About Public Issues Corporates may raise capital in the primary market by way of an initial public offer, rights

issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both. There are two types of Public Issues: ISSUE TYPE Fixed Price Issues OFFER PRICE Price at which the securities are offered and would be allotted is made known in advance to the investors DEMAND PAYMENT RESERVATIONS Demand for the securities offered is known only after the closure of the issue 100 % advance payment is required to be made by the investors at the time of application. 10 % advance payment is required to be made by the QIBs along with the application, while other categories of investors have to pay 100 % advance along with the application. 50 % of the shares offered are reserved for applications below Rs. 1 lakh and the balance for higher amount applications.

Book BuildingIssues A 20 % price band is offered by the issuer within which investors are allowed to bid and the final price is determined by the issuer only after closure of the bidding.

Demand for the securities offered , and at various prices, is available on a real time basis on the BSE website during the bidding period..

50 % of shares offered are reserved for QIBS, 35 % for small investors and the balance for all other investors.

More About Book Building Book Building is essentially a process used by companies raising capital through Public Offerings-both Initial Public Offers (IPOs) or Follow-on Public Offers ( FPOs) to aid price and demand discovery. It is a mechanism where, during the period for which the book for the offer is open, the bids are collected from investors at various prices, which are within the price band specified by the issuer. The process is directed towards both the institutional as well as the retail investors. The issue price is determined after the bid closure based on the demand generated in the process. The Process:

The Issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'. The Issuer specifies the number of securities to be issued and the price band for the bids. The Issuer also appoints syndicate members with whom orders are to be placed by the investors. The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to open auction. The book normally remains open for a period of 5 days. Bids have to be entered within the specified price band. Bids can be revised by the bidders before the book closes. On the close of the book building period, the book runners evaluate the bids on the basis of the demand at various price levels. The book runners and the Issuer decide the final price at which the securities shall be issued. Generally, the number of shares are fixed, the issue size gets frozen based on the final price per share. Allocation of securities is made to the successful bidders. The rest get refund orders.

Guidelines for Book Building

Rules governing Book building are covered in Chapter XI of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000. BSE's Book Building System

BSE offers a book building platform through the Book Building software that runs on the BSE Private network. This system is one of the largest electronic book building networks in the world, spanning over 350 Indian cities through over 7000 Trader Work Stations via

leased lines, VSATs and Campus LANS. The software is operated by book-runners of the issue and by the syndicate members , for electronically placing the bids on line real-time for the entire bidding period. In order to provide transparency, the system provides visual graphs displaying price v/s quantity on the BSE website as well as all BSE terminals.

Book Building IPO is the most popular and coveted process all over the globe through which companies float their IPOs in the primary market. Final price of the IPO gets discovered only after the bidding process and hence is not prefixed. This article would help the readers to get an overview on book building method and would help them to make informed IPO investment. Introduction Initial Public Offerings are issued to the primary market in various ways among which the most popular one is through book building process. This process utilizes the market forces for price discovery of the IPO. Book Building IPO - In a Nutshell According to the Book building method, the IPO issuing company doesn't fix the price in advance, rather gives a price band to the investors within which they are entitled to bid. The investors, in turn, bid for the same by stating the quantity as well as the price of the IPO shares at which they are interested to purchase. IPO's final price is then determined on the basis of all the bid prices. Participants of Book Building IPO

Institutional Investors Foreign Institutional Investors (FIIs) and MFs (Mutual Funds) HNI (High Networth Individuals) These individuals buy IPOs at large quantities. Retail Investors These are the common investors whose maximum investment limit is Rs. 50,000. Process of Book Building IPO A company issuing an IPO through book building method follows the following steps:

A leading merchant banker is nominated by the IPO issuing company for book building, known as Book-Runner.

The concerned company then announces the total number of IPO shares that it is willing to issue along with the price range/band. Investors are then allowed to bid for these issued shares for a limited time period. Investors place their preferences (that is, quantity and price of IPO shares) through a broker. brokers place these bids/orders on behalf of their clients through the electronic media into an electronic book where they are stored. These stored bids are henceforth evaluated by the merchant banker along with the IPO issuing company on the basis of certain criteria such as earliness of bid, aggression of price, quality of investor and many more. A cut-off price is then decided by accepting the lowest price at which all the IPO securities can be disposed off. IPOs are then allotted to those investors whose bid prices are above the cut-off mark until the IPO shares get exhausted.

