Table of contents

Serial No. 1. 2. 3. . ". !. 7. #. 9. 1%. 11. 12.

Particulars IPO An Introduction Significance of IPO Analyzing an IPO investment IPO Investment Strategies Pricing of an IPO Princi$al ste$s in an IPO &oo'()uilding Process *ase study+ ,ug-es Soft.are Solutions

Page No. 7 9 1 1! 1# 2% 2 31

,/I01 Purvan'ara $ro2ects IPO 3aluation 3 Past IPO Performance IPO 4lossary &i)liogra$-y "% "2 "!

INITIAL PUBLIC OFFERING (IPO)

5-e first $u)lic offering of e6uity s-ares or converti)le securities )y a com$any1 .-ic- is follo.ed )y t-e listing of a com$any7s s-ares on a stoc' e8c-ange1 is 'no.n as an 9 Initial Pu lic O!!ering7. In ot-er .ords1 it refers to t-e first sale of a com$any7s common s-ares to investors on a $u)lic stoc' e8c-ange1 .it- an intention to raise ne. ca$ital. 5-e most im$ortant o)2ective of an IPO is to raise capital for t-e com$any. It -el$s a com$any to ta$ a .ide range of investors .-o .ould $rovide large volumes of ca$ital to t-e com$any for future gro.t- and develo$ment. A com$any going for an IPO stands to ma'e a lot of money from t-e sale of its s-ares .-ic- it tries to antici$ate -o. to use for furt-er e8$ansion and develo$ment. 5-e com$any is not re6uired to re$ay t-e ca$ital and t-e ne. s-are-olders get a rig-t to future $rofits distri)uted )y t-e com$any.

Co"#anies !all into t$o roa% categories& Pri'ate an% Pu lic.

A $rivately -eld com$any -as fe.er s-are-olders and its o.ners don:t -ave to disclose mucinformation a)out t-e com$any. ;-en a $rivately -eld cor$oration needs additional ca$ital1 it can )orro. cas- or sell stoc' to raise needed funds. Often <going $u)lic< is t-e )est c-oice for a gro.ing )usiness. *om$ared to t-e costs of )orro.ing large sums of money for ten years or more1 t-e costs of an initial $u)lic offering are small. 5-e ca$ital raised never -as to )e re$aid. ;-en a com$any sells its stoc' $u)licly1 t-ere is also t-e $ossi)ility for a$$reciation of t-e s-are $rice due to mar'et factors not directly related to t-e com$any. Any)ody can go out and incor$orate a com$any+ 2ust $ut in some money1 file t-e rig-t legal documents and follo. t-e re$orting rules of 2urisdiction suc- as Indian *om$anies Act 19"!. It usually isn:t $ossi)le to )uy s-ares in a $rivate com$any. One can a$$roac- t-e o.ners a)out investing1 )ut t-ey:re not o)ligated to sell you anyt-ing. Pu)lic com$anies1 on t-e ot-er -and1 -ave sold at least a $ortion
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of t-emselves to t-e $u)lic and trade on a stoc' e8c-ange. 5-is is .-y doing an IPO is also referred to as <going $u)lic.<

()* go #u lic++
&efore deciding .-et-er one s-ould com$lete an IPO1 it is im$ortant to consider t-e $ositive and negative effects t-at going $u)lic may -ave on t-eir mind. 5y$ically1 com$anies go $u)lic to raise and to $rovide li6uidity for t-eir s-are-olders. &ut t-ere can )e ot-er )enefits. 4oing $u)lic raises cas- and usually a lot of it. &eing $u)licly traded also o$ens many financial doors+ &ecause of t-e increased scrutiny1 $u)lic com$anies can usually get )etter rates .-en t-ey issue de)t.

As long as t-ere is mar'et demand1 a $u)lic com$any can al.ays issue more stoc'. 5-us1 mergers and ac6uisitions are easier to do )ecause stoc' can )e issued as $art of t-e deal.

5rading in t-e o$en mar'ets means li6uidity. 5-is ma'es it $ossi)le to im$lement t-ings li'e em$loyee stoc' o.ners-i$ $lans1 .-ic- -el$ to attract to$ talent.

4oing $u)lic can also )oost a com$any7s re$utation .-ic- in turn1 can -el$ t-e com$any to e8$and in t-e mar'et$lace.

SIGNIFICANCE OF IPO

Investing in IPO -as its o.n set of advantages and disadvantages. ;-ere on one -and1 -igelement of ris' is involved1 if successful1 it can even result in a -ig-er rate of return. 5-e rule is+ ,ig-er t-e ris'1 -ig-er t-e returns. 5-e com$any issues an IPO .it- its o.n set of management o)2ectives and t-e investor loo's for investment 'ee$ing in mind -is o.n o)2ectives. &ot- -ave a lot of ris' involved. &ut t-en investment also comes .it- an advantage for )ot- t-e com$any and t-e investors. 5-e significance of investing in IPO can )e studied from 2 vie.$oints for t-e company and for t-e investors. 5-is is discussed in detail as follo.s+

SIGNIFICANCE TO T,E CO-PAN.&

;-en a $rivately -eld cor$oration needs additional ca$ital1 it can )orro. cas- or sell stoc' to raise needed funds. Or else1 it may decide to =go $u)lic>. <4oing Pu)lic< is t-e )est c-oice for a gro.ing )usiness for t-e follo.ing reasons+

5-e costs of an initial $u)lic offering are small as com$ared to t-e costs of )orro.ing large sums of money for ten years or more1

5-e ca$ital raised never -as to )e re$aid.

;-en a com$any sells its stoc' $u)licly1 t-ere is also t-e $ossi)ility for a$$reciation of t-e s-are $rice due to mar'et factors not directly related to t-e com$any.

It allo.s a com$any to ta$ a .ide $ool of investors to $rovide it .it- large volumes of ca$ital for future gro.t-.

SIGNIFICANCE TO T,E S,ARE,OL/ERS& 5-e investors often see IPO as an easy .ay to ma'e money. One of t-e most attractive features of an IPO is t-at t-e s-ares offered are usually $riced very lo. and t-e com$any7s stoc' $rices can increase significantly during t-e day t-e s-ares are offered. 5-is is seen as a good 5-e o$$ortunity )y 9s$eculative investors7 loo'ing to notc- out some s-ort(term $rofit.

9s$eculative investors7 are interested only in t-e s-ort(term $otential rat-er t-an long(term gains.

T,E RIS0 FACTOR

Investing in IPO is often seen as an easy .ay of investing1 )ut it is -ig-ly ris'y and many investment advisers advise against it unless you are $articularly e8$erienced and 'no.ledgea)le. 5-e ris' factor can )e attri)uted to t-e follo.ing reasons+

UNPRE/ICTABLE& 5-e ?n$redicta)le nature of t-e IPO7s is one of t-e ma2or reasons t-at investors advise against investing in IPO7s. S-ares are initially offered at a lo. $rice1 )ut t-ey see significant c-anges in t-eir $rices during t-e day. It mig-t rise significantly during t-e day1 )ut t-en it may fall stee$ly t-e ne8t day.

NO PAST TRAC0 RECOR/ OF T,E CO-PAN.& @o $ast trac' record of t-e com$any adds furt-er to t-e dilemma of t-e s-are-olders as to .-et-er to invest in t-e IPO or not. ;it- no $ast trac' record1 it )ecomes a difficult

c-oice for t-e investors to decide .-et-er to invest in a $articular IPO or not1 as t-ere is )asis to decide .-et-er t-e investment .ill )e $rofita)le or not.

POTENTIAL OF STOC0 -AR0ET& Aeturns from investing in IPO are not guaranteed. 5-e Stoc' Bar'et is -ig-ly volatile. Stoc' Bar'et fluctuations .idely affect not only t-e individuals and -ouse-old1 )ut t-e economy as a .-ole. 5-e volatility of t-e stoc' mar'et ma'es it difficult to $redict -o. t-e s-ares .ill $erform over a $eriod of time as t-e $rofit and ris' $otential of t-e IPO de$ends u$on t-e state of t-e stoc' mar'et at t-at $articular time.

RIS0 ASSESS-ENT&
5-e $ossi)ility of )uying stoc' in a $romising start(u$ com$any and finding t-e ne8t success story -as intrigued many investors. &ut )efore ta'ing t-e )ig ste$1 it is essential to understand some of t-e c-allenges1 )asic ris's and $otential re.ards associated .itinvesting in an IPO. 5-is -as made Ris1 Assess"ent an im$ortant $art of Investment Analysis. ,ig-er t-e desired returns1 -ig-er .ould )e t-e ris' involved. 5-erefore1 a t-oroug- analysis of ris' associated .it- t-e investment s-ould )e done )efore any consideration. Cor investing in an IPO1 it is essential not only to 'no. a)out t-e .or'ing of an IPO1 )ut .e also need to 'no. a)out t-e com$any in .-ic- .e are $lanning to invest. ,ence1 it is im$erative to 'no.+ 5-e fundamentals of t-e )usiness 5-e $olicies and t-e o)2ectives of t-e )usiness 5-eir $roducts and services
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 5-eir com$etitors 5-eir s-are in t-e current mar'et 5-e sco$e of t-eir issue )eing successful It .ould )e -ig-ly ris'y to invest .it-out -aving t-is )asic 'no.ledge a)out t-e com$any.

5-ere are 3 'inds of ris's involved in investing in IPO+

BUSINESS RIS0+ It is im$ortant to note .-et-er t-e com$any -as sound )usiness and management $olicies1 .-ic- are consistent .it- t-e standard norms. Aesearc-ing )usiness ris' involves e8amining t-e )usiness model of t-e com$any.

