IPO ESSENTIALS

What is an IPO?

Initial Public Offering, IPO, is when an unlisted company

makes either a fresh issue of securities or an offer for sale of

its existing securities or both for the first time to the public
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Different Kinds of Issues

Issues

Public Rights Preferential

Initial Public Further Public

Offering Offering

Fresh Issue Offer For Sale Fresh Issue Offer For Sale
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Reasons to go public…
 Raising funds to finance cap ex programs like expansion,
diversification, modernization
 Financing of increased working capital requirements
 Debt refinancing
 Financing acquisitions like a manufacturing unit, brand
acquisition
 Exit route for existing investors
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Entry Norms
Entry norm I (EN I)
The company shall meet the following requirements:
(a) Net Tangible Assets of at least Rs. 3 crore for 3 full years
(b) Distributable profits in at least three years
(c) Net worth of at least Rs. 1 crore in three years
(d) If change in name, at least 50% revenue for preceding 1 year
should be from the new activity
(e) The issue size does not exceed 5 times the pre- issue net worth
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Entry Norms (Contd.)

Entry Norm II (EN II)
(a) Issue shall be through book building route, with at least 50% to
be mandatory allotted to the Qualified Institutional Buyers (QIBs)

(b) The minimum post-issue face value capital shall be Rs. 10 crore
or there shall be a compulsory market-making for at least 2 years
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Entry Norms (Contd.)

Entry Norm III (EN III)
(a) The “project” is appraised and participated to the extent of 15%
by FIs/Scheduled Commercial Banks of which at least 10% comes
from the appraiser(s)
(b) The minimum post-issue face value capital shall be Rs. 10 crore
or there shall be a compulsory market-making for at least 2 years
(c) The company shall also satisfy the criteria of having at least 1000
prospective allotters in its issue
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Pre-Issue Obligation
 Appointment of merchant banker registered with SEBI
 Appointment of other intermediaries
 Advisor
 Lead manager
 Co-manager
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Pre-Issue Obligation
 Registrar
 Category I and category II
 Assists in selection of banker
 Assists in devising application form
 Collection of daily collection figure
 Finalize the list of eligible allotters
 Amount of shares outstanding in the market matches
the amount of shares authorized by the company
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Pre-Issue Obligation
 Bankers
 Compulsory registration with SEBI
 Share application money account
 Issue of certificate of final collection figure
 Acceptance of money payable on allotment and on
calls
 Refund of application money to unsuccessful
applicants
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Pre-Issue Obligation
 Underwriters
 Advertising Agency
 English National Daily with wide circulation
 Hindi National newspaper
 Regional language newspaper with wide circulation at
the place of the registered office of the issuer
 Shall be in the format and contain the minimum
disclosure
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Pre-Issue Obligation
 Auditor
 Auditors’ report
 Promoters contribution certificate
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Promoter’s Contribution
 Who is Promoter?
 Persons who are in overall control of the company
 Instrumental in the formulation of a plan or
programme pursuant to which the securities are
offered to public
 Persons named in the prospectus as promoters
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Promoter’s Contribution
 Unlisted company
 Minimum requirement: 20% of the post-issue capital

 Listed company
 Post-issue holding should be more than 20%

 Should bring in their contribution including

premium fully before the issue
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Promoter’s Contribution
 Securities not eligible for computation
 Shares issued for consideration other than cash
 Shares resulting from bonus issue out of revaluation
reserves
 Shares issued to promoter during preceding year, at a
lower price
 Shares issued to partners for capital brought in during
last year
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Lock-in
 Indicates a freeze on the shares
 For minimum contribution 3 years
 For excess contribution 1 year
 Lock in period starts from
 Date of allotment
or
 Date commencement of commercial production
Securities And Exchange Board Of
India

(Disclosure And Investor Protection

Guidelines, 2000)
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Issue Details
(a) Logo, name, previous name, if any, address, telephone number, fax
number, contact person, website address and e-mail address of the
issuer company

(b) Nature, number, price and amount of instruments offered and issue
size, as may be applicable

(c) Risks in relation to first issue

(d) General risk regarding investments in equity

(e) Issuer's Absolute Responsibility clause

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Issue Details
(f) Logo, names and addresses of all the Lead Merchant Bankers
with their titles who file the prospectus with the Board, along
with their telephone numbers, fax numbers, website addresses
and e-mail addresses
(g) Logo, names of the Registrar to the Issue, along with its
telephone number, fax number, website address and e-mail
address
(h) Issue Schedule
(i) IPO Grading, Credit Rating, if applicable
(j) Names of the Stock Exchanges where listing is proposed along
with details of in-principle approval

Table of Contents
1) Definitions And Abbreviations
2)Risk Factors
3)Introduction
4)About The Issuer Company
5) Financial Information
6)Legal And Other Information
21
7) Other Regulatory And
Statutory Disclosures
8) Issue Information
9) Main Provisions Of The
Articles Of Association Of
The Company
10) Other Information
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Definitions and Abbreviations

 Conventional/ General terms

 Offering-related Terms
 Company/ Industry-related Terms
 Abbreviations
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Risk Factors

1. Forward-looking Statements and Market Data, if any (to

be disclosed on voluntary basis).
2. Risk Factors
i. Risks envisaged by Management.
ii.Proposals, if any, to address the risks.
iii.Notes to the risk factors.
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Introduction
1. Summary
i. Summary of the industry and business of the issuer company

ii. Offering details in brief

iii. Summary Consolidated Financial, Operating and Other Data

2. General Information
i. Name, address of registered office and the registration number of the issuer company, along with the
address of the Registrar of Companies where the issuer company is registered

ii. Board of Directors of the issuer company

iii. Brief details of the Chairman, Managing Director, Whole Time Director, etc

iv. Names, addresses, telephone numbers, fax numbers and e-mail addresses of the Company Secretary,
Legal Advisor and Bankers to the Company

