study circle meet 27 th august 2010 presentation by cs b narasimhan

STUDY CIRCLE MEETSTUDY CIRCLE MEET

2727THTH August 2010 August 2010

Presentation Presentation byby

CS B NarasimhanCS B Narasimhan

ICDR AND IPO NEW PROCESS ICDR 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)

BROAD BASIS FOR THE CHANGESBROAD BASIS FOR THE CHANGESDIP guidelines standsDIP guidelines stands rescinded ( Aug rescinded ( Aug 2009)2009)Broadly theBroadly the framework remains the framework remains the samesameSome moreSome more clarification providedclarification provided in the in the new Regulationsnew RegulationsGuidelines does not have theGuidelines does not have the force of lawforce of lawRegulations doesRegulations does EnforcementEnforcement to be more strictto be more strictUnwanted guidelines deletedUnwanted guidelines deleted from the from the new regulationsnew regulations

““Group Companies” & Eligibility normsGroup Companies” & Eligibility norms

The term "group The term "group companies" not companies" not explained.explained.

Exemptions were Exemptions were available to available to banking banking company, and company, and infrastructure infrastructure company. company.

The term "group The term "group companies" companies" explained to avoid explained to avoid confusion.confusion. The new The new norms also norms also bans firm bans firm allotmentallotment to to privileged people privileged people like relatives, like relatives, associates and associates and friends in IPO’s.friends in IPO’s.Exemption has been Exemption has been removed. removed. Eligibility normsEligibility norms have been made have been made applicable uniformlyapplicable uniformly to all types of to all types of issuers.issuers.

Definition of EmployeeDefinition of Employee

Definition Definition of "employee"of "employee"

Includes Includes permanent permanent employee/ employee/ director of director of subsidiary or subsidiary or holding holding company of the company of the issuer.issuer. (DIP (DIP Guidelines)Guidelines)

ExcludesExcludes permanent permanent employee/ director of employee/ director of subsidiary or holding subsidiary or holding company of the issuercompany of the issuer and and promoters and immediate promoters and immediate relatives of promoters. relatives of promoters. employee means a employee means a permanent and full-time permanent and full-time employeeemployee of the issuer, of the issuer, working in India or abroad working in India or abroad or a director of the issuer, or a director of the issuer, whether whole time or part whether whole time or part timetime Reservations to employees Reservations to employees will will not be subjectnot be subject to lock-in. to lock-in.

Key managerial person and Anchor Key managerial person and Anchor InvestorInvestor

Definition of Definition of "Key "Key Management Management Personnel"Personnel"

Definition ofDefinition of

“ “Anchor Anchor Investor”Investor” (AI)(AI)

Officers vested with Officers vested with executive powersexecutive powers and the and the officers at the officers at the level level immediately below the immediately below the board of directorsboard of directors of the of the issuer and includes issuer and includes any other any other personperson whom the issuer may whom the issuer may declare as a key management declare as a key management personnel. personnel.

““anchor investor"anchor investor" (AI) (AI) means a qualified institutional means a qualified institutional buyer buyer

Concept of AI notified by SEBI Concept of AI notified by SEBI on 9on 9thth July 2009 July 2009

Public Issues Public Issues Firm allotment Firm allotment in public issues in public issues was permitted.was permitted.

Book Book building building process could process could be made be made through 75% or through 75% or 100% of issue 100% of issue size.size.

There is There is no provision no provision for firm allotmentfor firm allotment in in public issues. This has public issues. This has been done away since been done away since there is a there is a separate separate window for AI and window for AI and also for QIPsalso for QIPs now now

75% book building75% book building route has been route has been omitted.omitted.

Public IssuesPublic IssuesThe allotment and The allotment and /or refund period /or refund period was 30 days for was 30 days for fixed price issues fixed price issues and 15 days for and 15 days for book built issues.book built issues.

Disclosure of Disclosure of price or price price or price band was band was required in draft required in draft prospectus in prospectus in case of fixed price case of fixed price public issues.public issues.

