Ipo Shahil Final

8/11/2019 Ipo Shahil Final

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IPOPRESENTED BY

ASHISH BROWNE 11 ASHWINI CHUBE 19

SHAHIL PARI 23



FLOW OF PRESENTATION

• What is IPO?

• Reasons, Advantages and Disadvantages• Eligibility norms

• Promoters’ contribution

• Lock-in requirements

• Pre-issue obligations

• Prospectus

• Pricing

• Post issue obligations



FLOW OF PRESENTATION

• Book building

• Listing of the issue

• IPO financing

• Grey market

• Guidelines on advertisement• Green shoe option

• Case study

• Case study – Google IPO• Future opportunities

• India vs US

• Recommendations



INITIAL PUBLIC OFFERING

IPO" stands for an "initial public offering " of securities.The term is usually used when a business has decided to"go public" to raise substantial amounts of capital byoffering ownership interests in the company to thepublic at large.

The "securities" being offered can include:• Shares of stock in a company• Bonds• Notes

• Debentures• Limited partnership units• Other types of investments in a company etc.



Debentures PreferenceShares

Fresh Issue– EquityShares

PublicBonds

PublicDeposits

LoansfromFIs &

Banks

Offerthrough

Prospectus

Offer forSale

PrivatePlacement

RightsIssue

FixedPrice

Process

BookBuilding

Process

METHODS OF RAISING CAPITAL



Pre issueshare capital

Promoter'sContribution Promoter's contribution

Rs. 200cr Rs. 100cr 50.00%

IPOpost issuecapital Promoter's contribution

Rs. 50cr Rs. 250cr 40.00%

OFS Post issue capital Promoter's contribution

Rs. 50cr Rs. 200cr 25.00%

IPO OFS post issue capitalpromoter'scontribution

Rs. 25crRs.

25cr Rs. 225cr 33.33%

A)

C)

B)



REASONS FOR GOING PUBLIC

• Raising funds to finance cap ex programs like expansion,

diversification, modernization.

• Financing of increased working capital requirements.

• Debt refinancing.

• Financing acquisitions like a manufacturing unit, brand

acquisitions.• Exit route for existing investors.



• The number of PE equity-backed IPOs have beenon a rise — six in 2004, 17 in 2005 and 14 till now

in 2006

• The trend of PE backed IPOs will only increase asmost funds hold a minority stake in Indian

companies and cannot force an acquisition on theIndian promoter who is keen on growth

• Culturally, Indian companies are promoter-runand want to leave a legacy behind. We prefercompanies going public as it prevents businessesfrom switching hands too often



EXAMPLES: PE EXIT



ADVANTAGES

• Facilitates future funding

Enables valuation of the

company

• Provides liquidity to existing

shares.

• Increases visibility of the

company

• Commands better pricing

than placement with few

investors.

DISADVANTAGES

• Dilution of ownership stake

• Involves substantial expenses

• Need to make continuous

disclosures• Increased regulatory

monitoring

• Takes substantial amount ofmanagement time and

efforts.



GLOBAL SCENARIO

Highlights of the IPO activity worldwide in2005:

• The capital raised around the world rose by one-third to $167 billion, the highest since 2000,while deal numbers remained steady at 1,537deals, compared to 1,516 in 2004.

• The biggest deal of the year was $9.2 billionlaunch of China Construction Bank (CCB),

China‟s largest IPO ever.• US achieved the highest amount of capital raised

in IPOs by any single country in the world.



GLOBAL SCENARIO

Amount Mobilized through IPO's worldwide

86

132145

116

177

210

94

6650

124

167

0

200

400

600

800

1000

1200

14001600

1800

2000

FY 95 FY 96 FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05

Year

N o . o f I P O ' s

0

50

100

150

200

250

C a p i t a l R a i s e d

NO. OF IPO'S CAPITAL RAISED ($)



INDIAN SCENARIO

Amount Mobilized Through IPOs

42

37

28

20

36 37

60

5 4

77987911093613749343410391202272227190

10

20

30

40

50

60

70

FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 April '06 May '06

Year

N o . o f I s s u

e s

0

2000

4000

6000

8000

10000

12000

14000

16000

A m o u n t ( R s

. c r )

No. of Issues Amt. (Rs. Crore)

Source: SEBI Bulletin, June 2006



ELIGIBILITY NORMS FOR IPO

• The primary issuances are governed by SEBI in termsof SEBI (Disclosures and Investor protection) guidelinesunder SEBI Act,1992.

• In 2000, SEBI issued ―Securities and Exchange Boardof India (Disclosure and Investor Protection)/DIPGuidelines, 2000‖ which is compilation of all circularsorganized in chapter forms.

• SEBI has laid down eligibility norms for entitiesaccessing the Primary market through public issues.There is no eligibility norm for a listed company makinga rights issue as it is an offer made to the existingshareholders who are expected to know their company.



ELIGIBILITY NORMS FOR IPO

• Dematerialized form

• Entry Norm I

• Entry Norm II

• Entry Norm III



The company shall meet the following requirements:

(a) Net Tangible Assets: At least Rs. 3 crores for 3 fullyears

(b) Distributable profits in atleast three years(c) Net worth of at least Rs. 1 crore in three years

(d) If change in name, atleast 50% revenue forpreceding 1 year should be from the new activity

(e) The issue size does not exceed 5 times the pre- issuenet worth

Entry Norm I



(a) Issue shall be through book building route, with atleast 50% to be mandatory allotted to the QualifiedInstitutional Buyers (QIBs)

(b) The minimum post-issue face value capital shall beRs.10 crore or there shall be a compulsory market-making for at least 2 yrs

Entry Norm II



(a) The “project” is appraised and participated to theextent of 15% by FIs/Scheduled Commercial Banks

(b) The minimum post-issue face value capital shall be Rs.10 crore or there shall be a compulsory market-making forat least 2 years

(c) The company shall also satisfy the criteria of having atleast 1000 prospective allotees in its issue

Entry Norm III



EXEMPTIONS FROM ELIGIBILITYNORMS

The following are eligible for exemption from entry norms:

(a) Private Sector Banks

(b) Public sector banks

(c) An infrastructure company whose project has beenappraised by a PFI or IDFC or IL&FS or a bank whichwas earlier a PFI and not less than 5% of the project costis financed by any of these institutions.

(d) Rights issue by a listed company



PROMOTERS‘ CONTRIBUTION

• Minimum requirement for calculating promoter‟scontribution:

Individuals – Rs. 25000 eachFirms – Rs. 1 lakh each

• Promoters should bring in full amount of contribution at

least one day prior to the opening of the public issue



PROMOTERS‘ CONTRIBUTION

• Minimum 20% of the post issue capital

• Requirement for Offer for Sale: Minimum 20% of postissue capital

• Exception:Equity acquired during preceding three years shall notbe considered for computation of promoterscontribution if it is:

o Acquired for consideration other than casho Resulting from a bonus issue out of revaluation

reserve





PRE-ISSUE OBLIGATIONS

1. Exercising of due-diligence

- Reasonable investigation to find all facts that would be of

material interest to an investor or acquirer of a business.- Full understanding ofDebtsPending and potential lawsuitsLeases

WarrantiesLong-term customer agreementsEmployment contractsCompensation arrangementsLitigations against the Company and/or Promoters




3. Documents to be submitted - a. Memorandum of Understanding

Lead Manager has to enter into an MoU with the issuer specifying their mutual rights,liabilities and obligations relating to the issue.

b. Inter-se allocation of responsibility

An agreement between multiple Lead Managers to an issue.c. Due-diligence certificate

Inclusion of all suggestions and observations made by the Company Law Board inthe Offer Document.

