INTRODUCTION

INTRODUCTION:
The term "IPO" slipped into everyday speech during the tech bull market of the late 1990s. ack
then! it seemed you couldn"t go a day #ithout hearing about a do$en ne# dot%com millionaires in
&ilicon 'alley cashing in on their latest IPO. The phenomenon spa#ned the term "siliconaire!"
#hich described the dot%com entrepreneurs in their early (0s and )0s #ho suddenly found
themselves living large due to IPOs from their Internet companies. &o! #hat is an IPO any#ay*
+o# did everybody get so rich so fast* ,nd! most importantly! is it possible for mere mortals like us
to get in on an IPO* ,ll these -uestions and more #ill be ans#ered in this tutorial. efore #e
continue! #e suggest you check out our stock basics tutorial as #ell as brokers and online trading if
you don"t have a solid understanding of stocks and ho# they trade.
.hat is an IPO* &elling &tock IPO is an acronym for Initial Public Offering. This is the first sale of
stock by a company to the public. , company can raise money by issuing either debt /bonds0 or
e-uity. If the company has never issued e-uity to the public! it"s kno#n as an IPO. 1ompanies fall
into t#o broad categories2 private and public.
, privately held company has fe#er shareholders and its o#ners don"t have to disclose much
information about the company. ,nybody can go out and incorporate a company2 3ust put in some
money! file the right legal documents! and follo# the reporting rules of your 3urisdiction. 4ost
small businesses are privately held. ut large companies can be private too. 5id you kno# that
I67,! 5omino"s Pi$$a! and +allmark 1ards are all privately held*
It usually isn"t possible to buy shares in a private company. 8ou can approach the o#ners about
investing! but they"re not obligated to sell you anything. Public companies! on the other hand! have
sold at least a portion of themselves to the public and trade on a stock e9change. This is #hy doing
an IPO is also referred to as "going public."
Public companies have thousands of shareholders and are sub3ect to strict rules and regulations.
They must have a board of directors and they must report financial information every -uarter. In the
:nited &tates! public companies report to the &71. In other countries! public companies are
overseen by governing bodies similar to the &71. ;rom an investor"s standpoint! the most e9citing
thing about a public company is that the stock is traded in the open market! like any other
commodity. If you have the cash! you can invest. The 17O could hate your guts! but there"s nothing
he or she could do to stop you from buying stock. .hy <o Public* <oing public raises cash! and
usually a lot of it. eing publicly traded also opens many financial doors2
ecause of the increased scrutiny! public companies can usually get better rates #hen they
issue debt.
,s long as there is market demand! a public company can al#ays issue more stock. Thus!
mergers and ac-uisitions are easier to do because stock can be issued as part of the deal.
Trading in the open markets means li-uidity. This makes it possible to implement things like
employee stock o#nership plans! #hich help to attract top talent.
eing on a ma3or stock e9change carries a considerable amount of prestige. In the past! only private
companies #ith strong fundamentals could -ualify for an IPO and it #asn"t easy to get listed. The
Internet boom changed all this. ;irms no longer needed strong financials and a solid history to go
public. Instead! IPOs #ere done by smaller startups seeking to e9pand their business. There"s
nothing #rong #ith #anting to e9pand! but most of these firms had never made a profit and didn"t
plan on being profitable any time soon. ;ounded on venture capital funding! they spent like Te9ans
trying to generate enough e9citement to make it to the market before burning through all their cash.
In cases like this! companies might be suspected of doing an IPO 3ust to make the founders rich. In
'1 talk! this is kno#n as an e9it strategy! implying that there"s no desire to stick around and create
value for shareholders. The IPO then becomes the end of the road rather than the beginning. +o#
can this happen* =emember2 an IPO is 3ust selling stock. It"s all about the sales 3ob. If you can
convince people to buy stock in your company! you can raise a lot of money. In our opinion! IPOs
like this are e9tremely risky and should be avoided.
+o# can I get in on an IPO* The :nder#riting Process <etting a piece of a hot IPO is very
difficult! if not impossible. To understand #hy! #e need to kno# ho# an IPO is done! a process
kno#n as under#riting. .hen a company #ants to go public! the first thing it does is hire an
investment bank. , company could theoretically sell its shares on its o#n! but realistically! an
investment bank is re-uired % it"s 3ust the #ay .all &treet #orks. :nder#riting is the process of
raising money by either debt or e-uity /in this case #e are referring to e-uity0. 8ou can think of
under#riters as middlemen bet#een companies and the investing public. The biggest under#riters
are <oldman &achs! 4errill >ynch! 1redit &uisse ;irst oston! >ehman rothers and 4organ
&tanley. The company and the investment bank #ill first meet to negotiate the deal. Items usually
discussed include the amount of money a company #ill raise! the type of securities to be issued! and
all the details in the under#riting agreement. The deal can be structured in a variety of #ays. ;or
e9ample! in a "firm commitment!" the under#riter guarantees that a certain amount #ill be raised
by buying the entire offer and then reselling to the public. In a "best efforts" agreement! ho#ever!
the under#riter sells securities for the company but doesn"t guarantee the amount raised. ,lso!
investment banks are hesitant to shoulder all the risk of an offering. Instead! they form a syndicate
of under#riters. One under#riter leads the syndicate and the others sell a part of the issue. Once all
sides agree to a deal! the investment bank puts together a registration statement to be filed #ith the
&71. This document contains information about the offering as #ell as company info such as
financial statements! management background! any legal problems! #here the money is to be used!
and insider holdings. The &71 then re-uires a "cooling off period!" in #hich they investigate and
make sure all material information has been disclosed. Once the &71 approves the offering! a date
/the effective date0 is set #hen the stock #ill be offered to the public. 5uring the cooling off period
the under#riter puts together #hat is kno#n as the red herring. This is an initial prospectus
containing all the information about the company e9cept for the offer price and the effective date!
#hich aren"t kno#n at that time. .ith the red herring in hand! the under#riter and company attempt
to hype and build up interest for the issue. They go on a road sho# % also kno#n as the "dog and
pony sho#" % #here the big institutional investors are courted. ,s the effective date approaches! the
under#riter and company sit do#n and decide on the price. This isn"t an easy decision2 it depends
on the company! the success of the road sho#! and most importantly! current market conditions. Of
course! it"s in both parties" interest to get as much as possible. ;inally! the securities are sold on the
stock market and the money is collected from investors. .hat ,bout 4e* ,s you can see! the road
to an IPO is a long and complicated one. 8ou may have noticed that individual investors aren"t
involved until the very end. This is because small investors aren"t the target market. They don"t have
the cash and therefore hold little interest for the under#riters.
If under#riters think an IPO #ill be successful! they"ll usually pad the pockets of their favorite
institutional client #ith shares at the IPO price. The only #ay for you to get shares /kno#n as an
IPO allocation0 is to have an account #ith one of the investment banks that is part of the
under#riting syndicate. ut don"t e9pect to open an account #ith ?1000 and be sho#ered #ith an
allocation. 8ou need to be a fre-uently trading client #ith a large account to get in on a hot IPO.
ottom line! your chances of getting early shares in an IPO are slim to none unless you"re on the
inside. If you do get shares! it"s probably because nobody else #ants them. <ranted! there are
e9ceptions to every rule and it #ould be incorrect for us to say that it"s impossible. @ust keep in
mind that the probability isn"t high if you are a small investor.
Things to 1onsider before uying >et"s say you do get in on an IPO. +ere are a fe# things to look
out for. Ao +istory It"s hard enough to analy$e the stock of an established company. ,n IPO
company is even trickier to analy$e since there #on"t be a lot of historical information. 8our main
source of data is the red herring! so make sure you e9amine this document carefully. >ook for the
usual information! but also pay special attention to the management team and ho# they plan to use
the funds generated from the IPO. ,nd #hat about the under#riters* &uccessful IPOs are typically
supported by bigger brokerages that have the ability to promote a ne# issue #ell. e more #ary of
smaller investment banks because they may be #illing to under#rite any company. The >ockup
Period
If you look at the charts follo#ing many IPOs! you"ll notice that after a fe# months the stock takes a
steep do#nturn. This is often because of the lockup period. .hen a company goes public! the
under#riters make company officials and employees sign a lockup agreement. >ockup agreements
are legally binding contracts bet#een the under#riters and insiders of the company! prohibiting
them from selling any shares of stock for a specified period of time. The period can be anything
from ) to (B months. 90 days is the minimum period stated under =ule 1BB /&71 la#0 but the
lockup specified by the under#riters can last much longer. The problem is! #hen lockups e9pire all
the insiders are permitted to sell their stock. The result is a rush of people trying to sell their stock to
reali$e their profit. This e9cess supply can put severe do#n#ard pressure on the stock price.
;lipping ;lipping is reselling a hot IPO stock in the first fe# days to earn a -uick profit. This isn"t
easy to do! and you"ll be strongly discouraged by your brokerage. The reason behind this is that
companies #ant long%term investors #ho hold their stock! not traders. There are no la#s that
prevent flipping! but your broker may blacklist you from future offerings or 3ust smile less #hen
you shake hands. Of course! institutional investors flip stocks all the time and make big money. The
double standard e9ists and there is nothing #e can do about it because they have the buying po#er.
ecause of flipping! it"s a good rule not to buy shares of an IPO if you don"t get in on the initial
offering. 4any IPOs that have big gains on the first day #ill come back to earth as the institutions
take their profits. ,void the +ype It"s important to understand that under#riters are salesmen. The
#hole under#riting process is intentionally hyped up to get as much attention as possible. &ince
IPOs only happen once for each company! they are often presented as "once in a lifetime"
opportunities. Of course! some IPOs soar high and keep soaring. ut many end up selling belo#
their offering prices #ithin the year. 5on"t buy a stock only because it"s an IPO % do it because it"s a
good investment.
Tracking &tocks Tracking stocks appear #hen a large company spins off one of its divisions into a
separate entity. The rationale behind the creation of tracking stocks is that individual divisions of a
company #ill be #orth more separately than as part of the company as a #hole. ;rom the
company"s perspective! there are many advantages to issuing a tracking stock. The company gets to
retain control over the subsidiary but all revenues and e9penses of the division are separated from
the parent company"s financial statements and attributed to the tracking stock. This is often done to
separate a high gro#th division #ith large losses from the financial statements of the parent
company. 4ost importantly! if the tracking stock rockets up! the parent company can make
ac-uisitions #ith stock of the subsidiary instead of cash.
.hile a tracking stock may be spun off in an IPO! it"s not the same as the IPO of a private company
going public. This is because tracking stock usually has no voting rights! and often there is no
separate board of directors looking after the rights of the tracking stock. It"s like you"re a second
class shareholderC This doesn"t mean that a tracking stock can"t be a good investment. @ust keep in
mind that a tracking stock isn"t a normal IPO.
Introduction to Merchant Banking
Meaning:
The 4erchant anker has been defined under the &ecurities ,nd 79changes oard of India
/4erchant ankers0 =ules! 199( as Dany person #ho is engaged in the business of issue
management either by making arrangements regarding selling! buying or subscribing to securities as
manager! consultant! advisor or rendering corporate advisory service in relation to such issue
managementE.
History of Merchant Banking
The history of merchant bank can be dated back to 1F
th
G 1H
th
centuries #hen it first started in Italy
G ;rance. This #as started by the Italian grain merchants. It comprised of merchant bankers #ho
intermediated or assisted in financing the transactions of other traders and their o#n trade too. .ith
the passage of time the practices in evolved and the merchant banking in the modern era started
from >ondon #here the merchants started to finance the foreign trade through acceptance of bill.
>ater they e9tended their services to the governments of under developed countries to raise the long
term funds through the floatation of bonds in the >ondon money market. Over the period they
e9tended their services to loan syndication! under#riting the issues! portfolio management etc. The
post #ar period #itnessed huge increase in the merchant banking activities.
Merchant Banking in India
4erchant banking activity #as officially commenced into the Indian capital 4arkets #hen
<rindlays bank received the license from reserve bank in 19IF. <rindlays started its operations #ith
management of capital issues! recogni$ed the re-uirements of upcoming class of 7ntrepreneurs for
diverse financial services ranging from production planning and system design to market research.
,part from this it also provides management consulting services to meet the =e-uirements of small
and medium sector rather than large sector.

