COMPARATIVE STUDY ON INITIAL

PUBLIC OFFER ( IPO )

SUBMITEED BY : KUNAL HINGU

WRO : 0614630
 WHAT IS IPO ?

-PROCESS OF SELLING SECURITIES TO PUBLIC IN PRIMARY

MARKET.

-MADE WITH 2 TYPES-

1)FIXED PRICE ISSUES
2)BOOK BUIDING ISSUES

-MAJORLY DONE TO RAISE CAPITAL

 WHY IPO DONE ?

1)NEW CAPITAL
ALMOST ALL COMPANIES GO PUBLIC PRIMARILY BECAUSE THEY NEED MONEY TO EXPAND THE
BUSINESS

2)FUTURE CAPITAL
ONCE,PUBLIC FIRMSCAPITAL IN FUTURE HAVE GREATER AND EASIER ACCESS TO CAPITAL IN
FUTURE.

3)MERGER AND ACQUISITION

ITS EASIER FOR OTHER COMPANIES TO NOTICE AND EVALUATE A PUBLIC FIRM FOR POTENTIAL
SYNERGIES.

IPO IS OFTEN USED TO FINANCE ACQUISITION.

 SEBI GUIDELINES FOR IPO

1. It must have a pre-issue net worth of not less than rupees one crore in 3 out
of preceding 5 years ,with a minimum net worth to be net worth to be met
during the 2 immediately preceding years.
2. It must have a track record of distributing dividend for at least 3 out of the
immediately preceding 5 years, and
3. The issue size, the firm allotment and the promoters contribution through
the offer document should not exceed 5 times the pre-issue net worth as per
the last a available audited document with the SEBI.
4. If the above condition are not satisfied, then the IPO can be made only
through a book-building process, provided that sixty percent ( 60% ) of the
issue size must be allotted to qualified institutional buyers (“QIB”)
 THE PROCESS OF IPO

1. Company nominates lead merchant bankers

2. Disclose of securities to be issued & price band for biding
3. Appointment of syndicate members
4. Bidding process
5.Process normally remains for 5 days
6. Bids have to be entered within the specified price band
7. On the closure of the process, the book runners evaluates the price levels
8. At last the book runners & the issuer decides the final price
9. Allocation of securities is made to the successful bidders
10. Rest get refund orders.
LET’S CHECK EXAMPLES.
 ABOUT THE COMPANY

1. The 153 year old company, tribhovandas bhimji zaveri, mumbai’s local
jeweller, plan to raise around RS 200 CRORE through 16.7 million share.
2. The company is in the retail jewellery bussiness with 14 showrooms
across 5 states mainly in western and central india.
3. Around 72% revenue comes from gold jewellery and 25% from diamond.
4.
 ABOUT IPO
Offer date 24-26 april
Price band Rs. 120-126 per share
Minimun application 45 shares
Reserve for QIB 50%
Reserve for non institutional 15%
bidders
Reserve for retail 35%
Total amount to be raised Rs. 200 crore
Total no. of share on sale 16.7 million
Got bid for 1.62 crore shares
 PLANS

1. To finance establishment of new showrooms.

2. To expand this to around 57 showrooms, adding 43 new ones in india
2015.
3. To use about RS. 20 Crore to open 9 new large format showrooms by the
end of fiscal 2013.
4. To finance working capital requirement.
5. The remaining amount would be used for general corporates purpose.
 FINANCIAL INFORMATION

IN RS. CRORE FY 10 FY 11 FY 12
NET SALES 885 1194 1117
%changes 32.3 34.9 NA
OPERATION 47 87 102
PROFIT
%changes 11 37.2 NA
NET PROFIT 17 40.4 50.5
%changes 63.5 137.6 NA
 COMPETITORS/PEERS

• TANISHQ
• RAJESH EXPORTS
• GITANJALI GEMS
• SHRI GANESH JEWELLERY
• SURAJ DIAMOND
 SHARE HOLDING PATTERN POST IPO

HOLDIN
HOLDERS G% HOLDING%
promoters holding 74.17% OTHERS
FLL 11.85% DLL 11%
DLL 3.17% 3%
OTHERS 10.81%

FLL
12%

promoters
holding
74%
 DAY 1 TRADING
LISTING DAY TRADING DAY 1 TRADING
INFORMATION
122
BSE NSE 120
118
116

Axis Title
ISSUE PRICE RS. 120.00 RS. 120.00 114
112 Series1
OPEN: RS. 115.00 RS. 115.05 110 Series2
LOW: RS.110.00 RS. 110.05 108
106
HIGH: RS. 119.80 RS. 120.00 104
LAST TRADE: RS. 111.20 RS. 111.00 OPEN: LOW: HIGH: LAST
TRADE:
VOLUME: 11,57,892 12,53,983
 NO.OF TIMES ISSUE IS
SUBSCRIBED

SUBSCRIBED BY

QUALIFIED
ANCHOR INVESTORS INSTITUTIONAL BUYERS
23% 26%

NON
INSTITUTIONAL
RETAIL INVESTORS INVESTORS
13% 38%
 STRENGTH OF TBZ

 Strong and trusted brand name.

 Focus to develop new design and products by understanding customer
requirement with constant interaction.
 The company has substantial experience in expanding operation and
managing the launch of new showroom.
 The company has its own manufacturing facility in kandivali carpet area of
5,755 sq. ft.
 WEAKNESS OF TBZ

 Inventory risk and gold price fluctuation is also high.

 Working capital situation of the company is not good.
 Financial performance of the company is also not encouraging.
 Peers are doing good in compare to TBZ.
 OPPORTUNITIES FOR TBZ

 Banded retail chain are expanding their presence by creating growth opportunities in the
jewellery market.
 The indian gold jewellery sector accounted for 61% total domestic gold demand in 2011.
 It is expected that domestic industry to grow at a CARG of 10%-12% up to 2015 because of
 Higher disposable income.
 Rising young population with the urge to spend.
 Higher no. of women investing her saving in gold/diamond.
 Conscious marketing efforts by companies.
 Steady rise in gold price across the global market.
 THREATS OF TBZ
 There is intense competition in the jewellery retailing market.
 Branded players are also willing to expand.
 Devaluation of gold may affect the business.
 The company has not registered its jewellery designs so it could be
duplicated by competitors.
 The new tax policy where the customer has to give his/her PAN number
on purchase made above ‘5 lakhs’ is likely to hinder the business.
 CONCLUSION

• IPO of TBZ got moderate response:

I. The shares are offered quite expensive in compare to its peers.
II. As it intend to utilize 70% of its raised funds for working capital needs, this
may affect the performance of the company.
III. The opening of new stores will mount pressure on profitability due to time
taken for break-even of new stores, higher marketing expenses and working
capital requirements.
IV. Even though the gross margin in the gold segment is around 10.86% , while
that in the case of diamond jewellery is around 36% company intent to
invest in gold bussiness.
 OTHERS EXAMPLE OF IPO

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