized68a 9mFY04 earnings.
Bank of Maharashtra
Issue Structure
 Type Public issue
 Size Rs 2.3 bn
 Lead Managers SBI Capital Markets, Kotak

Investment
Banking, Enam
 Price Rs 23 per share (premium

of Rs 13 per share)
 Listing NSE and BSE
 Shares on offer 100 million
 Promoters post
issue holding 76.77%
 Issue Opens February 25, 2004.

Issue Structure
Retail Others
Investor*
No. of shares Minimum of 50 Minimum of 50 m
m shares shares
% of total size 50% 50%
Minimum 100 shares Rs 50,000
Bid/Application size
In multiples of 100 shares 100 shares
Maximum Not exceeding Not exceeding the
Bid/Application size Rs 50,000 size of the offer
• 1 m shares are reserved for the employees and directors
of the bank.
Business
Bank of Maharashtra (BOM) is a medium sized regional bank, with
very strong concentration in the western state of Maharashtra.
Nearly 72% of its 1,251 branches are in Maharashtra. The bank’s
concentration in the western region is also reflected in its lending
portfolio. Nearly 64% of the bank’s gross lending is to the western
region. The bank offers plain vanilla products to the retail segment
as well as to small, medium and large industries. Lending to the mid-
market and retail segments is the thrust area for the bank. Over the
last 5 years (FY99-03), BOM’s deposits and advances have grown at
a CAGR of 19% and 22% respectively. 90% of BOM’s branches are
computerized.
The main objectives of this public issue are:
• To augment the capital base of the Bank to meet its future
capital adequacy requirements.
• To augment the long-term resources of the Bank.
• To list the shares on various stock exchanges as well as to

meet the expenses of the issue.
Promoters
Bank of Maharashtra (BOM) was established in 1935, at Pune, as a
public limited company. The Bank was 71tilized71ati in 1969 and
was transformed into a public sector bank. The Government of India
presently holds 100% of the ownership in the Bank. Post the IPO,
promoter holding in the bank will reduce to 76.8%.
Sector
Since the process of 71tilized71ation was initiated in early 1990s, no
other sector in India has witnessed the kind and pace of reforms as
has been taking place in the banking sector. These reforms vindicate
the importance of a vibrant banking system that stands as the
backbone of a strong and prosperous economy. Banks, apart from
being the repository of a nation’s savings, are a vital source of
capital for industry, commerce and agriculture.
The Indian banking sector is currently in a transition phase. One of
the most significant developments in recent times has been the
enactment of the Securitisation Act, which aims to tackle the
menacing problem of non-performing assets (NPAs). Another
development taking place in the Indian banking industry is the
increasing move towards absorption of technology and upgradation
of technological infrastructure. This has immensely helped in
improving the efficiency of banks in India, especially those of the
public sector banks.
While public sector banks are in the process of restructuring, private
sector banks are busy consolidating through mergers and
acquisitions (the sector has been recently opened up for foreign
investments). With increasing competition, and the need to adhere
to national and international (Basel reforms) regulations, the need of
the hour for Indian banks is to continuously upgrade their existing
systems and processes to meet demands of the future.
The government has initiated the process of unlocking the true

potential of public sector banks. This, the government is doing by
diluting its equity shareholding in these banks. Rather than
improving operational efficiencies of these banks, this move is
necessary if India hopes to build a first world banking industry. This
will also unlock shareholder value for the government, so that the
funds generated can be 72tilized to retire public debt and to invest in
the development of the Indian economy.
FY03 was a good year for the banking sector, as the growth in credit
off-take from banks was robust. The banks also benefited immensely
from the falling interest rates. Going forward, banks might not have
this benefit as interest rates are not expected to fall at the same
pace as seen before. Hence profit growth may be subdued. In terms
of credit growth, as India’s core sectors continue to witness a
revival, the trend in increased credit-off take is likely to continue.
Especially, retail credit off-take is expected to remain strong going
forward with the housing finance industry, the main contributor to
credit off-take from this segment, expected to grow between 20%-
25% in the next 3-4 years.
Shareholding
Government of India 100.0 76.8
Free-float 0.0 23.2
Total 100.0 100.0
The table below lists the adjusted price/book-value figures of

banks. Based on the IPO price and FY03 networth and NPA
figures we arrive at a price to book ratio of 1.7 for BOM.
Considering the fact that BOM has poor operational and
efficiency parameters compared to its private and public sector
peers, the IPO price seems to adequately factor in the current
status of the bank.
Adjusted price/book value*
BOM** SBI OBC HDFC Bank

1.7 2.9 2.8 4.7
* using FY03 networth and NPA figures and current

market price
** post issue networth and FY03 reserves and NPA
figures
CMC Limited
Issue Summary
 Type Public issue
 Size Rs 1,852.5 m
 Lead Managers HSBC Securities, Enam Financial
 Price Rs 475
 Listing BSE and NSE
 Promoters Tata Sons Limited
 Shares on offer 3.9 million
 Promoters post
issue holding 51.3%
 Issue Closes February 28, 2004
Issue Structure
QIBs Non- Retail
Institutional Investor*
Investor
No. of shares 1,988,186 994,094 994,094
Minimum Rs 50,001 Rs 50,001 10 shares
Bid/Application
size
Bid/Application exceeding the size of the
the offer
Business
The business of CMC is organised around four strategic business
units (SBUs). The first is the Customer Services Division, where
the company provides services like infrastructure development and
management, networking management, third party maintenance and
networking consultancy. The Systems Integration Division is
involved in activities like software development, maintenance and
systems consultancy. The ITES Division has offerings like data
management services, facilities management, web design, hosting
and electronic data interchange (EDI). Finally, the Education &
Training Division offers courses in IT through the company's own
and franchisee centres.
CMC's revenues and profits have grown at CAGR of 15% and 46%
for the period FY99 to FY03. Some of the key projects the company
has been involved in the past include BOLT (for BSE), FACTS (a
fingerprint identification system) and IMPRESS (ticketing and
reservation system for Indian Railways).
Promoters
CMC was initially promoted by the Government of India (GoI) in
1975. Then in 2001, the government divested 51% of its
shareholding to Tata Sons Ltd (TSL). TSL later acquired 0.12% of
the shares in the company and now has the management control.
At present, the GoI holds 26.3% of the company's share capital.
The present promoter, TSL, is the principal investment holding

