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CHAPTER – I

INTRODUCTION

INTRODUCTION
An initial public offering (IPO), referred to simply as an "offering" or "flotation", is when a
company (called the issuer) issues common stock or shares to the public for the first time.
They are often issued by smaller, younger companies seeking capital to expand, but can also
be done by large privately-owned companies looking to become publicly traded.

In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it
determine what type of security to issue (common or preferred), best offering price and time
to bring it to market.

An IPO can be a risky investment. For the individual investor it is tough to predict what the
stock or shares will do on its initial day of trading and in the near future since there is often

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little historical data with which to analyze the company. Also, most IPOs are of companies
going through a transitory growth period, and they are therefore subject to additional
uncertainty regarding their future value.

Capital market is an essential pre-requested for industrial and commercial development of a


country. Capital market refers to the institutional arrangement which facilitates the
borrowings and lending of long term fund. In capital market we can divided into two parts
they are primary and secondary market. In primary market also known as new issue market.
It represents primary market where new securities i.e. shares or bonds that have never been
previously offered.The importance of this study is analyzing the IPO scrip’s during the year
2006 to 2010. This study based on differences of Issue price and LTP. In order to whether the
IPO’s are overpriced or under priced. The investor how get the gain or loss.The study
continued based on the only 2 parameters they are Issue price and LTP. The differences of
LTP & Issue price we can describe the scrip is overpriced or under priced. Not other
parameters considered. This study shows that sector wise scrip’s are overpriced or under
priced.

In this study find the IPO how gives the benefits and given the guidelines and suggestions to
the investor. Before selecting a company the investor should think about the company. A good
investor should diversify and reduces his risk by investing in different securities. Primary
market returns are very attractive in short period especially on the day of listing. But investor
in IPO’s should take wise decision in choosing the best company.

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NEED OF THE STUDY

IPO’s are often looked upon as a speculative opportunity to earn abnormal profits onthe
listing day. Companies which decide to go public face the added pressure of the marketwhich
may cause them to focus more on short-term results rather than long-term growth. Theactions
of the company's management also become increasingly scrutinized as investorsconstantly
look for rising profits. This may lead management to perform somewhatquestionable
practices in order to boost earnings.

Before deciding whether or not to go public, companies must evaluate all of thepotential
advantages and disadvantages that will arise and fix prices that are in the best interestof the
company and investors. This study helps the investor to decide the suitable investment
strategy to get maximized returns.

SCOPE OF THE STUDY:

 The study covers only NSE listed securities of primary market.


 Only LTP and Issue price are taken into consideration for judging whether the scrip’s
are under priced or over priced not considering other parameters.
 The study covers the period from year 2006-2017 only
 Study covers randomly selected scrip’s under various sectors.

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OBJECTIVES OF THE STUDY:

 To study the trends in primary market from 2006-2017 with special reference to LTP
(Last Traded Price) and Issue Price.

 To examine the difference between LTP and Issue Price of various scraps in different
sectors.
 To assess whether the Issue Price are over priced or under priced based on difference
between LTP and Issue Price.
 To examine gain or loss to the investor based on the above study.

RESEARCH METHODOLOGY OF THE STUDY:

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The data collection methods include both primary and secondary collection methods.

Primary Data: This method includes the data collected from the personal interaction
with authorized members of Sharekhan.

Secondary Data: The secondary data collection method includes:


 The lecturers delivered by the superintendents of respective departments.
 The brochures and material provided by Sharekhan.
 The data collected from the magazines of the NSE, economic times, NSE website,
etc.

 Various books relating to the investments, capital market and other related topics.

TOOLS USED FOR ANALYSIS:

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1) TABULATION: A Table is a systematic arrangement of statistical data in rows and
columns. Rows are horizontal arrangements whereas columns are vertical. Tabulation is a
systematic presentation of data in a form suitable for analysis and interpretation.
The tables used are as follows:
a) One way table: It presents only one characteristic and hence in answering one or more
independent questions with regard to those characteristics.
b) Two-way table: It contains sub divisions of a total and is able to answer two mutually
dependent questions.

2) DIAGRAMETIC AND GRAPHICAL REPRESENTATION OF DATA: A picture


is worth a thousand words. The impression created by a picture has much greater impact
than any amount of detailed explanation. Statistical data can be effectively presented in
the form of diagrams and graphs. Graphs and Diagrams make complex data simple and
easily understandable. They help to compare related data and bring out subtle data with
amazing clarity.

The Diagram used are as follows:


a) Bar diagrams: Bar diagrams are used specifically for categorical data or series. They
consist of the group of equi-distant rectangles, one for each group or category of data
in which the values of magnitudes are represented by length or height of rectangles.
b) Sample Bar diagram: It is used of comparative study of two or more aspects of a
single variable or single category of data.

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LIMITATIONS OF THE STUDY:

A good report sells the results of the study. But every project has its own limitations.
These limitations can be in terms of
1. The project doesn’t study the whole primary market due to time availability and
course requirement.
2. Project doesn’t consider whole issues under each sector due to time limitation.
Ittakes Into consideration randomly selected issues
3. Limited to a particular period: Data under consideration is taken from 2006-2017
Previous years are not taken into consideration.
4. Partial fulfillment: Project studied doesn’t fulfill all requirements because it does
not study the whole primary market due to time availability and course
Requirement. It only fulfills the partial requirement as it studies only certain
important aspects of primary market.
5. Approximate results: The results are approximated, as no accurate data is
Available.
6. Study takes into consideration only LTP and issue prices and their difference for
Concluding whether an issue is overpriced or under priced leaving other.

7. The study is based on the issues that are listed on NSE only.

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CHAPTER – II
REVIEW OF LITERATURE

INITIAL PUBLIC OFFERS

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This project focuses on the relatively unexplored area of primary equity markets in India.
Its broad goal is to begin the process of understanding how and why primary markets
develop.

Primary markets are where the firms raise capital through the issuance of financial
securities traded after insurance. The research will examine the development of domestic
primary market, focusing on macro economic factors. With the abolition of Control over
Capital Issues prior approval of capital issue proposals by companies has been dispensed
with. The companies are required now to be fair and honest to the investing public by
disclosing all material facts along with the risk factors associated with their projects to the
public. The present practice of brochure which is circulated widely to the investors along
with application form has been replaced with abridged prospectus to be attached to the
New Issue application forms.

The word “market” can have different meanings but it is used most often as a catchall
term to denote both primary and secondary market. Infact primary market and
secondary market are both distinct terms that refers to the market where securities are
created and the one in which they are traded among investors respectively. Knowing the
functions of primary and secondary market is the key to understanding how stocks trade.
Without them, the stock market would be much harder to navigate and much less
profitable. We will help you to understand how these markets work and how they relate to
individual investors.

The primary market is that part of capital markets that deals with issuance of new
securities. Companies, government or Public sector institutions can obtain funding
through the sale of new stock or bond issue. This is typically done through a syndicate of
securities dealers .The process of selling new issues to the investors is called
Underwriting. In the case of new stock issue, this sale is called an IPO (Initial public
offering). Dealers earn a commission that is built into the price of the security, though it
can be found in the prospectus.

The market in which investors have the first opportunity to find a newly issued
security. After the first purchases, subsequent trading is said to occur in secondary market.
The primary market is where securities are created. It is in this market that firms sell

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(float) new stock and bonds to the public for the first time. For our purposes, you can
think of a primary market as being synonymous with an IPO. Simply put, an IPO occurs
when a private company sells stocks to the public for the first time.

METHODS OF FLOATING NEW ISSUES:


The various methods which are used in floatation of new securities in the new issue
market are
1)Public Issue / Offer through Prospectus
2) Offer for sale
3)Private Placement
4) Right Issues
5) Stock Exchange Pricing
6) Subscription by inside coteries

1) PUBLIC ISSUES: This is the most common method followed by joint stock
companies to raise capital through the issue of new securities. Under this method,
the issuing company directly offers to the general public or institutions a fixed
number of shares at a stated price through a document called prospectus.

The purpose of raising the new capital is to finance some capital expenditure,
it is usual for companies to issue a prospectus inviting the public to take up the new
securities. Legally no public limited company can raise capital from public without
issuing prospectus.

2) OFFER FOR SALE: Under this method the company sells the shares /securities to
the issue house / brokers at an agreed price . The issue house/brokers sell their
shares / securities to the investors at a higher price.

The company is relieved from the problem of printing and advertisement of


prospectus and making allotment of shares . Offer for sale is not common in India.

3) PRIVATE PLACEMENT: The promoters sell their shares to their friends , relatives
and well wishers to obtain the minimum subscription which is a precondition for issue
of shares to the public.

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Once this precondition for issue of shares is met , the issue house/brokers buy
the securities out right with the intention of placing them with their clients afterwards.

The issue house/brokers maintain their own list of clients and through
customer contact sell the securities. The main disadvantage of this method is that the
securities are not widely distributed to the large section of investors.

4) RIGHT ISSUES: Rights issue is a method of raising funds in the market by an


existing company. A right means an option to buy certain securities at a certain
privileged price within a specified period.

Shares so offered to the existing shareholders are called Right shares. Right
shares are offered to the existing shareholders in a particular proportion to their
existing shareholders. The company should abide with section 81 of the companies
act.

If the shareholders fail to take the Right shares within a specified period, the
balance is to be equally distributed among applicants for additional shares. Any
balance still left over may be disposed off in the market.

5) STOCK EXCHANGE PLACING: this method has been discontinued in India due
to strict regulations and statutory rules for listing of securities. According to it, “A
company used to place its shares privately with the aid of brokers, and then secured
permission for dealing on stock exchange”. This method involved little cost but often
led to concentration of new shares in few hands.

6) SUBSCRITION BY INSIDE COTERIES: when a company goes to the new issue


market a certain percentage of the capital is kept in reserve for subscription by inside
coteries.

SEBI GUIDELINES FOR NEW ISSUE MARKET:


The SEBI guidelines for different category of companies are as follows
A) NEW COMPANY: A new company is a company which has not completed twelve
months of production and where the promoters do not have a track record. These
companies have to issue shares only at par.

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B) PRIVATE AND CLOSELY HELD COMPANIES: These companies having a track
record of consistent profitability for last three years, are permitted to price their issues
freely.
C) EXISTING LISTED COMPANIES: The existing limited companies will be
allowed to raise fresh capital by freely pricing its shares provided the promoters
contribution is 50% on first 100 crores of issue.
D) DIFFERENTIAL PRICING: Issue to the public can be priced differentially as
compared to issue to right shareholders justification for the price difference should be
mentioned in the offer document.
E) LOCK IN PERIOD: Lock in period is five years for promoters contribution from the
date of allotment or from commencement of commercial production whichever is
later.
F) GUIDELINES FOR PUBLIC ISSUE:
 Every application should be accompanied with an abridged prospectus.
 The risk factors should be highlighted in the abridged prospectus.
 Company’s management, Past history and present business of the firm should be
highlighted in the prospectus.
 Justification for premium should be stated
 The public issues should be kept open for a minimum of three days and a maximum
of ten working days.
 The quantum of issue should not exceed the amount specified in the prospectus
 Compliance report in the prescribed form should be submitted to SEBI within forty
five days from the date of closure of issue.
 The allotment of shares has to be made in multiples of tradable lots if the minimum
of subscription of ninety percent has not been received the entire amount is to be
refunded to the investors within 120 days.
 Underwriting has been made mandatory
 The gap between the closure date of various issues i.e. rights and public should not
exceed thirty days.

RECENT TRENDS AND DEVELOPMENTS IN NEW ISSUE MARKET:


The recent economical changes i.e. privatization, liberalization, foreign private
participation, disinvestment in public sector have given a new direction to the capital market.