The allotment/refund The allotment/refund period has been made period has been made 15 days for both fixed 15 days for both fixed price and book builtprice and book built issuesissues ( ( Possibly Possibly keeping SMEs in mindkeeping SMEs in mind))

For Book Built issues For Book Built issues price band / Floor price price band / Floor price needs to be needs to be announced announced 2 days2 days before issue before issue opening and for opening and for Fixed Fixed price at the time of ROC price at the time of ROC filingfiling

Public IssuesPublic IssuesSurplus money in Surplus money in Green Shoe Green Shoe Option (GSO) Bank Option (GSO) Bank Account was required Account was required to be transferred to to be transferred to the investor the investor Protection Fund of Protection Fund of stock exchangesstock exchanges

Issue period for Issue period for Infrastructure Infrastructure companies in companies in public issues was 21 public issues was 21 days, as against 10 days, as against 10 days for other issues.days for other issues.

Surplus money would Surplus money would now be transferred to now be transferred to the the Investor Investor Protection and Protection and Education Fund (IPEF) Education Fund (IPEF) established by the established by the BoardBoard

The issue period has The issue period has been made been made uniform to uniform to 10 days for all types 10 days for all types of issuersof issuers. The need . The need to give more time for to give more time for this sector was this sector was dispensed withdispensed with since since money comes only on money comes only on the last daythe last day

Public IssuesPublic IssuesParticulars as per Particulars as per audited financial audited financial statements would statements would not be more than 6 not be more than 6 months old from months old from the issue opening the issue opening date for all issuers, date for all issuers, except Government except Government Companies.Companies. Disclosure on Disclosure on pledge of shares by pledge of shares by promoters promoters

Financial institutionFinancial institution as a monitoring as a monitoring agencyagency not defined not defined beforebefore

Both the Government Both the Government and non-government and non-government issuers would now be issuers would now be treated at par. treated at par.

The New Regulations The New Regulations provides for provides for Disclosure Disclosure on pledge of shares by on pledge of shares by promoterspromoters consequent consequent to amendment in the to amendment in the listing agreementlisting agreementReplaced by Replaced by "public "public financial institution or a financial institution or a scheduled commercial scheduled commercial bank"bank" who would be who would be acting as monitoring acting as monitoring agency.agency.

Book Building IssueBook Building Issue If issue opening and If issue opening and closing closing advertisement advertisement contained highlights, contained highlights, then the then the advertisement would advertisement would contain risk factors.contain risk factors.

Forfeiture of Forfeiture of money on money on unexercised unexercised warrants in warrants in preferential issues preferential issues

If advertisement If advertisement contains information contains information other than the details other than the details specified in the format,specified in the format, the advertisement the advertisement shall contain risk shall contain risk factors.factors.

Where the warrant Where the warrant holder exercises holder exercises his his option to convert only option to convert only some of the warrantssome of the warrants held by him, upfront held by him, upfront payment made against payment made against only such warrants can only such warrants can be adjusted. be adjusted. Balance Balance will stand forfeitedwill stand forfeited

Book Building IssuesBook Building IssuesMinimum Minimum promoters' promoters' contribution contribution brought in by brought in by promoters/ persons promoters/ persons belonging to belonging to promoter promoter group/friends, group/friends, relatives and relatives and associatesassociates

Issue period was Issue period was not clear not clear in case of in case of revisionrevision in price in price band in book built band in book built public issues. public issues.

Promoter’s Promoter’s contributioncontribution shall be shall be brought in only by brought in only by promoters whose promoters whose identity, photograph, identity, photograph, etc are etc are disclosed in disclosed in the offer document.the offer document. The New Regulations The New Regulations provide that provide that total total issue period shall not issue period shall not exceed 10 days,exceed 10 days, including any including any revision in price revision in price band.band.

Monetary ControlMonetary Control Pre-issue Pre-issue advertisement to be advertisement to be made made immediately immediately after receipt of after receipt of observationsobservations from the from the BoardBoard

Documents such as M Documents such as M of A and A of A of the of A and A of A of the Company, audited Company, audited balance sheet to be balance sheet to be attached with due attached with due diligence certificate.diligence certificate.

