INITIAL PUBLIC OFFERING IN PUBLIC AND PRIVATE SECTOR COMPANIES

Presented by: Group 5 Neeraj Kumar Singh Nidhi Mishra Nishtha Srivastava Pallavi Gogoi Pankhuri Krishna Parinita Dash Pawandeep Singh Pravesh Kumar Poonam Nautiyal

Agenda
Types of Market IPO Definition & Introduction Process of IPO Eligibility for an IPO Advantages and Disadvantages of an IPO SEBI guidelines for an IPO IPO in Different Companies: a) Public Sector Companies: I)Coal India Ltd IPO II) Oil India Ltd IPO b) Private Sector Companies: I) Bajaj Corp Ltd IPO II) Jaypee Infratech IPO Refrences

TYPES OF MARKET
PRIMARY MARKET: 3 methods through which securities can be issued: - > RIGHT ISSUE - > IPO ( INITIAL PUBLIC OFFER ) - > PREFERENTIAL ISSUE SECONDARY MARKET

IPO ( INITIAL PUBLIC OFFER )-Definition & Introduction

IT IS AN EXERCISE WHEN AN UNLISTED COMPANY MAKES EITHER A FRESH ISSUE OF SECURITIES OR OFFER FOR SALE THE EXISTING SECURITIES OR BOTH TO THE PUBLIC FOR THE FIRST TIME. IPO or initial public offering is the most closely event followed in the stock market and is the first stock that is sold by the company to the public. IPO can be raised either by public company or Private Company. IPO raises the funds from the public by issuing the shares through primary market and after the shares get listed they are traded on secondary market.

Process of IPO
1)When a company wishes to make a public offering, the first and foremost step is to select an investment bank which can advise it and can perform underwriting functions in connection with the issue. 2) The company which offers the shares to the public is known as issuer it enters into a contract with underwriter to sell the shares to the public. 3) Underwriters then approach the investors to sell the shares.

The sale of shares in an IPO can take several forms some of them are:- a) Best effort contract b) Firm commitment contract c) Bought deal d) Dutch auction e) Self distribution of stock Underwriters gets commission upon selling the shares on the percentage of the value of shares sold.

4) The company and the investment bank or the underwriter will meet to negotiate the deal. 5) Once both the parties agree to the terms and conditions and agree on the deal, the investment bank puts a registration statement to be filed at SEC. 6) The SEC then requires a cooling off period, once the SEC approves the offering a date is decided when stock is made available to the public. 7) As the date approaches the underwriters and the company decide upon the price. 8) Finally after all the formalities the securities is sold on the stock market and money is collected from the investor.

Advantages and Disadvantages of IPO

Advantages: 1) Access to capital to fund growth 2) Creation of liquidity and potential exit for the current owners 3) Maximum value of the company 4) Enhancement of the companys public profile 5) Enhanced loyalty of key personnel

Disadvantages: 1)Time and expense 2) Disclosure 3) Decision on stock price 4) Regulatory Review 5) Falling Stock Prices

SEBI GUIDELINES FOR AN IPO

1) 2) 3) IPOs of small companies Size of the Public Issue: Issue Of Shares Cannot Be Less Than 25% Of The Total Issue. Regarding allotment of shares: a) Should Be Listed At The Regional Stock Exchange. b) Minimum Of 50% Of The Net Offer To The Public Has To Be Reserved For Investors Applying For Less Than 1000 Shares. c) At least 5 Investors For Every 1 Lakh Equity Offered. d) Quoting Of Permanent Account Number Or Gir No. In Application For Allotment Of Securities Is Compulsory.

e) Indian Development Financial Institutions And Mutual Fund Can Be Allotted Securities Up To 75% Of The Issue Amount. f) A Venture Capital Fund Shall Not Be Entitled To Get Its Securities Listed On Any Stock Exchange Till The Expiry Of 3 Years From The Date Of Issuance Of Securities. g) Allotment to categories of FIIs and NRIs/OCBs is up to a maximum of 24%, which can be further extended to 30% by an application to the RBI - supported by a resolution passed in the General Meeting.

4) Other regulations pertaining to IPO: a) Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public unless it is disinvestment in which case it is not applicable. b) If the issue is undersubscribed then the collected amount should be returned back . c) If the issue size is more than Rs. 500 crores voluntary disclosures should be made regarding the deployment of the funds. d) There should not be any outstanding warrants or financial instruments of any other nature, at the time of initial public offer. e) The resultant shares will not be taken into account for reckoning the minimum promoter's contribution and further, the same will also be subject to lock-in. f) Draft prospectus submitted to SEBI should also be submitted simultaneously to all stock exchanges where it is proposed to be listed.

IPO of Different Companies

1) Public Sector Companies: a) Coal India Ltd IPO
Coal India's $ 3.5 billion dollar initial public offering (IPO) is the biggest in the history of corporate India, it was oversubscribed 15.2 times. The total no. of shares to be sold through this IPO is 632 million shares Rs15,475 crore amount Coal India plans to raise at upper end of price band of between Rs 225 and Rs 245 Rs 236,148 crore. Amount collected by the IPO in offers made over four days .