FINANCIAL RIS0& Is t-is com$any solvent .it- sufficient ca$ital to suffer s-ort(term )usiness set)ac'sD 5-e li6uidity $osition of t-e com$any also needs to )e considered. Aesearc-ing financial ris' involves e8amining t-e cor$oration:s financial statements1 ca$ital structure1 and ot-er financial data.

-AR0ET RIS0&
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It .ould )eneficial to c-ec' out t-e demand for t-e IPO in t-e mar'et1 i.e.1 t-e a$$eal of t-e IPO to ot-er investors in t-e mar'et. ,ence1 researc-ing mar'et ris' involves e8amining t-e a$$eal of t-e cor$oration to current and future mar'et conditions.

ANAL.SING AN IPO IN2EST-ENT

POTENTIAL IN2ESTORS AN/ T,EIR OB3ECTI2ES& Initial Pu)lic Offering is a c-ea$ .ay of raising ca$ital1 )ut all t-e same it is not considered as t-e )est .ay of investing for t-e investor. &efore investing1 t-e investor must do a $ro$er analysis of t-e ris's to )e ta'en and t-e returns e8$ected. ,e must )e clear a)out t-e )enefits -e -o$e to derive from t-e investment. 5-e investor must )e clear a)out t-e o)2ective -e -as for investing1 .-et-er it is long(term ca$ital gro.t- or s-ort(term ca$ital gains. 5-e $otential investors and t-eir o)2ectives could )e categorized as+

I@*OBE I@3ES5OA+ An 9income investor7 is t-e one .-o is loo'ing for steadily rising $rofits t-at .ill )e distri)uted to s-are-olders regularly. Cor t-is1 -e needs to e8amine t-e com$any:s $otential for $rofits and its dividend $olicy.
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4AO;5, I@3ES5OA+ A 9gro.t- investor7 is t-e one .-o is loo'ing for $otential steady increase in $rofits t-at are reinvested for furt-er e8$ansion. Cor t-is -e needs to evaluate t-e com$any:s gro.t$lan1 earnings and $otential for retained earnings.

SPE*?0A5OA+ A 9s$eculator7 loo's for s-ort(term ca$ital gains. Cor t-is -e needs to loo' for $otential of an early mar'et )rea't-roug- or discovery t-at .ill send t-e $rice u$ 6uic'ly .it- little care a)out a ra$id decline.

IN2ESTOR RESEARC,& It is im$erative to $ro$erly analyze t-e IPO t-e investor is $lanning to invest into. ,e needs to do a t-oroug- researc- at -is end and try to figure out if t-e o)2ective of t-e com$any matc- -is o.n $ersonal o)2ectives or not. 5-e un$redicta)le nature of IPO7s and volatility of t-e stoc' mar'et adds greatly to t-e ris' factor. So1 it is advisa)le t-at t-e investor does -is -ome.or'1 )efore investing. 5-e investor s-ould 'no. a)out t-e follo.ing+ &?SI@ESS OPEAA5IO@S+ ;-at are t-e o)2ectives of t-e )usinessD ;-at are its management $oliciesD ;-at is t-e sco$e for gro.t-D ;-at is t-e turnover of t-e la)our forceD
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;ould t-e com$any -ave long(term sta)ilityD

CI@A@*IA0 OPEAA5IO@S+ ;-at is t-e com$any7s credit -istoryD ;-at is t-e com$any7s li6uidity $ositionD Are t-ere any defaults on de)tsD *om$any7s e8$enditure in com$arison to com$etitors. *om$any7s a)ility to $ay(off its de)ts. ;-at are t-e $ro2ected earnings of t-e com$any

BAAFE5I@4 OPEAA5IO@S+ ;-o are t-e $otential investorsD ;-at is t-e sco$e for success of t-e IPOD ;-at is t-e a$$eal of t-e IPO for t-e ot-er investorsD ;-at are t-e $roducts and services offered )y t-e com$anyD ;-o are t-e strongest com$etitors of t-e com$anyD

IPO IN2EST-ENT STRATEGIES

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Investing in IPOs is muc- different t-an investing in seasoned stoc's. 5-is is )ecause t-ere is limited information and researc- on IPOs1 $rior to t-e offering. And immediately follo.ing t-e offering1 researc- o$inions emanating from t-e under.riters are invaria)ly $ositive. 5-ere are some of t-e strategies t-at can )e considered )efore investing in t-e IPO+

?@/EAS5A@/ 5,E ;OAFI@4 OC IPO+ 5-e first and foremost ste$ is to understand t-e .or'ing of an IPO and t-e )asics of an investment $rocess. Ot-er investment o$tions could also )e considered de$ending u$on t-e o)2ective of t-e investor.

4A5,EA F@O;0E/4E+ It .ould )e )eneficial to gat-er as muc- 'no.ledge as $ossi)le a)out t-e IPO mar'et1 t-e com$any offering it1 t-e demand for it and any offer )eing $lanned )y a com$etitor.

I@3ES5I4A5E &ECOAE I@3ES5I@4+ 5-e $ros$ectus of t-e com$any can serve as a good o$tion for finding all t-e details of t-e com$any. It gives out t-e o)2ectives and $rinci$les of t-e management and .ill also cover t-e ris's.

F@O; GO?A &AOFEA+ 5-is is a crucial ste$ as t-e )ro'er .ould )e t-e one .-o .ould ma2orly -andle your money. IPO allocations are controlled )y under.riters. 5-e first ste$ to getting IPO allocations is getting a )ro'er .-o under.rites a lot of deals. BEAS?AE 5,E AISF I@3O03E/+
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IPO investments -ave a -ig- degree of ris' involved. It is t-erefore1 essential to measure t-e ris's and ta'e t-e decision accordingly.

I@3ES5 A5 GO?A O;@ AISF+ Cinally1 after t-e -ome.or' is done1 and t-e )ig ste$ needs to )e ta'en. All t-at can )e suggested is to 9invest at your o.n ris'7. /o not ta'e a ris' greater t-an your ca$acity.

PRICING OF AN IPO

5-e $ricing of an IPO is a very critical as$ect and -as a direct im$act on t-e success or failure of t-e IPO issue. 5-ere are many factors t-at need to )e considered .-ile $ricing an IPO and an attem$t s-ould )e made to reac- an IPO $rice t-at is lo. enoug- to generate interest in t-e mar'et and at t-e same time1 it s-ould )e -ig- enoug- to raise sufficient ca$ital for t-e com$any. 5-e $rocess for determining an o$timal $rice for t-e IPO involves t-e under.riters arranging s-are $urc-ase commitments from leading institutional investors. PROCESS&
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Once t-e final $ros$ectus is $rinted and distri)uted to investors1 com$any management meets .it- t-eir investment )an' to c-oose t-e final offering $rice and size. 5-e investment )an' tries to fi8 an a$$ro$riate $rice for t-e IPO de$ending u$on t-e demand e8$ected and t-e ca$ital re6uirements of t-e com$any. 5-e $ricing of an IPO is a delicate )alancing act as t-e investment firms try to stri'e a )alance )et.een t-e company and t-e investors. 5-e lead under.riter -as t-e res$onsi)ility to ensure smoot- trading of t-e com$any7s stoc'. 5-e under.riter is legally allo.ed to su$$ort t-e $rice of a ne.ly issued stoc' )y eit-er )uying t-em in t-e mar'et or )y selling t-em s-ort. IPO PRICING /IFFERENCES& It is generally noted1 t-at t-ere is a large difference )et.een t-e $rice at t-e time of issue of an Initial Pu)lic Offering HIPOI and t-e $rice .-en t-ey start trading in t-e secondary mar'et. 5-ese $ricing dis$arities occur mostly .-en an IPO is considered =-ot>1 or in ot-er .ords1 .-en it a$$eals to a large num)er of investors. An IPO is =-ot> .-en t-e demand for it far e8ceeds t-e su$$ly. 5-is im)alance )et.een demand and su$$ly causes a dramatic rise in t-e $rice of eac- s-are in t-e first day itself1 during t-e early -ours of trading.

UN/ERPRICING AN/ O2ERPRICING OF IPO4s

UN/ERPRICING& 5-e $ricing of an IPO at less t-an its mar'et value is referred to as 9?nder$ricing7. In ot-er .ords1 it is t-e difference )et.een t-e offer $rice and t-e $rice of t-e first trade. ,istorically1 IPO7s -ave al.ays )een 9under$riced7. ?nder$riced IPO -el$s to generate additional interest in t-e stoc' .-en it first )ecomes $u)licly traded. 5-is mig-t result in significant gains for investors .-o -ave )een allocated s-ares at t-e offering $rice. ,o.ever1 under$ricing also results in loss of significant amount of ca$ital t-at could -ave )een raised -ad t-e s-ares )een offered at t-e -ig-er $rice.
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O2ERPRICING& 5-e $ricing of an IPO at more t-an its mar'et value is referred to as 9Over$ricing7. Even =over$ricing> of s-ares is not as -ealt-y o$tion. If t-e stoc' is offered at a -ig-er $rice t-an .-at t-e mar'et is .illing to $ay1 t-en it is li'ely to )ecome difficult for t-e under.riters to fulfill t-eir commitment to sell s-ares. Curt-ermore1 even if t-e under.riters are successful in selling all t-e issued s-ares and t-e stoc' falls in value on t-e first day itself of trading1 t-en it is li'ely to lose its mar'eta)ility and -ence1 even more of its value.

PRINCIPAL STEPS IN AN IPO

A##ro'al o! BO/+ A$$roval of &O/ is re6uired for raising ca$ital from t-e $u)lic.

A##oint"ent o! lea% "anagers+ t-e lead manager is t-e merc-ant )an'er .-o orc-estrates t-e issue in consultation of t-e com$any.