Pre-issue Pre-issue advertisementadvertisement would be made would be made after after registering of registering of Prospectus / red Prospectus / red herring prospectusherring prospectus with Registrar of with Registrar of Companies but Companies but beforebefore opening of opening of the issue.the issue. The New The New Regulations require Regulations require for attachment of for attachment of checklist onlychecklist only..

Other HighlightsOther Highlights For follow on public For follow on public offers (FPO)offers (FPO) the notice the notice of Board meeting had of Board meeting had to be given as per to be given as per clause 19 of the listing clause 19 of the listing agreement a agreement a week week before the board before the board meeting.meeting.

The underwriting The underwriting obligations will be for obligations will be for the entire amountthe entire amount

Since the price band isSince the price band isrequired to be announced required to be announced one day before the issue one day before the issue opening notice period to opening notice period to Stock Exchange for the Stock Exchange for the Board meeting to be held Board meeting to be held for this purpose has been for this purpose has been reduced to 48 hoursreduced to 48 hours Underwriting Underwriting obligationsobligations will not be will not be restricted to the restricted to the minimum subscription minimum subscription amount of 90% of the amount of 90% of the issue size but issue size but for for 100% of the issue size.100% of the issue size.

Stock Exchanges and Public Stock Exchanges and Public RepresentativeRepresentative

Stock Exchanges would Stock Exchanges would be required to disclose be required to disclose complaints lodged by complaints lodged by investors against trading investors against trading members and companies members and companies listed on the exchange in listed on the exchange in their website their website

Where there is Where there is drawal of lots it has drawal of lots it has to be done in the to be done in the presence of the PR presence of the PR from the governing from the governing Board of the Stock Board of the Stock ExchangeExchange

These disclosures These disclosures will also include will also include details pertaining to details pertaining to arbitration penal arbitration penal action etc against action etc against trading members. trading members.

The The reference to PRreference to PR has been omitted has been omitted from ICDR. It has from ICDR. It has been clarified by been clarified by SEBI that it is SEBI that it is intentional.intentional.

Debarment and offer for saleDebarment and offer for sale

Companies Companies prohibitedprohibited if if debarred from debarred from accessing Capital accessing Capital Market –Order or Market –Order or Direction by BoardDirection by Board

No provision for No provision for offer for sale by offer for sale by listed entitieslisted entities

The The Issuer, any of its Issuer, any of its promoters, directors or promoters, directors or persons in control are persons in control are debarreddebarred

O F S Provided forO F S Provided for. . Promoters with majority Promoters with majority shareholding in listed shareholding in listed entities can do offer for entities can do offer for sale…. sale…. Disinvestment Disinvestment and increasing in public and increasing in public holding to 25%holding to 25%

Provisions relating to Provisions relating to OTCEI, E-IPO OmittedOTCEI, E-IPO Omitted

Post Issue Monitoring reportPost Issue Monitoring report

3 day report 3 day report (working days (working days from the closure from the closure of the issue)of the issue)Final Final 50 days50 days post issue post issue monitoring monitoring report (50 report (50 calendar days calendar days from closure of from closure of the issue)the issue)

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

15 days within 15 days within fifteen daysfifteen days

of the date of of the date of finalizationfinalization of basis of basis of allotment or of allotment or within fifteen days of within fifteen days of refund of money refund of money incase of failure of incase of failure of issue, from closure.issue, from closure.

Other changes notified later 9Other changes notified later 9thth Nov 2009Nov 2009

Reservation for Reservation for EmployeesEmployees– Upto 5 % of the issue sizeUpto 5 % of the issue size– Ceiling of Rs 1 LakhCeiling of Rs 1 Lakh– Extend reservation for Extend reservation for

Rights Issue alsoRights Issue also– Discount for Employees Discount for Employees

alsoalso

19

New process

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)

21

New process – 14th August 2003

Market participants objection (BRLM and SM)

This portion of notification shelved

ONGC Fiasco 29th March 2004

SMILE committee recommendations

GRIP (ASBA process)

ASBA phase I and Phase II

Lukewarm response (can not be made compulsory ….

