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INTRODUCTION OF STOCK MARKET & IPOs

WHAT IS MEANT BY A STOCK EXCHANGE?

The Securities Contract (Regulation) Act, 1956 [SCRA] defines ‘Stock Exchange’ as any

body of individuals, whether incorporated or not, constituted for the purpose of assisting,

regulating or controlling the business of buying, selling or dealing in securities. Stock

exchange could be a regional stock exchange whose area of operation/jurisdiction is

specified at the time of its recognition or national exchanges, which are permitted to have

nationwide trading since inception. NSE was incorporated as a national stock exchange.

BRIEF HISTORY OF STOCK EXCHANGES

Do you know that the world's foremost marketplace New York Stock Exchange (NYSE),

started its trading under a tree (now known as 68 Wall Street) over 200 years ago?

Similarly, India's premier stock exchange Bombay Stock Exchange (BSE) can also trace

back its origin to as far as 125 years when it started as a voluntary non-profit making

association.

News on the stock market appears in different media every day. You hear about it any

time it reaches a new high or a new low, and you also hear about it daily in statements

like 'The BSE Sensitive Index rose 5% today'. Obviously, stocks and stock markets are

important. Stocks of public limited companies are bought and sold at a stock exchange.

But what really are stock exchanges? Known also as the stock market or bourse, a stock

exchange is an organized marketplace for securities (like stocks, bonds, options) featured

by the centralization of supply and demand for the transaction of orders by member

brokers, for institutional and individual investors.

The exchange makes buying and selling easy. For example, you don't have to actually go

to a stock exchange, say, BSE - you can contact a broker, who does business with the

BSE, and he or she will buy or sell your stock on your behalf.

Stock exchanges are the most perfect type of market for securities, whether of govt. and

semi-govt. bodies and also for shares and debentures issued by the joint stock companies

in the stock market, purchases and sale of shares are made in conditions of free

Initial Public Offers and its effect on Stock Market Page 1

competition. Govt. securities are traded outside the trading ring in the form of over the

counter sale or purchase. The bargains that are stuck in the trading ring by the member

of the stock exchanges are at the fairest prices determined by the basis laws of demand

and supply.

The only stock exchanges operating in the 19th century were those of Bombay, set up in

1875 and Ahmadabad set up in 1894. These were organized as voluntary non-profit

making association of brokers to regulate and protect their interests before the control on

securities, trading became a central subject and the Bombay securities. Under this act, the

Bombay stock exchange was recognized in 1927 and Ahmadabad and other centre’s, but

they were not recognized. Soon after they become a central subject, central legislation

was proposed and a committee, headed by A.D GORWALA went into the bill of

securities contract, which became law in 1956.

GROWTH OF STOCK EXCHANGES IN INDIA

The stock market activities in India were relatively on a low key during the beginning of

the decade of 80’s mainly because of the allies regime till 947. Afterwards, the

government of India concentrated more on administration and less on development and

pursuit of the philosophy of public sector dominating the economy Stock exchanges were

placed under the exclusive regulation of the government through proclamation in 1930 of

the constitution of India.

During the 1950’s & 1960’s Indian economy was dominated by the public sector, which

was considerate as the major vehicle for economic and industrial development. This trend

has changed since mid 80’s with liberalization of government polices and greater freedom

given to private sector.

This policy of progressively deregulating the economy led to the emergence of stock

markets as a major instrument of finance for industry and trade. India can boast of being

one of the oldest stock market in Asia. The Bombay stock exchange (BSE) as founded in

1875, while the London stock exchange was established in 1773.


INTRODUCTION TO IPOs

DEFINITION

Initial Public Offering: The first sale of stock by a company to the public. Companies

offering an IPO are sometimes new, young companies, or sometimes companies which

have been around for many years but are finally deciding to go public. IPOs are

often risky investments, but often have the potential for significant gains. IPOs are often

used as a way for a young company to gain necessary market capital.

The term "IPO" slipped into everyday speech during the tech bull market of the late

1990s. Back then, it seemed you couldn't go a day without hearing about a dozen new

dot-com millionaires in Silicon Valley cashing in on their latest IPO. The phenomenon

spawned the term "siliconaire," which described the dot-com entrepreneurs in their early

20s and 30s who suddenly found themselves living large due to IPOs from their Internet

companies. So, what is an IPO anyway? How did everybody get so rich so fast? And,

most importantly, is it possible for mere mortals like us to get in on an IPO? All these

questions and more will be answered in this tutorial. Before we continue, we suggest you

check out our stock basics tutorial as well as brokers and online trading if you don't have

a solid understanding of stocks and how they trade.

What is an IPO?