company of the Tatas. The principal business of TSL is investment
holding, consultancy services in finance, computer software,
business operations and management, economic and market
research and quality assurance. TSL has the following four
operating divisions:
• Tata Consultancy Services,

• Tata Economic Consultancy Services,
• Tata Financial Services, and
• Tata Quality Management Services

Sector
The Indian software sector, over the past couple of years, has been
facing pressure of slowdown in the global technology spending. While
corporations around the world (especially in the US) reduced their IT
budgets, there has been a downward pressure on billing rates as
well. However, this slowdown has presented companies in the Indian
software sector with a huge opportunity on the outsourcing front,
the market for which is expected to grow at a CAGR of over 50%
through 2008 (NASSCOM-McKinsey estimate). As a matter of fact,
despite this downturn, the Indian software industry grew at an
average rate of 26%-28% p.a. Even for FY04, while NASSCOM has
projected a 26% growth for the sector, there is a big possibility of
this target being overshot. This is because the momentum towards
outsourcing is gaining ground. Indian software companies therefore,
can hope for increased business.
As for the domestic market, this was estimated to be around Rs 88
bn in FY03. Out of this, systems and network integration services
constitute to around 29%, with the remaining contributed by
customized software development (22%), consulting (13%), third
party maintenance (12%), IT-enabled services (11%) and systems
and facilities management (13%).
Share holding

Promoter Group 51.3 51.3
Government of India 26.3 Nil
Public & others* 22.4 48.7
Total 100.0 100.0
• Includes banks, FIs, mutual funds, FIIs and private corporate bodies
CMC PCS Infosys

Price (Rs) 475 230 5,065
P/E (x) 19.7 15.4 26.9
P/Sales (x) 1.0 2.3 7.1
OPM (%) 7.8 20.5 32.1
NPM (%) 5.1 14.7 26.5
CMC's valuation, despite the company' unimpressive growth

record of the past, is currently at the higher end of the
spectrum. Also, the company's operating margins are less than
a quarter of the second largest software exporter from the
country, Infosys. While the company has traditionally focused
more on providing facilities management and maintenance
services to its clients, this seems to be shifting now towards
other IT services like software development, ITES and systems
integration. This transition is likely to bring along with it a
whole host of challenges like increased attrition, staff cost
increases and managing growth. On the positive, this move
could improve the overall margins in the long-term, provided
the company exploits the synergies with the Tata Group.
Considering the fact that the management is yet to test global

markets in a meaningful way, the risk profile of the stock is on
the higher side. On a relative basis, considering the already
high valuations and poor return ratios, there are better
nvestment opportunities available in the software sector
basket.
Indian Petrochemicals Corporation
Limited
Issue Summary
 Type Offer for sale by the book building route.
 Size Rs 10.1 bn (As per the floor price)
 Lead Managers Kotak Mahindra Capital Company Ltd.,

SBI Capital Markets Ltd., J M Morgan
Stanley Pvt. Ltd.
 Price Floor Price of Rs 170
 Listing Bombay and the National Stock

Exchange.
 Promoters Reliance Petroinvestments Limited.
 Shares on offer 59.4 m shares (could be enhanced upto

71.85 m shares if strategic partner does
not exercise option to acquire 5%).
 Promoters post
issue holding No change* (subject to the company not
exercising its option to take up another
5% being offered to it). However, in case
the option is exercised, the holding shall
go up to 51%.
 Issue Opens February 20, 2004.

Issue Structure
QIBs Non- Retail Investor

Institutional
Investor
No. of shares Maximum Minimum of Minimum of 14.9
of 29.7 m 14.9 m shares* m shares*
shares *
Minimum Rs 50,001 Rs 50,001 35 equity shares
Bid/Application
size
Maximum Not Not exceeding Not exceeding
Bid/Application exceeding the size of the Rs 50,000
the offer
(*) the figures are likely to change subject to Reliance

Petroinvestments Ltd's decision to exercise the option
of 5% stake offered to it by the GOI.
Background
Indian Petrochemicals Corporation Limited (IPCL) is an erstwhile
PSU and is currently owned by Reliance Petroinvestments (46%
stake), a wholly owned subsidiary of Reliance Industries. IPCL is a
leading integrated manufacturer of petrochemical products with
one naphtha-based complex located at Vadodara and two gas-
based complexes at Gandhar and Nagothane with a total combined
installed capacity of 830,000 tonnes per annum of ethylene. IPCL
is the second largest petrochemicals company in India, next only
to Reliance Industries. Along with Reliance, it controls
approximately 68% of the polymers capacity in the country.
Polymers constitute around 70% of sales revenue for the
company.
Business
The primary products manufactured by IPCL are polymers, fibres,
fibre intermediaries and chemicals. It derives 70% of its revenues
from its polymers business (polyethylene, polyvinyl chloride,
polypropylene, agrifilms) and has an installed capacity of 940,000
tonnes per annum, second only to Reliance. IPCL has a 28% market
share in the polymers business in India. Looking at the table below,
it is apparent that the company derives a major chunk of its
business from the polyethylene segment (LDPE, LLDPE and HDPE)
and polyvinyl chloride (PVC).
Revenue Break Up % of Market share

revenues (%)
Polymers 70 27.5
Fibres and Fibre 14 27
Intermediates
Chemicals 14 11
Other products 2 NA
Total 100
Polymer products % market share
Low Density Polyethylene (LDPE) 100
Linear Low Density polyethylene (LLDPE) 33
High Density polyethylene (HDPE) 26
Polyvinyl Chloride (PVC) 27
Polymers are a major driving source for a petrochemicals business,

as these products find their application in every economic activity
ranging from automobiles to footwear. The following are the major
uses of polymer products.
Polymer Products and the uses

