DOMESTIC ISSUE

MANAGEMENT
(CHAPTER 5)
THE IPO DECISION
Strategic dimension
Corporate philosophy
Unlock Value
Better visibility, credibility, attracts and retains better
talent if listed.
Large family of small shareholders
Requires higher maturity levels for the company
Makes it more expensive for promoters to consolidate
stakes.
Post-issue promoter holding is a concern for possible
hostile bids.
Privacy, less regulation if unlisted
Disclosures, corporate governance, higher compliance
and shareholder activism if listed.
THE IPO DECISION

Financial dimension
IPO decision is often more financial than strategic. An
imperative in capital intensive industries.
IPO provides liquidity in shares and more fund raising
opportunities for growth financing.
Necessity to maintain acceptable DERs which need
equity support beyond promoters margins.
Liquidity event for existing investors and ESOP holders
Provides currency for M&A
Requires preparation of the proper balance sheet.
Requires a credible investment plan.
Post-listing performance pressures.
THE IPO DECISION

Investment Banking dimension

Business Plan, future outlook, past financial
performance, grading potential
Proposed Issue pricing, size of the offer
Post-Issue Capital Structure
Prevailing market conditions, timing the offer.
Issue Structure, free float
Possibility of finding institutional support.
Smaller issues backed by non-reputed merchant bankers
lack credibility and have been pulled up by SEBI.
PUBLIC OFFER STRUCTURES
Initial Public offer can be made under the
following structures -
New issue of Shares by the Issuer This has the effect
of increasing the issued capital of the company.
Resolution under section 81(1A) of the Companies Act
would be required.
Offer for Sale Under this structure, the existing
shareholders make an offer to the public of existing
shares. No impact on companys balance sheet. Shares
should have been held for atleast one year.
Combined Public Offer A combination of a public
issue and an offer for sale.
REGULATORY FRAMEWORK FOR PUBLIC OFFERS

Public Offers are regulated under the SEBI (Issue of

Capital and Disclosure Requirements) Regulations 2009
(formerly DIP Guidelines 2000 upto 25th August 2009) as
amended from time to time, in short, the ICDR
Regulations.
Other aspects of issues such as issue of shares to the
public, allotments and incidental matters are governed
by sections 56-58, 60-76 of the Companies Act 1956
(corresponding to Chapter III of the Companies Act
2013).
Issues are also governed by Listing Guidelines and the
SCRA 1956, SCR Rules 1957 for the purpose of listing
and secondary market trading thereafter.
The issue of shares to non-residents is governed by the
Foreign Exchange Management Act 1999.
IMPORTANT CONCEPTS ICDR REGULATIONS

Lead Manager BRLMs, issue management team

Underwriting syndicate
Issue Management Team
Fixed Price Offer
Book Built Offer Floor, Cap, Price Band and Cut-off Price
Issue Size and NPO (Issue size less Promoters component
less reservations).
Reservations on Competitive Basis employees (not more
than 5% of issue size, shareholders of group companies
(10%), customers and creditors (bondholders or depositors)
5%. Inter-se adjustments among categories is permitted.
Anchor Investor QIB with a minimum application size of
Rs. 100 million. (30% of the QIB allocation should be made
to anchor investors). Anchor investor concept replaced
firm allotment concept with lock-in of 30 days.
IMPORTANT CONCEPTS ICDR REGULATIONS

Qualified Institutional Bidders (QIBs), Retail Investors and

HNIs
Eligibility to go public
IPO Grading
Lock-in of pre-issue capital
Promoters Contribution
Issue Allocation
Minimum Lot (for anchor investors Rs. 5 crore, min 2
investors for issues upto Rs. 250 crore, min five investors
beyond Rs. 250 crore). For others minimum application size
between Rs 5000 and Rs. 7000.
Offer Document DRHP RHP - Prospectus
Green-shoe Option
Basis of Allotment
Listing Agreement
 Important Concepts ICDR Regulations

Eligibility Criteria Normal Eligibility conditions failing which

alternative conditions.
Company should satisfy in 3 out of the preceding 5 financial
years, the following minimum criteria
Minimum networth of Rs. 1 crore
Consolidated Profit of atleast Rs. 15 crore
Tangible asset base of atleast Rs. 3 crore
The issue size shall not exceed 5 times the pre-issue networth.
Alternative Conditions
Issue to be made through mandatory book building route.
Atleast 75% of NPO allotment to QIBs failing which issue will be
cancelled.
 Important Concepts ICDR Regulations

Issue Pricing IPO pricing is different from valuation of a company.