1itibank &etup its merchant banking division in Indian in 19F0.
Indian banks &tarted banking &ervices from 19F(.
&tate bank of India started the merchant banking division in 19F(
,fter that there #ere many banks #hich set up the merchant bank division such asJ
I1I1I
ank of India
ank of aroda
1anara ank
Pun3ab Aational ank
:1O ank
The 4erchant ank got more importance in the year 19H) #hen there #as a huge boom in the
primary market #here the companies #ere going for ne# issue. 4erchant banking activities are
organi$ed and undertaken in several forms. 1ommercial banks and foreign development
finance institutions have organi$ed them through formation divisions! nationali$ed banks have
formed subsidiary companies! share brokers and consultancies constituted themselves into public
limited companies or registered themselves as private limited 1ompanies. &ome merchant banking
companies have entered into collaboration #ith merchant bankers of foreign countries abroad #ith
several branches.
Services rovided !y Merchant Banks
elo# mentioned are the ma3or services offered by 4erchant ankersJ

Pro3ect 1ounseling
4anagement of debt and e-uity offerings
Issue 4anagement
4anagers! 1onsultants or ,dvisers to the Issue
:nder#riting of Public Issue
Portfolio 4anagement
=estructuring strategies
Off &hore ;inance
Aon%resident Investment
>oan &yndication
1orporate 1ounseling and advisory services
Placement and distribution
R"S"#RCH M"THODO$O%&
'( Descri)tive Research
5escriptive research is used to obtain information concerning the current status of the phenomena
to describe D#hat e9istsE #ith respect to variables or conditions in a situation. 5escriptive research!
also kno#n as statistical research! describes data and characteristics about the population or
phenomenon being studied. 5escriptive research ans#ers the -uestions who! what! where! when and
how. ,lthough the data description is factual! accurate and systematic! the research cannot describe
#hat caused a situation.
*( #na+ytica+ Research
,nalytical research takes descriptive research one stage further by seeking to e9plain the reasons
behind a particular occurrence by discovering causal relationships. Once causal relationships have
been discovered! the search then shifts to factors that can be changed /variables0 in order to
influence the chain of causality.
Ty)e of Research Design: The research design is pre planned #hich is designed for analysis.
,nd also the data #as collected from structured and #ell thought K out instruments.
Data:
5ataLs are the useful information or any forms of document designed in a systematic and
standardi$e manner #hich are used for some further proceedings. One of the important tools for
conducting marketing research is the availability of necessary and useful data. &ome time the data
are available readily in one form or the other and some time the data are collected afresh. The
sources of 5ata fall under t#o categories! Primary &ource and &econdary &ources.

', ri-ary Data: 1ollected from personal intervie#! collected under the guidance of &ri
=amakrishna! 4anager /;inance0 in Interconnected stock roking.
*, Secondary Data2 The &econdary data has been collected from
'( ,nnual reports of organi$ation.
*( Internet
.( roachers.
/( +ouse maga$ines of the units.
0( Other reports of the units.
1( ooks
S#M$" D"SI%N:
Sa-)+e unit: &ample unit is the organi$ation the pro3ect #as completed.
Ti-e and )+ace: Pro3ect completed #ithin a period of BM days. The company is in +yderabad.
SOURC"S O2
D#T#
RIM#R& D#T# S"COND#R& D#T#

O!3ectives of the ro3ect
To study and understand the concept of and procedure involved in Initial Public Offer /IPO0.
,n attempt has been made to analy$e the various IPOs and recommend others to invest in
good initial public offerings after thorough research of financial statements of the
companies.
To study and understand the process of 5ue 5iligence and its significance in Initial Public
Offers.
To analy$e the effect of Initial Public Offers on the issuing company! investors and the stock
market.
To understand the role of a merchant banker in managing Initial Public Offers.
To be actively involved in merchant banking activities! in order to gain valuable kno#ledge
through first%hand e9perience in managing the issue of Initial Public Offers of various client
companies.
;ind out the factors #hich influence the IPO >isting Process.
S)read a4areness a!out this )rocess(
$i-itation of the ro3ect
,nalysis done for a time period of BM days.
The time hori$on taken is considered short for the analysis of long run performance.
It #as tried very harder to include the best of information from published and unpublished
sources available on internet! books and maga$ines but some of the data re-uired for the
detailed study #as not available freely.
,lthough Initial Public Offers are issued by many companies! this study is confined to a fe#
companies only.
The pro3ect is based on the secondary data collected.
R"5I"6 O2 $IT"R#TUR"
* $IT"R#TUR" R"5I"6

The literature revie# on IPOs can be divided in the follo#ing main heads%
a, Reason and timing of going public

<oing public marks a #atershed in the life cycle of the firm. .hile increased e-uity can
support the firmLs future plans of gro#th! the trade off for the firm is that of increased public
scrutiny.

Brea+y and Myers 7*880, state that in the conte9t of US# the firms may seek private e-uity
in their initial years and only later go for public issues.

agano9 anetta and :inga+es 7';;<, in their study of Ita+ian fir-s! find that firms going
public are not seeking money for gro#th but are rebalancing their accounts after high
investment and gro#th.

$erner 7';;/, found that there are times /#indo#s of opportunity0 #hen the markets could
be e9tremely optimistic about a particular industry and it may be a good time for the firms in
that industry to go public.

The post IPO period sees a reduction in leverage as #ell as investment. They state that going public
is a conscious choice that some firms make #hile some others prefer to remain private. Thus going
public is not a natural element in the life cycle of a firm.
!) Valuation of IPOs
Benveniste and S)indt 7';<;, find that under #riters try to resolve the information
asymmetry problem bet#een the firm and the investors by providing an incentive to the
investors to reveal their private information about the firm.

=i- and Ritter 7';;;, in their study of 190 firms find that under #riters forecast the ne9t
years earnings numbers and multiply them #ith P7 ratios of comparable firms in the
industry to get the appro9imate price of the IPO. +o#ever they also found that P7 ratios
using historical earnings numbers do not give accurate results #hereas #hen forecasted
earnings numbers are used then the valuation is much more accurate.

