Equity Shares

By:
Maria Bhalerao
Namrata Tiwari
Neenoy gonsalves
Shanson Paul
Ritesh Shinde
Gaurav Bhansal
Chetan Jadhav
 What is Financial Market

 A system comprised of individuals and

institutions, instruments, and procedures
that bring together borrowers and savers.
 It help to facilitate:
 Price discovery
 To raise the capital
 Cash liquidity
 Equity Shares

 Equity shares were earlier known

as ordinary shares.
 The holders of these shares are
the real owners of the company.
 Features of Equity shares

 Right to Control
 Pre - emptive Right
 Owned Capital
 Transfer of Shares
 Equal Rights
 Transfer of Shares
 Advantages

 No Obligation to pay Dividend

 Capital Gain
 Limited Liability
 Owner of the company
 Right Issue
 Long term and permanent capital
 Disadvantages

 No Flexibility in capital structure

 Speculation
 Uncertain and Irregular Income
 Trading on Equity not possible
 Limited control
 Types

 Authorised share capital

 Issued share capital
 Subscribed share capital
 Paid up share capital
 Perference Shares

 They have fixed rate of return

 They do not enjoy normal voting
rights
 These shares are called hybrid
financing
 Advantages

 Appeal to caution investors

 No obligation for dividend
 No interference
 Trading on equity
 Disadvantages

 Fixed obligation
 Limited appeal
 Low return
 No voting rights
Preference can be traded on stock exchange

 Preference shares are quasi-equity instruments that

have limited voting rights and give specific dividend
that is paid out before a company distributes
dividend to regular shareholders.
 According to data compiled from depositories, in the
last three years, more than Rs 25,000 crore was
raised through preference share issuance by 295
companies. In 2011-12, 147 issuers tapped the
market to raise Rs 10,000 crore.
 IPO

• Definition: A company’s first

equity issue made available to the
public.
• This issue occurs when a privately
held company decides to go public
• Also called an “unseasoned new
issue.
 Current Example of IPO

 Indigo
 IndiGo Airlines IPO to open on October
27, price band Rs 700-765
 Indigo lines up IPO to raise an estimate
of 2500 cr
 Indigo jump 20% in 2 day
 IPO Promotor : Rahul Bhatia & Rakesh Gangwal
 Lead Manager: Barclays, citigroup ,JP morgan
 Issue Detail:
 »» Issue Open: Oct 27, 2015 - Oct 29, 2015
»» Issue Type: 100% Book Built Issue IPO
»» Issue Size: Equity Shares of Rs. 10
»» Issue Size: Rs. 1,272.20 Crore
»» Face Value: Rs. 10 Per Equity Share
»» Issue Price: Rs. 700 - Rs. 765 Per Equity Share
»» Market Lot: 15 Shares
»» Minimum Order Quantity: 15 Shares
»» Listing At: BSE, NSE
 CCD

 Café Coffee Day plans to raise Rs 1150 crore through

IPO which open on 14, October 2015 and close on 16,
October 2015. It has fixed a price band of Rs 316-328
for the share sale.
Following about the IPO:-
 V G Siddhartha, who is the main promoter as well as
Chairman and MD, holds 54.78 percent stake, while
all promoters together have 92.74 percent holding in
the company.
 Coffee Day Enterprises is the parent company of the Coffee
Day Group and operates coffee business through a
subsidiary, Coffee Day Global Ltd (earlier known as
Amalgamated Bean Coffee Trading Company Limited) and
its subsidiaries.
 Company is one of the largest exporters of Indian coffee
beans, primarily to Europe, Japan and the Middle East.
 Axis Bank, Citigroup Global Markets, Edelweiss Capital,
Kotak Mahindra Capital, Morgan Stanley India and YES
Bank are lead managers of the IPO
 Issue Detail:
»» Issue Open: Oct 14, 2015 - Oct 16, 2015
»» Issue Type: 100% Book Built Issue IPO
»» Issue Size: Equity Shares of Rs. 10
»» Issue Size: Rs. 1,150.00 Crore
»» Face Value: Rs. 10 Per Equity Share
»» Issue Price: Rs. 316 - Rs. 328 Per Equity Share
»» Market Lot: 45 Shares
»» Minimum Order Quantity: 45 Shares
»» Listing At: BSE, NSE
What is depository receipts

