EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
The India Info line group, comprising the holding company, India Info line Limited and its wholly-owned subsidiaries, straddle the entire financial services space with offerings ranging from Equity research, Equities and derivatives trading, Commodities trading, Portfolio management Services, Mutual Funds, Life Insurance, Fixed deposits, Govt. bonds and other small savings instruments to loan products and Investment banking. India Info line also owns and manages the websites www.indiainfoline. Command www.5paisa.com The Company has a network of 976 business locations (branches and sub-brokers) spread across 365 cities and towns. It has more than 800,000 customers. In todays competitive world there are many goods chasing few customers some are trying it expands their size and share of existing market. As a result there are loser and winners. Winners are those who carefully analyze needs identify opportunities and create aloe rich offers for target customer. The objective of the market research to determine the demand and supply and use of the product and competitors study so as to get the total market scenario of the product for analyzing market problem research is needed. A firm can obtained market research in a number of ways. It can hire market research firm or it can ask student to design and carry out market research project. These marketing problems and opportunities if entrust to the student of marketing. Specially when they seek the same during the project gives opportunities to apply their theoretical knowledge and managerial knowledge. India infoline.com/5paisa.com is related to share market, it is equity to caused organization tracing its lineage to SSKL, a veteran solution company with over 8 decades of experience in the lead in stock market.

OBJECTIVE

Objective of the Study

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The objective of this study to know how the companies are able to raise funds from the private or public market.

To Analysis the IPO market. To know the book building process of IPOs To know the process of pricing of IPOs. What is the role of SEBI in issuing the IPOs in market

INTRODUCTION

INTRODUCTION
INITIAL PUBLIC OFFERING (IPO)

The first public offering of equity shares or convertible securities by a company, which is followed by the listing of a companys shares on a stock exchange, is known as an Initial Public Offering. In other words, it refers to the first sale of a companys common shares to investors on a public stock exchange, with an intention to raise new capital. The most important objective of an IPO is to raise capital for the company. It helps a company to tap a wide range of investors who would provide large volumes of capital to the company for future growth and development. A company going for an IPO stands to make a lot of money from the sale of its shares which it tries to anticipate how to use for further expansion and development. The company is not required to repay the capital and the new shareholders get a right to future profits distributed by the company.

Companies fall into two broad categories: Private and Public.

A privately held company has fewer shareholders and its owners don't have to disclose much information about the company. When a privately held corporation needs additional capital, it can borrow cash or sell stock to raise needed funds. Often "going public" is the best choice for a growing business. Compared to the costs of borrowing large sums of money for ten years or more, the costs of an initial public offering are small. The capital raised never has to be repaid. When a company sells its stock publicly, there is also the possibility for appreciation of the share price due to market factors not directly related to the company. Anybody can go out and incorporate a company: just put in some money, file the right legal documents and follow the reporting rules of jurisdiction such as Indian Companies Act 1956. It usually isn't possible to buy shares in a private company. One can approach the owners 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 exchange. This is why doing an IPO is also referred to as "going public."

Why go public??
Before deciding whether one should complete an IPO, it is important to consider the positive and negative effects that going public may have on their mind. Typically, companies go public to raise and to provide liquidity for their shareholders. But there can be other benefits. Going public raises cash and usually a lot of it. Being publicly traded also opens many financial doors: Because of the increased scrutiny, public companies can usually get better rates when they issue debt.

As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of the deal.

Trading in the open markets means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent.

Going public can also boost a companys reputation which in turn, can help the company to expand in the marketplace.

Company profile

Company profile About Us

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We are a one-stop financial services shop, most respected for quality of its advice, personalised service and cutting-edge technology.

Vision Statement :

Our vision is to be the most respected company in the financial services space.

India Infoline Group :

The India Infoline group, comprising the holding company, India infoline limited and its wholly-owned subsidiaries, straddle the entire financial services space with offerings ranging from equity research, equities and derivatives trading, commodities trading, portfolio management services, mutual funds, life insurance, fixed deposits, goi bonds and other small savings instruments to loan products and investment banking. India Infoline also owns and manages the websites www.indiainfoline.com and www.5paisa.com the company has a network of over 2100 business locations (branches and sub-brokers) spread across more than 450 cities and towns. The group caters to approximately a million customers.

India Infoline Group subsidiaries:

India Infoline Media and Research Services Limited India Infoline Commodities Limited India Infoline Marketing & Services India Infoline Investment Services Limited

IIFL (Asia) Pte Limited

Our Global Presence:

USA, Dubai, Singapore

History
We were founded in 1995 by Mr. Nirmal Jain (Chairman and Managing Director) as an independent business research and information provider. We gradually evolved into a one-stop financial services solutions provider. Our strong management team comprises competent and dedicated professionals We are a pan-India financial services organization across 1,361 business locations and a presence in 428 cities. Our global footprint extends across geographies with offices in New York, Singapore and Dubai. We are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). We offer a wide range of services and products comprising broking (retail and institutional equities and commodities), wealth management, credit and finance, insurance, asset management and investment banking. We are registered with the BSE and the NSE for securities trading, MCX, NCDEX and DGCX for commodities trading, CDSL and NSDL as depository participants. We are registered as a Category I merchant banker and are a SEBI registered portfolio manager. We also received the FII license in IIFL Inc. IIFL Securities Pte Ltd received approval from the Monetary Authority of Singapore to carry out corporate advisory and dealing in securities operations. Two subsidiaries India Infoline Investment Services 10

and Moneyline Credit Limited are registered with RBI as non-deposit taking nonbanking financial services companies. India infoline Housing Finance Ltd, the housing finance arm, is registered with the National Housing Bank.

Milestones 1995
Incorporated as an equity research and consulting firm with a client base that included leading FIIs, banks, consulting firms and corporates.

1999
Restructured the business model to embrace the internet; launched archives.indiainfoline.com mobilised capital from reputed private equity investors.

2000
Commenced the distribution of personal financial products; launched online equity trading; entered life insurance distribution as a corporate agent. Acknowledged by Forbes as Best of the Web and ...must read for investors.

2004
Acquired commodities broking license; launched Portfolio Management Service.

2005
Listed on the Indian stock markets.

2006
Acquired membership of DGCX; launched investment banking services.

2007
Launched a proprietary trading platform; inducted an institutional equities team; formed a 11

Singapore subsidiary; raised over USD 300 mn in the group; launched consumer finance business under the Money line brand.

2008
Launched wealth management services under the IIFL Wealth brand; set up India Infoline Private Equity fund; received the Insurance broking license from IRDA; received the venture capital license; received in principle approval to sponsor a mutual fund; received Best broker- India award from Finance Asia; Most Improved Brokerage- India award from Asia money.

2009
Received registration for a housing finance company from the National Housing Bank; received Fastest growing Equity Broking House - Large firms in India by Dun & Bradstreet.