urnananda- and S4a-inathan 7*88*, say that IPOs are priced M0N higher than
industry peers. ,lso they find that more the IPO is overpriced #ith respect to its peers! #orse
is its long term performance.
c) Allocation mechanism
The allocation mechanisms are specified by the regulators in different countries. $oughran9
Ritter and Ryd>vist 7';;/, find ) main categories across countries%,uctions! ;i9ed price offers
and ook uilding. Sher-an 7*880, finds that ook building is a superior mechanism for selling
IPOs rather than auctions.
"5O$UTION #ND %RO6TH O2 INDI#N RIM#R& M#R="T(
"ar+y $i!era+i?ation hase: ';;*@';;0 72iAed ricing,
The initiation of the process of reform in India also #ould not have been possible #ithout changes
in the regulatory frame#ork. The Ae# 7conomic policy /19910 led to a ma3or change in the
regulatory frame#ork of the capital market in India. The 1apital Issues /1ontrol0 ,ct 19BF #as
repealed and the Office of the 1ontroller of 1apital Issues /11I0 #as abolished. The &ecurities and
79change oard of India /&7I0! established in 19HH and armed #ith statutory po#ers in 199(!
came to be established as the regulatory body #ith the necessary authority and po#ers to regulate
and reform the capital market. &7I came to be recogni$ed as a regulatory body for the capital
market after the abolition of the 11I. The control on pricing of capital issue has been abolished and
easy access is provided to the capital market. Initial Public Issue caught the attention of general
public only after the success of =eliance! #hen millions of small investors made huge returns #hich
#ere unheard of till then. 5hirubhai ,mbani #as the first promoter #ho raised huge amounts
through the public issue route to finance large facilities.
The issue process #as smoothened! procedures #ere simplified and free pricing #as allo#ed!
although #ith certain restrictions! The Indian market had the concept of par value of e-uity shares!
and anything above par #as considered premium. The only companies that #ere allo#ed to come
#ith premium issues #ere those! #hich had a three year profit%track record for the preceding five
years. Ae# companies #ithout this record could float premium issues if their promoting companies
had the same track record and they had to hold M0N of the post issue capital. ,ny ne# company
floated by first generation entrepreneurs could only issue e-uity at par. There #as no restriction
about prices in a premium issue.
The offer #as al#ays at a fi9ed price! #hether premium or par. The companies had to appoint
intermediaries like merchant bankers! registrars! bankers etc. 4erchant bankers had the
responsibility of fi9ing the prices! in consultation #ith the company! carrying out #ith due
diligence! preparing the prospectus /offer documents0 etc. The prospectus had to be submitted to
&7I for getting scrutiny.
The trend continued in the early nineties as many large pro3ects #ere launched after the economy
#as liberalised. 4any of these companies came out #ith public issues and the retail participation
increased dramatically. ut many of the companies #hich raised money during this period 3ust
disappeared #ithout a trace.
$ate $i!era+i?ation eriod: ';;1@*880 7Book Bui+ding,
The late nineties and the first fe# years of the current decade did not see much activity in the
primary market even though #e sa# a huge bull run led by technology stocks at the turn of the
decade. The bad e9periences of retail investors kept them a#ay from the market and made it
difficult for companies to launch successful issues. The corporate sector #as recovering from the
damage caused by large capacity e9pansions and ne# pro3ects set up in the nineties.
The dormant primary issues market came alive after (00) mostly because of the divestment
programme of the government. The issue of 4aruti :dyog! through #hich the government sold part
of its stake in the company! rekindled retail investor interest in the primary market. The issue #as
made at a very reasonable price and investors made very good returns immediately.
The year (00B sa# the primary market activity at its historic peak as some large private companies
also came out #ith issues. ;urther divestment by the governmentJ including the largest ever issue by
an Indian company from OA<1! attracted more retail investors into the market. The IPO market
continues to bu$$ in the current year as #ell. Taking advantage of the strength in the secondary
market! many high profile companies are lining up to raise money from the market. The year started
#ith the issue from @et ,ir#ays #hich attracted a lot of interest from investors. ,s a result of
tougher regulations! the -uality of the issues has gone up substantially.
*881 on4ards scenario:
India"s IPO market emerged as the eighth largest #ith ?F.() billion /=s )0!000 core0 in net proceeds
through FH public issues! global research and consultancy firm 7rnst G 8oung said in its <lobal
IPO report. ,cross the #orld! the companies raised ?(BI billion! up from ?1IF billion in (00M!
through a total of 1!F(9 IPOs! led by 1hinese companies at the top #ith net proceeds of ?MI.I
billion. +o#ever! the biggest number of IPOs came from the :nited &tates #ith 1HF offerings!
follo#ed by @apan #ith 1HM and 1hina #ith 1FM IPOs. ,ccording to the study! India"s increasing
number of larger deals has been driven by the gro#th of Indian corporations and their need for
additional capital for potential ac-uisitions. In (00F Indian IPOs continue to surge in numbers.
1ontinued strength is e9pected in the real estate and energy sector. "The rapid gro#th in emerging
market economies has resulted in a migration of capital from the developed economies into the
emerging markets!" 7G8 said.
The localisation trend in India is evidenced by several billion%dollar IPOs hosted by Indian
e9changes. In (00I! India"s largest IPO! =eliance Petroleum raised ?1.H billion! follo#ed by the oil
production and e9ploration company! 1airn 7nergy! #hich raised ?1.) billion #ith both companies
listing on domestic e9changes.
+o#ever! some Indian companies are also listing abroad! especially >ondon! &ingapore and
>u9embourg! primarily for higher valuations and visibility! the report noted.
The private e-uity rush into India is creating the potential for many IPO e9its. In (00I! private
e-uity firms invested more than ?F billion in India. Top global private e-uity funds as #ell as local
funds! have been key drivers of Indian IPO markets.
In (00F alone! 9M IPOs came and ma3ority of them #ere great hit because of favorable market
conditions.
In the year (00H! only )I IPOs came in the market but failed to collect money.
This year! so far 1) IPOs came in to the market.
5ue to favorable market conditions! recent IPOs of ,dani po#er! A+P1 and Oil India #ere hit.
,dani po#er! the company o#ned by <autam ,dani #as one ma3or IPO after the financial crisis.
The issue #as over subscribed by (1 times. It is a fact that after listing the companies didn"t shine
much e9cept Oil India. On the listing day itself! Oil India"s stock price #as up by =s100. Indian IPO
market is no# active and people are more interested in buying fresh shares. Primary market in India
slo#ly gaining pace and this #ill be the same in the near future.
India IO #ctivity
=INDS O2 ISSU"S
Primarily! issues can be classified as a Public! =ights or preferential issues /also kno#n as private
placements0. .hile public and rights issues involve a detailed procedure! private placements or
preferential issues are relatively simpler. The classification of issues is illustrated belo#2
Public issues can be further classified into Initial Public offerings and further public offerings. In a
public offering! the issuer makes an offer for ne# investors to enter its shareholding family. The
issuer company makes detailed disclosures as per the 5IP guidelines in its offer document and
offers it for subscription. The significant features are illustrated belo#2
Initia+ u!+ic Offering 7IO,
It is #hen an unlisted company makes either a fresh issue of securities or an offer for sale of its
e9isting securities or both for the first time to the public. This paves #ay for listing and trading of
the issuerLs securities.
2urther )u!+ic offering 72O,
It is #hen an already listed company makes either a fresh issue of securities to the public or an offer
for sale to the public! through an offer document. ,n offer for sale in such scenario is allo#ed only
if it is made to satisfy listing or continuous listing obligations.
Rights Issue 7RI,
It is #hen a listed company #hich proposes to issue fresh securities to its e9isting shareholders as
on a record date. The rights are normally offered in a particular ratio to the number of securities
held prior to the issue. This route is best suited for companies #ho #ould like to raise capital
#ithout diluting stake of its e9isting shareholders unless they do not intend to subscribe to their
entitlements.
rivate )+ace-ent
It is an issue of shares or of convertible securities by a company to a select group of persons under
&ection H1 of the 1ompanies ,ct! 19MI #hich is neither a rights issue nor a public issue. This is a
faster #ay for a company to raise e-uity capital. , private placement of shares or of convertible
securities by a listed company is generally kno#n by name of preferential allotment. , listed
company going for preferential allotment has to comply #ith the re-uirements contained in 1hapter
OIII of &7I /5IP0 <uidelines pertaining to preferential allotment in &7I /5IP0 guidelines include
pricing! disclosures in notice etc! in addition to the re-uirements specified in the 1ompanies ,ct.
Ma3or Reason for $isting IO
The increase in the ca)ita+: ,n IPO allo#s a company to raise funds for utili$ing in
various corporate operational purposes like ac-uisitions! mergers! #orking capital! research
and development! e9panding plant and e-uipment and marketing.
$i>uidity: The shares once traded have an assigned market value and can be resold. This
is e9tremely helpful as the company provides the employees #ith stock incentive packages
and the investors are provided #ith the option of trading their shares for a price.
5a+uation: The public trading of the shares determines a value for the company and sets a
standard. This #orks in favor of the company as it is helpful in case the company is looking
for ac-uisition or merger. It also provides the share holders of the company #ith the present
value of the shares.
Increased 4ea+th: The founders of the companies have an affinity to#ards IPO as it can
increase the #ealth of the company! #ithout dividing the authority as in case of partnership.
R"%U$#TOR& 2R#M"6OR= 2OR IO&
"+igi!i+ity Conditions for Co-)anies Issuing Securities
The companies issuing securities offered through an offer docu-ent shall satisfy the follo#ing at the
time of filing the draft offer document #ith &7I and also at the time of filing the final offer document
#ith the =egistrar of 1ompaniesP 5esignated &tock 79change2
2i+ing of offer docu-ent
Ao issuer company shall make any public issue of securities! unless a draft
ros)ectus has been filed #ith the Board through a Merchant Banker! at least .8 days
prior to the filing of the Prospectus #ith the =egistrar of 1ompanies 7ROC,2
Provided that if the oard specifies changes or issues observations on the draft
Prospectus /#ithout being under any obligation to do so0! the issuer company or the $ead
Manager to the Issue shall carry out such changes in the draft Prospectus or comply #ith
the observation issued by the oard before filing the Prospectus #ith =O1.
Co-)anies !arred not to issue security
Ao company shall make an issue of securities if the company has been prohibited
from accessing the capital market under any order or direction passed by the oard.
#))+ication for +isting
Ao company shall make any public issue of securities unless it has made an
application for listing of those securities in the stock e9change
Issue of securities in de-ateria+i?ed for-
Ao company shall make public or rights issue or an offer for sale of securities!
unless2
The company enters into an agree-ent #ith a de)ository for demateriali$ation of
securities already issued or proposed to be issued to the public or e9isting shareholdersJ and
a. The company gives an o)tion to subscribersP shareholdersP investors to
receive the security certificates or hold securities in de-ateria+i?ed for-
#ith a depository.
IO %rading
Ao un+isted co-)any shall make an IPO of e-uity shares unless the follo#ing
conditions are satisfied as on the date of filing of Prospectus #ith =O12
a. the unlisted company has o!tained grading for the IPO from at +east one
credit rating agency
b. Disc+osures of all the grades obtained! along #ith the rationaleP description
furnished by the credit rating agency/ies0 for each of the grades obtained.
"+igi!i+ity Nor-s for IO
,n unlisted company may make an initial public offering /IPO0 of e-uity shares only if 2%
The company has net tangible assets of at least =s. ) crores in each of the preceding ) full
years /of 1( months each0! of #hich not more than M0N is held in monetary assets.
The company has a track record of distributable profits in terms of &ection (0M of the
1ompanies ,ct! 19MI! for at least three /)0 out of immediately preceding five /M0 years.
The company has a net #orth of at least =s. 1 crore in each of the preceding ) full years /of
1( months each0.
In case the company has changed its name #ithin the last one year! at least M0N of the
revenue for the preceding 1 full year is earned by the company from the activity suggested
by the ne# name.
ROC"DUR" 2OR IOS
2iAed ricing versus True ricing 7Book@ Bui+ding,
The traditional method of doing IPOs is the fi9ed price offering. +ere! the issuer and the merchant
banker agree on an Dissue priceE. Then the investor has a choice of filling in an application form at
this price and subscribing to the issue. 79tensive research has revealed that the fi9ed price offering
is a poor #ay of doing IPOs. ;i9ed price offerings! all over the #orld! suffer from QIPO
underpricing". In India! on average! the fi9ed%price seems to be around M0N belo# the price at first
listingJ i.e. the issuer obtains M0N lo#er issue proceeds as compared to #hat might have been the
case. This average masks a steady stream of dubious IPOs #ho get an issue price #hich is much
higher than the price at first listing. +ence fi9ed price offerings are #eak in t#o directions2
dubious issues get overpriced and
<ood issues get under priced.
BOO=@BUI$DIN%
, mechanism #here! during period for #hich the IPO is open! bids are collected from investors at
various prices #hich are above or e-ual to the floor price /the minimum price0. The final price of
the share is determined after the bid closing date! based on certain evaluation criteria.
The S"BI 7Disc+osure and Investor rotection, %uide+ines9 *888! define the term Qbook%building"
in a rather comple9 language as "a process undertaken by #hich a demand for the securities
proposed to be issued by a body corporate is elicited and built%up and the price for such securities is
assessed for determination of the -uantum of such securities to be issued by means of a notice!
circular! advertisement! document or information memoranda or offer document.""
ook building process is a common practice used in most developed countries for marketing a
public offer of e-uity shares of a company. +o#ever! ook building acts as scientific as #ell as
fle9ible price discovery method through #hich a consensus price of IPOLs may be determined by
the issuer company along #ith the ook =unning >ead 4anager /i.e. merchant banker0 on the basis
of feedback received from individual investors as #ell as most informed investors /#ho are
institutional and corporate investors like! :TI! >I1I! <I1I! ;IIs! and &;1I etc0. The method helps to
make a correct evaluation of a companyLs potential and the price of its shares.
In simple terms! book%building is a mechanism by #hich the issue )rice is discovered on the basis
of !ids received from syndicate membersPbrokers and not by the issuersPmerchant bankers.
T&"S O2 BOO=BUI$DIN%
The issue of securities through ook building can be done in either of the follo#ing t#o #ays.
FMN ook building
100N ook building
B0C Book Bui+ding )rocess:@

:nder this type of public offer! the issue of securities has to be categori$ed into2
Placement portion category
Aet offer to the public
The option of FMN ook uilding is available to all body corporate that are other#ise eligible to
make an issue of capital to the public. The securities issued through the book building process are
indicated as "placement portion category" and securities available to public are identified as "net offer
to public". In this option! under#riting is mandatory to the e9tent of the net offer to the public. The
issue price for the placement portion and offers to public are re-uired to be same
'88C of the net offer to the )u!+ic through Book Bui+ding )rocess2%
The 100N of the net offer to the public! entire issue is made through ook uilding process.
+o#ever! there can be a reservation or firm allotment to a ma9imum of MN of the issue si$e for the
permanent employees! shareholders of the company or group companies! persons #ho! on the date
of filing of the draft offer document #ith the oard! have business association! as depositors!
bondholders and subscribers to services! #ith the issuer making an initial public offering.
The number of bidding centers! in case of FMN book building process should not be less than the
number of mandatory collection centers specified by &7I. In case of 100N book building process!
the bidding centers should be at all the places #here the recognised stock e9changes are situated.
ROC"SS O2 BOO=BUI$DIN%
The ookbuilding is basically an auction of share. ookbuilding essentially means that the Rbook is
being built.L 5uring the process on both the A&7 G &7! investors can #atch the book being built a
chart sho#n indicates the bid price G the number of shares being bid for. This helps the investors to
kno# the market price. ;ollo#ing mentioned are the main steps of ookbuilding Process
The company first a))oints a !ook runner! i.e. merchant banker.
The !ook runner )re)ares D su!-its the draft docu-ents to the S"BI G obtains an
ackno#ledgement card.
The issuer D !ook runner decide to offer shares at a )rice 4ithin a s)ecified )rice !and
7range,(
Offer regarding the de-and for securities at different )rice +eve+s are invited fro-
syndicate -e-!ers consisting of eligible brokers! merchant bankers! under#riters!
financial institutions! the bids. The advertisement should mention the opening G closing
dates for the bids. , bid is usually open for minimum M #orking days.
ased on the bids received! the issuer arrives at a fina+ cut@off rate G the allocation in
consultation #ith =>4.
The issuer G the book runner may impose restrictions on the number of shares that can be
allotted to each client so as to avoid any future takeover threats.
The fina+ )ros)ectus is fi+ed 4ith the registrar of companies along #ith the procurement
agreement.
The placement portion opens for subscription only after the prospectus is filed #ith the
=O1.
The placement portion closes a day before the opening of the public issue portion.
The public portion opens G the allotment G listing of puts is done. The price determined in
the ookbuilding process is applicable to the public portion as #ell. If the public portion
stands oversubscribed! then the allotment is made on a proportionate basis.
Book Bui+ding rocess in India
The steps #hich are usually follo#ed in the book building process can be summari$ed belo#2
The issuer company proposing an IPO appoints a lead merchant banker as a =>4.
/(0 Initially! the issuer company consults #ith the =>4 in dra#ing up a draft prospectus /i.e.
offer document0 #hich does not mention the price of the issues! but includes other details about the
si$e of the issue! past history of the company! and a price band. The securities available to the public
are separately identified as Dnet offer to the publicE.
/)0 The draft prospectus is filed #ith &7I #hich gives it a legal standing.
/B0 , definite period is fi9ed as the bid period and =>4 conducts a#areness campaigns like
advertisement! road sho#s etc.
/M0 The =>4 appoints a syndicate member! a &7I registered intermediary to under#rite the
issues to the e9tent of Dnet offer to the publicE.
/I0 The =>4 is entitled to remuneration for conducting the ook uilding process.
/F0 The copy of the draft prospectus may be circulated by the =>4 to the institutional
investors as #ell as to the syndicate members.
/H0 The syndicate members create demand and ask each investor for the number of shares and
the offer price.
/90 The =>4 receives the feedback about the investorLs bids through syndicate members.
/100 The prospective investors may revise their bids at any time during the bid period.

