A Project Report on

INITIAL PUBLIC OFFERING (IPO) ANALYSIS

Submitted by

SHIVANSH DWIVEDI (M22BBAU0110)

under the supervision of

Faculty Mentor: Dr. Puja Kaura

School Of Management
Bennett University
Greater Noida, Uttar Pradesh, India
 ACKNOWLEDGEMENT

I want to convey my heartfelt thanks to all those who have been instrumental in the
accomplishment and triumph of this project. A special acknowledgment goes to Dr. Puja Kaura,
our Faculty Mentor, for their outstanding support and guidance throughout the project. I am also
grateful to my friends and family for their steadfast encouragement and support during this
undertaking. The collaborative effort of everyone involved has been crucial to the success of
this project, and I appreciate the invaluable contributions from each of you
Sincerely,
SHIVANSH DWIVEDI
 TABLE OF CONTENTS

S.NO TOPIC REMARK

1 EXECUTIVE
SUMMARY
2 INTRODUCTION

3 WHY DO
COMPANIES GO
PUBLIC?
4 PROCEDURE FOR
GETTING IN AN IPO

5 PROCEDURE FOR
APPLYING IN AN IPO

6 IPO GRADING

7 ADVANTAGES AND
DISADVANTAGES
8 IPO SCAMS

9 CONCLUSION

10 BIBLIOGRAPHY

EXECUTIVE SUMMARY
The current focal point in the industry is undeniably the initial public offering, or
IPO, owing largely to India's position as an emerging nation with rapid growth
across various sectors crucial for national success. The nation's progress is
intricately linked to its workforce's nature and the prioritization of each sector. In
the context of industry expansion, providing adequate funding to balance and meet
societal demands is essential for the nation's economic growth.

This study delves into the motivations behind companies opting for IPOs, offering an
analysis of the advantages and disadvantages associated with these public offerings.
It explores the pre-IPO actions taken by businesses, the role of regulatory bodies
such as SEBI (Securities and Exchange Board of India), the functioning of stock
exchanges like BSE and NSE, the distinctions between primary and secondary
markets, and the key terminologies associated with IPOs. The study provides
insights into the market dynamics driving IPOs and the criteria considered before
initiating one. It also outlines the assessment criteria for a successful IPO.

Recognizing that scams are an unfortunate part of any industry, the study addresses
them and offers minimal guidance. Additionally, it sheds light on the costs incurred
by a company during an IPO. The IPO remains a crucial source of funds, especially
for small companies, fostering their growth and providing a new perspective. This
trend has been significant in the past and continues to be a vital financial strategy
for many years to come..

INTRODUCTION
The term "IPO" stands for initial public offering, which involves
the issuance of new shares from a previously unlisted corporation.
This process involves making shares, previously held by promoters
or individual investors, available to the general public. The
ownership stake decreases as these shares are offered to the public,
whether the existing shareholders (like promoters) sell their shares or new shares are introduced. In all scenarios, the
portion of the total capital held by promoters diminishes.

For example, if a company initially has 100 shares and issues 50 of them to the public in an IPO, the promoter's ownership
decreases from 100% to 50%. In another scenario, if the company issues an additional 50 shares to the public, the
promoter's ownership drops from 100% to 67%.

Investors eagerly await IPOs as shares are typically offered at a discount to their perceived actual worth. This discount
means that shares, with an intrinsic value of Rs. 100, might be issued at, say, Rs. 80 during the IPO. The stock's listing
price, when it hits the market, tends to be closer to Rs. 100. The profit made by an investor who gains from the difference
between the IPO and listing prices is referred to as a listing gain. This presents an opportunity for IPO investors to achieve
long-term goals in a short-term phase, especially in a bullish market.

The first instance of a company offering its stock to the general public is termed an IPO. Businesses can raise capital by
issuing debt or stock, with the term "IPO" specifically used when a business has not previously sold equity to the public.

Businesses are categorized into two main groups: private and public. Private businesses have fewer shareholders and are
exempt from certain disclosure requirements. Establishing a corporation involves contributing funds, completing legal
paperwork, and adhering to jurisdictional reporting requirements. While the majority of small companies are privately
owned, notable large companies like Hallmark Cards, Domino's Pizza, and IKEA are also privately held.

Typically, purchasing stock in a privately held corporation is challenging, as owners are not obligated to sell. However,
publicly traded corporations, having sold shares to the public, facilitate trading on stock exchanges. The transition from
private to public, often through an IPO, is commonly known as "going public."

