HISTORICAL STUDY OF LAST 3 YEAR IPO

Savitree Singh(NISM,Mumbai)

Outline

What is an IPO

Advantage and Disadvantage of IPOs

No. of issues in the year .

Size of the issues.

Sectors—Total issues divided in to sectors-geographical distribution.

Regional analysis.

Size of issue (Min-Max –Average)

Time taken between (SEBI observation,….)

Issues Exp\issues Size.

Analysis of IPOs.

No of withdrawals\files.

bank loan/appraisal.

legal analysis.

Lead Merchant Banker In the Market.

What is an IPO…..

An initial public offering, or IPO, is the first sale of stock by a company to the public. If the company has never issued equity to the public, it's known as an IPO.

Advantages and Disadvantages of IPOs…

Advantages….

Corporate Operational Purposes.

Acquisitions / Mergers.

Working Capital / Long term Capital

Expansion / Diversification

Liquidity for Shareholders

Visibility with Public /

Stakeholders

Allows public to part take in the value

creation

Disadvantages

High Expenditure

Stringent Eligibility norms

Stringent Compliances

Pressure for Short term performance

Volatility of shares.

Threat of Takeovers

LISTING & ADMISSION OF SECURITIE

Regulatory Considerations for Issuers coming out with IPO’s

Companies seeking a listing must adhere to the SEBI (DIP) Guidelines, SCRA Rulesand the listing requirements/policies of the stock exchange they wish to list on

FDI/FII

policyListingRegulatory Considerations

SEBI (DIP) Guidelines/SCRA Rules

Exchange Requirements/ Policies

Either

Indian Public Offerings Listing on the Bourses

Promoter Contribution

Ineligibility

for Promoter

Contribution

Following securities during the preceding 3 years

•Acquired for consideration other than cash

•Out of Bonus issue, out of revaluation reserves or reserves without accrual of cash resources

Shares acquired in preceding one year at a price lower than the Offer price

Exception made to shares acquired pursuant to scheme of merger

Promoter

Promoter includes person or persons :

• Who are in over-all control of the company OR named in prospectus as promoters;

• Who are instrumental in the formulation of a plan or program pursuant to which the securities are offered to the public

Promoter

Contribution

Promoter’s shareholding not to be less than 20% of the post issue capital

•In case of a shortfall, promoter to bring in full amount of promoter’s contribution atleast one day prior to the issue opening date at the IPO valuation

Listed Companies, exempted, if having a track record of 3 year profitability

Participation in excess of 20% will attract preferential pricing

Indian Public Offerings Listing on the Bourses

Lockup Provisions

Minimum promoter contribution to be locked in for period of three year

Excess promoter contribution to be locked in for a period of one year

Shortfall in firm allotment subscribed by the promoters to be locked in for a period of one year

Inter-se transfer of shares among promoters or pre issue holders subject to continuation of residual lock-in period

Promoter

Contribution

Others

Relaxation of

lock in

conditions

Pre issue capital locked in for a period of 1 years

• Except

• Held by SEBI registered Venture Funds for period of one year

• Held for a period of one year at the time of filing of the prospectus with SEBI and Offered for sale

• Held by employees issued under a SEBI compliant ESOP scheme

Eligibility Norms for Issuing Securities - SEBI Requirements.

No unlisted Company can make a public issue of securities unless the company has:-(Clause 2.2.1)

• Net tangible assets of Rs.30 mn in each of the 3 preceding years

• Not more than 50% of NTA are held as monetary assets

• a track record of distributable profits in at least 3 years out of immediately preceding 5 years &

• pre-issue net worth of Rs. 10 mn. in each of the 3 preceding 3 years

• Not to exceed 5 times pre issue net worth

No unlisted Company can make a public issue of securities unless the company has:- (Clau. 2.2.2)

• Allot 50% to QIBs by way of book building route OR

• Project has participation by FIs/SCBs to the extent of 15%, of which 10% is from appraisers. Also 10% allocation is to made to QIBs

• AND

• Post Issue capital of Rs.100 mn OR

• Compulsory market making for 2 yrs from the date of listing

Eligibility Norms for Issuing Securities - SEBI Requirements.