v. Name, address, telephone number, fax number and e-mail address of the Compliance Officer
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vi. Names, addresses, telephone numbers, fax numbers, contact person, website
addresses and e-mail addresses of the Merchant Bankers, Co-Managers, Registrars
to the Issue, Bankers to the Issue, Brokers to the Issue, Syndicate members, Self
Certified Syndicate Banks, etc.
vii. Names, addresses, telephone numbers, fax numbers and e-mail addresses of the
auditors of the issuer company.
viii. Statement of inter se allocation of responsibilities among Lead Managers.
ix. Credit Rating (in case of debenture issue) / IPO Grading.
x. Names, addresses, telephone numbers, fax numbers, website addresses and e-mail
addresses of the trustees under debenture trust deed (in case of debenture issue).
xi. Name of the monitoring agency, if applicable.
xii. Where the project is being appraised, name, address, telephone number and e-mail
address of the appraising entity.
xiii. Book Building Process in brief.
xiv. Details of Underwriting, if any.
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3. Capital Structure 4. Objects of the Offering

i. Capital structure i. Funds Requirement
ii. Classes of shares, if applicable ii. Funding Plan (Means of Finance)
iii. Notes to capital structure
iii. Appraisal

iv. Schedule of Implementation

v. Funds Deployed

vi. Sources of Financing of Funds already

deployed

vii.Details of Balance Fund Requirement

viii.Interim Use of Funds

ix. Basic Terms of Issue

x. Basis for issue price

xi. Tax Benefits

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About the Issuer Company

1. Industry overview ii. Business strategy
a) Brief statement about business strategy.
2. Business overview b) Brief statement about future prospects,
i. Details of the business of the issuer including capacity & capacity utilization and

company projections.

a) Location of the project. iii. Competitive strengths (to be

b) Plant, machinery, technology, process, etc.
disclosed on a voluntary basis).
c) Collaborations, any performance guarantee or
assistance in marketing by the collaborators. iv. Insurance (to be disclosed on a
d) Infrastructure facilities for raw materials and
voluntary basis).
utilities like water, electricity, etc.
e) Products/ services of the company. v. Property.

vi. Purchase of property.

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3. Key Industry-Regulation (if applicable)

4. History and Corporate Structure of the issuer company:

(i) History and Major Events.
(ii) Main objects.
(iii) Subsidiaries of the issuer company, if any and their businesses.
(iv) Shareholders agreements.
(v) Other agreements.
(vi) Strategic partners.
(vii) Financial partners.
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5. Management
i. Board of Directors.

ii. Compensation of Managing Directors/ Whole time Directors.

iii. Compliance with Corporate Governance requirements.

iv. Shareholding of Directors, including details of qualification shares held by them.

v. Interest of the Directors.

vi. Change, if any, in the directors in last three years and reasons thereof, wherever applicable.

vii. Management Organisation Structure.

viii. Details regarding Key Management Personnel.

ix. Employees.

x. Disclosures regarding employees stock option scheme/ employees stock purchase scheme of the

issuer company, if any, as required by the Guidelines or Regulations of the Board relating to

Employee Stock Option Scheme and Employee Stock Purchase Scheme.

xi. Payment or Benefit to Officers of the Company (non-salary related).

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6. Promoters/ Principal Shareholders:

i. Details about promoters who are individuals
ii. Details about promoters which are companies
iii. Common pursuits
iv. Interest of promoters
v. Payment or benefit to promoters of the issuer company
vi. Related party transactions as per the Financial Statements

7. Exchange rates (to be disclosed on voluntary basis)

8. Currency of presentation
9. Dividend policy
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Financial Statements
1. Selected Consolidated Financial and Operating data.
2. Financial information of the issuer company.
3. Financial information of group companies.
4. Changes in Accounting Policies in the last three years.
5. Management’s Discussion and Analysis of Financial Condition and
Results of Operations as Reflected in the Financial Statements:
i. Overview of the business of the issuer company.
ii. Significant developments subsequent to the last financial year.
iii. Factors that may affect Results of the Operations.
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Financial Statements (Contd.)

iv. Discussion on Results of Operations.
v. Comparison of recent financial year with the previous financial years (last
three years) on the major heads of the Profit & Los Statement.
vi. Liquidity and Capital Resources (to be disclosed on voluntary basis).
vii. Capital Expenditure (to be disclosed on voluntary basis).
viii. Foreign Exchange Risk (to be disclosed on voluntary basis).
ix. Interest rate Risk (to be disclosed on voluntary basis).
x. Recent accounting pronouncements (to be disclosed on voluntary basis).
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Legal Other Information

1. Outstanding litigations and Material Developments
i. Outstanding litigations involving the issuer company.

ii. Outstanding litigations against the issuer company’s subsidiaries (if applicable).

iii. Outstanding litigations involving the promoter and group companies.

iv. Material developments since the last balance sheet date.

2. Government approvals/ Licensing Arrangements

i. Investment approvals (FIPB/ RBI, etc.).

ii. All government and other approvals.

iii. Technical approvals.

iv. Letter of intent/ industrial license and declaration of the Central Government/ RBI about

non responsibility for financial soundness or correctness of statements.


Other Regulatory and Statutory
Disclosures
1. Authority for the issue and
details of the resolution passed
for the issue.
2. Prohibition by SEBI.
3. Eligibility of the Issuer Company
to enter the Capital market.
4. Disclaimer clause.
5. Caution.
6. Disclaimer in respect of
jurisdiction.
7. Disclaimer clause of the stock
Exchanges.
8. Disclaimer clause of the Reserve
Bank of India (if applicable).
Filing of prospectus with the
Board and the Registrar of
Companies.
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9. Listing.
10. Impersonation.
11. Consents.
12. Expert opinion obtained, if any.
13. Expenses of the issue.
14. Details of fees payable.
15. Underwriting commission,
brokerage and selling
commission.
16. Previous rights and public issues
if any (during the last five years).
17. Capitalisation of reserves or
profits (during last five years).
18. Revaluation of assets, if any
(during last five years).
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Offering Information
1. Terms of the issue
i. Ranking of equity shares. (Details of Applications Supported by Blocked Amount Process)

ii. Mode of payment of dividend.

iii. Face value and issue price/ floor price/ price band.

iv. Rights of the equity shareholder.

v. Market lot.

vi. Nomination facility to investor.

vii.Minimum subscription.

viii.Arrangements for Disposal of Odd Lots.

ix. Restrictions, if any, on transfer and transmission of shares/debentures and on their

consolidation/ splitting.
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2. Issue procedure:
i. Fixed price issue or book building procedure as may be applicable, including details
regarding bid form / application form, who can bid/apply, maximum and minimum
bid/application size, bidding process, bidding, bids at different price levels, etc.
ii. Option to subscribe in the issue.
iii. How to apply - availability of forms, prospectus and mode of payment.
iv. Escrow mechanism:
(a) Escrow A/c. of the company.