 Reasons for Investing in Coal India Stock: a) largest coal producer in the world. b) coal is limited resource and the prices of coal can only go up and hence has good prospect of increasing its profitability. c) Largest Reserves in the World implying 138 years at Current Production Rate. Risks: a) Coal is increasingly coming under stricter environmental and safety regulations b) Raniganj and Jharia Coalfields face problem of Subsidence due to non-scientific mining c) Corruption and Pilferage. Objective: The objects of the Offer are to carry out the divestment of 631,636,440 Equity Shares by the Selling Shareholder and to achieve the benefits of listing the Equity Shares on the Stock Exchanges.

b) Oil India Ltd IPO Usage of Proceeds of OIL India Limited IPO: The funds raised in the IPO of Oil India Limited will be used to fund capex requirement for 2009-10 and 2010-11 when it had planned Rs 2,300 crore and Rs 2,400 crore expenditures respectively. OIL IPO Price Range/Price Band: OIL, price band is in range of Rs. 950-Rs. 1050 and is good as compared to ONGC. OIL IPO Listing Date: OIL IPO issue open date was September 7, 2009 and the issue will close on September 11, 2009. The issue had listed on the market on September 29.

 Offer Structure for different categories: The offer structure for different categories is as follow: a) QIB (Including Mutual Funds)-60%, b) HNI-10%, c) Retail-30%, d) Lot Size-6, e) Post Issue Equity (Rs. in crore) -240.45, f) Issue Size (Rs. in crore) -2512.8 to 2777.73, g)Face Value (Rs) -10. Object of the Issue: Oil is expecting to raise Rs. 2512 crore at the lower band and Rs. 2777 crore at the upper band of the issue.

Recommendation: According to us the company has grown reasonably well historically and will continue to maintain the growth trajectory and margins going forward. Based on the above factors we recommend subscribing to the issue with long term investment objective.

2) Private Sector Companies

a) Bajaj Corporation Ltd IPO:

The objects of the issue are: To promote future products For acquisition and other strategic initiatives For general Corporate Purposes Strengths:-Market leader in light hair oil segment with 50% market share. -Strong brand equity - known for reliability, quality and competitive price. -Established distribution net work. Experienced, efficient and professional management. -It has given IPO grade as 4 by CRISIL.

 Risks:-The company depends heavily on Almond Drops. -The company operates in a highly competitive FMCG market. IPO Information: -Issue Open: Aug 02, 2010 while Issue close: Aug 05, 2010. Issue Size: 4,500,000 Equity Shares. Issue Size (in Rs): Rs. 283.50 297.00 Crore. Face Value: Rs. 5 / Equity Share. Issue Type: 100% Book Built Issue IPO. Issue Price: Rs. 630 - Rs. 660 Per Equity Share. Minimum Quantity: 10 Shares (Rs. 6600 Rs with 1 Lot). Maximum Quantity: 150 Shares (Rs. Rs 99000 with 15 Lot). Listing at: BSE, NSE. Recommendation: -we will suggest going for the issue keeping a higher growth prospect in mind with long term prospective.

b) Jaypee Infratech IPO:

Risk and Concern: a) Expressway faces high market risk b) The company faces competition from numerous other players Jaypee IPO: a) It had raised an IPO with an issue size of six crore equity shares of Rs. 10 each held by Jaiprakash Associates, through a 100% book building process. b) The IPO has opened on April 29, 2010 and had closed on May 4, 2010. The issue prize was in range from Rs.102 to Rs. 117 per share, and the shares are proposed to be listed on the NSE and BSE.

c) The IPO got maximum demand from qualified institutional buyers (QIB) and was subscribed 1.77 times in the portion reserved for them. d) In the HNI (high networth individuals) segment, the public issue was subscribed 1.15 times, whereas shares reserved for retail buyers and employees remained under- subscribed. e) In the retail segment, the IPO got subscribed 61%, while in the employees portion, it was subscribed just 10%. Recommendation: According to various brokerages, the Sum of the Parts Valuation of Jaypee Infratech ranges from Rs 99 to Rs 125, quite reasonable in our view. We Recommend Investment in the

Issue only from Medium to Long Term Perspective.

Refrences
http://www.stockmarketsreview.com/pricetargets/oil_india_ipo_oil_indi a_limited_ipo_review_analysis_and_recommendation_20090904/ http://www.stockmarketbaba.in/ipo/oil-india-ipo-analysis-review http://www.investopedia.com/terms/d/dutchauction.asp http://www.dalalstreet.biz/ipo/2010/04/jaypee-infratech-ipoinvestment-decision/ http://www.livemint.com/2010/05/10181426/Jaypee-Infratech-IPOlisting-p.html http://www.firstchoiceipoanalysis.com/2010/04/ipo-analysis-jaypeeinfratech-limited.html http://www.stockmarkettipz.info/jaypee-infratech-coming-ipo-croreequity-shares.html http://www.indiamarkets.com/imo/finanavenues/Tree2/html/2t6.html http://www.stockmarkettipz.info/bajaj-corp-ipo-analysis-updatescompany-profile-risk-and-concern-outlook.html

Thank You