4. List of promoters - A list of persons who constitute the promoters group and their individual share

holdings.

Size of the Issue Fees Rs.

Up to Rs.5 crores 10,000Rs.5 cr. To Rs.10 cr. 15,000

Rs.10 cr. To Rs.50 cr 25,000

Rs.50 cr. To Rs.100 cr 50,000

Rs.100 cr. To Rs.500 cr. 2,50,000

Above Rs.500 cr. 5,00,000

2. Payment of Requisite Fee




Role in the pre-issue process :

- To maintain a standard of ―Due Diligence‖ - To draft and design Offer Document, Prospectus, statutory

advertisements.- To ensure compliance with stipulated requirements and completion of

prescribed formalities with the Stock Exchanges, RoC and SEBI.• The Lead Merchant Banker shall not act as a Registrar to an issue in

which it is also handling the post issue responsibilities.

Size of the Issue No. of Lead Managers

Less than Rs. 50 crores 2

Rs.50 crores to Rs.100 crores 3



Above Rs.400 crores 5 or more

5. Appointment of intermediaries

BRLM (Book Running Lead Manager) – A Merchant Bankerpossessing a valid SEBI registration.





b. Registrar – He provides administrative support to the

issue process.

Functions:

• To make sure that the amount of shares outstanding in

the market matches the amount of shares authorized bythe company.• To finalize the list of eligible allottees after deleting the

invalid applications.• To ensure that the corporate action for crediting of

shares to the demat accounts of the applicants is doneand the dispatch of refund orders to those applicable aresent.

• To coordinate with the Lead Manager for follow-upactivities.

• E.g. Karvy Consultants.

PRE ISSUE OBLIGATIONS



c. Bankers to the issue

They open the Share Application Money Account(Escrow A/c) of the company. All the issue proceeds aretransferred only to this a/c. the co. cannot withdraw themoney from this a/c. till the entire process of allotmentand listing is completed.

• Bankers to the Issue are appointed in all the mandatorycollection centers.

• They help to get quick estimates of collection andadvising the issuer about closure of the issue.

• E.g. SBI, Kotak Mahindra Bank.




d. Underwriter to the issue.

- ―Underwriting is a contract wherein the underwriter(usually a merchant bank, broker or FI) agrees topurchase a certain number of shares in the event ofunder subscription of the issue.‖

- E.g. DSP Merrill Lynch, Enam Financial Consultants.

e. Syndicate Members

- The BRLM may appoint those intermediaries who areregistered with the Board and who are permitted to carry

on activity as an ‗Underwriter‘ as syndicate members.- The syndicate members are mainly appointed to collectand enter the bid forms in a book built issue.




f. Depository- Holds the security in electronic form on behalf of the

investor.

- Provides services related to transactions in securities.

- E.g. NSDL, CDSL

g. Brokers to the issue

- Any member of any recognized stock exchange can beappointed as a broker.

- Offers marketing support to the issue.

- Disseminates information to the investors about theissue.




h. Auditors to the issue

- The regular auditors of the co. can act in this capacity.

- They have to submit the Auditors‘ Report along with the

financial statements for inclusion in the Prospectus.




• Book Running Lead Managers

• 1. SBI Capital Markets Ltd.2. IL&FS Investsmart Ltd.

3. ICICI Securities Ltd.

• Registrar to the issue• 1. Karvy Computershare Pvt. Ltd.

Syndicate Members

• 1. ICICI Brokerage Ltd.

2. Kotak Securities Ltd.



Statement of Inter se allocation

of Responsibilities among Lead Managers

S. N Activities Responsibilities Co-ordintors

1. Capital structuring with the relative components andformalities such as type of instruments etc.

SBI CAPS SBI CAPS

2. Due diligence of the Company‘s operations/

management/ business plans/ legal etc.SBI CAPS SBI CAPS

3. Drafting and Design of the offer document and ofstatutory advertisement including memorandum

containing salient features of the Prospectus. The

designated Lead manager shall ensure compliance

With Stipulated requirements and completion of

prescribed formalities with the Stock Exchanges

Registrar of Companies and SEBI.

SBI CAPS SBI CAPS

4. Drafting and approval of Issue and statutory publicitymaterial, etc.

SBI CAPS SBI CAPS

5. Drafting and approval of all corporate advertisement,brochure and other

SBI CAPS SBI CAPS



Statement of Inter se allocationof Responsibilities among Lead Managers

S. N Activities Responsibilities Co-ordintors

6. Appointment of Registrar, Bankers and Advertising Agency

SBI CAPS SBI CAPS

7. Appointment of Printers SBI CAPS SBI CAPS

8.Marketing of the Issue, which will cover inter alia,·

•Formulating marketing strategies, preparation ofpublicity budget·

• Finalize media & PR strategy·

• Finalize centres for holding conferences forbrokers, press, etc.·

• Finalize collection centres·• Follow-up on distribution of publicity and issuematerial including application forms, RHP anddeciding on the quantum of the issue material.

SBI CAPS, IIL,

and ISEC

SBI CAPS

9. Finalizing the list of QIBs. Divisions of QIBs forone to one meetings, road show related activities

and order procurement

SBI CAPS, IIL,

and ISEC

ISEC

Statement of Inter se allocation of Responsibilities among



Statement of Inter se allocation of Responsibilities amongLead ManagersS. N Activities Responsibilities Co-ordintors

10. Finalizing pricing and allocation. SBI CAPS, IIL,

and ISEC

ISEC

11. Post bidding activities including management ofEscrow Accounts, co-ordination with Registrar andBanks, Refund to Bidders, etc.

SBI CAPS SBI CAPS

12. The Post-issue activities of the Issue will involve

essential follow-up steps, finalization of basis ofallotment/weeding out of multiple application,etc.

Major ones are :

• Listing of securities

• Dispatch of certificates and refunds

• The various agencies connected with the work

such as Registrars to the issue• Bankers to the issue and the bank handling

refund business

Lead Manager shall be responsible for ensuring

that these agencies fulfil their functions and

enable him to discharge this responsibilityThrough suitable agreements with the issuer co.

SBI CAPS SBI CAPS



6. Registration of the Offer Document

a. 10 copies of the Draft Prospectus have to be filed with SEBI. Thedraft prospectus should be accompanied by

Due Diligence Certificate from BRLM. Statement of Inter-se allocation of responsibility

Copy of Memorandum of Understanding

b. SEBI makes a copy of the Draft Prospectus available to the publicon its website sebi.gov.in

c. SEBI reserves the right to make amendments to the DraftProspectus. This must be done within 21 days from the date offiling. Any person can make a complaint to SEBI about any non-disclosure or mis-statements in the draft prospectus. After the dueamendments have been made by the BRLM, a No ComplaintCertificate is issued.




7. Mandatory Collection Centers

The minimum no. of collection centers for an issue ofcapital shall be

- The 4 metropolitan cities viz. Mumbai, Delhi, Kolkata,Chennai.

- At all such places where stock exchanges are located, inthe region where the regd. office of the co. is situated.

8. Authorized Collecting Agents

- Shall collect applications along with application money.

- Deposit application in the Share Application Money Account of the designated banker to the issue.






PRE ISSUE OBLIGATIONS (cont..)