Product Uses
LDPE/LLDPE Consumer packaging/film, extrusion wires,
cable coatings
HDPE Fertilizers, household packaging, woven
sacks, cartons, crates, luggage, pipes
Polypropylene (PP) Cement packaging, monofilament yarn,
ropes
PVC Water pipe, electrical wires, cables, sheets
Polybutadeine Rubber Automotive tyres and tubes, conveyor belts
(PBR) and footwear
Sector
The petrochemical industry is highly capital and technology

intensive. To put things in perspective, a minimum economic size of
an integrated petrochemical plant of around 1 MTPA requires an
investment of Rs 100 bn, thereby restricting entry. The demand for
the petrochemical products is cyclical in nature. Over a period of
time, it has been noticed that the demand for petrochemical
products is related to the economic growth, pricing of the
feedstock, international prices and competing products.
Feedstock, namely naphtha and gas liquids, account for 60% to

70% of raw material costs for petrochemical producersIn India, the
primary products of the petrochemical sector are polymers, fibres,
fibre intermediaries and chemicals. Polymers such as ethylenes,
polyvinyl chloride and polypropylene account for a major chunk of
the domestic production capacity with IPCL and Reliance accounting
for nearly 70% of the capacity.
In case strategic partner
exercises the option of 5%
(%) Pre- Post- Pre-Offer Post-Offer
Offer Offer
Promoters 46.02 46.02 46.02 51.02
GOI 33.95 5.00 33.95 5.00
Others* 20.03 48.98 20.03 43.98
• Includes Mutual Funds, Banks, FIs, FIIs and the general public
Comparative Valution and Comments
9mFY04 IPCL Reliance

Current price (Rs) 195 603
Price to earnings (x) 21.0 16.9
Price to book value (x) 1.9 2.5
Operating margin (%) 15.4 19.5
Net profit margin (%) 3.2 9.9
Petrochemical stocks have historically traded at a Price to Book

Value (P/BV) range of 0.5 times to 1.2 times, depending on the
petrochemicals cycle. As mentioned earlier, the petrochemical
prices have been on an uptrend over the past one and a half
years. IPCL currently trades at a P/BV of 1.9x FY04 estimated
numbers, which is already on the higher side. Also, reduction of
import duties and growing competition are a major cause of
concerns. Operating profit margins, for instance, has declined
from 35% in FY97 (the peak of the cycle) to 15% currently. Even
if the petrochemical cycle remains favorable for the near-term,
operating margins are unlikely to reach previous peak levels
considering the change in competitive landscape. From this
perspective, the risk profile of the stock is on the higher side.
Patni Computer Systems Limited
Issue Summary
 Type 100% book building
 Size Rs 3.7 bn to Rs 4.3 bn (based on the range

of Rs 200-Rs 230 per share)
 Price Price band of Rs 200-Rs 230 per share
 Shares on offer 18.7 m
 Issue Opens January 27, 2004
 Lead Managers DSP Merrill Lynch, Kotak Mahindra

Capital,Karvy
 Listing Mumbai and National Stock Exchange Limited
 Promoters Narendra K. Patni, Gajendra K. Patni, Ashok

K. Patni and iSolutions Inc (60.8%)
 Promoterspost
issue holding 51.3%
Issue structure
QIBs Non- Retail
Institutional Investor
Investor
No. of shares 11,234,400 2,808,600 4,681,000
Minimum Rs 50,001 Rs 50,001 Minimum
Bid/Application 50 shares
size
Bid/Application exceeding book built
size book built portion
portion
Business
Patni Computer Systems (PCS) is a mid-size company engaged in providing
software solutions and services, domestically and internationally. The
company's sphere of offerings includes application development and
integration, application maintenance, enterprise application systems, R&D
services and business process outsourcing services. PCS has GE Group and
State Farm Insurance as its two largest clients with revenue contributions of
US$ 76.8 m (42% of consolidated revenues) and US$ 31.5 m (17%) to PCS'
9mFY04 revenues. Among verticals, PCS has a substantial presence in the
financial services, insurance and manufacturing verticals. The share of
revenues from these verticals in 9mFY04 was around 79%.
The main objectives of this public issue are:
For PCS, the three major objects of the public issue are:
 Raising capital for strategic initiatives, increasing sales,

marketing and promotional activities and general corporate
purposes.
 Achieving the benefits of listing.
 Meeting offer expenses.
Sector
The Indian software sector has been, over the past couple of years,
facing pressure of slowdown in the global technology spending.
While corporations around the world (especially in the US) reduced
their IT budgets, there has been a downward pressure on billing
rates as well. However, this slowdown has presented companies in
the Indian software sector with a huge opportunity on the
outsourcing front, the market for which is expected to grow at a
CAGR of over 50% through 2008 (NASSCOMM-McKinsey estimate).
As a matter of fact, despite this downturn, the Indian software
industry grew at an average rate of 26%-28% p.a. Even for FY04,
while NASSCOM has projected a 26% growth for the sector, there
is a big possibility of this target being overshot. This is because the
momentum towards outsourcing is gaining ground. Indian software
companies therefore, can hope for increased business.