Total No of issues in last 3 year…

2007-08 126

2008-09 35

2009-10: 49

Total No. of issue got clearance in last 3 years….

2007-08 103 out of 126

2008-09 29 out of 35

2009-2010 11 out of 49

Total No. of issues……

Total no of issue got cleared

2007-08 103

2008-09 29

2009-10 11

Total no. of issues got withdrawn

2007-08 9

2008-09 4

2009-10 1

Total no. of issues refilled and closed in the following year….

Total no. of issues closed and refilled in 2007 are 5 and 1 respectively.

Total No. of issues closed and incomplete in 2008 is 1 each.

Total no. of issues incomplete in 2009-2010 are many.

Issue Size In (%) Term(2007-08)(excluding some co. which data is not available in their draft letter)

More than 1500 Power Grid Corporation of India LimitedOil India Limited More than 500Edelweiss Capital Limited Wockhardt Hospitals LimitedRural Electrification Corporation Limited Brigade Enterprises Limitedmore than 200 Motilal Oswal Financial Services LimitedMaytas Infra Limited Jyothy Laboratories LimitedBGR Energy Systems Limited OnMobile Global LimitedFuture Capital Holdings Limited Gammon Infrastructure Projects Limited (Refiled)Xenitis Infotech Limited Jaiprakash Power Ventures LimitedPipavav Shipyard Limited. more than 100Koutons Retail India Limited Empee Distilleries LimitedConsolidated Construction Consortium Limited Religare Enterprises LimitedKNR Constructions Limited Transformers and Rectifiers (India) LimitedShriram EPC Limited Titagarh Wagons Limited (Refiled)Austral Coke & Projects Limited (Refiled) Gokul Refoils and Solvent LimitedSejal Architectural Glass Limited (Refer to sr. no. 104) Resurgere Mines & Minerals India Limited (Refer to sr. no. 108)Pride Hotels Limited Birla Cotsyn (India) Limited (Refer to sr. no. 118)Vishal Information Technologies Limited.

Issue size of co in(%)term in 2008-09

More than 3000

NHPC

More than 1500

Adani Power Limited

more than 500

GodrejProperties Limited

more than 200

MahindraHolidays & Resorts (India) Limited

more than 100

Persistent systems Limited

Raj Oil Mills Limited

Issue size of co in(%)term in 2009-2010

More than 3000

Adani Power Limited

More than 1500

Indiabulls Power Limited

more than 500

JSW Energy Limited

Cox And Kings (INDIA) Limited

Godrej Properties Limited-Refiled

more than 200

Den Networks Limited

D B Corp Limited

more than 100

Regional analysis(in three Year)

• IPO Companies Locations……..

2007

East

West

North

South

2008

East

West

North

South

2009

East

West

North

South

Sectors—Total issue divided in to sector

Infrastructure

power

IT

Real estate

Financials

Pharmaceutical

Others

2007

Infrastructurepower

IT

Real estate

Financials

2008

Infrastructure

power

IT

Real estate

PharmaceuticalFinancial

2009

Listing Procedure in SE

Submission of Articles and Memorandum

Approval by Listing Committee of the Exchange

Granting permission to use the name of the Exchange in the prospectus

Informing SEBI of the LC’s decision

1% security deposit with Designated SE

Time taken amongst Various process

Issuer Company

Time taken By Merchants

Bankers to submit Offer

Docks With Sebi&

Exchange(After Mou)

time taken by

Exchge.(After OD receipt

To Date of In-Principle

Approval)