Selling Stock IPO is an acronym for Initial Public Offering. This is the first sale of stock

by a company to the public. A company can raise money by issuing either debt (bonds) or

equity. If the company has never issued equity to the public, it's known as an IPO.

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. Anybody can go out and incorporate a company:

just put in some money, file the right legal documents, and follow the reporting rules of

your jurisdiction. Most small businesses are privately held. But large companies can be

private too. Did you know that IKEA, Domino's Pizza, and Hallmark Cards are all

privately held?

It usually isn't possible to buy shares in a private company. You 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."

Public companies have thousands of shareholders and are subject to strict rules and

regulations. They must have a board of directors and they must report financial

information every quarter. In the United States, public companies report to the SEC. In

other countries, public companies are overseen by governing bodies similar to the SEC.

From an investor's standpoint, the most exciting 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 CEO could hate your guts, but there's nothing he or she could do to stop

you from buying stock. Why Go Public? 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.

Being on a major stock exchange carries a considerable amount of prestige. In the past,

only private companies with strong fundamentals could qualify for an IPO and it wasn't

easy to get listed. The Internet boom changed all this. Firms no longer needed strong

financials and a solid history to go public. Instead, IPOs were done by smaller startups

seeking to expand their business. There's nothing wrong with wanting to expand, but most

of these firms had never made a profit and didn't plan on being profitable any time soon.

Founded on venture capital funding, they spent like Texans trying to generate enough

excitement to make it to the market before burning through all their cash. In cases like

this, companies might be suspected of doing an IPO just to make the founders rich. In VC

talk, this is known as an exit 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. How can this happen? Remember: an IPO is just selling stock. It's all about the

sales job. 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 extremely risky and should be avoided.


NEED OF THE STUDY

This study is needed because now days every companies wants to extent their business

and they wants to go for public. Every investor also looking towards different IPO’s to

invest in large amount in beginning to retain the more earnings in future. As a citizen or

investor also, if any body wants to know about the economic position of companies as

well as countries, every body must be have some basic knowledge about stock market and

other related information.

This study is needed because;

To know the facts of stock market fluctuations during IPO’s issues.

To understand the IPO’s and Stock market basics.

To know about the stock market indices.

To know about investors mindset during IPO’s issues.

To know why companies wants to go for public.

This project is needed because; all of the above options are never ended. As a financial

student, as a investor, as a citizen and everybody must be having some knowledge to

understand the things. So researcher’s project will cover the all things.

This project is needed because; all of the above options are never ended. As a financial

student, as a investor, as a citizen and everybody must be having some knowledge to

understand the things. So researcher’s project will cover the all things.


IMPORTANCE OF THE STUDY

The prospectus includes very important information like the historical

performance of the company in the previous years, the current performance of the

company, the amount of shares that they are offering to the public, what they intend to do

with the money after the IPO amongst other things. Any prudent investor will take his/her

time to go through this information in order to make an informed decision on the amount

of shares to take up or even if to participate in the offer. As an investor this are the things

to look out for in the prospectus and Stock Markets concepts and how the indices of stock

markets will effected by an IPO’s.

It consists with Companies IPO’s performance in the pre-ceding years. This is important

for you, to develop performance trends and therefore be able to predict its future

performance- all factors held constant. This is mainly done by looking at the fluctuations

in stock markets.


RESEARCH METHODOLOGY

RESEARCH:

Research in common refers to a search for knowledge. We can also define

research as a scientific and systematic search for pertinent information on a specific topic.

D.Slesinger and M.Stephenson define research as the ‘manipulation Of things,

concepts or symbols for the purpose of generalizing to extend, Correct or verify

knowledge, whether that the practice of an art”.

Research methodology is a way to systematically solve the research Problem. The

steps adopted by the researcher to solve the research problem.

1. Descriptive Research

Descriptive research is used to obtain information concerning the current status of the

phenomena to describe “what exists” with respect to variables or conditions in a situation.

Descriptive research, also known as statistical research, describes data and characteristics

about the population or phenomenon being studied. Descriptive research answers the

questions who, what, where, when and how. Although the data description is factual,

accurate and systematic, the research cannot describe what caused a situation.

2. Analytical Research

Analytical research takes descriptive research one stage further by seeking to explain

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 (variables) in order to influence the chain of causality.

TYPE OF RESEARCH DESIGN:

The research design is pre planned which is designed for analysis. And also the data was

collected from structured and well thought – out instruments.

NATURE OF STUDY:


The study was totally a fact-finding study. The main aim of this is to identify and evaluate

the IPO’s and its effects on stock market.

STUDY AREA:

The study has been conducted in Emkay Global Financial Services Pvt. Ltd..,

Mahabubnagar.