Promoters 60.8 51.3
Others* 39.2 33.7
Public - 15.0
Total 100.0 100.0
• General Atlantic Mauritius Ltd., GE Capital Mauritius Equity

Investment,
and GE APC Technology Investments II (Mauritius) Ltd.
PCS Infosys Satyam

Price (Rs) 215* 5,431 341
P/E (x) 14.4 29.7 19.4
P/Sales (x) 2.1 7.8 4.4
OPM (%) 20.5 32.9 27.6
NPM (%) 14.7 26.3 22.8
• Assuming an average price of Rs 215, i.e., between Rs 200 and Rs
230.
While PCS scores low on performance parameters (like operating
margins, return ratios and ability to outperform the industry) when
compared with other listed software majors like Infosys and Wipro,
it has been a focused player in its chosen area(s) of operation. The
company has also been on the conservative side with regards to
growing its business inorganically. After weighing risk factors like
high attrition rates and positives like huge outsourcing opportunities,
valuations seem to be on the lower side of the spectrum.
Petronet LNG Ltd (PLL)
Issue size: 261mn shares

Expected Price: Rs 13-15
Likely offer size: Rs3.4 – 3.9bn
Issue opens: 01st March 2004
Issue closes: 09th March 2004
Issue Background:
Petronet LNG Ltd. (PLL), country’s first natural gas importer, has come out with
its initial public offering (IPO) and the offer comprises an issue of 261mn shares
with a face value of Rs 10 each.
10% of the shares have been reserved for its employees and whole time
directors and that of its promoter companies. Out of the remaining 45% will be
reserved for qualified institutional buyers while the remaining will be equally split
between retail and non-institutional buyers.

The equity holding pattern pre and post issue will be as follows:
Pre-Issue Post-Issue
No. of Shares Percentage No. of Shares Percentage
IOC 6295 12.50% 93750000 12.500%
BPCL 6295 12.50% 93750000 12.500%
GAIL 6295 12.50% 93750000 12.500%
ONGC 6295 12.50% 93750000 12.500%
Strategic / Financial - 39000000 5.200%
Investors
Individuals 0144 40.00% 20144 0.003%
Public Issue 260979900 34.797%
Total 50360 750000044
• The shares will be listed on The Stock Exchange, Mumbai and
National Stock Exchange of India.
Company Highlights
• PLL has been formed by the Government of India to import LNG and
set up LNG terminals in India. The company has been formed as a
joint venture promoted by GAIL, ONGC, IOC and BPCL with an
authorized capital of 12bn.
• The company has initially setup two LNG terminals at Dahej in
Gujarat with capacity of 5MMTPA (Metric Million Tons Per Annum) and
at Kochi in Kerala with a capacity of 2.5MMTPA. The Dahej plant has
commissioned on the 9th of February with the arrival of first shipment
from Qatar.
• According to the prospectus, PLL intends to utilize net proceeds of
the IPO towards financing part cost of the Rs2,576.68crore LNG import
and regassification facilities of 5MT per annum at Dahej. The project
cost is funded in 70:30 debt-equity mix. PLL had raised debt worth
Rs1,805 crore and the four promoter companies, which hold 12.5%
stake each, have contributed their share.
Business Model of the project:
Considering the nature of the project, the company has entered into
firm contracts for purchase & transport of LNG to the project site and
supply regassified LNG to its offtakers. The entire regassified LNG
quantity would be sold to its offtakers i.e. GAIL, IOC and BPCL in the
ratio of 60:30:10. The company’s LNG SPA Agreement allows it to
import specified quantities up to 5MMTPA of LNG over a period of 25
years. The LNG would be supplied to the company at Ras Laffan Port,
Qatar and would be transported to the project Site at Dahej through
exclusive Time Charter Agreements. After regassification of LNG into
natural gas, the company shall supply the same to its offtakers.
Customer Focus
Dahej Plant: the plant is expected to market the produce in the states
of Gujarat, Maharashtra, Madhya Pradesh, Rajasthan, Uttar Pradesh,
Delhi, Haryana and Punjab through the HBJ pipeline network.
Kochi Plant: The plant will satisfy the demands of the customers in and
around Kochi.
Qualitative factors in favor of the company
• Promoters of the company viz. BPCL, GAIL, IOC & ONGC are India’s
leading oil & gas companies with extensive experience in the sector.
• Gaz De France, one of the leading global LNG players, is participating
in the Project as a strategic investor and is also providing technical
assistance during to the Company for initial phase of operations &
maintenance of the LNG terminal.
• Three of the four promoters GAIL, IOC and BPCL have signed Take or
Pay Offtake contracts for the regassified LNG for our entire production.
• The project is located on the west coast of the country which offers
advantages in terms of proximity to both LNG supplier in the Middle
East as well as the market for natural gas viz Gujarat and customers
along the HBJ pipeline.
• Proximity of project site to HBJ pipeline network of GAIL.

• The company has entered into a lump sum fixed price date certain
EPC contract for construction, erection & commissioning of LNG Port
and regassification facilities. The commercial operations are expected
to commence from April 2004.
• The company has entered into a long term LNG supply contract with
RasGas II, which has large and proven gas reserves sufficient to meet
its obligations under the LNG Sale Purchase Agreement.
• It has entered into a long term Time Charter Agreement for two LNG
tankers with companies experienced
in LNG shipping.
Financial Highlights
• Since the project is under implementation no profit & loss account
has been prepared.
• The net asset value per share has increased to 9.78 as on 30th
September 2003 from Rs7.67 as on 31st March 1999.

