56 icdr and ipo new process by mr narsimhan

8/8/2019 56 Icdr and Ipo New Process by Mr Narsimhan

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STUDY CIRCLE MEETSTUDY CIRCLE MEET

2727THTH August 2010August 2010

PresentationPresentation byby

CS B NarasimhanCS B Narasimhan


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ICDR AND IPO NEW PROCESSICDR AND IPO NEW PROCESS

DIP VS ICDRDIP VS ICDR

IPO NEW PROCESSIPO NEW PROCESS

Significance of some changes madeSignificance of some changes made

Green Shoe OptionGreen Shoe Option

UNDERWRITING IN IPOUNDERWRITING IN IPO

IPO GRADING (THE FLIP SIDE)IPO GRADING (THE FLIP SIDE)


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BROAD BASIS FOR THE CHANGESBROAD BASIS FOR THE CHANGES

DIP guidelines standsDIP guidelines stands rescinded ( Augrescinded ( Aug2009)2009)

Broadly theBroadly the framework remains theframework remains thesamesame

Some moreSome more clarification providedclarification provided in thein thenew Regulationsnew Regulations

Guidelines does not have theGuidelines does not have the force of lawforce of law

Regulations doesRegulations does

EnforcementEnforcement to be more strictto be more strictUnwanted guidelines deletedUnwanted guidelines deleted from thefrom thenew regulationsnew regulations


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Group Companies & Eligibility normsGroup Companies & Eligibility norms

The term "groupThe term "groupcompanies" notcompanies" notexplained.explained.

Exemptions wereExemptions wereavailable toavailable to

bankingbankingcompany, andcompany, andinfrastructureinfrastructurecompany.company.

The term "groupThe term "groupcompanies"companies"explained to avoidexplained to avoidconfusion.confusion. The newThe newnorms alsonorms also bansbansfirm allotmentfirm allotment totoprivileged peopleprivileged peoplelike relatives,like relatives,associates andassociates andfriends in IPOs.friends in IPOs.Exemption has beenExemption has been

removed.removed.Eligibility normsEligibility normshave been madehave been madeapplicable uniformlyapplicable uniformlyto all types ofto all types ofissuers.issuers.


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Definition of EmployeeDefinition of Employee

DefinitionDefinitionof "employee"of "employee"

IncludesIncludespermanentpermanent

employee/employee/director ofdirector ofsubsidiary orsubsidiary orholdingholdingcompany of thecompany of the

issuer.issuer. (DIP(DIPGuidelines)Guidelines)

ExcludesExcludes permanentpermanentemployee/ director ofemployee/ director ofsubsidiary or holdingsubsidiary or holdingcompany of the issuercompany of the issuer andandpromoters and immediatepromoters and immediate

relatives of promoters.relatives of promoters.employee means aemployee means apermanent and fullpermanent and full--timetimeemployeeemployee of the issuer,of the issuer,working in India or abroadworking in India or abroad

or a director of the issuer,or a director of the issuer,whether whole time or partwhether whole time or parttimetime

Reservations to employeesReservations to employeeswillwill not be subjectnot be subject to lockto lock--

in.in.


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Key managerial person and AnchorKey managerial person and Anchor

InvestorInvestor

Definition ofDefinition of"Key"KeyManagementManagementPersonnel"Personnel"

D

efinition ofD

efinition ofAnchorAnchorInvestorInvestor(AI)(AI)

Officers vested withOfficers vested withexecutive powersexecutive powers and theand theofficers at theofficers at the levellevelimmediately below theimmediately below theboard of directorsboard of directors of theof the

issuer and includesissuer and includes any otherany otherpersonperson whom the issuer maywhom the issuer maydeclare as a key managementdeclare as a key managementpersonnel.personnel.

anchor investor"anchor investor" (AI)(AI)means a qualified institutionalmeans a qualified institutionalbuyerbuyer

Concept of AI notified by SEBIConcept of AI notified by SEBIon 9on 9thth July 2009July 2009


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Public IssuesPublic Issues

Firm allotmentFirm allotmentin public issuesin public issueswas permitted.was permitted.

BookBookbuildingbuildingprocess couldprocess couldbe madebe madethrough 75%through 75%or 100% ofor 100% ofissue size.issue size.

There isThere is no provisionno provisionfor firm allotmentfor firm allotment ininpublic issues. This haspublic issues. This hasbeen done away sincebeen done away since

there is athere is a separateseparatewindow for AI andwindow for AI andalso for QIPsalso for QIPs nownow

75% book building75% book buildingroute has beenroute has been

omitted.omitted.


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Public IssuesPublic IssuesThe allotment andThe allotment and/or refund period/or refund periodwas 30 days forwas 30 days forfixed price issuesfixed price issuesand 15 days forand 15 days for

book built issues.book built issues.

Disclosure of priceDisclosure of priceor price band wasor price band was

required in draftrequired in draftprospectus in caseprospectus in caseof fixed priceof fixed pricepublic issues.public issues.