/110 The =>4 on receipts of the feedback from the syndicate members about the bid price and the
-uantity of shares applied has to build up an order book sho#ing the demand for the shares of the
company at various prices. The syndicate members must also maintain a record book for orders
received from institutional investors for subscribing to the issue out of the placement portion.
/1(0 On receipts of the above information! the =>4 and the issuer company determine the issue
price. This is kno#n as the market%clearing price.
/1)0 The =>4 then closes the book in consultation #ith the issuer company and determine the
issue si$e of /a0 placement portion and /b0 public offer portion.
/1B0 Once the final price is determined! the allocation of securities should be made by the =>4
based on prior commitment! investorLs -uality! price aggression! earliness of bids etc. The bid of an
institutional bidder! even if he has paid full amount may be re3ected #ithout being assigned any
reason as the ook uilding portion of institutional investors is left entirely at the discretion of the
issuer company and the =>4.
/1M0 The ;inal prospectus is filed #ith the registrar of companies #ithin ( days of determination of
issue price and receipts of ackno#ledgement card from &7I.
/1I0 T#o different accounts for collection of application money! one for the private placement
portion and the other for the public subscription should be opened by the issuer company.

/1F0 The placement portion is closed a day before the opening of the public issue through fi9ed
price method. The =>4 is re-uired to have the application forms along #ith the application
money from the institutional buyers and the under#riters to the private placement portion.
/1H0 The allotment for the private placement portion shall be made on the (
nd
day from the closure
of the issue and the private placement portion is ready to be listed.
/190 The allotment and listing of issues under the public portion /i.e. fi9ed price portion0 must be as
per the e9isting statutory re-uirements.
/(00 ;inally! the &7I has the right to inspect such records and books #hich are maintained by the
=>4 and other intermediaries involved in the ook uilding process
ricing
efore establishment of &7I in 199(! the -uality of disclosures in the offer documents #as very
poor.
The main dra#back of free pricing #as the process of pricing of issues. The issue price #as
determined around I0%F0 days before the opening of the issue and the issuer had no clear idea about
the market perception of the price determined.
In ook uilding the price is determined on the basis of demand received or at price above or e-ual
to the floor price.

The ,llotment Process through ook%building2
Ste)'@The Co-)any 4i++ EdiscoverE its )rice

7arlier! the company determined a fi9ed price for the stock issue. The issue #as marketed to the
general public through advertisements and a media campaign.
Today! companies prefer a book building process. ook building is the process of price discovery.
That means there is no fi9ed price for the share. Instead! the company issuing the shares comes up
#ith a price band. The lo#est price is referred to as the floor and the highest! the cap. ids are then
invited for the shares. 7ach investor states ho# many shares sPhe #ants and #hat sPhe is #illing to
pay for those shares /depending on the price band0. The actual price is then discovered based on
these bids.
Ste)*@+ayers of the ga-e