(b) Escrow A/c. of the syndicate member.

v. Terms of payment and payment into the Escrow Collection Account.

vi. Electronic registration of bids.
vii.Build up of the book and revision of bids.
viii.Price discovery and allocation.
ix. Signing of underwriting agreement.
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x. Filing of prospectus with the Registrar of Companies.

xi. Announcement of pre-issue Advertisement.
xii. Issuance of Confirmation of Allocation note (“CAN”) and Allotment in the Issue.
xiii. Designated date.
xiv. Other instructions:
(a) Joint bids in the case of individuals.

(b) Multiple bids.

(c) Permanent Account Number

(d) Rejection of Bids

(e) Equity shares in de-mat form with NSDL or CDSL.

(f) Investor’s attention invited to contact the compliance officer in case of any pre-issue/ post-
issue related problems.

xv. Disposal of application and Application moneys.

xvi. Provisions of sub-section (1) of section 68A of the Companies Act, 1956 relating to
punishment for fictitious applications.
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xvii. Interest on refund of excess bid amount.

xviii. Basis of allotment or allocation.
xix. Procedure and time of schedule for allotment and issue of certificates.
xx. Method of proportionate allotment.
xxi. Letters of allotment or refund orders
xxii. Restrictions on foreign ownership of Indian securities, if any.
(a) Investment by NRIs .
(b) Investment by FIIs.
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Red Herring Prospectus

 It is a prospectus which does not have details of either
price or number of shares being offered or the amount of
issue.
 Therefore, in case the price is not disclosed, the number
of shares and the upper and lower price bands have to be
disclosed.
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Red Herring Prospectus (Contd.)

 On the other hand, an issuer can state the issue size and
the number of shares are determined later.
 In the case of book-built issues it is a process of price
discovery, hence, only on completion of the bidding
process, the details of the final price are included in the
offer document.
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SEBI’s Role in an Issue

 Submission of offer document to SEBI should not in any
way be deemed or construed that the same has been
cleared or approved by SEBI
 SEBI does not recommend any issue nor does take any
responsibility either for the financial soundness of any
scheme or the project for which the issue is proposed to
be made
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Difference between…
 Offer document
 Covers all the relevant information to help an investor to make
his/her investment decision
 Draft Offer document
 Offer document in draft stage
 Are filed with SEBI, at least 21 days prior to the filing of the Offer
Document with the RoC
 Abridged Prospectus
 Contains all the salient features of a prospectus
 Accompanies the application form of public issues
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What is 'IPO Grading'?

 Aimed at facilitating the assessment of equity
issues offered to public
 An assessment of the ‘fundamentals’ of that
issue in relation to the universe of other listed
equity securities in India
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IPO Grading Parameters

 Financial risks
 Accounting quality
 Corporate governance
 Management quality
 Earnings per share
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Advantages of IPO Grading

 Is likely to help SEBI regulate the IPO market by helping
it protect the investors from cases of vanishing
companies
 Retail investors, stand to benefit the most on account of
the professional perspective of the company's
fundamentals
 Neutral agencies can be more objective in their
evaluation of a public offer compared to other market
participants
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Disadvantages of IPO Grading

 The rating agencies will not talk about “what price” and
“what time” aspects of the offer
 Rating agencies (experienced in debt rating) could face
trouble with rating the equities, which, unlike debt
rating, is more dynamic and cannot be standardized
 Investors may get deluded by a low-graded IPO, which
could become a `missed opportunity' in the future
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Pricing
 No price formula stipulated by SEBI
 Issuer in consultation with the merchant banker
determines the price as well as the price band
 SEBI plays no role in price fixation
 Full disclosure of parameters used for pricing to SEBI

Factors Influencing Pricing
QUALITATIVE
 Past Records
 Experience of Promoters
 Unique Selling Proposition
 Industry Scenario
 Credit Rating
48
QUANTITIVE
 Current Market Price & High
Low of last 3 yrs
 P/E Multiple compared to
Industry
 Growth Rate in PAT & EPS
 Book Value of Shares
 RONW & ROCE
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Fixed Price V/S Book Building

 Offer / Allotment Price is
known by the investor in
advance.
 Demand for the securities
offered is known only after the
closure of the issue
 Payment can be made at the
time of subscription wherein
refund is given after allocation
 Only indicative Price Range is
known to the Investor.
 Demand for the securities
offered can be known everyday
as the book is built.
 Payment only after allocation
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Process of Book Building

 Appointment of BRLM by the issuer Company
 Draft prospectus
 Filing the draft prospectus with SEBI
 Bid period is decided on
 Appointment of a SEBI registered syndicate member as
the underwriter by BRLM
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Process of Book Building

 Circulation of copy of draft prospectus to institutional
investors and syndicate member
 Syndicate members create demand
 BRLM receives feedback from syndicate members
 BRLM has to build up an order book
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Process of Book Building

 Syndicate members to maintain record book
 Issue Price is determined
 Order book is closed and issue size for placement portion
and the public issue portion determined
 Final price is determined and allocation is made
 Filing Final Prospectus with Registrar of Companies
 Different accounts for collection of application money
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Reservations
 Retail Investors 35%
 Non Institutional Investors 15%
 Qualified Institutional Investors 50%
 54

Post Issue Obligations

 Role of Registrar
 Determines the no. of successful applicants
 Scrutinizes all applications
 Grouping the applications and segregating them
 In case of oversubscription , allotment finalized by consulting
Regional Stock Exchange
 Dispatching Certificate of allotment/refund order
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Post Issue Obligations (Contd.)