The allotment/refundThe allotment/refundperiod has been madeperiod has been made15 days for both fixed15 days for both fixedprice and book builtprice and book builtissuesissues (( PossiblyPossiblykeeping SMEs in mindkeeping SMEs in mind))

For Book Built issuesFor Book Built issuesprice band / Floor priceprice band / Floor priceneeds to beneeds to be announcedannounced

2 days2 days before issuebefore issueopening and foropening and for FixedFixedprice at the time of ROCprice at the time of ROCfilingfiling


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Public IssuesPublic IssuesSurplus money inSurplus money in

Green ShoeGreen ShoeOption (GSO) BankOption (GSO) BankAccount was requiredAccount was requiredto be transferred toto be transferred tothe investorthe investor

Protection Fund ofProtection Fund ofstock exchangesstock exchanges

Issue period forIssue period forInfrastructureInfrastructure

companies incompanies inpublic issues was 21public issues was 21days, as against 10days, as against 10

days for other issues.days for other issues.

Surplus money wouldSurplus money would

now be transferred tonow be transferred tothethe InvestorInvestorProtection andProtection andEducation Fund (IPEF)Education Fund (IPEF)established by theestablished by theBoardBoard

The issue period hasThe issue period hasbeen madebeen made uniform touniform to10 days for all types10 days for all typesof issuersof issuers. The need. The need

to give more time forto give more time forthis sector wasthis sector wasdispensed withdispensed with sincesincemoney comes only onmoney comes only onthe last daythe last day


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Public IssuesPublic IssuesParticulars as perParticulars as peraudited financialaudited financialstatements wouldstatements wouldnot be more than 6not be more than 6months old from themonths old from theissue opening dateissue opening datefor all issuers,for all issuers,

except Governmentexcept GovernmentCompanies.Companies.Disclosure onDisclosure onpledge of shares bypledge of shares bypromoterspromoters

Financial institutionFinancial institutionas a monitoringas a monitoringagencyagency not definednot definedbeforebefore

Both the GovernmentBoth the Governmentand nonand non--governmentgovernmentissuers would now beissuers would now betreated at par.treated at par.

The New RegulationsThe New Regulationsprovides forprovides for DisclosureDisclosure

on pledge of shares byon pledge of shares bypromoterspromoters consequentconsequentto amendment in theto amendment in thelisting agreementlisting agreementReplaced byReplaced by "public"public

financial institution or afinancial institution or ascheduled commercialscheduled commercialbank"bank" who would bewho would beacting as monitoringacting as monitoringagency.agency.


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Book Building IssueBook Building IssueIf issue opening andIf issue opening and

closingclosingadvertisementadvertisementcontained highlights,contained highlights,then thethen theadvertisement wouldadvertisement wouldcontain risk factors.contain risk factors.

Forfeiture ofForfeiture ofmoney onmoney on

unexercisedunexercisedwarrants inwarrants inpreferential issuespreferential issues

If advertisementIf advertisement

contains informationcontains informationother than the detailsother than the detailsspecified in the format,specified in the format,the advertisementthe advertisementshall contain riskshall contain riskfactors.factors.

Where the warrantWhere the warrantholder exercisesholder exercises hishisoption to convert onlyoption to convert onlysome of the warrantssome of the warrants

held by him, upfrontheld by him, upfrontpayment made againstpayment made againstonly such warrants canonly such warrants canbe adjusted.be adjusted. BalanceBalancewill stand forfeitedwill stand forfeited


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Book Building IssuesBook Building IssuesMinimumMinimum

promoters'promoters'contributioncontributionbrought in bybrought in bypromoters/ personspromoters/ personsbelonging tobelonging to

promoterpromotergroup/friends,group/friends,relatives andrelatives andassociatesassociates

Issue period wasIssue period wasnot clearnot clear in case ofin case ofrevisionrevision in pricein priceband in book builtband in book builtpublic issues.public issues.

PromotersPromoters

contributioncontribution shall beshall bebrought in only bybrought in only bypromoters whosepromoters whoseidentity, photograph,identity, photograph,etc areetc are disclosed indisclosed in

the offer document.the offer document.

The New RegulationsThe New Regulationsprovide thatprovide that totaltotalissue period shall notissue period shall not

exceed 10 days,exceed 10 days,including anyincluding anyrevision in pricerevision in price

band.band.


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Monetary ControlMonetary ControlPrePre--issueissue

advertisement to beadvertisement to bemademade immediatelyimmediatelyafter receipt ofafter receipt ofobservationsobservations from thefrom the

BoardBoard

Documents such as MDocuments such as Mof A and A of A of theof A and A of A of theCompany, auditedCompany, auditedbalance sheet to bebalance sheet to beattached with dueattached with duediligence certificate.diligence certificate.

PrePre--issueissueadvertisementadvertisementwould be madewould be made afterafterregistering ofregistering ofProspectus / redProspectus / red

herring prospectusherring prospectuswith Registrar ofwith Registrar ofCompanies butCompanies butbeforebefore opening ofopening of

the issue.the issue.

The NewThe NewRegulations requireRegulations requirefor attachment offor attachment of

checklist onlychecklist only..