The number of issues made and the amount of capital raised from the market has been
phenomenal in the last decade. The public sector organizations like financial institutions,
public sector undertaking have started dominating the primary market. In 1996-97, all public

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financial institutions including IDBI, IFCI, ICICI and many public sector backs have
mobilized resources through public issue route. There is a major decline in the equity at
premium issues over the years.

CAPITAL MOBILISED THROUGH DEBT: the late 90’s have witnessed the bent of
capital market for the issue of debt as that period is characterized with high interest rates and
negative returns from the secondary market.

MUTUAL FUNDS: New mutual funds were set up during the last decade. Many investors
are turning towards mutual funds to take the advantage of expertise in investments and
lowering of investment risk.

SEBI has dispensed with the requirement of a minimum promoters contribution and lock
in for listed companies with a three year dividend track record in the past five years

The lock in period for employees in their stock option schemes was withdrawn but
lock in will still apply to any preferential allotment made to promoters. The pricing of such
issues would be based on market prices.

The market reforms include the introduction of electronic trading with the setting up
of OCTEI and NSE.th process of Book building was encouraged and IPO through Book
building has picked up.

Credit rating was made mandatory for some issues. This step has built the customer
confidence in the market. Qualitative changes included the introduction of new innovative
financial instruments. Certain innovative financial instruments were designed to suit the
investors requirement. With the globalization of business, foreign markets have welcomed
Indian companies. The Indian companies have issued GDR (global depository receipts) and
ADR (American depository receipts) , foreign currency bomds , euro currency bonds etc.

TO SUGGEST GUIDELINES TO INVESTORS:


1. The investor should purchase the shares after a detailed study about the company.
(That includes fundamental analysis, economical analysis and technical analysis.)

2. Liquidity and intrinsic value of the scrip should be high.

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3. The investor should have a clear idea about the financial position, than determine an
appropriate allocation mix of the assets, which maximizes the returns.

4. An easy solution to investor is to invest in to mutual fund schemes through a


systematic investment plan (sip) the mutual fund gives you a well diversified,
professionally managed portfolio at low cost

5. Investor need to develop a long term investment mindset rather than short term
investment to get more returns or for achieving financial goals

6. Investors emotions and judgment plays a dynamic role in investment process. The
investor should control his emotion and impatience and he should take strong decision

7. A good investor should diversifies and reduces his risk by investing in different
securities which contained different risks and returns in order to achieve his goals

8. The investor should understand the market psychology apart from fundamental
analysis. Because these psychological factors have a greater impact on market.

9. The investor must to review and revise the portfolio periodically. Based on
circumstances he should change the production of the stock

10. Investor need to aware of new information, which reflects wider changes in share
prices.

11. The investor can get certain tax benefit from investing in stock markets
a) Investment on government fixed deposits
b) Dividend on certain shares
c) UTI units
12. If investor wants to manage their investment aggressively, you have to monitor
important developments affecting the economy, various industrial sectors, and individual
companies.

a. Investor has to develop sound standards for selecting growth stocks and hold
growth stocks as long as they remain growth stocks

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13. For purchasing stock of any company the investor to analyze the potentiality or
worthiness of the product, profitability, treatment of HR, innovative ideas of the company,
integrity

14. Avoid certain kinds of shares for ex; shares of unlisted companies

15. Participate in different schemes of mutual funds and high liquidity stocks.

Investors more crazy about the new issues because:


i. The issues are often offered at par and they feel they are getting shares at
“reasonable price”

ii. If the company does well their capital appreciation and premium will be
more

iii. But before selecting a company the investor should think about that
company in a following way

iv. What is track record of the company

v. Is there adequate assurance of the availability of inputs

vi. How strong they are developing the market for product

vii. What are the competitions etc… need to analyze.

PROBLEMS OF NEW ISSUE MARKET:


The problems of new issue market can be summarized as follows:
i. The new issue market failed to mobilize adequate savings from the household
sector. Only 10 % of the financial savings was mobilized. One reason for such
failure is lack of awareness among these sector and private placement of capital
by the companies.
ii. The new issue market has failed to communicate to the public the benefits of
investing in new instruments.
iii. Merchant banks have failed to bridged the gap between the investors and the
companies .they have failed to evaluate the projects taken up by companies,
credentials of promoters, technical and managerial aspects, etc. this has led to

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customers being duped by companies. SEBI has now brought out stringent
guidelines for companies and merchant bankers.
iv. Investment in capital markets are considered to be risky. So the risk averse attitude
of customer have diverted the investment from shares to fixed deposits and
debentures.
v. Abnormally high cost of flotation has kept away small companies from the
primary market.
vi. NIM has not reached to the semi urban and rural areas. An investor from this
region has to spend additional cost for post and bank charges to access the NIM.
vii. Delay in allotment of shares, refunding of application money, posting of share
certificates etc are common anomalies in NIM
viii. New companies failed to gain the favor of underwriter. Caution investors have
stayed away from new companies, which led to devolution on underwriters.
ix. Timing of an issue is very important. But companies failed to keep an eye on the
other issues which are made during the same time. Thus crowding of new issues at
one time has made the investor to select the one which he considered to be worthy.

INITIAL PUBLIC OFFERING


IPO is an acronym for initial public offering. This is the first sale of stock by a company to
the public. A company can raise money by issuing either debt or equity. If the company has
never issued equity to the public , it is known as an IPO. Corporate may raise capital in the
primary market by way of an IPO, right issue or private placement.

Companies fall into two broad categories private and public. A privately held
company has fewer shareholders. Anybody can come out and incorporate a private
company, put in some money file the right legal documents and follow the reporting rules.
Most small businesses are privately held, but large companies can be private too. IKEA,
Domino’s pizza and Hallmark cards are all privately held. It usually is not possible to buy
shares in private company. The shares of private company are not offered to general public.

On the other hand public companies can sold at least a portion of themselves to the
public and trade on stock exchange. This is why doing an IPO is also referred to as going
public. Public companies have thousands of share holders and are subjected to strict rules and
regulations.

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WHY GO PUBLIC?
Going public raises cash , being publicly traded also opens many financial doors .Because of
increased scrutiny public companies can usually get better rates when they issue debt. As
long as there is a market demand a public company can always issue more stock.

Trading in open market means liquidity. Being on a major stock exchange carries a
considerable amount of prestige. In past companies with strong fundamentals could only
qualify for an IPO, but Internet boom changed all this. Firms no longer needed strong
financial and a solid history to go public. Instead, IPO’s were done by smaller start ups
seeking to expand their business. There is nothing to worry for expansion of IPO but most of
these firms had never made a profit and didn’t plan on being profitable any time. In cases like
this companies might be suspected of doing an IPO just to make the founders rich. The IPO
then becomes the end of the road rather than beginning.

How can this happen? Remember an IPO is just selling stock, it is all about the sales
job. If you can convince people to buy stock in your company, you can raise a lot of money .
In our opinion IPO’s came just to collect money are extremely risky and should be avoided.

IPO BASICS: HOW TO GET INTO AN IPO?


1) UNDERWRITING PROCESS: Getting a piece of a hot IPO is very difficult, if not
impossible. To understand why we need to know how an IPO is done , a process known as
underwriting.

When a company wants to go public , the first thing it does is hire an investment
bank. A company could theoretically, sell its shares on its own but realistically, an investment
bank is required. Underwriting is the process of raising money by either debt or equity.
Underwriter acts as a middlemen between companies and the investing public.

The company and the investment bank will first meet to negotiate the deal. Items
usually discussed includes the amount of money company will raise , the types of securities
to be issued and all details in underwriting agreement. The deal can be structured in a variety
of ways. For example, in a “firm commitment” deal the underwriter guarantees that a certain
amount will be raised by buying the entire offer and then reselling to the public. In a “best
effort” deal the underwriter sells the securities , but doesn’t guarantee the amount raised.

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Once all sides agree to deal , the investment bank puts together a registration
statement to be filed with SEC, governing bodies. This document contains information about
offering as well as company information such as financial statements , management
background , legal problems and insider holdings. The SEC then requires a “cooling off
period” in which they investigate and make sure all material information has been disclosed.
Once SEC approves the offering, a date is set when the stock will be offered to the public.

During the cooling off the period the underwriters put together what is known as red
herring. This is an initial prospectus containing all information about the company except for
the offer price and effective date , which aren’t known at the time with the red herring in hand
, the underwriter and the company attempt to hype and build up interest for the issue. They
go on a road show also known as “the dog and pony show” where the big institutional
investors are courted .

As an effective date approach the underwriter and company sit down and decide on
the price. This is not an easy decision, it depends on the company , the success of the road
show and most importantly current market conditions. Of course it is in both parties interest
to get as much as possible. Finally the securities are sold on the stock market and money is
collected from investors.

2) INDIVIDUAL INVESTOR:As you can see, the road to an IPO is an long and
complicated one. You may have noticed that individual investors are not involved until the
very end, because small investors are not the target market. They do not have more cash and
therefore hold little interest for the underwriters. If the underwriters think that an IPO will be
successful they will usually pad the pockets of their favorite institutional client with shares at
IPO price. The only way for individual investor to get shares is to have an account with one
of the investment banks that is part of the underwriting syndicate. But an individual cannot
expect to open an account with $1000 and be showered with an allocation. He has to be
frequently trading client with a large account to get into an hot IPO.

POINTS TO BE CONSIDERED TO GET INTO AN IPO:


1)NO HISTORY:It’s hard enough to analyze the stock of an established company. An IPO
company is even trickier to analyze since there won’t be a lot of historical information. The
main source of data is Red herring prospectus, so make sure you examine this document

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carefully. Look for the usual information but also pay special attention to the management
team and how they plan to use the funds generated from an IPO.

2) LOCK UP PERIOD : If you look at the charts following many IPO’s, you will notice that
after few months the stock takes a sleep downturn, this is often because of lockup period.
When a company goes public, the underwriters make company officials and employees sign a
lock up agreement. Lock up agreements are legally binding contracts between underwriters
and insiders of the company, prohibiting them from selling any shares of stock for a specified
period of time. The period can be anything from 3 to 24 months. 90 days is minimum period
stated under rule, but lockup specified by the underwriters can last much stronger. The
problem is when lockups expire all the insiders are permitted to sell their stock. The result is
a rush of people trying to sell their stock to realize their profit. This excess supply can put
severe downward pressure on the stock price.

3) FLIPPING: Flipping is reselling a hot IPO stock in the first few days to earn a good
profit. This is not easy to do and you will be strongly discouraged by your broker. The reason
behind this is that, the companies want long term investors who hold their stock, not traders.
There are no laws that prevent flipping, but your broker may black list you from future
offering or just smile less when you shake hands.

4) Of course, institutional investors flip stocks all the time and make big money. The double
standard exists and there is nothing we can do about it as they have buying power. Because of
flipping , it is a good rule not to buy shares of an IPO if you don’t get in on the initial
offering. Many IPO’s that have big gains on the first day will come back to earth as the
institutions take their profits.

5) AVOID THE HYPE :Its important to understand that underwriters are salesmen . The
whole underwriting process is intentionally hyped up to get as much attention as possible.
Since IPO’s only happen once for each company, they are often presented as “once in a
lifetime” opportunities. Of course some IPO soar high and keep soaring. But many end up
selling below their offering prices within the year. Don’t buy a stock because it is an IPO do it
because it is a good investment.

BOOK BUILDING PROCESS:


The abolition of the capital issues control act, 1947 has brought a new era in the primary
market in India. The control over the pricing of the issues, designing and tenure of capital

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issues were abolished. The issuers at present are free to make the price of issue. The main
drawback of pricing was the process of pricing of issues. The issue price was determined
around 60 to 70 days before the opening of the issue and the issuer had no clear idea abut the
market perception of the price determined. The traditional fixed price method of tapping
individual investor from two defects
1) Delay in initial public process.
2) Under pricing/over pricing of issues.