Company Structure
India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services and Portfolio Management Services. It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL as a depository participant, providing a one-stop solution for clients trading in the equities market. It has recently launched its Investment banking and Institutional Broking business.

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A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. These services are offered to clients as different schemes, which are based on differing investment strategies made to reflect the varied risk-return preferences of clients.

India Infoline Media and Research Services Limited.

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The content services represent a strong support that drives the broking, commodities, mutual fund and portfolio management services businesses. Revenue generation is through the sale of content to financial and media houses, Indian as well as global. It undertakes equities research which is acknowledged by none other than Forbes as 'Best of the Web' and 'a must read for investors in Asia'. India Info lines research is available not just over the internet but also on international wire services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where India Infoline is amongst the most read Indian brokers.

India Infoline Commodities Limited.

India Infoline Commodities Pvt Limited is engaged in the business of commodities broking. Our experience in securities broking empowered us with the requisite skills and technologies to allow us offer commodities broking as a contra-cyclical alternative to equities broking. We enjoy memberships with the MCX and NCDEX, two leading Indian commodities exchanges, and recently acquired membership of DGCX. We have a multi-channel delivery model, making it among the select few to offer online as well as offline trading facilities.

India Infoline Marketing & Services

India Infoline Marketing and Services Limited is the holding company of India Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited. (a) India Infoline Insurance Services Limited is a registered Corporate Agent with the Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate Agent for ICICI Prudential Life Insurance Co Limited, which is India's largest private Life Insurance Company. India Infoline was the first corporate agent to get licensed by IRDA 14

in early 2001. (b) India Infoline Insurance Brokers Limited is a newly formed subsidiary which will carry out the business of Insurance broking. We have applied to IRDA for the insurance broking licence and the clearance for the same is awaited. Post the grant of license, we propose to also commence the general insurance distribution business.

India Infoline Investment Services Limited

Consolidated shareholdings of all the subsidiary companies engaged in loans and financing activities under one subsidiary. Recently, Orient Global, a Singapore-based investment institution invested USD 76.7 million for a 22.5% stake in India Infoline Investment Services. This will help focused expansion and capital raising in the said subsidiaries for various lending businesses like loans against securities, SME financing, distribution of retail loan products, consumer finance business and housing finance business. India Infoline Investment Services Private Limited consists of the following step-down subsidiaries. (a) India Infoline Distribution Company Limited (distribution of retail loan products) (b) Money line Credit Limited (consumer finance) (c) India Infoline Housing Finance Limited (housing finance)

IIFL (Asia) Pte Limited

IIFL (Asia) Pte Limited is wholly owned subsidiary which has been incorporated in Singapore to pursue financial sector activities in other Asian markets. Further to obtaining the necessary regulatory approvals, the company has been initially capitalized at 1 million Singapore dollars.

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Management Team

Mr. Nirmal Jain Chairman & Managing Director India Infoline Ltd.

Nirmal Jain, MBA (IIM, Ahmadabad) and a Chartered and Cost Accountant, founded Indias leading financial services company India Infoline Ltd. in 1995, providing globally acclaimed financial services in equities and commodities broking, life insurance and mutual funds distribution, among others. Mr. Jain began his career in 1989 with Hindustan Levers commodity export business, contributing tremendously to its growth. He was also associated with Inquire-Indian Equity Research, which he cofounded in 1994 to set new standards in equity research in India. Mr. R Venkataraman Executive Director India Infoline Ltd.

R Venkataraman, co-promoter and Executive Director of India Infoline Ltd., is a

B. Tech (Electronics and Electrical Communications Engineering, IIT Kharagpur) and 16

an MBA (IIM Bangalore). He joined the India Infoline board in July 1999. He previously held senior managerial positions in ICICI Limited, including ICICI Securities Limited, their investment banking joint venture with J P Morgan of USA and with BZW and Taib Capital Corporation Limited. He was also Assistant Vice President with G E Capital Services India Limited in their private equity division, possessing a varied experience of more than 16 years in the financial services sector.

The Board of Directors

Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India Infoline Ltd. comprises: Mr Nilesh Vikamsey Independent Director India Infoline Ltd. Mr. Vikamsey, Board member since February 2005 - a practising Chartered Accountant and partner (Khimji Kunverji & Co., Chartered Accountants), a member firm of HLB International, headed the audit department till 1990 and thereafter also handles financial services, consultancy, investigations, mergers and acquisitions, valuations etc; an ICAI study group member for Proposed Accounting Standard 30 on Financial Instruments Recognition and Management, Finance Committee of The Chamber of Tax Consultants (CTC), Law Review, Reforms and Rationalization Committee and Infotainment and Media Committee of Indian Merchants Chamber (IMC) and Insurance Committee and Legal Affairs Committee of Bombay Chamber of 17

Commerce and Industry (BCCI). Mr. Vikamsey is a director of Miloni Consultants Private Limited, HLB Technologies (Mumbai) Private Limited and Chairman of HLB India. Mr Sat Pal Khattar Non Executive Director India Infoline Ltd. Mr Sat Pal Khattar, - Board member since April 2001 - Presidential Council of Minority Rights member, Chairman of the Board of Trustee of Singapore Business Federation, is also a life trustee of SINDA, a non profit body, helping the under-privileged Indians in Singapore. He joined the India Infoline board in April 2001. Mr Khattar is a Director of public and private companies in Singapore, India and Hong Kong; Chairman of Guocoland Limited listed in Singapore and its parent Guoco Group Ltd listed in Hong Kong, a leading property company of Singapore, China and Malaysia. A Board member of India Infoline Ltd, Gateway Distriparks Ltd both listed and a number of other companies he is also the Chairman of the Khattar Holding Group of Companies with investments in Singapore, India, UK and across the world.

Mr Kranti Sinha Independent Director India Infoline Ltd. Mr. Kranti Sinha Board member since January 2005 completed his masters from 18

the Agra University and started his career as a Class I officer with Life Insurance Corporation of India. He served as the Director and Chief Executive of LIC Housing Finance Limited from August 1998 to December 2002 and concurrently as the Managing Director of LICHFL Care Homes (a wholly owned subsidiary of LIC Housing Finance Limited). He retired from the permanent cadre of the Executive Director of LIC; served as the Deputy President of the Governing Council of Insurance Institute of India and as a member of the Governing Council of National Insurance Academy, Noida apart from various other such bodies. Mr. Sinha is also on the Board of Directors of Hindustan Motors Limited, Larsen & Toubro Limited, LICHFL Care Homes Limited, Gremach Infrastructure Equipments and Projects Limited and Cinemax (India) Limited. Mr Arun K. Purvar Independent Director India Infoline Ltd. Mr. A.K. Purvar Board member since March 2008 completed his Masters degree in commerce from Allahabad University in 1966 and a diploma in Business Administration in 1967. Mr. Purwar joined the State Bank of India as a probationary officer in 1968, where he held several important and critical positions in retail, corporate and international banking, covering almost the entire range of commercial banking operations in his illustrious career. He also played a key role in cocoordinating the work for the Bank's entry into the field of insurance. After retiring from the Bank at end May 2006, Mr. Purwar is now working as Member of Board of Governors of IIM-Lucknow, joined IIMIndore as a visiting professor, joined as a Hon.19

Professor in NMIMS and he is also a member of Advisory Board for Institute of Indian Economic Studies (IIES), Waseda University, Tokyo, Japan. He has now taken over as Chairman of India Venture Advisors Pvt. Ltd., as well as IL & FS Renewable Energy Limited. He is also working as Independent Director in leading companies in Telecom, Steel, Textiles, Auto parts, Engineering and Consultancy.

