Presented By:

Hitesh Punjabi
GURU NANAK COLLEGE OF ARTS, SCIENCE & COMMERCE



Presentation on:
Investment Banking


An investment bank is a financial institution that assists individuals, corporations, and governments
in raising capital by underwriting and/or acting as the client's agent in the issuance of securities. An
investment bank may also assist companies involved in mergers and acquisitions and provide
ancillary services such as market making, trading of derivatives and equity securities, and FICC
services (fixed incomeinstruments, currencies, and commodities).

Or

A financial intermediary that performs a variety of services. This includes underwriting, acting as
an intermediary between an issuer of securities and the investing public, facilitating mergers and
other corporate reorganizations, and also acting as a broker for institutional clients.

What Does Merchant Banking do?

Merchant banks primarily perform international financing activities such as foreign corporate
investing, foreign real estate investment, trade finance and international transaction facilitation.
Some of the activities that a pure merchant bank is involved in may include issuing letters of credit,
transferring funds internationally, trade consulting and co-investment in projects involving trade of
one form or another.

What is Investment Banking

What is the difference between Investment and Merchant Banking?

Even though, a fine line separates a Merchant bank from an investment bank, there are some
differences between them.

- Traditional investment banks only engage in the underwriting of shares and issuance of
shares, whereas merchant banks involve in international financial activities.

- While traditional investment banks assist companies in the acquisition and merges,
merchant banks are not.

- Normally investment banks focus on share issuance of large private and public companies,
whereas merchant banks look after small scale companies.

- While merchant banks still offer trade financing to their clients, investment banks rarely
offer this service.

- Investment banks offer advisory services for acquisition and mergers, whereas a merchant
bank provides little or no of such services.



Debt
Equity
In India
Outside India
From Banks & FIs
Public Issue of
Bonds/Debentures
IPO
FPO
Rights Issue
Preference Issue
ECB ADR/GDR FCCB
Fund Raising Options
Options for Raising Funds

Public issue: When an issue / offer of securities is made to new investors for becoming part of shareholders
family of the issuer it is called a public issue. Public issue can be further classified into Initial public offer (IPO)
and Further public offer (FPO).

Initial public offer (IPO): When an unlisted company makes either a fresh issue of securities or offers its
existing securities for sale or both for the first time to the public, it is called an IPO. This paves way for listing
and trading of the issuers securities in the Stock Exchanges.

Further public offer (FPO) or Follow on offer: When an already listed company makes either a fresh issue of
securities to the public or an offer for sale to the public, it is called a FPO.

Rights issue (RI): When an issue of securities is made by an issuer to its shareholders existing as on a particular
date fixed by the issuer (i.e. record date), it is called an rights issue. The rights are offered in a particular ratio
to the number of securities held as on the record date.

Bonus issue: When an issuer makes an issue of securities to its existing shareholders as on a record date,
without any consideration from them, it is called a bonus issue. The shares are issued out of the Companys
free reserve or share premium account in a particular ratio to the number of securities held on a record date.

Private placement: When an issuer makes an issue of securities to a select group of persons not exceeding 49,
and which is neither a rights issue nor a public issue, it is called a private placement. Private placement of
shares or convertible securities by listed issuer can be of two types:
Key terms Defined

There are mainly two kinds - Preferential allotment and Qualified Institutional PLacement.

Preferential Allotment :Under the preferential allotment, a listed company issues securities
to a select group of entities, which may be institutions or promoters, at a particular price.
The eligibility of investors is as per Chapter XIII of SEBI (DIP) guidelines.

Investors may have a lock-in period. Usually for a preferential allotment, companies are
required to take permission of shareholders.

Qualified institutional placement : Qualified institutional placement is another way to go for
private placement under which a listed company issues shares or convertibles to institutional
buyers only, as per the provisions mentioned in Chapter XIIIA of SEBI (DIP) guidelines.

This process was introduced in 2006 to provide listed companies a new window to raise
funds from the domestic market rather than going to foreign markets.
Key terms Defined

For Funding Needs
Funding Capital Requirements for Organic Growth
Expansion through Projects
Diversification
Funding Global Requirements
Funding Joint Venture and Collaborations needs
Funding Infrastructure Requirements, Marketing Initiatives and Distribution Channels
Financing Working Capital Requirements
Funding General Corporate Purposes
Investing in businesses through other companies
Repaying debt to strengthen the Balance Sheet
Meeting Issue Expenses

For Non-funding Needs
Enhancing Corporate Stature
Retention and incentive for Employees through stock options
Provide liquidity to the shareholders

Why IPOs?