A##oint"ent o! ot)er inter"e%iaries+

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( ( ( ( (

*o(managers and advisors ?nder.riters &an'ers &ro'ers and $rinci$al )ro'ers Aegistrars

Filing t)e #ros#ectus $it) SEBI+ 5-e $ros$ectus or t-e offer document communicates information a)out t-e com$any and t-e $ro$osed security issue to t-e investing $u)lic. All t-e com$anies see'ing to ma'e a $u)lic issue -ave to file t-eir offer document .it- SE&I. If SE&I or $u)lic does not communicate its o)servations .it-in 21 days from t-e filing of t-e offer document1 t-e com$any can $roceed .it- its $u)lic issue.

Filing o! t)e #ros#ectus $it) t)e registrar o! t)e co"#anies + once t-e $ros$ectus -ave )een a$$roved )y t-e concerned stoc' e8c-anges and t-e consent o)tained from t-e )an'ers1 auditors1 registrar1 under.riters and ot-ers1 t-e $ros$ectus signed )y t-e directors1 must )e filed .it- t-e registrar of com$anies1 .it- t-e re6uired documents as $er t-e com$anies act 19"!.

Printing an% %is#atc) o! #ros#ectus + After t-e $ros$ectus is filed .it- t-e registrar of com$anies1 t-e com$any s-ould $rint t-e $ros$ectus. 5-e 6uantity in .-ic- $ros$ectus is $rinted s-ould )e sufficient to meet re6uirements. 5-ey s-ould )e send to t-e stoc' e8c-anges and )ro'ers so t-ey receive t-em atleast 21 days )efore t-e first announcement is made in t-e ne.s $a$ers.

Filing o! initial listing a##lication+ ;it-in 1% days of filing t-e $ros$ectus1 t-e initial listing a$$lication must )e made to t-e concerned stoc' e8c-anges .it- t-e listing fees.

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Pro"otion o! t)e issue+ 5-e $romotional cam$aign ty$ically commences .it- t-e filing of t-e $ros$ectus .it- t-e registrar of t-e com$anies and ends .it- t-e release of t-e statutory announcement of t-e issue.

Statutor* announce"ent+ 5-e issue must )e made after see'ing a$$roval of t-e stoc' e8c-ange. 5-is must )e $u)lis-ed atleast 1% days )efore t-e o$ening of t-e su)scri$tion list.

Collections o! a##lications+ 5-e Statutory announcement s$ecifies .-en t-e su)scri$tion .ould o$en1 .-en it .ould close1 and t-e )an's .-ere t-e a$$lications can )e made. /uring t-e $eriod t-e su)scri$tion is 'e$t o$en1 t-e )an'ers .ill collect t-e a$$lications on )e-alf of t-e com$any.

Processing o! a##lications+ Scrutinizing of t-e a$$lications is done.

Esta lis)ing t)e lia ilit* o! t)e un%er$riters + If t-e issue is undersu)scri)ed1 t-e lia)ility of t-e under.riters -as to )e esta)lis-ed.

Allot"ent o! s)ares+ Pro$ortionate system of allotment is to )e follo.ed.

Listing o! t)e issue+ 5-e detail listing a$$lication s-ould )e su)mitted to t-e concerned stoc' e8c-ange along .it- t-e listing agreement and t-e listing fee. 5-e allotment formalities s-ould )e com$leted .it-in 3% days.

Boo1 uil%ing is t)e #rocess o! #rice %isco'er* (Basic conce#t)

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5-e com$any does not come out .it- a fi8ed $rice for its s-aresJ instead1 it indicates a $rice )and t-at mentions t-e lo.est Hreferred to as t-e floorI and t-e -ig-est Ht-e ca$I $rices at .-ic- a s-are can )e sold.

Bi%s are t)en in'ite% for t-e s-ares. Eac- investor states -o. many s-ares sK-e .ants and .-at sK-e is .illing to $ay for t-ose s-ares Hde$ending on t-e $rice )andI. 5-e actual $rice is t-en discovered )ased on t-ese )ids. As .e continue .it- t-e series1 .e .ill e8$lain t-e $rocess in detail.

According to t-e )oo' )uilding $rocess1 t-ree classes of investors can )id for t-e s-ares+ 1. Lualified Institutional &uyers+ Butual funds and Coreign Institutional Investors. 2. Aetail investors+ Anyone .-o )ids for s-ares under As "%1%%% is a retail investor. 3. ,ig- net .ort- individuals and em$loyees of t-e com$any.

Allot"ent is t-e $rocess .-ere)y t-ose .-o a$$ly are given HallottedI s-ares. 5-e )ids are first allotted to t-e different categories and t-e over(su)scri$tion Hmore s-ares a$$lied for t-an s-ares availa)leI in eac- category is determined. Aetail investors and -ig- net .ort- individuals get allotments on a #ro#ortional asis.

E5a"#le 6& Assuming you are a retail investor and -ave a$$lied for 2%% s-ares in t-e issue1 and t-e issue is over(su)scri)ed five times in t-e retail category1 you 6ualify to get % s-ares H2%% s-aresK"I. Sometimes1 t-e over(su)scri$tion is -uge or t-e issue is $riced so -ig- t-at you can:t really )id for too many s-ares )efore t-e As "%1%%% limit is reac-ed. In suc- cases1 allotments are made on t-e )asis of a lottery.

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E5a"#le 7& Say1 a retail investor -as a$$lied for five s-ares in an issue1 and t-e retail category -as )een over(su)scri)ed 1% times. 5-e investor is entitled to -alf a s-are. Since t-at isn:t $ossi)le1 it may t-en )e decided t-at every 1 in 2 retail investors .ill get allotment. 5-e investors are t-en selected )y lottery and t-e issue allotted on a $ro$ortional )asis. 5-at is .-y t-ere is no .ay you can )e sure of getting an allotment.

BOO0 BUIL/ING PROCESS

&oo' &uilding is )asically a ca$ital issuance $rocess used in Initial Pu)lic Offer HIPOI .-icaids $rice and demand discovery. It is a $rocess used for mar'eting a $u)lic offer of e6uity s-ares of a com$any. It is a mec-anism .-ere1 during t-e $eriod for .-ic- t-e )oo' for t-e IPO is o$en1 )ids are collected from investors at various $rices1 .-ic- are a)ove or e6ual to t-e floor $rice. 5-e $rocess aims at ta$$ing )ot- .-olesale and retail investors. 5-e offerKissue $rice is t-en determined after t-e )id closing date )ased on certain evaluation criteria.

19

T)e Process&
5-e Issuer .-o is $lanning an IPO nominates a lead merc-ant )an'er as a :)oo' runner:.

5-e Issuer s$ecifies t-e num)er of securities to )e issued and t-e $rice )and for orders.

5-e Issuer also a$$oints syndicate mem)ers .it- .-om orders can )e $laced )y t-e investors.
20

 Investors $lace t-eir order .it- a syndicate mem)er .-o in$uts t-e orders into t-e :electronic )oo':. 5-is $rocess is called :)idding: and is similar to o$en auction.

A &oo' s-ould remain o$en for a minimum of " days.

&ids cannot )e entered less t-an t-e floor $rice.

&ids can )e revised )y t-e )idder )efore t-e issue closes.

On t-e close of t-e )oo' )uilding $eriod t-e :)oo' runner evaluates t-e )ids on t-e )asis of t-e evaluation criteria .-ic- may include ( Price Aggression Investor 6uality Earliness of )ids1 etc.

5-e )oo' runner t-e com$any concludes t-e final $rice at .-ic- it is .illing to issue t-e stoc' and allocation of securities.

4enerally1 t-e num)ers of s-ares are fi8edJ t-e issue size gets frozen )ased on t-e $rice $er s-are discovered t-roug- t-e )oo' )uilding $rocess.

Allocation of securities is made to t-e successful )idders.

21

 &oo' &uilding is a good conce$t and re$resents a ca$ital mar'et .-ic- is in t-e $rocess of maturing.

&oo'()uilding is all a)out letting t-e com$any 'no. t-e $rice at .-ic- you are .illing to )uy t-e stoc' and getting an allotment at a $rice t-at a ma2ority of t-e investors are .illing to $ay. 5-e $rice discovery is made de$ending on t-e demand for t-e stoc'. 5-e $rice t-at you can suggest is su)2ect to a certain minimum $rice level1 called t-e floor $rice. Cor instance1 t-e floor $rice fi8ed for t-e Baruti:s initial $u)lic offering .as As 11"1 .-icmeans t-at t-e $rice you are .illing to $ay s-ould )e at or a)ove As 11". In some cases1 as in &iocon1 t-e $rice )and Hminimum and ma8imum $riceI at .-ic- you can a$$ly is s$ecified. A $rice )and of As 27% to As 31" means t-at you can a$$ly at a floor $rice of As 27% and a ceiling of As 31". If you are not still very comforta)le fi8ing a $rice1 do not .orry. Gou1 as a retail investor1 -ave t-e o$tion of a$$lying at t-e cut(off $rice. 5-at is1 you can 2ust agree to $ic' u$ t-e s-ares at t-e final $rice fi8ed. 5-is .ay1 you do not run t-e ris' of not getting an allotment )ecause you -ave )id at a lo.er $rice. If you )id at t-e cut(off $rice and t-e $rice is revised u$.ards1 t-en t-e managers to t-e offer may reduce t-e num)er of s-ares allotted to 'ee$ it .it-in t-e $ayment already made. Gou can get t-e a$$lication forms from t-e nearest offices of t-e lead managers to t-e offer or from t-e cor$orate or t-e registered office of t-e com$any.