 Role of underwriters
 If issue not subscribed up to 90% they should bring in shortfall
amount
 Honor commitments within 60 days of closure of issue
 If an issue is not subscribed to 100%, the underwriters are obligated
to take-up the unsubscribed portion
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Allotment
 Applicants categorized according to no. of shares applied
 The total number of shares to be allotted to each
category as a whole shall be arrived at on a proportionate
basis (number of applicants in the category x number of
shares applied for) multiplied by the inverse of the over-
subscription ratio
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Illustration
Total number of applicants in category of 100s 1,500
Total number of shares applied for 1,50,000
Number of times over-subscribed 3
Therefore, Proportionate allotment to category 1,50,000 x 1/3
50,000
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Illustration
Number of the shares to be allotted to the successful allotters shall be
arrived at on a proportionate basis
E.g.:
No. of shares applied by each applicant 100
No. of times oversubscribed 3
Proportionate allotment to each successful applicant 100 x 1/3
 (to be rounded off to 100) 33
 59

Post Issue Obligations (Contd…)

All the applications where the proportionate allotment

works out to less than 100 shares per applicant, the
allotment shall be made as follows:
 Each successful applicant shall be allotted a minimum
of 100 securities
 The successful applicants out of the total applicants
shall be determined by withdrawal of lots.
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Post Issue Obligations (Contd...)

If the proportionate allotment to an applicant is more than 100 but is

not a multiple of 100, 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.

Illustration:
If the proportionate allotment works out to 250, the applicant would be
allotted 300 shares.
If however the proportionate allotment works out to 240, the applicant
shall be allotted 200 shares.
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Green Shoe Option

 Also known by its legal title as an "over-allotment
option" (the only way it can be referred to in a
prospectus), gives underwriters the right to sell
additional shares in a registered securities offering if
demand for the securities is in excess of the original
amount offered

 An issuer company making a public offer of equity

shares can avail of the Green Shoe Option (GSO) for
stabilizing the post listing price of its shares
 62

Glossary
Offer for sale
A public invitation by a sponsoring intermediary, such as
an investment or merchant bank, of existing securities

 Further Public Offering

Public offer by a listed company through issue of shares
 63

Glossary
 Fresh Issue
Initial public offer through issue of new shares

 Rights Issue
Existing shareholders have the privilege to buy a
specified number of new shares from the firm at a
specified price within a specified time
 64

Glossary
 Market Making
A broker-dealer firm accepts the risk of holding a
certain number of shares of a particular security in
order to facilitate trading and liquidity in that
security by displaying buy and sell quotations for a
guaranteed number of shares. The lead manager is
supposed to be the market maker or appoint one
 65

Glossary
 Qualified Institutional Buyers
Institutional investors who are generally perceived to possess
expertise and the financial muscle to evaluate and invest in the
capital markets
 Lead Managers
The commercial or investment bank which has primary
responsibility for organizing a given credit or bond issuance.
This bank will find other lending organizations or underwriters
to create the syndicate, negotiate terms with the issuer, and
assess market conditions. Also called syndicate manager,
managing underwriter or lead underwriter
 66

Glossary
 Registrar
They play an administrative role in conducting a public
issue. They are responsible for collecting information
from the collecting banks and report to the companies
and lead managers about the issue collections. They
advise the company regarding the closure or extension of
closing date of the issue.
 67

Glossary
 Underwriter
Financial intermediaries that buy stock or bonds from an
issuer and then sell these securities to the public
 68

Glossary
 Grey Market
Grey market is the unofficial trading in a company’s
share before it starts trading on the stock exchange after
an IPO.
 69

Guidelines on advertisement
 Truthful, clear, concise matter and understandable
language
 Statements considered misleading
 Should not use celebrities, models, fictional characters,
landmarks
 In case of Television ads risk factors should not be
scrolled and advise to refer to Red Herring Prospectus
 70

Guidelines on advertisement contd..

 Financial data for past three years
 Print size not to be less than 7 points
 Compulsory mention of risk factors
 No advertisement regarding subscription status during
period of subscription
 No corporate advertisement of issuer company shall be
issued after 21 days of the filing of the offer document
with the Board till the closure of the issue
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Description of Equity Shares and Terms

of the Articles of Association
1. Rights of members regarding voting, dividend, lien on
shares and the process for modification of such rights
and forfeiture of shares.
2. Main provisions of the Articles of Association.
 72

Listing Procedure (NSE)

1. Approval of Memorandum and Articles of Association

2. Approval of draft prospectus

3. Submission of Application
 73

Approval of Memorandum and

Articles of Association
Provisions Needed
 There shall be no forfeiture of unclaimed dividends before the claim
becomes barred by law

 Fully paid shares shall be free from all lien and that in the case of partly
paid shares the Issuer's lien shall be restricted to moneys called or payable
at a fixed time in respect of such shares

 Any amount paid up in advance of calls on any share may carry interest but
shall not in respect thereof confer a right to dividend or to participate in
profits

 Option or right to call of shares shall not be given to any person except with
the sanction of the Issuer in general meetings.
 Permission for Sub-Division/Consolidation of Share Certificate.
 74

Approval of draft prospectus

Issuer shall file draft prospectus with the NSE. In case

NSE is no the regional stock exchange, then the draft
prospectus should be filed simultaneously with the NSE,
when the same is filed with the Regional Stock Exchange
pertaining to the issue, for perusal of NSE
 75

Listing Procedure (BSE)

 Minimum Listing Requirements for New Companies
Companies have been classified as large cap companies and small cap
companies. A large cap company is a company with a minimum issue size of Rs.
10 crore and market capitalization of not less than Rs. 25 crore. A small cap
company is a company other than a large cap company

 In respect of Large Cap Companies

 The minimum post-issue paid-up capital of the applicant company
(hereinafter referred to as "the Company") shall be Rs. 3 crore
 The minimum issue size shall be Rs. 10 crore
 The minimum market capitalization of the Company shall be Rs. 25 crore
(market capitalization shall be calculated by multiplying the post-issue
paid-up number of equity shares with the issue price)
 76