Huge Issue Expenses

Huge Administrative Expenses

Severe Regulation

Volatile Stock Market

Annual Listing Fee
Demerits of Issue of Shares

1. Appointment of a Merchant Banker
-Advisory Service
-Preparation of Basic Documents
-Appointment of other Merchant Bankers
-Preparation of Other Documents : MOU and Due Diligence Certificate
-Preparation and Filing of Final Prospectus
-Allocation of Responsibilities
2. Application to a Stock Exchange
3. Agreement with Depositories
4. Appointment of Underwriters
5. Appointment of Registrar to the Issue: Functions of Registrar
6. Appointment of Bankers
7. Appointment of Brokers
8. Appointment of Advertising Agencies: Statutory & Non-Statutory
9. Issue of Shares..
10. Filing Prospectus with SEBI, Registrar of Companies and Stock Exchanges
11. Convening Press Conference or Investors Meet
12. Despatch of Application Forms
13. Opening of Subscription List
14. Closure of Subscription List
15. Allotment of Shares
16. Listing of Shares

Public Issue of Equity Shares

Pre-Issue Stage of IPO
Appointment of Other Financial Intermediaries
Application to Stock Exchange
Preparation of Draft Red Herring Prospectus
Filing Documents with SEBI
Informing the Registrar of Companies
Agreement with Depositories
Appointment of an Ad Agency
Filing Final Red-Herring Prospectus
Despatch of Application Forms
Opening Escrow Accounts

Actual Issue Stage
Opening the
Subscription
List
Receipt of
Application
cum Bid
Forms
Uploading the
Information
Closure of
Subscription List

Allotment Stage
Determining the Cut-Off Price
Actual Allotment
Crediting Demat Accounts
Listing the Shares
Filing Final Prospectus

Offer Document
General Corporate Information;
Industry overview;
Projects, objects to the issue;
Operations, Branches, offices;
Future Prospects;
Sustainability of the business;
Capital Structure, its Evolution and
Shareholding Details;
Promoters & Promoter Group;
Management of Company;
Board Committees;
Key Managerial Personnel and Other
Officers;

Holding, Subsidiary and Group Companies;
Material Contracts & Commitments;
Assets and Immovable Property;
Financials;
Outstanding Litigations and Claims;
Intellectual Property Rights ("IPR");
Legal Compliances;
Insurance and Risk Management;
Human resource/ Employees;
Managements Discussion and Analysis;

What is an offer document?
Offer document is a document which contains all the relevant information about the company,
promoters, projects, financial details, objects of raising the money, terms of the issue etc and is used for
inviting subscription to the issue being made by the issuer.

Offer Document is called Prospectus in case of a public issue or offer for sale and Letter of Offer in
case of a rights issue.
Content Of Offer Document

Structure of an offer document.:

(a) Cover Page
Under this head full contact details of the Issuer Company, lead managers and registrars, the nature, number,
price and amount of instruments offered and issue size, and the particulars regarding listing. Other details
such as Credit Rating, IPO Grading, risks in relation to the first issue, etc are also disclosed if applicable.

(b) Risk Factors
Under this head the management of the issuer company gives its view on the Internal and external risks
envisaged by the company and the proposals, if any, to address such risks. The company also makes a note on
the forward looking statements. This information is disclosed in the initial pages of the document and also in
the abridged prospectus. It is generally advised that the investors should go through all the risk factors of the
company before making an investment decision.

(c) Introduction
Under this head a summary of the industry in which the issuer company operates, the business of the Issuer
Company, offering details in brief, summary of consolidated financial statements and other data relating to
general information about the company, the merchant bankers and their responsibilities, the details of
brokers/syndicate members to the Issue, credit rating (in case of debt issue), debenture trustees (in case of
debt issue), monitoring agency, book building process in brief, IPO Grading in case of First Issue of Equity
capital and details of underwriting Agreements are given. Important details of capital structure, objects of the
offering, funds requirement, funding plan, schedule of implementation, funds deployed, sources of financing
of funds already deployed, sources of financing for the balance fund requirement, interim use of funds, basic
terms of issue, basis for issue price, tax benefits are also covered.
Guide to understand an Offer Document

(d) About us
Under this head a review of the details of business of the company, business strategy, competitive strengths,
insurance, industryregulation (if applicable), history and corporate structure, main objects, subsidiary details,
management and board of directors, compensation, corporate governance, related party transactions, exchange
rates, currency of presentation and dividend policy are given.

(e) Financial Statements
Under this head financial statement and restatement as per the requirement of the Guidelines and differences
between any other accounting policies and the Indian Accounting Policies (if the Company has presented its
Financial Statements also as per either US GAAP/IFRS) are presented.

(f) Legal and other information
Under this head outstanding litigations and material developments, litigations involving the company, the
promoters of the company, its subsidiaries, and group companies are disclosed. Also material developments
since the last balance sheet date, government approvals/licensing arrangements, investment approvals (FIPB/RBI
etc.), technical approvals, and indebtedness, etc. are disclosed.
Guide to understand an Offer Document

(g) Other regulatory and statutory disclosures
Under this head, authority for the Issue, prohibition by SEBI, eligibility of the company to enter the capital market,
disclaimer statement by the issuer and the lead manager, disclaimer in respect of jurisdiction, distribution of
information to investors, disclaimer clause of the stock exchanges, listing, impersonation, minimum subscription,
letters of allotment or refund orders, consents, expert opinion, changes in the auditors in the last 3 years, expenses
of the issue, fees payable to the intermediaries involved in the issue process, details of all the previous issues, all
outstanding instruments, commission and brokerage on, previous issues, capitalization of reserves or profits,
option to subscribe in the issue, purchase of property, revaluation of assets, classes of shares, stock market data
for equity shares of the company, promise visvis performance in the past issues and mechanism for redressal of
investor grievances is disclosed.