Risks involved with the project:
• Single supplier of LNG: PLL has entered into an LNG Sale Purchase
Agreement (SPA) on July 31, 1999 with Ras Laffan Liquefied Natural
Gas Company Limited (RasGas) which was further assigned by RasGas
to RasGas (II) on July 2, 2002. The SPA provides that PLL shall take or
pay for if not taken the contracted quantities of LNG for a period of 25
years. In case of default/delay from the suppliers side, the companies
performance could take a hit. However, the company is allowed to
procure LNG from any other alternate source.
• Transportation of LNG: PLL requires to transport the natural gas from
Qatar to its project site in Dahej. For this they have entered into two
Time Charter Agreements (TCA). TCA provides for exclusive use of two
LNG tankers for a period of 25 years by paying specified hire charges.
In the event of any disruption or nonavailability of LNG tankers, the
company’s operations may be adversely impacted for the duration of
nonavailability of a tanker. However in such a scenario they have an
option to procure services of other LNG tankers from the spot markets.
• Dependence on few customers: The entire production is proposed to
be sold to GAIL, BPCL and IOC. Any delay or denial from any of these
companies could adversely effect the company’s operations. However
the probability of such an event happening is very low because of the
large demand and supply gap existing in the country for natural gas.
• Sole gas transporter: It is proposed that entire quantity of LNG after
regassification into natural gas would be transported using the GAIL
pipeline network. The company’s offtakers are therefore dependent on
GAIL pipeline network connecting Dahej-Vemar-Vijaipur. Any delay
incompletion or non availability of network in future could affect PLLs
offtakers and may temporarily have an adverse effect on its operations
since the
Take or Pay obligations undertaken by PLLs offtakers are required to
be settled at the end of every year.However, GAIL is in advanced
stages of completing the pipeline system for evacuating gas from the
Dahej terminal. Further, GAIL has a successful track record in
constructing and operating gas pipelines in the country.

AN INVESTING CHALLENGE IN IPO
The sad story of the Indian primary and secondary markets continues.
Unprecedented events have taken a toll on sentiment towards the
equity markets and consequently, IPOs have dried up. We take a look
at the IPO scene in the last couple of years, and get a feel of what lies
ahead.
The erosion of funds raised
(Rs m) FY02* FY03* % Change

Public issues 19,715 1,443 -92.7%
Rights issues 499 493 -1.2%
Domestic floatations 49,709 18,876 -62.0%
Overseas floatations 701 - -100.0%
PPL 29,495 16,940 -42.6%
Total floatations 50,410 18,876 -62.6%
Total funds raised 100,119 37,752 -62.3%
* Represents February year ending
The last 12 months have seen a significant fall in the funds raised from
capital markets through public issues, rights issue, domestic and
overseas floatations. In FY02 (Feb 2001 – Feb 2002) total funds raised
from the capital markets stood at Rs 100 bn. However, this figure
dwindled to Rs 38 bn in FY03 (Feb 2002 – Feb 2003), a sharp 62%
fall. If one were to further break it up, then public issues have actually
dipped by 92% YoY.
Top 10 Gainers
Company Name Offer Offer CMP* %