Listing Fees (BSE)

Particulars Amount (Rs)
Initial Listing fees 7500
Annual listing fees companies with
paid capital
Of Rs 1 crore 4200
Above 1crore upto 5 crore 8400
Above 5crore upto 10 crore 14000
Above 10 crore upto 20 crore 28000
Above 20 crore upto 50 crore 42000
Above 50 crore 70000
 77

 In respect of Small Cap Companies

 The minimum post-issue paid-up capital of the Company shall be Rs. 3 crore
 The minimum issue size shall be Rs. 3 crore
 The minimum market capitalization of the Company shall be Rs. 5 crore
(market capitalization shall be calculated by multiplying the post-issue paid-up
number of equity shares with the issue price); and
 The minimum income/turnover of the Company shall be Rs. 3 crore in each of
the preceding three 12-months period
 The minimum number of public shareholders after the issue shall be 1000.
 A due diligence study may be conducted by an independent team of Chartered
Accountants or Merchant Bankers appointed by BSE, the cost of which will be
borne by the company. The requirement of a due diligence study may be waived
if a financial institution or a scheduled commercial bank has appraised the
project in the preceding 12 months
 78

Permission to Use the Name of BSE in an

Issuer Company's Prospectus
Companies desiring to list their securities offered through a public issue are required
to obtain prior permission of BSE to use the name of BSE in their prospectus or offer
for sale documents before filing the same with the concerned office of the Registrar of
Companies.

BSE has a Listing Committee , comprising of market experts, which decides upon the
matter of granting permission to companies to use the name of BSE in their
prospectus/offer documents. This Committee evaluates the promoters, company,
project , financials, risk factors and several other aspects before taking a decision in
this regard.

Decision with regard to some types/sizes of companies has been delegated to the
Internal Committee of BSE.
 79

Submission of Letter of Application

 As per Section 73 of the Companies Act, 1956, a company seeking listing of
its securities on BSE is required to submit a Letter of Application to all the
stock exchanges where it proposes to have its securities listed before filing
the prospectus with the Registrar of Companies.
 Companies making public/rights issues are required to deposit 1% of the
issue amount with the Designated Stock Exchange before the issue opens.
This amount is liable to be forfeited in the event of the company not
resolving the complaints of investors regarding delay in sending refund
orders/share certificates, non-payment of commission to underwriters,
brokers, etc.
 80

Payment of Listing fees (NSE)

Particulars Amount (Rs)
Initial Listing Fees 20,000.00
Annual Listing Fees

i) Companies with listed capital* upto Rs. 5 crores 10,000.00

(ii) Above Rs. 5 crore and upto Rs. 10 crores 15,000.00

(iii)Above Rs. 10 crore and upto Rs. 20 crore 30,000.00

Companies which have a listed capital* of more than Rs.

20 crore are required to pay an additional fee @ Rs. 750
for every additional Rs. 1 crore or part thereof.
Aishwarya Telecom Limited
 82

Risk Factors
• An investment in the company’s Equity Shares involves a high
degree of risk. One should carefully consider all of the information
in this Prospectus, including the risks and uncertainties described
below, before making an investment decision. Risks have been
quantified, wherever possible. If any of the following risks actually
occur, the business, financial condition and results of operations
could suffer, the trading price of the Equity Shares may decline
and you may lose all or part of your investment.
 83

Risk Factors contd…

• A. INTERNAL TO THE COMPANY

▫ Dependence on Technology
▫ Variations in the revenues of these telecom operators
▫ Decrease in Govt. spending in telecom sector
▫ Unable to qualify the tender
▫ Availability & retention of skilled & trained personnel
▫ Increase presence of foreign T&M manufacturers in India
▫ Cancellation / non-renewance of tie-ups with foreign distributors
▫ Recruitment for new unit
▫ Company’s proposed expansion plans are subject to the risk of
cost and time overruns
 84

Risk Factors contd…

▫ Contingent Liabilities
 As on December 31, 2007, the contingent liabilities are as follows:

Particulars Rs. in Lakhs

Counter Guarantees given for obtaining Bank Guarantees from various 116.89
Banks
Counter Guarantees given for obtaining Letter of Credit from various 46.70
Banks
Disputed Income Tax Liabilities 4.02
Disputed Sales Tax Liabilities 53.14
Total 220.75
 85

Risk Factors contd…

• B. EXTERNAL TO THE COMPANY
▫ Change in Import Duty Structure
▫ Exposure to Foreign Currency Risk
▫ Adverse changes in tax policies of Government of India and
other state Governments
▫ Economic downturn
▫ Effect of Natural Calamities, Terrorism and Violence
▫ Disruption of Utility Services
▫ Downgrading of India’s debt rating by a domestic or
international rating agency
 86

Introduction
• Summary
1. Industry Overview
 Progressive reforms
 Telecommunication sector in the forefront of reforms
 Invited private participation
 Telecom density was just 2% prior to telecom reforms
 Quite low compared to other developed countries having telecom
density of 70-80%
 Overall teledensity is 23.89% at the end of December 2007
 T&M instruments sector is playing a vital role in instrument
operations
 The Indian market for T&M instruments was estimated at Rs. 602
crore for the year 2006-07
 Imported instruments’ sales estimates were at Rs. 552 crore
 87

Introduction contd…
2. Business Overview
 ATL deals in hi-tech test & measuring equipments
 The Company has its manufacturing facilities situated at two
production units
 ATL is ISO 9001:2000 Certified Company manufacturing Fibre
Optic Test Equipments & Cable Fault Locators
 Currently, ATL manufactures products for Telephone Service
Providers, Defence Sector, Railways, Telecom equipment
manufacturing companies and Cable TV Operators
 ATL is planning to expand in to designing products for Defence
Sector and Educational Sector also
 88

Equity Shares offered:

Fresh Issue 40,00,000 Equity Shares of Rs. 10 each
Comprising of
Employee Reservation Portion 1,00,000 Equity Shares of Rs. 10 each
Net Issue to Public 39,00,000 Equity Shares of Rs. 10 each
Of Which
Qualified Institutional Buyer portion of which Upto 19,50,000 Equity Shares of Rs. 10 each
(Available for Allocation on a proportionate basis)