Public companies are subject to strict laws and regulations, with thousands of shareholders. They must submit financial
data quarterly and maintain a board of directors. In the U.S., public corporations file reports with the Securities and
Exchange Commission (SEC), and similar regulatory agencies oversee public firms in other nations. The intriguing aspect
of investing in public companies lies in the fact that their stocks are traded openly on the market like any other
commodity, providing accessibility for investors, irrespective of the CEO's opinion.
In terms of IPOs, the Indian stock
exchanges (BSE and NSE, including
SMEs) came in third globally in
2022. There were no international
transactions.
There were 18 IPOs (including one
InvIT) in Q4 2022 on the main
markets (BSE and NSE), as opposed
to 24 IPOs in Q4 2021 and 4 IPOs
in Q3 2022. This is a 25 percent

WHY DO COMPANIES GO PUBLIC?

The process of "going public," also known as participating in an "initial public offering" (IPO), involves the
transformation of a company owned by a few individuals into a company owned by a broader public. This transformation
includes making a portion of the company's ownership available to the general public through the sale of either debt or,
more commonly, equity securities such as stocks.

Going public is a means of raising substantial capital, and a public listing provides various financial advantages. Publicly
traded companies often enjoy better rates when issuing debt due to heightened scrutiny, and they have the flexibility to
issue additional stocks as long as there is market demand. This flexibility facilitates smoother execution of mergers and
acquisitions. Trading on open markets enhances liquidity, allowing for initiatives like employee stock ownership plans,
which help attract top talent.
Being listed on a major stock exchange carries a significant level of prestige. In the past, only financially robust privately
held businesses were eligible for an IPO, and the process was challenging. However, the internet boom altered this
landscape. Nowadays, companies don't necessarily need impressive financials and a lengthy track record to go public.
Smaller startups, aiming to expand their businesses, began opting for IPOs. While the desire for growth is understandable,
some of these businesses, initially funded by venture capital, pursued IPOs without having turned a profit or intending to
do so in the near future. Engaging in lavish spending to create a buzz and reach the market became a common strategy.

In some cases, suspicions may arise that companies conduct an IPO primarily to benefit the founders, marking it as an exit
strategy. This suggests an absence of intent to stay and add value for shareholders, turning the IPO into the final
destination rather than a starting point. The key factor in this process is the sales role, as persuading people to invest in the
company's stock can result in significant capital being raised.

.
PROCEDURE FOR GETTING IN AN IPO
1) Select an underwriter.
2) Register IPO with the SEC
3) Print prospectus.
4) Present roadshow
5) Price the securities
6) Sell the securities

1) Select an underwriter-
 An underwriter acts as an intermediary between a company issuing securities and the public investors..
 The primary participant in an IPO is typically the underwriter.
Typically, the underwriter takes on the risk of being unable to sell the securities by acquiring them at a price
lower than the offering price.

TYPES OF UNDERWRITERS
 Firm commitment underwriter:
 The underwriter buys the entire issue and assumes complete financial responsibility for any shares that remain
unsold
 This is the most prevalent form of underwriting in the United States.
 Best efforts underwriting:
 The underwriter endeavors to sell the maximum number of shares in the issue but is not required to compensate
the issuer for any shares that go unsold.
 LEADING IPO UNDERWRITERS

Goldman Sachs

Morgan Stanley

Merrill Lynch

2) Register IPO and With the SEC

 The company is required to create and submit a registration statement to the SEC.
 In this statement, comprehensive details about the company engaged in a public offering are revealed.
3) Print Prospectus
 A legal document known as the prospectus provides information to prospective investors about the
issuing company and the planned offering.
 Includes a large portion of the data found in the registration statement.
 It's common to refer to the preliminary prospectus as a "red herring."
4) Present road shows
 Around the nation, institutional investors are shown the road show.
 With the road show, businesses can increase interest in their brand and, consequently, the price.
 Enables the company and its underwriters to obtain data from possible buyers
5) Price the securities
 For the issuers, determining the appropriate fee for divesting a portion of the company is crucial.
 Based on the company's worth and the anticipated demand for the securities, the prices of the securities
are set.
 Examples of Valuation method
- Net present value
- Earnings/Price ratios

6) Sell the securities

 Beginning on the day the registration statement becomes effective, a full-fledged selling campaign is launched.
 The delivery of securities must be accompanied with a final prospectus.
This graph shows that the overall performance of the IPOs -

 The dot-com bubble caused IPOs to peak in 2000. During this period, a lot of unprofitable businesses went public. Following
the bubble collapse, there was a dramatic decline in IPOs.