Time Take By Sebi (After

In-Principle Approval by

Exchange) Total Day

AVERAGE TIME PASSED ON

VARIOUS PROCESS IN Right

ISSUE52 126 187 365

Bank Appraisal of the project and performance of the company in 2007

Company Name Bank Name Processing Status Remarks

Power Grid Corporation of India Limited Asian Development Bank,World bankObservations issued on 10-Aug-

2007Trading above the issue price

SVPCL Limited BOB CAPITAL MARKETObservations issued on 11-Sep-

2007Issued but not yet listed

Brahamputra Consortium Limited Punjab National BankObservations issued on 26-Jul-

2007Issued but not yet listed

Empee Distilleries Limited Allbank Finance LimitedObservations issued on 19-Sep-

2007Trading below the issue price

Globus Spirits Limited SBIObservations issued on 28-Dec-

2007Trading above the issue price

Manjushree Extrusions Limited Bank of indiaObservations issued on 8-Nov-

2007Issued but not yet listed

Somi Conveyor Beltings Limited PNB Refiled Issued but not yet listed

Avon Weighing System Limited Bank of indiaObservation issued on 12-Mar-

2008.Issued but not yet listed

Austral Coke & Projects Limited Mott MacDonald Pvt Ltd. File closed Issued but not yet listed

Surya Food & Agro Limited SBIObservations issued on 27-Feb-

2008.Issued but not yet listed

Somi Conveyor Beltings Limited(Refiled) PNBObservations issued on 01-April-

2008.Trading below the issue price

20 Microns Limited. IDBIObservations issued on 26-June-

2008.Trading blow the issue price

Bharat Oman Refineries Limited SBI Withdrawn vide letter dt. 03.03.09Issued but not yet listed

Appraisal for 2008

Company Name Bank Name Processing Status Remarks

AjantaManufacturing Limited ICICI,SBI Withdrawn Bad

CellebrumTechnologies Limited SBI File closed Bad

Usher Eco Power Limited Dena Bank.Observation issued on Apr-24-

2009.Issued but not yet listed

Great Eastern Energy Corporation

LimitedAllahabad Bank

Observation issued on October-

07-2009.Issued but not yet listed

Sea TV Network Limited Repco Bank Limited.Observation issued on November-

04- , 2009Issued but not yet listed

Appraisal for 2009

Company Name Bank Name Processing Status Remarks

Adani Power Limited SBI, ICICIObservation issued on June-19-

2009.Doing good

Kabirdass Motor Company UBI under Process Under Process

Indiabulls Power LimitedPower Finance Corporation Limited,SBI

CAPITA MARKET COMPANYObservation issued on

September-25-2009.Doing good

Vipul Impex & Infrabuild Limited. ORIENTAL BANK OF COMMERCE Withdrawn Under Process

JSW Energy LimitedSBI, ICICI,Infrastructure development

fianance companyObservation issued

on November-06-2009.Doing good

Ankita Knit Wear Limited SBI awaited from exchange and sebi Under Process

Everest Infra Energy Limited SBI,IDBI,DETUSCHE BANK under Process Under Process

Nitesh Estate Ltd SBI under Process Under Process

Fineotex Capital Limited Indian Bank, Bandra Branch, Mumbai. under Process Under Process

Issue appraisal Summary

Out of 203 company which came with IPO during the three year period 176 company project not appraised by any bank or third party, only 27 company project appraised by, while in company its not applicable because these company were either bank & nbfc or they were not able to get it.

In 176 company which project were not appraised by bank, the basic reason behind that either their project was not that much attractive that bank thought to appraise it or company not approached to bank or the basic object of the issue were debt consolidation along with some other expansion &working capital requirement, and big chunk of money went to either debt consolidation or working capital requirement .