It is more about setting the offer price. Fundamental approach does
not figure much, instead relative valuation based on P/E and BV
multiples is used.
Differential Pricing to employees (not more than Rs. 1 lakh) and
retail investors. Max discount 10%. Anchor investors and promoters
can subscribe at higher prices.
Price disclosure can be made 2 days before the IPO opens in the RHP.
No outstanding convertibles shall exist at the time of IPO other than
ESOPs.
NPO NPO shall be 25% or 10% of post-issue capital as the case may
be depending upon the size of the issue being more than or less than
Rs. 4000 crore. Minimum NPO requirement does not apply to PSUs
and infra companies whose projects are appraised and funded by
banks or FIs.
Main Provisions for IPOs - ICDR Regulations read
with SCR Rules / Companies Act

Face Value Rs. 10 if issue price is upto Rs. 500, less than
Rs. 10 for higher prices.
Promoters Contribution shall not be less than 20% of
post-issue capital (on fully diluted basis). In a convertible
structure PC should be equivalent to 20% as above either
as equity or through the issue.
Shares acquired for non-cash consideration in the
preceding three years and at less than offer price in the
preceding one year shall be ineligible for reckoning 20%.
The promoters shall satisfy the requirements at least one
day prior to the date of opening of the issue and the
amount shall be kept in escrow account.
Main Provisions for IPOs - ICDR Regulations read
with SCR Rules / Companies Act
Lock-in The minimum promoters contribution of 20% shall be
locked in for 3 years from the date of allotment of shares or from
the date of commencement of operations by the company,
whichever is later.
Excess contribution by the promoters in an issue over and above
what is required to make up the 20% shall be locked in for one
year.
The entire pre-issue capital in case of an IPO shall be locked in for
one year except the promoters contribution since it is locked-in
separately except
shares allotted to employees prior to the IPO under a scheme
shares held by venture capital fund or a foreign venture capital
investor for a period of at least one year.
Minimum Subscription 90% of the offer through the
prospectus. If not received issue to be cancelled and amounts to
be refunded within 70 days for an underwritten issue.
Main Provisions For IPOs - ICDR Regulations Read With SCR
Rules / Companies Act
Issue Allocation
Fixed price issue Promoter category, Reservations, rest for
NPO (to be as per SCR Rules). Min 50% to retail investors,
other 50% to HNIs and QIBs. No mandatory allocation to
QIBs.
Book-built Offer NPO
If normal eligibility conditions are met min 35% of NPO for
retail, min 15% HNI, rest QIBs including 5% for MFs. Out of the
50% for QIBs, 30% may be allocated to anchor investors
including one-third to MFs.
If normal eligibility conditions are not met minimum 75% for
QIBs (incl 5% for MFs), 10% for retail and 15% for HNI.
If NPO is 10% under Rule 19(2)(b) the mandatory allocation to
QIBs shall be 60% (incl 5% to MFs), 15% shall be to retail and
25% shall be to HNIs.
The issue is not valid if the number of allottees are less than
1000.
Main Aspects Of Public Offer

Offer Document
One of the most important components of making a public
offer.
It represents the quality of disclosures made by a
prospective issuer.
It shows the way the companys management was
conducted in the past and throws light on financial
practices.
It provides the basis for the issue price based on which
investors can take a call on the investment prospects of the
issue.
Debt Instruments Regulations

Additional requirements for Pure Debt

Instruments
Regulated under SEBI (Issue and Listing of Debt
Securities) Regulations 2008
Unlisted companies may also make public offers
under these regulations.
Does not include bond issues by Government (G-Secs)
and securitised debt instruments.
Approvals from shareholders, in-principle approval
from stock exchange, independent credit rating,
appointment of Debenture Trustee are mandatory.
Underwriting and security creation are optional under
the above regulations.
Under the Companies Act creation of a Debenture
Redemption Reserve is mandatory.
Convertible Instruments Regulations

IPO can be made through a convertible issue.