In fixed price method, public offers do not have any flexibility in terms of prices as well as
number of issues. From experience it can be stated that a majority of the public issues come
through fixed price method are either under priced or over priced. Retail investors are unable
to distinguish good issues from bad one. That is why book building mechanism, a new
(product) process of price discovery has been introduced to overcome this limitation and
determine issue price effectively.

SEBI guidelines defines book building as a process undertaken by which a demand for the
securities proposed to be issued by a corporate body is elicited and build up and the price for
such securities is assessed for the determination of the quantum of such securities to be issued
by means of a notice, circular, advertisement, document or information memoranda or offer
document.

Book building is basically a capital issuance process used in IPO which aids price and
demand discovery. It is a process used for marketing a public offer of equity shares of a
company. It is a mechanism where during a period fro which a book for IPO is open, bids are
collected from the investors at various prices, which are above or equal to the floor price. The
process aims at tapping both wholesale and retail investors. The offer/issue price is then
determined after the bid closing date based on certain evaluation criteria.

FEATURES OF BOOK BUILDING PROCESS:


1) Public offers in fixed price method involves a pre issue cost of 2-3 percent and carry the
risk of failure if it does not receive 90 percent of total subscription. In Book building such
cost and risk can be avoided because Issuer Company can withdraw the market if demand for
security does not exist.
2) Institutional investor like to participate largely in book built transactions as in this process
the time taken for completion of entire process is less than the fixed price issues

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3) Here the price is determined on the basis of the demand received or at the price above or
equal to the floor price whereas in fixed price option the price of issues is fixed first and then
securities are offered to the investors.
4) Book is built by book running lead manager to know the everyday demand whereas in case
of fixed price of public issues, the demand is known at the close of the issue.
5)Book should remain open for minimum of 5 days.

BOOK BUILDING PROCESS IN INDIA:


The main parties who are directly associated with book building process are issuer company.
BRLM (Book Running Lead Managers) and the syndicate members. The BRLM (merchant
banker) and the syndicate members who are the intermediaries are both eligible to act as
underwriters. The steps involved in book building process are as under:
1) The issuer company proposing an IPO appoints a lead merchant banker as BRLM.
2) Initially the issuer company consults with the book running lead manager in drawing up a
draft prospectus which does not mention the price of the issues but includes other details
about the size of the issues, past history of a company and a price band. The securities
available to the public are separately identified as net offer to the public.
3) The draft prospectus is filed with SEBI which gives it a legal standing.
4) A definite period is fixed as a bid period and BRLM conducts awareness
campaign like advertisements, road shows etc.
5) The BRLM appoints a syndicate member, a SEBI register intermediary who underwrite
the issues to the extent of net offer to the public
6) The BRLM is entitle to remuneration for conducting the book building process
7) The copy of draft prospectus may be circulated by BRLM to the institutional investors as
well as to the syndicate members
8) The syndicate members create demand and ask each investor for the number of shares and
offer price
9) The BRLM receives the feedback about the investors bid through syndicate members
10) The prospective investors may revise their bids at any time during the bi d period
11) The BRLM on receipt of feedback from the syndicate embers about the bid price and
quantity of share apply has to build up an order book showing the demand for the shares of
the company at various prices. The syndicate members must also maintain a record book for
orders received from institutional investors for subscribing to the issue of private portion.

21
12) On receipt of above information, the BRLM and the issuer company decides the issue
price. This is known as market clearing price.
13) The BRLM then closes the book in consultation with the issuer company and determine
the issue size of placement portion and public offer portion.
14) Once the final price is determined the allocation of securities should be made by BRLM
based on prior commitment, investors quality, price aggression, earliness of bids etc. the bid
of an institutional bidder, even if he has paid full amount may be rejected without being
assigned any reason as the book building portion of institutional investors is left entirely at
the discretion of issuer company and the BRLM.
15) The final prospectus if filed with the registrar of companies within 2 days of
determination of issue price and receipts of acknowledgement card from SEBI.
16) Two different accounts for collection of application money, one for the private placement
portion and the other for the public subscription should be opened by Issuer Company.
17) The placement portion is closed a day before the opening of public issue through faxed
price method. The BRLM is required to have the application forms along with application
money from the institutional buyers and underwriters to the private placement portion.
18) The allotment for the private placement portion shall be made on the second day from the
closure of the issue and the private placement portion is ready to be listed.
19) The allotment an listing of issues under the public portion i.e. fixed price portion must be
as per the existing statuary requirements
20) Finally the SEBI has the right to inspect such records and books which are maintained by
BRLM and the intermediaries involved in the Book building process.

DIIFFERENCE BETWEEN SHARE OFFERED THROUGH BOOK BUILDING AND


THROUGH NORMAL PUBLIC ISSUE:
1) In normal public issue method the price at which the securities are offered/allotted is
known in advance to the investor whereas the price at which these securities will be
offered/allotted is not known in advance to the investor in book building process. Only
indicative price range is known.
2) In normal public issue method demand for the securities offered is known only after the
closure of the issue whereas in book building method demand for the securities offered can be
known everyday as the book is built

22
3) In normal issue method payment is made at the time of subscription wherein refund is
given after allocation whereas in book building method payment is made only after
allocation.
4) In book building securities are offered a t prices above or equal to the floor prices, whereas
securities are offered at a fixed price in case of normal public issues.

OFFER TO THE PUBLIC THROUGH BOOK BUILDING PROCESS


The oxford dictionary of business jumps from “bonus shares to book keeping” and
then on “book of primary entry” without devoting an entry for book building. Book building
is the process by which an underwriter attempts to offer an IPO based on demand form
institutional investors.

An underwriter “builds a book” by accepting orders from fund managers, indicating


the number of shares they desire and the price they are willing to pay. Book maker is not the
same as the book builder. The former takes bets and pays out money to the people who win.
The IPO can be made through fixed price method, book building method or a combination of
both. In case the issuer choose to issue securities through book building route then as per
SEBI guidelines, an issuer company can issue securities in the following manner.
A) 100 percent of the net offer to the public through book building route
B) 75 percent of the net offer to the public through the book building process and 25 percent
through fixed price portion.
C) Under 90 percent scheme this percentages will be 90 and 10 respectively.

A) 100 % THROUGH BOOK BUILDING PROCESS :In the 100 percent of the net offer
to the public, entire issue is made through book building process. In case of 100 percent book
building process, the bidding centers should be at all the places where recognized stock
exchanges are situated.

B) 75 % THRUOGH BOOK BUILDING PROCESS : The option of 75 percent book


building is available through the book building process are indicated as placement portion
category and securities available to public are identified as net offer to the public. In this
option, underwriting is mandatory to the extent of net offer to the public. The issue price for
placement portion and offers to public are required to be same.

23
C) 90 % THROUGH BOOK BUILDING PROCESS: This option is not available in
India.

TYPES OF INVESTORS
There are three kinds of investors in book building issue. The retail individual
investor (RII), the non-institutional investor (NII) and the qualified institutional buyers
(QIB). RII is an investor who applies for stocks for a value of not more than rupees 100000.
Any bid exceeding this amount is considered in the NII category. NIIs are commonly referred
to as high net worth individuals. On the other hand QIBs are institutional investors who
posses the expertise and the financial muscle to invest in securities markets.

Mutual funds, financial institutions, scheduled commercial banks, insurance


companies, provident funds, state industrial development corporations fall under the
definition of being a QIB. Each of these is allotted a certain percentage of total issue. The
total allotment of RII category has to be at least 35 percent of the total issue. RII also have an
option of applying at cut-off price. This option is not available to other classes of investors.
NIIs are to be given at least 15 percent of the total issue and QIBs are to be issued not more
than 50 percent of the total issue

REVERSE BOOK BUILDING PROCESS:


The reverse book building is a mechanism provided for capturing the sell orders online basis
from the shareholders through respective BRLMs which can be used by the companies
intending to delist its shares through buy back process. In reverse book building scenario, the
acquirer/company offers to buy back shares from the shareholders. The reverse book building
is basically a process used for efficient price discovery. It is a mechanism where during the
period for which the reverse book building is open offers are collected from the shareholders
at various prices, which are above or equal to the floor price. The buy back price is
determined after the offer closing date.
Business process for delisting through book building is as follows
1. The acquirer shall appoint designated BRLM for accepting offers form the
shareholders
2. The company/acquirer intending to delist its shares through book building process
is identified by way of a symbol assigned to it by BRLM.

24
3. Orders for the offer shall be placed by the shareholders only through the
designated trading members, duly approved by the exchange.
4. The designated trading members shall ensure that the security/shareholder deposit
the securities offered with the trading members prior to the placement of an order.
5. The offer shall be open for N number of days
6. The BRLM shall intimate the final acceptance price and provide the valid
accepted order file to the National Securities Clearing Corporation Limited (wholly
owned securities of NSE carrying out clearing and responsible for settlement operation.).

SEBI guidelines shall be applicable to delisting of securities of companies and specifically


apply to:
1. Voluntary delisting being sought by the promoters of a company.
2. Any acquisition of shares of the company (either by a promoter or by any other
person)or scheme or arrangement, by whatever name referred to, consequent to which
the public shareholding falls below the minimum limit specified in the listing conditions
or listing agreement that may result in delisting of securities.
3. Promoters of the company who voluntarily seek to delist their securities from all or some
of the stock exchanges.
4. Case where a person in control of the management is seeking to consolidate his holding
in a company in a manner which would result in the public share holdings or in the
listing agreement that may have affect of company being delisted.
5. The companies which may be compulsorily delisted by stock exchanges

Advantages of Reverse book building process


1. It provides a fair,efficient and transparent method for collecting offer using latest
electronic trading systems.
2. The NSE system offers a nation wide bidding facility in securities.
3. Cost involved in issue are far less than those in a normal IPO.

RED HERRING PROPECTUS:


A preliminary registration statement that must be filed with the SEC describing a new
issue of stock and the prospects of the issuing company.

"Red Herring Prospectus" is a prospectus which does not have details of either price
or number of shares being offered or the amount of issue. This means that in case the price is

25
not disclosed, the number of shares and the upper and lower price bands are disclosed. On the
other hand, an issuer can state the issue size and the number of shares are determined later.
An RHP for and FPO can be filed with the RoC without the price band and the issuer, in such
a case will notify the floor price or a price band by way of an advertisement one day prior to
the opening of the issue. In the case of book-built issues, it is a process of price discovery and
the price cannot be determined until the bidding process is completed. Hence, such details are
not shown in the Red Herring prospectus filed with the RoC in terms of the provisions of the
Companies Act.

Only on completion of the bidding process, the details of the final price are included in the
offer document. The offer document filed thereafter with ROC is called a prospectus.
“Abridged Prospectus” means contains all the salient features of a prospectus. It accompanies
the application form of public issues.

GREEN SHOE OPTION:


In most of the case it is experienced that IPO through book building method in India turns out
to be over priced or under priced after their listing and ultimately the small investor becomes
the net loser. If the prices in open market fall below the issue price, small investors may start
selling their securities to minimize losses. Therefore there was a vital need of a market
stabilizer to smoothen swing in the open market price of a newly listed shares after an IPO.
Market stabilization is the mechanism by which stabilizing agent acts on behalf of the issuer
company, buys a newly issued securities for the limited purpose of preventing a decline in the
new securities in open market price in order to facilitate its distribution to the public. It can
prevent the IPO from huge price fluctuation and save investors from potential loss. Such
mechanism is known as Green Shoe Option. Green Shoe Option can rectify the demand and
supply imbalances and can stabilize the price of the stock. It owes its origin to the green shoe
option company, which used this option for the first time in the world.

SEBI recognized GSO system of initial public 2004 August. According to SEBI
Guidelines “A company desirous of availing GSO shall pass the resolution in the general
body meeting authorizing the public issue, seek authorization, also for possibility of allotment
of further shares to the stabilizing agent. The company shall appoint one of the Lead book
runners among the issue management team as stabilizing agent, will be responsible for price
stabilization process if required.