Conclusion Book building method is considered more transparent and market determined than the fixed price IPOs. Here the IPO issuing price is not pre-determined and is discovered only after the closing of bidding period. That is why book building is the most popular method to the companies for issuing their IPOs to the primary market all through the world. Appointment Procedure 1. Meeting of Board of Directors 2. Appointing of Merchant Bankers- Specialized financial Consultancy who looks after Initial Public Offering 3. Apponting of Registrar and transfer agent done by Merchant Bankers 4. Banks- Appointed by Merchant Bankers 5. Appointing of Lawyer Real Procedure 6. Book issued by Merchant bankers and submit it to SEBI which includes Reason of Issuing, no of Shares, Financial Condition of the company, current Business, Management, Growth in Sectors and Risk factor 7. Prospectus- Issued to stock Market and registrars 8. Printing Of Forms 9. appointment of Brokers 10. Marketing & Advertising 11. Brokers Meeting in a Company 12. Road Shows or meetings 13. IPO starts 3-7 days opened 14. IPO closed

Post IPO 15. collection of Forms 16. Oversubscripttion or Undersubscripttion 17. Allotement Of shares a. Pro data allotement b. lottery system 18. Issue of share certificate a. Letter of allotement b. regret Leter 19. Refund cheque 20. Listing Of shares in NSE or BSe Book Building About Book Building Book Building is basically a capital issuance process used in Initial Public Offer (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 the period for which the book for the IPO is open, bids are collected from 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. The Process: >>The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'. >>The Issuer specifies the number of securities to be issued and the price band for orders. >>The Issuer also appoints syndicate members with whom orders can be placed by the investors. >>Investors place their order with a syndicate member who inputs the orders into the 'electronic book'. This process is called 'bidding' and is similar to open auction. >>A Book should remain open for a minimum of 5 days. >>Bids cannot be entered less than the floor price. >>Bids can be revised by the bidder before the issue closes. >>On the close of the book building period the 'book runner evaluates the bids on the basis of the evaluation criteria which may include -Price Aggression -Investor quality -Earliness of bids, etc.

>>The book runner and the company conclude the final price at which it is willing to issue the stock and allocation of securities. >>Generally, the number of shares are fixed, the issue size gets frozen based on the price per share discovered through the book building process. >>Allocation of securities is made to the successful bidders. >>Book Building is a good concept and represents a capital market which is in the process of maturing. Initial Public Offerings Corporates may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both. In case the issuer chooses to issue securities through the book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner: 100% of the net offer to the public through the book building route. 75% of the net offer to the public through the book building process and 25% through the fixed price portion. Under the 90% scheme, this percentage would be 90 and 10 respectively. Difference between shares offered through book building and offer of shares through normal public issue: Features Fixed Price process (FPP) Book Building process (BBP) Pricing (FPP)--> Price at which the securities are offered/allotted is known in advance to the investor. (BBP) --> Price at which securities will be offered/allotted is not known in advance to the investor. Only an indicative price range is known. Demand (FPP)--> Demand for the securities offered is known only after the closure of the issue (BBP)--> Demand for the securities offered can be known everyday as the book is built. Payment

(FPP)---> Payment if made at the time of subscripttion wherein refund is given after allocation. (BBP)--> Payment only after allocation. Investment Banking An investment bank is a financial institution which raises capital, trades securities, and manages corporate mergers and acquisitions. Another term used for investment banking is corporate finance. Investment banks work for companies and governments, and profit from them by raising money through the issuance and selling of securities in capital markets (both equity and debt) and insuring bonds (for example selling credit default swaps), and providing the necessary advice on transactions such as mergers and acquisitions. Most of investment banks provide strategic advisory services for mergers, acquisitions, divestiture or other financial services for clients, like the trading of derivatives, commodity, fixed income, foreign exchange, and equity securities. Investment banking is a form of banking which finances the capital requirements of enterprises. Investment banking assists as it performs IPOs, private placement and bond offerings, acts as broker and helps in carrying out mergers and acquisitions. An Investment Banker can be considered as a total solutions provider for any corporate, desirous of mobilizing its capital. The services provided range from investment research to investor service on the one hand and from preparation of the offer documents to legal compliances & post issue monitoring on the other. A long lasting relationship exists between the Issuer Company and the Investment Banker. Functions of Investment Banking: Investment banks carry out multilateral functions. Some of the most important functions of investment banking are as follows:

Investment banking helps public and private corporations in issuance of securities in the primary market. They also act as intermediaries in tradingfor clients. Investment banking provides financial advice to investors and helps them by assisting in purchasing and trading securities as well as managing financial assets Investment banking differs from commercial banking as investment banks don't accept deposits neither do they grant retail loans. Small firms which provide services of investment banking are called boutiques. They mainly specialize in bond trading, providing technical analysis or program trading as well as advising for mergers and acquisitions

Core activities of Investment Banking

Investment banking: is the traditional aspect of investment banks that involves helping customers raise funds in the capital markets and advise them on mergers and acquisitions. Investment banking can also involve subscribing investors to a security issuance, negotiating with a merger target and coordinating with bidders. Sales and trading: Depending on the needs of the bank and its clients, the main function of a large investment bank is buying and selling products. In market making, the traders will buy and sell securities or financial products with the goal of earning an incremental amount of money on every trade. Sales is the term that is used for the sales force, whose primary job is to call on institutional and highnet-worth investors to suggesttrading ideas and take orders Research: is the division of investment banks which reviews companies and makes reports about their prospects, often with "buy" or "sell" ratings. Although the research division generates no revenue, its resources can be used to assist traders in trading, can be used by the sales force in suggesting ideas to the customers, and by the investment bankers for covering their clients.

When corporation sells new securities to raise funds, the offering is called a primary issue. The agent responsible for finding buyers for these securities is called the investment banker. The investment banker purchase primary issue from corporation and arranges immediate resell of these securities to the investors. Merrill Lynch & Co., Goldman Sachs are some examples of well-known investment banking firms. Broadly investment bankers (investment banking firms) perform three functions: Investigation, Analysis and Research (Origination), Underwriting (Public Cash offerings) and Distribution. Most of time a single investor banker performs all functions, however some investment bankers are specialized in certain functional areas only. Investigation, Analysis and Research (Origination): Origination includes the subsidiary operations of discovery, investigation, and negotiation. Discovery is the finding of a prospective issue of securities; investigation is the testing of the investment credit of the prospective security issuer, and the intrinsic soundness of the issue; negotiation is the determination of the amount, the price, and the terms of the proposed issue. Investigation usually involves an analysis of the financial history of the corporation by accountants, investigation of legal factors, a survey of its physical property by engineers, and in-depth review of operations. The purpose of investigation and analysis is to determine whether a proposed issue has sufficient merit to be offered to investment community. In other words, function of investment banking is careful analysis of the soundness and reliability of the corporation whose securities are seeking the investment

market. The task of investigation and analyzing the numerous factors, which govern the value of investment securities, varies considerably with the different types of issuing bodies. Underwriting (Public Cash offerings): When a corporation wishes to issue new securities and sell them to the public, it makes an arrangement with an investment banker whereby the investment banker agrees to purchase the entire issue at a set price, known as underwriting. Underwriting also refers to the guarantee by the investment banker that the issuer will receive a certain minimum amount of cash for their new securities. The investment banker buys a new security issue, pays the issuer, and markets the securities. The underwriters compensation is the difference between the price at which the securities sold to the public, and the price paid to the company for the securities. Underwriting can be done either through negotiations between underwriter and the issuing company (called negotiated underwriting) or by competitive bidding. A negotiated underwriting is a negotiated agreed arrangement between the issuing firm and its investment banker. Most large corporations work with investment bankers with whom they have long-term relationship. In competitive bidding, the firm awards offering to investment banker that bid the highest price. In certain cases, for large or risky issues a number of investment bankers get together as a group, they are referred to as syndicate. A syndicate is a temporary association of investment bankers brought together for the purpose of selling new securities. One investment banker is selected to manage the syndicate called the originating house, which does underwriting of the major amount of the issue. There are two types of underwriting syndicates, divided and undivided. In a divided syndicate, each member group has liability of selling a portion of offerings assigned to them. However, in undivided syndicate, each member group is liable for unsold securities up to the amount of its percentage participation irrespective of the number of securities that group has sold. Distribution: Another function of investment banker it to market the security issues. The investment banker acts as a specialist to distribute securities efficiently for the corporation. It can be very expensive and ineffective for a corporation to sell an issue by establishing marking and selling organization by its own. Investment banker has established marketing and sales network to distribute securities. For a reputed invest banker, with its past history of selecting good companies and pricing