Optionally Convertible debt structures have to
satisfy the conditions applicable to pure debt
instruments such as DRR, Credit rating and
trusteeship.
Conversion price can be (1) set at the time of the
issue, (2) at the time of conversion or (3) be made
subject to a cap and determinable at the time of
conversion. In case of (2), conversion shall be at the
option of the investor.
Where debt convertibles are subsisting at the time
of an equity IPO, such convertibles should have a
floor price as fixed at the time of their issue.
IMPORTANT STEPS IN
IPO PROCESS
PREPARING THE COMPANY FOR IPO
Deciding on the financial year, balance sheet, group structure.
Formulating the scheme of the IPO purpose, size, promoters
stake post-issue, pre-issue capital structure arrangements, pre-
issue disclosure arrangements.
Negotiations with potential lead managers and evaluating bids
Deciding with the lead manager the main parameters of the
issue
Pricing
Issue Structure
Pre-issue placements
Marketing
Issue Budget
Offer document preparation, risk factors, disclosures relating to
promoters, group companies, litigations etc.
Assisting in the due diligence process, paper-work
Co-ordination with LM and other agencies during the entire
issue process.
IPO PROCESS
Pre-issue Activities
Board and EGM / AGM resolutions.
Decide on Fixed Price Offer or Book Built Offer
Engage lead merchant banker and enter into agreement.
Appoint other merchant banker and intermediaries such as
syndicate members, underwriters, brokers, bankers, registrar,
printers, PR agency.
Due diligence by pre-issue merchant banker.
Finalisation of Issue Structure and issue budget.
Preparation of DRHP including financial certification by
auditors.
Filing DRHP with SEBI. Quiet Period for 30 days.
Prepare and file listing application with stock exchange along
with DRHP for in-principle approval.
A copy of DRHP is also filed with ROC for observations.
IPO PROCESS
Pre-issue Activities
Road shows and talks with potential underwriters, anchor
investors, press, brokers and investor associations.
IPO grading process from atleast one rating agency.
SEBI observations, stock exchange observations, changes to DRHP
and finalise RHP. File final RHP with ROC for registration.
Receipt of in-principle listing approval from stock exchange. Under
ICDR it should be within 15 days of filing DRHP.
Tripartite agreement with NSDL / CDSL and registrar for
dematerialisation of shares.
Printing of application forms (with abridged prospectus as per
necessary disclosures provided in Schedule VIII of IDCR
Regulations) and RHP.
Statutory and voluntary advertisements in print and media.
Despatch of issue stationery to all mandatory collection centres of
syndicate members, brokers, investor associations etc.
IPO PROCESS
During Issue
Issue should be closed after keeping it open for a minimum of 3
working days and maximum of ten days including 3 days for
price revision if any.
Each bidder can furnish three options in his bid but the amount
to be paid along with the bid would be the one applicable to the
highest bid amount payable among the options.
QIB investors can bid placing a margin amount in escrow while
the others have to bid paying the full amount with their bid
forms.
Applicants can bid for three different prices and quantities at or
above the floor price or within the price band as may be
applicable. Retail investors are allowed to bid at cut-off price.
The collection centres receive the payments and send them to
the escrow bank for collection.
IPO PROCESS
Post-issue Activities
Issue process reduced to T+12 from T+30 in 2010. In the past
SEBI attempted to introduce T+7 which was resisted by the
investment bankers. SEBI proposes to move to a T+7 global
standard in due course.
No allotments can be made until the minimum subscription is
received (section 69).
No allotments can be made until the beginning of the fifth day
of the issue of the Prospectus .
Receipt of confirmations from bankers and determination of
valid subscription lists by registrar.
Determination of Cut-off Price based on bidding schedules.
IPO PROCESS
Post-issue Activities
Finalising the basis of allotment
Use of the over-subscription ratio
Applicable issue allocation norms should be followed
Allotment subject to Minimum lot
Over-subscription leads to draw of lots
Board resolution to be passed confirming basis of allotment.
Intimation to successful and unsuccessful allottees. Transfer of
refund amounts to refund account to be refunded (in case of non-
ASBA applications). Credit of shares to demat accounts of
successful allottees.
Completion of final listing approval formalities with stock
exchange.
Transfer of funds from escrow account to companys account after
filings with SEBI and Stock Exchange.
Trading begins on listing day.
Filing of Form 2 with ROC.
PROCESS OVERVIEW AND TIME FRAME
Illustrative Book Built Public Issue Process in weeks