Three classes of investors can bid for the shares2
Sualified Institutional uyers2 SIs include mutual funds and ;oreign Institutional
Investors. ,t least M0N of the shares are reserved for this category.
=etail investors2 ,nyone #ho bids for shares under =s M0!000 is a retail investor. ,t least
(MN is reserved for this category.
The balance bids are offered to high net#orth individuals and employees of the company.
OBF"CTS O2 TH" O22"RIN% N"6 IO
;unds =e-uirement
;unding Plan /4eans of ;inance0
,ppraisal
&chedule of Implementation
;unds 5eployed
&ources of ;inancing of ;unds already deployed
5etails of alance ;und =e-uirement
Interim :se of ;unds
asic Terms of Issue
asis for issue price
Ta9 enefits
#D5#NT#%"S D DR#6B#C=S O2 IO
The #dvantages of IO are numerous. The companies are launching more and more IPOLs to raise
funds #hich are utili$ed for undertakings various pro3ects including e9pansion plans. The
,dvantages of IPO is the primary factor for the immense gro#th of the same in the last fe# years.
The IPO or the initial public offering is a term used to describe the first sale of the shares to the
public by any company. ,ll types of companies #ith the idea of enhancing gro#th launch IPOs to
generate funds to cater the re-uirements of capital for e9pansion! ac-uiring of capital instruments!
undertaking ne# pro3ects.
Ma3or #dvantages of IO
IPO has a number of advantages. IPO helps the company to create a public a#areness about the
company as these public offerings generate publicity by inducing their products to various
investors.
The increase in the ca)ita+: ,n IPO allo#s a company to raise funds for utili$ing in various
corporate operational purposes like ac-uisitions! mergers! #orking capital! research and
development! e9panding plant and
e-uipment and marketing.
$i>uidity: The shares once traded have an assigned market value and can be resold. This is
e9tremely helpful as the company provides the employees #ith stock incentive packages and the
investors are provided #ith the option of trading their shares for a price.
5a+uation: The public trading of the shares determines a value for the company and sets a
standard. This #orks in favor of the company as it is helpful in case the company is looking for
ac-uisition or merger. It also provides the share holders of the company #ith the present value of
the shares.
Increased 4ea+th: The founders of the companies have an affinity to#ards IPO as it can increase
the #ealth of the company! #ithout dividing the authority as in case of partnership.
Dra4!acks of IOGs
It is true that IPO raises huge capital for the issuing company. ut! in order to launch an Initial
Public Offering /IPO0! it is also necessary to make certain investments. &etting up an IPO does not
al#ays lead to an improvement in the economic performance of the company. , continuing
e9penditure has to be incurred after the setting up of an IPO by the parent company. , lot of
e9penses have to be incurred in the form of legal fees! printing costs and accounting fees! #hich are
connected to the registering of an IPO. &uch e9penses might cost hundreds of :& dollars. ,part
from such enormous costs! there are other factors as #ell that should be taken into consideration by
the company #hile introducing an IPO.
&uch factors include the rules and regulations involved to set up public offerings and this entire
process on the other hand involve a number of comple9ities #hich sometime re-uire the services of
e9perts in relevant fields. &ome companies hire e9perts to do the needful to ensure a hassle%free
e9ecution of the task. ,fter the IPO is introduced! the e9penses become a routine in every activity
involved. esides! the 17O of the company #ould have to spend a lot of time in handling the &71
regulations or sometimes he hires e9perts to do the same. ,ll these aspects! if not handled #ith
efficiency! prove to be some ma3or dra#backs related to the launch of IPOs.
The launch of IPO also brings about shareholders of the company. &hareholders have o#nership in
the company. The primary o#ners of the company or the people holding ma9imum authority in the
company cannot take decisions all by themselves once an IPO has been launched and shareholders
have been formed. The shareholders have an active participation in every decision that is being
taken even if they do not hold M0 percent share of the company. They have their individual demands
to be met as they o#n a certain percentage of stakes in the company. The &71 regulations re-uire
notifications from the shareholders of the company! meetings! and also approvals from them #hile
making important business decisions.
, ma3or risk #ith shareholders is that! they can sell off their stocks any time they #ant! in case they
see the price band of the stakes of that company is going do#n. This #ill lead to a further drop of
the value of shares in the market #hich in turn #ill decrease the overall value of the company.
IO %rading
IO grading /initial public offering grading0 is a service aimed at facilitating the assessment of
e-uity issues offered to public. The grade assigned to any individual issue represents a relative
assessment of the RfundamentalsL of that issue in relation to the other listed e-uity securities in
India. IPO grading is positioned as a service that provides Ran independent assessment of
fundamentalsL to aid comparative assessment that #ould prove useful as an information and
investment tool for investors. 4oreover! such a service #ould be particularly useful for assessing
the offerings of companies accessing the e-uity markets for the first time #here there is no track
record of their market performance.
IPO grade assigned to any issue represents a relative assessment of the RfundamentalsL of that issue
in relation to the universe of other listed e-uity securities in India. This grading can be used by the
investor as tool to make investment decision. The IPO grading #ill help the investor better
appreciate the meaning of the disclosures in the issue documents to the e9tent that they affect the
issueLs fundamentals. Thus! IPO grading is an additional investor information and investment
guidance tool.
1redit =ating agencies /CR#s0 like I1=,! 1=I&I>! 1,=7 and ;itch =atings #ho are registered
#ith &7I #ill carry out IPO grading. &7I does not play any role in the assessment made by the
grading agency. The grading is intended to be an independent and unbiased opinion of that agency.
IPO grading is not mandatory but is optional and the assigned grade #ould be a one time
assessment done at the time of the IPO and meant to aid investors #ho are interested in investing in
the IPO. The grade #ill not have any ongoing validity.
S"BI %UID"$IN"S ON IO %R#DIN%
Ao unlisted company shall make an IPO of e-uity shares or any other security #hich may be
converted into or e9changed #ith e-uity shares at a later date! unless the follo#ing
conditions are satisfied as on the date of filing of Prospectus /in case of fi9ed price issue0 or
=ed +erring Prospectus /in case of book built issue0 #ith =O12
The unlisted company has obtained grading for the IPO from at least one credit
rating agencyJ
5isclosures of all the grades obtained! along #ith the rationalePdescription furnished
by the credit rating agency/ies0 for each of the grades obtained! have been made in
the Prospectus /in case of fi9ed price issue0 or =ed +erring Prospectus /in case of
book built issue0J and
The e9penses incurred for grading IPO have been borne by the unlisted company
obtaining grading for IPO.
4ost of the market analysts have #elcomed this move of &7I as it #ill help the investors in a
volatile market to kno# #hether the merchant banker has carried the e9ercise in determining the
price of an issue in a proper manner or not. It #ill also help the investors in kno#ing #hether the
price of the issue is 3ustified or not. They even said that management of a good company #ill never
get afraid of getting graded of their IPOs if they are good. The only demerit of this step by the &7I
as said by many e9perts is that there #ill be a slo#do#n in the number of IPOs coming out as
grading #ill be a bit lengthy process and there #ill be a cost%factor attached to it also.
2"#TUR"S O2 IO %R#DIN%
IPO grading covers both internal and e9ternal aspects of a company seeking to make an IPO in
general. The internal factors include competence and effectiveness of the management! profile of
promoters! marketing strategies! si$e and gro#th of revenues! competitive edge! technology!
operating efficiency! li-uidity and financial fle9ibility! asset -uality! accounting -uality! profitability
and hedging of risks. ,mong e9ternal factors! the key one is the industry and economicPbusiness
environment for the issuer. +ere! it is important to note that internationally! the global rating
agencies such as &tandard G Poors and 4oodys do not perform grading of IPOs at all. .hile
&tandard G Poors is the ma3ority stakeholder in 1=I&I> >td! 4oodys is the single biggest
stakeholder in I1=, >td. &imilarly! the third global player ;itch I1, /#hich ac-uired another
rating agency 5un G radstreet in (0000 also does not grade IPOs as yet. The IPO grading is
indicated on a five point scale and a higher score indicating stronger fundamentals.
An IPO grading Scale
IO grade #ssess-ent
MPM &trong fundamentals
BPM ,bove average fundamentals
)PM ,verage fundamentals
(PM elo# average fundamentals
1PM Poor fundamentals
The process #ill ideally re-uire (%) #eeks for completion! so it may be a good idea for companies
to initiate the grading process about I%H #eeks before the targeted IPO date to provide sufficient
time for any contingencies.
Cost Invo+ved In IO %rading
Though nothing has been declared officially but most of the credit rating has said that IPO%grading
#ould not cost much to the issuers. They #ould be charging 10 basis points of the amount to be
raised #ith a ceiling of about =s 10%1M lakhs. Thus! even in the case of a mega IPO! there #ould be
a cap on fees! he noted. ,round 100 IPOs hit the market on an average every year. +o#ever! despite
this seemingly big number! the total receipts for the entire rating industry on account of grading fees
#ould be only about =s 10%1M crore.
Benefits of IO %rading
There are various positive sides of an IPO grading. The most significant factors that go in favor of
IPO grading are2
/a0 rofessiona+ and Inde)endent #))raisa+: IPO grading #ill create a#areness about the
fundamentals of the companyLs IPO and #ill provide focused company information as a key input
to prospective investors that #ill be helpful in taking an investment decision! in a manner similar to
#hat a credit rating is for debt investors.
/b0 Re-ova+ of Infor-ation Burden: .here disclosures of issues are large and comple9! a service
analy$ing and interpreting these disclosures independently and -uickly #ill be e9tremely useful in
cutting through the clutter. Thus! the usefulness of IPO grading #ould be particularly high for small
investors as it #ill serve as a guide about the company coming out #ith the issue.
/c0 I-)edi-ent for 6eak Co-)anies: .hile fundamentally sound companies #ill gain from
the market! companies #hose fundamentals are not very strong #ill be impeded in building
up speculative demand among investors. &uch #eak companies #ill need to offer pricing!
#hich #ill ade-uately compensate investors for the risks they take. Therefore! IPO grading
provides disincentives for #eak companies planning to come to the market to raise easy
capital.
RO$" O2 M"RCH#NT B#N="RS IN IO
IntermediaryLs help corporations design securities that #ill be attractive to investors! buy these
securities from the corporations! and then resell them to savers in the primary markets.
Merchant BankersH $ead Manager
4erchant bankers play an important role in issue management process. >ead managers have to
ensure correctness of the information furnished in the offer document. They have to ensure
compliance #ith &7I rules and regulations as also <uidelines for 5isclosures and Investor
Protection. To this effect! they are re-uired to submit to &7I a due diligence certificate confirming
that the disclosures made in the draft prospectus or letter of offer are true! fair and ade-uate to
enable the prospective investors to make a #ell informed investment decision. The role of merchant
bankers in performing their due diligence functions has become even more important #ith the
strengthening of disclosure re-uirements and #ith &7I giving up the vetting of prospectuses. Their
functions are2
To act as intermediaries bet#een the company seeking to raise money and the investors.
They must possess a valid registration from &7I enabling them to do this 3ob.
They are responsible for complying #ith the formalities of an issue! like dra#ing up the
prospectus and marketing the issue.
If it is a book building process! the lead manager is also in charge of it. In such a case! they
are also called ook =unning >ead 4anagers.
COM#N& B#C=%ROUND
COM#N& RO2I$"
1O4P,A8 P=O;I>7
Incorporated in 199)! Aet #orth &tock roking >imited /A&>0 has been a listed company
at ombay &tock 79change /&70! 4umbai since 199M.
, 4ember! at the Aational &tock 79change of India /A&70 and ombay &tock 79change! 4umbai
/&70 on the 1apital 4arket and 5erivatives /;utures G Options0 segment! A&> has been
traditionally servicing Institutional clients and in the recent past has forayed into retail broking!
establishing branches across the country. Presence is being marked in the 4iddle 7ast! 7urope and
the :nited &tates too! as part of our attempts to cater to global markets. .e are a 5epository
participant at 1entral 5epository &ervices India /15&>0 #ith plans to become one at Aational
&ecurities 5epository /A&5>0 by the end of this -uarter. .e have our customers participating in the
booming commodities markets #ith our membership at the 4ulti 1ommodity 79change of India
/41O0 and Aational 1ommodity G 5erivatives 79change /A157O0! through Aet#orth
&tock.1om >td. .ith its strong support and business units of research! distribution G advisory!
A&> aims to become a one%stop solution to the broking and investment needs of its clients!
globally.
Aet#orth has been successfully providing premium financial services and information for more
than a decade. Our aim has consistently been to empo#er investors to take charge of their financial
future G help them gro# their Aet#orth.
Aet#orth has al#ays endeavored to make a difference in the financial services space. It constantly
focuses on scaling and upgrading the technology infrastructure so as to provide the best services to
the investors. .e have a presence of around )M0 centers across India.
.e are
4anaged by a talented team of around H00 professionals.
&erving nearly 100!000 clients across the country.
I&O 90012(000 1ertified &oft#are 5ivision.
.inner of 1A1%T'1HLs ;inancial ,dvisor ,#ards (00H for est =egional >evel ;inancial
,dvisor.
Proclaimed amongst the most read research analyst /Team Aet#orth0 by Thomson =euters
consistently over a period of time.
, 1harter member of ;inancial Planning &tandards oard of India T;P&U.
,lliance partners #ith PA for online trading.
1orporate ,gents for 4et>ife India Insurance 1o >td.
&trong team of professionalLs e9perienced and -ualified pool of human resources dra#n
from top financial service G broking houses form the backbone of our si$eable infrastructure.
+ighly technology oriented! the companyLs scalability of operations and the highest level of service
standards has ensured rapid gro#th in the number of locations G the clients serviced in a very short
span of time. RAet#orthiansL! as each one of our B00 plus and ever gro#ing team members are
addressed! is a dedicated team motivated to continuously progress by imbibing the best of global
practices! Indian sing
such practices! and to constantly evolve a comprehensive suite of products G
services trying to meet every financial P investment need of the clients.
A&7 14 and 5erivatives &egment &7I =egn. 1A()0I)HI)9 G 1A;()0I)HI)9
&7 14 and 5erivatives &egment &7I =egn. 1A010I)HI)B G
P4& &7I =egn. 1AP000001)F1 15&> 5P &7I =egn. IA%5P%15&>
The Aet#orth connectivity #ith 10F branches and gro#ing
RODUCTS #ND S"R5IC"S ORT2O$IO
=etail and institutional broking
=esearch for institutional and retail clients
5istribution of financial products
P4&
1orporate finance
Aet trading
5epository services
1ommodities roking
Infrastructure
V , corporate office and ) divisional offices in 15 of 4umbai #hich houses state%of%the%art
dealing room! research #ing G management and back offices.
V ,ll of 10F branches and franchisees are fully #ired and connected to hub at 1orporate office
at 4umbai. ,dd on branches also #ill be #ired and connected to central hub
V .eb enabled connectivity and soft#are in place for net trading.
V I0 operative I5Ls for dealing room
V In house technology back up team to ensure un%interrupted connectivity.
199)2 Aet#orth &tarted #ith )00 &-.ft. of office space G 10 employees
(0102 &pread over B( cities /around F0!000 &-.ft of office space0 #ith over 10F branches G
employee strength over B00
4arket G research
;ocusing on your needs
7very investor has different needs! different preferences! and different vie#points. .hether investor
prefer to make o#n investment decisions or desire more in%depth assistance! company committed
to providing the advice and research to help you succeed.
Aet#orth providing follo#ing services to their customers!
5aily 4orning Aotes
4arket 4using
1ompany =eports
Theme ased =eports
.eekly Aotes
IPOs
&ector =eports
&tock &tance
Pre%guarterP:pdates
ullion Tracker
;GO Tracker
S:,>IT8 PO>I18
To achieve and retain leadership! Aet#orth shall aim for complete customer satisfaction! by
combining its human and technological resources! to provide superior -uality financial services. In
the process! Aet#orth #ill strive to e9ceed 1ustomerLs e9pectations.
,s per the -uality policy! Aet#orth #ill2
uild in house processes that #ill ensure transparent and harmonious relationships #ith its
clients and investors to provide high -uality of services.
7stablish a partner relationship #ith in its investor service agents and vendors that #ill help
in keeping up its commitments to the customers.
Provide high -uality of #ork life for all its employees and e-uip them #ith ade-uate
kno#ledge G skill so as to respond to customerLs needs.
1ontinue to uphold the values of honesty G integrity and strive to establish unparalleled
standards in business ethics.
:se state%of%the art information technology in developing ne# and innovative financial
products and services to meet the changing needs of investors and clients.
&trive to be a reliable source of value%added financial products and services and constantly guide
the individuals and institutions in making a 3udicious choice of it.
&trive to keep all stake%holders /share holders! clients! investors! employees! suppliers and
regulatory authorities0 proud and satisfied.
6ey Personnel2
V 4r. & P @ain K 145 Aet#orth &tock roking >td.
, -ualified 1hartered ,ccountant #ith over 1M years of e9perience in the capital
markets.
V 4r. 5eepak 4ehta K +ead P4&
Over 1( years of e9perience in the capital markets and has the prior #ork e9perience of
serving on the 7-uity desk of =eliance.
V 4r.'iral 5oshi K 7-uity &trategist
, -ualified 1hartered ,ccountant #ith e9perience of over a decade in technical analysis
#ith respect to e-uity markets.
V 4r. 'inesh @ain K ,sst. ;und 4anager
, -ualified 4, graduate speciali$ing in finance and over t#o years of e9perience in the
capital markets.
V =esearch and the ack office.
OUR %ROU COM#NI"S
Net4orth Stock Broking $td( INSB$J
A&> is a member of the Aational &tock 79change of India >td /A&70 and the ombay &tock
79change >td /&70 in the 1apital 4arket and 5erivatives /;utures G Options0 segment. A&>
has also ac-uired membership of the currency derivatives segment #ith A&7! &7! :&7 G 41O%
&O. It is 5epository participants #ith 1entral 5epository &ervices India /15&>0 and Aational
&ecurities 5epository /India0 >imited /A&5>0. .ith a client base of around 100!000 loyal
customers! A&> is spread across the country though its around )M0 branches. A&> is listed on
the &7 since 199B.

Net4orth 6ea+th So+utions $td( IN6S$J
A.&> is into the business of delivery of ;inancial Planning G ,dvice. ItLs vision is to R,dvice G
79ecute money related solutions toPfor our customers in the most 1onvenient G 1onsolidated
manner! #hile making sure that their e9perience #ith us is al#ays pleasant G memorable resulting
in positive advocacyL. The product G &ervices include ;inancial Planning! >ife Insurance! On%line
Trading ,ccount! 4utual ;unds! 5ebenturesPonds! <eneral Insurance! >oans and 5epository
&ervices.