26
The stabilizing agent shall enter into an agreement with the promoters who will lend
their share, specifying the maximum number of shares that may be borrowed from the
promoters, which shall not be in excess of fifteen percent of the total issue size. The
stabilization mechanization shall be available for the period disclosed by the company in the
prospectus, which shall not exceed 30 days from the date when trading permission was given
by the exchanges.

Ideally, with the intervention of the stabilizing agent the share price should not fall
below the issue price for a period of 30 days from the listing date. Due to this option, the
investor has a time period of 30 days up to which he is safe and his chances of incurring the
losses are minimum.

A GSO is a clause contained in the underwriting agreement of IPO. The GSO is also
referred to as an over allotment provision, allows the underwriting syndicate to buy up an
additional 15 % of the shares at the offering price if public demand for the shares exceeds
expectations and the stock trades above its offering price.

The GSO provides extra incentive for the underwriters of a new stock offering. In
addition this investment banks, brokerages and other financing parties also often exercise the
GSO the cover some of the short position. They may have create an effort to maintain a stable
market after a new stock begins to trade as well as to meet after market demand.

AN INTERESTING FACT:
The Green shoe company was the first issuer to allow the over allotment option to its
underwriters, hence the name. The provision that has become standard in firm commitment
underwriting is the over allotment option or green shoe option. Where the company and other
sellers of securities grant and option to the underwriters to purchase additional shares (around
15 % in total offerings) on the same term as the original shares offer to the underwriters. The
GSO allows the underwriters to exercise significant market clout in stabilizing activities
during a 30 day period immediately following a public offering. The over allotment gives the
underwriters buying power to cover their short position in order to stem a falling stock price,
without the risk of having to buy stock at higher prices to cover their short position is the
stock price increases.

27
CHAPTER – III
INDUSTRY PROFILE
&
COMPANY PROFILE

28
INDUSTRY PROFILE
INDIAN STOCK MARKET
Stocks that respond to interest rate moves, coupled with select debt schemes, are likely to be
the winners in 2015, with the Reserve Bank of India expected to start easing its monetary
policy.

Fund managers said economic prospects have improved, but the New Year may be tougher
for equity investors to make money as valuations of many stocks are rich after the broad-
based rally in 2014. Concern over interest rate hike in the US and weak global crude oil
prices may also keep investors on.

India is among the top-performing emerging markets in 2014. So far in 2014, the Sensex has
gained 34%. Smaller companies have fared even better, with the BSE Mid Cap index surging
56% and the BSE Small Cap Index jumping 75%.

Though the falling crude prices have improved the prospects of the Indian economy, India
may not be spared if there is an emerging market sell-off. "On the global front, oil exporting
nations could face problems, and there could be a global risk aversion.

Market participants consider probable interest rate cuts by the Reserve Bank of India (RBI) as
the biggest trigger for the economy and the markets. The extent of monetary policy easing
would determine the strength of rally in shares of the so-called interest rate-sensitive sectors
such as banks, auto, real estate and bonds.

Fund managers said debt funds could offer good returns in the coming year as a fall in
interest rates could lead to an appreciation in bond prices. With wholesale price inflation
coming at nil for November, expectations of interest rate cuts as early as in the March quarter
are high. "Shortterm rates can fall more than long-term rates. We expect consumer inflation to
be in the range of 5-5.5%, and expect RBI to cut interest rates by 50 basis points in 2015,"
said DhawalDalal, executive V-P and head (fixed income), DSP BlackRock Mutual Fund. If
interest rates fall by 50 basis points, investors could see a 5% capital appreciation on their
long-term gilt fund portfolio.

29
Measured by BSE Sensex, stock market has generated a positive return of about 9 per cent
for investors in 2013, while gold prices fell by about three per cent and its poorer cousin
silver plummeted close to 24 per cent.
After outperforming stock market for more than a decade, gold has been on back foot for two
consecutive years now vis-a-vis equities, shows an analysis of their price movements.

"Gold's under-performance was mainly due to prices falling in dollar terms amid anticipated
tapering over last several months combined with FII investment in Indian stocks.

"This movement has been equally true for global markets as 2013 saw gold losing its shine
and markets coming back with a bang," said Jayant Manglik, President Retail Distribution,
Religare Securities.

"As always, gold and stock prices follow opposite trends and this year was no different
except that both changed direction," he said.

Improvement in the world economy has brought the risk appetite back amongst retail
investors and this has drenched the liquidity from safe havens such as gold leading to its
under-performance, an expert said.

In 2012, the Sensex had gained over 25 per cent, which was nearly double the gain of about
12.95 per cent in gold. The appreciation in silver was at about 12.84 per last year.

According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets have
particularly shown great strength post July-August 2013 when RBI took some strong
measures to control the steeply depreciating rupee."

"When the US Fed gave indications that it might taper its stimulus programme given the
economy shows improvement, a knee-jerk correction was seen in most risky assets, including
stocks in Indian markets. However, assurance by the Fed about planned and staggered
tapering in stimulus once again proved to be a catalyst for the markets."

"External factors affecting Indian stocks seem to be negative for the first half of 2014 due to
continued strength of the US dollar and benign in the second half. By that time, elections too
would have taken place. A combination of domestic and international factors point to a
bumper closing of Indian markets in 2014 with double-digit percentage growth," he said.

30
Stock market segment mid-cap and small-cap indices have fallen by about 10 per cent and 16
per cent, respectively, in 2013.

Foreign Institutional Investors have bought shares worth over Rs 1.1 lakh crore (nearly USD
20 billion) till December 19. In 2012, they had pumped in Rs 1.28 lakh crore (USD 24.37
billion).

Evolution
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years
ago. The earliest records of security dealings in India are meager and obscure. The East India
Company was the dominant institution in those days and business in its loan securities used
to be transacted towards the close of the eighteenth century.

By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in
Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers
recognized by banks and merchants during 1840 and 1850.

The 1850's witnessed a rapid development of commercial enterprise and brokerage business
attracted many men into the field and by 1860 the number of brokers increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of Europe
was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to
about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump
began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at
Rs. 87).

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,
found a place in a street (now appropriately called as Dalal Street) where they would
conveniently assemble and transact business. In 1887, they formally established in Bombay,
the "Native Share and Stock Brokers' Association" (which is alternatively known as " The
Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it
was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

Other leading cities in stock market operations


Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After
1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were

31
floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers
formed "The Ahmadabad Share and Stock Brokers' Association".

What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to
Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta. After
the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which was
followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between 1904
and 1908. On June 1908, some leading brokers formed "The Calcutta Stock Exchange
Association".

In the beginning of the twentieth century, the industrial revolution was on the way in India
with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company
Limited in 1907, an important stage in industrial advancement under Indian enterprise was
reached.

Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies generally
enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange" with 100
members. However, when boom faded, the number of members stood reduced from 100 to 3,
by 1923, and so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was a
rapid increase in the number of textile mills and many plantation companies were floated. In
1937, a stock exchange was once again organized in Madras - Madras Stock Exchange
Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange
Limited).

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the
Punjab Stock Exchange Limited, which was incorporated in 1936.

Indian Stock Exchanges - An Umbrella Growth


The Second World War broke out in 1939. It gave a sharp boom which was followed by a
slump. But, in 1943, the situation changed radically, when India was fully mobilized as a
supply base.

32
On account of the restrictive controls on cotton, bullion, seeds and other commodities, those
dealing in them found in the stock market as the only outlet for their activities. They were
anxious to join the trade and their number was swelled by numerous others. Many new
associations were constituted for the purpose and Stock Exchanges in all parts of the country
were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940)
and Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the
Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947,
amalgamated into the Delhi Stock Exchnage Association Limited.

Post-Independence Scenario
Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange
was closed during partition of the country and later migrated to Delhi and merged with Delhi
Stock Exchange.

Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.

Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well established
exchanges, were recognized under the Act. Some of the members of the other Associations
were required to be admitted by the recognized stock exchanges on a concessional basis, but
acting on the principle of unitary control, all these pseudo stock exchanges were refused
recognition by the Government of India and they thereupon ceased to function.

Thus, during early sixties there were eight recognized stock exchanges in India (mentioned
above). The number virtually remained unchanged, for nearly two decades. During eighties,
however, many stock exchanges were established: Cochin Stock Exchange (1980), Uttar
Pradesh Stock Exchange Association Limited (at Kanpur, 1982), and Pune Stock Exchange
Limited (1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock
Exchange Limited (1984), Kanara Stock Exchange Limited (at Mangalore, 1985), Magadh
Stock Exchange Association (at Patna, 1986), Jaipur Stock Exchange Limited (1989),

33
Bhubaneswar Stock Exchange Association Limited (1989), Saurashtra Kutch Stock Exchange
Limited (at Rajkot, 1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently
established exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one
recognized stock exchanges in India excluding the Over The Counter Exchange of India
Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

The Table given below portrays the overall growth pattern of Indian stock markets since
independence. It is quite evident from the Table that Indian stock markets have not only
grown just in number of exchanges, but also in number of listed companies and in capital of
listed companies. The remarkable growth after 1985 can be clearly seen from the Table, and
this was due to the favouring government policies towards security market industry.

Trading Pattern of the Indian Stock Market


Trading in Indian stock exchanges are limited to listed securities of public limited companies.
They are broadly divided into two categories, namely, specified securities (forward list) and
non-specified securities (cash list). Equity shares of dividend paying, growth-oriented
companies with a paid-up capital of atleast Rs.50 million and a market capitalization of
atleast Rs.100 million and having more than 20,000 shareholders are, normally, put in the
specified group and the balance in non-specified group.

Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery
transactions "for delivery and payment within the time or on the date stipulated when
entering into the contract which shall not be more than 14 days following the date of the
contract" : and (b) forward transactions "delivery and payment can be extended by further
period of 14 days each so that the overall period does not exceed 90 days from the date of the
contract". The latter is permitted only in the case of specified shares. The brokers who carry
over the outstandings pay carry over charges (cantango or backwardation) which are usually
determined by the rates of interest prevailing.

A member broker in an Indian stock exchange can act as an agent, buy and sell securities for
his clients on a commission basis and also can act as a trader or dealer as a principal, buy and
sell securities on his own account and risk, in contrast with the practice prevailing on New
York and London Stock Exchanges, where a member can act as a jobber or a broker only.

34
The nature of trading on Indian Stock Exchanges are that of age old conventional style of
face-to-face trading with bids and offers being made by open outcry. However, there is a
great amount of effort to modernize the Indian stock exchanges in the very recent times.

Over The Counter Exchange of India (OTCEI)


The traditional trading mechanism prevailed in the Indian stock markets gave way to many
functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long
settlement periods and benami transactions, which affected the small investors to a great
extent. To provide improved services to investors, the country's first ringless, scripless,
electronic stock exchange - OTCEI - was created in 1992 by country's premier financial
institutions - Unit Trust of India, Industrial Credit and Investment Corporation of India,
Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation
of India, General Insurance Corporation and its subsidiaries and CanBank Financial Services.

Trading at OTCEI is done over the centres spread across the country. Securities traded on the
OTCEI are classified into:
 Listed Securities - The shares and debentures of the companies listed on the OTC can
be bought or sold at any OTC counter all over the country and they should not be listed
anywhere else
 Permitted Securities - Certain shares and debentures listed on other exchanges and
units of mutual funds are allowed to be traded
 Initiated debentures - Any equity holding atleast one lakh debentures of a particular
scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,
certificates of listed securities and initiated debentures are not traded at OTC. The original
certificate will be safely with the custodian. But, a counter receipt is generated out at the
counter which substitutes the share certificate and is used for all transactions.

In the case of permitted securities, the system is similar to a traditional stock exchange. The
difference is that the delivery and payment procedure will be completed within 14 days.

Compared to the traditional Exchanges, OTC Exchange network has the following
advantages:

35
 OTCEI has widely dispersed trading mechanism across the country which provides
greater liquidity and lesser risk of intermediary charges.
 Greater transparency and accuracy of prices is obtained due to the screen-based
scripless trading.

