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Preparation of Red Herring Prospectus

The document provides information about the preparation of a red herring prospectus for VRL Cabs Ltd., a new business venture by VRL Logistics Ltd. that will provide cab services using a technological platform. It discusses the eligibility criteria and documents required for an IPO, services provided by merchant bankers, the duration of the IPO which is 18 months from allotment, and suggests considering price bands used by competitor companies in the industry.

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Rohit Goyal
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0% found this document useful (0 votes)
55 views8 pages

Preparation of Red Herring Prospectus

The document provides information about the preparation of a red herring prospectus for VRL Cabs Ltd., a new business venture by VRL Logistics Ltd. that will provide cab services using a technological platform. It discusses the eligibility criteria and documents required for an IPO, services provided by merchant bankers, the duration of the IPO which is 18 months from allotment, and suggests considering price bands used by competitor companies in the industry.

Uploaded by

Rohit Goyal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Preparation of Red Herring Prospectus

Financial Markets and Services


Christ (Deemed to be University)
3 BBA FIB B
Dr. Prathibha Raj M.S.
August 12th, 2021

Group Members
2023654 Anushka Raj
2023656 Deepanshi Singh
2023658 Fida Firos
2023680 Tanisha Dugar
INTRODUCTION

NAME OF THE NEW BUSINESS - VRL CABS LTD.

Founded in 1976, VRL Logistics Ltd is a well-known logistics transportation company in the
country and the largest commercial vehicle owner in India. The company provides express
services, priority freight, and air passenger transportation. Their safe and reliable logistics
network ensures delivery even in remote locations which has increased their customer base.

The logistics and transport company is now getting into providing cab services using a
technological platform, under the name VRL Cabs Ltd. This new business has its own app that
allows passengers to book a ride anytime, anywhere at affordable prices. It is a friendly, safe, and
comfortable transportation. The special feature about the app that distinguishes VRL Cabs from
other taxi companies is that it has an offline tracking feature. If one does not have internet, they
can book through SMS and the driver whose info is provided can be tracked offline.

ELIGIBILITY CRITERIA AND DOCUMENTS REQUIRED FOR ISSUE OF IPOs

The eligibility criteria are listed below:

● Paid-up capital:

The paid-up share capital of the applicant must be at least Rs 100 million and the
capitalization of the applicant's registered capital must be at least Rs 250 million.

● Prerequisites for listing: Issuer shall comply with Securities Contracts (Regulations) Act
1956, Companies Act 1956/2013, India Securities and Exchange Commission Act 1992,
any regulations or regulations described in previous resolutions, and the authorities in
accordance with the aforementioned regulations. The announcements, clarifications, and
guidelines were issued.
● A track record of at least three years: applicants seeking listing or promoters/promotion
companies incorporated within or outside India, or associations which later became
companies (which did not exist as a company for three years) only in Only those who
meet the SEBI requirements are eligible for listing.
● The company's net assets must be positive and you have not received any NCLT
liquidation request.
● Applicants who wish to list their securities on the stock exchange must meet the
following requirements:
1. Investor Complaint Correction Mechanism: arrangements or mechanisms
developed to correct investor complaints, including the SEBI complaint correction
system.
2. Payment default: Even if the company does not repay the interest and/or capital
of the applicant, promoter/promoter company’s bonds/bond/fixed deposit holders,
it will be considered. These securities will not be considered until the company
has settled all outstanding debts (that is, the payment of principal or interest).
3. Securities Trading: Securities are stocks or bonds that the management intends
to buy or sell in a short period of time for profit. Regardless of whether the
securities are sold individually or through an exchange, all operations must be
performed through a valid transfer contract, and have formal constraints and seals.

Documents Required for Listing of Shares

Following are the documents required to be submitted for a share listing on the
stock exchange:

● Certified copy of Memorandum & Article of Association;


● Prospectus & agreement with underwriters;
● Details of Capital Structure;
● Auditor’s report and copies of financial statement for the last 5 years;
● Copy of shares & debentures, letter of allotment, and letter of regret;
● Changes in the capital structure, borrowings, and other aspects of the firm since its
incorporation;
● Details of shares or debentures issued for a non-cash consideration;
● A statement that defines the distribution of shares as well as additional data about the fee,
brokerage, discounts, or other terms associated with the issuing of shares;
● Agreement with a financial institution, if any;
● A copy of consent from SEBI.