Companys philosophy on Corporate Governance The India Infoline Group is committed to placing the Investor First, by continuously striving to increase the efficiency of the operations as well as the systems and processes for use of corporate resources in such a way so as to maximize the value to the stakeholders. The Group aims at achieving not only the highest possible standards of legal and regulatory compliances, but also of effective management.

Committee

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Audit Committee
Terms of reference & Composition, Name of members and Chairman: The Audit committee comprises Mr Nilesh Vikamsey, Chairman of the Committee, Mr Sat Pal Khattar, Mr Sanjiv Ahuja and Mr Kranti Sinha, three of whom are independent Directors. The Managing Director, the Executive Director along with the Statutory and Internal Auditors are invitees to the Meeting. The Terms of reference of this committee are as under: - To investigate into any matter that may be prescribed under the provisions of Section 292A of The Companies Act, 1956 Recommendation and removal of External Auditor and fixation of the Audit Fees. Reviewing with the management the financial statements before submission of the same to the Board. - Overseeing of Companys financial reporting process and disclosure of its financial information. - Reviewing the Adequacy of the Internal Audit Function.

Compensation/ Remuneration Committee

Terms of reference & Composition, Name of members and Chairman: The Compensation / Remuneration Committee comprise Mr Sanjiv Ahuja, Chairman of the Committee, Mr Nilesh Vikamsey and Mr Kranti Sinha, all of whom are independent Directors. The Terms of reference of this committee are as under: - To fix suitable remuneration package of all the Executive Directors and Non Executive Directors, Senior Employees and officers i.e. Salary, perquisites, bonuses, stock options, pensions etc. - Determination of the fixed component and performance 21

linked incentives alongwith the performance criteria to all employees of the company - Service Contracts, Notice Period, Severance Fees of Directors and employees. Stock Option details: whether to be issued at discount as well as the period over which to be accrued and over which exercisable. - To conduct discussions with the HR department and form suitable remuneration policies.

Share Transfer and Investor Grievance Committee

Details of the Members, Compliance Officer, No of Complaints received and pending and pending transfers as on close of the financial year. The committee functions under the Chairmanship of Mr Kranti Sinha, a Non-executive independent Director. The other Members of the committee are Mr Sanjiv Ahuja, Independent Director and Mr R Venkataraman, Executive Director. Ms Komal Parikh, Company Secretary is the Compliance Officer of the Company.

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Data Analysis And Interpretation

Comparison of indiainfo line with other brokers

PATICULARS

INFOLINE

ICICI-DIRECT

SHARE-

RELIANCE23

Initial Charge (in Rs) Initial Margin (In Rs) AMC (In Rs) Brokerage (In Rs) F&O Segment

555 2000 NIL .05% .50% .05/LOT

975 5000 500 (after 1 year) .075% .75% N.A

KHAN 750 5000 300 (after 1 year) .10% .50% N.A

MONEY 750 500 (a/c access fee) 500 (after 1 year) .10% .50% N.A

Results on the Basis of charges There are the two type of the transaction:1. Intra-day based 2. Delivery based

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Comment:- According to the survey HDFC securities charge maximum brokerage as compare to others whereas India Infoline Ltd. charge only 0.20 paisa on maximum investment

ROLE OF STOCK BROKER

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A stock broker is a professional who buys and sells stocks and other securities in the stock market through the book makers from the stock investors. As per the law in United States one needs to pass the General Securities Representative Examination or the Series 7 exam for working as a stock broker. Brokers provide different types of services to their clients. Execution only - In this service the broker only carries out the trading according to the direction of the investor. This is the basic and the most commonly used service of the brokers. Advisory dealing - In this service the broker not only performs the buying and selling instructions of the client but also advises the investor about which stock to buy and which stock to sell. Discretionary dealing - This is the most comprehensive service that a broker provides. In this case the broker has the discretionary power to take the investment decisions on behalf of the investor. These are the basic services provided by the stock market brokers and it completely depends on you which service you will subscribe to. For example, if you are quite apt at stock market analysis and can regularly watch on the happenings of stock market and the stocks in which you invest, it is better to have a stockbroker to execute your buying and selling instructions. It will not only save the service charges but also give you full confidence in stock market trading.

ANALYSING AN IPO INVESTMENT

POTENTIAL INVESTORS AND THEIR OBJECTIVES:

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Initial Public Offering is a cheap way of raising capital, but all the same it is not considered as the best way of investing for the investor. Before investing, the investor must do a proper analysis of the risks to be taken and the returns expected. He must be clear about the benefits he hope to derive from the investment. The investor must be clear about the objective he has for investing, whether it is long-term capital growth or short-term capital gains. The potential investors and their objectives could be categorized as:

INCOME INVESTOR:
An income investor is the one who is looking for steadily rising profits that will be distributed to shareholders regularly. For this, he needs to examine the company's potential for profits and its dividend policy.

GROWTH INVESTOR:
A growth investor is the one who is looking for potential steady increase in profits that are reinvested for further expansion. For this he needs to evaluate the company's growth plan, earnings and potential for retained earnings.

SPECULATOR:

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A speculator looks for short-term capital gains. For this he needs to look for potential of an early market breakthrough or discovery that will send the price up quickly with little care about a rapid decline.

INVESTOR RESEARCH:
It is imperative to properly analyze the IPO the investor is planning to invest into. He needs to do a thorough research at his end and try to figure out if the objective of the company match his own personal objectives or not. The unpredictable nature of IPOs and volatility of the stock market adds greatly to the risk factor. So, it is advisable that the investor does his homework, before investing. The investor should know about the following:

BUSINESS OPERATIONS:
What are the objectives of the business? What are its management policies? What is the scope for growth? What is the turnover of the labor force? Would the company have long-term stability?