IPO Grading

• Not mandatory

• But if opted:It is mandatory for the issuer to disclose allgrades obtained by it, including unaccepted grades,In the prospectus and abridged prospectus

• CRISIL, ICRA, etc. engaged in rating

S ll IPO h b d



Small IPOs may have to be rated

• BSE is learnt to be insisting that some smallercompanies get their issues rated. This was indicatedby merchant bankers handling the public issues ofsome small companies

• To check the fly-by-night companies

• The problem facing small companies is that there isno mechanism of credit enhancement, which makesit difficult for the issuer to improve on the rating.



• CRISIL announced 2/5 grade for twocompanies — Shree Ashtavinayak CineVision and Minar International

• This grade indicates below averagefundamentals of these two IPOs.



PROSPECTUS

“It is any document described or issued as

a prospectus and includes any notice, circular,

advertisement or other document inviting

deposits from the public or inviting offers fromthe public for the subscription or purchase of

any shares in, or debentures of, a body

corporate.”

SEBI Gu idel ines



CONTENTS OF PROSPECTUS

• General Information

- It consists of name , address, telephone no, fax no and email

address.

- Credit rating (in case of debenture issue)

• Capital Structure of the company

- Authorized issue and subscribed no. of instruments.

- Size of present issue.

a. Promoters contributionb. Firm allotment

c. Reservation for specified categories

d. Net offer to public



• Terms of Present Issue

- Authority of the issue

- Terms of payment

- Procedure and time for allotment and issue of certificates/refund

orders

• Particulars of the Issue

- Purpose of the Issue

- Project cost

- Means of financing

- Name of appraising agency if any

- Name of monitoring agency if any



• Company, Management and Project

- Promoters and their background

- Location of the project

- Infrastructure facilities

- Nature of products and services

• Financial information of Group Companies- Balance sheet data

- Profit and loss data

- Stock market quotation.



• Basis of Issue Price

- Weighted Avg. Return on Net Worth in the last 3 yrs.

- In case of a new issue, EPS pre issue, P/E pre-issue

- Comparison of all accounting ratios with the companies of

comparable size.

• Outstanding Litigations or defaults- Whether all payments / refunds debentures, deposits of banks,

institutional dues etc. have been paid up to date.



DISCLOSURES IN THE OFFER

DOCUMENT

• The risk factor shall appear in offer document asinternal risk and external risk.

• Whether the company proposes to raise fund for a

purpose like fixed assets creation and/or for rotationsuch as working capital etc. shall be disclosed clearly inthe offer document.

• One standard financial unit shall be used in the offer

document. (e.g. lakhs , thousands)

• The issuer company may include in the offer document,the financial statements prepared on the basis of morethan one accounting standards.



OBJECTS of the issue

Particulars Rs. Mn

Setting up of infrastructure facility for Development Centre at Hyderabad 772.65

Setting up of infrastructure facility for Back up/ Disaster Recovery Centreat Bangalore

127.87

Establishing Overseas Marketing Offices 40.60

Expansion & upgradation of existing R & D facilities 220.25

Fund regional/global expansion & acquire & invest in strategic business 200.00

Meet working Capital requirement 284.48

Contingencies 104.11

General corporate purpose @

@ to be finalised after the net proceeds of the issue



Internal RISK FACTORS

• A complaint has been filed by the RoC, Andhra Pradesh against the Companyunder section 629A of the Companies Act, 1956 (the Act) for alleged non-compliance with the provisions of Sections 63, 68 and 628 of the Act

• The shares of Prism Foods Limited now known as Tanla Solutions Limitedwere under suspension from trading between December 08, 1999 and April 27,2000 while the Company was under the management of the former promoters.

• The ability to attract and retain skilled IT personnel,is important. Any inabilityon its part to attract the skilled personnel, may lead to a decline in the qualityof products and services offered, which could adversely affect its business andfinancial performance.

• Its business and the businesses of many of its customers are subject toregulation in the countries in which it operate.

• Top five customers contributed around 49% of its total consolidated revenuesof around Rs 871 million for the half year ended September 30, 2006.



• Changes in technology may render our current technologiesobsolete or require us to make substantial new investments toseek to remain competitive.

• The valuations in the emerging internet/telecom industry arecurrently high and may not be sustainedin the future.

• We have not yet indentified the precise location of the premisesin Bangalore for the establishment of our backup/ disasterrecovery centre.

• The Company may fail in its endeavours to sell offshoredevelopment services to content providers,and mobile networkoperators including MVNOs.

• Any failures of the international mobile telecommunicationnetwork or the internet may reduce the use of the Company’sservices.

Internal RISK FACTORS



• Our tax liability may increase and our profitability maybe reduced in the event of termination or reduction ofour tax incentives.

• An economic downturn may adversely impact our

operating results.

• Global competition is expected to intensify in thetelecom technology solutions markets.

• A significant change in the regulatory environment

• Revenues largely from the provision of products andservices that facilitate SMS usage by mobile telephone

subscribers.

external RISK FACTORS



WHAT IS RED HERRING PROSPECTUS ?

• A preliminary prospectus issued by stock-underwriting

firms to measure investor interest in a prospective stock

offering. The document must contain a warning, printed in

red, that the document does not contain all the information

normally required by the stock exchange authority, and thatsome parts may be changed before the final prospectus is

issued to the public.

• It is understood that the document will be modified

significantly before the final prospectus is published.



• It is a prospectus which does not have details ofeither price or number of shares being offered or the

amount of issue.

• Therefore, in case the price is not disclosed, thenumber of shares and the upper and lower price

bands have to be disclosed.

• On the other hand, an issuer can state the issuesize and the number of shares are determined later.

• The offer document filed with RoC on completion ofthe bidding process with the details of the final priceincluded is called a prospectus.



CONTENTS OF RED HERRING PROSPECTUS

• Definitions & Abbreviations• Risk Factors & associated Management perceptions

• PART I – Capital Structure

– Terms & Particulars of Current Issue – Company Details

– Basis of Issue Price

– Any Litigations

• PART II

– Financial Information – Main provisions of AoA of Company

• PART III – Declaration



DISTINGUISH BETWEEN :

RED HERRINGDOCUMENT

FINAL PROSPECTUS

Offered to potential investorsBEFORE security is priced orfinalized

Offered to potential investors AFTER security is priced orfinalized

Called so because of thedisclaimer printed in red

Also referred to as Blackbecause of no such disclaimer

Mainly does not contain theissue size and price

Contains all informationincluding issue size & price

Subject to modifications beforefinalizing with SEBI

Is the final document, cannot bechanged



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Rampant Bonus Issuances Make Cost Of A Single

Share A Few Paise For Many

• Promoters make bonus issues just a few months before IPO

• Parsvnath made 2 bonus issues in 6 months before IPO

• The average acquisition cost per share for Mr Pradeep Jain was amere 10 paise compared to the IPO price of Rs 300

• The promoters of Sun TV, for instance, gave themselves 30 bonusshares for every one share held just before the IPO

• In majority of the IPO‘s the promoters‘ gains were more than 50times or 5,000%. In a few instances though, the gains have been ashigh as 1,000 times or 1,00,000%. The best being a whopping gainof 17,124 times or 17,12,400%.

The Darker Side



The Darker Side• Investors have lost wealth to the tune of Rs 14,000

crore in about 60 companies listed in the past one

year as their share prices have fallen substantiallysince listing

• RPL, GTL Infrastructure, Tantia Construction, Inox

Leisure, ABG Shipyard, Plethico Pharmaceuticals,Royal Orchid and PVR are few examples ofcompanies whose stocks have lost ground but stillquoting above offer prices this phenomenon.