Net4orth Co--odities D Invest-ents $i-ited INCI$J
A1I> is the commodities arm of A&>. It is a member at the 4ulti 1ommodity 79change of India
/41O0! Aational 1ommodity G 5erivatives 79change /A157O0 and I17O G is backed by solid
research G analytics in 1ommodities.

Net4orth Soft Tech $td( INS$J
A&> is an I&O 90012(000 1ertified 1ompany. It is into ,pplication 5evelopment G maintenance.
uilding G Implementation of packaged soft#are across various functions #ithin the ;inancial
&ervices Industry is at its core. It also provides data center services #hich include hosting of
#ebsites! applications G related services. It combines a uni-ue delivery model infused by a distinct
culture of customer satisfaction.

Ravisha 2inancia+ Services vt( $td( IR2S$J
=;&> is a =I registered A;1 engaged in financing! primarily it provides loan against securities.
Contract Us:
Registrars and Transfer #gent
/&hare transfers and communications regarding share certificates! dividends andchange
of address0
MHs(Sky+ine 2inancia+ Services rivate $i-ited
Okhla Industrial ,rea!
Phase % I!
Ae# 5elhi % 110 0(0.
Tel Ao.2 011 % )0HM FMFM /10 >ines0!
7%4ail2 adminWskylinerta.com
$isting of ">uity Shares on Stock "Achange at:
ombay &tock 79change >imited!
4umbai /&70 Phiro$e @ee3eebhoy To#ers!
5alal &treet! 4umbai B00 001
&tock 1ode G I&IA2 ombay &tock 79change &crip 1ode2 M11MM1
De-at ISIN Nu-!ers in NSD$ D CDS$ for ">uity Shares: IN";8.D8'8''
Balancesheet - Networth Stock Broking Ltd.
Particulars Mar'12 Mar'11 Mar'10 Mar'09 Mar'08
Liabilities
12
Months
12 Months
12
Months
12 Months 12 Months
Share Capital 11.23 11.23 11.23 12.75 12.75
Reserves & Surplus 16.68 19.53 22.57 29.47 42.66
Net Worth 27.92 30.77 33.8 42.22 55.4
Secured Loans .6 21.77 2.47 .85
!nsecured Loans
TT!L L"!#"L"T"$% 27.92 30.82 55.57 &2.&9 5&.25
!ssets
"ross #loc$ 1.97 12.91 18.85 18.72 16.4
%&' (cc. )epreciation 4.3 5.35 6.74 5.16 3.32
Net #loc' &.&8 7.57 12.11 13.5& 12.72
Capital *or$ in +ro,ress. .6 1.16 1.98
-nvest.ents. 9.35 9.35 1.35 1.34 1.34
-nventories .2 .1 .1 .8 .5
Sundr/ )e0tors 12.95 15.85 27.91 12.39 18.6
Cash (nd #an$ 6.4 25.66 43.91 38.3 44.4
Loans (nd (dvances 44.93 19.73 24.25 33.36 22.2
Total (urrent !ssets &4.3 &1.25 9&.08 84.14 85.25
Current Lia0ilities 47.6 42.71 59.31 42.3 49.67
+rovisions 5.36 4.65 4.26 4.48 4.38
Total (urrent Liabilities 52.42 47.35 &3.57 4&.51 54.05
N$T ()**$NT !%%$T% 11.89 13.9 32.51 37.&3 31.2
1isc. 23penses .1
TT!L !%%$T%
+!,#,(,-,$.
27.92 30.82 55.57 &2.&9 5&.25
Profit G >oss % Aet#orth &tock roking >td.
MarE'* MarE'' MarE'8 MarE8; MarE8<
1( 4onths 1( 4onths 1( 4onths 1( 4onths 1( 4onths
INCOM":
&ales Turnover (0.0F )1.1) BB.0M )B.MI BI.H)
79cise 5uty 0 0 0 0 0
N"T S#$"S *8(8B .'('. //(80 ./(01 /1(<.
Other Income 0 0 0 0 0
TOT#$ INCOM" *'(/1 ..(8. /B(. .<(0 /;(8<
"K"NDITUR":
4anufacturing 79penses I.IB 9.M) 0 0 0
4aterial 1onsumed 0 0 0 0 0
Personal 79penses 1(.0F 1B.(I 1H.BI 1F.M) (1.(1
&elling 79penses 0 0 H.HF M.HI 0.BF
,dministrative 79penses M.HH H.HM ().(B ((.9) ().9H
79penses 1apitalised 0 0 0 0 0
Provisions 4ade 0 0 0 0 0
TOT#$ "K"NDITUR" */(0; .*(1. 08(0B /1(.* /0(11
Operating Profit %B.M( %1.M1 %I.M1 %11.FI 1.1F
"BITD# @.('. 8(/ @.(*B @B(<. .(/'
5epreciation 1.I( 1.9F (.1B (.1M 1.I(
Other .rite%offs 0 0 0 0 0.01
"BIT @/(B0 @'(0B @0(/* @;(;< '(B<
Interest 1.01 (.1( (.MM (.9I 1.IH
"BT @0(B1 @.(1; @B(;B @'*(;/ 8('
Ta9es %(.99 %0.I %0.) %0.1 0.19
rofit and $oss for the &ear @*(BB @.(8* @B(1B @'*(< 8
Aon =ecurring Items 0 0 %0.F %0.) 0
Other Aon 1ash ,d3ustments 0 0 0 0 ).19
Other ,d3ustments 0 0.01 0.0) 0.0( 0
R"ORT"D #T @*(<0 @.(8* @<(.< @'.('1 .(80
="& IT"MS
Preference 5ividend 0 0 0 0 0
7-uity 5ividend 0 0 0 0 0.B(
7-uity 5ividend /N0 0 0 0 0 ).FM
&hares in Issue />akhs0 11(.)( 11(.)( 11(.)( 11(.)( 11(.)(
"S @ #nnua+ised 7Rs, @*(0/ @*(1; @B(/1 @''(B* *(B*
#N#$&SIS #ND
INT"RR"T#TION
Introduction of Co-)any:
Incorporated in 199)! 1redit ,nalysis G =esearch >td /1,=70 is the second largest full%service
credit rating company in India. 1,=7 offers rating and grading services across a diverse range of
instruments and industries including IPO grading! e-uity grading! and grading of various types of
enterprises! including shipyards! maritime training institutes! construction companies and rating of
real estate pro3ects! among others. They also provide general and customi$ed industry research
reports.
1,=7"s e9isting shareholders include domestic banks and financial institutions! such as I5I ank!
1anara ank! &I and I>G;& etc. 1ompany"s list of clients includes banks and other financial
institutions! private sector companies! central public sector undertakings! sub%sovereign entities!
small and medium enterprises and micro%finance institutions.
They are the leading credit rating agency in India for IPO grading having graded the largest number
of IPOs since the introduction of IPO grading in India. 1,=7 =atings has completed over 190I9
rating assignments having aggregate value of about =s. BB0.M1 bn /as of &eptember )0! (01(0! since
its inception in ,pril 199).
COM#N& 2IN#NCI#$S:
articu+ars 2or the yearH)eriod ended 7in Rs( Mi++ion,
.'@Dec@'* .'@Mar@'' .'@Mar@'8 .'@Mar@8; .'@Mar@8<
Tota+ Inco-e (!1F1.9) 1!F((.MM 1!M(0.(I 999.)1 MB9.11
rofit #fter TaA 7#T, 1!1MF.0( HF9.B9 HMI.90 M().99 (II.HM
1,=7 total income and profit after ta9 have also continued to gro#. Its unconsolidated total
income has increased from =s. MB9.11 million for the financial year (00H to =s. (!1F1.9) million
for the financial year (01(! at a 1,<= of B1.0N during such period.
1,=7"s consolidated total income #as =s. (!1HF.9M million and =s. 1!0)9.FB million!
respectively! for the financial year (01( and the si9 months ended &eptember )0! (01(.
Their unconsolidated profit after ta9 has increased from =s. (II.HM million for the financial year
(00H to =s. 1!1MF.0( million for the financial year (01(! at a 1,<= of BB.)N during such period!
and their consolidated profit after ta9 #as =s. 1!1MF.I9 million and =s. B9F.FM million!
respectively! for the financial year (01( and the si9 months ended &eptember )0! (01(.
;or the financial years (010! (011 and (01(! their unconsolidated profit after ta9 margin #as
MI.BN! M1.1N and M).)N! respectivelyJ and for the financial year (01( and the si9 months ended
&eptember )0! (01(! its consolidated profit after ta9 margin #as M(.9N and BF.9N! respectively.
Their unconsolidated earnings /including other income0 before interest! ta9es! depreciation and
amorti$ation /"7IT5,"0 margin on unconsolidated total revenue #as H1.)N! FI.BN and FM.)N!
respectively! for the financial years (010! (011 and (01(J
The 7IT5, margin on consolidated total revenue #as FB.9N and I9.0N! respectively! for the
financial year (01( and the si9 months ended &eptember )0! (01(. Their unconsolidated return on
e-uity #as B0.1N! (9.9N and )0.FN! respectively! for the financial years (010! (011 and (01(J
and its consolidated return on e-uity #as )0.FN and 11.FN /not annuali$ed0! respectively! for the
financial year (01( and the si9 months ended &eptember )0! (01(.
1,=7 has maintained a highly li-uid! strong net #orth position! #ith no debt on a consolidated
basis as of &eptember )0! (01(. Their unconsolidated total net #orth has steadily increased from
=s. H)(.IB million as of 4arch )1! (00H to =s. )!FIF.F0 million as of 4arch )1! (01(.
C#R" has )aid dividends each year since its first fu++ year of o)erations(
=ey 2uture %ro4th Drivers
Initiatives by the <overnment to develop corporate bond market like increasing the ;II
limit in corporate bonds! etc
<reater market penetration by players such as insurance companies and pension funds!
&ustenance of economic gro#th % leading to increase in overall resource mobili$ation in the
economy!
79pansion of bank credit!
1ontinued implementation of asel II norms!
4andatory grading of IPOs
I. It is India"s 1st rating agency to receive I&O 90012(00H -uality management certifications
for its head office in 4umbai and si9 branch offices for the credit rating of debt instruments
and facilities! for research services at its head office in 4umbai and for data processing at
the 1,=7 6no#ledge 1entre in ,hmedabad
RIS=S D CONC"RNS
1,=7"s business and revenues are impacted by changes in the volume of debt instruments
issued and bank loans and facilities provided in the Indian debt market. ,ny reduction in
such volumes may adversely affect its business! results of operations and financial
performance.
If the current global economic do#nturn reduces the volume of debt instruments issued or
bank loans and facilities provided in the Indian debt market! its business and results of
operations could be adversely affected
,ny damage to the trust and confidence that 1,=7"s clients have in them #hich is largely
dependent on its brand recognition and reputation! may adversely affect its business!
financial performance and results of operations.
4aterial changes in the regulations that govern company"s business could adversely affect
their results of operations.
Profit margins could be under stress as company may focus on volume business #ith lo#
margins /&47 rating! in #hich 1,=7 plans to increase its focus! is a relatively lo# margin
business.0
1,=7 =atings is primarily engaged in the rating business #hich is largely contributing to
top line. The company plans to diversify geographies and product portfolio to de%risk
earning and business. ;ailure in diversifying business may result into lo#er gro#th and
margins in medium term
6e Reco--end Investors to LSu!scri!eL to the C#R" IO D L$ong
Ter- InvestorsL can invest and rea) the !enefits of 6ea+th Creation.
Reason 2or Su!scri!e:
1,=7 is a debt free company.
1,=7 has Treasury as on +1;81) stood at =s)IM 1r! #hich is X =s 1(HPshare.
The company has consistently maintained a dividend payout since inception
1are =atings has recently started operations in Aigeria! 4aldives and &outh ,merica has
plans to e9pand footprints globally.
1,=7 is the second largest rating agency in the country #hich has seen B0N gro#th in
profits and revenue in the last fe# years. Git is the only domestic rating agency #ith no
foreign holding. 4ean#hile! rival rating agencies 1risil and I1=, are both listed and are
under foreign firm"s control.
,t the upper price band of =s FM0 and lo#er price band of =s F00! the issue is attractively
priced at X1H.M9 and X1F.(9 its ;81( 7P& of =s B0.I.
The issue is priced at a discount to the company"s peer group and #e believe the offer price
is attractive considering the company"s better margin profile and robust business gro#th in
comparison to the peer group.
The company has a book 'alue of =s 1)(and PP' of M.IH9 at upper end of the price band
as of ;81(
Care $i-ited Stock Muotes D Charts 7'H'H*8'. /:8'a-,