Available for allocation to Mutual Funds Upto 97,500 Equity Shares of Rs. 10 each
(Available for Allocation on a proportionate basis)

Balance for all QIBs including Mutual Funds 18,52,500 Equity Shares of Rs. 10 each
(Available for Allocation on a proportionate basis)

Non Institutional Portion Not less than 5,85,000 Equity Shares of Rs. 10 each
(Available for Allocation on a proportionate basis)

Retail portion Not less than 13,65,000 Equity Shares of Rs.10 each
(Available for Allocation on a proportionate basis)

Equity Shares outstanding prior to the Issue 66,59,400 Equity Shares of Rs. 10 each

Objects of the Issue The Company intends to deploy the net proceeds of the fresh issue for part-
financing its proposed project
 89

Introduction contd…

3. SUMMARY OF FINANCIAL AND OPERATING

INFORMATION
 Summary of Assets & Liabilities is
required
 Summary Statement of Profits & Losses is
required
 90

General Information
AISHWARYA TELECOM LIMITED
• INCORPORATION
▫ The Company was incorporated as Aishwarya Telecom Private Limited on June 2, 1995
with the Registrar of Companies, Andhra Pradesh, Hyderabad and took over the
business of the partnership firm named ‘Advanced Electronics & Communications
System’. Subsequently, it was converted into a Public Limited Company on July 12,
2005 and the name of the company was changed Aishwarya Telecom Limited vide a
fresh Certificate of Incorporation obtained from the Registrar of Companies, Andhra
Pradesh, Hyderabad.
• REGISTERED OFFICE
Aishwarya Telecom Limited
3-C, Samrat Commercial Complex
Opp A G Office
Saifabad, Khairatabad
Hyderabad - 500 004
Andhra Pradesh, India
Tel.: +91 40 2323 6019, 2323 5439
Fax: +91 40 2329 6282
E-mail: ipo@aishwaryatelecom.com
Website: www.aishwaryatelecom.com
 91

• Company Registration No.: 01-20569

• Corporate Identification Number (CIN):
U64204AP1995PLC020569
• REGISTRAR OF COMPANIES
▫ Registrar of Companies, Andhra Pradesh
2nd Floor, CPWD Building
Kendriya Sadan,
Sultan Bazar, Koti
Hyderabad – 500 195
• BOARD OF DIRECTORS
Name of the Director Designation
Mr. G Rama Krishna Reddy Chairman (Non-Executive and Non-
Independent)
Mr. G Rama Manohar Reddy Managing Director
Mrs. G Amulya Reddy Whole-Time Director
Mr. D Venkata Subbiah Director (Independent)
Mr. K Hari Krishna Reddy Director (Independent)
Mr. Venkataraman Krishnan Director (Independent)
 92

General Information contd…

• CREDIT RATING
▫ As the present Issue is of Equity Shares, credit rating is not
required
• IPO GRADING
▫ CARE has assigned “IPO Grade 2 out of 5” to the proposed
Public Issue of the Company indicating ‘below average
fundamentals’, vide its letter dated August 30, 2007 and
the Grading has been subsequently revalidated vide its letter
dated January 29, 2008 for a further period of three months
from the date of revalidation
 93

Projects
• ATL has planned various expansion projects as
detailed below. (Rs in Lakhs)
Project Cost
Capital expenditure for R&D of Optical Time Domain 80.39
Reflectometer
Capital expenditure for R&D of Ethernet Traffic Analyzer 64.17
Cost of package for GSM/CDMA/GPRS analyzers for providing 700.13
technical audit services to mobile operators
Land and construction of building for a new production unit at 272.31
Hyderabad
Land and construction of new corporate, marketing, R&D office at 332.40
Hyderabad
Additional working capital requirements 700.00
Public issue expenses 250.60
Total 2400.00
 94

CAPITAL STRUCTURE OF THE COMPANY

Share Capital Nominal Value Aggregate Value

A. Authorised Capital 12,00,00,000

1,20,00,000 Equity shares of Rs. 10 each
B. Issued, Subscribed and Paid Up 6,65,94,000
Capital Before the Issue
66,59,400 Equity Shares of Rs. 10 each
fully paid up
C. Present Issue through this 4,00,00,000 14,00,00,000
Prospectus
Fresh Issue of:
40,00,000 Equity Shares of Rs. 10 each
Of which
D. Employee Reservation Portion 10,00,000 35,00,000
1,00,000 Equity Shares of Rs. 10 each are
reserved for allotment to eligible
employees of the Company
 95

CAPITAL STRUCTURE contd..

E. Net Issue to the Public 3,90,00,000 13,65,00,000

39,00,000 Equity Shares of Rs. 10 each

F. Paid Up Share Capital After the 10,65,94,000 24,53,14,000

Issue
1,06,59,400 Equity Shares of Rs. 10 each
G. Share Premium Account
Before the Issue 3,87,20,000
After the Issue 13,87,20,000
 96

OBJECTS OF THE ISSUE

• To fund the Capital Expenditure for Research & Development of Main Frame
Optical Time Domain Reflectometer (OTDR) in collaboration with IIT,
Chennai
• To fund the Capital Expenditure for Research & Development of Ethernet
Traffic Analyzers
• To fund the cost of Global System for Mobile Communication (GSM)/ General
Packet for Radio Service (GPRS)/Code Division Multiple Access (CDMA)
Analyzers for providing Technical Audit Services to the Mobile Operators
• To purchase land & construct building for new corporate, marketing,
administrative and R&D office at Hyderabad
• To purchase land & construction of building for a new production unit at
Hyderabad;
• To meet additional working capital requirements for its operations
• To meet the expenses of this Issue
 97

FUNDS REQUIREMENT

Sr. No. Particulars Amt.