 Since the exact price of the transaction is shown on the computer screen, the investor
gets to know the exact price at which s/he is trading.
 Faster settlement and transfer process compared to other exchanges.
 In the case of an OTC issue (new issue), the allotment procedure is completed in a
month and trading commences after a month of the issue closure, whereas it takes a
longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency investors
are gradually becoming aware of the manifold advantages of the OTCEI.

National Stock Exchange (NSE)


With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock
market trading system on par with the international standards. On the basis of the
recommendations of high powered Pherwani Committee, the National Stock Exchange was
incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and
Investment Corporation of India, Industrial Finance Corporation of India, all Insurance
Corporations, selected commercial banks and others.

Trading at NSE can be classified under two broad categories:


(a) Wholesale debt market and
(b) Capital market.

Wholesale debt market operations are similar to money market operations - institutions and
corporate bodies enter into high value transactions in financial instruments such as
government securities, treasury bills, public sector unit bonds, commercial paper, certificate
of deposit, etc.

There are two kinds of players in NSE:


(a) Trading members and
(b) Participants.

36
Recognized members of NSE are called trading members who trade on behalf of themselves
and their clients. Participants include trading members and large players like banks who take
direct settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism which
adopts the principle of an order-driven market. Trading members can stay at their offices and
execute the trading, since they are linked through a communication network. The prices at
which the buyer and seller are willing to transact will appear on the screen. When the prices
match the transaction will be completed and a confirmation slip will be printed at the office
of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as follows:
 NSE brings an integrated stock market trading network across the nation.
 Investors can trade at the same price from anywhere in the country since inter-market
operations are streamlined coupled with the countrywide access to the securities.
 Delays in communication, late payments and the malpractice’s prevailing in the
traditional trading mechanism can be done away with greater operational efficiency and
informational transparency in the stock market operations, with the support of total
computerized network.

Unless stock markets provide professionalized service, small investors and foreign investors
will not be interested in capital market operations. And capital market being one of the major
source of long-term finance for industrial projects, India cannot afford to damage the capital
market path. In this regard NSE gains vital importance in the Indian capital market system.

Planning History of India


The development of planning in India began prior to the first Five Year Plan of independent
India, long before independence even. The idea of central directions of resources to overcome
persistent poverty gradually, because one of the main policies advocated by nationalists early
in the century. The Congress Party worked out a program for economic advancement during
the 1920’s, and 1930’s and by the 1938 they formed a National Planning Committee under
the chairmanship of future Prime Minister Nehru. The Committee had little time to do
anything but prepare programs and reports before the Second World War which put an end to
it. But it was already more than an academic exercise remote from administration.
Provisional government had been elected in 1938, and the Congress Party leaders held

37
positions of responsibility. After the war, the Interim government of the pre-independence
years appointed an Advisory Planning Board. The Board produced a number of somewhat
disconnected Plans itself. But, more important in the long run, it recommended the
appointment of a Planning Commission.

The Planning Commission did not start work properly until 1950. During the first three years
of independent India, the state and economy scarcely had a stable structure at all, while
millions of refugees crossed the newly established borders of India and Pakistan, and while
ex-princely states (over 500 of them) were being merged into India or Pakistan. The Planning
Commission as it now exists, was not set up until the new India had adopted its Constitution
in January 1950.

Objectives of Indian Planning


The Planning Commission was set up the following Directive principles :
 To make an assessment of the material, capital and human resources of the country,
including technical personnel, and investigate the possibilities of augmenting such of
these resources as are found to be deficient in relation to the nation’s requirement.
 To formulate a plan for the most effective and balanced use of the country’s resources.
 Having determined the priorities, to define the stages in which the plan should be
carried out, and propose the allocation of resources for the completion of each stage.
 To indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political situation,
should be established for the successful execution of the Plan.
 To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.
 To appraise from time to time the progress achieved in the execution of each stage of
the Plan and recommend the adjustments of policy and measures that such appraisals
may show to be necessary.
 To make such interim or auxiliary recommendations as appear to it to be appropriate
either for facilitating the discharge of the duties assigned to it or on a consideration of
the prevailing economic conditions, current policies, measures and development
programs; or on an examination of such specific problems as may be referred to it for
advice by Central or State Governments.

38
The long-term general objectives of Indian Planning are as follows:
 Increasing National Income

 Reducing inequalities in the distribution of income and wealth

 Elimination of poverty

 Providing additional employment; and

 Alleviating bottlenecks in the areas of : agricultural production, manufacturing


capacity for producer’s goods and balance of payments.

Economic growth, as the primary objective has remained in focus in all Five Year Plans.
Approximately, economic growth has been targeted at a rate of five per cent per annum. High
priority to economic growth in Indian Plans looks very much justified in view of long period
of stagnation during the British rule

39
COMPANY PROFILE
SHAREKHAN

Share khan, India’s leading stock broker is the retail arm of SSKI, an organization
with over eighty years of experience in the stock market with more than 280 share shops
in 120 cities and big towns, and premier online trading destination www.sharekhan.com.
Share khan offers the trade execution facilities for cash as well as derivatives, on BSE and
NSE, depository services, commodities trading on the MCX(Multi Commodity Exchange
of India Ltd) and NCDEX (National Commodity and Derivative Exchange) and most
importantly, investment advice tempered by eighty years of broking experience.

Share khan provides the facility to trade in commodities through Share khan
Commodities Pvt.Ltd-a wholly owned subsidiary of its parent SSKI. Share khan is the
member of two major commodity exchanges MCX and NCDEX.

SSKI
Apart from Share khan, the SSKI group also comprises of institutional broking and corporate
finance. The institutional broking division caters to domestic and foreign institutional
investors, while the corporate finance division focuses on niche areas such as infrastructure,
telecom and media. SSKI owns 56% in Share khan and the balance ownership is HSBC, First
Caryl and Intel Pacific. SSKI has been voted as the top domestic brokerage house in the
research category, twice by Euro money survey and four times by Asia money survey.

SHAREKHAN STOCK BROKING COMPANY


Share khan is one of the leading retail brokerage of City Venture which is running
successfully since 1922 in the country. Earlier it was the retail broking arm of the Mumbai
based SSKI (SRIPAL SRAVANTHI KANTHILAL ISWARLAL)Group, which has over eight
decades of experience in the stock broking business. Share khan offers its customers a wide
range of equity related services including trade execution on BSE, NSE, Derivatives,
depository services, online trading, investment advice etc.

40
Earlier with a legacy of more than 80 years in the stock markets, the SSKI group ventured
into institutional broking and corporate finance 18 years ago. SSKI is one of the leading
players in institutional broking and corporate finance activities. SSKI holds a sizeable portion
of the market in each of these segments. SSKI’s institutional broking arm accounts for 7% of
the market for Foreign Institutional portfolio investment and 5% of all Domestic Institutional
portfolio investment in the country.

It has 60 institutional clients spread over India, Far East, UK and US. Foreign Institutional
Investors generate about 65% of the organization’s revenue, with a daily turnover of over
US$ 2million.The objective has been to let customers make informed decisions and to
simplify the process of investing in stocks.

“Mission” of the Share khan is


“To educate and empower the individual investor to make better investment
decisions through

 QUALITY ADVICE
 INNOVATIVE PRODUCTS and
 SUPERIOR SERVICE.”

WORK STRUCUTRE OF SHAREKHAN:


Share khan has always believed in investing in technology to build its business. The
company has used some of the best-known names in the IT industry, like Sun Microsystems,
Oracle, Microsoft, Cambridge Technologies, Nexgenix, Vignette, VeriSign Financial
Technologies India Ltd, Spider Software Pvt. Ltd. to build its trading engine and content. The
City Venture holds a majority stake in the company. HSBC, Intel & Carlyle are the other
investors.

On April 17, 2002 Sharekhan launched Speed Trade and Trade Tiger, are net-based
Executable application that emulates the broker terminals along with host of other
information relevant to the Day Traders. This was for the first time that a net-based trading
station of this caliber was offered to the traders. In the last six months Speed Trade has
become a de facto standard for the Day Trading community over the net. Share khan’s ground
network includes over 700+ Share shops in 130+ cities in India.
41
The firm’s online trading and investment site www.sharekhan.com - was launched on
Feb 8, 2000. The site gives access to superior content and transaction facility to retail
customers across the country.

PRODUCT AND SERVICES OFFERD BY SHAREKHAN:


 Equity Trading Platform (Online/Offline).
 Commodities Trading Platform (Online/Offline).
 Portfolio Management Service.
 Mutual Fund Advisory and Distribution.
 Insurance Distribution.
 Forex

REASON TO CHOOSE SAHREKHAN LIMITED


Experience
SSKI has more than eight decades of trust and credibility in the Indian stock market.
In the Asia Money broker's poll held recently, SSKI won the 'India's best broking house for
2004' award. Ever since it launched Share khan as its retail broking division in February

42
2000, it has been providing institutional-level research and broking services to individual
investors.

Technology
With their online trading account one can buy and sell shares in an instant from any PC
with an internet connection. Customers get access to the powerful online trading tools that
will help them to take complete control over their investment in shares.

Knowledge
In a business where the right information at the right time can translate into direct
profits, investors get access to a wide range of information on the content-rich portal,
www.sharekhan.com. Investors will also get a useful set of knowledge-based tools that will
empower them to take informed decisions.

Convenience
One can call Share khan’s Dial-N-Trade number to get investment advice and execute
his/her transactions. They have a dedicated call-center to provide this service via a Toll Free
Number 1800 22-7500 & 39707500 from anywhere in India.

Customer Service
Its customer service team assist their customer for any help that they need relating to
transactions, billing, demat and other queries. Their customer service can be contacted via a
toll free number, email or live chat on www.sharekhan.com.

Investment Advice
Sharekhan has dedicated research teams of more than 30 people for fundamental and
technical research. Their analysts constantly track the pulse of the market and provide timely
investment advice to customer in the form of daily research emails, online chat, printed
reports etc.

Benefits
 Free Depository A/c
 Instant Cash Transfer
 Multiple Bank Option.

43
 Secure Order by Voice Tool Dial-n-Trade.
 Automated Portfolio to keep track of the value of your actual purchases.
 Personalized Price and Account Alerts delivered instantly to your Mobile Phone & Email
address.
 Special Personal Inbox for order and trade confirmations.
 On-line Customer Service via Web Chat.
 Buy or sell even single share
 Anytime Ordering.

Share khan offers the following products :-


CLASSIC ACCOUNT
This is a User Friendly Product which allows the client to trade through website
www.sharekhan.com and is suitable for the retail investors who is risk-averse and hence
prefers to invest in stocks or who does not trade too frequently.

Features
 Online trading account for investing in Equity and Derivatives via
www.sharekhan.com
 Live Terminal and Single terminal for NSE Cash, NSE F&O & BSE.
 Integration of On-line trading, Saving Bank and Demat Account.
 Instant cash transfer facility against purchase & sale of shares.
 Instant order and trade confirmation by E-mail.
 Streaming Quotes (Cash & Derivatives).

SPEEDTRADE
SPEEDTRADE is an internet-based software application that enables you to buy and
sell in an instant. It is ideal for active traders and jobbers who transact frequently during day’s
session to capitalize on intra-day price movement.
Features
 Single screen trading terminal for NSE Cash, NSE F&O & BSE.
 Technical Studies & Multiple Charting.
 Market summary (Cost traded scrip, highest clue etc.)
 Alerts and reminders.

44
 Back-up facility to place trades on Direct Phone lines.

DIAL-N-TRADE
Along with enabling access for trade online, the CLASSIC and SPEEDTRADE
ACCOUNT also gives Dial-n-trade services. With this service, one can dial Share khan’s
dedicated phone lines 1800-22-7500, 3970-7500. Beside this, Relationship Managers are
always available on Office Phone and Mobile to resolve customer queries.