,o$ is t)e #rice !i5e%+ All t-e a$$lications received till t-e last date are analysed and a final offer $rice1 'no.n as t-e cut(off $rice is arrived at. 5-e final $rice is t-e e6uili)rium $rice or t-e -ig-est $rice at .-ic- all t-e s-ares on offer can )e sold smoot-ly. If your $rice is less t-an t-e final $rice1 you .ill not get allotment. If your $rice is -ig-er t-an t-e final $rice1 t-e amount in e8cess of t-e final $rice is refunded if you get allotment. If you do not get allotment1 you s-ould get your full refund of your money in 1" days after t-e final allotment
22

is made. If you do not get your money or allotment in a mont-:s time1 you can demand interest at 1" $er cent $er annum on t-e money due. ,o$ are s)ares allocate%+ As $er regulations1 at least 2" $er cent of t-e s-ares on offer s-ould )e set aside for retail investors. Cifty $er cent of t-e offer is for 6ualified institutional investors. Lualified Institutional &idders HLI&I are s$ecified under t-e regulation and allotment to t-is class is made at t-e discretion of t-e com$any )ased on certain criteria. LI&s can )e mutual funds1 foreign institutional investors1 )an's or insurance com$anies. If any of t-ese categories is under(su)scri)ed1 say1 t-e retail $ortion is not ade6uately su)scri)ed1 t-en t-at $ortion can )e allocated among t-e ot-er t.o categories at t-e discretion of t-e management. Cor instance1 in an offer for t.o la'- s-ares1 around "%1%%% s-ares Hor generally 2" $er cent of t-e offerI are reserved for retail investors. &ut if t-e )ids from t-is category are received are only for %1%%% s-ares1 t-en 1%1%%% s-ares can )e allocated eit-er to t-e LI&s or non(institutional investors.

5-e allotment of s-ares is made on a $ro(rata )asis. *onsider t-is illustration+ An offer is made for t.o la'- s-ares and is oversu)scri)ed )y times times1 t-at is1 )ids are received for si8 la'- s-ares. 5-e minimum allotment is 1%% s-ares. 11"%% a$$licants -ave a$$lied for 1%% s-ares eac-J and 2%% a$$licants -ave )id for "%% s-ares eac-. 5-e s-ares .ould )e allotted in t-e follo.ing manner+

S-ares are segregated into various categories de$ending on t-e num)er of s-ares a$$lied for. In t-e a)ove illustration1 all investors .-o a$$lied for 1%% s-ares .ill fall in category A and t-ose for "%% s-ares in category & and so on.

5-e total num)er of s-ares to )e allotted in category A .ill )e "%1%%% H1%%M1"%%M1K3I. 5-at is1 t-e num)er of s-ares a$$lied for H1%%IM num)er of a$$lications received H1"%%IM oversu)scri$tion ratio H1K3I. *ategory & .ill )e allotted 3313%% s-ares in a similar manner.
23

S-ares allotted to eac- a$$licant in category A s-ould )e 33 s-ares H1%%M1K3I. 5-at is1 s-ares a$$lied )y eac- a$$licant in t-e category multi$lied )y t-e oversu)scri$tion ratio. As1 t-e minimum allotment lot is 1%% s-ares1 it is rounded off to t-e nearest minimum lot. 5-erefore1 "%% a$$licants .ill get 1%% s-ares eac- in category A N total s-ares allotted to t-e category H"%1%%%I divided )y t-e minimum lot size H1%%I.

In category &1 eac- a$$licant s-ould )e allotted 1!7 s-ares H"%%K3I. &ut it is rounded off to 2%% s-ares eac-. 5-erefore1 1!7 a$$licants out of 2%% H333%%K2%%I .ould get an allotment of 2%% s-ares eac- in category &.

5-e final allotment is made )y dra.ing a lot from eac- category. If you are luc'y you may get allotment in t-e final dra..

5-e s-ares are listed and trading commences .it-in seven .or'ing days of finalisation of t-e )asis of allotment. Gou can c-ec' t-e daily status of t-e )ids received1 t-e $rice )id for and t-e res$onse form various categories in t-e ;e) sites of stoc' e8c-anges. 5-is .ill give you an idea of t-e demand for t-e stoc' and a c-ance to c-ange your mind. After seeing t-e res$onse1 if you feel you -ave )id at a -ig-er or a lo.er $rice1 you can al.ays c-ange t-e )id $rice and su)mit a revision form.

5-e traditional met-od of doing IPOs is t-e !i5e% #rice o!!ering. ,ere1 t-e issuer and t-e merc-ant )an'er agree on an <issue $rice< ( e.g. As.1%%. 5-en one -ave t-e c-oice of filling in an a$$lication form at t-is $rice and su)scri)ing to t-e issue. E8tensive researc- -as revealed t-at t-e fi8ed $rice offering is a $oor .ay of doing IPOs. Ci8ed $rice offerings1 all over t-e .orld1 suffer from OIPO under$ricing:. In India1 on average1 t-e fi8ed($rice seems to )e around "%P )elo. t-e $rice at first listingJ i.e. t-e issuer o)tains "%P lo.er issue $roceeds as com$ared to .-at mig-t -ave )een t-e case. 5-is average mas's a steady stream of du)ious IPOs .-o get an issue $rice .-ic- is muc- -ig-er t-an t-e $rice at first listing. ,ence fi8ed $rice offerings are .ea' in t.o directions+ du)ious issues get over$riced and good issues get under$riced1 .it- a $revalence of under$ricing on average.
24

;-at is needed is a .ay to engage in serious $rice discovery in setting t-e $rice at t-e IPO. @o issuer 'no.s t-e true $rice of -is s-aresJ no merc-ant )an'er 'no.s t-e true $rice of t-e s-aresJ it is only t-e mar'et t-at 'no.s t-is $rice. In t-at case1 can .e 2ust as' t-e mar'et to $ic' t-e $rice at t-e IPOD

Imagine a $rocess .-ere an issuer only releases a $ros$ectus1 announces t-e num)er of s-ares t-at are u$ for sale1 .it- no $rice indicated. Peo$le from all over India .ould )id to )uy s-ares in $rices and 6uantities t-at t-ey t-in' fit. 5-is .ould yield a $rice. Suc- a $rocedure s-ould innately o)tain an issue $rice .-ic- is very close to t-e $rice at first listing (( t-e -allmar' of a -ealt-y IPO mar'et.

Aecently1 in India1 t-ere -ad )een issue from ,ug-es Soft.are Solutions .-ic- .as a milestone in our gro.t- from fi8ed $rice offerings to true $rice discovery IPOs. ;-ile t-e ,SS issue -as many $ositive and fascinating features1 t-e design ado$ted .as still riddled .it- fla.s1 and .e can do muc- )etter.

/ocu"ents Re8uire%&
A com$any coming out .it- a $u)lic issue -as to come out .it- an O!!er /ocu"ent9 Pros#ectus. An offer document is t-e document t-at contains all t-e information you need a)out t-e com$any. It .ill tell you .-y t-e com$any is coming is out .it- a $u)lic issue1 its financials and -o. t-e issue .ill )e $riced. 5-e /ra!t O!!er /ocu"ent is t-e offer document in t-e draft stage. Any com$any ma'ing a $u)lic issue is re6uired to file t-e draft offer document .it- t-e Securities and E8c-ange &oard of India1 t-e mar'et regulator.

25

If SE&I demands any c-anges1 t-ey -ave to )e made. Once t-e c-anges are made1 it is filed .it- t-e Aegistrar of *om$anies or t-e Stoc' E8c-ange. It must )e filed .it- SE&I at least 21 days )efore t-e com$any files it .it- t-e Ao*K Stoc' E8c-ange. /uring t-is $eriod1 you can c-ec' it out on t-e SE&I ;e) site.

Re% ,erring Pros#ectus is 2ust li'e t-e a)ove1 e8ce$t t-at it .ill -ave all t-e information as a draft offer documentJ it .ill1 -o.ever1 not -ave t-e details of t-e $rice or t-e num)er of s-ares )eing offered or t-e amount of issue. 5-at is )ecause t-e Aed ,erring Pros$ectus is used in )oo' )uilding issues only1 .-ere t-e details of t-e final $rice are 'no.n only after )idding is concluded.

Pla*ers&
*o(managers and advisors ?nder.riters 0ead managers &an'ers &ro'ers and $rinci$al )ro'ers Aegistrars Stoc' e8c-anges.

26

CASE STU/.& ,UG,ES SOFT((ARE SOLUTIONS

Aecently1 in India1 t-ere -ad )een issue from ,ug-es Soft.are Solutions .-ic- .as a milestone in gro.t- from fi8ed $rice offerings to true $rice discovery IPOs. ;-ile t-e ,SS issue -as many $ositive and fascinating features1 t-e design ado$ted .as still riddled .it- fla.s1 and .e can do muc- )etter.

,o$ %i% t)e ,ug)es issue $or1+ 5-e Berc-ant &an'ers selected <syndicate mem)ers< .-o -el$ed in selling t-e issue.Orders .ere collected )y t-e merc-ant )an'ers or syndicate mem)ers HonlyI1 and su)mitted using t-e com$uterised IPO system created )y @SE. 5-e @SE system only acce$ted t-ese ordersJ it did not reveal any information to investors. Investors could $lace1 modify or delete orders in t-e <)oo' )uilding $eriod< (( -o.ever t-ey .ere doing t-is in t-e )lind since t-e system gave t-em no information. 5-e @SE system revealed information to t-e merc-ant )an'ers. 5-e full data)ase of orders .as $assed on )y @SE to t-e merc-ant )an'ers1 .-o could t-en use t-is for discretionary allocation of s-ares.