;'1(;8 @<(*0 7@8(<;C,
Stock rice Move-ents
5ay"s Open2 91I.90
5ay"s +igh % >o#2 91I.90 % 91I.90
Previous 1lose2 9(M.1M
Total Traded 'alue2 I0
M( .eeks +igh % >o#2 0.00 % 0.00
=eff 2 http2PP###.chittorgarh.comPipoPipoYlist.asp
=eff 2 http2PP###.chittorgarh.comPipoPipoYrevie#.asp*aZ9H
C F"6"$$"R
Incorporated in (00M! P1 @e#eller >td is an established 3e#ellery retailer in Aorth India.
1ompany"s operations include the manufacture! retail and #holesale of 3e#ellery. P1@ offers a #ide
range of products including gold 3e#ellery! diamond 3e#ellery and other 3e#ellery including silver
articles. They provide 100N +allmarked 3e#ellery and 1ertified 5iamond 3e#ellery.
In addition to their retail operations! they also sell gold and diamond 3e#ellery on a #holesale basis
to other 3e#ellery retailers in India. They also e9port gold and diamond 3e#ellery on a #holesale
basis to international distributors in 5ubai! +ong 6ong and &ingapore.
P1 @e#eller have )0 sho#rooms under the "P1 @e#eller" brand located across () cities in north and
central India. 1ompany is planning to e9pand their sho#room net#ork across India by adding (0
more in ne9t t#o years! including in southern and #estern parts of India. They have manufacturing
facilities at M locations.
ISSU" D"T#I$:
[[ Issue O)en2 5ec 10! (01( % 5ec 1(! (01(
[[ Issue Ty)e2 100N ook uilt Issue IPO
[[ Issue Si?e2 BM!1))!M00 7-uity &hares of =s. 10
[[ Issue Si?e2 =s. I09.)0 1rore
[[ 2ace 5a+ue2 =s. 10 Per 7-uity &hare
[[ Issue rice2 =s. 1(M % =s. 1)M Per 7-uity &hare
[[ Market $ot2 90 &hares
[[ Mini-u- Order Muantity2 90 &hares
[[ $isting #t2 &7! A&7
Strengths & Expansion Plans:
). >arge ;ormat &tores in +igh &treet ,reas % P1@"s large format stores /of at least )!000 s-. ft.
each0 in prominent high street locations have helped it build a strong brand. These stores are
especially suited for the #edding 3e#ellery market. P1@ has gro#n rapidly in Aorth G
1entral India from ) sho#rooms in (00F to )0 sho#rooms in (01(. It hopes to maintain this
momentum going for#ard by adding (0 large stores in .est and &outh India.
B. 4argin 79pansion >ead by 5iamond @e#ellery % &ales of diamond 3e#ellery as a percentage
of total domestic revenues has increased from 1HN in ;810 to (FN in ;81(. 1ontinued
focus on diamond 3e#ellery should boost margins going for#ard.
Risks:
=evenue 1oncentration G Intensifying 1ompetition % , large part of P1@"s sales are from its
stores in 5elhi. It might be difficult for P1@ to break into ne# regions and moneti$e its brand
due to rising competition from its competitors and the unorgani$ed segment.

1hange in <old >oan &chemes % 1urrently P1@ is using non%fund based credit facilities to
procure gold. These schemes help P1@ derisk its operations from gold price volatility. ,ny
changes in the regulations or features of these scheme could lead to rising #orking capital
re-uirements and falling margins. IPO /P1 @e#eller IPO0 5etail
COM#N& ROMOT"RS:
Co-)anyEs )ro-oters are:
1. 4r. Padam 1hand <upta and
(. 4r. alram <arg
COM#N& 2IN#NCI#$S:
articu+ars 2or the yearH)eriod ended 7in Rs( Mi++ion,
.8@Se)@'* .'@Mar@'* .'@Mar@'' .'@Mar@'8 .'@Mar@8; .'@Mar@8<
Tota+ Inco-e (0!IB(.B0 )I!FB(.0F ((!09I.() 11!0BB.M) I!9().HB )!FIF.MB
rofit #fter TaA 7#T, 1!B1).0B (!)1(.91 1!BBH.IM IIB.MF )09.H0 1(9.IH
OBF"CTS O2 TH" ISSU":
The ob3ect of the issue are to2
1. ;inance establishment of ne# sho#roomsJ and
(. <eneral corporate purposes.
PC Jeweller IPO Grading
1=I&I> has assigned a IPO <rade )PM to the IPO of P1 @e#eller. This grade indicates that the
fundamentals of the P1 @e#eller IPO are "average" relative to the other listed e-uity securities in
India. 1=I&I> assigns IPO grading on a scale of M to 1! #ith <rade M indicating strong fundamentals
and <rade 1 indicating poor fundamentals. Please note that this grade is not an opinion on #hether
the issue price is appropriate in relation to the issue fundamentals. The grade is not a
recommendation to buy! sell or hold the graded instrument! or a comment on the graded
instrument"s future market price or its suitability for a particular investor.
Rs 5 Discount for Retail Bidders And Employees
The promoter of P1 @e#eller has offered Rs 0 discount to retai+ investors and e-)+oyees in P1
@e#eller IPO shares. The discount #ill be given on the final price of the IPO shares.
Need to Su!scri!ed of NotN
The company mulls establishments of ne# sho#rooms and mobili$e generate corpus
fund. To part finance! it is offering BM!1))!M00 e-uity shares of =s.10 each #ithin a
price band of =s. 1(M%1)M. =etail investors and eligible employees are entitled for a
discount of =s. M per share on final pricing. The issue comprises a net issue to the
public of BB!FFM!000 e-uity shares and a reservation of )MH!M00 e-uity shares for
subscription by eligible employees. The issue shall constitute (M.(0N of the post issue
paid%up e-uity share capital of the company and the net issue shall constitute (M.00N
of the post issue paid%up e-uity capital of the company. Issue opens for subscription
on 10.1(.1( and #ill close on 1(.1(.1(. 4inimum application is to be made for 90
shares and in multiples thereof thereafter. Post allotment! e-uity shares #ill be listed
on &7 and A&7. .ith this float the company aims to collect =s. MIB.1F crore to =s.
I09.)0 crore based on lo#er or higher price band. I5I 1apital 4arket &ervices >td!
6otak 4ahindra 1apital 1ompany >td and &I 1apital 4arkets >td are the =>4s
and 6arvy 1omputershare is the registrar to the issue. 1,=7 and 1=I&I>! both have
rated this IPO at IPO <rade ) indicating ",verage ;undamentals" of the company.
The company also floats customer friendly schemes every year and is thus getting
more business and fancy.,s far as =>4"s mandate performances are concerned! the
first figure is for total mandate and in bracket are for failure to give listing gains. &I
1ap (( /H0! 6otak 4ahindra 1ap % BI /1)0 and I5I 1apital % 1I /H0.
Conclusion In!estment "trategy
,s far company"s performance is concerned! for last three fiscals it has posted average
7P& of =s. 1).B0 and for first half of the current fiscal it stands at =s. 10.I0 along
#ith A,' of =s. M(.0H. It has issued bonus in the ratio of ( shares for every 1 share
held in &eptember (011. Thus the asking price is at around H.M PP7 on fully diluted
e-uity and is thus priced reasonably compared to its peer that are -uoting around 1) to
B( PP7. 1onsidering fancy for gem and 3e#ellery sector counters! invest-ent is
reco--ended(
MM
c Fe4e++er $td Stock Muotes D Charts /1P(P(01) M2(9am0

1FM.B0
\10.10 /\I.11N0
Stock rice Move-ents
5ay"s Open2 1II.10
5ay"s +igh % >o#2 1F9.(M % 1IM.I0
Previous 1lose2 1IM.)0
Total Traded 'alue2 1B1IFFI9
M( .eeks +igh % >o#2 0.00 % 0.00
=eff 2 http2PPcrisil.comP=atingsProchure#arePAe#sP1=I&I>%research%pr0I111(Yipo%
gradingYpc%3e#eller.pdf
BH#RTI IN2R#T"$ $IMIT"D IO
Incorporated in (00I! harti Infratel >imited is a provider of to#er and related
infrastructure. harti Infratel is one of the #orld"s largest telecom to#er infrastructure
MI
providers #hich deploys! o#ns and manages telecom to#ers and communication
structures for all #ireless operators. The business of harti Infratel and Indus is to
ac-uire! build! o#n and operate to#er and related infrastructure.
harti Infratel and Indus currently provide access to their to#ers primarily to #ireless
telecommunications service providers. harti Infratel"s and Indus"s three largest
customers are harti ,irtel /together #ith harti +e9acom0! 'odafone India and Idea
1ellular. They are the three leading #ireless telecommunications service providers in
India by #ireless revenue.
In India! Infratel has over )B!000\ to#ers! across 1H states! and 11 Telecom circles!
and still gro#ing. harti Infratel also has a B(N stake in Indus To#ers #hich #as
created as a @oint 'enture bet#een harti Infratel! 'odafone and ,ditya irla Telecom
to hive off the To#ers business in 1M telecom circles.
Issue Detai+:
[[ Issue O)en2 5ec 11! (01( % 5ec 1B! (01(
[[ Issue Ty)e2 100N ook uilt Issue IPO
[[ Issue Si?e2 1HH!900!000 7-uity &hares of =s. 10
[[ Issue Si?e2 =s. B!1MM.H0 1rore
[[ 2ace 5a+ue2 =s. 10 Per 7-uity &hare
[[ Issue rice2 =s. (10 % =s. (B0 Per 7-uity &hare
[[ Market $ot2 M0 &hares
[[ Mini-u- Order Muantity2 M0 &hares
[[ $isting #t2 &7! A&7
Co-)any ro-oters:
The promoter of the company is harti ,irtel.
MF
Co-)any 2inancia+s:
articu+ars 2or the yearH)eriod ended 7in Rs( Mi++ion,
.8@Se)@'* .'@Mar@'* .'@Mar@'' .'@Mar@'8 .'@Mar@8; .'@Mar@8<
Tota+ Inco-e M0!90H.9 9M!9F0.I HI!(MF.9 F1!(HH.B M1!FF(.F F!0MF.0
rofit #fter TaA 7#T, B!I0B.I F!M0F.) M!M1B.H (!M(9.F 1!9M(.B B0).F
O!3ects of the Issue:
The ob3ects of the issue are to2
1. Installation of B!H1) ne# to#ersJ
(. :pgradation and replacement on e9isting to#ersJ
). <reen initiatives at to#er sitesJ
B. <eneral corporate purposesJ and
M. enefits of listing of the 7-uity &hares on the &tock 79changes.
B#arti Infratel IPO Grading
1=I&I> has assigned a IPO <rade BPM to the IPO of harti Infratel. This grade
indicates that the fundamentals of the harti Infratel IPO are "above average" relative
to the other listed e-uity securities in India. 1=I&I> assigns IPO grading on a scale of
M to 1! #ith <rade M indicating strong fundamentals and <rade 1 indicating poor
fundamentals. Please note that this grade is not an opinion on #hether the issue price
is appropriate in relation to the issue fundamentals. The grade is not a
recommendation to buy! sell or hold the graded instrument! or a comment on the
graded instrument"s future market price or its suitability for a particular investor.=ead
$% Discount for Retail Bidders
The promoter of harti Infratel has offered Rs '8 discount to retai+ investors in
harti Infratel IPO shares. The discount #ill be given on the final price of the IPO
shares.
MH
Bh Infrate+ Stock Muotes D Charts /1P)P(01) (2((am0