SHARE MOBILE
Sharekhan had introduced Share Mobile, mobile based software where one can watch
Stock Prices, Intra Day Charts, Research & Advice and Trading Calls live on the Mobile. (As
per SEBI regulations, buying-selling shares through a mobile phone are not yet permitted.)

PREPAID ACCOUNT
Customers pay Advance Brokerage on trading Account and enjoy uninterrupted
trading in their Account. Beside this, great discount are also available (up to 50%) on
brokerage.
 Prepaid Classic Account: - Rs.750
 Prepaid Speed trade Account: - Rs.1000

IPO ON-LINE
Customers can apply to all the forthcoming IPOs online. This is quite hassle-free,
paperless and time saving. Simply allocate fund to IPO Account, Apply for the IPO and Sit
Back & Relax.

Mutual Fund Online


Investors can apply to Mutual Funds of Reliance, Franklin Templeton Investments,
ICICI Prudential, SBI, Birla, Sundaram, HDFC, DSP Merrill Lynch, PRINCIPAL and TATA
with Sharekhan.

45
Zero Balance ICICI Saving Account
Sharekhan had tied-up with ICICI bank for Zero Balance Account for Share khan’s
Clients. Now their customers can have a Zero Balance Saving Account with ICICI Bank after
your demat account creation with Sharekhan.
AWARDS:
 Rated among the top 20 wired companies along with Reliance, HLL, Infosys etc by
Business Today edition.
 PIONEERS of online trading in India.
 Amongst the top 3 online trading websites from India.
 Most preferred financial destination amongst online banking customers.
 Winner of ‘Best Financial Website Award
 Awarded to Share khan at the Ahwaz ‘Consumer Awards 2005’ in the "Stock Broking"
category. Research conducted by AC Nielsen-ORG MARG for Ahwaz.

SWOT ANALYSIS

Strengths

 Strong credibility among investors because of its heritage.


 Excellent reputation among the business society.
 Capability of providing superior customer service.
 Quality research team.
 Easier access to the customer due to largest ground network of 280 branded share
shops in 120 cities.
 Abundant information about economy and companies.
 Ability to attract and retain superior and quality personnel.
 Highly sophisticated infrastructure.
 Efficient research and analysis team, which by interpreting the economy and
company’s performance accurately is enhancing the profitability of the clientele.

Weaknesses

 Limited customer appeal as the company product line does not include mutual funds
which is increasingly becoming a preferred customer investment option.
 Inadequate product awareness among the retail investors.

46
 Limited customer appeal as the company does not have access to the BSE online
space.
 Brand awareness is low in the financial market.
 Promotional activities conducted by the company are not at par with the other firms.

Opportunities
 Hyderabad covers only 3% of investors which gives huge potential for the market

penetration.
 Bullish phase of the market attracts investing public.
 Access to the BSE online space for the retail investors creates opportunity to increase
clientele base.
 An awareness campaign about online trading creates new market.

Threats

 Availability of Unit Linked Insurance Policies (ULIP’s) and mutual funds in the
market.
 Threat of entry is high in this industry as the manpower required is less and capital
requirement is medium.

Observations:

 Fluctuations are more in secondary market than any other market.


 There are more speculators than investors.
 Information plays a vital role in the secondary market.
 Previously rolling settlement is T+5 days, now it changed to T+2 days and further
it will be changing to T+1 day.
 It was also observed that many broking houses offering internet trading allow
clients to use their conventional system as well just ensure that they do not loose them
and this instead of offering e-broking services they becomes service providers.
 The number of players is increasing at a steady rate and today there are over a
dozen of brokerage houses who have opted to offer net trading to their customers and
prominent among them are SHARE KHAN, India bulls, kotakstreet, ICICI direct and
geojit.

47
 The Bombay stock exchange sensex zoomed past the 7700 barrier for the first
time in history to achieve new all time high of 7800 intra day trade and ended at a
historic close of 7732 points.

48
CHAPTER – IV
DATA ANALYSIS & INTERPRETATION

49
DATA ANALYSIS & INTERPRETATION

IPO Issues in 2016-2017

Issuer Company Issue Open Issue Close Offer Issue Issue Size
Price Type (Rs Crore)
(Rs.)

OFS Techno 14th Jan ----- 26.75 27.35 9.4


291.0
Narayana Hruda 6th Jan ----- 336.70 34.68
0
Narayana Hrudayalaya Ltd Dec 17, 2016 Dec 21, 250/- IPO-BB 613.08
IPO 2016

Alkem Laboratories Limited Dec 8, 2016 Dec 10, 1050/ IPO-BB 1,349.61
IPO 2016 -

Dr. Lal PathLabs Limited Dec 8, 2016 Dec 10, 550/- IPO-BB 638.00
IPO 2016

S H Kelkar& Company Ltd Oct 28, 2016 Oct 30, 180/- IPO-BB 200.00
IPO 2016

Interglobe Aviation Ltd IPO Oct 27, 2016 Oct 29, 765/- IPO-BB 1,272.20
2016

Coffee Day Enterprises Ltd Oct 14, 2016 Oct 16, 328/- IPO-BB 1,150.00
IPO 2016

Sadbhav Infrastructure Aug 31, 2016 Sep 2, 2016 103/- IPO-BB 425.00
Project Limited IPO

Prabhat Dairy Limited IPO Aug 28, 2016 Sep 4, 2016 115/- IPO-BB 520.00

Shree Pushkar Chemicals Aug 25, 2016 Aug 27, 65/- IPO-BB 70.00

50
and Fertilisers Ltd IPO 2016

Pennar Engineered Building Aug 25, 2016 Aug 27, 178/- IPO-BB 156.19
Systems Ltd IPO 2016

Navkar Corporation Limited Aug 24, 2016 Aug 26, 155/- IPO-BB 600.00
IPO 2016

Power Mech Projects Ltd Aug 7, 2016 Aug 11, 640/- IPO-BB 273.22
IPO 2016

Syngene International Ltd Jul 27, 2016 Jul 29, 2016 250/- IPO-BB 550.00
IPO

Manpasand Beverages Ltd Jun 24, 2016 Jun 26, 320/- IPO-BB 400.00
IPO 2016

PNC Infratech Limited IPO May 8, 2016 May 12, 378/- IPO-BB 488.44
2016

UFO Moviez Ltd IPO Apr 28, 2016 Apr 30, 625/- IPO-BB 600.00
2016

MEP Infrastructure Apr 21, 2016 Apr 23, 63/- IPO-BB 324.00
Developers Ltd IPO 2016

VRL Logistics Ltd IPO Apr 15, 2016 Apr 17, 205/- IPO-BB 473.88
2016

Inox Wind Limited IPO Mar 18, 2016 Mar 20, 310/- IPO-BB 700.00
2016

Adlabs Entertainment Ltd Mar 10, 2016 Mar 12, 168/- IPO-BB 341.48
IPO 2016

51
Chart Title

INTERPRETATION
The above table projects the difference between LTP and Issue price of different companies in
the current year and the positions in the company’s are dependent on the market value only.

Based on LTP and Issue price differences we can conclude that the investor who invested in
Amrapali cap and Just dial got highest benefit respectively.

IPO Issues in 2015-2016

Equity Issue Price Current Price %Gain/Loss

December-2015

Monte Carlo 645.00 544.40 -15.60

Anubhav Infra 15.00 14.60 -2.67

52
Captain Pipes 40.00 42.50 6.25

AanchalIspat 20.00 17.00 -15.00

November-2015

Jet Infra 125.00 128.00 2.40

JLA Infraville 10.00 13.49 34.90

October-2015

Vibrant Global 19.00 18.90 -0.53

Aryaman Cap 12.00 13.25 10.42

Dhabriya Poly 15.00 24.00 60.00

Momai Apparels 78.00 82.35 5.58

AtishayInfotec 16.00 18.75 17.19

Ultracab India 36.00 54.00 50.00

Shemaroo Ent 170.00 158.95 -6.50

September-2015

Encash Ent 40.00 111.05 177.63

Naysaa Sec 15.00 15.00 0.00

Sharda Crop 156.00 257.55 65.10

Snowman Logist 47.00 96.55 105.43

August-2015

Vishal Fabrics 45.00 55.00 22.22

CarewellInds 15.00 8.20 -45.33

Bhanderi Infra 120.00 120.00 0.00

July-2015

Oasis Tradelink 30.00 35.20 17.33

June-2015

53
TariniInt 41.00 24.25 -40.85

DhanukaCommerc 10.00 8.50 -15.00

SPS Finquest 75.00 84.00 12.00

May-2015

GCM Capital 20.00 115.30 476.50

Bansal Roofing 30.00 30.50 1.67

Wonderla 125.00 291.85 133.48

April-2015

R&B Denims 10.00 11.00 10.00

Women's Next 65.00 65.70 1.08

OceanaaBiotek 10.00 11.40 14.00

March-2015

Krishna Prasad 10.00 23.00 130.00

Karnimata Cold 20.00 19.50 -2.50

February-2015

Unishire Urban 10.00 10.00 0.00

PolymacThermo 35.00 96.00 174.29

54
INTERPRETATION
The above table projects the difference between LTP and Issue price of different companies in
the current year and the positions in the company’s are dependent on the market value only.

Based on LTP and Issue price differences we can conclude that the investor who invested in
Amrapali cap and Just dial got highest benefit respectively.

New issues in future market

Issuer Exchang Issue Open Issue Close Offer Price Issue Issue
Company e (Rs.) Type Size
(Rs
Crore
)
NCML BSE, Dec 29, 2015 Jan 2, 2016 100/- to IPO- 60.00 -
Industries Ltd NSE 120/- BB 72.00
IPO
Monte Carlo BSE, Dec 3, 2015 Dec 5, 2015 630/- to IPO- 350.43
Fashions NSE 645/- BB
Limited IPO
Shemaroo BSE, Sep 16, 2015 Sep 18, 2015 155/- to IPO- 120.00
Entertainment NSE 170/- BB

55
Ltd IPO
Sharda BSE, Sep 5, 2015 Sep 9, 2015 145/- to IPO- 351.86
Cropchem Ltd NSE 156/- BB
IPO
Snowman BSE, Aug 26, Aug 28, 44/- to 47/- IPO- 197.40
Logistics Ltd NSE 2015 2015 BB
IPO
Wonderla BSE, Apr 21, 2015 Apr 23, 2015 115/- to IPO- 181.25
Holidays Ltd NSE 125/- BB
IPO
 BB = 100% Book Building Issue, FP = Fixed Price Issue
 Initial Public Offer (IPO), is the first sale of shares by the privately owned company
to the public. The companies going public raises funds through IPO's for working
capital, debt repayment, acquisitions, and a host of other uses.

 Investor can apply for IPO Stocks by filling an IPO Application Form. These forms
are usually available with stock brokers for free. Investor can also apply for IPO
Stocks online through Online Stock Brokers like ICICI bank, Share Khan, and
Reliance Money.

 Chittorgarh.com, India's No. 1 IPO investment portal provide recent IPO information
from primary stock market. IPO Tools available on this website includes IPO
Allotment Status, IPO Bidding Information, IPO Ratings, IPO Grading, IPO
Reviews, Grey Market Premiums of IPO's, IPO News and IPO Performance
Tracker

INTERPRETATION
The above table projects the difference between LTP and Issue price of different companies in
the current year and the positions in the company’s are dependent on the market value only.

Based on LTP and Issue price differences we can conclude that the investor who invested in
Amrapali cap and Just dial got highest benefit respectively.