Determination of Floor
Price/ Price Band, Filing
of Final Prospectus with
Formation of ROC, underwriting
underwriting syndicate, agreements, issue opens
road shows and and closes, allotments,
amendments to DRHP trading.
and finalizing of RHP.
Issue presentations
(Pitching), MOU by
lead managers, Due
Diligence, Filing of
DHRP with SEBI.

6-8 w 12 w 16-18 w
ISSUE MANAGEMENT
ISSUE MANAGEMENT

Main aspects -
Issue Structuring
Due Diligence
Preparation of Offer Document
Ensure necessary statutory compliance
Tying up appropriate underwriting arrangements
Preparing, controlling and monitoring issue budget.
Marketing of Issue, proper positioning and branding.
Interactions with various agencies involved with the
issue SEBI, underwriters, bankers, auditors, experts,
law firm, registrar, printer, PR agency, press and media,
brokers, courier agency and investor associations.
Post Issue allotment, compliance matters and listing
formalities.
IMPORTANT ASPECTS

Issue Pricing unlike valuation, issue pricing is

based on relative valuation and market variables
Capital Structure total expansion to existing
capital, post-issue number of shares and
shareholding pattern, compliance to guidelines,
marketability.
Issue Structure Face value of share and issue
price, minimum subscription amount, terms of
payment, allocation of issue, NPO, underwriting,
costing.
SELECT PUBLIC OFFERS PRIOR TO 2008 MELTDOWN

Name of the Issuer Issue IPO No. of times Listing Price /

Price Rs Grading subscribed Price Trend Rs.
per share per share

Jet Airways 1100 NA 16 (80% top 685

end 1125)

GMR Infra 310 NA 8.6 315 - 152

Tech Mahindra 365 NA 75 (QIB 104, 550

HNI 140)
Punjab National Bank 390 NA NA 500-300

Reliance Petroleum 60 NA 50 102 (since

merged)
Reliance Power (Bonus issue 450 4 by ICRA 73 Listing day
3:5 in June 2008) Post Bonus 530-386
cost 280
IMPORTANT ASPECTS OF ISSUES

Offer Document One of the most important

components of making a public offer.
It represents the quality of disclosures made by a
prospective issuer and sets a benchmark for
future disclosures.
It shows the way the companys management
was conducted in the past and throws light on
financial practices.
It provides the basis for the issue price based on
which investors can take a call on the investment
prospects of the issue.
IMPORTANT ASPECTS OF ISSUES

Determination of Cut-off Price

Finalising the basis of allotment
Use of the over-subscription ratio
Applicable isse allocation norms should be
followed
Allotment subject to Minimum lot

Over-subscription leads to draw of lots

IPO MARKET TRENDS
AND CASE STUDIES
OFFER STRUCTURE CASES

TATA CONSULTANCY LTD Mix of

Public issue and Offer for Sale
BIOCON Mix of Public issue and Offer for
Sale
MCX Pure Offer for Sale
JUST DIAL Pure Offer for Sale
AIR DECCAN