• As many as 30 of the 60 new listings are currentlytrading below their respective offer prices

Company Price %Gain/loss



Company Price %Gain/loss

Issue Current

Deccan Aviation 148 132.55 -10.44

Solar Explosives 190 130.6 -31.26 Vikash Metal & Power 20 12.25 -38.75

Richa Knits 30 18.1 -39.67

Alps Industries 120 72.05 -39.96

Emkay Shares & Stock 120 72.05 -39.96 Jet Airways 1100 606.3 -44.88

Dynemic Products 35 19 -45.71

Powersoft Global Solutions 22 10.69 -51.41

Visa Steel 57 27.55 -51.67 Sakuma Exports 50 18.6 -62.8

Sree Sakthi Paper Mills 30 10.99 -63.37

Compulink Systems 60 17.2 -71.33

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PRICING

• Companies are now allowed to freely price their issuesas per the latest SEBI guidelines.

• Price Band – It is a range and not an individual value.The lower limit of the price band is known as the floor

price and the upper limit is known as the cap price. Theissuer can mention a price band of 20% (cap in the priceband should not exceed 20% of the floor price).

• Cut-off price – it is the price ultimately decided by theBRLM and Investment Bankers. Assuming an individualinvestor does not want to go through the hassle of thebidding process, he may simply write in the applicationform ―cut-off‖.



• Cut-off amount = no. of shares x cap price.

• The final pricing tends to focus on current market conditions and

specific demand for the offering at alternative price levels from theinvestors.

Minimum Subscription of 90% within 60 days



Denomination of Shares

• If issue price is more than Rs. 500 per share, the facevalue can be between Re.1 to Rs.10/- per share

• If issue price is less than Rs. 500 per share, the face valuehas to be Rs. 10/- per share

• Disclosure about the face value of shares should bemade in the advertisement, offer documents and inapplication forms in identical font size as that of issueprice or price band



TANLA



Qualitative factors

• Strength in established and proven telecomproducts and solutions

• Leading telecom companies as clients in

India as well as overseas

• Flexib le pr ic ing models

• End-to-end of fer ings

• Focus on R&D

Quantitative Factors



Year (Consolidated) EPS (Rs.) Weight

FY04 1.216 1FY05 2.56 2

FY06 8.87 3

Weighted Average 5.39

HY06 (end Sept. 30) 10.47

Year (Unconsolidated) EPS (Rs.) Weight

FY04 1.216 1

FY05 1.78 2

FY06 754 3

Weighted Average 4.57HY06 (end Sept. 30) 6.65

EPS of face value of Rs. 2/- each

Q



2. P/E in relation to Issue Price = 35.15

Issue Price = Rs. 265

Pre-Issue EPS = 7.54

P/E = Issue Price / EPS

RONW has been calculated as per the

following formula:• (Net Profit after tax)/(Net Worth excluding

revaluation reserve at the end of the year)



Year (Consolidated) RONW (%) Weight

FY04 51.38 1

FY05 44.77 2

FY06 69.51 3


HY06 (end Sept. 30) 46.87

Year (Unconsolidated) RONW (%) Weight

FY04 51.38 1

FY05 35.76 2

FY06 70.17 3


HY06 (end Sept. 30) 38.60

4 Minimum Return on total Net Worth after the Issue required toonso a e as s - 0



4. Minimum Return on total Net Worth after the Issue required tomaintain pre-Issue EPS of 8.87 is 94.99%

EPS ( Pre-Issue ) = 8.87

No. of shares ( Pre- Issue ) = 34.115 millionEquity Share Cap = Rs. 68.230 millionNo. of shares ( IPO ) = 15.885 millionEquity Share Cap = Rs. 31.770million

Total No. of shares = Rs. 50 million

Total Equity Share Cap = Rs. 100 million

Reserves & Surplus = Rs. 366.88 million

• EPS = PAT/ No. of shares

• EPS = New PAT / New no. of shares8.87 = New PAT / 50 mn

New PAT = 443.5 mnRONW (New) = 443.5 / 466.8

= 94.99%

HY 06



4. Minimum Return on total Net Worth after the Issue required to maintain pre-Issue EPS of 10.47 is 62.80%

EPS ( Pre-Issue ) = 10.47No. of shares ( Pre- Issue ) = 34.115 millionEquity Share Cap = Rs. 68.230 millionNo. of shares ( IPO ) = 15.885 millionEquity Share Cap = Rs. 31.770millionTotal No. of shares (Post Issue) = Rs. 50 millionEquity Share Cap (Post Issue) = Rs. 100 million



• EPS = New PAT / New no. of shares10.47 = New PAT / 50 mn

New PAT = 523.5 mnRONW (New) = 523.5 / 833.593

= 62.80%



ANALYSIS / outlook

There are no comparable listed companies in India doing the same business asthat of Tanla.

Even though Tanla Solutions has shown 300%+ consolidated topline growthin 1 HY07 and 200% growth at bottomline we have assumed a modest

200% topline growth in our estimates for the full year. Based on this we have arrived At FY07 E EPS of Rs. 15.7 on diluted equity base of 50 mn shares

On this diluted EPS the stock is priced at 14.7x at the lower band and 16.9x atthe upper band.

We recommend to subscribe



Consolidated NAV (Rs.)

As on March 31, 2006 12.75

As on September 30, 2006 22.33

After issue 15.43

5. Net Asset Value (NAV) per Equity Share -

NAV has been calculated as per the following formula:(Net worth excluding revaluation reserve and preference share capital at the end of the

year)/(Total number of equity shares)

6. Comparison with Industry Peers -

The Company is in the business of providing telecom products and services, such asSMSC, Aggregator Services and Offshore development relating to the same. There areno comparable listed companies in India. Hence, comparison with industry peers is notapplicable.



Year EPS (Rs.) WeightFY04 14.84 1

FY05 17.34 2

FY06 12.23 3


EPS of face value of Rs. 10/- each

Quantitative Factors



2. P/E in relation to Issue Price = 2.125Issue Price = Rs. 26

Pre-Issue EPS = 12.23

P/E = Issue Price / EPS

RONW has been calculated as per the following formula:• (Net Profit after tax)/(Net Worth excluding revaluation reserve at the end

of the year)

Year (Unconsolidated) RONW (%) Weight

FY04 23.11 1

FY05 41.22 2

FY06 52.74 3




4. Minimum Return on total Net Worth after the Issue required to maintain pre-Issue EPS of 12.23 is

EPS ( Pre-Issue ) = 12.23No. of shares ( Pre- Issue ) = 76.132 millionEquity Share Cap = Rs. 761.32 millionNo. of shares ( IPO ) = 71.5 millionEquity Share Cap = Rs. 715 million

Total No. of shares = Rs. 147.632 million

Total Equity Share Cap = Rs. 1,476.32 million



• EPS = New PAT / New no. of shares12.23 = New PAT / 147.632 mn

New PAT = 1805.539 mnRONW (New) = 18055.39/

= 69.149%



Consolidated NAV (Rs.)