(h) Offering information
Under this head Terms of the Issue, ranking of equity shares, mode of payment of dividend, face value and issue
price, rights of the equity shareholder, market lot, nomination facility to investor, issue procedure, book building
procedure in details along with the process of making an application, signing of underwriting agreement and filing
of prospectus with SEBI/ROC, announcement of statutory advertisement, issuance of confirmation of allocation
note("can") and allotment in the issue, designated date, general instructions, instructions for completing the bid
form, payment instructions, submission of bid form, other instructions, disposal of application and application
moneys, , interest on refund of excess bid amount, basis of allotment or allocation, method of proportionate
allotment, dispatch of refund orders, communications, undertaking by the company, utilization of issue proceeds,
restrictions on foreign ownership of Indian securities, are disclosed.

(i) Other Information
This covers description of equity shares and terms of the Articles of Association, material contracts and documents
for inspection, declaration, definitions and abbreviations, etc.

Guide to understand an Offer Document

Offer Price: Price at which the securities are offered and would be allotted is made known in
advance to the investors

Demand: Demand for the securities offered is known only after the closure of the issue

Payment:100 % advance payment is required to be made by the investors at the time of
application.

Reservation: 50 % of the shares offered are reserved for applications below Rs. 1 lakh and
the balance for higher amount applications.

Fixed Price Issues

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

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

Payment: 10 % advance payment is required to be made by the QIBs along with the
application, while other categories of investors have to pay 100 % advance along with the
application.

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

Book Building

BSE offers the book building services through the Book Building software that runs on the
BSE Private network.

This system is one of the largest electronic book building networks anywhere spanning over
350 Indian cities through over 7000 Trader Work Stations via leased lines, VSATs and Campus
LANS

The software is operated through book-runners of the issue and by the syndicate member
brokers. Through this book, the syndicate member brokers on behalf of themselves or their
clients' place orders.

Bids are placed electronically through syndicate members and the information is collected on
line real-time until the bid date ends.

In order to maintain transparency, the software gives visual graphs displaying price v/s
quantity

BSE's Book Building System

Merits of Book-Building
Realisation of a High Price
Quick Issue Process
Fast Availability of Funds
Lesser Issue Expenses
Quick Update
Lack of Uncertainty
Quick Allotment
Opportunity for Revision
Quick Listing of Shares
Less Administrative Cost
Preference by Institutional Investors
Up-to-date Information

IPO Process Book Built Issue
Decision to go for IPO
Appointment of BRLM
and legal counsel
Due diligence
Drafting of Draft Red
Herring
Filing with SEBI &
Stock Exchanges
Pre-Marketing
SEBI Clearance &
ROC Filing
Roadshows
Book building
Funds transferred
to issuer
Listing
RoC filing of final
Prospectus
Pricing &
Allocation
Preparation/
Approvals
Marketing and Estimation of Price Range Launch &
Completion
Issuer

The Issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'.

The Issuer specifies the number of securities to be issued and the price band for the bids.

The Issuer also appoints syndicate members with whom orders are to be placed by the
investors.

The syndicate members input the orders into an 'electronic book'. This process is called
'bidding' and is similar to open auction.

The book normally remains open for a period of 5 days.
Bids have to be entered within the specified price band.
Bids can be revised by the bidders before the book closes.
On the close of the book building period, the book runners evaluate the bids on the basis of
the demand at various price levels.
The book runners and the Issuer decide the final price at which the securities shall be issued.
Generally, the number of shares are fixed, the issue size gets frozen based on the final price per
share.
Allocation of securities is made to the successful bidders. The rest get refund orders.

Book Building Process





Key Points to Watch out while doing Analysis of IPO

Is this a good promoter?
Get to know the promoter - thatis the key.
If the promoter is okay, almost all other factors will automatically get taken care of.
If there is any foreign collaboration of repute, it helps.
What is the promoters background and experience?
Experience in the same business/industry (promoting individuals/ promoting companies)
Is the promoter a liability or an asset?
Are there any material defaults/ litigations against the company or its promoters?
Persons/Companies that have not been compliant with laws of the land reflect a worrisome mindset.
If you find too many defaults/litigations of a material nature or even one of a very serious nature, a
the issue.
Criminal proceedings against the promoters.
Check out record of past defaults of companies/ individuals
What is the status of the issuing company?
Holding company
Main company



IPO Analysis Points

How has been the performance of the company?
Number of years in the business
Size of the company
Growth rate
Market share and growth
Are the financials, specially the recent ones, reliable?
Many resort to window dressing; high sales often lie in sundry debtors, profits could be because
of a very high other income or unusual income.
Beware of bloated previous years financials; amazing how almost every company performs so
exceedingly well in the year and quarter preceding the issue!
Look at aging of sundry debtors (and earlier write-offs).
Look for changes in accounting policies (depreciation etc.), in financial year.
Look if there are any significant Notes to the Accounts.
Look if there are any significant qualifications by the auditors.
What to look for in the Balance Sheet?
Fixed assets
Investments
Loan and advances
How are the cash flows?
Is it negative?