VARIOUS SERVICES AVAILED BY MERCHANT BANKERS

A merchant banker is defined as follows under SEBI rules;


“any person who is engaged in the business of issue management either by arranging for buying,
selling or subscribing to securities or acting as manager, consultant or rendering corporate
advisory services about such issue management”.
Listed below are the services provided by the merchant bankers to customers:
● Project Counselling
● Loan Syndication
● Management of Capital Issues
● Portfolio Management
● Portfolio Counselling

The following are the responsibilities of a merchant banker in the IPO process:
1. Pre-issue role:
It is the stage before issuing the securities to the subs. Some of the major activities done
by the merchant banker about IPO management at this stage are:
● Due diligence of the issuer: The lead manager must do due diligence and satisfy
themselves about all elements of the matter, according to Regulation 24 of the SEBI
(ICDR) Regulation, 2018,includes the draft offer document's truthfulness and sufficiency
of disclosure, and the offer document's validity and adequacy of disclosure. Merchant
bankers must submit a due diligence certificate along with a draft offer agreement to
SEBI.
● Designation of intermediaries: Article 23 of the ICDR Regulation requires the issuer to
designate commercial bankers and other intermediaries, and consult with commercial
bankers. Commercial bankers must also verify the capacity and independence of
intermediary institutions in accordance with these rules.
● Public Offering Documents and Publication of Announcements: According to IDR Rule
26, commercial bankers must ensure that the draft offer letter is open to the public at least
21 days after completing the websites of SEBI and the stock market.
● Calculating requisite fees and ensuring legal compliances: It is the merchant banker's
responsibility to determine the requisite fee to be paid with the draft offer document listed
in Schedule III and to verify that the issue complies with all applicable legal compliance.
2. Post-issue role:
The stage after the securities are issued to the subscribers is known as the post-issue role.
This includes:
● Allotment procedure and basis of allotment: In compliance with Regulation 49 of
ICDR Regulations, the merchant banker, the registrar of the issue, along with the
MD of the recognized stock exchange, is responsible for ensuring that the basis of
allocation is concluded fairly and properly.
● Post-issue monitoring report: In the case of an IPO, the merchant banker must
provide a post-issue monitoring report on the third day after the issue's
subscription period has ended.
● Post-issue advertisement: Regulation 51 of the ICDR regulations requires
merchant bankers to ensure that a post-issue advertisement detailing subscription,
the basis of allotment, value, and percentage of all applicants, date of filing of
listing application, and other information is published in at least one nationwide
English and Hindi newspaper within ten days of the date of various activities.
● Redressal of investors grievance: The Post-Issue Lead Merchant Banker will be
actively involved in post-issue operations such as allocation, refund, and
despatch, and will frequently monitor the resolution of investor concerns.
● Certificate regarding the realization of stock investors and other requirements
Operational guidelines prescribed by SEBI:

Submission of the draft and final offer documents, instructions on post-obligations, and
the issuance of penalty points are all examples of merchant banker(s) compliance
requirements in connection to operational standards.

DURATION OF IPO

The lock-in period in an IPO typically begins with the allotment date in the proposed public
offering and the end date is calculated as three years from the allotment date.
Market regulator SEBI recently announced that the lock-up period for a promoter's shares in an
IPO company would be reduced to 18 months from the date the IPO shares were awarded instead
of the current three years, under certain conditions .
Thus the duration of IPO of our new company VRL CABS LTD. is 18 months from the
allotment date - April 15, 2021.

PRICE BANDS SUGGESTION


A price band is a way of determining value in which the seller specifies an upper and lower cost
range within which buyers must make bids. This method is commonly utilized in initial public
offerings (IPOs).

The promoters or selling shareholders of a company determine the price band in cooperation
with the book running lead managers. It allows a company to determine how much money
investors are willing to pay for a share of the company's ownership.

Competitor companies’ price bands in the industry


Based on observing various competitor’s price bands, we can consider the following:

Duration of IPO: April 15th - April 17th


Price Band: 357.4 - 380
Floor cap: Rs 357.4
Cap Price: Rs. 380

DRAWING INFERENCES ON THE SUCCESS OR FAILURE OF THIS PARTICULAR


COMPANY

India has a highly disorganized and poor infrastructure of public transport that makes it
challenging for passengers to travel due to lack of availability, safety, reliability, quality, etc.
VRL Cabs solves this problem by offering quick and reliable transportation at fair prices. Within
a single app, the passengers can book a cab with various features like drivers info, emergency
button, translators, etc which provides a comfortable and safe experience. An advantage VRL
Cabs has over its competitors is the option of booking and tracking offline as this is one of the
major challenges technology-based transportation companies face.

REFERENCES
● Role of Merchant Banker in IPO Management (with case study). (2020). TaxGuru.

https://taxguru.in/sebi/role-merchant-banker-ipo-management-with-case-study.html

● 13 Different Services Rendered by Merchant Bankers - Googlesir. (2020, July 14).

Googlesir. https://www.googlesir.com/services-offered-by-merchant-bankers/

● “SEBI | VRL Logistics Limited.” Www.sebi.gov.in, www.sebi.gov.in/filings/public-

issues/apr-2015/vrl-logistics-limited_29564.html. Accessed 11 Aug. 2021.

● India, N. (2021). Eligibility Criteria - NSE India. NSE India.


https://www.nseindia.com/companies-listing/raising-capital-public-issues-eligibility-
equity-debt
● ‌Shaji, A. M. (2017, August 9). Shares Listing Procedure in India - Enterslice Fintech.
Enterslice. https://enterslice.com/learning/shares-listing-procedure-in-india/
● Choudhury, A. (2021, January 12). Uber’s Success Is Deeply Tied To Its Success In

India: Shirish Andhare. Analytics India Magazine. https://analyticsindiamag.com/ubers-

success-is-deeply-tied-to-its-success-in-india-shirish-andhare/

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