As on March 31, 2006 18.30

After issue 22.0

5. Net Asset Value (NAV) per Equity Share -

NAV has been calculated as per the following formula:(Net worth excluding revaluation reserve and preference share capital at the end of

the year)/(Total number of equity shares)



EPS P/E ROANW% BV/ Sh M P P/BV

DCB 12.23 2.125 52.74 18.3 26* 1.42

Bank of Rajasthan 2.8 13.6 4.6 31.7 37.05 1.16

IndusInd Bank Ltd 0.2 - 27 29.8 43.4 1.45

Jammu & Kashmir Bank Ltd 35.3 11.1 10.2 371.1 574.65 1.54

Karur Vyasa Bank Ltd 37.9 7.3 16.6 242.4 286.45 1.18

Karnataka Bank 14.1 8 16.9 91.6 127.55 1.39

Yes Bank Ltd 2.3 39.9 14.1 21.2 142.05 6.70

* Issue price

Market price (MP) as on 16th Dec 06 - BSE

6. Comparison with Industry Peers -



POST ISSUE OBLIGATIONS

1. Monitoring Reports – It starts with a closure of thesubscription lists. Within 3 days of the closure of theissue, the invt. banker is required to inform SEBIwhether the issue has been subscribed to at least 90%

of the total amt. in his Monitoring Report.

2. Processing of Applications – The Registrar to the issuewould have to determine the no. of successfulapplicants, after the receipt of the application formsfrom the collecting banks. He would have to scrutinizeall applications, to check for multiple applications &rejections; also to see whether the applications arecomplete in all respects.




• Underwriters

o The lead Merchant Banker satisfies himself that theissue is fully subscribed before announcing closure ofthe issue.

o Lead Merchant Banker ensures that the underwriters

honor their commitments within 60 days from the dateof closure of the issue.

o If the issue is not subscribed upto 90%, the underwritersshall have to bring-in the shortfall within 60 days of the

closure of the issue.

o If an issue is not subscribed to 100%, the underwritersare obligated to take-up the unsubscribed portion.




Bankers to an issue

The Lead Merchant Banker ensures that moneys received pursuant to the issue and kept in a separate

bank

It is released by the said bank only after the listing permission has been obtained from the stock

exchanges.

• Advertisement

o Lead Merchant Banker ensures the release ofadvertisement within 10 days of completion of various

activities in 1 English National Daily, 1 Hindi Nationalpaper and a Regional paper

o Closure of issue





• Proportionate Allotment Procedure:

o Allotment shall be on proportionate basis within thespecified categories,

o It is rounded off to the nearest integer




METHOD OF PROPORTIONATE BASIS OF ALLOTMENT

• Bidders categorized acc. to no. of equity shares appliedfor.

• Total equity shares allotted to each category = (No. ofbidders in category x no. of equity shares applied for byeach bidder) x inverse of over-subscription ratio.

• No. of equity shares allotted to successful bidder = total

number of Equity Shares applied for by each Bidder inthat category x the inverse of the over-subscription ratio.

ILLUSTRATION



TOTAL SHARES OFFERED @rs.600 10crore

Shares on offer for retail category 2.5crore

The total issue was oversubscribed by 4 timesRetail category 8.25 times

Minimum application bid is 9 shares and multiple thereof

NO. NAME No. of shares

applied

Eligible to be alloted

1 A 81 81/8.25=9.82

Rounded off to 10shares

2 B 72 72/8.25=8.73

Rounded off to

9 shares

3 C 63 63/8.25=7.63

ISSUE DETAILS



Sr no Particulars Issue details

1 Issue size 200 crores equity shares

2 Allocation to QIB(50%) 100 crores equityshares

Of which

a) reservation to mf(5%) 5 crores equity shares

b)balance for all QIBincluding MF s

95 crores equity shares

3 No of QIB applicants 10

4 No of shares applied for 500 crores equity shares



DETAILS OF ALLOTMENT

TOQIBBIDDERS/APPLICANTS



Type of

QIB

bidders

Shares

bid for Allocation of 5

crores shares to

MFs

proportionately

Allocation ofBalance 95 crores

shares to

QIBs proportionately

Aggregate

allocation

to MFs

(I) (II) (III) (IV) (V)

A1 50 0 9.60 0

A2 20 0 3.84 0

A3 130 0 24.95 0

A4 50 0 9.60 0

A5 50 0 9.60 0

MF1 40 1 7.48 8.48

MF2 40 1 7.48 8.48

MF3

80

2

14.97

16.97

MF4 20 0.5 3.74 4.24

MF5 20 0.5 3.74 4.24

500 5 95 42.42

TOQIBBIDDERS/APPLICANTS (No. of equity shares in crores)

SUMMARY



• Due Diligence

• Preparation of theProspectus /InformationMemorandum

• Arranging FirmAllotments

• Statutory approvals

• Liaising with Ratingagencies / DebentureTrustee / StockExchange

• Press and Brokerconferences

• IPO Funding

• Printing & Distributionstationery

• Roadshows

• Press

• Brokers

• Institutional Investors

• Retail Investors

• One to One meets

• Analyst meets

• NRI Investors

• Investor identification

• Research Reports

• Consortium formation

• Legal due diligence

• Documentation andDisbursement

• Finalizing Basis ofAllotment

• Documentationwith depositories

• Credit intoinvestor accounts

• Listing approvalsfrom the stock

exchanges

• Post issueresearch support

PRE ISSUE MARKETING POST ISSUE



BOOK BUILDING



BOOK BUILDING

“ A process undertaken by which a demand forthe securities proposed to be issued by a bodycorporate is elicited and built up and the price for

such securities is assessed for the determination of

the quantum of such securities to be issued bymeans of a notice, circular, advertisement,document or information memoranda or offerdocument.”

SEBI Guidelines

• It refers to the collection of bids from investors,hi h i b d i di ti i



which is based on an indicative price range.

• Investors may be Retail Bidders, Non-InstitutionalBidders or Qualified Institutional Bidders (QIBs)

• Bids are collected at various prices, which are above

or equal to the floor price.

• The offer/issue price is then determined after the bidclosing date based on certain evaluation criteria.

• The basic motto of book building is that the marketknows the best.

FIXED PRICE ISSUE VS BOOK BUILDING



FIXED PRICE ISSUE VS. BOOK BUILDING

Features Fixed Price Process Book Building Process

Pricing

Price at which the securities

are offered/allotted is known

in advance to the investor.

Price at which securities will be

offered/allotted is not known in

advance to the investor. Only an

indicative price range is known.

Demand

Demand for the securities

offered is known only after

the closure of the issue

Demand for the securities offered

can be known everyday as the

book is built.

Payment

Payment made as and when

the calls are made.

Payment at the time of

subscription.

TYPES OF BOOK BUILDING



TYPES OF BOOK BUILDING

• 75% Book Building process

In the 75% book building exercise, 75% of the IPO will bethrough book building and 25% will be through a Fixed Priceissue.

• 100% Book Building process

Option available only if the issue size is above Rs. 25 crores.

Book building is for the portion other than the promoters'

contribution.

75 % BOOK BUILDING



75 % BOOK BUILDING

• The option of book-building shall be available to all bodycorporate which are otherwise eligible to make an issue ofcapital to the public.

• The issuer company shall have an option of either reserving

the securities for firm allotment or issuing the securitiesthrough book-building process.

• The requirement of minimum 25% of the securities to be

offered to the public shall also be applicable

• In case the book-building option is availed of, underwritingshall be mandatory to the extent of the net offer to the public.



• On receipt of the information, the Book Runner and theissuer company shall determine the price at which thesecurities shall be offered to the public.

• The issue price for the placement portion and offer to thepublic shall be the same.