FINANCIAL

OPERATIONS:
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What is the companys credit history? What is the companys liquidity position? Are there any defaults on debts? Companys expenditure in comparison to competitors. Companys ability to pay-off its debts. What are the projected earnings of the company

MARKETING OPERATIONS:
Who are the potential investors? What is the scope for success of the IPO? What is the appeal of the IPO for the other investors? What are the products and services offered by the company? Who are the strongest competitors of the company?

SIGNIFICANCE OF IPO

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Investing in IPO has its own set of advantages and disadvantages. Where on one hand, high element of risk is involved, if successful, it can even result in a higher rate of return. The rule is: Higher the risk, higher the returns. The company issues an IPO with its own set of management objectives and the investor looks for investment keeping in mind his own objectives. Both have a lot of risk involved. But then investment also comes with an advantage for both the company and the investors. The significance of investing in IPO can be studied from 2 viewpoints for the company and for the investors. This is discussed in detail as follows:

SIGNIFICANCE TO THE COMPANY:

When a privately held corporation needs additional capital, it can borrow cash or sell stock to raise needed funds. Or else, it may decide to go public. "Going Public" is the best choice for a growing business for the following reasons:

The costs of an initial public offering are small as compared to the costs of borrowing large sums of money for ten years or more,

The capital raised never has to be repaid.

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When a company sells its stock publicly, there is also the possibility for appreciation of the share price due to market factors not directly related to the company.

It allows a company to tap a wide pool of investors to provide it with large volumes of capital for future growth.

SIGNIFICANCE TO THE SHAREHOLDERS:

The investors often see IPO as an easy way to make money. One of the most attractive features of an IPO is that the shares offered are usually priced very low and the companys stock prices can increase significantly during the day the shares are offered. This is seen as a good opportunity by speculative investors looking to notch out some short-term profit. The speculative investors are interested only in the short-term potential rather than longterm gains.

THE RISK FACTOR

Investing in IPO is often seen as an easy way of investing, but it is highly risky and many investment advisers advise against it unless you are particularly experienced and knowledgeable. The risk factor can be attributed to the following reasons: 31

UNPREDICTABLE:
The Unpredictable nature of the IPOs is one of the major reasons that investors advise against investing in IPOs. Shares are initially offered at a low price, but they see significant changes in their prices during the day. It might rise significantly during the day, but then it may fall steeply the next day.

NO PAST TRACK RECORD OF THE COMPANY:

No past track record of the company adds further to the dilemma of the shareholders as to whether to invest in the IPO or not. With no past track record, it becomes a difficult choice for the investors to decide whether to invest in a particular IPO or not, as there is basis to decide whether the investment will be profitable or not.

POTENTIAL OF STOCK MARKET:

Returns from investing in IPO are not guaranteed. The Stock Market is highly volatile. Stock Market fluctuations widely affect not only the individuals and household, but the economy as a whole. The volatility of the stock market makes it difficult to predict how the shares will perform over a period of time as the profit and risk potential of the IPO depends upon the state of the stock market at that particular time.

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RISK ASSESSMENT:
The possibility of buying stock in a promising start-up company and finding the next success story has intrigued many investors. But before taking the big step, it is essential to understand some of the challenges, basic risks and potential rewards associated with investing in an IPO. This has made Risk Assessment an important part of Investment Analysis. Higher the desired returns, higher would be the risk involved. Therefore, a thorough analysis of risk associated with the investment should be done before any consideration. For investing in an IPO, it is essential not only to know about the working of an IPO, but we also need to know about the company in which we are planning to invest. Hence, it is imperative to know: The fundamentals of the business The policies and the objectives of the business Their products and services Their competitors Their share in the current market The scope of their issue being successful It would be highly risky to invest without having this basic knowledge about the company.

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There are 3 kinds of risks involved in investing in IPO:

BUSINESS RISK:
It is important to note whether the company has sound business and management policies, which are consistent with the standard norms. Researching business risk involves examining the business model of the company.

FINANCIAL RISK:
Is this company solvent with sufficient capital to suffer short-term business setbacks? The liquidity position of the company also needs to be considered. Researching financial risk involves examining the corporation's financial statements, capital structure, and other financial data.

MARKET RISK:
It would beneficial to check out the demand for the IPO in the market, i.e., the appeal of the IPO to other investors in the market. Hence, researching market risk involves examining the appeal of the corporation to current and future market conditions.

IPO INVESTMENT STRATEGIES

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Investing in IPOs is much different than investing in seasoned stocks. This is because there is limited information and research on IPOs, prior to the offering. And immediately following the offering, research opinions emanating from the underwriters are invariably positive. There are some of the strategies that can be considered before investing in the IPO:

UNDERSTAND THE WORKING OF IPO:

The first and foremost step is to understand the working of an IPO and the basics of an investment process. Other investment options could also be considered depending upon the objective of the investor.

GATHER KNOWLEDGE:
It would be beneficial to gather as much knowledge as possible about the IPO market, the company offering it, the demand for it and any offer being planned by a competitor.

INVESTIGATE BEFORE INVESTING:

The prospectus of the company can serve as a good option for finding all the details of the company. It gives out the objectives and principles of the management and will also cover the risks.

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 KNOW YOUR BROKER:

This is a crucial step as the broker would be the one who would majorly handle your money. IPO allocations are controlled by underwriters. The first step to getting IPO allocations is getting a broker who underwrites a lot of deals.

MEASURE THE RISK INVOLVED:

IPO investments have a high degree of risk involved. It is therefore, essential to measure the risks and take the decision accordingly.

INVEST AT YOUR OWN RISK: Finally, after the homework is done, and the big step needs to be taken. All that can be suggested is to invest at your own risk. Do not take a risk greater than your capacity.

PRICING OF AN IPO

The pricing of an IPO is a very critical aspect and has a direct impact on the success or failure of the IPO issue. There are many factors that need to be considered while pricing an IPO and an attempt should be made to reach an IPO price that is low enough to generate 36

interest in the market and at the same time, it should be high enough to raise sufficient capital for the company. The process for determining an optimal price for the IPO involves the underwriters arranging share purchase commitments from leading institutional investors.

PROCESS:
Once the final prospectus is printed and distributed to investors, company management meets with their investment bank to choose the final offering price and size. The investment bank tries to fix an appropriate price for the IPO depending upon the demand expected and the capital requirements of the company. The pricing of an IPO is a delicate balancing act as the investment firms try to strike a balance between the company and the investors. The lead underwriter has the responsibility to ensure smooth trading of the companys stock. The underwriter is legally allowed to support the price of a newly issued stock by either buying them in the market or by selling them short.

IPO PRICING DIFFERENCES:

It is generally noted, that there is a large difference between the price at the time of issue of an Initial Public Offering (IPO) and the price when they start trading in the secondary market.

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These pricing disparities occur mostly when an IPO is considered hot, or in other words, when it appeals to a large number of investors. An IPO is hot when the demand for it far exceeds the supply. This imbalance between demand and supply causes a dramatic rise in the price of each share in the first day itself, during the early hours of trading.