Nu"erous !la$s in t)is& Crom a )asic economic $ers$ective1 t-e IPO is a relations-i$ )et.een t-e issuer H,ug-esI and investors. It is -ard to 2ustify t-e re6uirement t-at orders only go to merc-ant )an'ers or syndicate mem)ersJ t-is greatly s-rin's t-e e8tent to .-ic- t-e IPO -arnesses @SE:s remar'a)le distri)ution mac-inery. A su$erior IPO $rocess .ould involve investors going to any @SE terminal and $lacing orders. 5-e essence of modern mar'et design is su$erior information dis$lay for su$erior $rice discovery. Investors s-ould )e a)le to continuously see -o. many s-ares -ave )een )id forJ t-e s-a$e of t-e demand functionJ t-e cutoff $rice1 etc. ?sing t-is information t-ey .ould )e a)le to
27

t-in' more effectively a)out order revisions1 cancellations1 fres- order $lacement1 etc. 5-e ,ug-es IPO1 done t-roug- t-e s$ace age 3SA5 tec-nology of @SE1 uses standards of trans$arency associated .it- a 19t- century mar'et design. In t-e ,ug-es IPO1 t-e merc-ant )an'ers s$ecified a )and1 from As. #% to As.!3%1 in .-ic- orders -ad to fall. 5-e merc-ant )an'ers $roved to )e .rong1 and t-e IPO suffered from severe under $ricing. If .e ta'e $rice discovery seriously1 .e s-ould let t-e mar'et set t-e $rice. 5-e ,ug-es IPO $rocess .as too elongated in time. 5-e IPO $rocess s-ould o)tain $rice discovery in a s-ort time($eriod .-ere everyone interested in t-e issue is trading on t-e screen at t-e same time. An issue t-at lasts for more t-an an -our raises t-e cost for $artici$ants to constantly monitor t-e order )oo' and revise orders. 5-e sale of $art of t-e issue at a fi8ed $rice Hdiscovered at t-e auctionI reduces t-e size of t-e auction and raises t-e $ro)a)ility of mar'et mani$ulation at t-e auction. 5-ere s-ould )e no discretionary allocation of s-aresJ instead s-ares s-ould )e allocated $urely )y $rice((time $riority.

I%eal IPO Process&

28

On Bonday morning1 t-e ne.s$a$er s-ould carry an advertisement .-ic- is t-e $ros$ectus of t-e IPO1 .-ic- only tal's a)out t-e firm and is silent on valuation. 5-e IPO s-ould ta'e $lace on 5uesday evening1 from cutoff $rice1 s-ould u$date on t-e screen in real(time. Investors s-ould )e a)le to go to any @SE terminal and $lace orders into t-e auction. 5-is -arnesses 1%1%%% odd com$uter screens in 3%% cities all over India in t-e auction $rocess. Crom t-e issuers $ers$ective1 @S** s-ould $erform t-e credit en-ancement e8actly as it does on t-e e6uity mar'et. At a legal level1 all orders on t-e screen s-ould )e $laced )y @S**1 t-us s-ielding t-e issuer from t-e credit ris' associated .it- anonymous order $lacement. 5-ere s-ould )e no fragmentation of t-e s-ares on offer. All s-ares to )e sold s-ould go t-rouga single auction. If a retail investor .anted to <access t-e IPO at $rices close to t-e offer $rice< s-e .ould 2ust $lace non((com$etitive )ids at t-e IPO1 .-ere s-e )ids to )uy HsayI 1%% s-ares at t-e IPO $rice1 .-atever it $roves to )e. Allocation of s-ares in t-e de$ository s-ould ta'e $lace on 5uesday itself. 5-ere s-ould )e no $-ysical s-ares. 5rading on @SE s-ould start on ;ednesday Ht-e ne8t dayI. 5-is gives us a one(( day lag )et.een t-e IPO and t-e start of trading. 5-is $ro$osed IPO $rocess sounds startlingly effective. 5o $ut it in $ers$ective1 it is $art of t-e same disintermediation $rocess t-at .e -ave seen in ot-er areas of t-e financial mar'ets. ;itanonymous1 electronic trading on t-e e6uity mar'et1 t-e )ro'erKdealer -as )een fundamentally disintermediated out of secondary mar'et trading1 .-ic- is no. dominated )y t-e actions of )uyers and sellers Hand not intermediariesI. In t-at same fas-ion1 t-e IPO $rocess $ro$osed -ere uses tec-nology to lin' u$ t-e issuer and t-e investor .it- a trans$arent $ricing mec-anism1 and eliminates t-e traditional over-eads of intermediation. PB to " PB. 5-e auction s-ould )e a

sim$le uniform($rice auction .it- full trans$arency. A $icture of t-e demand sc-edule1 and t-e

29

HDIL IPO VALUATION

ABOUT ,/IL&
30

,OUSING /E2ELOP-ENT AN/ INFRASTRUCTURE LI-ITE/ (,/IL) is a $art of t-e ;ad-a.an 4rou$ Hformerly 'no.n as t-e /-eera2 4rou$I1 .-ic- -as )een involved in real estate develo$ment in t-e Bum)ai Betro$olitan Aegion for almost t-ree decades.

Since 199!1 ,/I0 -as )een satisfying t-e diverse needs of scores of -ome see'ers in Bum)ai Betro$olitan region. 5-eir )usiness focuses on real estate develo$ment1 including construction and develo$ment of residential $ro2ects1 commercial1 retail and slum re-a)ilitation $ro2ects. A sincere study of t-e mar'et and a strong feeling to meet t-e needs of t-e lo.er and t-e middle income grou$ $rom$ted ,/I0 to -el$ t-ese $eo$le tide over difficult times and -arro.ing e8$eriences of )uying a -ome. ,/I0 -ad acted $ro(actively in identifying t-e intricate needs of its residents and offered t-em 2ust .-at t-ey needed. It $rovided and still $rovides all services under one roof t-roug- tie(u$s .it- )an's and ,C*7s. ;it- numerous $ro2ects to its credit and la'-s of -a$$y and satisfied -ome )uyers1 ,/I0 -as carved a nic-e for itself in t-e real estate industry and -as made its mar' in t-e -earts of millions of $eo$le.

,/IL4s Boar% o! /irectors &

In tune .it- its efforts to evolve into a $rofessionally managed *or$orate Structure1 ,/I0 -as )roaden its &oard com$osition )y inducting $eo$le of -ig- standing from t-e )an'ing industry1 legal and t-e audit $rofession as Inde$endent /irectors. 5-e *om$any no. -as an ideal mi8 of E8ecutive and Inde$endent /irectors1 .-ic- gives it an advantage of e8$ertise of various fields in effective management and consistent gro.t-.

-ISSION&
31

,/I0 is committed to creating microstructures1 megastructures and infrastructure for t-e nation and creating value for our customers1 investors1 em$loyees Q society at large. T)eir "ission is to e an icon in In!rastructure : Real Estate /e'elo#"ent; %e!ining&
<UALIT.

*onforming to standards Par E8cellence 5-eir Botto to deliver t-e )est at all time

-AR0-ANS,IP

CUSTO-ER SATISFACTION

FINANCE&
Cinance for )uying flats in any of t-e ,/I0 $ro2ects can )e o)tained t-roug- any one of t-e follo.ing ,ousing Cinance *om$anies+ ,/FC LIC GIC
/e$an ,ousing Finance Cor#oration Li"ite% 2.S.A Ban1 ,ousing Finance

,ousing /e'elo#"ent an% In!rastructure Lt% = IPO

32

,/IL IPO ( o$ened for su)scri$tion on 2# Rune1 2%%7 and closed on Ruly %31 2%%7. A out t)e Co"#an*& Since 197#1 ,/I0 -as )een satisfying t-e diverse needs of scores of -ome see'ers in Bum)ai1 t-e commercial ca$ital of India and &angalore. It .as not 2ust t-e intention of doing )usiness )y )eing res$onsi)le for mar'eting afforda)le -omesJ t-e very inclination .as to give t-e )est to t-e -ome see'er fraternity at large.

Issue /etails + Issue of E6uity S-aresS 3%1%%%1%%% E6uity S-ares of .-icEm$loyee Aeservation PortionS !%%1%%% E6uity S-ares @et IssueS 291 %%1%%% E6uity S-ares Of .-ic-+ Lualified Institutional &uyers HLI&sI Portion At least 171! %1%%% E6uity S-aresM of .-icAvaila)le for Butual Cunds only ##21%%% E6uity S-aresM &alance of LI& Portion Havaila)le for LI&s including Butual CundsI + 1!17"#1%%% E6uity S-aresM @on(Institutional Portion 219 %1%%% E6uity S-aresM Aetail Portion #1#2%1%%% E6uity S-aresM 4reen S-oe O$tion Portion1 ?$ to 1"%%1%%% E6uity S-ares 5-e Issue and 4reen S-oe O$tion Portion ?$ to 3 1"%%1%%% E6uity S-ares Pre an% #ost>Issue E8uit* S)ares& E6uity S-ares outstanding $rior to t-e Issue + 1#%1%%%1%%% E6uity S-ares E6uity S-ares outstanding after t-e Issue He8cluding t-e e8ercise of t-e 4reen S-oe O$tionI + 21%1%%%1%%% E6uity S-ares E6uity S-ares outstanding after t-e Issue Hincluding t-e e8ercise of t-e 4reen S-oe O$tion in fullI + 21 1"%%1%%% E6uity S-ares

IPO 2ALUATION& /CF ANAL.SIS

33

INTRO/UCTION& In sim$le terms1 discounted cas- flo. tries to .or' out t-e value of a com$any today1 )ased on $ro2ections of -o. muc- money it:s going to ma'e in t-e future. /*C analysis says t-at a com$any is .ort- all of t-e cas- t-at it could ma'e availa)le to investors in t-e future. It is descri)ed as <discounted< cas- flo. )ecause cas- in t-e future is .ort- less t-an cas- today.