IPO Analysis Points

What is the promoters attitude towards shareholder rewards, in case of listed group
companies?
Dividend policy
Bonus issues
Rights issues
De-listing of group companies
Past public issue pricing
How has been the performance of the group companies?
Number of years in the business
Size of the companies
Growth rates
Market shares and growth
Financials
How significant are the related party transactions?
Is it a family business?
Do group companies constitute the main clientele?
Is most raw materials sourced from group companies?
Extent of related party financial transactions?
Is there any conflict of interest among group companies?
Are there companies in the group doing the same business?


IPO Analysis Points

Who is on the Board of Directors?
Family-controlled or broad-based
Independent directors
Key directors-in terms of experience and connections
Compliance of Clause 49 of the Listing Agreement on Corporate Governance
What are the products/ services of the company?
Old economy/ new economy?
Cyclical?
Flavour of the season?
Upstream/ downstream?
Market outlook?
Be concerned about your own exposure to a particular industry.
What about technology?
Is the Technology used has entry Barrier?
What about customers?
Over dependence on one or a few customers?
Too many fixed priced, long-term contracts etc?
What is the size of the issue?
A large issue ensures better allotment as also better liquidity.



IPO Analysis Points

What will be the public float after the issue?
This is critical as public float finally determines the liquidity.
What is the promoters holding after the issue?
A small post-issue stake does not inspire much confidence
Is the price justified?
In Justification of Issue Price, look whether P/E has been calculated on recent period EPS
or on weighted average of 2-3 years.
Look at the peer group prices.
What has been the capital build up?
Previous public issues/rights issues/overseas issues/preferential issues.
To whom, when, at what price?
Is there any venture capital/private equity fund investment in the company?
Who invested, when, at what price, for what stake?
How does the offer price compare with price of allotments made to them?
Are these now funds exiting fully or partially in this offer?
Partial exit or no exit is more confidence building; VCs are expecting a higher secondary
market exit price




IPO Analysis Points

What are the objects of the issue?
Finance a new project (new/diversification)?
Undertake expansion
Augment working capital?
Repay debt? (to promoters?)
Do acquisitions?
Fund subsidiaries?
Open branches?
For general corporate purposes?
Exit to promoters/others (offer for sale); No fund inflows into the company?
What are the components of the project cost?
Comparison of cost of projects of two similarcompanies.
What has been the utilisation of existing capacity?
Is the present capacity fully/ substantially being used?
-

IPO Analysis Points

How is the company financing the objects of the issue?
Is entire cost being funded by the present issue?
Is company committing any internal accruals to the project?
Is appraisal of any relevance?
Good, if appraised but not a critical factor
Are there any further capital raising plans?
This may lead to a dilution of your earnings.
What is the time frame of deployment of issue proceeds?
Is it immediate or is it spread over next 2-3-4 years? If most of it is for later deployment, why
money being raised now?
Stretched deployment has its own hazards!
What are the key risk factors?
Lawyers are now listing out too many risk factors to crowd out significant ones (e.g. communal
India, South Asia conflict zone etc.)
Sebi insists on too many irrelevant risk factors (e.g. First-generation entrepreneurs, rented
premises etc.)
Identify critical internal risk factors; likely impact on the company family disputes?
Identify critical external risk factors; likely impact on the company
- Dependence on airport infrastructure?
Future prospects of the principal? (stock exchange)
- Over dependence on one industry? (for raw materials or customers)


IPO Analysis Points

Are any major government approvals pending?
Some of these may have a major bearing on the company/project
- Intermediary registration with SEBI?
- NBFC approval from RBI?
- Banking approval from RBI?
- Pollution Control approval from PCB?
- Licenses to run cinema halls?
Is the industry highly regulated?
Are there any significant trademark/ brand/ copyright issues?
This could be a problem area in many ways.
Does the company own these?
Recent case of Jet Airways and how it was resolved before the issue.
Serious litigation by others can hurt the company.
Where is the company listing?
Apply only if the company is listing at BSE/NSE.
If a company is listing only at regional exchanges, you will have no exit, as almost all regional
exchanges are lying closed.
Is the company/ group company already listed abroad?
Will have better disclosures
Will have better corporate governance


IPO Analysis Points

Is there any special reservation for shareholders of the company/group companies?
A reservation increases the chances of allotments
What is the record of investor complaints in listed entities?
Type of complaints
Aging of complaints
Number of complaints
What additionally should one look for in an FPO?
Take a close look at the data of share prices/volumes in the recent period.
What should one look out for in case the company has any listed group company?
Take a close look at the details of the share prices/volumes in the recent period over at least
last one year
Besides offer document, should one look at other sources of information?
Business channels, financial newspapers and the regular media. You will often find issues
being discussed, graded etc.


