EXECUTIVE SUMMARY

EXECUTIVE SUMMARY:
When a business entity needs money the general course of action that it follows is that it goes to the bank. However banks may not be ready to provide huge finance for a long time especially if the returns are not fixed. The best way to raise money is through offer of shares. The securities which the companies issue for the first time to the public and other financial institutions either after incorporation or on conversion from private to public company is called INITIAL PUBLIC OFFERING or IPO. Raising equity gives boost to economical development of the country. This report talks about how IPO helps in raising fund for the companies going public, what are its pros and cons, and also it gives us detailed idea why companies go public. How and what are the steps taken by the companies before going for any IPO and also the role of (SEBI) Securities and Exchange Board of India the BSE and NSE , what are primary and secondary markets and also the important terms related to IPO. Investing in IPOs is not complex anymore, Kotak Securities has made buying IPOs very simple. All you have to do is make one phone call, and that's all. No IPO application forms, no queues, simply pick the phone or log on to www.kotaksecurities.com and place your IPO order within seconds. Kotak Securities provide you information on IPO News , Forthcoming IPOs in India and lots more. To start investing in IPOs, all you need to do is open an online trading account. Title of the project:

Company Name & Place:

Need for the study:

Objective of the study:

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To analyze and evaluate the complex IPO process. To study and incorporate the legal requirements of an IPO. SEBI Norms and Guidelines. Various aspects of IPO like cost, Involvement of intermediaries, pricing of an IPO. Pricing of an issue through the Book-Building Method.

Methodology:

Primary data: Consist of the Survey done by meeting people who are either Customers in Share Market or have idea about it. The data can be collected by laymen to find out their needs. Secondary data would consist of widely available resources like 1. Newspapers 2. Magazines 3. Journals 4. Websites 5. Books etc.
Sample size:

Tools used for Analysis:

Introduction:

MEANING OF STOCK EXCHANGE :

Stock exchange represents an organized market in trading of securities. Stock exchange is established with the main purpose of providing a market place for the members to deal in securities. Stock exchanges are indispensable for the proper functionin of corporate g enterprises. Stock exchange helps the investors, ready and continuous market, negotiability, liquidity and safety of investments.

According to securities contracts (regulation) Act 1956, stock exchange means anybody or individuals, wherever incorporated or not constituted for the purpose of assessing, regulation or controlling the business of buying, selling or dealing in securities.

According to this Act, a security includes shares, scrips, stocks, bonds, debentures or other marketable securities.

HISTORY OF STOCK EXCHANGE :

Exchange arises in Europe in 16th century. Trading was carried on in those exchanges in terms of securities. The London stock exchange was tended to deals only in company shares at that time. It may also consider as the earliest of modern type of stock markets.

1860, the exchange flourished with 60 brokers. In fact the 'Share Mania' in India began with the American Civil War broke and the cotton supply from the US to Europe stopped. Further the brokers increased to 250.At the end of the war in 1874, the market found a place in a street (now called Dalal Street). and The National Stock Exchange Of India (NSE) was incorporated in November 1992 as tax-paying company.

Introduction to the capital market

The capital market is the market for securities, where companies and the government can raise long term funds. The capital market includes the stock market and the bond market. Financial regulators ensure that investors are protected against fraud. The capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded. Capital market thus plays a vital role in channelizing the savings of individuals for Investment in the economic development of the country. As a result the investors are not constrained by their individual abilities, but by the abilities of the companies, which in turn enhance the savings and investments in the country, liquidity of capital market is an important factor affecting growth. Since projects require long term finance, but on the other hand, the investor may not like to relinquish control over their savings for a long time. A liquid stock market ensures a quick exit without incurring heavy losses or costs. Thus development of efficient market system is necessary for creating conductive climate for investment and economic growth.

Capital market Segment Primary and Secondary

Broadly , the comprises of two segments the new issue market which is commonly known as primary market and the stock market which is known as secondary market.

Primary
A primary offering, such as with a corporate bond, means you are buying it directly from the issuer, at par value, usually. A secondary market is where you sell or buy existing issues. I.E. If you bought a bond last year, now need to get your principal, you can sell it in the secondary market. You may not get par value. If rates are up since you bought the bond, then you will likely have to sell it at a discount to be able to get rid of it. If rates have fallen since you bought it, you could get a premium for it.

Secondary
The market where securities are traded after they are initially offered in the primary market. Most trading is done in the secondary market. To explain further, it is trading in previously issued financial instruments. An organized market for used securities. Bombay Stock Exchange (BSE), National Stock Exchange NSE, bond markets, over-the-counter markets, residential mortgage loans, governmental guaranteed loans etc Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets. For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduitby facilitating value-enhancing control activities, enabling implementation of incentive-

based management contracts, and aggregating information (via price discovery) that guides management decisions.