For e5a"#le1 let:s say someone as'ed you to c-oose )et.een receiving As1%% today and receiving As1%% in a year. *-ances are you .ould ta'e t-e money today1 'no.ing t-at you could invest t-at As1%% no. and -ave more t-an As1%% in a year:s time. If you turn t-at t-in'ing on its -ead1 you are saying t-at t-e amount t-at you:d -ave in one year is .ort- As1%% today ( or t-e discounted value is As1%%. Ba'e t-e same calculation for all t-e cas- you e8$ect a com$any to $roduce in t-e future and you -ave a good measure of t-e com$any7s revenue. 5-ere are several tried and true a$$roac-es to discounted cas- flo. analysisJ .e .ill use t-e !ree cas) !lo$ to !ir" a$$roac- commonly used )y Street analysts to determine t-e <fair value< of com$anies.

T)e Forecast Perio%&

5-e ta)le )elo. s-o.s good guidelines to use .-en determining a com$any:s e8cess return $eriodKforecast $eriod+

34

Co"#an* Co"#etiti'e Position Slo.(gro.ing com$anyJ o$erates in -ig-ly com$etitive1 lo. margin industry Solid com$anyJ o$erates .it- advantage suc- as strong mar'eting c-annels1 recogniza)le )rand name1 or regulatory advantage Outstanding gro.t- com$anyJ o$erates .it- very -ig- )arriers to entry1 dominant mar'et $osition or $ros$ects

E5cess Return9Forecast Perio% 1 year

" years

1% years

,o. far in t-e future s-ould .e forecastD 0et:s assume t-at t-e com$any is 'ee$ing itself )usy meeting t-e demand for its Infrastructure develo$ment. 5-an's to strong mar'eting c-annels and u$graded tec-nology and ,/I0 -as )een satisfying t-e diverse needs of scores of -ome see'ers in Bum)ai Betro$olitan region. 5-eir )usiness focuses on real estate develo$ment1 including construction and develo$ment of residential $ro2ects1 commercial1 retail and slum re-a)ilitation $ro2ects. 5-ere is enoug- demand for Infrastructure develo$ment to maintain five years of strong gro.t-1 )ut after t-at t-e mar'et .ill )e saturated as ne. com$etitors enter t-e mar'et. So1 from t-e a)ove ta)le1 .e .ill $ro2ect cas- flo.s for t-e ne8t five years of )usiness.

Gro$t) Rate& ,/I0 is e8$ected to gro. at to -ave *A4A of

of 42% for DC !a"uatio# for comi#g $ years. 42 %( source: Emkay Research). We take fixed growth rate

35

Rein'est"ent Rate& If .e rela8 t-e assum$tion t-at t-e only source of e6uity is retained earnings1 t-e gro.t- in net income can )e different from t-e gro.t- in earnings $er s-are. Intuitively1 note t-at a firm can gro. net income significantly )y issuing ne. e6uity to fund ne. $ro2ects .-ile earnings $er s-are stagnate. 5o derive t-e relations-i$ )et.een net income gro.t- and fundamentals1 .e need a measure of -o. investment t-at goes )eyond retained earnings. One .ay to o)tain suc- a measure is to estimate directly -o. muc- e6uity t-e firm reinvests )ac' into its )usinesses in t-e form of net ca$ital e8$enditures and investments in .or'ing ca$ital.

E8uit* Rein'est"ent Rate ? Gro$t) Rate 9 ROE T 2K7! T @@.7A B

Forecasting Free Cas) Flo$s& Cree cas- flo. is t-e cas- t-at flo.s t-roug- a com$any in t-e course of a 6uarter or a year once all cas- e8$enses -ave )een ta'en out. Cree cas- flo. re$resents t-e actual amount of cas- t-at a com$any -as left from its o$erations t-at could )e used to $ursue o$$ortunities t-at en-ance s-are-older value ( for e8am$le1 develo$ing ne. $roducts1 $aying dividends to investors or doing s-are )uy)ac's.

Free cas) !lo$

? EBIT (6>ta5) = CEBIT (6>ta5) D Rein'est"ent RateE

36

EBIT (6>ta5) nth year

= EBIT (1-tax) n-1 year (1 + growth rate)

As in mn Current .ear E5#ecte% Gro$t) Rate EBIT (6>ta5) E8uit* Rate FCFE *alculating t-e /iscount Aate A .ide variety of met-ods can )e used to determine discount rates1 )ut in most cases1 t-ese calculations resem)le art more t-an science. Still1 it is )etter to )e generally correct t-an $recisely incorrect1 so it is .ort- your .-ile to use a rigorous met-od to estimate t-e discount rate. A good strategy is to a$$ly t-e conce$ts of t-e .eig-ted average cost of ca$ital H;A**I. 5-e ;A** is essentially a )lend of t-e cost of e6uity and t-e after(ta8 cost of de)t. Rein'est"ent ( ( "".2!P "".2!P "".2!P "".2!P "".2!P 221#" 3%39 1!39 "7% ! 7#1"3 ( !1#1 7FFG 2P #777 7FFH 2P 12 !3 7F6F 2P 17!9# 7F66 2P 2"131 7F67 2P 3"!#!

37

Cost of Equity (Re):

?nli'e de)t1 .-ic- t-e com$any must $ay at a set rate of interest1 e6uity does not -ave a concrete $rice t-at t-e com$any must $ay. &ut t-at doesn:t mean t-at t-ere is no cost of e6uity. E6uity s-are-olders e8$ect to o)tain a certain return on t-eir e6uity investment in a com$any. Crom t-e com$any:s $ers$ective1 t-e e6uity -olders: re6uired rate of return is a cost1 )ecause if t-e com$any does not deliver t-is e8$ected return1 s-are-olders .ill sim$ly sell t-eir s-ares1 causing t-e $rice to dro$. 5-erefore1 t-e cost of e6uity is )asically .-at it costs t-e com$any to maintain a s-are $rice t-at is satisfactory Hat least in t-eoryI to investors. 5-e most commonly acce$ted met-od for calculating cost of e6uity comes from t-e @o)el Prize(.inning ca$ital asset $ricing model H*APBI1 .-ere+

Cost of Equity = RF + Beta (Rm-Rf)

Rf - Risk-Free Rate ( 5-is is t-e amount o)tained from investing in securities considered free from credit ris'1 suc- as government )onds from develo$ed countries. 5-e interest rate of government )onds is fre6uently used as a $ro8y for t-e ris'(free rate.

- Beta ( 5-is measures -o. muc- a com$any:s s-are $rice moves against t-e mar'et as a .-ole. A )eta of one1 for instance1 indicates t-at t-e com$any moves in line .it- t-e mar'et. If t-e )eta is in e8cess of one1 t-e s-are is e8aggerating t-e mar'et:s movementsJ less t-an one means t-e s-are is more sta)le.;e ta'e &eta of com$ara)le firm i.e ?nitec- .-ic- is -aving )eta of 1.1

(Rm Rf) Equity Market Risk Premium ( 5-e e6uity mar'et ris' $remium HEBAPI re$resents t-e returns investors e8$ect1 over and a)ove t-e ris'(free rate1 to com$ensate t-em for ta'ing e8tra ris' )y investing in t-e stoc' mar'et. In ot-er .ords1 it is t-e difference )et.een t-e ris'( free rate and t-e mar'et rate.

38

Cost o! /e t (R%)&
As com$anies )enefit from t-e ta8 deductions availa)le on interest $aid1 t-e net cost of t-e de)t is actually t-e interest $aid less t-e ta8 savings resulting from t-e ta8(deducti)le interest $ayment. 5-erefore1 t-e after(ta8 cost of de)t is Ad H1 ( cor$orate ta8 rateI.

(eig)te% A'erage Cost O! Ca#ital (

!CC):

5-e ;A** is t-e .eig-ted average of t-e cost of e6uity and t-e cost of de)t )ased on t-e $ro$ortion of de)t and e6uity in t-e com$any:s ca$ital structure. 5-e $ro$ortion of de)t is re$resented )y /K31 a ratio com$aring t-e com$any:s de)t to t-e com$any:s total value He6uity U de)tI. 5-e $ro$ortion of e6uity is re$resented )y EK31 a ratio com$aring t-e com$any:s e6uity to t-e com$any:s total value He6uity U de)tI. 5-e ;A** is re$resented )y t-e follo.ing formula+ WACC = = Cost of Equity + Cost of De t E!" # Re + R$ # (% - &or'orate ta# rate) # D!"(

EK3 *or$orate ta8 /K3

%.!! 3%P %.3

Af &eta Am

7. 1.1 13."

*ost of /e)t /K3 8 H1 ( cor$orate ta8 rateI %.3 V1(%.3%W

*ost of E6uity EK3 8 VAf U &eta HAm(AfIW %.!! V7. U 1.1 8 !W

(ACC ? Cost o! /e t I Cost o! E8uit* ? H.@B

Present 2alue&
5-e $resent value of a single or multi$le future $ayments H'no.n as cas- flo.sI is t-e nominal amounts of money to c-ange -ands at some future date1 discounted to account for t-e time value
39

of money1 and ot-er factors suc- as investment ris'. A given amount of money is al.ays more valua)le sooner t-an later since t-is ena)les one to ta'e advantage of investment o$$ortunities. Present values are t-erefore smaller t-an corres$onding future values.

;-en future cas- flo. of t-e com$any is divided )y t-e discount rate .e get t-e $resent value of t-at $redicted years cas- flo..

Present 2alue n ;-ere1 n T year

? Pre%icte% cas) !lo$ n K (6I %iscount rate)n

As in mn 7FFG 3927 7FFH ""7! H1.%9"I /iscount rate Present 'alue 1.%9" 3"#! X !"% 7F6F 791# H1.%9"I Y !%3% H1.%9"I 7#2% H1.%9"I" 1%1 1 7F66 112 3 7F67 1"9!"