1 Capital Expenditure for Research & Development of Main 80.39
Frame Optical Time Domain Reflecto Meter (OTDR)
2 Capital Expenditure for Research & Development of 64.17
Ethernet Traffic Analyzers
3 Cost of GSM/GPRS/CDMA Analyzers for providing 700.13
Technical Audit Services to the Mobile Operators
4 Cost of land & construction of building for a new 272.31
production unit at Hyderabad
5 Cost of land & construction of building for new corporate, 332.40
marketing, administrative and R&D office at Hyderabad
6 Additional working capital requirements 700.00
7 Issue Expenses 138.00
Total 2287.40
 98

MEANS OF FINANCE

Sr. No. Particulars Amount

1 Public Issue of Equity Shares 1400.00
2 Internal Accruals 58.90
3 Term Loan from SBH 360.00
4 Pre-IPO Placement 468.50
Total 2287.40
 99

About ATL
• Location of the Project
▫ Existing Project:
 The Company has its manufacturing facilities situated at two
production units
1) 2-330, Thota Street 2) Industrial Plot No. F-102
Yanam – 533 464 UPSIDC Industrial Area,
Pondicherry Selaqui
Dehradun, Uttarakhand
• Technology
▫ The Company deals in Test & Measuring equipments (T&M).
T&M Equipments are used to qualify, trouble shoot and to
maintain the telecom optical, copper and wireless networks.
▫ The products (Test and Measuring Equipments) of the
Company are mainly classified into three categories
1. Fiber Optic Cable Testing Equipments
2. Data Network Testers
3. Copper Cable Testing Equipments
 100

Legal and other Information

• Litigation involving the Company
▫ There are no outstanding litigations, defaults etc pertaining to
matter likely to affect operations and finances of the Company
including prosecution under any enactment in respect of
Schedule XIII of the Companies Act, 1956 (1 of 1956).
• Against the company
▫ The Company received a legal notice dated 07.03.07 from M/s. EL-
Tronics, Jaipur (ET) wherein ET demanded payment of
expenses/interest/penalties/damages for deficiency of service/loss of
goodwill amounting to Rs. 5,70,600/- and for delay in delivery of
certain equipments by ATL
▫ Subsequently, ET filed a complaint before the District Forum
(Hyderabad) praying for relief of Rs. 7,19,100/- along with
compensation of Rs. 1,00,000/-, which was dismissed by the forum
▫ ET has then preferred an appeal before State Forum (AP) against the
order of the District Forum
 101

Legal and other Information contd..

• By the company
▫ The Company is party to certain legal proceedings, incidental to its
business and operations, which if not determined in its favour, could
have a material adverse impact on the business, results of operations
and/or financial condition of the Company.

Type of Litigation Amt. involved Present Status

Income Tax 8,52,415 ACIT demanding additional IT for the AY
2004-05, the co. preferred an appeal before
the Commissioner of IT (Appeals) - II
Sales Tax 5,83,611 DC of Sales Tax , in 2001-02, assessed the
products manufactured by the co. under a
different category which attracts higher rate
of ST; the High Court granted the stay
appealed by the co., till the disposal of the
appeal
 102

Type of Amt. Present Status

Litigation involved
Sales Tax 23,01,489 The Commercial Tax Officer, while assessing the
APGST Sales Tax Return of the Company for the year
2003-04, disallowed certain exemptions and also
enhanced the taxable turnover; the Appellate Deputy
Commissioner passed an order, in reply to the
company’s appeal, wherein it had partly allowed the
appeal and partly remanded the matter to the assessing
authority
Sales Tax 33,79,692 The Commercial Tax Officer, while assessing the CST
Sales Tax Return of the Company for the year 2003-04,
disallowed certain exemptions and also enhanced the
taxable turnover; the Appellate Deputy Commissioner
passed an order, in reply to the company’s appeal,
wherein it had partly allowed and partly dismissed the
appeal
Criminal 8,95,000 The Company has filed a criminal case under Section
138 of the Negotiable Instruments Act, against one of
its customers for non-payment of the amount due
towards sale of goods and consequent dishonour of
cheque received from the said customer.
 103

Legal and other Information contd..

• Litigations of companies/firms promoted by the

promoters/directors of ATL
▫ There is no company/firm promoted by the promoters/directors of
Aishwarya Telecom Limited

• Litigations Of Subsidiary Company(ies)

▫ The Issuer Company does not have any subsidiary company

• Against or By the Directors

▫ There are no cases / litigations filed by or against the directors of the
Company

• Against or by the promoters

▫ There are no cases / litigations filed by or against the promoters (i.e.,
Mr G Rama Krishna Reddy, Mr G Rama Manohar Reddy and Mrs G
Amulya Reddy)
 104

Other Regulatory And Statutory Disclosures

• Authority for the present issue
▫ The issue of Equity Shares by the Company has been authorised by the
resolution of the Board of Directors passed at their meeting held on
January 9, 2007, and subsequently authorised by the shareholders
passed at the Extraordinary General Meeting of the Company held on
February 15, 2007.

• Prohibition by sebi/any other authority

▫ There is no prohibition against The Company, its Directors, its
Promoters, Promoter Group, the Group Companies, other companies
with which the promoters/directors are associated

• Eligibility for the issue

▫ The Company is eligible for the issue as per Clause 2.2.1 of the SEBI
(DIP) Guidelines as confirmed by the Auditors of the Company
 The Company has net tangible assets of at least Rs. 3 crores in each of the
preceding three full years (of 12 months each), of which not more than 50% is
held in monetary assets;
 105

Other Regulatory And Statutory Disclosures

contd…
 The Company has had a track record of distributable profits as per Section 205
of Companies Act, 1956 for at least three out of the immediately preceding five
years;
 The Company has had a pre-Issue net worth of more than Rs. 1 crore in each of
the preceding three full years;
 The name of the Company has not been changed in last one year;
 The proposed Issue size would not exceed five times the pre-Issue net worth as
per the audited accounts for the year ended March 31, 2007.