Provisions of the Companies Act )

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 by

Registrar/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 demat

account of brokers

7 T + 6 days Trading to commence

23

New Process Post issue activities

24

Book building – Post issue activities

Pricing based on demand (Bids)

Finalization of prospectus

Filing with SEBI and ROC

Collection of bid data

Non ASBA & ASBA

Cleaning and validation of bid data

DP ID Ben ID and PAN matched with Depository database

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

rectification)

Final book taken after rectification from both SE

25

Submission of base documents to SE

SM to send data and 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)


26

Recon. of electronic book with schedule and FC (gross

level)

Bidded not banked

Banked not bidded

Technical rejections

Invalid bids ( not matched cases)

Amount mismatch (treatment thereof)

PAN mismatch and multiple applications


27

Preparation and submission of basis to DSE

Approval of basis by DSE (T+8)

Apply the basis on data and 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)


28

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

Filing of distribution schedule etc with SE (T+10)

Completion of all formalities for listing with SE

Confirmation for demat credit from depositories

RTI to confirm refund despatch

SE to inform members of commencement of

trading

Commencement of trading (GONG ceremony)

(T+12)


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 of allotment

T+10 & 11 - submission of all documents

T+12 - listing and trading

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 SEP PROPORTIONATE ALLOTMENT FROM SEP

20052005

5% RESERVATION FOR MF FROM SEP 5% RESERVATION FOR MF FROM SEP 20052005


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 < Rs Increased to 35 % and amount < Rs

100,000/- from March 2005100,000/- from March 2005– 25% for HNI > Rs 50,000/-25% for HNI > Rs 50,000/-– 15 % for amount >1,00,000/- Mar 200515 % for amount >1,00,000/- Mar 2005

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


Time line in Public IssuesTime line in Public Issues– 30 days for completion plus 7 working 30 days for completion plus 7 working

days for Listing ( 40 days)days for Listing ( 40 days)– 15 days for completion plus 7 working 15 days for completion plus 7 working

days for Listing (22 days)days for Listing (22 days)– Completion of all activities within 12 Completion of all activities within 12

working days ( Sunday & Public working days ( Sunday & Public Holiday excluded)Holiday excluded)


MODE OF PAYMENT & RECONMODE OF PAYMENT & RECON– By cheque /DD through SMBy cheque /DD through SM– Electronic IPO and secondary market Electronic IPO and secondary market

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

BOOK BUILDINGBOOK BUILDING

GREEN SHOE OPTION GREEN SHOE OPTION

UNDERWRITING UNDERWRITING &&IPO GRADINGIPO GRADING

CONCEPT OF GREEN SHOE CONCEPT 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 THIS MONEY RECEIVED THROUGH THIS

PROCESS USED FOR STABILISATIONPROCESS USED FOR STABILISATION ADDITIONAL ALLOTMENT UPTO ADDITIONAL ALLOTMENT UPTO

15% OF ISSUE SIZE15% OF ISSUE SIZE LENDING BY PROMOTERS LENDING BY PROMOTERS STABILIZING AGENT (SA) BRLMSTABILIZING AGENT (SA) BRLM