period price Change
Fortune Informatics Ltd Sep-99 10 48.2 381.5%
Punjab National Bank Mar-02 31 102.9 231.9%
Moschip Semiconductor Dec-00 10 29.1 191.0%
Technology Ltd
Andhra Bank Feb-01 10 26.3 162.5%
Infobahn Technologies Ltd Mar-00 10 23.8 137.5%
Canara Bank Nov-02 35 67.8 93.7%
I-Flex Solutions Ltd Jun-02 530 911.2 71.9%
Syndicate Bank Oct-99 10 16.4 64.0%
Geometric Software Solutions Feb-00 300 484.6 61.5%
Company Ltd
Divi's Laboratories Ltd Feb-03 130 207.9 59.9%
It is not as if the IPOs didn’t make money for the investor. Infact,
recent banking IPOs like Punjab National Bank, Andhra Bank, Canara
Bank and Syndicate Bank, are among the top performers for investors.
Improving environment for the sector in terms of clear government
policy gave a fillip to the sentiment towards this sector. Recent passing
of the Securitisation Bill as well as budget measures like the hike in
FDI limits to 74% from the earlier 49% for private banking majors has
peppered stock prices of these IPOs to new highs.
Top 10 losers
Company Name Offer Offer CMP* %
period price Change
Integrated Hitech Ltd Dec-99 10 0.6 -94.0%
IQMS Software Ltd Oct-00 10 0.6 -94.0%
Sibar Media & Entertainment Jul-00 10 0.5 -95.0%
Ltd
e.star Infotech Ltd Feb-01 10 0.5 -95.5%
GDR Software Ltd Apr-00 10 0.5 -95.5%
Shree Rama Multi-Tech Ltd Jan-00 120 4.8 -96.0%
Omni Ax's Software Ltd Apr-00 15 0.5 -96.7%
Fourth Generation Information Nov-00 10 0.3 -97.0%
Systems Ltd
Vision Organics Ltd Oct-00 40 0.8 -98.1%
Dynacons Systems & Solutions Jul-00 30 0.3 -99.0%
Ltd
* price as on 28/03/03
Post the tech bust the top losers have been tech IPOs. Quite a few
companies, which got listed during the boom period, have either gone
into oblivion, which means that they went bust or have seen significant
erosion of their respective market caps. Some of the examples are
Integrated Hitech Ltd., Shree Rama Multi-Tech Ltd., e.star Infotech
Ltd. and IQMS Software Ltd. Investors just went after the IPOs that
had a prefix or a suffix remotely connected to tech or software. During
the boom, a lot of companies knowingly changed their names to give
an impression of being a tech company. And as happens after every
wild boom, reality struck and most of the shady IPOs got hammered to
reflect their true values. So some vanished overnight and some are
trading at a fraction of their original IPO price. Of course, there was a
high profile listing of the banking product major, i-flex Solutions, which
has given investors decent returns till date. Bharti Teleservices was
another big IPO, though not as lucrative as yet. But such issues were
too few and far between.
This prompted the SEBI to issue new guidelines for the companies
wanting to get listed on the stock exchanges. It required that the
potential listing company should have a clean financial track record
and secondly, it should have paid minimum three years of dividends
prior to the listing. Also, the promoters now are required to have a
three-year lock in period in the company’s equity, thus insuring that
there is no highway robbery of the retail investor’s hard earned
money.
After the lull, FY04 could bring smiles to the IPO market. The current
year could probably see the mother of all IPOs, i.e., the much-awaited
Tata Consultancy Services (TCS) IPO. The company is expected to
offer 10% of its total equity to the public. The issue size is likely to be
in the range of a huge Rs 30-40 bn. The company is the largest
software exporter from India and in order to seal its authority in the
software market the company has indicated that post listing it would
be looking to merge 4 of its subsidiaries with itself, which include Tata
Elxsi, Tata Infotech, CMC Ltd and Tata Technologies (unlisted), thus
adding more muscle to its market leadership.
That is not all. FY04 could also be witness to the debut of India’s
largest passenger car company, Maruti Udyog, on the Indian bourses.
The auto major is expected to raise Rs 8 bn by divesting 25% of the
government’s stake in the company. However, given the government’s
stand on the divestment issue, this sell off could take some time.
After all the booms (Tech, media and telecom) now the next probable
boom could be in for banking companies. Reports suggest that PSU
banks could be eyeing the primary market in order to increase their
capital adequacy after seeing the success other listed banking stocks
have had on the bourses. The new entrants could be Indian Bank and
UCO Bank among other PSU banks.
All in all, FY04 offers a better perspective and does have a good
chance of turning around the IPO sentiment. If this happens, one
should really do their homework on the company’s looking for money
in the IPO markets. Promoter background is of utmost importance.
Then do look into the business profile of the company and find out
what it intends to do with the IPO proceeds. Also, analyse the financial
viability of the project and see whether the IPO is fairly priced or not.
After all, even if the issue is good and the price is not fair, one can
always buy into it in the secondary market.
One of the biggest challenges facing the IPO market is the falling
interest rate scenario. A few years back, corporates could access the
debt market only at 15%-20% interest rates. However, owing to the
soft interest rate regime, corporates can access funds at even 6%-9%.
This has made the debt market more attractive to corporates than a
few years back. So, it is doubly important to keep the IPO market
vibrant so that corporates continue to view it as a viable fund-sourcing
avenue. But this is only possible with continued investor interest,
which can only come in if the IPO issues that hit the market bring
strong business profiles for investors to choose from. This is where the
regulator’s eyes are needed.
Whatever SEBI does or does not do, investors while entering the
market (both IPOs and secondary) should keep their own eyes open
and be prudent. After all, it is your money on the line, not SEBI’s or
anybody else’s.
CHANGING TRENDS IN IPO
The Indian primary market has come a long way particularly in the last
decade after deregulation of the Indian economy in FY92. Both the
primary and secondary markets have had their fair share of reforms,
structural cum policy changes time to time. The most commendable
being the dismantling of the Controller of Capital Issues (CCI) and
introduction of the free pricing mechanism (which permits the
companies to price the issues). This changed the whole facet of Initial
Public Offering (IPO) market. Free pricing mechanism allowed good
corporates to raise money from the primary market at the right price,
which was denied earlier. However, the decontrol was, to some extent,
misused by corporates to overprice issues.
The government realised the need for a regulated environment and

started to promote its necessity in capital markets. Spearheading this
was the establishment of The Securities and Exchange Board of India
(SEBI) which became active in 1992. SEBI was assigned the role of
monitoring and regulating the working of stockbrokers, bankers to an
issue, merchant bankers, portfolio managers, and other intermediaries
who are associated with stock markets. The effects of these structural
changes are apparent from the trends in the resources raised from
primary market, which includes public issues, rights issues, private
placements and overseas issues.
The Primary market 'Cycle'

(Rs bn) FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00
Public 134.6 188.9 249.1 182.6 157.8 122.1 144.5 159.0
Issues
(% y-o-y 40.3% 31.9% - -13.6% -22.6% 18.3% 10.0%
growth) 26.7%
Rights 121.6 129.1 115.7 61.3 26.6 20.0 36.1 16.2
Issues
6.2% - - -56.5% -24.7% 80.2% -
10.4% 47.1% 55.2%
Private 18.7 79.8 115.4 65.3 104.8 347.9 251.9 403.2
Placement
326.0% 44.5% - 60.4% 231.9% -27.6% 60.0%
43.4%
Overseas 7.5 79.9 78.8 25.7 56.8 11.0 181.0 39.9
Issues
959.2% -1.3% - 120.7% -80.6% 1540.7% -
67.4% 78.0%
Total 282.4 477.7 558.9 334.9 346.0 501.1 613.5 618.2
69.1% 17.0% - 3.3% 44.8% 22.4% 0.8%
40.1%
Source: CMIE
It is evident that during 1992-94, the bourses started to show signs of