Deccan Aviation Ltd, which runs the low-cost carrier Air-

Deccan first cracked a private equity deal in January 2005
to raise about $40m for 26% equity from ICICI Ventures-
Capital International combine with a valuation of around
Rs.800 crore.
SpiceJet raised $20m by offering a stake of about 6.5% to
Temasek subsidiary MacRitchie and a mid-east investor
Istithmar, giving it a valuation of around Rs. 1500 crore.
Incidentally, full service carrier Jet Airways secured a
valuation of nearly Rs 7,600 crore (around $1.75bn) when
it floated its maiden public issue in 2005, offloading 20%
of its equity for about Rs 1,900 crore. The Jet public offer
was priced at Rs. 1100 per share.
AIR DECCAN

Air-Deccan, came out with an initial public offering (IPO) with an

offer priced at Rs 150 to Rs 175. The Bangalore-based airline planned
to raise Rs 400 crore to Rs 432 crore (at the top end of the band)
through the issue.
The promoters and existing private investors ICICI Ventures and
Capital, were to hold 75% in the company post-issue. The private
equity investors did not sell part of their stake through the IPO. The
airline floated about 25% of its equity to the public giving it the
budget airline a valuation of $350 million (Rs. 1750 crore).
We do not want people to lose money on listing, Capt. Gopinath,
Managing Director said. Air-Deccan, which operated 30 aircraft at the
time of the IPO, lost Rs 121 crore in the ten-month period from April
to November 05 on revenues of Rs 480 crore.
The company was expected to continue making losses for the next
year and a half because of its aggressive expansion plans.
AIR DECCAN

Air Deccan signed up Enam Securities, ABN Amro Rothschild, JP

Morgan, ICICI-Securities and SBI Capital Markets as merchant
bankers for its IPO. However, three of its merchant bankers, ABN
Amro, Rothschild and JP Morgan, withdrew from the issue because
of differences over the issues timing. Ultimately, the company
appointed Enam Securities and ICICI Securities as its lead
managers.
The roadshows were held in key international financial markets
such as Mumbai, Singapore, London and New York. The IPO
opened for public subscription on May 18, 2006.
On that day, the stock market lost over 800 points, about 8% of the
total market cap in a historic Thursday crash. The companys IPO
went belly up on the first three days.
Looking at the developments, the company widened the lower end
of the price band on the second day to Rs.146 and extended the
closing date by three days.
AIR DECCAN