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Other HighlightsOther HighlightsFor follow on publicFor follow on public

offers (FPO)offers (FPO) the noticethe noticeof Board meeting hadof Board meeting hadto be given as perto be given as perclause 19 of the listingclause 19 of the listingagreement aagreement a weekweekbefore the boardbefore the boardmeeting.meeting.

The underwritingThe underwritingobligations will be forobligations will be forthe entire amountthe entire amount

Since the price band isSince the price band is

required to be announcedrequired to be announcedone day before the issueone day before the issueopening notice period toopening notice period toStock Exchange for theStock Exchange for theBoard meeting to be heldBoard meeting to be heldfor this purpose has beenfor this purpose has been

reduced to 48 hoursreduced to 48 hours

UnderwritingUnderwritingobligationsobligations will not bewill not berestricted to therestricted to the

minimum subscriptionminimum subscriptionamount of 90% of theamount of 90% of theissue size butissue size but forfor100% of the issue100% of the issuesize.size.


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Stock Exchanges and PublicStock Exchanges and Public

RepresentativeRepresentativeStock Exchanges wouldStock Exchanges wouldbe required to disclosebe required to disclosecomplaints lodged bycomplaints lodged byinvestors against tradinginvestors against tradingmembers and companiesmembers and companies

listed on the exchange inlisted on the exchange intheir websitetheir website

Where there isWhere there isdrawal of lots it hasdrawal of lots it hasto be done in theto be done in the

presence of the PRpresence of the PRfrom the governingfrom the governingBoard of the StockBoard of the StockExchangeExchange

These disclosuresThese disclosureswill also includewill also includedetails pertaining todetails pertaining toarbitration penalarbitration penalaction etc againstaction etc against

trading members.trading members.

TheThe reference to PRreference to PRhas been omittedhas been omittedfrom ICDR. It hasfrom ICDR. It hasbeen clarified bybeen clarified bySEBI that it isSEBI that it isintentional.intentional.


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Debarment and offer for saleDebarment and offer for sale

CompaniesCompaniesprohibitedprohibited ififdebarred fromdebarred fromaccessing Capitalaccessing CapitalMarketMarket Order orOrder or

Direction by BoardDirection by Board

No provision forNo provision foroffer for sale byoffer for sale by

listed entitieslisted entities

TheThe Issuer, any of itsIssuer, any of its

promoters, directors orpromoters, directors orpersons in control arepersons in control aredebarreddebarred

O F S Provided forO F S Provided for..

Promoters with majorityPromoters with majorityshareholding in listedshareholding in listedentities can do offer forentities can do offer forsale.sale. DisinvestmentDisinvestmentand increasing in publicand increasing in public

holding to 25%holding to 25%

Provisions relating toProvisions relating toOTCEI, EOTCEI, E--IPO OmittedIPO Omitted


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Post Issue Monitoring reportPost Issue Monitoring report

3 day report3 day report(working days(working daysfrom the closurefrom the closureof the issue)of the issue)

FinalFinal 50 days50 dayspost issuepost issuemonitoringmonitoringreport (50report (50

calendar dayscalendar daysfrom closure offrom closure ofthe issue)the issue)

3 Day report3 Day report ((calendar days).calendar days).

15 days within15 days withinfifteen daysfifteen days

of the date ofof the date offinalizationfinalization of basisof basisof allotment or withinof allotment or withinfifteen days of refundfifteen days of refundof money incase ofof money incase offailure of issue, fromfailure of issue, fromclosure.closure.


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Other changes notified later 9Other changes notified later 9thth

Nov 2009Nov 2009Reservation forReservation forEmployeesEmployees

Upto 5 % of the issue sizeUpto 5 % of the issue size

Ceiling of Rs 1 LakhCeiling of Rs 1 Lakh

Extend reservation forExtend reservation forRights Issue alsoRights Issue also

Discount for EmployeesDiscount for Employeesalsoalso


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19

New process


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20

New process 14th August 2003

Notification dated 14th August 2003

Visualized electronic IPO with secondary

market settlement

Process involved limited KYC by SM

Elimination of paper work

Elimination of duplication of effort

Seamless process of allotment and listing

Trading to commence on (T+6)


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21

New process 14th August 2003

Market participants objection (BRLMand SM)

This portion ofnotification shelved

ONGC Fiasco 29th March 2004

SMILE committee recommendations

GRIP (ASBA process)

ASBA phase IandPhase II

Lukewarm response (cannot be made compulsory .

Provisions of the Companies Act )


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22

Timelines & deliverables## This day..This day.. These deliverables..These deliverables..