Free Cas) Flo$

TER-INAL 2ALUE

Per#etuit* Gro$t) -o%el:

40

5-e Per$etuity 4ro.t- Bodel accounts for t-e value of free cas- flo.s t-at continues into $er$etuity in t-e future1 gro.ing at an assumed constant rate. ,ere1 t-e $ro2ected free casflo. in t-e first year )eyond t-e $ro2ection -orizon H@U1I is used. ;e -ave assumed $er$etuity gro.t- rate for ,/I0 as !P &eyond 2%12 ,/I0 is e8$ected to gro. at !P $.a i.e. at its $er$etuity rate1 -ence net income for t-e year 2%13 .ill )e+ Net inco"e o! 7F67 D (6I #er#etuit* gro$t) rate) ? ? 3"!#! Z H1U%.%!I Rs. JKG7K "n

Rein'est"ent rate a!ter 7F67 (Ter"inal Point): Rein'est"ent rate ? Per#etuit* Gro$t) rate 9 Return on E8uit* ,ere1 return on e6uity is rate at .-ic- com$any e8$ect to get returns on its investments after terminal $oint i.e. 2%12. Aeturn on e6uity .ill dro$ to t-e sta)le $eriod cost of ca$ital of 9."P. Aeinvestment rate Hterminal $ointI T T !K9." !3P

Free cas) !lo$ 5-erefore1

? EBIT (6>ta5) = CEBIT (6>ta5) 5 Rein'est"ent RateE

41

Cree cas- flo. 2%&'

')*2) + ,')*2) 8

"2PW

Rs. 6JHJA "n

Gor%on Gro$t) -o%el&

5-ere are several .ays to estimate a terminal value of cas- flo.s1 )ut one .ell(.orn met-od is to value t-e com$any as a $er$etuity using t-e 4ordon 4ro.t- Bodel. 5-e mode" uses this formu"a: Free &as) f*o+ of t)e year after t)e termi,a* year (Dis&ou,t Rate Per'etuity -ro+t) Rate) 5-e formula sim$lifies t-e $ractical $ro)lem of $ro2ecting cas- flo.s far into t-e future. 5-erefore1 Ter"inal 2alue T ? 1393! Z 1%% H.@ = A Rs 6LAFHH "n

Present 'alue o! Ter"inal *ear

? ?

1 !%99 K H1.%9"I! Rs. GLK@L "n

Calculating Total Enter#rise 2alue: .ota* E,ter'rise = /um of Prese,t 0a*ue for 1 years + Prese,t 0a*ue2f .ermi,a* 3ear + Cas) De t ? J777G I GLK@L I 6HLH > JK@A
42

? Cair value @um)er of outstanding s-ares Fair 'alue o! t)e ,/IL #er s)are T T ?

Rs. 66@6K@ "n As 11"17" mn 21 mn Rs @JG

SENSITI2IT. ANAL.SIS
Sensitivity analysis is t-e investigation of -o. t-e $ro2ected $erformance varies along .itc-anges in t-e 'ey assum$tions on .-ic- t-e $ro2ections are )ased. 5-e sensitivity analysis of t-e a)ove /*C model can )e done as follo.s+

/iscount Rate HB @.@B AB A.@B "9! "33 !9 H.@B "92 "3# #3 6FB "#" "37 #9

Per#etuit* Gro$t) Rate

,/IL IPO
Particulars Figures Issue of E6uity s-ares 3%1%%%1%%% E6uity S-ares outstanding $rior to t-e 1#%1%%%1%%% Issue E6uity S-ares outstanding after t-e 21%1%%%1%%%
43

Issue Price &and Issue Price 0isting Price 3 /ays ,ig3 /ays 0o. *lose Price H2!t- Ruly 2%%7I /*C 3aluation

As. 3% to As."%% As. "%% As. "3# As.!3 As."3" As. !21 As. "3#

NSE /ata
5otal 5rd Lty 5urnover in 0acs 2#"9%#%! 1!%%3%.# #""22 # !".1

/ate

Prev *lose O$en "3#.! " 9. "#".!

,ig"7".9" "#7. !3 .3

0o. "3" " ".3 "#".!

*lose ""9.3" "#%.1 !21.

2 (Rul(%7 "%% 2"(Rul(%7 ""9.3" 2!(Rul(%7 "#%.1

912"7"7 ""97!.##

It can e seen t)at #er s)are 'alue o! t)e ,/IL co"es to Rs. @JG an% t)e listing #rice is Rs.@JG. Close Price as o! 7At) 3ul* 7FFK is Rs.A76. ,ence it is u*ing o##ortunit* o! t)e in'estors.

,/IL IPO NE(S TRI2IA&

According to *0SA1 ,/I0 IPO -ad )een $riced at a 2%(3%P discount to its for.ard @P3. 5-e IPO is good )ut t-e only concern -ere is t-e fall in retail demand for $ro$erty )ecause of -ig- interest rates.

5-e ,/I0 IPO -ad $erformed $retty .ell.

44

 It -ad )een su)scri)ed )y !.! times Hoversu)scri)ed ".! timesI.

Aetail category -as )een su)scri)ed )y only 1."9 times Hoversu)scri)ed )y %."9 timesI.

Institutional investor category in t-e ,/I0 IPO -ad )een su)scri)ed )y over 1%.13 times Hoversu)scri)ed 9.13 timesI

5-e ,ig- @et.ort- Individual category -ad )een su)scri)ed )y 1.7# times Hoversu)scri$tion ratio+ %.7# timesI.

45

Pur'an1ara #roMects IPO

Puravan'ara Pro2ects 0imited is a &angalore )ased real estate develo$er com$any .it- more t-an 3% years of $resence in Bum)ai1 &angalore1 Foc-i1 *-ennai1 *oim)atore1 ,ydera)ad1 Bysore1 *olom)o and t-e ?nited Ara) Emirates H?.A.EI. Its $u)lic issue o$ens Ruly 311 2%%7 and closes on August 31 2%%7.

Business O'er'ie$&

5-e o$erations of t-e com$any include identificationKac6uisition of land1 $lanning1 e8ecuting and mar'eting of real estate $ro2ects. &ot- residential and commercial $ro2ects are e8ecuted. Aesidential $ro2ects consist of a$artment com$le8es1 villas and to.n-ouses .-ile commercial $ro2ects include retail and office $remises.

5-e com$any .as originally incor$orated as Puravan'ara *onstructions Private 0imited in 19#! at Bum)ai. In 1992 it .as made a $u)lic limited com$any and t-e name .as c-anged as Puravan'ara Pro2ects 0imited.

5-e total land area availa)le is 3#.%7 million s6uare foot1 develo$a)le area is 11!.2 million s6uare foot and salea)le area is 1%!.#% million s6uare foot.

5-e com$any7s real estate develo$ment is concentrated $rimarily in sout-ern India i.e. &angalore1 *-ennai and Foc-i. It -as also ac6uired roug-ly 1.%! million s6uare foot of land in *olom)o for lu8ury residential $ro2ect consisting of inde$endent villas and to.n-ouses.

5-e list of com$leted $ro2ects so far is given )elo.+

46

At Bum)ai+

ProMect Na"e ?ran Par'1 Bora Aoad

Salea le area %.%2

At &angalore+

ProMect Na"e Purva Par'1 *o8 5o.n *astlemaine1 Rayama-al Aoad Purva @est1 *am)ridge Aoad Purva 4races1 Gela-an'a Purva Iris1 *o8 5o.n Purva ,eig-ts1 &annerg-atta Aoad Purva Paradise1 /omlur Purva Cairmont1 Foramangala Purva Pavilion1 ,e))al Purva Par'ridge1 Barat-a-alli Purva *arnation1 *o8 5o.n ;-itefield &ouganvilla

Salea le area %."% %.%2 %.%1 %.17 %.%! %.3"

%.%" %. 1 %.2 %.3" %.%# %.%7

47

Purva Aiviera1 Barat-a-alli

1.2!

Salea)le area is in million s6uare foot. 5-e com$any -as also com$leted a commercial $ro2ect1 5-e Pavilion1 on B.4. Aoad1 &angalore and it is ready for occu$ation. One more commercial $ro2ect is )eing underta'en at *-ennai .it- a salea)le area of %.3" million s6uare foot.

5-ere are residential $ro2ects currently under e8ecution at &angalore on land t-at is o.ned )y t-e com$any .it- a salea)le area of !. 1 million s6uare foot. 5-ese are Purva 4rande H0avelle AoadI1 Purva Countains6uare HBarat-alli RunctionI1 Purva 3enezia HGele-an'aI and Purva ,ig-lands HFana'a$ura AoadI. Similarly t-ere are t.o ongoing $ro2ects at *-ennai. 5-ese are Purva S.anla'e HOld Ba-a)ali$uram AoadI1 Purva Rade HArcot AoadI .it- a total salea)le area of %.92 million s6uare foot. In addition1 at Foc-i1 t-ere are t-ree more $ro2ects currently in $rogress. 5-ese are Purva 4rand &ay HBarine /riveI1 Purva Eternity HFa''anadI1 Purva Boonreac- HAir$ort AoadI .itsalea)le area of 1.#! million s6uare foot.

5-e com$any also e8ecutes " more $ro2ects at &angalore on 2oint develo$ment )asis .it- a total salea)le area of 1. million s6uare foot.