securities builds a broad client base over time, and further increases the efficiency with which securities can be sold. Invest banker offers security to both corporation issuing securities and investors buying securities. For corporations investment banker offers definite price guaranty on a certain date for securities to offer. The corporation runs no risk of the uncertainties of the market and do not have to spend on resources with which it is not equipped with. To the investor, the responsible investment banker offers protection against unsafe securities. The offering of a few unsound issues can caused serious loss to its reputation, and hence loss of business. Therefore, investment banker play very important role in issuing new security offerings.

SMALL BUSINESS VALUATION METHODS BOOK VALUE Is simply the small business valuation based upon the accounting books of the business. Assets less liabilities equals the owners equity, which is the "Book Value" of the business. The problem with book value small business valuation methods is that the accounting records may not accurately reflect the true value of the assets in the small business valuation. ADJUSTED BOOK VALUE VALUATION METHODS Your MBA performs two types of adjusted book value small business valuation: Tangible Book Value and Economic Book Value (also known as book value at market). Tangible Book Value small business valuation is different than book value in that it deducts from asset value intangible assets, which are assets that are not hard (e.g., goodwill, patents, capitalized start-up expenses and deferred financing costs). Economic Book Value small business valuation allows for a value analysis that adjusts the assets to their market value. This small business valuation allows valuation of goodwill, real estate, inventories and other assets at their market value.

INCOME CAPITALIZATION VALUATION METHODS First you must determine the capitalization rate - a rate of return required to take on the risk of operating the business (the riskier the business, the higher the required return). Earnings are then divided by that capitalization rate. The earnings figure to be capitalized should be one that reflects the true nature of the business, such as the last three years average, current year or projected year. When determining a capitalization rate you should compare with rates available to similarly risky investments. DISCOUNTED EARNINGS This determines the value of a small business based upon the present value of projected future earnings, discounted by the required rate of return (capitalization rate). Usually, the question is how well earnings are projected. DISCOUNTED CASH FLOW VALUATION METHODS Are the small business valuation methods best used to conduct a business valuation on an entity established for the purpose of fulfilling a specific project, in certain startup and other companies where cash flow is more important than net income, and when a certain time frame is set where an investor wishes to see his investment returned over a specific period of time. In discounted cash flow, the present value of liabilities is subtracted from the combined present value of cash flow and tangible assets, which determines the value of the business. PRICE EARNINGS MULTIPLE The price-earnings ratio (P/E) is simply the price of a company's share of common stock in the public market divided by its earnings per share. Multiply this multiple by the net income and you will have a value for the business. If the business has no income, there is no business valuation. If the common stock in not publicly traded, business valuation of the stock is purely subjective. This may not be the best choice of business valuation methods, but can provide a benchmark business valuation. DIVIDEND CAPITALIZATION Since most closely held companies do not pay dividends, when using dividend capitalization valuators must first determine dividend paying capacity of a business. Dividend paying capacity based on average net income and on average cash flow are used. To determine dividend paying capacity, near term capital needs, expansion plans, debt repayment, operation cushion, contractual requirements, past dividend paying history of a business and dividends of a comparable company should be investigated. After analyzing these factors, percent of average net income and of average cash flow that can be used for the payment of dividends can be estimated. What also must be determined is the dividend yield, which can best be determined by analyzing comparable companies. As with the price earnings ratio method, this usually produces a subjective result.