• On determination of the issue price within two day,thereafter the prospectus shall be filed with the Registrarof Company.

• One day prior to the opening of the issue to the public,

Book Runner shall collect from the institutional buyersand the underwriters the application forms along with theapplication moneys to the extent of the securitiesproposed to be allotted to them / subscribed by them.

• The issuer company shall open two different accounts forll ti f li ti f th i t l t



collection of application moneys, one for the private placementportion and the other for the public subscription.

# Escrow Account :- Account opened with an Escrow CollectionBank and in whose favor the Bidder will issue Cheques or draftsin respect of the Bid Amount when submitting a Bid.

• Allotments for the private placement portion shall be made on

the second day from the closure of the issue.

• However, to ensure that the securities allotted under placementportion and public portion are pari passu in all respects, theissuer company may have one date of allotment which shall bethe deemed date of allotment for the issue of securities through

book building process.

100% BOOK BUILDING PROCESS



• Issue of capital shall be Rs.25 crores and above.

• Reservation or firm allotment to the extent of percentage specified inthese Guidelines shall not be made to categories other than thecategories mentioned below:

• Book Building shall be for the portion other than the promoterscontribution

(a) ‗permanent employees of the issuer company and in the case of anew company the permanent employees of the promotingcompanies';

(b) ‗shareholders of the promoting companies in the case of a newcompany and shareholders of group companies in the case of anexisting company‘ on a ‗firm allotment basis‘.



• The primary responsibility of building the book shall be that ofthe Lead Book Runner.

• The Book Runner's may appoint those intermediaries who areregistered with the Board and who are permitted to carry onactivity as an ‗Underwriter‘ as syndicate members.

• In case of an under subscription in an issue, the shortfall shallhave to be made good by the Book Runner's to the issue.



BOOK BUILDING PROCESS

1 Company plans an IPO via book building Route



1. Company plans an IPO via book building Route.

2. Appointment of Lead Managers/merchant bankers as a book runners

3. Preparation of a draft prospectus (containing all mandatory companydisclosers other than price)

4. Draft prospectus filed simultaneously with (SEBI)

- Any modification to be incorporated.

5. Applications from the public to bid.

- Advt. in not less than 3 newspapers

The advertisement shall also contain the following:

- The date of opening and closing of the bidding.- The names and addresses of the syndicate members as well as

the bidding terminals for accepting the bids.- The method and process of bidding.

6. Procedure for bidding:



1) Bid shall be open for at least 5 days.

2) Bidding shall be permitted only if an electronically linked transparentfacility is used.

3) The ‗syndicate members‘ shall be present at the bidding centers so

that at least one electronically linked computer terminal at all thebidding centers is available for the purpose of bidding.

4) The number of bidding centers shall not be less than thef f



number of mandatory collection centers specified in theseGuidelines.

5) Individual as well as institutional investors shall place their bidsonly through the ‗syndicate members‘ who shall have theright to vet the bids.

6) The investors shall have the right to revise their bids.

Revised Bid must only be made on that Revision Form.

1. Bid or the revise Bid should not be less than the FloorPrice or higher than the Cap Price.

2. Non-institutional and QIB Bidders can not bid at cut-offprice.

7. Price discovery begins through the bidding process.



1) The Lead Manager and the Underwriter play an important role in theprice determination of the issue.

2) The following accounting ratios may be given as the basisfor issue price:

- EPS, pre-issue, for the last three years

(as adjusted for changes in capital).

- P/E, pre-issue and comparison thereof with industry P/Ewhere available (giving the source from which industry P/Ehas been taken).

- Average return on net-worth in the last three years.

- Net-Asset Value per share based on last balance sheet.



3) On closure of the book, the quantum of sharesordered and the respective prices offered are known.

4) The price discovery is a function of demand at variousprices.

5) The book runner and the company conclude the

pricing and decide the allocation

8.Refund of application money with in 15 days.

9. Allotment of shares within 30 days.

10. Listing on the stock exchanges.

• Illustration:

• Book Building and Price Discovery



• Book Building and Price Discovery

Process

• Bidders can bid at any price within the priceband. For instance, assume a price band ofRs. 20 to Rs. 24 per share, issue size of

3,000 equity shares and receipt of five bidsfrom bidders. The illustrative book as shownbelow shows the demand for the shares of the

issuer company at various prices and iscollated from bids received from variousinvestors.

Invest Bid Bid Price Cumulative Subscripti



Invest

ors Bid

Qty

Bid Price

(Rs.) Cumulative

Quantity Subscripti

on

A 500 24 500 16.67%

B 1,000 23 1500 50.00%

C 1,500 22 3,000 100.00%

D 2,000 21 5,000 166.67%

E 2,500 20 7,500 250.00%

The Issuer, in consultation with the BRLMs, will finalise the issue price at or below such cut-offprice, i.e., at or below Rs. 22. All bids at or above this issue price and cut-off bids are valid bidsand are considered for allocation in the respective categories.

LISTING OF THE ISSUE



LISTING OF THE ISSUE

• Company executes a Listing Agreement with the StockExchanges before formal trading can begin. The Listing

Agreement requires the company to make certaindisclosures and perform certain deeds.

• The information disclosures relate to Annual Reports,periodic Financial Statements, Dividends, Rights Issue,bonus shares and other relevant information deemed

essential for shareholders.

QUALIFICATION FOR LISTING ON NSE



1. Paid up capital

- Paid up capital of the applicant should not be less than10 crores.

2. Three yrs background of the;

a) The applicant

b) The promoters/promoting company

3. Has not been offered to the Board for Industrial andFinancial Reconstruction.

4. The net worth of the company has not been wiped out.

5. The company has not received any winding up petitionby the court.

6. Track record of the directors of the company.

LISTING PROCEDURE



LISTING PROCEDURE

• Initial discussions - Authorized persons of the concerned issuer should hold discussionswith NSE personnel regarding various requirements to be fulfilled bythe issuer.

• The approval of Memorandum and Articles of Association should be

submitted by the issuing company to the stock exchange.

• Approval of draft prospectus -Issuer shall file draft prospectus with the NSE. In case NSE is notthe regional stock exchange, then the draft prospectus should befiled simultaneously with the NSE, when the same is filed with the

Regional Stock Exchange pertaining to the issue, for perusal ofNSE.

• Submission of application – Issuers desiring to list new securities on

the NSE shall make an application for admission of their securitiest d li th NSE i th f ib d i thi d



to dealings on the NSE in the forms prescribed in this regard.

• The listing fees depend on the paid up share capital of your

company

Particulars Amount ( Rs. )

Initial Listing Fees 7,500

Annual Listing FeesCompanies with paid up share and/or debenture capital:Of Rs.1 crore 4,200

Above Rs.1 crore and up to Rs.5 crores 8,400 Above Rs.5 crores and up to Rs.10 crores 14,000 Above Rs.10 crores and up to Rs.20 crores 8,000

Above Rs.20 crores and up to Rs.50 crores 42,000 Above Rs.50 crores 70,000

Companies which have a paid up capital of more than Rs. 50 crores will pay additionallisting fees of Rs. 1400 for every increase of Rs. 5 crores or part thereof in the paid upshare/debenture capital

Indicative Time Schedule

Activities Responsibility Date



1 Finalize Fund Raising & related matters Company/Investment Banker

X - 30

2 Board meeting for Fund Raising/Appointment of

Merchant Bankers

Company X - 30

3 Company to provide Information for Due Diligence/Offer Document preparation to Inst Banker

Company X - 30

4 Receive Appraisal report Company X - 25

5 To keep first draft of Project Report / Offer Document

ready.