IPO Analysis Points




Regulations

Common Conditions for Public Issues and Rights Issues
Provisions as to Public Issue
Eligibility Requirements
Pricing in Public Issue
Promoters Contribution
Restriction on Transferability (Lock-in) of Promoters Contribution, etc.
Minimum Offer to Public, Reservations, etc.
Manner of Disclosures in the Offer Documents
General Obligations of Issuer and Intermediaries with respect to Public
Issue and Rights Issue
Preferential Issue
Qualified Institutions Placement
Bonus Issue
Issue of Indian Depository Receipts

ISSUE OF CAPITAL AND DISCLOSURE (REQUIREMENTS)
REGULATIONS, 2009

Promoters
Contribution
Minimum of 20% of the post issue capital of the Company for unlisted companies;
for listed companies, either to extent of 20% in issue or to ensure post issue holding
of 20%

Following shares are ineligible for the computation of Promoters contribution
Issued in last one year at a price lower than issue price, unless topped up
Issued in last three years out of bonus issue or revaluation reserve for
consideration other than cash

Lock-In Period
For Promoters:
Lock-in for a period of 3 years from the date of allotment or from the date of
commencement of commercial production, whichever is later
Balance pre-issue capital, other than held by Indian and Foreign Venture Funds
(registered with SEBI) and shares held for at least one year and being offered for sale
in the issue
Must be locked-in for a period of 1 year from the date of allotment

ICDR Regulation 32-48-deals with Minimum Promoters Contribution, Lock-in

Corporate Governance Requirements (As per SEBI the requirements of
clause 49 is applicable to all the companies seeking listing first time)
Compositi
on of the
Board
Audit
Committee
Investor
Committee
Optimum number of executive and non executive directors with at least 50% being non-
executive. If the chairman, has executive powers then 50% of Board comprises of
Independent directors. While if chairman has non-executive powers then 1/3 of the Board
comprises of Independent directors.

Mandatory constitution of Audit Committee with minimum three directors and headed
by an Independent director.

All members shall be financially literate (should be able to understand financial
statements) and at least one member should have accounting and financial management
expertise.

Shareholder/Investor Grievances Committee to be formed under the chairmanship of a
non executive director to look into the redressing of shareholder and investor complaints
like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends


At least one director on the Board of the holding company shall be a director on the
Board of a material non listed Indian subsidiary Company-Material non-listed
subsidiary means a subsidiary whose turnover or net worth exceeds 20% of the
consolidated turnover or net worth in the preceding accounting year
Audit committee of the listed holding company shall also review the financial
statements, in particular, the investments by the unlisted subsidiary Company
A separate section on Corporate Governance to be included in the Annual Reports
with disclosures on compliance of mandatory and non-mandatory requirements
Submission of quarterly compliance report to the stock exchanges
Report on
Corp.
Governance
Subsidiary
Company
CEO/CFO
Certificatio
n
CEO/CFO to certify the financial statements and cash flow statements

Corporate Governance Requirements (As per SEBI the requirements of clause 49
is applicable to all the companies seeking listing first time)

Various Legal Agreements undertaken by the Issuer Company
Agreements
Parties to the Agreement


Purpose of
Agreements
Engagement
Letter
BRLM MoU
Company and individually with Investment Bankers, Counsels to the
Company, Auditors, Registrar and other intermediaries Company and
BRLMs
Engaging the
intermediaries for
the Services Lays
down the roles,
responsibilities, reps
of BRLM and
Company
Registrar MoU
Company and Registrar
Lays down the roles,
responsibilities of the
Registrar
Escrow
Agreement
Company, BRLMs, Syndicate Members, Registrar and Escrow Bankers to the
Issue
Lays down the
process for receipt of
Issue proceeds and
release of funds to
the Company

Listing
Agreement
Company and Stock Exchanges
Binds the Company
to the
requirements of
the Listing rules of
the Stock
Exchanges
Tripartite
Agreement with
Depository
Company, NSDL and CDSL
Lays down the
provisions of NSDL
/ CDSL acting as
the Depositories of
the Company
Underwriting
Agreement
Company and the Underwriters (BRLM and Syndicate members)
Lays down the
terms of
Underwriting and
the extent of
underwriting
Syndicate
Agreement
Company, BRLMs and Syndicate Members
Lays down the
process of
marketing and
handling the forms
Various Legal Agreements (Cont..)