“a security designed to make investing

outside of one’s home country easier
 Types of ADRs

Non sponsored
• Traded on the OTC market
 No formal agreement between bank and company
• The underlying company has no commitment

Sponsored
 Varying degrees of commitment a company can make to the DR
Program
 Level 1 sponsored

 One bank acts as a transfer agent for the company

 Limited reporting requirements with SEC
 Periodic financials not required
 Traded on the OTC market
 Most common way DRs are sold in the U.S.
 Level 2 sponsored

 Under SEC regulation

 Must file form equivalent to the U.S. Form 10-k
annually in compliance with GAAP
 Listed on U.S. Stock Exchanges like NYSE, NASDAQ,
and AMEX
 Provides more exposure in U.S. markets for company
 Level 3 Sponsored

 Requirements for listing similar to the strictness of a

U.S. company
 Form F-1 required, which resembles the U.S.
prospectus
 Registered with SEC
 Information on company can be easily found by
investors
 Necessary if company intends to issue new shares in
U.S. market
 What is GDR

 A global depository receipt (GDR), also known

as international depository receipt (IDR), is a
certificate issued by a depository bank, which
purchases shares of foreign companies and deposits
it on the account. They are the global equivalent of
the original American depository receipts (ADR) on
which they are based. GDRs represent ownership of
an underlying number of shares of a foreign
company and are commonly used to invest in
companies from developing or emerging markets by
investors in developed markets.
 Novation Process

 When buyer becomes seller and

seller became the buyer all this
process is called as novation
process
 ADR of HDFC Bank

 . HDFC Bank is the second largest private sector

bank in the country (after ICICI Bank) in terms of
asset size. The bank has tripled its share from 1.2% of
total non-food credit in FY02 to 4.2% in FY12. Retail
assets constituted 51.3% of advances in FY12. Its
group companies, HDFC Standard Life (insurance),
HDFC AMC (mutual funds) and HDFC Securities
(equities) add scalability to the bank's offerings
 HDFC Bank plans to raise Rs1,500-2,000 crore
through domestic institutional investors and the rest
from foreign investors
 “The other approval we have got is to come up with a
level 1 American depositary receipt (ADR) which
does not involve the issue of fresh capital. It is just a
conversion of existing equity shares into ADR. It
creates a larger platform of people who can buy the
shares.
 Under HDFC’s proposed sponsored level 1 ADR
programme, up to 10 per cent of its existing paid-up
capital will be converted into ADRs.
American Depository Receipts of HDFC Bank (NOV-9/2015)

Price High Low

Open (US$)59.14
(US$)58.88 (US$)59.79 (US$)58.11

Value 52-Week
% Change-
Volume620,772 (US$)36,551,0 H/L65.44 /
0.59
55 47.60
 Conclusion
 Companies come to the stock market in a variety of different ways and for a variety of
reasons.
 As a private investor, you can sometimes get an allocation of newly-issued shares, but
often the issue will be confined to institutional investors. With internet shares, and
the movement towards direct online IPOs, this may change for the better.
 Most of the time you will be trading in a company's ordinary shares on the secondary
market.
 Companies issue other types of share - notably preference shares, convertibles, and
warrants - and even if you don't own them they may have an effect on your dividend
entitlement if they dilute earnings.
 A scrip issue is designed to improve marketability of ordinary shares, and does not
dilute your ownership.
 A rights issue is designed to raise more money for the company, and existing
shareholders will be invited to buy first. You have a choice about whether to exercise your
rights, but if you do not, your ownership may be diluted.