Rating to the issues……2007

Company Name

Credir Rating

Ratings

Remarks

Jyothy Laboratories Limited CRISIL 4 Trading below the issue price

Religare Enterprises Limited CRISIL 4 Trading above the issue price

Edelweiss Capital Limited CRISIL 4 Trading below the issue price

Wockhardt Hospitals Limited FITCH 4 Trading below the issue price

OnMobile Global Limited CRISIL 4 Trading below the issue price

Transformers and Rectifiers

(India) LimitedCARE 4 Trading below the issue price

Reliance Power Limited CRISIL 4 Trading below the issue price

Gammon Infrastructure Projects

Limited (Refiled)CARE 4 Trading below the issue price

Mahindra Holidays & Resorts

India LimitedFitch 4 Trading above the issue price

DB Corp Limited CARE 4 Trading above the issue price

Rating to the issues in 2008………

Company Name Credir Rating Ratings Remarks

Ajanta Manufacturing

LimitedICRA 3 Withdrawn

AMR Constructions Limited ICRA 3 Pending

Pradip Overseas Limited Brickwork Ratings India Private Limited 3 Issued but not listed

MayajaalEntertainment

LimitedCARE 3 Pending

BSTranscomm FITCH 4 Pending

Rating to the issues in 2009………

Company Name Credir Rating Ratings Remarks

Adani Power Limited ICRA 3 Trading above the issue price

Indiabulls Power Limited CRiSIL 3 Trading below the issue price

Den Networks Limited ICRA 3 Trading below the issue price

JSW Energy Limited CARE 4 Trading below the issue price

Cox And Kings (INDIA) Limited CARE 4 Trading above the issue price

Godrej Properties Limited-

RefiledICRA 4 Trading above the issue price

Aqua Logistics Limited Brickwork Ratings India Private Limited 3 Not yet listed

Jubilant Foodworks Limited FITCH 3 Not yet listed

Issue Related expenses(issue Exp./issue Size)

Total issue size of 22 Co. was Rs.6300.25 Cr.

Out of Rs.6300 Cr.Rs.260.5 Cr.(1.219%) Spend on issue related expenses(like fee to intermediary, printing & stationery etc.).

Around 50% of issue Related Expenses has paid to merchant banker.

On average issue Expenses (%) of total issue size of all company was 4.13.

Issue related expenses was very high for small company like 20 Microns Limited, Somi Conveyor Beltings Limited(12%)and for large company it was very small like for Power Grid Corporation of India Limited , it is just 1.15 %.

Fees to Merchant Banker is just 1.23 to 2%.

(Note all the data is taken only for that companies for whom all the data is available)

No of withdrawal/files/Closed

No of withdrawals/files 9 IPO out of 115 were withdrawn in 2007-08, and 4 issue were withdrawn out of 39 during the period 2008-09,while 1 right IPO out of 49 withdrawn during the period 2009-10.

Total No of issue which is closed in the year 2007-08 is 3 , and for 2008-09 is 1 and for 2009-10 is not yet counted( data is not sufficient to answer)

Key Merchant Bankers in the Year 2007…..

Enam Financial Consultants Private Limited Kotak Mahindra Capital Company Limited Keynote Corporate Services Limited

SREI Capital Markets Limited JM Morgan Stanley Private Limited ICICI Securities Limited

Allbank Finance Limited Allianz Securities Limited Anand Rathi Securities Limited.

Edelweiss Capital Limited Others

2007

Lead Merchant Banker’s…………..

AlmondzGlobal Securities Limited

Chartered Capital & Investment Limited

EnamSecurities Private Limited

others

IDBI Capital Market Services Limited

IL&FSInvestsmartSecurities Limited

Karvy Investor Services Limited

Keynote Corporate Services Limited

KotakMahindraCapital Company Limited

Motilal OswalInvestment Advisors Private Limited

Saffron Capital Advisors Limited

Edelweiss Capital Limited

Almondz Global Securities Limited

Atherstone Capital Markets Limited

others

Deutsche Equities IndiaPrivate Limuited

DSP Merill Lynch

Edelweiss Capital Limited

Enam Securities Private Limited

ICICI Securities Limited

20092008

Lessons Learned

Thank You