48

A vie. of t-e Purva Cairmont1 ,SA 0ayout1 Foramangala1 &angalore

5-e com$any -as entered into a 2oint venture HFe$$el Puravan'ara Pro2ects Private 0imitedI .it- Fe$$el Investment Bauritius Private 0imited1 a su)sidiary of t-e Singa$ore )ased Fe$$el 0and 0imited. Elita Promenade1 a residential $ro2ect in &angalore1 is )eing e8ecuted .it- a salea)le area of 1.22 million s6uare foot )y t-is 2oint venture. 5-roug- its IPO t-e com$any $lans to mo)ilize As.1112" crores at t-e u$$er $rice )and of As."2"1 .-ic- s-all )roadly )e used for re$ayment of loan of As. 2% crores and As.3"1 crores for ac6uiring 3."! million s6uare foot land in and around Sri$erum)udur and Fanc-ee$uram near *-ennai. After t-e IPO $romotors s-all -ave #9.9"P sta'e in t-e com$any.

Cinancial data+

Ite" Income E8$enditure Profit )efore ta8 @et $rofit

7FFJ 1.3" 32.29 9.%!

7FFL 7!.3# "9.9 1!.

7FF@ 1"1.%3 11%.!% %. 3

!. 9

1".

3#.%2

Ite" Income E8$enditure Profit )efore ta8 @et $rofit

7FFA 2#%. 2 197.#1 #2.!1

7FFK 1!.#! 2# ."3 132.33

73. "

13%. %

All figures in As. *rores.

49

*om$arison .it- some listed com$anies+

Co"#an* &0FAS,GA P PE@I@0A@/ A@SA0 MM P?A3A MM

EPS 3.#%

P9E 3".%%

Boo1 'alue 237.#%

"7.%% 9. % !.#%

#.!% 29.9% 77.2% M

1% .#% #%."% 11."%

At t-e u$$er $rice )and.

MM Cace value of Ansal and Puravan'ara is As.".

50

IPO /etails+

Issue Period+ Issue Size+ Cace 3alue+ Price &and+ Bar'et 0ot+ Binimum Luantity+ Aetail Investor 0imit+

Ruly 311 2%%7 to August %31 2%%7 211 !71!1% E6uity S-ares As. " As. "%% to As. "2" 1% s-ares 1% s-ares As.1%%1%%%

*lic' -ere to do.nload a$$lication form.

*lic' -ere for Aed ,erring Pros$ectus.

*onclusion+

Puravan'ara -as a strong $resence in sout-ern India1 .-ere lot of I5 com$anies -ave set u$ t-eir o$erations. After So)-a /evelo$ers1 Puravan'ara is t-e second &angalore )ased realty ma2or to enter t-e ca$ital mar'ets. 5-e com$any sells t-e real estate $ro$erties directly to t-e customers .it- mar'eting offices in India and ?AE. 5-e strong mar'eting net.or' .ill -el$ t-e com$any to reac- t-e large @AI $o$ulation in 4ulf countries.

Puravana'ara -as t-e industry e8$erience and tec-nical e8$ertise. Boreover1 it o.ns nearly 3P of t-e develo$a)le land .-ic- gives a distinct advantage.

At t-e u$$er $rice )and As."2"1 EPS of !.#% and PKE of 77.2%1 t-e stoc' may )e slig-tly e8$ensive )ut t-ere seems to )e some considera)le u$side1 )ased t-e gro.ing demand in real estate industry and com$any7s ongoing K $ro$osed $ro2ects.
51

PAST IPO PERFOR-ANCE

Equity Issue "ri#e C$osing "ri#e as on 11%&'%(&&)) * +ain%,oss

!-ri$ (&&) -ita -hree ood .roducts /imited 1ammo# 2#frastructure 3ro4ects /imited '% &0) .ar#h (&&) 651uard 2#dustries /imited Rura" E"ectrificatio# Cor.oratio# /imited 1-- 8merica 2#fotech /imited *2 &%$ 4%% /e0ruary (&&) 9a#4ushree Extrusio#s /imited :u"si Extrusio#s /imited 2R; 2#frastructure De!e"o.ers /imited ;a#g <!erseas /imited -hriram E3C /imited <#mo=i"e 1"o=a" /imited >?R Co#structio#s /imited Cords Ca="e 2#dustries /imited @ >umar 2#fra.ro4ects /imited Re"ia#ce 3ower /imited uture Ca.ita" Ao"di#gs /imited 4$ *$ &*$ 2%) '%% 44% &)% &'$ &&% 4$% )0$ 2'.) )0.)$ &*2.$ &0$.& 220 $77.0 7%.) *7.$$ 7&.4$ '0&.'$ $0&.& 54).'' 57.)& 5&.'$ 52%.24 524.0) '0.2) 540.0$ 5''.0) 5&0.*0 5&7.)% 520.0$ 00.7$ &&&.0 4&%.0$ &*.'$ 0.27 2.00 4'.& &04.2 4'.0) 5&.0*

52

IPO GLOSSAR.
53

A
Allocation 5-is is t-e amount of stoc' in an initial $u)lic offering HIPOI granted )y t-e under.riter to an investor. A!ter"ar1et 5rading in t-e IPO su)se6uent to its offering is called t-e aftermar'et.

B
Boar% o! /irectors 5-e com$osition of t-e &oard of /irectors is $articularly critical for an IPO. 5y$ically1 a )oard is com$osed of inside and outside directors. Bro1en IPOs If an IPO trades )elo. its IPO $rice in t-e aftermar'et1 it is said to )e a )ro'en IPO.

C
Calen%ar 5-is refers to u$coming IPOs and secondary offerings. &ro'erage -ouses -ave e6uity calendars1 )ond calendars and munici$al calendars. Clearing Price 5-e $rice at .-ic- all s-ares of an IPO can )e sold to investors in a /utc- Auction. Sometimes referred to as t-e =mar'et clearing $rice>.

F
First /a* Close 5-e closing $rice at t-e end of t-e first day of trading reflects not only -o. .ell t-e lead manager $riced and $laced t-e deal1 )ut .-at t-e near(term trading is li'ely to )e. Float
54

;-en a com$any is $u)licly traded1 a distinction is made )et.een t-e total num)er of s-ares outstanding and t-e num)er of s-ares in circulation1 referred to as t-e float. 5-e float consists of t-e com$any:s s-ares -eld )y t-e general $u)lic.

Green S)oe A ty$ical under.riting agreement allo.s t-e under.riters to )uy u$ to an additional 1"P of s-ares at t-e offering $rice for a $eriod of several .ee's after t-e offering. 5-is o$tion is also called t-e overallotment and is e8ercised .-en t-e IPO is oversu)scri)ed and trading a)ove its offer $rice. 5-e term comes from t-e 4reen S-oe *om$any1 .-ic- .as t-e first to -ave t-is o$tion.

4
,ot Issue ;-en t-ere is significantly more demand t-an su$$ly for an IPO it is said to )e a -ot issue.

5
Initial Pu lic O!!ering 5-is is t-e event of a com$any first selling its s-ares to t-e $u)lic.

Insi%ers Banagement1 directors and significant stoc'-olders are regarded as insiders )ecause t-ey are $rivy to information a)out t-e o$erations of a com$any not 'no.n to t-e general $u)lic. IPO Price Individual investors often as' .-y t-e $rice at .-ic- an IPO starts trading is different from its offer $rice. 5-is occurs )ecause t-e offer $rice is set )y t-e under.riters )efore t-e stoc' starts trading. Once t-e stoc' starts trading1 t-e $rice is determined )y actual su$$ly and demand and can )e -ig-er or lo.er. IPO Researc) Prior to t-e offering1 t-e under.riters involved in t-e IPO are $ro-i)ited from issuing researc- or recommendations for forty days. Collo.ing t-e IPO1 t-e under.riter is allo.ed to issue a researc- re$ort

M-6
-ar1et Ca#italiNation
55

5-e total mar'et value of a firm. It is defined as t-e $roduct of t-e com$any:s stoc' $rice $er s-are and t-e total num)er of s-ares outstanding

-ar1et 2alue 5-e mar'et value of a com$any is determined )y multi$lying t-e num)er of s-ares outstanding )y t-e current $rice of t-e stoc'.

2
O!!ering Price 5-is is t-e $rice at .-ic- t-e IPO is first sold to t-e $u)lic. It is set )y t-e lead manager1 usually after t-e close of stoc' mar'et trading t-e nig-t )efore t-e s-ares are distri)uted to IPO )uyers. In t-e case of some foreign IPOs1 t-e $ricing occurs over t-e .ee'end. O'ersu scri e% ;-en a deal -as more orders t-an t-ere are s-ares availa)le it is said to )e oversu)scri)ed.

P
Preli"inar* Pros#ectus 5-is is t-e offering document $rinted )y t-e com$any containing a descri$tion of t-e )usiness1 discussion of strategy1 $resentation of -istorical financial statements1 e8$lanation of recent financial results1 management and t-eir )ac'grounds and o.ners-i$. Procee%s *om$anies go $u)lic to raise money. 5-e money raised is referred to as $roceeds.

R
Re% ,erring 5-is is t-e term of art for t-e $reliminary $ros$ectus. It gets its name from t-e $rinted red disclaimer on t-e left side of t-e $ros$ectus.

7-"
Un%er$riter
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5-is is a )ro'erage firm t-at raises money for com$anies using $u)lic e6uity and de)t mar'ets. ?nder.riters are financial intermediaries t-at )uy stoc' or )onds from an issuer and t-en sell t-ese securities to t-e $u)lic. 2enture Ca#ital Cunding ac6uired during t-e $re(IPO $rocess of raising money for com$anies. It is done only )y accredited investors.

BIBLIOGRAP,.

....i$o-ome.com ....essortment.com ....investo$edia.com

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....i$oavenue.com ....moneycontrol.com .....i'i$edia.com

....moneycentral.-oovers.com ....)ullis-indian.com ....ru$ya.com

....investorguide.com

....-dil.inK

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