IPO Issues in 2014-2015

Equity Issue Price Current Price %Gain/Loss

56
January-2015

Suyog Tele 25.00 25.15 0.60

RCI Industries 40.00 36.15 -9.63

December-2014

Tentiwal Wire 13.00 11.50 -11.54

Captain Poly 30.00 38.00 26.67

November-2014

Stellar Capital 20.00 10.95 -45.25

Mitcon Cons 61.00 45.45 -25.49

October-2014

Amrapali Cap 100.00 100.00 0.00

VCU Data Mgmt 25.00 28.15 12.60

August-2014

Silverpoint 15.00 7.40 -50.67

June-2014

Edynamics Sol 25.00 57.30 129.20

Just Dial 530.00 1575.00 197.17

Onesource Tech 14.00 7.85 -43.93

April-2014

Repco Home 172.00 326.20 89.65

March-2014

Bothra Metals 25.00 26.25 5.00

HPC Bio 35.00 166.00 374.29

Channel Nine 25.00 108.50 334.00

Kavita Fabrics 40.00 108.50 171.25

57
Sunstar Realty 20.00 128.25 541.25

February-2014

Esteem Bio 25.00 184.00 636.00

Issue Price
Current Price
%Gain/Loss

INTERPRETATION:
The above table projects the difference between LTP and Issue price of different companies in
the current year and the positions in the company’s are dependent on the market value only.

Based on LTP and Issue price differences we can conclude that the investor who invested in
Amrapali cap and Just dial got highest benefit respectively.

58
IPO Issues in 2013-2014

Equity Issue Price Current Price %Gain/Loss


January-2014
Eco Friendly 25.00 25.60 2.40
December-2013
Bharti Infratel 220.00 209.90 -4.59
PC Jeweller 135.00 141.90 5.11
CARE 750.00 820.35 9.38
Veto Switch 50.00 50.75 1.50
Tara Jewels 230.00 212.00 -7.83
November-2013
Bronze Infra 15.00 14.65 -2.33
October-2013
RCL Retail 10.00 9.70 -3.00
Anshus Clothing 27.00 31.50 16.67
September-2013
Comfort Comm 10.00 17.55 75.50
ThejoEngg 402.00 17.55 -95.63
SRG Housing Fin 20.00 21.25 6.25
Jointeca Edu 15.00 15.90 6.00
August-2013
Jupiter Infomed 20.00 24.50 22.50
Sangam Advisors 22.00 23.95 8.86
July-2013
VKS Projects 55.00 189.10 243.82
Max Alert Syste 20.00 94.95 374.75
May-2013
Monarch Health 40.00 142.50 256.25
Speciality Rest 150.00 173.40 15.60
Tribhovandas 120.00 226.25 88.54
April-2013
NBCC 106.00 158.15 49.20
MT Educare 80.00 107.60 34.50
March-2013
Olympic Cards 30.00 60.60 102.00
BCB Finance 25.00 25.00 0.00
MCX India 1032.00 1343.25 30.16
November-2012
Indo Thai Secu 74.00 10.70 -85.54
October-2012

59
VaswaniInd 49.00 4.73 -90.35
M and B Switch 186.00 25.95 -86.05
Flexituff Inter 155.00 223.45 44.16
TaksheelSolut 150.00 8.36 -94.43

INTERPRETATION:
The above table projects the difference between LTP and Issue price of different companies in
the current year and the positions in the companys are dependent on the market value only.

Based on LTP and Issue price differences we can conclude that the investor who invested in
Rushil Decorand One life Capital got highest benefit respectively.

IPO Issues in 2012

Equity Issue Price Current Price %Gain/Loss


November-2012
Indo Thai Secu 74.00 12.93 -82.53
October-2012
VaswaniInd 49.00 10.99 -77.57

60
M and B Switch 186.00 68.30 -63.28
TaksheelSolut 150.00 13.53 -90.98
Flexituff Inter 155.00 249.70 61.10
Onelife Capital 110.00 299.20 172.00
TijariaPolypip 60.00 8.94 -85.10
Prakash Constro 138.00 131.70 -4.57
September-2012
PG Electroplast 210.00 171.00 -18.57
SRS 58.00 34.25 -40.95
TD Power System 256.00 244.05 -4.67
Brooks Labs 100.00 14.08 -85.92
August-2012
Tree House Edu 135.00 214.15 58.63
L&T Finance 52.00 48.95 -5.87
Inventure Grow 117.00 210.20 79.66
July-2012
Readymade Steel 108.00 63.75 -40.97
Birla Pacific 10.00 7.01 -29.90
Rushil Decor 72.00 161.05 123.68
June-2012
Timbor Home 63.00 28.70 -54.44
VMS Industries 40.00 44.55 11.37

INTERPRETATION:
The above table projects the difference between LTP and Issue price of different companies in
the current year and the positions in the companys are dependent on the market value only.

61
Based on LTP and Issue price differences we can conclude that the investor who invested in
Rushil Decorand One life Capital got highest benefit respectively.

TABLE SHOWING SCRIPS OF FINANCIAL SERVICES

62
DIFFRENCE
ISSUE
DATE OF PRICE ISSUE BETWEEN
NAME OF THE ISSUE SIZE LTP
S.NO ISSUE RANGE PRICE ISSUE
(LAKHS)
PRICE &LTP
MotilalOswal Financial 20/08/10-
1 29.8271 725-825 825 971.20 +146.20
services Ltd 23/8/10
ICRA Ltd 20/03/10-
2 25.811 275-330 330 1030 +700
23/03/10
Power finance 31/01/10-
3 1173.167 73-85 85 200.90 +115.90
Corporation Ltd 06/02/10
Transwarranty Finance 23/01/10-
4 60 48-55 52 29.15 -22.85
Ltd 02/02/10
Emkayshare&stock 31/03/09-
5 62.50 100-120 120 140.10 +20.10
brokers Ltd 07/04/09
Mahindra&Mahindra 21/02/09-
6 200 170-200 200 233.95 +33.95
Financial services Ltd 24/02/09
Infrastructure
15/07/08-
7 development Financial 4036 29-34 34 140.10 +106.10
22/07/08
co. Ltd
IL&FS Investment Ltd 4/07/09-
8 114 110-125 125 194.10 +69.10
08/07/09
India Infoline Ltd 21/04/08-
9 118.78138 70-80 76 849.50 +773.50
27/04/08
Indian Bulls Financial 06/10/07-
10 271.87519 16-19 19 593.10 +574.10
Services Ltd 10/09/07

63
CHART SHOWING ISSUE PRICE & LTP
1200

1000

800

600

400

200

0
M I PFISSUE
T PRICE
E M LTP
ID IL IIL IB

INTERPRETATION:
1.The above table reveals that the difference between LTP and Issue Price of MotilalOswal
Financial services Ltd , ICRA Ltd, Power finance Corporation Ltd , Transwarranty Finance
Ltd , Emkayshare&stock brokers Ltd , Mahindra&Mahindra Financial services Ltd ,
.Infrastructure development Financial co. Ltd , IL&FS Investment Ltd , India Infoline Ltd ,
Indian Bulls Financial Services Ltd is (+)146.20, (+)700 , (+) 115.90 , (-)22.85 , (+)20.10 ,
(+)33.95 , (+)106.10 , (+)69.10 , (+)773.50 , (+)574.10 respectively.

Based on LTP & Issue price differences we can conclude that the investor who
invested in India infoline Ltd and ICRA Ltd got highest gain of Rs.773.50 and Rs.700
respectively.

It can be concluded that the all the above scrip’s are under priced except
Transwarranty Finance Ltd, which is overpriced.

64
TABLE SHOWING SCRIPS OF ELECTRONICS & ELECTRICAL

ISSUE
NAME DATE DIFFERENCE
SIZE PRICE ISSUE
S.NO OF OF LTP BETWEEN ISSUE
(LAK RANGE PRICE
ISSUE ISSUE PRICE & LTP
HS)
MIC
30/04/10-
1 Electronic 51 129-150 150 525.05 +375.05
08/05/10
s Ltd
Redington
22/01/10-
2 (Indian) 132.31 95-113 113 320 +207
25/01/10
Ltd
Autoline
08/01/10-
3 Industries 37.5 200-225 225 209.95 -15.05
12/01/10
Ltd
FIEM
21/09/08-
4 Industries 41 125-145 137 102.95 -34.05
27/09/08
Ltd
Voltamp
24/08/08- 48.838
5 Transform 295-345 345 1342.25 +997.25
29/08/08 4
ers Ltd
Opto
31/03/08-
6 circuits(In 40 240-270 270 532 +262
05/04/08
dia) Ltd

65
CHART SHOWING ISSUE PRICE & LTP
1400
1200
1000
800
600
400
200
0
MIC RL AIL price
issue FIEM VTL OCL

INTERPRETATION:
1. .The above table shows that the difference between LTP and Issue Price of MIC electronics
Ltd , Redington (India) Ltd , Autoline industries Ltd , FIEM industries Ltd , Voltamp
Transformers Ltd , Opto circuits (India) Ltd is (+) 375.05 , (+)207 , (-)15.05 ,
(-) 34.05, (+) 997.25, (+) 262 respectively.

Based on LTP and Issue Price differences we can conclude that the investor who
invested in Voltamp Transformers Ltd, MIC Electronics Ltd, Opto Circuits (India) Ltd,
Redington (India) Ltd got benefits of Rs.997.25, Rs.375.05, Rs.262, and Rs.207 respectively.

It can be interpreted that the conclusion all the above scrip’s are under priced except
Autoline industries Ltd and FIEM industries Ltd , which are over priced.

66
TABLE SHOWING SCRIPS OF INFRASTRUCTURE

DIFFRENCE
DATE ISSUE PRICE ISSUE
S.N NAME OF BETWEEN
OF THE SIZE RANG PRIC LTP
O THE ISSUE ISSUE PRICE &
ISSUE (LAKHS) E E
LTP
IVR Prime 23/07/10
1 Urban - 141.5 510-600 550 407.95 -142.05
developers Ltd 26/07/10
DLF Ltd 11/06/10-
2 29 150-175 175 757.45 +582.45
14/06/10
LancoInfratec 06/11/08- 444.7238
3 200-240 240 363 +123
h Ltd 10/11/08 1
Atlanta Ltd 1/09/08-
4 43 130-150 150 285.90 +135.90
07/10/8
GMR 31/07/08
5 Infrastructure - 381.3698 210-250 210 807.65 +597.65
Ltd. 04/08/08
Patel 03/05/08
106.2496
6 Engineering - 400-440 440 470.10 +30.10
5
Ltd 09/05/08
AIA
17/11/07- 1396.5
7 Engineering 47 275-315 315 +1081.50
22/11/07 0
Ltd
IVRCL 18/03/07
8 Infrastructure - 31.89870 385-415 395 415.40 +20.40
& Projects Ltd 23/03/07

67
CHART SHOWING ISSUE PRICE & LTP
1400
1200
1000
800
600
400
200
0
R LF L AL R L A CL
I V D LI M PE I
A R
G IV
ISSUE PRICE LTP

INTERPRETATION:
The above table reveals that the difference between LTP and Issue Price of in case of DLF
Ltd , LancoInfratech Ltd , Atlanta Ltd , GMR Infrastructure Ltd , Patel Engineering Ltd , AIA
engineering Ltd , IVRCL Infrastructure and projects Ltd is (+)582.45 , (+)123 , (+)135.90 ,
(+)597.65 , (+)30.10 , (+)1081.50 , (+)20.40 and IVR Prime Urban developers Ltd is
(-)142.05.

Based on LTP and Issue price differences we can concluded that the investor who invested in
IVR Prime Urban Developers Ltd got loss of Rs.(-)142.05 and other (who invested in other
scrip’s) investor got benefit.

At the end it can be concluded that the scrip IVR Prime Urban Developers ltd has been over
priced and the others DLF Ltd, LancoInfratech Ltd, Atlanta Ltd, GMR Infrastructure Ltd,
Patel Engineering Ltd, AIA engineering Ltd, IVRCL Infrastructure and projects Ltd have
been under priced.