Intermediaries and their Roles
Party Key Responsibility Appointment
Lead Managers
Overall Co-ordination
Conduct due diligence and finalize disclosure in Offer Document
Assist the legal counsel in drafting of Offer Document
Interface / ensure compliance protocol with SEBI / NSE / BSE
Upfront
Legal Due Diligence
Drafting the offer document
Guidance on any other incidental legal matters
Assistance in complying with requirement for selling in international
geographies
Domestic &
International
Legal Counsels
Upfront
Reviewing and auditing financials and preparing financial statements for
inclusion in the Offer Document
Verify/audit various financial and other data used in the Offer document
and provide Comfort Letter
Auditors
Existing
Auditors
Co-ordination with the Issuer and Bankers regarding collections,
reconciliation, refunds etc
Securing allocation approval from Stock Exchanges
Post issue co-ordination collation and reconciliation of Information
Registrars
4 weeks before
filing DRHP
with SEBI

IPO Grading
Agency
Provides IPO Grading

2 weeks before filing
RHP with ROC
Depository (NSDL,
CDSL)
Tripartite Agreement
Dematerialization of Companys shares
Demat transfer of Shares
Credit of Shares to Allottees

After appointment of
Registrar
Printers
Bulk printing of the Red Herring Prospectus Bid Forms, final Prospectus, CAN, Refund
orders etc.
Ensure timely dispatch and distribution of stationery to all centers
Before Filing DRHP
with SEBI
Advertisers
Preparing and getting published all statutory notices
Creating all advertisement materials

Before Filing DRHP
with SEBI
Escrow Collections
Banks & Bankers
of the Issue
Acting as collecting agents
Escrow Account & Refund account


Before Filing RHP with
ROC
Self Certified
Syndicate Bank
(SCSB)
To receive bids and block bid amount in the investors bank account based on applications
submitted;
To provide FC on account transfer/ unblock funds post finalization of basis of allotment,
To address investor grievances on account of ASBA bids
Approved by SEBI
Intermediaries and their Roles

(a) Which are the intermediaries involved in an issue?
Intermediaries which are registered with SEBI are Merchant Bankers to the issue (known as Book
Running Lead Managers (BRLM) in case of book built public issues), Registrars to the issue, Bankers
to the issue & Underwriters to the issue who are associated with the issue for different activities.
Their addresses, telephone/fax numbers, registration number, and contact person and email
addresses are disclosed in the offer documents.

(i) Merchant Banker: Merchant banker does the due diligence to prepare the offer document which
contains all the details about the company. They are also responsible for ensuring compliance with
the legal formalities in the entire issue process and for marketing of the issue.

(ii) Registrars to the Issue: They are involved in finalizing the basis of allotment in an issue and for
sending refunds, allotment etc.

(iii) Bankers to the Issue: The Bankers to the Issue enable the movement of funds in the issue process
and therefore enable the registrars to finalize the basis of allotment by making clear funds status
available to the Registrars.

(iv) Underwriters: Underwriters are intermediaries who undertake to subscribe to the securities
offered by the company in case these are not fully subscribed by the public, in case of an
underwritten issue.
Intermediaries involved in the Issue Process

Capital Structure
Shareholding Pattern (pre-issue and post-issue)
Securities Premium Account (pre-issue and post-issue)
Holding of the promoter and promoter group
Disclosure about ESOPs if any
Objects of the
Issue
Total requirements of funds
Means of Financing
Undertaking by the issuer company confirming firm arrangements of finance through
verifiable means towards 75% of the stated means of finance (excluding proposed IPO)
Details about the appraisal of the project
Interim use of funds
Business
Description about the Industry in which the Company operates
Detailed description about the business of the Company
Disclosures in the Offer Document

Risk Factors
Risks related to the Company
External Risk Factors
Company
Management
Details about the Board of Directors and various committees
Details about key management persons

Disclosures in the Offer Document (Contd)
Financial
Disclosures
Auditors Report to have five year restated financials for the
Issuer Company, and
All Subsidiaries of the Issuer Company or Consolidated Financials of the Issuer Company
Audited financials presented should not be more than six months old at the time of filing DRHP with
SEBI and must be updated to be not more than six months old on the date of filing the prospectus with
the ROC
All financials should be presented based on Indian GAAP
MD&A
Detailed discussion on performance for the past 3 years
Capital Expenditure
Cash Flow and Liquidity
Litigations and
Defaults
All pending litigations in which the Company/Promoters / Promoter Group / Directors / Group
companies are involved.
Both, litigations filed by or against the Company/Promoters / Promoter Group / Directors / Group
companies
Outstanding litigations, defaults, etc., pertaining to matters likely to affect operations and finances of
the company.
The pending proceedings initiated for economic offences against the directors, the promoters,
companies and firms promoted by the promoters indicating their present status.