UNDERPRICING AND OVERPRICING OF IPOs

UNDERPRICING:
The pricing of an IPO at less than its market value is referred to as Underpricing. In other words, it is the difference between the offer price and the price of the first trade. Historically, IPOs have always been underpriced. Underpriced IPO helps to generate additional interest in the stock when it first becomes publicly traded. This might result in significant gains for investors who have been allocated shares at the offering price. However, underpricing also results in loss of significant amount of capital that could have been raised had the shares been offered at the higher price.

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OVERPRICING:
The pricing of an IPO at more than its market value is referred to as Overpricing. Even overpricing of shares is not as healthy option. If the stock is offered at a higher price than what the market is willing to pay, then it is likely to become difficult for the underwriters to fulfill their commitment to sell shares. Furthermore, even if the underwriters are successful in selling all the issued shares and the stock falls in value on the first day itself of trading, then it is likely to lose its marketability and hence, even more of its value.

PRINCIPAL STEPS IN AN IPO

Approval of BOD: Approval of BOD is required for raising capital from the public.

Appointment of lead managers: the lead manager is the merchant banker who
orchestrates the issue in consultation of the company.

Appointment of other intermediaries:

Co-managers and advisors Underwriters 39

Bankers Brokers and principal brokers Registrars

Filing the prospectus with SEBI: The prospectus or the offer

document communicates information about the company and the proposed security issue to the investing public. All the companies seeking to make a public issue have to file their offer document with SEBI. If SEBI or public does not communicate its observations within 21 days from the filing of the offer document, the company can proceed with its public issue.

Filing of the prospectus with the registrar of the companies: once the prospectus have been approved by the
concerned stock exchanges and the consent obtained from the bankers, auditors, registrar, underwriters and others, the prospectus signed by the directors, must be filed with the registrar of companies, with the required documents as per the companies act 1956.

Printing and dispatch of prospectus: After the prospectus is

filed with the registrar of companies, the company should print the prospectus. The quantity in which prospectus is printed should be sufficient to meet requirements. They should be send to the stock 40

exchanges and brokers so they receive them at least 21 days before the first announcement is made in the news papers.

Filing of initial listing application: Within 10 days of filing the

prospectus, the initial listing application must be made to the concerned stock exchanges with the listing fees.

Promotion of the issue:

The promotional campaign typically

commences with the filing of the prospectus with the registrar of the companies and ends with the release of the statutory announcement of the issue.

Statutory announcement: The issue must be made after seeking

approval of the stock exchange. This must be published at least 10 days before the opening of the subscription list.

Collections of applications:

The Statutory announcement

specifies when the subscription would open, when it would close, and the banks where the applications can be made. During the period the subscription is kept open, the bankers will collect the applications on behalf of the company.

41

Processing of applications: Scrutinizing of the applications is

done.

Establishing the liability of the underwriters: If the issue is

undersubscribed, the liability of the underwriters has to be established.

Allotment of shares: Proportionate system of allotment is to be

followed.

Listing of the issue: The detail listing application should be

submitted to the concerned stock exchange along with the listing agreement and the listing fee. The allotment formalities should be completed within 30 days.

Book building is the process of price discovery (Basic concept)

The company does not come out with a fixed price for its shares; instead, it indicates a price band that mentions the lowest (referred to as the floor) and the highest (the cap) prices at which a share can be sold.

42

Bids are then invited for the shares. Each investor states how many shares s/he wants and what s/he is willing to pay for those shares (depending on the price band). The actual price is then discovered based on these bids. As we continue with the series, we will explain the process in detail.

According to the book building process, three classes of investors can bid for the shares:

1. Qualified Institutional Buyers: Mutual funds and Foreign Institutional Investors. 2. Retail investors: Anyone who bids for shares under Rs 50,000 is a retail investor. 3. High net worth individuals and employees of the company.

Allotment is the process whereby those who apply are given (allotted) shares. The bids are first allotted to the different categories and the over-subscription (more shares applied for than shares available) in each category is determined. Retail investors and high net worth individuals get allotments on a proportional basis.

Example 1:
Assuming you are a retail investor and have applied for 200 shares in the issue, and the issue is over-subscribed five times in the retail category, you qualify to get 40 shares (200 shares/5). Sometimes, the over-subscription is huge or the issue is priced so high that 43

you can't really bid for too many shares before the Rs 50,000 limit is reached. In such cases, allotments are made on the basis of a lottery.

Example 2:
Say, a retail investor has applied for five shares in an issue, and the retail category has been over-subscribed 10 times. The investor is entitled to half a share. Since that isn't possible, it may then be decided that every 1 in 2 retail investors will get allotment. The investors are then selected by lottery and the issue allotted on a proportional basis. That is why there is no way you can be sure of getting an allotment.

BOOK BUILDING PROCESS

Book Building is basically a capital issuance process used in Initial Public Offer (IPO) which aids price and demand discovery. It is a process used for marketing a public offer of equity 44

shares of a company. It is a mechanism where, during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The process aims at tapping both wholesale and retail investors. The offer/issue price is then determined after the bid closing date based on certain evaluation criteria.

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46

The Process:
The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'.

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

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

Investors place their order with a syndicate member who inputs the orders into the 'electronic book'. This process is called 'bidding' and is similar to open auction.

A Book should remain open for a minimum of 5 days.

Bids cannot be entered less than the floor price.

Bids can be revised by the bidder before the issue closes.

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 On the close of the book building period the 'book runner evaluates the bids on the basis of the evaluation criteria which may include Price Aggression Investor quality Earliness of bids, etc.

The book runner the company concludes the final price at which it is willing to issue the stock and allocation of securities.

Generally, the numbers of shares are fixed; the issue size gets frozen based on the price per share discovered through the book building process.

Allocation of securities is made to the successful bidders. Book Building is a good concept and represents a capital market which is in the process of maturing.

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Book-building is all about letting the company know the price at which you are willing to buy the stock and getting an allotment at a price that a majority of the investors are willing to pay. The price discovery is made depending on the demand for the stock. The price that you can suggest is subject to a certain minimum price level, called the floor price. For instance, the floor price fixed for the Maruti's initial public offering was Rs 115, which means that the price you are willing to pay should be at or above Rs 115. In some cases, as in Biocon, the price band (minimum and maximum price) at which you can apply is specified. A price band of Rs 270 to Rs 315 means that you can apply at a floor price of Rs 270 and a ceiling of Rs 315. If you are not still very comfortable fixing a price, do not worry. You, as a retail investor, have the option of applying at the cut-off price. That is, you can just agree to pick up the shares at the final price fixed. This way, you do not run the risk of not getting an allotment because you have bid at a lower price. If you bid at the cut-off price and the price is revised upwards, then the managers to the offer may reduce the number of shares allotted to keep it within the payment already made. You can get the application forms from the nearest offices of the lead managers to the offer or from the corporate or the registered office of the company.