 A multitude of variables, such as the robust performance of the stock market, the accessibility of low-cost finance, and the
increasing appeal of special purpose acquisition companies (SPACs), could have contributed to the 2021 IPO peak.

 Economic recessions may have contributed to the drops in the number of initial public offerings (IPOs) in 2003 and 2009.

PROCEDURE FOR APPLYING IN AN IPO

A corporation produces application forms for investors to fill out when it floats a public offering, or IPO. Public concerns
are available for just a few days. Any public matter must be kept open for at least three days and up to twenty-one days in
accordance with the legislation. The offer shall be available for issues that are backed by financial institutions for a
minimum of three days and a maximum of twenty-one days. The offer should be available for issues that are backed by all
financial institutions in India for a maximum of 10 days. Issues are often only open for three to four days. As directed on
the form, deposit the properly filled-out application along with cash, check, DD, or stock investment before the closing
date. Investment firms' (closed-end funds') initial public offerings (IPOs) typically include underwriting costs, which
burden purchasers. As directed on the form, deposit the properly filled-out application along with cash, check, DD, or
stock investment before the closing date. Investment firms' (closed-end funds') initial public offerings (IPOs) typically
include underwriting costs, which burden purchasers.

Prior to participating in any IPO, it's crucial to assess the risk factors:
1. Examine the promoters, evaluating their credibility and historical performance.
2. Understand the nature of the company's products or services, along with their potential in the market.
3. Investigate if the company has technological partnerships and assess the standing of its collaborators.
4. Identify and analyze the inherent risk factors.
5. Review the historical performance of the company launching the IPO.
6. Evaluate the project cost, financing arrangements, and potential profitability options.

The inaugural IPO by a consumer

internet company in India is
anticipated to be launched on July
19. Despite the company
experiencing ongoing losses, it aims
for a high valuation, a relatively
novel approach in the Indian
markets. Comparable companies
with similar business models
internationally have demonstrated
positive performance in recent
years.

Read more at:

HOW TO MAKE
PAYMENTS FOR IPO?
The company establishes the payment terms
for any initial public offering (IPO) or
public issue, ensuring compliance with
relevant laws and regulations. Typically,
businesses may require either full payment
with the application or half of the total
amount upfront with the remaining portion
to be paid upon allocation. In cases where
funds are needed in stages, the company
may request payments based on its cash
flow requirements. For public issues
exceeding Rs. 250 crore, regulations mandate the following payment schedule: 25% at the time of application, another

25% upon allotment, and the remaining 50% in two or more installments .

IPO GRADING
It is a process wherein the IPOs that are launching in India are given particular grades (ranging from level 1 to level 5). Credit Rating
Agencies (CRAs) affiliated with SEBI (Securities and Exchange Board of India) grade securities.
When comparing an IPO with comparable stock exchange-listed IPOs, a rating is helpful. Two main criteria are used to make the
comparison: market conditions and company fundamentals.
IPOs are rated from 1 to 5 on a grading scale. The better the company's fundamentals, the higher the number. The weaker the
fundamentals, the lower the number.
Whether a corporation agrees with the grade that has been assigned to them or not, they must reveal it in accordance with ICDR
requirements. Grades must be accepted by companies. If they're not happy, they may choose to receive their grades from other
organizations.

WORKING ON IPO GRADING

Companies are now required by SEBI to obtain a credit rating from one of the rating firms. For businesses submitting IPO applications
after May 1, 2007, it was necessary. However, beginning of February 4, 2014, the issuer no longer has to grade their IPO.
Based on company’s fundamentals, the grades are given on a 5-point scale. These are follows:

IPO Grade 1: Indicates weak company fundamentals.

IPO Grade 2: Suggests company fundamentals below the average.
IPO Grade 3: Reflects average company fundamentals.
IPO Grade 4: Signifies above-average company fundamentals.
IPO Grade 5: Represents good or strong company fundamentals.
FACTORS AFFECTING IPO GRADING
IPO grading depends on numerous factors. Industries in which a company operates, its financial position, its strengths and its
competitive advantage are a few among others.
The following factors affect a company IPO's grading (though not limited to these factors):
 Financial positions of the company
 Capabilities of management
 Industry prospects of a company
 Company prospects
 Competitive advantage
 Corporate governance practices
 Risks and opportunities of new projects
 Company's business environment
These are only a few of the other factors considered while assigning grades to the IPOs of companies. These factors may vary by
company and industry-wise.
SEBI made an effort to facilitate the decision-making process of investors by making available additional information about the firm's
fundamentals.