Investment Banker X - 5

6 To finalize Project Report/ Offer document Investment Banker X

7 Appointment of Registrars, Printers, Bankers ,Underwriters and Ad Agency to the issue

Investment Banker& Company

X

8 Signing of Annual accounts for March 2006 Company/Auditors X

9 Receive Auditors report & tax Benefits Company/Auditors X+10

10 Due Diligence & Finalize Offer Document Investment Banker X + 12

11 Receive solicitors comments on draft offer document Investment Banker X + 22

12 File Draft Prospectus with Securities and Exchange Boardof India/ Stock Exchanges

Investment Banker X + 25

Activities Responsibility Date

13 Receive Stock exchange comments/ approval on Offer Investment Banker X + 60



13 Receive Stock exchange comments/ approval on OfferDocument

Investment Banker X + 60

14 Freeze marketing plan Investment Banker /Company / Ad Agency

X + 70

15 Receives SEBI's final clearance Investment Banker X + 80

16 Board meeting and filing prospectus with ROC Company X + 100

17 Receive clearance from Registrar of companies Company / InvestmentBanker

X + 101

18 Printing of Prospectus and Application Forms Investment Banker /

Printer

X + 102

19 Circulation of Prospectus and Application Forms, Marketing ofIssue, Hold Press and Broker conference/ Release of statutoryadvertisements

Investment Banker /Company / Ad Agency

X + 107

20 Road Shows complete Investment Banker /Company / Ad Agency

X + 110

21 Public issue opens Investment Banker X + 125

22 Public issue closes Investment Banker X + 132

23 Finalize Basis of Allotment/ Credit of shares into demataccounts/ Listing of shares on stock exchanges

Investment Banker /Company / Registrar

X + 142

24 File Reports with SEBI Investment Banker X + 150



IPO Financing



IPO Financing

• IPO financing provides leverage to makelarge size applications in public issues

• IPO financing is nothing but marginfinancing in primary market

• The financier finances the remainingamount

• If the margin for a particular IPO is set at 20%, theapplication size would be four times bigger than the



pp ggapplication that could have been made by the investorwith his/her own money

Own Investment Through IPOFinancing

Investor‘s Funds (Rs.) 10,00,000 10,00,000

Financing (Rs.)* 0 40,00,000

Application Size (Rs.) 10,00,000 50,00,000

No. of shares applied (Issue Price Rs.100/each)

10,000 50,000

No. of times oversubscribed 10 10

Allotment (No. of shares) 1000 5000

Interest @ 15% (3 months) Nil 1,50,000

Total cost of acquisition per share 100 130

Price after 3 months 175 175

Gains 75000 135000

• Most of the issues have received very good over-subscription andshares have yielded handsome post-listing gains. The higher allotmentsthrough IPO financing route have added significantly to the investors‘



g g g ywealth

• Like any other leveraging tool, IPO financing also has its drawbacksand an investor need to take a calculated call. The superior returnsthrough IPO financing would depend completely on the premise that thelisting price or post listing price of the scrip is higher than the acquisitioncost of shares allotted in an IPO

• over subscription allotment acquisition cost per share

• So, in case a public issue gets huge over subscription, theacquisition cost can be really high leaving little room forappreciation

• Also, in case a public issue is not priced attractively, thesame can change the entire dynamics leading to financialloss

GREY MARKET

G k t i th ffi i l t di i



• Grey market is the unofficial trading in acompany‘s share before it starts trading on the

stock exchange after an IPO

• Before the issue opens for trading, a buyeragrees to buy certain shares of the IPO at afixed price from some other party

• This price is based on the likely opening price

• Participants of grey market

GUIDELINES ON ADVERTISEMENT



• Truthful, clear, concise matter and understandablelanguage.

• Statements considered misleading

• Should not use celebrities, models, fictional characters,

landmarks or caricatures• Not to appear in form of „crawlers‟

• In case of Television ads

o Risk factors should not be scrolled

o Advise to refer to Red Herring Prospectus



• Financial data for past three years• Print size not to be less than 7

• Compulsory mention of risk factors

• No advertisement regarding subscription status during

period of subscription.• No corporate advertisement of issuer company shall be

issued after 21 days of the filing of the offer documentwith the Board till the closure of the issue.

Green shoe option



p

• Green shoe option means an option of allocatingshares in excess of the shares included in thepublic issue

• Green Shoe‖ comes from the name of company― The Green Shoe Company Ltd‖

• Green Shoe is a clause contained in theunderwriting agreement of IPO

• It allows to buy upto 15% of additional shares atthe offering price as per the demand

• Shares purchased by a stabilizing agent

Green shoe option



• The equation appears to be : - – Total Shares 10000000

– Additional Share( 15% ) 1500000

– Net 11500000

– If after 30 days share price falls below theissue price stabilizing agent buys shares from

market and increased the price. – If share price is above issue price the

stabilizing agent has no role to play.

p

HOW DOES IT WORK?



ISSUER CO.

BRLMs

STABILISING AGENT

GSO BANK A/C GSO DEMAT A/C

SHARE PRICE < ISSUE PRICE

BUYS SHARES

PROMOTERS /LENDERS

Green shoe option



• From an investor‘s perspective, an issuewith green shoe option provides moreprobability of getting shares

• Post listing price may show relatively morestability as compared to market.

p



CASE STUDY

About Parsvanath Developers



• One of north India‘s leading real estatedevelopment companies

• Began operations by marketing real estateprojects and from 1990 began constructing

• Currently has a land bank of 108.7mn sq ftspread across 41 cities in 14 states.

• Of which it has 3.5mn sq ft development space

• Main business operations are in the north Indiaregion ; majority from NCR region.

p

Objectives



j

• The objects of the issue are to meet the cost ofdevelopment and construction of some of projects.

• PDL plans to raise proceeds through the public issue tofinance the its 11 projects, which would cost thecompany around Rs14.3bn.

• Rs10.9bn would be raised from the issue, the remainingportion of through internal accruals.

• Balance funds to be utilized for generalcorporate purposes including brand building

exercises and strengthening of our marketingcapabilities.

Issue Details Of Parsvnath Developers IPO



Issue Size 33,038,000 shares

Issue Type 100 % Book Building

Face Value Rs 10 each

Price Range Rs.250 to Rs.300

Market Lot multiples of 20 equity shares

Minimum Order Quantity 20 equity shares

IPO Market Timings 10.00 a.m. to 5.00 p.m.

Issue Period The offer is open from November 6 to 10 2006

Book Running Lead Managers



Registrar to the issue.

ISSUE STRUCTURE



Total IPO of 36325800 equity shares of Rs. 10 each

Issue shares of 33238000.

Equity shares

Green shoe option of 3087800 Equityshares

33038000 Equity shares 200000(employees)

Retail

9911400

HNI

3303800

QIBs

19822800

QUALIFIED INSTITUTIONAL BUYERS

Who can apply Public Financial Institutions ,etc.



Who can apply Public Financial Institutions ,etc.