CONCEPT OF GREEN SHOE OPTIONCONCEPT OF GREEN SHOE OPTION

DISCLOSURES IN OFFER DISCLOSURES IN OFFER DOCUMENTDOCUMENT

GSO BANK AND DEMAT GSO BANK AND DEMAT ACCOUNTACCOUNT

SA CAN ONLY BUY IF MARKET SA CAN ONLY BUY IF MARKET PRICE IS BELOW ISSUE PRICEPRICE IS BELOW ISSUE PRICE

SA CANNOT SELL SINGLE SA CANNOT SELL SINGLE SHARESHARE

CANNOT BUY BEYOND OVER CANNOT BUY BEYOND OVER ALLOTMENTALLOTMENT

CONCEPT OF GREEN SHOE CONCEPT OF GREEN SHOE OPTIONOPTION

ADDITIONAL ALLOTMENT IN ADDITIONAL ALLOTMENT IN CASE OF SHORTFALLCASE OF SHORTFALL

BALANCE TRANSFERRED TO BALANCE TRANSFERRED TO IPEF OF SEBI IPEF OF SEBI

AVAILABLE FOR 30 DAYS ONLYAVAILABLE FOR 30 DAYS ONLYCALLED SO AFTER A COMPANY CALLED SO AFTER A COMPANY

NAMED GS ADOPTED THIS NAMED GS ADOPTED THIS CONCEPT IN ITS IPOCONCEPT IN ITS IPO

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

GSO Bank 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

GSO Bank A/c. - Rs.30 Crores

SITUATIONS EMERGING AT THE SITUATIONS EMERGING AT THE END OF 30 DAYSEND OF 30 DAYS

GSO BANK A/CGSO BANK A/C GSO DEMAT A/CGSO DEMAT A/C ACTION TO FOLLOWACTION TO FOLLOW POST POST ISSUE ISSUE CAPITALCAPITAL

%OF %OF PROMOTPROMOTOR OR HOLDINGHOLDING

11 Rs.30 CroresRs.30 Crores NILNIL Transfer 30 Cr. To XYZ Transfer 30 Cr. To XYZ Ltd. Co. to allott 30 lakh Ltd. Co. to allott 30 lakh shares to Mr. Ashares to Mr. A

530 530 lakh lakh sharesshares

300/530 300/530 =57%=57%

22 Rs.30 Cr.-Rs.27 Cr = Rs.30 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 to Transfer 30 lakh shares to Mr. AMr. A


300/500 300/500 = 60%= 60%

33 30Cr.-9Cr. = 21 Cr. 21-30Cr.-9Cr. = 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 to Transfer 10 lakh shares to Mr. A. Transfer Rs.20 Cr. Mr. A. Transfer Rs.20 Cr. To XYZ Ltd. XYZ Ltd. To To XYZ Ltd. XYZ Ltd. To allot 20 lakh shares to allot 20 lakh shares to Mr.AMr.A


300/520 300/520 = 58%= 58%

UnderwritingUnderwriting

Hard UnderwritingHard Underwriting

– Underwriter Underwriter agrees to buy his agrees to buy his commitmentcommitment at its earliest at its earliest stagestage

– Guarantees a fixed amountGuarantees a fixed amount to the to the issuer from the issue If the shares issuer from the issue If the shares are not subscribed by investorsare not subscribed by investors

– Where the issue is devolved on Where the issue is devolved on underwriters and they have to underwriters and they have to bring bring in the amount by subscribing to the in the amount by subscribing to the sharesshares

UNDERWRITING = INSURANCE


Hard UnderwritingHard Underwriting– Underwriting agreement Underwriting agreement signed signed

before the issue openingbefore the issue opening– Underwriting Underwriting not mandatorynot mandatory for for

Fixed Price IssueFixed Price Issue– If FP is If FP is underwritten fullyunderwritten fully

underwriters will have to bring in underwriters will have to bring in their obligationstheir obligations

– IN Book Built Issue Underwriting is IN Book Built Issue Underwriting is mandatory.mandatory.



Soft UnderwritingSoft Underwriting

– Underwriting agreement only after Underwriting agreement only after the issue closesthe issue closes

– Pricing is determined only after Pricing is determined only after issue closing in Book Built Issuesissue closing in Book Built Issues

– Paradox of some sortsParadox of some sorts

– Underwriting obligations have Underwriting obligations have been met in the past???? HOW??been met in the past???? HOW??