ADVANTAGES AND DISADAVANTAGES OF IPO

THE ADVANTAGES:

The act of going public offers several advantages, with the primary one being the ability to raise funds.
Companies opting for an initial public offering (IPO) make ownership shares available to the general public in
exchange for capital. The funds acquired can be utilized for purposes such as settling outstanding debts, funding
capital expenditures, or supporting research and development (R&D).

Another potential advantage is the heightened public awareness that can result from IPOs. The publicity
generated by going public can introduce a company's products to a broader audience, potentially leading to an
increase in market share.

Additionally, founders might use an IPO as an avenue to exit the company. IPOs have been a common method
for venture capitalists to realize profits from their investments in successful businesses they contributed to
building.

THE DISADVANTAGES:

Going public may entail several drawbacks, with a significant one being the increased demand for investor
disclosure. Once a company goes public, it becomes mandatory for them to regularly update the public on their
operations and financial performance, following specific protocols. These obligations come with associated
costs and may draw public scrutiny.

The Securities Exchange Act of 1934 governs the periodic financial reporting requirements for public
companies, which can pose challenges for newly listed firms. Additionally, they must adhere to various
guidelines monitored by the Securities and Exchange Commission (SEC).

Compliance with regulatory standards can result in substantial expenses, which further escalate when additional
laws are enacted to safeguard investors. The development of financial reporting documents, payment of audit
fees, establishment of investor relations divisions, and the formation of accounting oversight committees are
among the additional financial burdens.

IPO SCAMS
The term "IPO scamming," which is another name for pre-IPO scamming, refers to dishonest practices around an
organization's initial public offering (IPO) of stock. These frauds prey on investors who want to invest early in potentially
fast-growing businesses before they go public. This is how it operates:
TYPES OF SCAMS:
o Selling Non-Existent or Unauthorized Shares: fraudsters may fabricate businesses or assert that they are the
owners of shares that are actually held by institutional investors, for example. Investors' money is lost and they
are left with nothing.
o False Information: In order to trick investors into purchasing shares at exorbitant prices, fraudsters may falsify
financial statements, hype growth expectations, or minimize hazards.
o Securities that aren't properly registered with regulatory agencies like the SEC are sold as unregistered securities,
which is against the law and a cause for concern.
o Artificial Demand: To boost the share price, scammers may fabricate accounts or manipulate the market. They
then sell their holdings to gullible investors at a loss.
RED FLAGS WATCH OUT FOR:
o Unrealistic Discounts: Offers of IPO shares at
significantly lower prices than the expected
listing price are likely scams.
o Lack of Transparency: If information about the
company, its financials, or the offering process is
unclear or unavailable, walk away.
o Unsolicited Offers: Be wary of unsolicited
calls, emails, or social media messages
promising IPO access.
o Guaranteed Returns: Genuine investments
rarely guarantee returns, and high promises are
often a sign of fraud.
PROTECTING YOURSELF:
o Make an investigation: Check the company's registration status, confirm its existence, and be aware of the risks.
o Never make an investment based on a solicited offer.
o Before making any investing decisions, seek the advice of a financial professional.
o Inform regulatory organizations like the SEC about any suspect
conduct.
 CONCLUSION
Every initial public offering (IPO) generates high anticipation, presenting both the possibility of losses or
significant profit. Given the historically unpredictable opening day returns of IPOs, investors attracted by
potential discounts may find them appealing. While the price of an IPO often stabilizes over time, the initial
volatility can present opportunities.

To participate in the latest IPO hitting the markets, open a free Demat account. Companies opt for an IPO to
raise funds by selling shares to the general public, a process known for its excitement and profit potential. It's
crucial to recognize that an IPO is a costly and intricate procedure demanding careful planning, organization,
and execution. Prior to pursuing an IPO, businesses must possess a solid business plan, robust financials, and a
clear growth strategy.

The market may witness brief and rapid movements, leading to significant fluctuations in stock prices. As an
investor, conducting thorough research, understanding your risk tolerance, and aligning with your long-term
financial objectives are imperative considerations before venturing into an IPO investment.
 BIBLIOGRAPHY

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https://www.statista.com/markets/422/topic/551/india/
https://www.ey.com/en_in/ipo/india-ipo-trends-report
https://www.businesstoday.in/
CONTENT
https://www.slideshare.net//finance-ipo-final
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https://www.investopedia.com/terms/i/ipo.asp
https://www.indiainfoline.com/knowledge-center/ipo/ipo-process-in-india
IMAGE
https://www.linkedin.com/feed/
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