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EQUITY
MARKETS

SUBMITTED TO: PROF

VAIBHAV
SIR
 
   
ë Sagar 09
ë Nirav 08
ë Mahesh 49
ë Divyam 39
ë Shemal 27
ë Hanish 44
ë Bhavesh 21
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ë Initial public offering (IPO), is referred when a
company issues common stock or shares to the
public for the first time.
They are often issued by smaller, younger
companies seeking capital to expand, but can
also
be done by large privately-owned companies
looking to become publicly traded.

ë IPO is New shares Offered to the public in the

Primary Market .The first time the company is
traded on the stock exchange
 
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ë Reliance Power IPO

ë Wockhardt Hospital IPO

ë KNR Constructions Ltd. IPO

ë Manjushree Extrusions Ltd IPO

ë J Kumar Infraprojects Ltd. IPO

ë Future Capital Holding Ltd IPO

ë Cords Cable IPO

 
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ë The increase in the capital: An IPO allows a

company to raise funds for utilizing in various
corporate operational purposes like acquisitions,
mergers, working capital, research and
development, expanding plant and equipment
and marketing.

ë Liquidity: The shares once traded have an

assigned market value and can be resold. This is
extremely helpful as the company provides the
employees with stock incentive packages and the
investors are provided with the option of trading
their shares for a price.


ë Valuation: The public trading of the shares
determines a value for the company and sets
a standard. This works in favor of the
company as it is helpful in case the company
is looking for acquisition or merger. It also
provides the share holders of the company
with the present value of the shares.

ë Increased wealth: The founders of the

companies have an affinity towards IPO as it
can increase the wealth of the company,
without dividing the authority as in case of
partnership.
 
ë IPOs generally involve one or more investment banks
as "underwriters." The company offering its shares,
called the "issuer," enters a contract with a lead
underwriter to sell its shares to the public. The
underwriter then approaches investors with offers to
sell these shares.

ë The sale (that is, the allocation and pricing) of shares

in an IPO may take several forms. Common methods
include:

ë Bought deal

ë Dutch auction

ë Firm commitment

ë Self Distribution of Stock

  


ë Investment banks, take many factors into

consideration when pricing an IPO, and
attempt to reach an offering price that is low
enough to stimulate interest in the stock, but
high enough to raise an adequate amount of
capital for the company. The process of
determining an optimal price usually involves
the underwriters ("syndicate") arranging
share purchase commitments from leading
institutional investors.
 
ë A company that is planning an IPO appoints lead
managers to help it decide on an appropriate
price at which the shares should be issued. There
are two ways in which the price of an IPO can be
determined: either the company, with the help of
its lead managers, fixes a price or the price is
arrived at through the process of book building.

ë Note: Not all IPOs are eligible for delivery

settlement through the DTC system, which would
then either require the physical delivery of the
stock certificates to the clearing agent bank's
custodian, or a delivery versus payment ("DVP")
arrangement with the selling group brokerage
firm. This information is not sufficient.



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ë Track record of the promoters

ë Financials position of that company

ë Read Prospectus very carefully

ë Issue price

  

ë It is true that IPO raises huge capital

for the issuing company. But, in order
to launch an IPO, it is also necessary
to make certain investments.

ë Setting up an IPO does not always

lead to an improvement in the
economic performance of thecompany.
A continuing expenditure
has to be incurred after the setting up of
an IPO by the parent company
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ë IPO is used by a company to raise it¶s

funds. The extra amount obtained
from public may be invested in the
development o f the company,
although it costs a little to a company
but it gives a way to get more money
for long term investments.