– Underwriter agrees to buy the Underwriter agrees to buy the shares at later stages as soon as shares at later stages as soon as the pricing process is completethe pricing process is complete



Soft UnderwritingSoft Underwriting

– Subsequently, he places those shares Subsequently, he places those shares with Institutional Investorswith Institutional Investors

– Also holds an option to invoke a force Also holds an option to invoke a force majeure (acts of God) clause majeure (acts of God) clause

– In case there are certain factors In case there are certain factors beyond the control that can affect the beyond the control that can affect the underwriter's ability to place the underwriter's ability to place the shares with the buyersshares with the buyers


IPO GradingIPO Grading (Unlisted Companies) (Unlisted Companies)IPO Grading IPO Grading Compulsory Compulsory fromfrom May 1, 2007 May 1, 2007Five-point point scaleFive-point point scaleHigher score Higher score indicating stronger indicating stronger Fundamentals Fundamentals and and vice versavice versaAll the grades to be disclosedAll the grades to be disclosedActivity to run parallel to the filing of draft offer Activity to run parallel to the filing of draft offer documentdocumentPrice of the IPO not taken into account for GradingPrice of the IPO not taken into account for Grading

IPO Grade : Price Matrix

High GradeHigh Price

High GradeLow Price

Low GradeHigh Price

Low GradeLow Price

First IPO Grading

CRISILCRISIL– Kiri Dyes and Chemicals Ltd –Kiri Dyes and Chemicals Ltd –

2/52/5

(Subscription – 1.3 times)(Subscription – 1.3 times)

ICRAICRA– SRS EntertainmentSRS Entertainment – 2/5 – 2/5

IPO Grading IPO Grading (Unlisted Companies)(Unlisted Companies)

Business Prospects and Competitive PositionBusiness Prospects and Competitive PositionIndustry ProspectsIndustry ProspectsCompany ProspectsCompany Prospects

Financial PositionFinancial PositionManagement QualityManagement QualityCorporate Governance PracticesCorporate Governance PracticesCompliance and Litigation HistoryCompliance and Litigation HistoryNew Projects — Risks and ProspectsNew Projects — Risks and Prospects

Key Components of Investment Decision

Fundamental Analysis

Fundamental Analysis

Returns Analysis

Returns Analysis

Investor Preference

Investor Preference

Factors Considered for IPO Grading

50.00

75.00

100.00

125.00

150.00

175.00

200.00

225.00

250.00

12-A

pr

13-A

pr

14-A

pr

15-A

pr

16-A

pr

17-A

pr

18-A

pr

19-A

pr

20-A

pr

21-A

pr

22-A

pr

23-A

pr

24-A

pr

25-A

pr

26-A

pr

27-A

pr

28-A

pr

29-A

pr

30-A

pr

1-M

ay

2-M

ay

3-M

ay

4-M

ay

5-M

ay

6-M

ay

7-M

ay

8-M

ay

9-M

ay

10-M

ay

11-M

ay

12-M

ay

13-M

ay

14-M

ay

15-M

ay

16-M

ay

17-M

ay

18-M

ay

19-M

ay

20-M

ay

21-M

ay

Market Price

Offer Price

ORBIT CORP.LTD.OFFER PRICE : Rs.110.00OPENING DATE : 20/03/2007LISTING DATE : 12/04/2007ISSUE AMOUNT : Rs.100.10 CROREIPO GRADING : 1/5

108.54%

16.32%

TIMES SUBSCRIBEDQ IB : 7.23NIB : 4.06RETAIL : 0.74

TOTAL : 4.48

39 Days

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

110.00

120.00

07-F

eb09

-Feb

11-F

eb13

-Feb

15-F

eb17

-Feb

19-F

eb21

-Feb

23-F

eb25

-Feb

27-F

eb01

-Mar

03-M

ar05

-Mar

07-M

ar09

-Mar

11-M

ar13

-Mar

15-M

ar17

-Mar

19-M

ar21

-Mar

23-M

ar25

-Mar

27-M

ar29

-Mar

31-M

ar02

-Apr

04-A

pr06

-Apr

08-A

pr10

-Apr

12-A

pr14

-Apr

16-A

pr18

-Apr

20-A

pr22

-Apr

24-A

pr26

-Apr

28-A

pr30

-Apr

02-M

ay04

-May

06-M

ay08

-May

10-M

ay12

-May

14-M

ay16

-May

18-M

ay20

-May

Market Price

Offer Price

CAMBRIDGE TECHNOLOGY ENTERPRISES LTD.OFFER PRICE : Rs.38.00OPENING DATE : 29/12/2006LISTING DATE : 07/02/2007ISSUE AMOUNT : Rs.15.40 CROREIPO GRADING : 2/5

200.79%

54.34%

163.