By 24th May, the retail and HNI portion was subscribed but
the company needed the vital QIB portion to be filled up.
The lead manager Enam complained that they could not
market the issue properly due to the volatile market.
The issue was finally salvaged with a 1.06 times
subscription, met mostly through last minute applications
from QIB investors.
The issue was priced at the lower end of Rs. 146.
The share made an unimpressive debut on the stock
exchange before plunging and has been quoting below its
offer price. It is presently quoting around Rs.110 after
touching a low of Rs. 64 in the past few months after
listing.
 WHAT ARE THE
INFERENCES TO BE
DRAWN FROM THE AIR
DECCAN IPO?
AIR DECCAN ASSESSMENT
The offer price of Rs. 146-175 per share resulted in a valuation of Rs.1750 crore
which was more than double the valuation at the previous round of financing a
year ago. The promoters average acquisition price was Rs. 4 per share.
The company has been loss making and will continue to make losses, probably
bigger. The companys networth was negative in 2005. The risk factors ran into
25 pages.
It is a clear case of over-pricing in a very competitive, price sensitive, highly
regulated and oil centric industry. The issue was fully underwritten due to
apprehension about its success.
The issue hit an air pocket on the first day itself. Though the general market
sentiment had been good, it was just the wrong week to open the IPO.
The companys issue costs rose heavily to procure last minute subscriptions in
the wake of a bad performance of the IPO.
Lead managers miscalculated the market and the pricing. There were differences
among the lead managers on the timing of the offer as well.
Air Deccan could never sustain price support and deliver value to investors in
order to be able to go for future fund raising. It eventually merged with
Kingfisher Airlines and the combined company continued to bleed and is
presently in the midst of bankruptcy restructuring (CDR) and sale of assets.
Investors found the IPO a loss making proposition.
PUBLIC OFFERS 2008 AND LATER
Towards the close of the bull markets in early 2008, two
public offers, namely EMAAR Developers and Wockhardt
Hospitals were withdrawn for lack of investor support
inspite of scaling down their price. While the former was
withdrawn after the issue opened, the latter was
withdrawn prior to its opening.
In 2009 (post rebounding of markets), the IPO market saw
some action with the huge success of Adani Power IPO,
which was the first major issue. The Rs. 3000 crore issue at
offer price of Rs. 90-100 per share was graded 3 by ICRA
was oversubscribed 21 times overall with QIB going at 410
times. It traded above offer price until mid 2011.
PUBLIC OFFERS 2008 AND LATER
But listing gains were not seen in NHPC public offer, a
disinvestment offer by the Government. The issue, priced
at Rs.36 opened at Rs. 39 and closed at Rs. 36 on the
opening day, going down below the offer price in the next
week.
In order to provide better investor response, several I-
banks and finance companies re-initiated IPO financing
products in the market. HNI investors could not recover
financing costs even in the NHPC offer.
Another disinvestment issue of OIL also opened in the
first week of September at a price band of Rs. 950-1050.
Both NHPC and OIL were branded as over-priced by
analysts. NHPC had an offer P/E of 38 (the highest among
all disinvestment IPOs) while OIL was at 10.
PUBLIC OFFERS 2008 AND LATER
Another interesting development has been the return of corporate
bond offerings in the public market after a span of a more than a
decade.
The successful issues have been that of Tata Capital, L&T Finance
SBI, Shriram Transport Finance Corporation. All of them were
offers of NCDs except SBI (as opposed to bonds) with different
structures.
L&Ts Rs. 1 billion issue (with a green shoe of 100%) was
oversubscribed 4 times overall and in all categories as well. HNI
was the best category registering 6 times. favoured more by
institutional investors than retail investors, through about 70% was
reserved for them.
Coal India Ltds IPO in 2010 at cut-off price of Rs. 245 per share
was graded 5 by CRISIL was well received by QIBs and saw fair
returns in the past two years. Listed at Rs.290. Only major success
in 2010.
PUBLIC OFFERS 2011

The year 2011 was disastrous for IPOs with about 30 IPOs
that traded below offer price. Investors lost about 80% of
their initial investment in about 12 issues. While 11 issues
were between Rs 100 crore and Rs 1,000 crore, 25 offers were
small ticket ones with a size of less than Rs 100 crore. This
forced even the government to abandon its FPO plans for
ONGC and instead go for an institutional placement in
March 2012 which was eventually bailed out by LIC.
There were only three public offers with sizes of above Rs
1,000 crore in 2011 (Tata Steel and PFC FPOs and L&T
Finance Holdings IPO). In 2010 there were 14 public offers
with issue size of above Rs 1,000 crore.
In 2011, 29 IPOs were called off due to poor market
conditions.
PUBLIC OFFERS 2012