recovery after the securities scam in FY92. The Sensex also touched a
new high during the same period due to the improved economic
environment. Though total funds mobilised during FY94 went up from
Rs 135 bn in FY93 to Rs 188 bn in FY94, a number of companies
started to cash in on the buoyant primary market, notably the finance
companies. Besides, as the domestic companies went on for overseas
issues (GDR, FCCBs and ECBs), there was a sharp increase in funds
raised through overseas issues, which shot up by 959% from Rs 8 bn
in FY93 to Rs 80 bn in FY94. The trend continued in 1995 backed by
robust industrial production and higher gross domestic product growth.
IPO market had another impressive year. Public issue proceeds moved
up to Rs 249 bn, a growth of a 32% compared to FY94.
Buoyed by the business scenario most of the manufacturing companies

went for huge capacity expansions and diversification. The impact of
this was visible as excess capacity cramped margins and many
companies went into the red. Public issues started drying up. The total
fund mobilised during FY96 came down by 40% as the proceeds from
public, rights and overseas issues fell by 27%, 47% and 67%
respectively. That is the reason why both proceeds from private
placement as well as overseas markets moved up sharply by 60% and
121% respectively in FY97. But, then came the South East Asian
crises, which hit the trade and economic growth. So, FIIs shifted their
portfolio, which resulted in reduced exposure towards developing
economies like India. The market remained flat, as investors preferred
to put money in banks rather than investing in shares.
But during the latter half of FY98, markets witnessed the boom in
software stocks. Software stock valuations soared through the roof.
This boom in the secondary market caught on to the primary market
as well. More than 50% of new issues were from software companies
in FY99. They received tremendous response from investors with over-
subscription rates ranging anywhere between 20 times-55 times the
issue size. Subsequently, these companies got listed at huge
premiums to their offer price, which triggered interest among
investors. The private placement market witnessed a surge in
mobilisations. This was largely due to promoter’s shoring up their
stakes in companies, in light of the takeover code taking a more
concrete shape. Also, as the primary markets for both equity and debt
turned bearish, companies opted for the low cost option of private
placements.
Moreover, funds mobilised via overseas issues witnessed a 1,500%

jump since Indian companies went for American Depository Receipts
(ADR) issues, the first one being, Infosys. However, proceeds from
private placements started to fall after SEBI announced new
regulations. The total receipts via private placement fell by 28% in
FY99.
Since inception, the role that market regulator SEBI has played in
reforming primary market is commendable. Stringent norms have
been imposed as and when required. Pre-issue requirements of issuing
company and Lead Managers, filing due-diligence report at the time of
filing of draft-prospectus and post-issue obligations of revealing the
allotment basis are some of the regulatory measures, which were
enacted to safeguard investors and to bring transparency in the
system. Other notable norms include the lock-in period norms for
promoters as well as mutual funds in the issuing company. Besides,
project appraisal route as an alternative to the profit track record
route was replaced by book-building route, where qualified institutional
investors (QIBs) where allowed to subscribe 60% of the issue.
Though these measures did prevent the investors from fraudulent

practices, the quality of new issues, however, seemed to be
deteriorating. Companies with good track record, teams and
institutional backing were overtaken by companies, which zoomed in
to cash in on this new economy boom.
Though public issue receipts showed 10% YoY growth in FY00, funds
mobilised from primary market remained flat (1%). The primary
market moved in tandem with secondary markets. For instance,
Television–18 got a tremendous response while public issue from
Ajanta Pharma just managed to sail through. Further, established
software companies preferred the private placement route for raising
funds in FY00. As a result, proceeds from private placement showed a
sharp rise of 60% to Rs 403 bn. For the second consecutive year, non-
financial public sector undertakings and government companies
remained absent from public issue market. Though private placement
receipts fell during FY00, some bond issues received good response
which include bond issue from Indian Oil Corporation and Hindustan
Petroleum Corporation Limited.
The IPO market has come a long way since the boom of FY94.
However lots has to be done since the market seems to be heading the
same direction as it way during the early nineties when non-banking
financial institutions tamed the primary market. Besides, recent
statistics also indicate that the average size of public issues have
shrinked to Rs 100 m in FY01. Added to the woe, only five issues in
the first half of the current year managed to get more than 5 times
over-subscription compared to 30 last year. This is expected to
continue as long as unscrupulous companies who do not have any
infrastructure facilities, manpower, revenue model, continue to raise
money from the markets.
Nevertheless, the regulators role is commendable and it can be

anticipated that the regulatory environment will only improve in the
coming years.
2004 – AN YEAR OF IPO
Going by the spate of IPOs that have been lined up, 2004 might well
turn out to be the year of the IPOs. The last time such an event
happened was in mid nineties, when a surge in demand resulted into
expanded capacities, however the fundamentals supporting it were not
strong enough and as a result, ended up eroding shareholder's wealth.
However, we believe that things are a little different today and an
investor has a much better chance of earning good returns as
compared to the last IPO boom. Let's find out the reasons behind the
same.
The big ones…

Company Estimated issue size (Rs bn)
ONGC 110.0
GAIL 19.0
IPCL 12.5
And the others…
Company Estimated issue size (Rs bn)
Dredging Corporation 2.9
Bank of Maharashtra 2.5
CMC 2.2
Improved fundamentals: Backed by business friendly policies and cost

reduction efforts, India Inc has cleaned up its act over the last few
years and has emerged leaner and meaner than ever before. On the
demand side, while the fast rising middle class and low interest rate
regimes have ensured that the industries produce more,
advancements in technology, especially IT and cheaper access to
financial markets has resulted into higher shareholder wealth creation.
However, relatively lower consumption levels compared to other
developing nations and continuous striving for further cost reduction
renders this as an opportune time for the investors to participate in
the growth story.
Better regulations: A large number of people who had invested during