1 T day Book closes

2 T + 1 days Price determination

Determination of offer size

3 T + 2 days Registrar draws the allocation list

All bids entered assumed as valid

4 T + 3 days Stock Exchanges approve the basis of allocation

Final prospectus printed and dispatched

CANs sent to QIBs

Allocation details electronically communicated byRegistrar/Company to brokers

5 T + 4 days Pay in (only high-value)

Bankers to confirm clearance of fund

Board meeting

Stock Exchanges to issue the listing and trading permission

6 T + 5 days Brokers account to be credited with shares

Broker to credit shares to the demat account of investors

Company to instruct NSDL/CDSL to credit shares to the demataccount of brokers

7 T + 6 days Trading to commence


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23

New Process Post issue activities


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24

Book building Post issue activities

Pricing based ondemand (Bids)

Finalizationof prospectus

Filing with SEBIand ROC

Collectionof biddata

Non ASBA & ASBA

Cleaning and validation of biddata

DPID BenIDandPAN matched withDepository database

Invalid cases submitted to BRLM/SM& Sub SM (1 day window for

rectification)

Final book takenafter rectification from both SE


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25

Submission of base documents to SE

SM to senddataand bids to EB (T+2)

RTI to give data file to EB to facilitate validation of

bids

Cheques to be cleared by EB (T+4)

Bids and bank schedule from EB to RTI

Technical rejections

RTI to obtain soft copy of schedule (T+4)and FC

from EB (T+6)



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26

Recon. of electronic book with schedule and FC (gross

level)

Biddednot banked

Bankednot bidded

Technical rejections

Invalid bids ( not matched cases)

Amount mismatch (treatment thereof)

PAN mismatch and multiple applications



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27

Preparationand submission of basis to DSE

Approval of basis by DSE (T+8)

Apply the basis ondataand give instructions for

transfer of funds to EB (T+8)

Similar exercise for ASBA bids (T+8)

Lock-in of pre issue capital (T+8)

Fund transfer confirmation by EB (T+9)

RTI to upload file for credit of shares (T+9)



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28

Confirmation from Depository for lock-in (T+9)

Filing ofdistribution schedule etc with SE (T+10)

Completion ofall formalities for listing with SE

Confirmation for demat credit from depositories

RTI to confirm refunddespatch

SE to inform members of commencement of

trad

in

g Commencement of trading (GONG ceremony)

(T+12)



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29

Book building guidelines 22nd April, 2010

Electronic book the base

Validation by Syndicate Member one day

Gross recon with Escrow Banker and electronic

book

T+7 - submission of basis

T+8 - approval ofallotment

T+10 & 11 - submission ofall documents

T+12 - listing and trading


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Changes in the Guidelines / RegulationsChanges in the Guidelines / Regulations

MARGIN MONEY FOR QIBMARGIN MONEY FOR QIB Was Zero initiallyWas Zero initially

Made 10 % from Sep 2005Made 10 % from Sep 2005

Made 100% from May 2010Made 100% from May 2010 ASBA made available for allASBA made available for all

DISCRETIONARY ALLOTMENTDISCRETIONARY ALLOTMENT PROPORTIONATE ALLOTMENT FROM SEPPROPORTIONATE ALLOTMENT FROM SEP

20052005

5% RESERVATION FOR MF FROM SEP5% RESERVATION FOR MF FROM SEP20052005


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Definition of Retail / HNI Aug 2003Definition of Retail / HNI Aug 2003

25% upto Rs 50,000/25% upto Rs 50,000/--

Increased to 35 % and amount < RsIncreased to 35 % and amount < Rs

100,000/100,000/-- from March 2005from March 2005 25% for HNI > Rs 50,000/25% for HNI > Rs 50,000/--

15 % for amount >1,00,000/15 % for amount >1,00,000/-- Mar 2005Mar 2005

Proposal to increase it to Rs 2 LakhsProposal to increase it to Rs 2 Lakhs


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Time line in Public IssuesTime line in Public Issues

30 days for completion plus 7 working30 days for completion plus 7 workingdays for Listing ( 40 days)days for Listing ( 40 days)

15 days for completion plus 7 working15 days for completion plus 7 workingdays for Listing (22 days)days for Listing (22 days)

Completion of all activities within 12Completion of all activities within 12working days ( Sunday & Publicworking days ( Sunday & Public

Holiday excluded)Holiday excluded)


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MODE OF PAYMENT & RECONMODE OF PAYMENT & RECON By cheque /DD through SMBy cheque /DD through SM

Electronic IPO and secondary marketElectronic IPO and secondary market

settlement T + 6 For listingsettlement T + 6 For listing Payment through ASBA for Retail onlyPayment through ASBA for Retail only

from July 2008from July 2008

Extension of ASBA for all from Jan 2009Extension of ASBA for all from Jan 2009

QIB covered through ASBA since 100%QIB covered through ASBA since 100%payment upfrontpayment upfront