DATA:

Data’s are the useful information or any forms of document designed in a systematic and

standardize manner which are used for some further proceedings. One of the important

tools for conducting marketing research is the availability of necessary and useful data.

Some time the data are available readily in one form or the other and some time the data

are collected afresh.

The sources of Data fall under two categories;

1) Primary Data: The Primary data are those, which are collected afresh for the first

Time, and thus happens to be original in character. With reference to This study,

data is collected through Interview method the study also includes obtaining

information from Knowledgeable persons. This interview is an informal or

unstructured one with competent and articulate individuals, programmers and

professionals of the organization. This interviews helps me to analyze the

information in effective way. Collected from personal interview, collected under

the guidance of Mr. Ramesh Babu, Manager in Emkay Global Financial

Services Ltd., Mahabubnagar Branch.

2) Secondary Data: The Secondary data has been collected from

1. Annual reports of organization.

2. Internet

3. Broachers.

4. House magazines of the units.

5. Other reports of the units.

6. Books

SAMPLE DESIGN:

Sample unit: Sample unit is the organization the project was completed.


Time and place: Project completed within a period of 45 days. Emkay Global Financial

Services Ltd., Mahabubnagar Branch.

SCOPE OF THE STUDY

The study with the prime objectives of IPOs and its effect on stock market. What are

the main reasons behind stock market fluctuations during IPOs issues? This study advices

the investor for future expectations towards market indices.

Researcher’s project will help full, to further study related to IPOs.

Researcher’s project will help full, to all financial students to gain some

information and knowledge related to IPOs.

Researcher’s project will help full, to broking companies and other related

consultancies to understand the market situations during IPOs issued.

Researcher’s project will help full, to Investors to gain the knowledge of Stock

Market and fluctuations during IPOs issued. It will be helpful to take decision

towards investments.

Researcher’s project will help full, to every citizen to understand Stock Market

fluctuations and IPO details and its effect on Stock Market.

Researcher’s project will help full, every body to Know about the how stock

market works.


OBJECTIVES OF THE STUDY

Before embarking on actual research objectives of study, we have to know the main

objective of this study is as fallows:

The ultimate objective of the study is to determine the IPO’s and its effect on

Stock Market.

This is assessed on the basis of the following criteria:

Secondary Objectives:

To find out the reasons behind fluctuating the stock market when IPO’s issued.

To know the objectives how IPO’s issued by companies.

To know the how investors minds will change.

To understands the basic things of IPO’s and stock market.

To know about the reasons for issuing the IPO’s.


LIMITATIONS OF STUDY

1. The study was to be completed in a short time; the time factor put a considerable

limit on the scope and the extensiveness of the study.

2. The unsupportive attitude of the respondents while responding to the questions,

requiring the qualitative information may have affected the final findings and

outcomes.

3. Because of the diversity of nature of respondents as well as due to conduction of

the study on very small scale, the findings of the survey could not be generalized.

4. It was tried very harder to include the best of information from published and

unpublished sources available on internet, books and magazines but some of the

data required for the detailed study was not available free.


REVIEW OF RELATED LITERATURE

The study is concerned with the ‘IPOs and its effect on Stock Market. Literature

related to the basic theoretical and practical aspects of these variables is reviewed in this

chapter. Review of related literature has been done particularly with a view to locate the

possible correlates of the variables studied. The two key concepts namely ‘IPOs’ and

‘IPOs effect on Stock Market’ are first explained and then the literature reviewed is

presented in the following sections.

THEORETICAL PERSPECTIVES OF THE VARIABLES

An overview of the literature in the field of Initial Public Offers and Educational

research concerned with the variables selected for the study is presented in this section

with a view to draw out the conceptual, theoretical and empirical development of the

variables and their assessment.

Journal of Emerging Market Finance, December, 2011

- By Nader Naifar

Explaining IPOs Under pricing in the Tunisian Market

This article tests four hypotheses (signaling, market tendency, market characteristics and

the ex ante uncertainty and information asymmetry) to explain the initial public offerings

(IPOs) under pricing in the Tunisian market. Most of the empirical studies focus mainly

on developed markets and only a few studies analyze the climates of IPOs in emerging

markets. The Tunisian business environment is motivating because of the institutional

reforms that have been successfully implemented since 1994. The study analyses all the

Tunisian IPOs from March 1992 to April 2008 in order to explain underpricing in IPOs.

The findings show that IPOs underpricing is mainly explained by the signalling and the

market characteristics hypotheses. The phenomenon of underpricing in IPOs is important

for portfolio managers who are expected to make optimal (value-maximising) financing

choices. Also, results of this study provide insight into the business environment in the

case of the Tunisian market.