• Filing of red herring prospectus with the board and the

registrar of companies
▫ A copy of the Draft Red Herring Prospectus, alongwith the
documents required, has been filed with Corporation Finance
Department of SEBI at SEBI Bhawan, Bandra Kurla Complex,
Bandra (East), Mumbai - 400051.
 106

Other Regulatory And Statutory Disclosures

contd…

▫ A copy of the Red Herring Prospectus, alongwith the material contracts

and documents required to be filed under Section 60B of the Companies
Act, 1956 has been delivered for registration to the Registrar of
Companies, Andhra Pradesh located at 2nd Floor, CPWD Building,
Kendriya Sadan, Sultan Bazar, Koti, Hyderabad – 500195.
▫ A copy of the Prospectus, along with the documents required to be filed
under Section 60 of the Companies Act, have been delivered for
registration to the Registrar of the Companies, Andhra Pradesh located at
2nd Floor, CPWD Building, Kendriya Sadan, Sultan Bazar, Koti,
Hyderabad – 500195.
▫ The Issuer and the Book Running Lead Managers confirm compliance of
all legal requirements applicable till the filing of the Prospectus with RoC.
Birla Cotsyn (India) Limited
 108

RISK FACTORS
 Business related risks
 Outstanding legal proceedings against Company
 Demand Notice for Rs 886.14 lakhs from Income Tax
Department for the assessment year 2005-06
 One of directors Shri Y.P. Trivedi was in RBI’s
defaulters list.
 Negative cash flows in the recent five years period
 109

RISK FACTORS (Contd.)

 RISK FACTORS RELATED TO GROUP
COMPANIES
 Birla Bombay Pvt. Ltd appears in the RBI Defaulters
List
 Show cause notice issued to Birla Leasing &
Infrastructure Limited
 Show cause notice issued to Dagger Forst Tools Ltd.
 Losses by promoter / group / associate company
 110

RISK FACTORS (Contd.)

 RISKS RELATING TO THE ISSUE
 Equity shares will not be able to sell immediately
 An active market may cause the price to fall
 Future sales of Equity Shares may adversely affect the
market price
 Post-issue volatility in prices of the scrip
 111

RISK FACTORS (Contd.)

 EXTERNAL RISK FACTORS
 Changes in regulations or applicable government incentives
 Emergence of competition from other manufacturing countries
 Financial instability in countries
 Increase in the cost of raw material
 Globally competitive environment
 Instability of economic policies and the political situation
 Terrorist attack, war, natural disaster or other catastrophic events
 112

Capital structure
 113

Basic Terms of the Issue

 Terms of the Issue
 Subject to the provisions of the Companies Act, Memorandum
and Articles of Association, Prospectus, etc.
 Subject to laws as applicable, guidelines, notifications and
regulations
 Terms of Payment
 Applications should be for a minimum of 350 equity shares
 Price of the equity shares of Rs. 14 /- per share is payable on
application
 114

Basic Terms of the Issue (Contd.)

 Authority for the Issue
 Issue of equity shares via Special Resolution passed at
Extra Ordinary General Meeting of Company held on
December 18, 2006
 115

OBJECTS OF THE ISSUE

 Expansion of integrated textile project at Khamgoan and
Malkapur
 To set up a garment manufacturing plant
 To establish retail outlets
 To achieve the benefits of listing company’s shares on
BSE and NSE
 116

Means of Finance

Sr. Particulars Amount (Rs. in

No. Lakhs)
1. Term Loan 15,459.00

2. Equity 16,353.00
Public / Promoters Contribution

3. Subsidy 208.00

TOTAL 32,020.00
 117

COST OF THE PROJECT AS PER THE

APPRAISAL REPORT
Sr. Particulars Amount (Rs. In
No. Lakhs)
1. Land & Site Development 327
2. Building & Civil construction cost 4888
3. Plant & Machinery (Domestic) 7524
4. Plant & Machinery (Imported) 4823
5. Stores & Misc Fixed Assets 3957
6. Acquisition cost 717
7. Contingency 1102
8. Preliminary & Pre-operative expenses 1812
9. Working Capital Margin 3169
10. Interest During Construction 476
11. Upfront fees 124
TOTAL COST 28919
 118

Business of the Company

 Company was earlier engaged in Cotton Ginning,
Pressing and Oil expelling
 Cotton spindle yarn manufacturing
 Manufacture of Open End rotor based Cotton yarn
 Manufacture of finished cloth
 119

Promoters & Promoter Group

 INDIVIDUALS
 Mr P.B.Bharadwaj
 Mr Yashovardhan Birla

 COMPANIES/TRUSTS/SOCIETIES
 Polytex Limited
 Nirved Traders Private Limited
 Shearson Investment & Trading Company Private Limited
 Yah Society
 Birla Industries Group Charity Trust ( Medical Institution)
 Sunanda Medical Institute
 120

Management
 BOARD OF DIRECTORS
 Mr. P.B. Bhardwaj
 Mr. Yashovardhan Birla
 Mr. P.V.R .Murthy
 Mr. Sanjay K. Agarwal
 Mr. Y. P. Trivedi
 Mr. Mohan Jayakar
 Mr. Mohandas Shenoy Adige
 Mr. Navinchandra Chhaganlal Shah
 Mr. Alok Bhardwaj
 121

BIRLA COTSYN IPO Price Band

 IPO price band was reduced to Rs 12-14 from Rs 15-18 per
equity share
 Issue was supposed to close on July 4 but that also got extended
to July 9, 2008.
 Public issue got subscribed just 0.51 times, till 3 rd July 2008
 The issue had been subscribed 1.46 times by non-institutional
investors, 0.90 times by retail individual investors, or RIIs, and
0.016 times by qualified institutional buyers till 4 th July 2008
 122

BIRLA COTSYN IPO Price Band (Contd.)

 IPO on June 30, 2008 to raise around Rs 96.12-112.14
crore at revised price band
 Price change had been marginal with the trend and
mood of the market
 It was because of the marginal shortfall in RII (Retail
Institutional Investors) subscription that the issue was
extended. Under SEBI guidelines, subscription by
qualified institutions is not mandatory
 123

References
 http://www.reliancemoney.com
 http://en.wikipedia.org
 http://finance.indiamart.com/india_business_information/sebi_investors_kno
whow.html
 http://www.hinduonnet.com/2003/03/26/stories/2003032604291800.htm
 http://demataccount.com/2008/01/15/learning-basic-concepts-of-ipo-india/
 http://www.sebi.gov.in
 124

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