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BOOK BUILDINGBOOK BUILDING

GREEN SHOE OPTIONGREEN SHOE OPTION

UNDERWRITINGUNDERWRITING

&&

IPO GRADINGIPO GRADING


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CONCEPT OF GREEN SHOECONCEPT OF GREEN SHOE

OPTIONOPTION

SIMPLE THEORY OF ECONOMICSSIMPLE THEORY OF ECONOMICS

OVER ALLOTMENT OF SHARESOVER ALLOTMENT OF SHARES

APPROVAL OF SHAREHOLDERSAPPROVAL OF SHAREHOLDERS

MONEY RECEIVED THROUGH THISMONEY RECEIVED THROUGH THIS

PROCESS USED FOR STABILISATIONPROCESS USED FOR STABILISATION

ADDITIONAL ALLOTMENT UPTO 15%ADDITIONAL ALLOTMENT UPTO 15%

OF ISSUE SIZEOF ISSUE SIZE LENDING BY PROMOTERSLENDING BY PROMOTERS

STABILIZING AGENT (SA) BRLMSTABILIZING AGENT (SA) BRLM


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CONCEPT OF GREEN SHOE OPTIONCONCEPT OF GREEN SHOE OPTION

DISCLOSURES IN OFFERDISCLOSURES IN OFFER

DOCUMENTDOCUMENT

GSO BANK AND DEMAT ACCOUNTGSO BANK AND DEMAT ACCOUNTSA CAN ONLY BUY IF MARKETSA CAN ONLY BUY IF MARKET

PRICE IS BELOW ISSUE PRICEPRICE IS BELOW ISSUE PRICE

SA CANNOT SELL SINGLE SHARESA CANNOT SELL SINGLE SHARE

CANNOT BUY BEYOND OVERCANNOT BUY BEYOND OVER

ALLOTMENTALLOTMENT


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CONCEPT OF GREEN SHOECONCEPT OF GREEN SHOE

OPTIONOPTION

ADDITIONAL ALLOTMENT INADDITIONAL ALLOTMENT IN

CASE OF SHORTFALLCASE OF SHORTFALL

BALANCE TRANSFERRED TO IPEFBALANCE TRANSFERRED TO IPEFOF SEBIOF SEBI

AVAILABLE FOR 30 DAYS ONLYAVAILABLE FOR 30 DAYS ONLY

CALLED SO AFTER A COMPANYCALLED SO AFTER A COMPANY

NAMED GS ADOPTED THISNAMED GS ADOPTED THISCONCEPT IN ITS IPOCONCEPT IN ITS IPO


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Green shoe option

XYZ Limited

Existing capital by Mr.A - 300 lakh shares

Issue Size - 200 lakh shares

GSO (15%) - 30 lakh shares

Shares lent by Mr.A - 30 lakh shares

XYZ Limited

Existing capital by Mr.A - 300 lakh shares

Issue Size - 200 lakh shares

GSO (15%) - 30 lakh shares

Shares lent by Mr.A - 30 lakh shares

Promoter holding on IPO - 270 lakh shares

Public holding - 230 lakh shares

Issue price - Rs.100/share

Promoter/Lender - Mr. A

GSOBank A/c. - Rs.30 Crores

Promoter holding on IPO - 270 lakh shares

Public holding - 230 lakh shares

Issue price - Rs.100/share

Promoter/Lender - Mr. A

GSOBank A/c. - Rs.30 Crores


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SITUATIONS EMERGING AT THESITUATIONS EMERGING AT THE

END OF 30 DAYSEND OF 30 DAYSGSO BANK A/CGSO BANK A/C GSO DEMAT A/CGSO DEMAT A/C ACTION TO FOLLOWACTION TO FOLLOW POSTPOSTISSUEISSUE

CAPITACAPITALL

%OF%OFPROMOTPROMOTORORHOLDINHOLDINGG

11 Rs.30 CroresRs.30 Crores NILNIL Transfer 30 Cr. To XYZTransfer 30 Cr. To XYZLtd. Co. to allott 30 lakhLtd. Co. to allott 30 lakh

shares to Mr. Ashares to Mr. A

530530lakhlakh

sharesshares

300/530300/530=57%=57%

22 Rs.30 Cr.Rs.30 Cr.--Rs.27 Cr =Rs.27 Cr =Rs.3 Cr. To IPEFRs.3 Cr. To IPEF

30 lakh shares @30 lakh shares @Rs.90/shareRs.90/share

Transfer 30 lakh shares toTransfer 30 lakh shares toMr. AMr. A

500500lakhlakhsharesshares

300/500300/500= 60%= 60%

33 30Cr.30Cr.--9Cr. = 21 Cr. 219Cr. = 21 Cr. 21--20 = 1 Cr. To IPEF20 = 1 Cr. To IPEF

10 lakh shares @10 lakh shares @Rs.90/ sharesRs.90/ shares

Transfer 10 lakh shares toTransfer 10 lakh shares toMr. A. Transfer Rs.20 Cr.Mr. A. Transfer Rs.20 Cr.To XYZ Ltd. XYZ Ltd. ToTo XYZ Ltd. XYZ Ltd. Toallot 20 lakh shares toallot 20 lakh shares toMr.AMr.A

520520lakhlakhsharesshares

300/520300/520= 58%= 58%


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UnderwritingUnderwriting

HardHard UnderwritingUnderwriting

UnderwriterUnderwriter agreesagrees toto buybuy hishiscommitmentcommitment atat itsits earliestearliest stagestage

GuaranteesGuarantees aa fixedfixed amountamount toto thetheissuerissuer fromfrom thethe issueissue IfIf thethe sharessharesareare notnot subscribedsubscribed byby investorsinvestors

WhereWhere thethe issueissue isis devolveddevolved onon

underwritersunderwriters andand theythey havehave toto bringbringinin thethe amountamount byby subscribingsubscribing toto thethesharesshares

UNDERWRITING = INSURANCE


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HardHard UnderwritingUnderwriting

UnderwritingUnderwriting agreementagreement signedsignedbeforebefore thethe issueissue openingopening

UnderwritingUnderwriting notnot mandatorymandatory forforFixedFixed PricePrice IssueIssue

IfIf FPFP isis underwrittenunderwritten fullyfullyunderwritersunderwriters willwill havehave toto bringbring inin

theirtheir obligationsobligations ININ BookBook BuiltBuilt IssueIssue UnderwritingUnderwriting isis

mandatorymandatory..



