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REPORT ON INITIAL PUBLIC OFFER (IPO)

SUBMITTED TO: SUBMITTED BY:MR.ANIL GHAI (AGM) KISHORE YEOLEKAR MINHAJ SHER KHAN

In this report you can understand/cover the following main points: To understand what is an IPO. To understand why company go for public. To understand the different types of issues. To understand the initial eligibility criteria for IPO. To understand the intermediaries involves in the IPO process. To understand the various initial IPO process.

Chapter-1This chapter gives an idea about the IPO and company raises money to fund their activities. OVERVIEW ABOUT IPOTheIPO CompaniesIn India Are Growing Every Year. Several Companies Are Launching IPO For Raising Money To Fund Their Growth Plans. The Past Few Years Have Witnessed The Growth In The IPO Companies In India. The Main Purpose Of The Initial Public Offering (IPO) Is To Launch The Issue Of Equity Shares To The Public At A Fixed Price Band. With The Rapid Economic Growth Of The Country And Several Changes In The Policy Structure, The Capital Market Was Completely Transformed.The IPO Has Helped The Companies To Churn Out Money And Utilize It In Developmental Projects And Ventures Such Infrastructure Based Projects, Output Expansion Programs, Acquisitions And Mergers, Etc.The Central Government Agency, Which Regulates The IPO Companies,The Securities Exchange Board Of India (SEBI).WHAT IS AN IPOAn Initial Public Offering, Or IPO, Is The First Sale Of Stock By A Company To The Public. A Company Can Rise Money By Issuing EitherDebtOrEquity. If The Company Has Never Issued Equity To The Public, It's Known As An IPO. Companies fall into Two Broad Categories:--PrivateandPublic.

A Privately Held Company Has FewerShareholdersAnd Its Owners Don't Have To Disclose Much Information About The Company. Anybody Can Go Out And Incorporate A Company: Just Put In Some Money, File The Right Legal Documents And Follow The Reporting Rules Of Your Jurisdiction. Most Small Businesses Are Privately Held But large companies can be private tooit usually isn't possible to buy shares in a private company. You can approach the owners about investing, but they're not obligated to sell you anything. Public companies, on the other hand, have sold at least a portion of themselves to the public and trade on astock exchange. This is why doing an IPO is also referred to as "going public."Public companies have thousands of shareholders and are subject to strict rules and regulations. They must have aboard of directorsand they must report financial information every quarter. In the United States, public companies report to theSecurities and Exchange Commission(SEC). In other countries, public companies are overseen by governing bodies similar to the SEC. From an investor's standpoint, the most exciting thing about a public company is that the stock is traded in the open market, like any other commodity. If you have the cash, you can invest. The CEO could hate your guts, but there's nothing he or she could do to stop you from buying stock.

Chapter-2

WHY COMPANY GO FOR PUBLIC

After reading about IPO, now you should be able to understand why companies go for public

The increase in the capital:An IPO allows a company to raise funds for utilizing in various corporate operational purposes likeacquisitions, mergers, working capital, research and development, expanding plant andequipment and marketing. Liquidity:The shares once traded have an assigned market value and can be resold. Thisis extremely helpful as the companyprovides the employees with stock incentive packages and the investors are provided with the option of trading their shares for a price. Valuation:The public trading of the shares determines a value for the company and sets a standard. This works in favour 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. 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 ofpartnership.

MAJOR IPOS IN INDIA

Chapter-3ELIGIBILITY CRITERIA FOR IPOAfter reading the above chapter, you should be able to understand, what the eligibility criteria of companies for issuing IPO in case of large cap company and small cap company or both.

The following eligibility criteria have been prescribed for the companies seeking permission to get listed on the stock exchange.The companies are classified into two categories: Large Cap and Small Cap. A company is treated as a large cap company if the issue size is greater than or equal to Rs 10 crore and Market capitalization of not less than Rs 25 crore.A) In case of Large Cap Companies The minimum post-issue paid-up capital of the applicant company shall be Rs. 3 crore. The minimum issue size shall be Rs. 10 crore; and The minimum market capitalization of the Company shall be Rs. 25 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price).