the IPO boom of the mid-nineties would not like to be reminded about
it. Of the numerous companies that made offers to the public, only a
handful managed to create wealth for its shareholders, while most of
them just squandered the money away. This left a bitter impression in
the minds of the investors, who chose to maintain a distance from
such offerings and this resulted in the IPO offers drying up post that
particular period. However, if the market regulator, SEBI is to be
believed, things are different today. Saddened by the wealth
destruction, it chose to take up action against errant companies and
tightened the IPO norms. Over the years it has brought stricter
regulations into play and has improved the disclosure framework. The
move seems to be paying off as this time round the quality of the
companies that have lined up for IPOs is seemingly much better than
what was witnessed the last time such a boom happened. The list
includes big-ticket names from the private and public sector as well as
emerging companies that are believed to have a sound business
model.
Importance to retail investors: Petronet LNG, which would be one of

the first issues to hit the IPO market has inserted an important clause
in its offering, which if followed by other companies, would mark an
important step in luring back the retail investors. The company has
reserved 90% of its total issue for retail investors. This would not only
ensure that value creation reaches to a wider section of the society but
would also help in stock price appreciation as the FIIs, who of late
have shown huge investment appetite, will be forced to access the
secondary markets in order to pick up a stake in the company.
Moreover, the government is also mulling the idea of adopting a
differential pricing policy in companies where it is selling stakes, with a
view to rewarding the retail investors by offering discounts. Such kind
of retail investor friendly policies will definitely help in re-igniting his
interest in IPOs.
Therefore, if one takes into account some of the changes that have
been listed above, it generates a feeling that things have definitely
improved for the better. But this in no way alters the risk profile of
equities. Equities have always remained riskier than other investment
avenues and therefore valuations and the business model of the
company should be the primary emphasis.
CONCLUSION
FY04 could bring smiles to the IPO market. The current year could
probably see the mother of all IPOs, i.e., the much-awaited Tata
Consultancy Services (TCS) IPO. That is not all. FY04 could also be
witness to the debut of India’s largest passenger car company, Maruti
Udyog, on the Indian bourses. The auto major is expected to raise Rs
8 bn by divesting 25% of the government’s stake in the company.
However, given the government’s stand on the divestment issue, this
sell off could take some time.
After all the booms (Tech, media and telecom) now the next probable
boom could be in for banking companies. Reports suggest that PSU
banks could be eyeing the primary market in order to increase their
capital adequacy after seeing the success other listed banking stocks
have had on the bourses. The new entrants could be Indian Bank and
UCO Bank among other PSU banks.
FY04 offers a better perspective and does have a good chance of

turning around the IPO sentiment
BIBLIOGRAPHY
BOOKS
 Varshney P.N. & Mittal D.K. Indian Financial System
 Bhalla V.K. Investment Management
SITES
 equitymaster.com
 investopedia.com
 infoindiaonline.com
 indiatimes.com
 yahoo.com
NEWSPAPER
 Economic Times
 Finance Times
 Times of India
 Hindustan Yimes
MAZAGINES
 Business Today
 Business World

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PROJECT

Submitted in the partial fulfillment of two year full time

Submitted by: Submitted to:

RUKMINI DEVI INSTITUTE OF ADVANCE STUDIES

I would like to extend my heartfelt gratitude to all those people who

helped me in carrying out this project study. My special thanks and

gratitude goes to Ms. Ankita Chopra (faculty Member) RDIAS who

helped me in carrying out this project study, acting as a guiding

spirit behind the compiling of this report.

Project work is a part of our curriculum, which helps us to correlate our

Serial no. Topic

 Advantages & Disadvantages of IPO

3. Entry Norms For a Public Issue

5. An investing challenge in IPO

IPO is an acronym for Initial Public Offering.This is the first sale of

stock by a company to the public. A company can raise money by

issuing either debt (bonds) or equity. If the company has never

issued equity to the public, it’s known as an IPO.Companies fall into

two broad categories:

 A privately held company

There a lot of advantages and disadvantage relating to issue of equity

shares which is discussed in detail in the coming pages.

important among them all is liquidity.

There is a systematic procedure for the issue of an IPO , which is

regulated by Security and Exchange Board of India (SEBI).

My study basically depends on the secondary data sources.

The various sources of secondary data include the following:

 News Paper – Economic times.

The structure of study is carried out in the following format:

Starting with the Basics of Initial Public Offer.

Next we will cover Equity issues of fast few years.

Then we will take up Recent Initial Public Offers in detaiL.

After that we will move on to some analysis part of IPOs in which we

will see investing challenge related to IPO, Changing trend of IPOs,

what has changed in past few years till now.

IPO is an acronym for Initial Public Offering.

equity to the public, it’s known as an IPO.

Companies fall into two broad categories:

referred to as “going public”. Public companies have thousands of shareholders

to stop you from buying stock.

disadvantages to being a public company, which should thoroughly be

considered. This memorandum will discuss the advantages and disadvantages of

process only after serious consideration of the advantages and disadvantages

and discussions with qualified advisors.

1. Increased Capital. A public offering will allow a company to raise capital

to use for various corporate purposes such as working capital,

acquisitions, research and development, marketing, and expanding plant

2. Liquidity. Once shares of a company are traded on a public exchange,

company to attract and retain employees by offering stock incentive

packages to those employees. Moreover, it also provides investors in the

company the option to trade their shares thus enhancing investor

larger pools of capital as well as different types of capital.

4. Valuation. Public trading of a company’’s shares sets a value for the

standards set by a private valuator. This is helpful for a company that is

looking for a merger or acquisition. It also allows the shareholders to know

the value of the shares.

to the public, subject to limitations of federal and state securities laws.

There are numerous disadvantages to going public.

1. Time and Expense. Conducting an IPO is time consuming and

expensive. A successful IPO can take up to a year or more to complete

and a company can expect to spend several hundreds of thousands of

dollars on attorneys, accountants, and printers. In addition, the