03%

TIMES SUBSCRIBED

QIB : 3.76 NIB : 3.29 RETAIL : 11.21

TOTAL : 6.71

103 Days

50.00

60.00

70.00

80.00

90.00

19-M

ar

20-M

ar

21-M

ar

22-M

ar

23-M

ar

24-M

ar

25-M

ar

26-M

ar

27-M

ar

28-M

ar

29-M

ar

30-M

ar

31-M

ar

1-A

pr

2-A

pr

3-A

pr

4-A

pr

5-A

pr

6-A

pr

7-A

pr

8-A

pr

9-A

pr

10-A

pr

11-A

pr

12-A

pr

13-A

pr

14-A

pr

15-A

pr

16-A

pr

17-A

pr

18-A

pr

19-A

pr

20-A

pr

21-A

pr

22-A

pr

23-A

pr

24-A

pr

25-A

pr

26-A

pr

27-A

pr

28-A

pr

29-A

pr

30-A

pr

1-M

ay

2-M

ay

3-M

ay

4-M

ay

5-M

ay

6-M

ay

7-M

ay

8-M

ay

9-M

ay

10-M

ay

11-M

ay

12-M

ay

13-M

ay

14-M

ay

15-M

ay

16-M

ay

17-M

ay

18-M

ay

19-M

ay

20-M

ay

21-M

ay

Market Price

Offer Price

AMD METPLAST LTD.OFFER PRICE : Rs.75.00OPENING DATE : 15/02/2007LISTING DATE : 19/03/2007ISSUE AMOUNT : Rs.68.22 CROREIPO GRADING : 3/5

8.93%

-7.93%

4.40

TIMES SUBSCRIBED QIB : 1.31NIB : 10.16RETAIL : 7.66

TOTAL : 4.42

63 Days

50.00

60.00

70.00

80.00

90.00

100.00

110.00

120.00

130.00

140.00

150.00

7-M

ar8-

Mar

9-M

ar10

-Mar

11-M

ar12

-Mar

13-M

ar14

-Mar

15-M

ar16

-Mar

17-M

ar18

-Mar

19-M

ar20

-Mar

21-M

ar22

-Mar

23-M

ar24

-Mar

25-M

ar26

-Mar

27-M

ar28

-Mar

29-M

ar30

-Mar

31-M

ar1-

Apr

2-A

pr3-

Apr

4-A

pr5-

Apr

6-A

pr7-

Apr

8-A

pr9-

Apr

10-A

pr11

-Apr

12-A

pr13

-Apr

14-A

pr15

-Apr

16-A

pr17

-Apr

18-A

pr19

-Apr

20-A

pr21

-Apr

22-A

pr23

-Apr

24-A

pr25

-Apr

26-A

pr27

-Apr

28-A

pr29

-Apr

30-A

pr1-

May

2-M

ay3-

May

4-M

ay5-

May

6-M

ay7-

May

8-M

ay9-

May

10-M

ay11

-May

12-M

ay13

-May

14-M

ay15

-May

16-M

ay17

-May

18-M

ay19

-May

20-M

ay21

-May

Market Price

Offer Price

EVINIX ACCESSORIES LTD.OFFER PRICE : Rs.120.00OPENING DATE : 12/02/2007LISTING DATE : 07/03/2007ISSUE AMOUNT : Rs.42.00 CROREIPO GRADING : 2/5

TIMES SUBSCRIBED QIB : 1.16 NIB : 11.98 RETAIL : 2.27

TOTAL : 3.42

-9.17%

-23.92%

-38.54%

75 Days

IPO GRADINGIPO GRADINGWas grading not a factor in Was grading not a factor in investors' decision making investors' decision making process? process? Or is that the bullish secondary Or is that the bullish secondary marketmarket conditions will always conditions will always overweigh?overweigh?Good to remember that IPOs can Good to remember that IPOs can be floated only in buoyant be floated only in buoyant markets.markets. Even the best issues will not Even the best issues will not sell in a bear marketsell in a bear marketMarket replete with examplesMarket replete with examples

IPO GRADINGIPO GRADING

It is being assumed by It is being assumed by most that IPO grading most that IPO grading is a perfect and an is a perfect and an objective process. objective process.