SALES MULTIPLE SMALL BUSINESS VALUATION METHODS Sales and profit multiples are the most widely used business valuation methods benchmark used in valuing a business. The information needed are annual sales and an industry multiplier, which is usually a range of .25 to 1 or higher. The industry multiplier can be found in various financial publications, as well as analyzing sales of comparable businesses. This method is easy to understand and use. The sales multiple is often used as the business valuation benchmark. PROFIT MULTIPLE SMALL BUSINESS VALUATION Profit and sales multiples are the most widely used small business valuation benchmarks used in valuing a business. The information needed are pretax profits and a market multiplier, which may be 1, 2, 3, or 4 and usually a ceiling of 5. The market multiplier can be found in various financial publications, as well as analyzing the sale of comparable businesses. These small business valuation methods are easy to understand and use. The profit multiple is often used as the small business valuation ceiling benchmark. LIQUIDATION VALUE This type of small business valuation is similar to an adjusted book value analysis. Liquidation value is different than a book valuation in that it uses the value of the assets at liquidation, which is often less than market and sometimes book. Liabilities are deducted from the liquidation value of the assets to determine the liquidation value of the small business. Liquidation value can be used to determine the bare bottom benchmark value of a business, since this should be the funds the business may bring upon small business valuation. REPLACEMENT VALUE This type of small business valuation is similar to an adjusted book value analysis. Replacement value is different than liquidation value in that is uses the value of the replacement value of assets, which is usually higher than a book valuation. Liabilities are deducted from the replacement value of the assets to determine the replacement value of the small business. TRUE VALUE SMALL BUSINESS VALUATION Is the amount that a buyer is finally willing to pay. This is the "real world" in small business valuation methods.

Due Diligence The words Due Diligence in the financial sense describe the process by which a bank or financial institution checks the identity, background and other aspects of the source of wealth of potential and existing customers. High quality due diligence requires careful and persistent effort by a financial institution to find out about the background and source of wealth of a customer. This provides two key benefits for the risk-aware financial business first, comfort that the firm is not exposing itself to excessive risk of being used by criminals to launder the Proceeds of Crime; and second (and equally important), sufficiently detailed knowledge of the customer's source of wealth and financial position to be able to sell products which are appropriate and which help the customer and the firm to make money.

Strict legal and regulatory requirements across the world to combat Money Laundering and other financial crime require financial institutions to "Know Your Customer" - having adequate information to make risk-based decisions at a number of stages in the customer relationship at take-on, during the annual reviews and when customer activity changes and a decision may be required to exit the relationship. A financial institution does not want to fall foul of legislation in key financial centres, such as the UKProceeds of Crime Act or the USA Patriot Act. Emerging economies around the globe are implementing legislation and regulation which is as tough as these laws. A business does not want to make the wrong decisions when looking at any type of customer, be it an individual or a corporate, and especially at times of volatile economic conditions and when exploring new business in emerging markets. Good quality due diligence will ensure that a business knows the source of wealth an individual brings to them, as well as the identity and background of the shareholders and key principals behind a corporate entity or joint venture.

Similarly, during the life of a customer relationship, the firm wants to be able to carry out checks on a customer's transactions to make sure that they are genuine and to be able to research any which may appear unusual. In particular with transactions, a firm must be able to complete due diligence very quickly where there are concerns, to be sure that settlement or delivery is completed on or by the planned value date a firm does not want to have to be paying back-value for delaying a transaction when speedier due diligence could have avoided it. Money Laundering is the term used to describe the use of the financial system by criminals to hide the source of funds gained from illegal activity such as drug trafficking, bribery, extortion, embezzlement, theft or other criminal activity, as the criminals try to make their ill gotten gains appear genuine. Anti Money Laundering is the term used by banks and other financial institutions to describe the variety of measures they have to combat this illegal activity and to prevent criminals from using individual banks and the financial system in general as the conduit for their Proceeds of Crime. It is the quality of your customer due diligence will determine whether your institution successfully identifies and prevents money laundering from taking place.

Due Diligence is the process of evaluating a prospective business decision by getting information about the financial, legal, and other material (important) state of the other party. Due diligence is used most often when buying a business, as the buyer spends time going through the financial situation of the business, legal obligations, customer records, and other documents. The prospective buyer wants to validate his/her opinion of the business to see if it is truly a good decision. If you don't do your "due diligence" in a business situation, you may end up buying something that isn't as you thought it was, or you may end up in a business relationship that will cause you trouble. It may be costly to perform due diligence, because it usually involves the services of a CPA and an attorney, but it's certainly worth your trouble. Financial derivatives are financial instruments that are linked to a specific financial instrument or indicator or commodity, and through which specific financial risks can be traded in financial markets in their own right; their value derives from the price of the underlying item (i.e. the reference price) and, unlike debt instruments, no principal amount is advanced to be repaid and no investment income accrues