(0(.HM
\1.HM /\0.9(N0
Stock rice Move-ents
5ay"s Open2 (01.(0
5ay"s +igh % >o#2 (0I.B0 % (01.(0
Previous 1lose2 (01.00
Total Traded 'alue2 IM1)(I M(
.eeks +igh % >o#2 0.00 % 0.00
=eff 2 harti Infratel IPO <rading =eport2
http2PPcrisil.comP=atingsProchure#arePAe#sP1=I&I>%research%pr(F111(Yipo%
gradingYbharti%infratel.pdf
M9
2indings D Conc+usion
2indings
,n IPO company is difficult to analy$e since there isn"t a lot of historical info.
,n IPO is the first sale of stock by a company to the public.
I0
It can be observed that out of ) companies! only ( companies have
given positive returns on the date of listing.
,s far as ) months G I months returns are concerned! ( companies
have given positive returns.
;or I months! c Fe4e++er $td has the highest &.5. at 1FM.B0
Aearly t#o%third of the I9 companies listed on bourses during
(01(% (01) are trading belo# their issue prices! resulting in
negative returns for investors.
,n analysis of the &7%listed companies sho#s that as many as BB
out of the I9 stocks are trading belo# their issue prices fi9ed after
their initial public offers.
In (01( comprising M9 private sector firms and 11 P&:s! came up #ith an
public offer this year! raising =s F1!11B crores in the process. Of the 11 P&:s
issues! the Pun3ab G &ind ank is the latest entrant2
The costs of an initial public offering are small as compared to the costs of
borro#ing large sums of money for ten years or more!
,n IPO is a costly undertaking. , typical firm may spend about 1M%(MN of the
money raised on direct e9penses. 7ven more resources are spent indirectly
/management time! disruption of business0.
Only 10 companies #ere able to perform positive returns at the end of 1 year.
The investor faces limited risk in the secondary market. +e is ade-uately
protected from counter party risks by the stock e9change. ut he needs much
more protection and safeguards in the primary market.
,ccording to my study the investment done in the securities by the investors is
mainly done only by the image of the company but not on the basis of the
fundamental analysis.
7P& is the money that is left over after a company pays all of its debt so!
higher the 7P& the better it is. /Pc @e#eller >td0
I1
, lo# PP7 is generally considered good because it may mean that the stock
price has not risen to reflect its earning po#er /Pc @e#eller >td0. , high PP7! on
the other may reflect an overpriced stock or decreasing earnings.
Investors evaluate an IPO ma9imum from Promoters of the company!
prevailing 4arket Trend G =ecent IPO performance G Issue &i$e of the IPO
and minimum from &uppliers of the company! >isting in .ell 6no#n &tock
e9changes G 4edia ,dvertisements.
Conc+usion
roadly speaking! companies are either private or public. <oing public means
a company is s#itching from private o#nership to public o#nership.
I(
<etting in on a hot IPO is very difficult! if not impossible.
The process of under#riting involves raising money from investors by issuing
ne# securities.
Thus #e have studied about the organisation and various forms of
organisations. +o# the funds can be raised is studied so as to kno# the
effective #ay of accessing capital for the organisation.
The study about IPO and its methods helped us to kno# the different #ays of
going for an IPO.
,nalysis of financial markets helped to kno# about the various types of
markets.
The advantages and disadvantages of going for an IPO are studied.
Thus the overall kno#ledge about IPO is gathered.
An IPO company is difficult to analyze since there isn't a lot of historical
info.
IPO is used by a company to raise its funds. The e9tra amount obtained from
public may be invested in the development o f the company! although it costs a
little to a company but it gives a #ay to get more money for long term
investments.
The ne# issue market failed to mobili$e ade-uate savings from the house
hold secor only 10.HN of financial savings #as mobili$ed one reason for such
failure is lack of a#areness.
I)
SU%%"STIONS
Suggestions
<overnment raises threshold for public shareholding in listed companies2 The
Indian government today amended the &ecurities.
IB
1ontracts /=egulation0 =ules! making it mandatory for listed companies to
have a minimum public holding of (MN.
The investment in IPO can prove too risky because the investor does not kno#
anything about the company because it is listed first time in the market so its
performance cannot be measure.
On the other hand it can be said that the higher the risk higher the returns
earned. &o #e can say that the though risky if investment is done then it can
give higher returns as #ell.
;or e9ample% #e can take the e9ample of =eliance po#er. The Investors
invested in huge amounts #ith the faith that they #ill get good returns but
nothing happened so #hen the IPO got listed. &o one should think and invest
in IPO.
Primary market is more volatile than the secondary market because all the
companies are listed for the first time in the market so nothing can be said
about its performance.
If higher risk is taken! it is al#ays re#arded #ith the higher returns. &o higher
the risk the more the returns re#arded for it.
D.e can fairly predict the future! but canLt make it happen as it is.E
Initial return given by the IPO should not be treated as indication of its success
or failure in the long run.
Investors of the secondary market must take part in the primary markets as it
has been seen that IPO activity in Indian &tock 4arket has been tremendously
gro#ing. ,nd IPO is the safest stock market investment.
Over subscription should be treated as indication of success of the issue.
Investors must analy$e all the sectors before investing in the IPO! in order to
get ma9imum returns.
Investors should take into consideration the promoters of the business! the
prevailing market trend G =ecent IPO performance before investing in an
IPO.
Though IPO is considered as a safe investment avenue but it is very important
to make thorough fundamental study of any IPO before taking the decision. ,s
IM
sometimes a fundamentally strong company may not provide good returns due
to some reasons as in case of 1airn India >td.
efore taking an IPO investment decision it is very necessary to study the
stock market behavior at that time since it can have a vital bearing on the
listing of IPO.
It is very important to study the company individually irrespective of the
gro#th potential of the sector. It is evident from the different IPO
performances of Idea cellular >td. G &pice 1ommunications >td. even #hen
they both belong to the gro#ing Telecom sector.
1ompanies issue their shares information through ne#spapers prospectus.
Theis nis not reached to illiterate persons. Then illiterate person also become
the investors in the company this is useful to be company as #ell as public.
,s per &7I the IPO& must be listed in stock e9change #ith in M days.
II
%$OSS#R&
IO %$OSS#R&
IF
A
#++ocation
This is the amount of stock in an initial public offering /IPO0 granted by the
under#riter to an investor.
#fter-arket
Trading in the IPO subse-uent to its offering is called the aftermarket.
B
Board of Directors
The composition of the oard of 5irectors is particularly critical for an IPO.
Typically! a board is composed of inside and outside directors.
Broken IOs
If an IPO trades belo# its IPO price in the aftermarket! it is said to be a broken
IPO.
C
Ca+endar
This refers to upcoming IPOs and secondary offerings. rokerage houses have
e-uity calendars! bond calendars and municipal calendars.

C+earing rice
The price at #hich all shares of an IPO can be sold to investors in a 5utch
,uction. &ometimes referred to as the Dmarket clearing priceE.
F
IH
2irst Day C+ose
The closing price at the end of the first day of trading reflects not only ho#
#ell the lead manager priced and placed the deal! but #hat the near%term
trading is likely to be.
2+oat
.hen a company is publicly traded! a distinction is made bet#een the total
number of shares outstanding and the number of shares in circulation! referred
to as the float. The float consists of the company"s shares held by the general
public.
G
%reen Shoe
, typical under#riting agreement allo#s the under#riters to buy up to an
additional 1MN of shares at the offering price for a period of several #eeks
after the offering. This option is also called the over allotment and is e9ercised
#hen the IPO is oversubscribed and trading above its offer price. The term
comes from the <reen &hoe 1ompany! #hich #as the first to have this option.
H
Hot Issue
.hen there is significantly more demand than supply for an IPO it is said to
be a hot issue.
I
Initia+ u!+ic Offering
This is the event of a company first selling its shares to the public.
Insiders
4anagement! directors and significant stockholders are regarded as insiders
because they are privy to information about the operations of a company not
kno#n to the general public.
I9
IO rice
Individual investors often ask #hy the price at #hich an IPO starts trading is
different from its offer price. This occurs because the offer price is set by the
under#riters before the stock starts trading. Once the stock starts trading! the
price is determined by actual supply and demand and can be higher or lo#er.
IO Research
Prior to the offering! the under#riters involved in the IPO are prohibited from
issuing research or recommendations for forty days. ;ollo#ing the IPO! the
under#riter is allo#ed to issue a research report
M!
Market Ca)ita+i?ation
The total market value of a firm. It is defined as the product of the company"s
stock price per share and the total number of shares outstanding
Market 5a+ue
The market value of a company is determined by multiplying the number of
shares outstanding by the current price of the stock.
O
Offering rice
This is the price at #hich the IPO is first sold to the public. It is set by the lead
manager! usually after the close of stock market trading the night before the
shares are distributed to IPO buyers. In the case of some foreign IPOs! the
pricing occurs over the #eekend.
Oversu!scri!ed
.hen a deal has more orders than there are shares available it is said to be
oversubscribed.
P
F0
re+i-inary ros)ectus
This is the offering document printed by the company containing a description
of the business! discussion of strategy! presentation of historical financial
statements! e9planation of recent financial results! management and their
backgrounds and o#nership.
roceeds
1ompanies go public to raise money. The money raised is referred to as
proceeds.
R
Red Herring
This is the term of art for the preliminary prospectus. It gets its name from the
printed red disclaimer on the left side of the prospectus.
"V
Under4riter
This is a brokerage firm that raises money for companies using public e-uity
and debt markets. :nder#riters are financial intermediaries that buy stock or
bonds from an issuer and then sell these securities to the public.
5enture Ca)ita+
;unding ac-uired during the pre%IPO process of raising money for companies.
It is done only by accredited investors.
F1
BIB$IO%R#H&
=7;7=7A17&
F(

BOO=S

1. 6han 4. 8 .and @ain. P.6 /(00M0. ;inancial management. Pearson publications
6"BSIT"S
1) http2PP###.google.com
2) http2PP###.crisil.com
3) http2PPiporatings.in
4) http2PP###.ipostatus.com
5) http2PP###.mandhana.com
6) http2PP###.3pinfra.com
7) http2PP###.unitedbankofindia.com
8) http2PP###.moneycontrol.com
9) http2PPmoney.rediff.com
10) ###.nseindia.com
11) ###.sebi.gov.in
12) ###.capitalmarket.com
F)