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SoftSoft UnderwritingUnderwriting

UnderwritingUnderwriting agreementagreement onlyonly afterafterthethe issueissue closescloses

PricingPricing isis determineddetermined onlyonly afterafterissueissue closingclosing inin BookBook BuiltBuilt IssuesIssues

ParadoxParadox ofof somesome sortssorts

UnderwritingUnderwriting obligationsobligations havehave

beenbeen metmet inin thethe past????past???? HOW??HOW?? UnderwriterUnderwriter agreesagrees toto buybuy thethe

sharesshares atat laterlater stagesstages asas soonsoon asasthethe pricingpricing processprocess isis completecomplete



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SoftSoft UnderwritingUnderwriting

Subsequently,Subsequently, hehe placesplaces thosethose sharesshareswithwith InstitutionalInstitutional InvestorsInvestors

AlsoAlso holdsholds anan optionoption toto invokeinvoke aa forceforce

majeuremajeure (acts(acts ofof God)God) clauseclause

InIn casecase therethere areare certaincertain factorsfactorsbeyondbeyond thethe controlcontrol thatthat cancan affectaffect thetheunderwriter'sunderwriter's abilityability toto placeplace thethesharesshares withwith thethe buyersbuyers



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IPO GradingIPO Grading (Unlisted Companies)(Unlisted Companies)

IPOIPO GradingGrading CompulsoryCompulsory fromfrom MayMay 11,, 20072007

FiveFive--pointpoint pointpoint scalescaleHigherHigher scorescore indicatingindicating strongerstronger FundamentalsFundamentals andandvicevice versaversaAllAll thethe gradesgrades toto bebe discloseddisclosedActivityActivity toto runrun parallelparallel toto thethe filingfiling of of draftdraft offerofferdocumentdocumentPricePrice ofof thethe IPOIPO notnot takentaken intointo accountaccount forfor GradingGrading

IPO Grade : Price Matrix

High Grade

High Price

High Grade

Low Price

Low Grade

High Price

Low Grade

Low Price

First IPO Grading

CRISILCRISIL

KiriKiri DyesDyes andand ChemicalsChemicals LtdLtd

22//55

(Subscription(Subscription 11..33 times)times)

ICRAICRA

SRSSRS EntertainmentEntertainment 22//55


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IPO GradingIPO Grading (Unlisted Companies)(Unlisted Companies)

Business Prospects and Competitive PositionBusiness Prospects and Competitive PositionIndustry ProspectsIndustry Prospects

Company ProspectsCompany Prospects

Financial PositionFinancial Position

M

anagement QualityM

anagement QualityCorporate Governance PracticesCorporate Governance Practices

Compliance and Litigation HistoryCompliance and Litigation History

New ProjectsNew Projects Risks and ProspectsRisks and Prospects

Key Components of Investment Decision

Fundamental

Analysis

Returns

AnalysisIn est r

referen e

Factors Considered for IPO Grading


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50.00

75.00

100.00

125.00

150.00

175.00

200.00

225.00

250.00

12-Apr

13-Apr

14-Apr

15-Apr

16-Apr

17-Apr

18-Apr

19-Apr

20-Apr

21-Apr

22-Apr

23-Apr

24-Apr

25-Apr

26-Apr

27-Apr

28-Apr

29-Apr

30-Apr

1-May

2-May

3-May

4-May

5-May

6-May

7-May

8-May

9-May

10-May

11-May

12-May

13-May

14-May

15-May

16-May

17-May

18-May

19-May

20-May

21-May

Market Price

Offer Price

ORBIT CORP.LTD.OFF ER PR ICE : Rs.110.00

OPENING DATE : 20/03/2007

LISTING DATE : 12/04/ 2007

ISSUE AM OUNT : Rs.100.10 CRORE

IPO GRADING : 1/5108.54%

16.32%

TIMES SUBSCRIBED

Q IB : 7.23

NIB : 4.06

RET AIL : 0.74

TOTAL : 4.48

39 Days


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30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