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

In reality, it appears In reality, it appears to be a hugely to be a hugely subjective and an subjective and an imperfect processimperfect process..

BASIS OF ALLOTMENTBASIS OF ALLOTMENT HISTORIC TRENDS OF THE PASTHISTORIC TRENDS OF THE PAST WEIGHTAGE FOR LOWER WEIGHTAGE FOR LOWER

CATEGORYCATEGORY HIGHER PERCENTAGE OF HIGHER PERCENTAGE OF

ALLOCATIONALLOCATION MULTIPLE APPLICATIONS MULTIPLE APPLICATIONS

(EXAMPLES)(EXAMPLES) EXAMPLES OF RS/RPPL/ REPLEXAMPLES OF RS/RPPL/ REPL STOCK INVESTSSTOCK INVESTS

BASIS OF ALLOTMENTBASIS OF ALLOTMENT CHANGE TO PRORATA CHANGE TO PRORATA

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

– 2 CATEGORIES– 2 CATEGORIES SMALL INVESTORS – GRIEVANCESSMALL INVESTORS – GRIEVANCES REVERSE NUMBERINGREVERSE NUMBERING ALLOTMENT IN DEMAT FORM ALLOTMENT IN DEMAT FORM

20012001 PREREQUISITES FOR OPENING PREREQUISITES FOR OPENING

DEMAT A/C TILL 2005DEMAT A/C TILL 2005 REQUIREMENT SPECIFIED POST REQUIREMENT SPECIFIED POST

IPO SCAMIPO SCAM

BASIS OF ALLOTMENTBASIS OF ALLOTMENT

FORMATION OF COMMITTEE FORMATION OF COMMITTEE FOR MULTIPLE APPLICATIONS FOR MULTIPLE APPLICATIONS IN 2001 UNDER IN 2001 UNDER CHAIRAMNSHIP OF JK VERMACHAIRAMNSHIP OF JK VERMA

SCAM AS IT UNFOLDEDSCAM AS IT UNFOLDED CASE OF PARAG JHAVERI CASE OF PARAG JHAVERI

20072007 MISUSE OF THE SYSTEMMISUSE OF THE SYSTEM

BASIS OF ALLOTMENT BASIS OF ALLOTMENT (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=8 ----- LOTTERY12/6=2, 24/6=4, 48/6=8 ----- LOTTERY72/6=12 ----FIRM 84/6=14 ---- FIRM72/6=12 ----FIRM 84/6=14 ---- FIRM96/6=16 ----FIRM 192/6=32----FIRM96/6=16 ----FIRM 192/6=32----FIRM

IF RETAIL IS 7 TIMESIF RETAIL IS 7 TIMES12/7=1.71=2 24/7=3.42=3 }12/7=1.71=2 24/7=3.42=3 }LOTTERYLOTTERY48/7=6.85=7 72/7=10.28=10 }48/7=6.85=7 72/7=10.28=10 }84/7=12 ---- FIRM 192/7=27 FIRM84/7=12 ---- FIRM 192/7=27 FIRM

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

GRAND TOTAL

Face value

Rs.

to

applicants

allottees

15-01-2008

Ratio of

18-01-2008

KARVY 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

BASIS OF ALLOCATION - BOOK BUILT PORTION FOR RETAIL INVESTORS

(1) No.of allottees per Rs.1 Lakh of offer (upto 225 shares) : (2) Subscription as multiple of offer (upto 225 shares):

Net quantum available for allotment

Shares issued vide Offer Document dated 19.01.2008

Applicant

THANK YOU………………..THANK YOU………………..

CS B NarasimhanCS B NarasimhanMobile No 9004089490Mobile No 9004089490Email Email [email protected]@karvy.com

[email protected]@gmail.com