Basis of allocation proportionate

Percentage of offer Size 60% of the net offer to Public

Number of Equity shares

available for allocation

19,822,800 Equity Shares

Minimum Bid Such number of Equity Shares Shares in multiples of 20 Equity Shares

so that

the Bid Amount exceeds

Rs 100,000

Maximum Bid Such number of EquityShares in multiples of 20

Equity Shares so that the Bid does not exceed the

Net Issue, subject to applicable limits

Allotment Mode Compulsory in Dematerialized mode

Margin money

10% of Bid Amount

NON-INSTITUTIONAL INVESTORS

Who can apply Resident Indian individuals, HUF, companies, corporate



bodies, NRI’s, Societies and trust, etc.

Basis of allocation Proportionate

Percentage of offer

Size

Minimum 10% of Net offer

Number of Equity

shares available for

allocation

Minimum of 3,303,800 equity shares.

Minimum Bid Such number of Equity Shares in multiples of 20 Equity

Shares so that the Bid Amount exceeds Rs 100,000

Maximum Bid Such number of Equity Shares in multiples of

20Equity Shares so that the Bid does not exceed the

Net Issue, subject to applicable limits


Margin money 100% of Bid Amount

RETAIL INDIVIDUAL

Who can apply Individuals Including NRI‟s and HUFs.



pp y g

Basis of allocation Proportionate.

Percentage of offer

Size

Minimum 30% of the net offer to Public.

No. of Eq.shares

available forallocation.

Minimum of 9,911,400 Equity Shares

equity shares.

Minimum Bid 20 equity shares

Maximum Bid Such number of Equity Shares in multiples of 20

Equity Shares so that the Bid Amount does notexceed Rs. 100,000


Margin money 100% of Bid Amount

Capital Structure



• Authorised Capital: 20,000,000 shares of Rs 10each

• Equity shares outstanding prior to issue:

148,370,400 shares• Equity shares outstanding after the issue:181,608,400 shares

• (Excluding the green shoe option)

• Equity shares outstanding after the issue:184,696,200• (Including the green shoe option)



SOURCE:INDIAINFOLINE



SOURCE:INDIAINFOLINE



Subscription details Times

Qualified institutional buyers 81.45

Non institutional investors 100.43

Retail individual investors 10.94

Employee Reservation 2.67

Total 61.84

GREENSHOE OPTION OF Parsvanth



• Stabilizing Agent (J M Morgan Stanley Private

L imited )

• Greenshoe lender (by Parasnath and Associates

Pvt L td, one of the promoters .)

• Greenshoe transferor

• GSO Bank account.

• GSO Demat account



• After allocation, the Stabilising Agent shall transfer the Over-All t t Sh f th GSO D t A t t th



Allotment Shares from the GSO Demat Account to therespective depository accounts of successful Bidders.

• For the purpose of purchasing the Equity Shares, theStabilizing Agent shall use the funds lying to the credit ofGSO Bank Account.

• If at the end of the Stabilisation Period, the number of shareslying in the GSO Demat Account are less than the borrowedshares, then Green Shoe Transferor shall (within five days ofthe end of the Stabilisation Period) transfer the deficit shares tothe GSO Demat Account.

• The Equity Shares transferred by the Green Shoe Transferor



shall be returned by the Stabilising Agent to the Green Shoe

Lenders in final settlement of Equity Shares borrowed, beingcredited into the GSO Demat Account.

• Upon the return of Equity Shares to the Green Shoe Lenders

the Stabilizing Agent shall close the GSO Demat Account.

PRIME RISK FACTORS

• Fluctuations in economic and market conditions



• Significant fluctuations in market value of undeveloped land,

developed land and constructed inventories• Periodic significant variations in revenues which are recognized

on basis of „Percentage of Completion Method‟ of accounting

on the based on our management‟s estimates of the project cost.

• Pending matters relating to alleged non-payment of stamp dutyand income tax against the company.

• Current projects‟ total saleable area based on management

estimates

• Results may be affected by highly fragmented and competitiveindustry and increased competitive pressure

PRIME RISK FACTORS

• failure to purchase any strategically located land might lead to



p y g y g

failure of the entire project.

• Necessary to sustain growth• Risk of withdrawal of certain tax benefits which are already

availed

• Risk of significant increases in prices or shortage of

building materials.• Delay in the completion of the project would result into

penalty

• Adjusting construction methods to different geographies

• Obtaining the necessary construction materials andlabour in sufficient amounts and on acceptable terms

• Obtaining necessary governmental approvals and thebuilding permits under unfamiliar regulatory regimes



building permits under unfamiliar regulatory regimes

• Attracting potential customers in a market in which we

do not have significant experience; and• Cost of hiring new employees and increased

infrastructure costs

• Loss of Key Managerial Personnel

• Risk in case of Third Party Contract• Changes in Regulatory Development Laws of SEZs

• No insurance cover for certain projects in the realestate business and construction business

•

Dependency various sub-contractors or specialistagencies to construct and develop projects.

SUMMARY OF THE Parsvanath IPO



• The cut-off price announced by Parsvanath for its

IPO was Rs. 300 per share.• Parsvanath share listed on Nov 30 2006• At the issue price of Rs 300, the size of the offering

amounts to Rs 991.14 crore. This includes the green

shoe option of Rs 92.63 crore.• The IPO was oversubscribed 61.84 times and over205.53 crore shares bids were received.

• The Parsvanath listing has added some Rs 100 billionto India's market capitalization, which stands at 500

billion.

Basis of allotment



Category No. of Applications

No. of EquityShares Applied For

Retail Investors 579,258 107,587,525

Non-InstitutionalInvestors 2,853 322,545,080

Qualified InstitutionalBuyers 433 1,613,238,080

Employee 404 538,940

Total 5,82,948 2,04,39,09,625

GLOBAL IPOs - GOOGLE



• The Google IPO : mired in controversy

• Google went public on August 19, 2004.

• Criticisms against the IPO :

- Google‘s Dual Share System2 classes of shares – One, having Super Majority Voting Rights andthe other having Ordinary Voting Rights.

- Google‘s founders, Larry Page and Sergey Brin ,violated SEC norms

by breaking the ―quiet period‖.

• Inspite of these criticisms, the IPO roped in $ 1.4 bn for Google andput the company‘s valuation at $ 30 bn.

DUTCH AUCTION MODEL



- Potential investors make bids for the shares of a company at a price

of their choice.

- At the close of the auction, the bids are arranged in descendingorder of bid prices.

- Clearing Price : Highest price at which the firm can sell all its pre-specified number of shares.

- Dutch Auction vs. Book Building : Underwriter does not have anysay in the pricing of the issue or in the allocation of shares topotential investors.

HOW DUTCH AUCTION HELPED GOOGLE



• The share price was determined by the Demand-Supply economics

through a transparent process by the investors.

• This is where the Dutch model scores over traditional models, as itdoesn‘t allow ― First-Day Pop ―.

• First-Day Pop is that situation wherein, the stock on the very first

day of trading on the markets, witnesses an increase of more than30%.

• The Clearing Price was set at $ 85 and the share closed on the firstday of trading at $ 100 i.e. an increase of 18 %.

FUTURE OPPORTUNITIES



• Companies with total issues of over Rs 55,000crore• Stability in market• Follow-on public issues (FPOs) largely from

public sector banks

INDIA vs US



Basis India US

Pricing Price Band No price band

Quotas Retail, QIB‟s,NIB‟s

No quotas

Book Building/Fixed price

75% or 100%book building

100% book building

Disclosures Reactive Proactive

Time gapbetween closureof issue andallotment

10 days Less than 3 days

MajorParticipants

QIB‟s, RetailInvestors

Pension funds and mutualfunds





Thank you !!!