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How is the price fixed?

All the applications received till the last date are analysed and a final offer price, known as the cut-off price is arrived at. The final price is the equilibrium price or the highest price at which all the shares on offer can be sold smoothly. If your price is less than the final price, you will not get allotment. If your price is higher than the final price, the amount in excess of the final price is refunded if you get allotment. If you do not get allotment, you should get your full refund of your money in 15 days after the final allotment is made. If you do not get your money or allotment in a month's time, you can demand interest at 15 per cent per annum on the money due.

How are shares allocated?

As per regulations, at least 25 per cent of the shares on offer should be set aside for

retail investors. Fifty per cent of the offer is for qualified institutional investors. Qualified Institutional Bidders (QIB) are specified under the regulation and allotment to this class is made at the discretion of the company based on certain criteria.

QIBs can be mutual funds, foreign institutional investors, banks or insurance

companies. If any of these categories is under-subscribed, say, the retail portion is not adequately subscribed, then that portion can be allocated among the other two categories at the discretion of the management. For instance, in an offer for two lakh shares, around 50,000 shares (or generally 25 per cent of the offer) are reserved for retail investors. But if the bids from this category are received are only for 40,000 shares, then 10,000 shares can be allocated either to the QIBs or non-institutional investors. 50

The allotment of shares is made on a pro-rata basis. Consider this illustration: An

offer is made for two lakh shares and is oversubscribed by times times, that is, bids are received for six lakh shares. The minimum allotment is 100 shares. 1,500 applicants have applied for 100 shares each; and 200 applicants have bid for 500 shares each. The shares would be allotted in the following manner:

Shares are segregated into various categories depending on the number of shares

applied for. In the above illustration, all investors who applied for 100 shares will fall in category A and those for 500 shares in category B and so on.

The total number of shares to be allotted in category A will be 50,000 (100*1500*1/3).

That is, the number of shares applied for (100)* number of applications received (1500)* oversubscription ratio (1/3). Category B will be allotted 33,300 shares in a similar manner.

Shares allotted to each applicant in category A should be 33 shares (100*1/3). That

is, shares applied by each applicant in the category multiplied by the oversubscription ratio. As, the minimum allotment lot is 100 shares, it is rounded off to the nearest minimum lot. Therefore, 500 applicants will get 100 shares each in category A total shares allotted to the category (50,000) divided by the minimum lot size (100).

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In category B, each applicant should be allotted 167 shares (500/3). But it is rounded

off to 200 shares each. Therefore, 167 applicants out of 200 (33300/200) would get an allotment of 200 shares each in category B.

The final allotment is made by drawing a lot from each category. If you are lucky you

may get allotment in the final draw.

The shares are listed and trading commences within seven working days of

finalization of the basis of allotment. You can check the daily status of the bids received, the price bid for and the response form various categories in the Web sites of stock exchanges. This will give you an idea of the demand for the stock and a chance to change your mind. After seeing the response, if you feel you have bid at a higher or a lower price, you can always change the bid price and submit a revision form.

The traditional method of doing IPOs is the fixed price offering. Here, the issuer and

the merchant banker agree on an "issue price" - e.g. Rs.100. Then one has the choice of filling in an application form at this price and subscribing to the issue. Extensive research has revealed that the fixed price offering is a poor way of doing IPOs. Fixed price offerings, all over the world, suffer from `IPO underpricing'. In India, on average, the fixed-price seems to be around 50% below the price at first listing; i.e. the issuer obtains 50% lower issue proceeds as compared to what might have been the case. This average masks a steady stream of dubious IPOs who get an issue price which is much higher than the price at first listing. Hence fixed price offerings are weak in two directions: 52

dubious issues get overpriced and good issues get underpriced, with a prevalence of underpricing on average. What is needed is a way to engage in serious price discovery in setting the price at the IPO. No issuer knows the true price of his shares; no merchant banker knows the true price of the shares; it is only the market that knows this price. In that case, can we just ask the market to pick the price at the IPO?

Imagine a process where an issuer only releases a prospectus, announces the number of shares that are up for sale, with no price indicated. People from all over India would bid to buy shares in prices and quantities that they think fit. This would yield a price. Such a procedure should innately obtain an issue price which is very close to the price at first listing -- the hallmark of a healthy IPO market.

Recently, in India, there had been issue from Hughes Software Solutions which was a milestone in our growth from fixed price offerings to true price discovery IPOs. While the HSS issue has many positive and fascinating features, the design adopted was still riddled with flaws, and we can do much better.

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Documents Required:

A company coming out with a public issue has to come out with an Offer Document/

Prospectus. An offer document is the document that contains all the information you need about

the company. It will tell you why the company is coming is out with a public issue, its financials and how the issue will be priced.

The Draft Offer Document is the offer document in the draft stage. Any company

making a public issue is required to file the draft offer document with the Securities and Exchange Board of India, the market regulator. If SEBI demands any changes, they have to be made. Once the changes are made,

it is filed with the Registrar of Companies or the Stock Exchange. It must be filed with SEBI at least 21 days before the company files it with the RoC/ Stock Exchange. During this period, you can check it out on the SEBI Web site.

Red Herring Prospectus is just like the above, except that it will have all the

information as a draft offer document; it will, however, not have the details of the price or the number of shares being offered or the amount of issue. That is because the Red Herring Prospectus is used in book building issues only, where the details of the final price are known only after bidding is concluded.

Players:
54

Co-managers and advisors Underwriters Lead managers Bankers Brokers and principal brokers Registrars Stock exchanges.

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RESEARCH METHODOLOGY

56

RESEARCH METHODOLOGY
6.1 Data Collection Source
Source of primary data for the present study is collected through questionnaire and answered by the small investors. The secondary data is collected from journals, books and through internet search.

6.1.1 Questionnaire Method

Under this method, list of questions pertaining to the survey are prepared for the small investors. Structured objective type questions are prepared for the respondents with fixed response categories. All of the questions are of multiple-choice type. The questions have more than one alternative.

6.2 Sampling Method 6.2.1 The Basis of Sampling

In the case of survey of small investors, a random sample is chosen.

6.2.2 Sample Size

Small investors- 50 6.3 STEPS FOLLOWED IN COMPLETING THE SECONDARY SOURCE SURVEY (i) Libraries at (a) (b) (c) (d) (ii) Indian Council for Applied Economic Research (ICAER) Indian Institute of Technology,(IIT) Delhi, Council of scientific and industries research (CSIR) PHD number of commerce, are visited.

Management /books, journals are consulted. 57

(iii)

Internet sites containing information on motivation are surfed.