Board Meeting for the IPO including taking on record a potential offer for sale through the IPO
process and setting up an IPO Committee
Approval/ authorization for Offer for Sale by Selling Shareholder(s)
Call for a Shareholders meeting to approve the following
Fresh issue of shares under Section 81 (1A) of the Companies Act (including reservations,
Greenshoe etc.)
ESOP/ ESPS, if any
Increase in authorised capital, if any
Amendment in the Articles of Association of the Company
Appointment of intermediaries by the Board/ IPO Committee
BRLMs/ Syndicate Members/ Stabilisation Agent
Domestic and International Legal Counsel
Registrars to the Issue
Advertising and PR Agency
Printers
Escrow Collection Bank to the Issue
IPO Grading agency
Monitoring agency, if applicable

Key Internal Approvals from Board and Shareholders

Declarations/ Undertakings enclosed with the filing of the DRHP with SEBI
That the complaints received in respect of this Issue shall be attended to by the Company expeditiously
and satisfactorily. The Company to appoint a Compliance Officer and authorize the Compliance Officer and the
Registrar to the Issue to redress complaints, if any, of the investors;

That all steps will be taken for the completion of the necessary formalities for listing and commencement
of trading at all the stock exchanges where the Equity Shares are proposed to be listed within 12 working days
from the issue closure.

Confirmation that adequate funds will be made available to the Registrars to the Issue for refunds
.
That the refund orders or Allotment advice to all the successful Bidders shall be dispatched within specified
time .

That no further offer of Equity Shares shall be made till the Equity Shares offered through the RHP are
listed or until the Bid monies are refunded on account of non-listing, under-subscription etc.

Declaration that the transactions of shares between Promoters and Promoter Group would be disclosed to
SEBI.

Undertaking that the Equity Shares being sold pursuant to the Offer for Sale are free and clear of any liens
or encumbrances, and shall be transferred to the successful Bidders within the specified time .
Undertaking regarding utilization of issue proceeds.


Key Internal Approvals from Board and Shareholders

Approve the offer documents at various stages (and all directors to sign the offer document
individually).
DRHP prior to filing with SEBI
RHP prior to filing with RoC
Final Prospectus prior to filing with RoC
Changes in RHP and Prospectus directed by RoC to be initialled
Public notices, if any, amending the RHP or the Prospectus

Finalize the Price Band at least two working days prior to Issue opening

Post Issue Decisions and Actions along with the Company
Finalization of Issue Price based on demand
Approve the basis of allotment as finalized in consultation with the Designated Stock
Exchange and allot shares
Key Internal Approvals from Board and Shareholders

Present the analysis to a committee comprising senior executives of the concerned grading
agency. This committee would discuss all relevant issues and assign a grade

Review SEBI observations and update their report if required.

Communicate the grade to the company along with an assessment report outlining the
rationale for the grade assigned

Though this process will ideally require 2 3 weeks for completion, our initial interaction with
Credit Rating Agencies indicates that it may be a good idea for Issuers to initiate the grading
process about 6 8 weeks before the targeted IPO date to provide sufficient time for any
contingencies

IPO Grading is required prior to marketing of the IPO and needs to be disclosed in the RHP
and Prospectus

The Credit Rating Agencies have to forward the names and details of IPOs graded by them on
a monthly basis to SEBI / Stock Exchanges for uploading on their website for public
information

IPO Grading Process

In respect of Large Cap Companies with a minimum issue size of Rs. 10 cr and market capitalization of not less
than Rs. 25 cr.

The minimum post-issue paid-up capital of the applicant company (also referred to as "the Company") shall be
Rs. 3 cr;
The minimum issue size shall be Rs. 10 cr;
The minimum market capitalization of the Company shall be Rs. 25 cr

In respect of Small Cap Companies other than a large cap company.

The minimum post-issue paid-up capital of the Company shall be Rs. 3 cr;
The minimum issue size shall be Rs. 3 cr;
The minimum market capitalization of the Company shall be Rs. 5 cr
The minimum income/turnover of the Company should be Rs. 3 cr in each of the preceding three 12-months
period;
The minimum number of public shareholders after the issue shall be 1000.
A due diligence study may be conducted by an independent team of Chartered Accountants or Merchant
Bankers appointed by the Exchange, the cost of which will be borne by the company. The requirement of a due
diligence study may be waived if a financial institution or a scheduled commercial bank has appraised the
project in the preceding 12 months.


LISTING WITH BSE

Permission to use the name of the Exchange in an Issuer Company's prospectus

The Exchange follows a procedure in terms of which companies desiring to list their securities
offered through public issues are required to obtain its prior permission to use the name of the
Exchange in their prospectus or offer for sale documents before filing the same with the
concerned office of the Registrar of Companies. The Exchange has since last three years formed a
"Listing Committee" to analyse draft prospectus/offer documents of the companies in respect of
their forthcoming public issues of securities and decide upon the matter of granting them
permission to use the name of "Bombay Stock Exchange Limited" in their prospectus/offer
documents. The committee evaluates the promoters, company, project and several other factors
before taking decision in this regard.

Allotment of Securities
As per Listing Agreement, a company is required to complete allotment of securities offered to
the public within 30 days of the date of closure of the subscription list and approach the Regional
Stock Exchange, i.e. Stock Exchange nearest to its Registered Office for approval of the basis of
allotment. In case of Book Building issue, Allotment shall be made not later than 15 days from
the closure of the issue failing which interest at the rate of 15% shall be paid to the investors.