Authorized capital is the amount for which a company has got the authorization from the regulatory body to raise through the issue. A company may or may not want to raise the full amount of authorized capital. Issue size is the amount that a company wants to raise funds through the issue. Its always less than or equal to authorized capital.Part payment facility may be available for the investors who want to subscribe to an issue. Post-issue paid-up capital is the value of subscriptions (including promoters holding) paid at the end of issue date. This will be less than issue size if the total subscriptions are less than the offered shares or when there is part payment facility available for the issue.Market capitalization is the product of number of shares outstanding (including promoters holding) and the market price. In an IPO before the first day of listing the market price is the issue price.

B)In respect of Small Cap Companies The minimum post-issue paid-up capital of the Company shall be Rs. 3 crore The minimum issue size shall be Rs. 3 crore The minimum market capitalization of the Company shall be Rs. 5 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price) The minimum income/turnover of the Company shall be Rs. 3 crore in each of the preceding three 12-months period The minimum number of public shareholders after the issue shall be 1000. A due diligence study may be conducted by an independent team of Chartered Accountants or Merchant Bankers (Investment Bankers) appointed by BSE, the cost of which will be borne by the company. The requirement of a due diligence study may be waived if a financial institution or a scheduled commercial bank has appraised the project in the preceding 12 months.In addition to this, the issuer company should have a post issue net worth (equity capital + free reserves excluding revaluation reserve) of Rs 20 crore.

c)For all companies In respect of the requirement of paid-up capital and market capitalization, the issuers shall be required to include in the disclaimer clause forming a part of the offer document that in the event of the market capitalization (product of issue price and the post issue number of shares) requirement of BSE not being met, the securities of the issuer would not be listed on BSE. The applicant, promoters and/or group companies, shall not be in default in compliance of the listing agreement. The above eligibility criteria would be in addition to the conditions prescribed under SEBI (Disclosure and Investor Protection) Guidelines, 2000.

D) Minimum Public Shareholding

If the issuers post issue market capitalization is more than Rs 4000 crore then issuers can consider an IPO size of 10% of post issue capital Every listed company should maintain public shareholding of at least 25%. Issuers diluting less than 25% via the IPO are required to comply with minimum public shareholding of 25% within three years of the rate of the IPO listing. Under the listing agreement, compliance with the minimum public shareholding can be carried out via an offer for sale through stock exchange mechanism, an institutional placement program or a follow on public offerings. However, if issuers post market issue market capitalization is less than Rs 4000 crore, then IPO size of at least 25% of post issue capital is required. PSUs are required to maintain minimum public shareholding of 10% instead of 25% required by other companies.

Chapter-4INTERMEDIARIES INVOLVE IN IPO PROCESSAfter reading the above chapter, you should be able to understand, what are the intermediaries involve in IPO process.

INTERMIDIARIES IN IPO PROCESSROLE

BOOK RUNNING LEAD MANAGERS (BRLM'S) OVERALL ISSUE MANAGEMENT MARKETING, PRICING, CO-ORDINATION EXECUTION, FILLINGS WITH THE SEBI

DOMESTIC LEGAL COUNSEIS (FOR UNDERWRITER + ISSUER) ADVERTISING ON STRUCTURE, DUE DILIGENCE, DOCUMENTATION/DRAFTING, REVIEWING AGREEMENT BETWEEN ISSUER,BRLM'S AND OTHER INTERMEDIARIES, PROVIDING LEGAL OPINION

INTERNATIONAL LEGAL COUNSEL DUE DILIGENCE, NEGOTIATION OF COMFORT LETTERS WITH AUDITORS, DRAFTING OF SPECIFIC SECTION(INDUSTRY, BUSINESS, RISK FACTORS, MD&A), DRAFTING INTERNATIONAL WRAP AND PROVIDING LEGAL OPINIONS, ADVICE ON COMPLIANCE WITH INTERNATIONAL REGULATIONS, PUBLICITY AND ROADSHOWS PROCESS, SELLING RESTRICTION, RESEARCH GUIDLINES, PFIC/ INVESTMENT COMPANY ACT

AUDITORS REVIEW OF FINANCIAL STATEMENTS, COMFORT LETTERS

REGISTRAR COLLECTION OF ISSUE SUBSRIPTION DETAIL, RECONCILIATION, ALLOTMENT, SHAREHOLDER REFUNDS, LIAISON-DESPATCH, HANDLING QUERIES AND REQUESTS ETC