110.00

120.00

07-Feb

09-Feb

11-Feb

13-Feb

15-Feb

17-Feb

19-Feb

21-Feb

23-Feb

25-Feb

27-Feb

01-Mar

03-Mar

05-Mar

07-Mar

09-Mar

11-Mar

13-Mar

15-Mar

17-Mar

19-Mar

21-Mar

23-Mar

25-Mar

27-Mar

29-Mar

31-Mar

02-Apr

04-Apr

06-Apr

08-Apr

10-Apr

12-Apr

14-Apr

16-Apr

18-Apr

20-Apr

22-Apr

24-Apr

26-Apr

28-Apr

30-Apr

02-May

04-May

06-May

08-May

10-May

12-May

14-May

16-May

18-May

20-May

Market Price

Offer Price

CAMBRIDGE TECHNOLOGY ENTERPRISES

LTD.OFFER PR ICE : Rs.38.00

OPENING DATE : 29/12/2006

LISTING DATE : 07/02/2007

ISSUE AM OUNT : Rs.15.40 CR ORE

IPO GRADING : 2/5

200.79%

54.34%

163.0

3%

TIMES SUBSCRIBED

QIB : 3.76NIB : 3.29

RETA IL : 11.21

TOTAL : 6.71

103 Days


48/58

50.00

60.00

70.00

80.00

90.00

19-Mar20-Mar21-Mar22-Mar23-Mar24-Mar

25-Mar26-Mar27-Mar

28-Mar29-Mar30-Mar31-Mar

1-Apr2-Apr3-Apr4-Apr

5-Apr6-Apr7-Apr8-Apr9-Apr10-Apr11-Apr12-Apr13-Apr

14-Apr15-Apr16-Apr17-Apr

18-Apr19-Apr20-Apr

21-Apr22-Apr23-Apr24-Apr25-Apr

26-Apr27-Apr28-Apr29-Apr30-Apr1-May2-May3-May4-May5-May6-May7-May8-May

9-May

MarketPrice

OfferPrice

AMD

METPLASTLTD.

OFFERPRICE

:Rs.75.00

OPENINGDATE

:15/02/2007

LISTINGDATE

:19/03/2007

ISSUE

AM

OUNT

:Rs.68.22CRORE

IPO

GRADING

:3

/5

8.93%

4.40

TIMESSUBSCRI

QIB

:

1.31

NIB

:10.16

RETAIL

:

7.66

TOTA

L:

4.42

63Days


49/58

50.00

60.00

70.00

80.00

90.00

100.00

110.00

120.00

130.00

140.00

150.00

7-Mar8-Mar9-Mar

10-Mar11-Mar12-Mar13-Mar

14-Mar15-Mar16-Mar17-Mar18-Mar19-Mar20-Mar21-Mar22-Mar23-Mar24-Mar25-Mar26-Mar27-Mar28-Mar29-Mar30-Mar

31-Mar1-Apr2-Apr3-Apr4-Apr5-Apr6-Apr7-Apr8-Apr9-Apr

10-Apr11-Apr12-Apr13-Apr14-Apr15-Apr16-Apr

17-Apr18-Apr19-Apr20-Apr21-Apr22-Apr23-Apr24-Apr25-Apr26-Apr27-Apr28-Apr29-Apr30-Apr1-May2-May3-May

4-May5-May6-May7-May8-May9-May

10 May

MarketPrice

OfferPrice

EVINIXACCESSORIESLTD.

OFFERPRICE

:Rs.120.00

OPENINGDATE

:12/02/2007

LISTINGDATE

:07/03/2007

ISSUE

AM

OUNT

:Rs.42.00CRO

RE

IPOGRADING

:2/5

T

IMESSUBSC

Q

IB

:

1.16

N

IB

:11.98

R

ETAIL

:

2.27

TOTAL:

3.42

-9.17%

-38.54%

75Days


50/58

IPO GRADINGIPO GRADINGWas grading not a factor inWas grading not a factor ininvestors' decision makinginvestors' decision makingprocess?process?

Or is that the bullish secondaryOr is that the bullish secondarymarketmarket conditions will alwaysconditions will alwaysoverweigh?overweigh?

Good to remember that IPOsGood to remember that IPOscan be floated only in buoyantcan be floated only in buoyantmarkets.markets.

Even the best issues will notEven the best issues will not

sell in a bear marketsell in a bear marketMarket replete with examplesMarket replete with examples


51/58

IPO GRADINGIPO GRADING

It is being assumed byIt is being assumed bymost that IPO gradingmost that IPO gradingis a perfect and anis a perfect and anobjective process.objective process.

If that was the case,If that was the case,there are no problems.there are no problems.

In reality, it appearsIn reality, it appearsto be a hugelyto be a hugely

subjective and ansubjective and animperfect processimperfect process..