Kanika Guptha (Feb’ 2011, INDIAN JOURNAL OF FINANCE) the study

concerned made on the level of under pricing of Indian IPOs for two time periods.

Representing opposite market conditions. The level of under pricing has been

tested from four parameters.

Such as;

Level of under pricing

To see the effect of the market conditions on the level of under pricing.

To see the efficiency of the market.

To see the effects over subscription on under pricing.

One of the Researches was done on IPOs of Reliance Power. The main objectives of the

study are as follows;

Primary Objective Understand the Reliance Power IPOs fall in price.

Secondary Objective Factors responsible for the fall in price of Reliance Power equity Perception of a retail investor toward Reliance Power before listing of IPO.

In the above study, the researcher taken only one company IPOs means Reliance

Power IPOs. In his/her research the researcher’s consider only the objective Reliance

IPOs fall in price and factors for fall in price.

My research is different from above research, in my research. I try to find the

IPOs effects over stock market. How stock market will fluctuate when newly IPOs issued

in stock market. This research don by taking case study of CIL IPOs. But this research

applicable for all new issues to understand the IPOs over Stock Market.

Some other researches were also done by the researcher’s such as…

INTIAL PUBLIC OFFER AND DUE DELIGANCE, the objectives of this study are as

follows;

To study and understands the concepts and procedures involved in IPO’s.

To study understand the process of Due Diligence and its significance in IPO’s.


To analyze the effect of Initial Public Offers on the issuing company, investors

and stock market.

To understand the role of an Investment banker in managing IPO’s.

The issue of an IPO by a company involved number of stages, each calling for great

deal verification. The relevant update information on the company has to cauterize

precisely in the prospectus. The decision by the investor on whether to invest in a

company influenced significantly by information contained in the prospectus. My

research also covers the factors which influencing the investors mindset to invest

money.

Some other researcher’s also done the so many researches. In their researches the given objectives are available.

The study the concept of Initial Public Offer (IPO).

To study the procedure for IPOs.

To study the IPO’s of in infrastructure sector the DLF Limited, Housing

Development and Infrastructure Limited and Omaxe Limited on the basis of issue,

allotment and performance.

In this research we can observe that, Concept of IPOs and procedure of IPOs only.

My research also covers the procedure of IPOs with different methods of IPOs pricing

calculations,

Another Research also done on IPO’s, the objectives of study are as follows..

To get the knowledge of IPO.

To analyze the returns of IPOs which were issued in the 1st quarter of 2007.

To know the return of those IPOs for 1 month, 3 months, 6 months, and 1 year.

To know the market rate of return for the same period.

To know the procedure for calculating the Standard Deviation, calculating

Sharpe’s Ratio & the abnormal return.

In above research study we can know about the concept of IPOs and returns on IPOs.

My research covers the information related to returns and this research gives the

knowledge to every investor about the market conditions and how are the expected

returns in particular scenario.


But, my research is different from all the other researches and this research in new

research. In this research the researcher’s main aim is to find out the concepts IPOs as

well as how the stock market effected by an IPOs. In this research, researcher’s done

a case study on IPOs of COAL INDIA LIMITED. How the CIL IPOs affect the

Stock Markets.

The literature review on IPOs can be divided in the following main heads-

a) Reason and timing of going public

Going public marks a watershed in the life cycle of the firm. While increased

equity can support the firm’s future plans of growth, the trade off for the firm is that of

increased public scrutiny.

Brealy and Myers (2005) state that in the context of USA the firms may seek

private equity in their initial years and only later go for public issues.

Pagano, Panetta and Zingales (1998) in their study of Italian firms, find that

firms going public are not seeking money for growth but are rebalancing their

accounts after high investment and growth.

Lerner (1994) found that there are times (windows of opportunity) when the

markets could be extremely 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 well as investment. They state

that going public is a conscious choice that some firms make while some others prefer to

remain private. Thus going public is not a natural element in the life cycle of a firm.

b) Valuation of IPO’s

Benveniste and Spindt (1989) find that under writers try to resolve the

information asymmetry problem between the firm and the investors by providing

an incentive to the investors to reveal their private information about the firm.

Kim and Ritter (1999) in their study of 190 firms find that under writers forecast

the next years earnings numbers and multiply them with PE ratios of comparable


firms in the industry to get the approximate price of the IPO. However they also

found that PE ratios using historical earnings numbers do not give accurate results

whereas when forecasted earnings numbers are used then the valuation is much

more accurate.