6.4 DATA PROCESSING METHODOLOGY

Once the primary data have been collected, they are (i) (ii) Edited inspected, corrected and modified. Tabulation- bring similar data together and totaling them in meaningful

categories. Questionnaires are edited both in the field and later in home. Field editing took place just often the interview. The collected data are placed into an order. Percentages of respondents answered similarly are calculated and placed in a table. Then this is interpreted. This involved drawing conclusion from the gathered data. Interpretation changes the new information immerging from the analysis into information that is pertinent or relevant to the study. In an initial public offering (IPO), a company offers shares to the public for the first time via a listing on a stock exchange. This is an also referred to as going public. Merchant Banking manages such IPO processes. We start by advising companies on the rationale for going public, and discussing the strategy with management. As lead manager we take care of all official documentation (including the prospectus), the valuation of the company and the marketing of the shares to prospective investors. During the marketing process, Merchant Banking introduces the company to institutional and retail investor, especially top-tier investors with Fortis Bank has a strong relationship. 58

This part of the process is called a road show moreover, Merchant Banking will continue to support your company long after the IPO with its extensive research, which consistently wins outstanding ratings from investors, not least because of our excellent knowledge and understanding of the countries in which we operate.

PRIMARY DATA:
In addition to the full support offered by our specialists for IPOs, we will also support your company in the event of a secondary offering. With access to wide network of investors and institutional, Merchant Banking has the contact to ensure the successful placing of every share. The airline had received as many as 15 bids from which six- SBI caps, HSBC securities, DSP Merrill Lynch, J M Morgan Stanley, Kodak Mahindra capital and Enam consultants jointly with Citibank- were short listed for appointment as an advisor to lay the roadmap for the IPO, which is expected to hit the market by December. A four member high-powered committee was set up to go through the bids and give its recommendations on the appointment of the advisor, which would be placed before the board, they said. After exhausting all options of disinvestment and equity infusion by the Union government, Air-India had set the ball rolling for its IPO, when the board gave its nod more than two months ago.

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PRIVATE COMPANY EXIT STRATEGY- IPO or M&A

The increased activity in private company M&A, combined with the fact that average private company acquisition values are outpacing average pre-IPO valuations, suggests that for many private companies M&A may be the preferred exit strategy. But what is driving disparity in value? Our analysis suggests the following factors:

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Public market demand is weakening- there are many companies trying to get out, but investors are becoming more and more particular about the types of companies they invest in (later stage-low risk).

With the pre-IPO valuations dropping, going public essentially represents another round of financing.

Corporate demand (i.e. Big Pharma and Mid-tier biopharma) is grater than ever to fill holes from pending expirations and to add innovative technologies/products to their pipelines.

Big pharma is flush with cash, driven largely by the passage of the American jobs Creation Act of 2004, which allows U.S. multinationals to repatriate foreign earnings through 2005 at an effective tax rate of 5.25%.

In fact, the top Big Pharma in the U.S. have announced their intentions to repatriate up to $100 billion in earnings, and many of them have already started doing so.

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FINDINGS

62

FINDINGS
1. According to the survey most of the customers of Infoline Ltd says that it is pocket friendly. 2. Coming to faith 70% say IndiaInfoline Ltd is better than others Stock brokers due to customers satisfaction. 3. Lack of promotional activities undertaken by IndiaInfoline securities Ltd. in Noida Region. 4. Main purposes of investments are returns & liquidity. 5. Investors take risk as well as returns into their mind while making the investment. 6. Businessmen are more interested in the stock market than the others. 7. Commodity market is less preferred by the investors, might because of less awareness about commodity market. 8. People want to invest their money in the security market but they have not the proper knowledge. 9. People pay more emphasis on brokerage than service provided by brokerage houses. 10. 3 elements affects the economy of any country:1) GOLD, 2) CRUDE OIL, 3) U.S DOLLAR

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CONCLUSIONS

64

CONCLUSIONS
On the basis of the study it is found that IndiaInfoline Ltd is better services provider than the other stockbrokers because of their timely research and personalized advice on what stocks to buy and sell. Infoline Ltd. provides the facility of Trade tiger as well as relationship manager facility for encouragement and protects the interest of the investors. It also provides the information through the internet and mobile alerts that what IPOs are coming in the market and it also provides its research on the future prospect of the IPO. Study also concludes that people are not much aware of commodity market and while its going to be biggest market in India. The company should also organize seminars and similar activities to enhance the knowledge of prospective and existing customers, so that they feel more comfortable while investing in the stock market.

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RECOMMENDATIONS

RECOMMENDATIONS
66

Since the primary market has continued to remain dormant, SEBI considered on priority basis the recommendations made by the Informal Group on Primary Market, and accepted most of the recommendations, including the following, which were accepted for immediate implementation: (i) Primary issues to be compulsorily made through the depository mode after a specified date. (ii) 100 per cent book building in respect of issues of Rs. 25 crore and above. (iii) Reduction in the minimum number of mandatory collection centres in respect of issues above Rs. 10 crore to 4 metropolitan cities plus the place having the regional stock exchange. In order to facilitate flow of funds to the infrastructure sector, the SEBI Board decided to grant specific relaxations to public issues by infrastructure companies. These relaxations would be applicable to infrastructure companies as defined under Section 10 (23G) of the Income Tax Act, 1961 subject to the condition that their projects are appraised by any Development Financial Institution (DFI) or Infrastructure Development Finance Company (IDFC) or Infrastructure Leasing and Financial Services (IL&FS). Further, the projects must also have a participation of at least 5 per cent of the project cost in debt and/or equity by the appraising institution. Subject to these conditions, the infrastructure company can avail of specified Relaxations/exemptions from the existing requirements as per SEBI's Disclosure and Investor Protection Guidelines Relaxations to Public Issues Infrastructure Companies Exemption from the requirement of making a minimum public offer of 25 per cent of 67