52/58


53/58

BASIS OF ALLOTMENTBASIS OF ALLOTMENT

## HISTORIC TRENDS OFTHEHISTORIC TRENDS OFTHEPASTPAST

## WEIGHTAGE FOR LOWERWEIGHTAGE FOR LOWERCATEGORYCATEGORY

## HIGHER PERCENTAGE OFHIGHER PERCENTAGE OFALLOCATIONALLOCATION

## MULTIPLE APPLICATIONSMULTIPLE APPLICATIONS

(EXAMPLES)(EXAMPLES)## EXAMPLES OF RS/RPPL/ REPLEXAMPLES OF RS/RPPL/ REPL

## STOCK INVESTSSTOCK INVESTS



54/58


## CHANGE TO PRORATACHANGE TO PRORATA

ALLOTMENT IN 1993/94ALLOTMENT IN 1993/94## SEGREGATION OF APPLICATIONSSEGREGATION OF APPLICATIONS

2 CATEGORIES2 CATEGORIES

## SMALL INVESTORSSMALL INVESTORS

GRIEVANCESGRIEVANCES## REVERSE NUMBERINGREVERSE NUMBERING

## ALLOTMENT IN DEMATFORMALLOTMENT IN DEMATFORM20012001

## PREREQUISITES FOR OPENINGPREREQUISITES FOR OPENINGDEMAT A/C TILL 2005DEMAT A/C TILL 2005

## REQUIREMENT SPECIFIED POSTREQUIREMENT SPECIFIED POSTIPO SCAMIPO SCAM


55/58


## FORMATION OF COMMITTEEFORMATION OF COMMITTEEFOR MULTIPLEFOR MULTIPLEAPPLICATIONS IN 2001APPLICATIONS IN 2001UNDER CHAIRAMNSHIP OF JKUNDER CHAIRAMNSHIP OF JKVERMAVERMA

## SCAM AS IT UNFOLDEDSCAM AS IT UNFOLDED

## CASE OF PARAG JHAVERICASE OF PARAG JHAVERI20072007

## MISUSE OFTHE SYSTEMMISUSE OFTHE SYSTEM

BA I F ALL TMENTBA I F ALL TMENT


56/58

BA I F ALL TMENTBA I F ALL TMENT(contd)(contd)

## TOTAL SHARES ON OFFER @Rs.500/TOTAL SHARES ON OFFER @Rs.500/--PER SHARE SAY 10 CROREPER SHARE SAY 10 CRORE

## FOR RETAIL SAY 3.5 CRORESFOR RETAIL SAY 3.5 CRORES

## RETAIL OVERSUBSCRIBED 6 TIMESRETAIL OVERSUBSCRIBED 6 TIMES

12/6=2, 24/6=4, 48/6=812/6=2, 24/6=4, 48/6=8 ----------

LOTTERYLOTTERY72/6=1272/6=12 --------FIRM 84/6=14FIRM 84/6=14 -------- FIRMFIRM

96/6=1696/6=16 --------FIRM 192/6=32FIRM 192/6=32--------FIRMFIRM

## IF RETAIL IS 7 TIMESIF RETAIL IS 7 TIMES

12/7=1.71=2 24/7=3.42=3 }12/7=1.71=2 24/7=3.42=3 }LOTTERYLOTTERY

48/7=6.85=7 72/7=10.28=10 }48/7=6.85=7 72/7=10.28=10 }

84/7=1284/7=12 -------- FIRM 192/7=27 FIRMFIRM 192/7=27 FIRM

KARVY BASIS OF ALLOCATION - BOOK BUILT PORTION FOR RETAIL INVESTORS


57/58

610.22 13.572340

Number of Amount Subscription

Shares (Face value) List

68400000 10 684000000 Opening :

68400000 10 684000000 Closing :

No. of Total No.of Propor - Number of Total No. of

Shares Number of Shares tionate successful Shares Surplus/

applied for applications applied in shares Before After applicants allocated/ Defecit

(Category received each available rounding rounding (after rounding allotted

wise) category off off off) (7)-(14)

(2) (3) (5) (7) (8) (9 (10) (12) (14) (16)

15 60176 902640 66506 1.11 15 2 27 4457 66855 -349

30 82844 2485320 183117 2.21 15 4 27 12273 184095 -978

45 67812 3051540 224835 3.32 15 2 9 15069 226035 -1200

60 112793 6767580 498630 4.42 15 8 27 33420 501300 -2670

75 40359 3026925 223022 5.53 15 10 27 14948 224220 -1198

90 70934 6384060 470373 6.63 15 4 9 31526 472890 -2517

105 151763 15935115 1174087 7.74 15 14 27 78692 1180380 -6293

120 66497 7979640 587934 8.84 15 16 27 39406 591090 -3156

135 19057 2572695 189554 9.95 15 2 3 12705 190575 -1021

150 57122 8568300 631306 11.05 15 20 27 42313 634695 -3389

165 14203 2343495 172667 12.16 15 5 6 11836 177540 -4873

180 30708 5527440 407258 13.26 15 8 9 27296 409440 -2182

195 19752 3851640 283786 14.37 15 1 1 19752 296280 -12494

210 172499 36224790 2669016 15.47 15 1 1 172499 2587485 81531

1 1 147 1173 1173 -1173

225 3656564 822726900 60617909 16.58 16 1 1 3656564 58505024 2112885

1 10 17 2150923 2150923 -2150923

4623083 928348080 68400000 4173929 68400000 0

Allocation per

RAND TOT

Face value

Rs.

to

applicants

allottees

15-01-2008

Ratio of

18-01-2008

Public issue of 68400000 equity shares of Rs 10/- each issued for cash at a price of Rs.430/- per share.

NAME OF THE COMPANY : RELIANCE POWER LIMITED

(1) No.of allottees per Rs.1 Lakh of offer (upto (2) Subscription as m

Net quantum available for allotment

Shares issued vide Offer Document dated 19.01.

Applicant


58/58

THANK YOU..THANK YOU..

CS B NarasimhanCS B Narasimhan

Mobile No 9004089490Mobile No 9004089490

EmailEmail [email protected]@karvy.com

OrOr

[email protected]@gmail.com