MEANING OF STOCK EXCHANGE

A stock exchange, share market or bourse is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets is driven by various factors which, as in all free markets, affect the price of stocks (see stock valuation). There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

CONCEPT OF SHARE TRADING

The concept of share broking emerged after the establishment of the joint stock companies. The ownership of the companies was divided into small parts and that every part was called share. So, the term Share denominates some part in the ownership of the company. The shares are freely transferable subject to the some certain restrictions. When the need was felt to sell the shares by the owner of the shares, it was difficult to find out the buyers of the shares who want to buy the shares at the price the seller want to sell. At that time a need was felt to bring the buyers and sellers on a common platform. To solve this problem, a group of persons came into picture, which used to bring the buyers and sellers together for the trade of the shares. These persons are called the share Brokers who find the persons who wish to buy or sell their securities. The whole process of finding the buyers and sellers of the securities by the brokers is called the Share Broking. The origination of the Indian securities market may be traced back to 1975, when 22 enterprise brokers under a Banyan tree established the Bombay Stock Exchange (BSE). Over the last 130 years, the Indian securities market has evolved continuously to become one of the most dynamic, modern international standards both in terms of structure and in terms of operating efficiency.

SETTLEMENT CYCLE SCHEDULE

SR. NO. 1 2 3 4 5

DAY T T+2 T+2 T+3 T+5

DESCRIPTION OF ACTIVITY TRADE Trading Day PAY IN BY 10.30 am. PAY OUT BY 2 pm. Auction of shortage in deliveries Auction pay-in by 10.30 (1 am/ pay Out by 2 pm.)

Functions of Stock Exchange

Stock exchange is established into the main purpose of providing a market place for the members to deal in securities under well laid down regulations and to protect the interest of the investors. The main functions of stock exchange are; 1. It brings the companies and investors together so that the investors can put risk capital into companies and thus, companies can use the capital. 2. It provides an orderly regulated market for securities. 3. It provides continuous, ready and open market for selling and buying securities. 4. It promotes savings and investment in the economy by attracting funds from the investors. 5. It facilitates take overs by means of acquiring majority of shares traded on the stock market. 6. It acts as a clearing house of business information. 7. It motivates the managers of well reputed companies, to retain their shares in A group, to improve performance. 8. It induces the managers to improve performance for converting non -specified shares into specified shares in the exchange. 9. It enables the investors to evaluate the net worth of their holdings. 10. It also allows the companies to float their shares in the market.

CHANGES IN STOCK EXCHANGES :

At the initial stages, there was floor trading i.e. people who want to buy or sales where company together and transfer their shares and securities required scrips as per shouting the price of shares for buy or sell it.

(1). Demate form of trading :

All scrips are put in Demate for trading in the last few years. By compulsory using of Demate from is increase the volume and increased in liquidity.

(2). Electronics form of trading :

Globalization of stock exchange is now on way. The electronics are has come to stock exchange nearly 100 % of all transaction are executed through Electronics Media more and more brokers and sub-brokers are setting into the internet.

(a). On Line trading systems : The SEBI have allowed On Line trading and broker would rush to the web site and trading through web site would increased. On the Internet one would be able to trade instantly and transferantly from any part of the world. In this method the investor comes to know immediately the trade members, time, rate at which the trade room places.

(3). Electronics Fund Collection :

Under this systems. The broker set their funds directly credited to their account and the clients can in then set their accounts credited or debited for the net funds to flow address the country.

Stock Exchanges in India

In India, there are 23 recognized Stock Exchanges which are as follows.
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The Ahmadabad Stock Exchange The Stock Exchange, Bombay The Bangalore Stock Exchange The Calcutta Stock Exchange Association The Cochin Stock Exchange Association Ltd. The Gauhati Stock Exchange Ltd. The Hyderabad Stock Exchange Ltd. The Mangalore Stock Exchange Ltd. The Ludhiana Stock Exchange Ltd. The Madras Stock Exchange Ltd. The Madhya Pradesh Stock Exchange Ltd. The Pune Stock Exchange Ltd. The Uttar Pradesh Stock Exchange Ltd. The Magadh Stock Exchange Ltd. The Jaipur Stock Exchange Ltd. Bhubaneswar Stock Exchange Association Ltd, Saurashtra Kutch Stock Exchange Ltd. Vadodara Stock Exchange Ltd. Coimbatore Stock Exchange Ltd. Meerut Stock Exchange Ltd, OTC Exchange of India. National Stock Exchange of India Ltd.

SEBI
SEBI is regulator to control Indian capital market. Since its establishment in 1992, it is doing hard work for protecting the interests of Indian investors. SEBI gets education from past cheating with naive investors of India. Now, SEBI is stricter with those who commit frauds in capital market. The role of security exchange board of India (SEBI) in regulating Indian capital market is very important because government of India can only opener takes decision to open new stock exchange in India after getting advice from SEBI. If SEBI thinks that it will be against its rules and regulations, SEBI can ban on any stock exchange to trade in shares and stocks.