Securities and also from the requirement stipulating 5 shareholders per Rs. 1 lakh of offer. Exemption from the minimum subscription of 90 per cent provided disclosure is made about the alternate source of funding considered by the company, in the event of Under-subscription in the public issue. Permission to freely price the offerings in the domestic market provided the promoter companies along with equipment suppliers and other strategic investors subscribe to 50 per cent of the equity at the same/higher price as/than the price offered to the public. However, adequate disclosures on justification for the pricing need to be made in the offer documents. Permission to keep the issues open for 21 days to enable the companies to mobilise funds. Exemption from the requirement to create and maintain a debenture redemption reserve (DRR) in case of debenture issues. Primary Markets Reforms 1997-98 Entry barrier for unlisted companies modified as dividend payment in immediately preceding 3 years. A listed company required to meet the entry norm only if the post-issue net worth becomes more than five times the pre-issue net worth. Companies required to make their partly paid-up shares fully paid up or forfeit the same, before making a public/rights issue. Unlisted company allowed to freely price its securities provided it has shown net profit in the immediately preceding 3 years subject to its fulfilling the existing 68

disclosure requirements. The Promoters contribution for public issues made uniform at 20% irrespective of the issue size. Written consent from share holders in regard to lock-in made compulsory for Securities to be offered for promoters contribution. Appointment of Registrar to an issue for rights issues made mandatory. A provision made regarding disclosure of the share holding of the promoters whose names figure in the paragraph on Promoters and their background in the offer document. The SEBI (Registrars to an Issue and Share Transfer Agents) Rules and Regulations 1993 have been amended to provide for an arms length relationship between the Issuer and the Registrar to the Issue. It has now been stipulated that no Registrar to an Issue can act as such for any issue of securities made by anybody corporate, if the Registrar to the issue and the Issuer company are associates. With a view to facilitating raising of funds by infrastructure projects, SEBI has allowed debt instruments to be listed on the Stock Exchanges without prior listing of equity. Corporate with infrastructure projects and Municipal Corporations to be exempted from the requirements of Rule 19(2b) of Securities (Contract) Regulation Rules to facilitate public offer and listing of its pure debt instruments as well as debt instruments fully or partly convertible into equity without the requirement of prior listing of equity but subject to conditions like investment grade rating. Only body corporate to be allowed to function as Merchant Bankers. Multiple categories of merchant bankers to be abolished and there shall be only one 69

entity viz., Merchant Banker. Presently, the Merchant Banker allowed to perform underwriting activity but required to seek separate registration to function as a Portfolio Manager under the SEBI (Portfolio Manager) Rules and Regulations, 1993. Merchant Bankers to be prohibited from carrying on fund based activities other than those related exclusively to the capital market; the activities undertaken by NBFCs such as accepting deposits, leasing, bill discounting, etc. not to be allowed to be undertaken by a merchant banker; the existing NBFCs performing merchant banking activities to be given suitable time to restructure their activities.

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SUGGESTIONS

SUGGESTIONS
1. Commitment should be equalized for every person. 2. Provide the facility of free demonstrations for all. 3. Improvement in the opening of De-mat & contract notice procedure is required. 4. There should be a limited number of clients under the relationship manger. So that he can handle new as well as old customer properly. 5. Some promotional activities are required for the awareness of the customer. 6. People at young age should be encouraged to invest in stock market. 7. Seminars should be held for providing information to prospective and present customers.

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APPENDIXES (QUESTIONNAIRE)

72

APPENDIXES (QUESTIONNAIRE)
QUESTIONNAIRE
DATE: NAME: OCCUPATION: AGE: CONTACT NO: 1) Do you know about Investment options available? a) Yes b) No

2) Do you know about the different types of investment alternatives? a) Insurance & mutual funds c) Real estate e) Commodity 3) What is the basic purpose of your investment? 73 b) Banks d) Share market f) Others

a) Liquidity c) Capital appreciation e) Tax benefits

b) Returns d) Risk covering

4) What are the most important things you take into account, while making any investment? a) Risk c) Both 5) Do you have any knowledge of share markets? a) Partial c) Nil 6) Do you have any D-mat & Trading account? a) Yes 7) In which company you have D-mat & Trading account? a) Share khan Ltd c) Indiainfoline 8) Are you satisfied with you present broking company? a) Yes 9) Why do people prefer stock market? a) For earning short term profit b) For earning long term profit c) For reducing risk d) For hedging purpose 10) What is your trading exchange preference? a) NSE c) MCX b) BSE d) NCDEX 74 b) No. b) Karvy d) Motilal Oswal. b) No b) Complete b) Returns

IPO GLOSSARY
A
Allocation

This is the amount of stock in an initial public offering (IPO) granted by the underwriter to an investor. Aftermarket Trading in the IPO subsequent to its offering is called the aftermarket.

B
Board of Directors The composition of the Board of Directors is particularly critical for an IPO. Typically, a board is composed of inside and outside directors.

Broken IPOs
75

If an IPO trades below its IPO price in the aftermarket, it is said to be a broken IPO.

C Calendar
This refers to upcoming IPOs and secondary offerings. Brokerage houses have equity calendars, bond calendars and municipal calendars.

Clearing Price
The price at which all shares of an IPO can be sold to investors in a Dutch auction. Sometimes referred to as the market clearing price.

F First Day Close

The closing price at the end of the first day of trading reflects not only how well the lead manager priced and placed the deal, but what the near-term trading is likely to be.

Float

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When a company is publicly traded, a distinction is made between 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 Green Shoe
A typical underwriting agreement allows the underwriters to buy up to an additional 15% of shares at the offering price for a period of several weeks after the offering. This option is also called the overallotment and is exercised when the IPO is oversubscribed and trading above its offer price. The term comes from the Green Shoe Company, which was the first to have this option.

H Hot Issue
When there is significantly more demand than supply for an IPO it is said to be a hot issue.

I Initial Public Offering

This is the event of a company first selling its shares to the public.

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Insiders
Management, directors and significant stockholders are regarded as insiders because they are privy to information about the operations of a company not known to the general public.

IPO Price

Individual investors often ask why the price at which an IPO starts trading is different from its offer price. This occurs because the offer price is set by the underwriters before the stock starts trading. Once the stock starts trading, the price is determined by actual supply and demand and can be higher or lower.

IPO Research
Prior to the offering, the underwriters involved in the IPO are prohibited from issuing research or recommendations for forty days. Following the IPO, the underwriter is allowed to issue a research report

M-N Market Capitalization

78

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 Value
The market value of a company is determined by multiplying the number of shares outstanding by the current price of the stock.

O Offering Price
This is the price at which 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 weekend.

Oversubscribed
When a deal has more orders than there are shares available it is said to be oversubscribed.

P Preliminary Prospectus
This is the offering document printed by the company containing a description of the business, discussion of strategy, presentation of historical financial statements, 79

explanation of recent financial results, management and their backgrounds and ownership.

Proceeds
Companies 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.

U-V Underwriter
This is a brokerage firm that raises money for companies using public equity and debt markets. Underwriters are financial intermediaries that buy stock or bonds from an issuer and then sell these securities to the public.

Venture Capital
Funding acquired during the pre-IPO process of raising money for companies. It is done only by accredited investors.

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BIBLIOGRAPHY

81

BIBLIOGRAPHY
www.ipohome.com www.essortment.com www.investopedia.com www.ipoavenue.com www.moneycontrol.com www.wikipedia.com

www.moneycentral.hoovers.com www.bullishindian.com www.rupya.com

www.investorguide.com

www.hdil.in/

Magazines:
Value line (share khan monthly research magazine) Capital market (5pasisa.com), New Delhi.

The finapoils (your personal finance advisor from Karvy)

Ncfm workbooks.

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