68
TABLE SHOWING SCRIPS OF TOYS AND TEXTILES

DIFFERENCE
DATE ISSUE PRICE ISSUE
S.N NAME OF BETWEEN
OF SIZE RANG PRIC LTP
O THE ISSUE ISSUE PRICE
ISSUE (LAKHS) E E
& LTP
Gangothri 18/05/08
134.1463
1 textiles ltd - 41-46 41 21.05 - 19.95
4
23/05/08
Mudra 08/02/10
2 Lifestyle ltd - 95.8 75-90 90 66.40 - 23.60
14/02/10
Indus Fila 12/02/10
216.3
3 Ltd - 48.43789 170-185 170 + 46.30
0
14/02/10
Kewalkiran 20/03/08
4 clothing Ltd - 31 250-275 260 300 + 40
23/03/08
Raj Royan 12/01/08
5 Ltd - 85 55-65 65 23.80 - 41.20
18/01/08
Nitin 06/01/08
222.2222
6 Spinners Ltd - 18-21 21 13.50 - 7.50
2
12/01/08
Ginni 19/12/07
252.6315
7 Filaments - 19-22 22 13.90 - 8.10
8
Ltd 23/12/07
Celebrity 19/12/07
8 Fashions Ltd - 45.50 160-180 180 67.40 - 112.60
22/12/07
Bombay
11/11/07-
9 Rayon 134.75 60-70 70 248 + 178
17/11/07
Fashion Ltd
Provogue 10/06/07
+ 736
10 (India) Ltd - 40.49402 130-150 150 886
16/06/07

69
CHART SHOWING ISSUE PRICE & LTP
900
800
700
600
500
400
300
200
100
0
T L IF C RR NS F E R P
G M K
ISSUE PRICE
G
LTP C B
K

INTERPRETATION:
It is understood from the above table the difference between LTP and Issue price of Gangothri
textiles ltd , Mudra Lifestyle ltd , Indus Fila Ltd , Kewalkiran clothing Ltd , Raj Royan Ltd ,
Nitin Spinners Ltd , Ginni Filaments Ltd , Celebrity Fashions Ltd , Bombay Rayon Fashion
Ltd , Provogue (India) Ltd is (-)19.95 , (-)23.60 , (+)46.30 , (+)40 , (-)41.20 , (-)7.50 ,
(-)8.10 , (-)112.60 , (+)178 , (+)736 respectively.

Based on LTP and Issue Price differences we can concluded that the investor who invested in
Indus Fila Ltd , Kewalkiran clothing Ltd , Bombay Rayon Fashion Ltd and Provogue (India)
Ltd got benefit of Rs.46.30 , Rs.40 , Rs.178 and Rs.736 respectively.

It can be concluded that the all the above scrip’s are overpriced except Indus Fila Ltd ,
Kewalkiran clothing Ltd , Bombay Rayon Fashion Ltd and Provogue (India) Ltd which is
under priced.

70
TABLE SHOWING SCRIPS OF AVIATION INDUSTRY

DIFFERENC
DATE ISSUE PRICE ISSUE
S.N NAME OF E BETWEEN
OF SIZE RANG PRIC LTP
O THE ISSUE ISSUE PRICE
ISSUE (LAKHS) E E
& LTP
Global 29/09/08
1 Vectra - 35 175-200 185 188 +3
Helicop Ltd 06/10/08
Deccan 18/05/08
143.7
2 Aviation ltd - 245.46 146-175 148 - 4.30
0
26/05/08
Jet Airways 18/02/07
172.6680 950- 912.6
3 (India) Ltd - 1100 - 187.40
1 1125 0
24/02/07

CHART SHOWING ISSUE PRICE & LTP

1200

1000

800

600

400

200

0
ISSUE PRICE LTP
GLOBAL DECCAN JET

71
INTERPRETATION:
From the above table shows the difference between the Issue price and Last Traded Price in
case of global vector helicop ltd is (+)3 and that of Deccan aviation Ltd and Jet Airways Ltd
is (-)4.30 and (-)187.40 respectively.

Based on LTP and Issue price differences we can conclude that the investors who invested in
Global vector Helicop Ltd of Rs.3 and the investor of Deccan Aviation Ltd and Jet Airways
Ltd got a loss of Rs.4.30 and 187.40 respectively.

At the end it can be concluded that the scrip Global Vector Helicop Ltd has been under priced
and the others Deccan and Jet Airways Ltd have been over priced.

72
TABLE SHOWING SCRIPS OFPETROLEUM INDUSTRY

DIFFERENC
ISSUE PRICE ISSUE
NAME OF DATE OF E BETWEEN
S.NO SIZE RANG PRIC LTP
THE ISSUE ISSUE ISSUE PRICE
(LAKHS) E E
& LTP
Cairn India Ltd 11/12/08- 3287.9967 173.3
1 160-190 160 + 13.35
15/12/08 5 5
Reliance 13/04/08- 134.4
2 4500 57-62 60 + 74.45
petroleum Ltd 20/04/08 5
Gujarat state 24/01/08-
3 1380 23-27 27 60.85 + 33.85
Petronet Ltd 28/01/08
Oil & Natural
05/03/06- 1425.9330 912.5
4 Gas 680-750 750 + 162.55
13/03/06 0 5
Corporation Ltd
Gas Authority 27/02/06- 348.9
5 845.6516 195 195 + 153.95
of India Ltd 05/03/06 5
Indian
20/02/06- 429.0
6 Petrochemicals 718.5006 170 170 + 259.05
27/02/06 5
Corporation Ltd
IndraPrastha 28/11/05- 120.1
7 400 40-48 48 + 72.10
Gas Ltd 05/12/05 0

73
CHART SHOWING ISSUE PRICE & LTP
1000
900
800
700
600
500
400
300
200
100
0
CIL RPL GSPLI PONGC
LTP GAIL IPCL IPGL

INTERPRETATION:
It is understood from the above table the difference between LTP and issue price of Cairn
India Ltd , Reliance petroleum Ltd , Gujarat state Petronet Ltd , Oil & Natural Gas
Corporation Ltd , Gas Authority of India Ltd , Indian Petrochemicals Corporation Ltd ,
IndraPrastha Gas Ltd is (+)13.35 , (+)74.45 , (+)33.85 , (+)162.55 , (+)153.95 , (+)259.05 ,
(+)72.10 respectively

Based on LTP and Issue price differences we can say that the investor who invested in
Indian Petrochemicals Corporation Ltd and Oil & Natural Gas Corporation Ltd got highest
benefit of Rs.259.05 and Rs.162.55 respectively.

It can be concluded that the all the above scrip’s are under priced.

74
TABLE SHOWING SCRIPS OF IT SERVICES / TECHNOLOGIES

ISSUE DIFFERENC
DATE PRICE ISSUE
NAME OF SIZE E BETWEEN
S.NO OF RANG PRIC LTP
THE ISSUE (LAKHS ISSUE PRICE
ISSUE E E
) & LTP
Everonn
05/07/10
1 Systems India 5000 125-140 140 752.50 + 612.50
-11/07/10
Ltd
Take Solutions 01/08/10
1043.2
2 Ltd - 21 675-730 730 + 313.20
0
07/08/10
HOV Services 04/10/08
3 Ltd - 40.50 200-240 200 183.20 - 16.80
07/10/08
Tech mahindra 01/08/08
1317.5
4 Ltd - 127.46 315-365 365 + 952.50
0
04/08/08
Tulip IT 09/12/07
5 Services Ltd - 90 100-120 120 880 + 760
15/12/07
Info Edge 30/10/08
6 53.23851 290-320 320 1106.05 + 786.05
(India) Ltd -02/11/08
Tata 29/07/06
7 Consultancy - 554.526 775-900 850 1001 + 151
Services Ltd 05/08/06
Datamatic Tech 12/04/06
8 Ltd - 103 101-110 110 44.50 - 65.50
19/04/06
CMC Ltd 23/02/06
9 - 39.76374 485 485 1010 + 525
28/02/06
Educomp 19/12/07
10 Solutions Ltd - 40 110-125 125 3015 + 2890
22/12/07
I-Flex Solutions 05/06/04
11 39.617 530 530 1865 + 1335
Ltd -11/06/04

75
CHART SHOWING ISSUE PRICE & LTP
3500
3000
2500
2000
1500
1000
500
0
ESIL TSL HOV TM TIT
IP IELTPTCS DT CMC ESL I-FS

INTERPRETATION:
The above table reveals that the difference between LTP and issue price in case of Everonn
Systems India Ltd , Take Solutions Ltd , Tech mahindra Ltd , Tulip IT Services Ltd , Info
Edge (India) Ltd , Tata Consultancy Services Ltd , CMC Ltd , Educomp Solutions Ltd , I-
Flex Solutions is (+)612.50, (+)313.20 , (+)952.50 , (+)760 , (+)786.05 , (+)151 , (+)525 ,
(+)2890 , (+)1335 and HOV Services Ltd , Datamatic Tech Ltd is (-) 16.80 , (-)65.50
respectively.

Based on LTP and Issue price differences we can conclude that the investor who invested in
Educomp Solutions Ltd, I-Flex Solutions and Tech mahindra Ltd got more gain of Rs.2890,
Rs.1335 and Rs.952.50 and the investor of HOV Services Ltd, Datamatic Tech Ltd got loss of
Rs.16.80, Rs.65.50 respectively.

At the end it can be concluded that the above all scrip’s are under priced except HOV
Services Ltd , Datamatic Tech Ltd which is overpriced.

76
FINDINGS
 The IPO returns are more when comparing with nifty returns for the year 2006 to
2016.
 ICICI, Rushil Decorand Onelife Capital has given highest benefit to the investor.
 Sun TV Ltd has given highest negative benefit to the investor.
 This study reveals IPO given 75% positive result and 25% negative result or benefit to
investor.
 Investors more crazy about the new issues or IPO.

77
SUGGESTIONS
 The returns of IPO’s are higher when compare to benchmark portfolio of Nifty. So an
investor can invest in IPO’s for better returns.

 There is a probability of listing a stock returns in positive is 75% and negative is 25%.

 Investor need to develop a long term investment mindset rather than short term
investment to get more returns or for achieving financial goals

 A good investor should diversifies and reduces his risk by investing in different
securities which contained different risks and returns in order to achieve his goals

 An easy solution to investor is to invest in to mutual fund schemes through a


systematic investment plan (sip) the mutual fund gives you a well diversified,
professionally managed portfolio at low cost

 Investor need to aware of new information, which reflects wider changes in share
prices.

78
CONCLUSION
 It can be observed that it is safe for the general public to invest in different sectors of
primary market in present than in the past because SEBI has been introduced and it
controls the operations and working of new issue market
 Primary market returns are very attractive in short period especially on the day of
listing. But investors in IPO’s should take wise decision in choosing the best
company.
 From the overall study it can be concluded that the highest positive difference
between Issue price and LTP is Educomp Solutions Ltd. scrip.
 The conclusion from the study is that the highest negative difference between Issue
price and LTP is Sun TV Ltd scrip.
 The study reveals that the scrip’s of Textiles and Media industries have highest
negative difference between LTP and Issue price.
 The study shows that the scrip’s of Bank and Power or Energy industries have highest
positive difference between LTP and Issue price.

79
BIBLIOGRAPHY
BOOKS
th
1. Financial Management By I.M Pandey - 11 Edition Published by Vikas Publishing
in the year of 2005
2. Financial Management By Prasanna Chandra - 9 th Edition published by Mcgraw
Higher Ed in the year of 2005
3. Total Quality Management By K. Shridhara Bai - 2nd Edition Published by Himalaya
Publishing House in the year of 2009
4. Management Accounting by R.K.Sharma & S.KGuptha - 2nd Edition published by
Kalyani Publishers in the year of 2015

Website Referred:-
 www.nseindia.com
 www.capitalmarket.com
 www.sebi.com
 www.google.com
 www.sharekhan.com

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