Objectives of SEBI
According to the preamble to the SEBI Act, the objectives of SEBI are enumerated below:
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To protect the interests of investors in securities; To promote the development of securities market; To regulate the securities market.

SEBI can exercise its powers by way of regulations. SEBI is bound by Central Governments directions on questions of policy and is obliged to make an annual report to the Government giving therein a true and full account of the activities, policies and programmes.

Powers of SEBI
Following powers have been given to SEBI under the Securities Contracts (Regulation) Act, 1956;
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Power to call for periodical returns from recognized stock exchanges. Power to call for any information or explanation from recognized stock exchanges or its members. Power to direct inquires to be made in relation to affairs of stock exchanges or its members. Power to grant approval to byelaws of recognized exchanges Power to make or amend byelaws of recognized exchanges Power to invoke Section 17 of the Securities Contracts (Regulation) Act in may State or Area and to grant licenses to dealers in securities. Power to compel listing of securities by public companies. Power to control and regulate stock exchanges. Power to grant registration to market intermediaries. Power to register and regulate working of collective investment schemes including mutual funds. Power to promote and regulate self-regulatory bodies. To prohibit fraudulent and unfair trade practices relating to securities. Power to prohibit insider trading Power to promoter investors education and training of intermediaries in capital market. To regulate substantial acquisition of shares and takeover of companies. Power to levy less. Power to conduct research and other functions.

Now, we explain role of SEBI in regulating Indian Capital Market more deeply with following points:

1. Power to make rules for controlling stock exchange: SEBI has power to make new rules for controlling stock exchange in India. For example, SEBI fixed the time of trading 9 AM and 5 PM in stock market.

2. To provide license to dealers and brokers: SEBI has power to provide license to dealers and brokers of capital market. If SEBI sees that any financial product is of capital nature, then SEBI can also control to that product and its dealers. One of main example is ULIPs case. SEBI said, It is just like mutual fund sand all banks and financial and insurance companies who want to issue it, must take permission from SEBI."

3. To Stop fraud in Capital Market: SEBI has many powers for stopping fraud in capital market. It can ban on the trading of those brokers who are involved in fraudulent and unfair trade practices relating to stock market.It can impose the penalties on capital market intermediaries if they involve in insider trading.

4. To Control the Merger, Acquisition and Takeover the companies: Many big companies in India want to create monopoly in capital market. So, these companies buy all other companies or deal of merging. SEBI sees whether this merger or acquisition is for development of business or to harm capital market.

5. To audit the performance of stock market: SEBI uses his powers to audit the performance of different Indian stock exchange for bringing transparency in the working of stock exchanges.

6. To make new rules on carry - forward transactions: Share trading transactions carry forward cannot exceed 25% of broker's total transactions. 90 day limit for carry forward.

7. To create relationship with ICAI: ICAI is the authority for making new auditors of companies. SEBI creates good relationship with ICAI for bringing more transparency in the auditing work of company accounts because audited financial statements are mirror to see the real face of company and after these investors can decide to invest or not to invest. Moreover, investors of India can easily trust on audited financial reports. After Satyam Scam, SEBI is investigating with ICAI, whether CAs are doing their duty by ethical way or not.

8. Introduction of derivative contracts on Volatility Index: For reducing the risk of investors, SEBI has now been decided to permit Stock Exchanges to introduce derivative contracts on Volatility Index, subject to the condition that; a. The underlying Volatility Index has a track record of at least one year. b. The Exchange has in place the appropriate risk management framework for such derivative contracts.

2. Before introduction of such contracts, the Stock Exchanges shall submit the following: i. Contract specifications ii. Position and Exercise Limits iii. Margins iv. The economic purpose it is intended to serve v. Likely contribution to market development vi. The safeguards and the risk protection mechanism adopted by the exchange to ensure m arket integrity, protection of investors and smooth and orderly trading. vii. The infrastructure of the exchange and the surveillance system to effectively monitor trading in such contracts, and viii. Details of settlement procedures & systems

ix. Details of back testing of the margin calculation for a period of one year considering a call and a put option on the underlying with a delta of 0.25 & -0.25 respectively and actual value of the underlying. Link 9. To Require report of Portfolio Management Activities: SEBI has also power to require report of portfolio management to check the capital market performance. Recently, SEBI sent the letter to all Registered Portfolio Managers of India for demanding report.

10. To educate the investors: Time to time, SEBI arranges scheduled workshops to educate the investors. On 22 may 2010 SEBI imposed workshop. If you are investor, you can get education through SEBI leaders by getting update information on this page.