LISTING WITH BSE

Trading Permission

As per SEBI Guidelines, the issuer company should complete the formalities for trading at all
the Stock Exchanges where the securities are to be listed within 7 working days of finalization
of Basis of Allotment.

A company should scrupulously adhere to the time limit for allotment of all securities and
dispatch of Allotment Letters/Share Certificates and Refund Orders and for obtaining the
listing permissions of all the Exchanges whose names are stated in its prospectus or offer
documents. In the event of listing permission to a company being denied by any Stock
Exchange where it had applied for listing of its securities, it cannot proceed with the
allotment of shares. However, the company may file an appeal before the Securities and
Exchange Board of India under Section 22 of the Securities Contracts (Regulation) Act, 1956.

LISTING WITH BSE

Employee reservation is now capped at up to 5% of the post issue capital instead of 10% of
issue size (as under the DIP Guidelines), application size for and value of allotment to an
employee under employee reservation capped at Rs 1 lakh, retail discounts to employees in
the reservation portion also limited to application size Rs 1 lakh

ASBA Process introduced on July 30, 2008 as an alternate mode of payment for Retail
Individual Investors expanded in 2009 to all categories of bidders excluding QIB

Pre Ipo Allotment/Transfer: Under ICDR regulations capital structure must be frozen at DRHP
stage and details of any pre IPO allotments/transfers must be disclosed.

The ISSUE OF CAPITAL AND DISCLOSURE (REQUIREMENTS) REGULATIONS( ICDR
Regulations) introduced the concept of anchor investors in 2009 allowing up to 30%
allocation at price equal to or above issue price to QIBs buyers applying for shares of a
minimum value of Rs 10 crore in a book built public issue
IPOs -Special issues

Reg4..provides for following general eligibility conditions for the issue
Issuer, its promoter group or directors or persons in control of the issuer should not be debarred
from accessing capital market

Promoters, directors or persons in control of the issuer should not be a promoter, director or
person in control of any other company which is debarred from accessing capital market

Issuer to make application to one or more recognized stock exchanges for listing of shares

Issuer to enter into agreement with a depository for demat of specified securities

All partly-paid up equity shares have been made fully paid-up

Made firm arrangements of finance through verifiable means towards 75% of the stated means
of finance excluding the amount to be raised through the issue or thru internal accruals

Reg4..provides for following general eligibility conditions for the issue

Reg30-31 deals with pricing and price band:
SEBI allows free pricing of equity shares in an IPO
Approval of RBI might be required for public issues by banks
Issuer may mention floor price or price band in RHP OR
Issuer may announce floor price or price band at least 2 working days before bid opening in IPO and at
least 1 day before bid opening in FPO in newspapers
Cap on the price</= 120% of the floor price. i.e The spread between floor price & Cap price shall not be
more than 20% (eg: 100-120)
Floor Price/Final Price not to be less than face value
If the issue price is above Rs.500 then the issuer can fix the FV of shares below Rs.10 but a minimum of
Rs.1.
Differential pricing is permissible in a public issue to retail individual investors and retail individual
shareholders
Retail investors can be offered shares at a discount to the price offered to other investor categories (Max
discount can be 10%)
FACTORS DETERMINING PRICE:
Financials of the Company Net worth, EPS, profit margin.
Industry P/E Ratio.
Standing of the Company in the relevant industry
Future prospect of the Industry as well as the Company
Background of the promoters

ICDR Regulation 30-31 deals with pricing and price band

Primary Criteria
Companies with track record
Companies without track record
Track record of distributable profits for 3 out of the
immediately preceding 5 years.

Pre-issue net worth of not less than Rs. 1 cr in each
of the preceding 3 full years .

Net tangible assets of atleast Rs. 3 cr for each of the
preceding 3 full years.

Not more than 50% of these to be held in the form of
monetary assets.
(Proposed IPO + Previous Issues in the same financial
year) < 5 times the pre-issue net worth
In case the company has changed its name within the
last one year, atleast 50% of the revenue for the
preceding 1 full year is earned by the company from
the activity suggested by the new name
Prospective allottees in the IPO should not be less
than 1000 in number
Choice of Route: Fixed Price or Book Building
50% of the net offer to
public being allotted to
QIBs
At least 15% of the project
cost is contributed by
scheduled commercial
banks and at least 10% of
the net offer to public is
allotted to QIBs
Minimum post-issue face
value capital must be Rs.
10 cr

OR

Compulsory market
making for at least 2 years
from the date of listing of
shares
Minimum post-issue face
value capital must be Rs. 10
cr

OR

Compulsory market
making for at least 2 years
from the date of listing of
shares
Choice of Route: Book
Building
Choice of Route: Fixed
Price or Book Building
ICDR Reg. 26 (Regarding IPO)

Thank You