The year 2012 saw the successful IPO of Multi Commodity

Exchange (MCX) . Among the several banks that held stake in
MCX prior to the IPO, only SBI, Bank of Baroda and Corporation
Bank offloaded bulk of their stakes in the IPO through an offer for
sale. The issue raised Rs. 660 crore at a cut-off price of Rs.1032 per
share and was oversubscribed 54 times with huge over-
subscriptions across all categories. The MCX scrip was also one of
the first to be listed on the new norms introduced by SEBI to curb
listing day volatility in stock price. The scrip started to trade at a
discovered price of Rs 1387 and reached an intra-day high of Rs.
1416 before closing the first day at Rs.1297. Traded above offer
price until May 2012. Currently at Rs. 1100.
Speciality Restaurantss IPO was offered at Rs. 150 opened at Rs.
153 and presently quotes above Rs. 200. (IPO Grading 4 indicating
above average fundamentals). There was good response from
Anchor Investors.
PUBLIC OFFERS 2012
Tribhovandas Bhimji Zaveri IPO quoted below offer price of Rs. 120 since
listing at Rs. 115. (IPO Grading 3 indicating average fundamentals)
The first SME IPO (BCB Finance) was offered at Rs. 25 and presently also
quotes at Rs. 25 due to the presence of market making.
The Rs 1665 crore IPO of Samvardhana Motherson Finance Ltd (SMFL)
was withdrawn due to poor response from investors across the board.
SMFLs offer was subscribed 0.23 times on its final day of subscription.
QIB quota was the most subscribed with bids for 57% shares. The response
in HNI, retail and employee quota was the worst in recent years. All of
these categories received bids only for 1% of the quota allocated. As per
experts, wrong timing of the IPO and stiff pricing of the shares were the
major reasons for the failure of the IPO. J.P. Morgan and Standard
Chartered Securities were the BRLMs.
The company had a profit of Rs. 13 crore on gross income of Rs. 40 crore
for the FY 2011. The IPO was graded 4 (above average fundamentals) by
ICRA and the pricing was Rs. 113-118 per share.
In 20102, 17 IPOs were called off till June due to poor market conditions
including Goodwill Hospitals, Galaxy Surfactants, Plastene etc.
PUBLIC OFFERS 2013 JUST DIAL
Just dial is a 24/7 Free Search service on a single national number
08888888888 that receives over 130 Million Calls every year. It
provides reliable information about local businesses, products and
services to the users in over 2000 cities in India having more than
300 million users.
Selling advertisement and qualified leads is the main source of
earning for Justdial. They have more than 145,000 paid advertisers.
Companies promote their brand across the Just Dial network and
reach millions people who are actively looking for information
about the products and services. There are 4 ways available to
promote brand or advertise on JustDial including Listing on Web,
Listing on Phone Search, Listing on Mobile Search and Placing
Video Ads.
The company did not require any funds through IPO. The main
purpose of listing was the offer for sale by selling shareholders. The
entire offer was an offer for sale.
PUBLIC OFFERS 2013 JUST DIAL
The public issue of Just Dial services was the most successful
in 2013.
Issue was opened around end of May 2013.
It listed on June 5th and closed the first day with a handsome
gain of 15% on the offer price. The price band was Rs. 470-
543. Cut-off Price was Rs. 530. IPO grading by CRISIL 5/5.
The issue offered a 10% discount and a safety net to retail
investors upto Rs. 50,000. The net was to be triggered for a
20% fall in market price below the offer price.
The Offer price of Rs. 530 was at a P/E of 90 without any peer
comparison. The offer price was close to 10 times the BV of
share.
The total issue budget amounted to 4.55% of the Issue Size
and was borne entirely by the selling shareholders.
RIGHTS ISSUES AND
FPOS
MAIN CONSIDERATIONS IN RIGHTS ISSUES

Pricing of Rights it has to be a fixed price offer

Dilution of existing holdings including that of the
promoters
Expansion in equity base
Consolidation of stakes
Financing to be raised
Type of instrument
Past history
Issue structure
Renunciation
Market conditions
ISSUE PROCESS

Consent of existing shareholders

Appointment of merchant banker
Preparation of letter of offer
Issue to be opened and closed within 30-60 days
Allotments to be finalised and intimated
including those of the renouncees.
Listing of the rights shares.
FOLLOW ON OFFERS
Listed companies can make follow on offers
(also known as secondary public offers) in the
same way as an IPO.
Free pricing is allowed through book building
route if the issue size exceeds 5 times the pre-
issue networth.
Pricing of FPOs is different from that of IPOs.
Lock-in of promoter capital shall apply upto 20%
o the post-issue capital.
All other provisions shall apply mutandis
mutandis as in IPO.
COMPOSITE OFFERS

A simultaneous rights-cum public offer is

known as a composite issue.
Differential pricing is allowed in a composite
offer.
The public issue cannot open after the rights has
closed.
Requirements of lock-in and minimum
promoters contribution shall apply.
There shall be separate and distinct processes for
the rights and public components.