Purnanandam and Swaminathan (2002) say that IPOs are priced 50% higher

than industry peers. Also they find that more the IPO is overpriced with respect to

its peers, worse is its long term performance.

c) Allocation mechanism

The allocation mechanisms are specified by the regulators in different countries.

Loughran, Ritter and Rydqvist (1994) find 3 main categories across countries-

Auctions, Fixed price offers and Book Building. Sherman (2005) finds that Book

building is a superior mechanism for selling IPOs rather than auctions.


INITIAL PUBLIC OFFERING (IPO) Initial public offering (IPO), also referred to simply as a "public offering", is when a

company issues common stock or shares to the public for the first time. They are often

issued by smaller, younger companies seeking capital to expand, but can also be done by

large privately-owned companies looking to become publicly traded. In an IPO, the issuer

may obtain the assistance of an underwriting firm, which helps it determine what type of

security to issue (common or preferred), best offering price and time to bring it to market.

Initial Public Offering (IPO) in India means the selling of the shares of a company, for the

first time, to the public in the country's capital markets. This is done by giving to the

public, shares that are either owned by the promoters of the company

or by issuing new shares. During an Initial Public Offer (IPO) the shares are given to the

public at a discount on the intrinsic value of the shares and this is the reason that the

investors buy shares during the Initial Public Offering (IPO) in order to make profits for

themselves.

IPO in India is done through various methods like book building method, fixed

price method, or a mixture of both. The method of book building has been introduced in

the country in 1999 and it helps the company to find out the demand and price of its

shares. A merchant banker is nominated as a book runner by the Issuer of the IPO. The

company that is issuing the Initial Public Offering (IPO) decides the number of shares

that it will issue and also fixes the price band of the shares. All these information are

mentioned in the company's red herring prospectus. During the company's Initial Public

Offering (IPO) in India, an electronic book is opened for at least five days. During this

period of time, bidding takes place which means that people who are interested in buying

the shares of the Company makes an offer within the fixed price band. Once the book

building is closed then the issuer as well as the book runner of the Initial Public Offering

(IPO) evaluate the offers and then determine a fixed price. The offers for shares that fall


below the fixed price are rejected. The successful bidders are then allotted the shares

IPO’s can be a risky investment. For the individual investor, it is tough to predict what the

stock or shares will do on its initial day of trading and in the near future since there is

often little historical data with which to analyze the company. Also, most IPO’s are of

companies going through a transitory growth period, and they are therefore subject to

additional uncertainty regarding their future value

KINDS OF ISSUES

Primarily, issues can be classified as a Public, Rights or preferential issues (also known as

private placements). While public and rights issues involve a detailed procedure, private

placements or preferential issues are relatively simpler. The classification of issues is

illustrated below:


Public issues can be further classified into Initial Public offerings and further public

offerings. In a public offering, the issuer makes an offer for new investors to enter its

shareholding family. The issuer company makes detailed disclosures as per the DIP

guidelines in its offer document and offers it for subscription. The significant features are

illustrated below:

Initial Public Offering (IPO)

It is when an unlisted company makes either a fresh issue of securities or an offer for sale

of its existing securities or both for the first time to the public. This paves way for listing

and trading of the issuer’s securities.

Further public offering (FPO)

It is when 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. An offer for sale in such

scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

Rights Issue (RI)

It is when a listed company which proposes to issue fresh securities to its existing

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

who would like to raise capital without diluting stake of its existing shareholders unless

they do not intend to subscribe to their entitlements.

Private placement

It is an issue of shares or of convertible securities by a company to a select group of

persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a

public issue. This is a faster way for a company to raise equity capital. A private

placement of shares or of convertible securities by a listed company is generally known

by name of preferential allotment. A listed company going for preferential allotment has

to comply with the requirements contained in Chapter XIII of SEBI (DIP) Guidelines

pertaining to preferential allotment in SEBI (DIP) guidelines include pricing, disclosures

in notice etc, in addition to the requirements specified in the Companies Act.


Major Reason for Listing IPO

The increase in the capital: An IPO allows a company to raise funds for

utilizing in various corporate operational purposes like acquisitions, mergers,

working capital, research and development, expanding plant and equipment and

marketing.

Liquidity: The shares once traded have an assigned market value and can be

resold. This is extremely helpful as the company provides the employees with

stock incentive packages and the investors are provided with the option of trading

their shares for a price.

Valuation: The public trading of the shares determines a value for the company

and sets a standard. This works in favor of the company as it is helpful in case the

company is looking for acquisition or merger. It also provides the share holders

of the company with the present value of the shares.

Increased wealth: The founders of the companies have an affinity towards IPO

as it can increase the wealth of the company, without dividing the authority as in

case of partnership.

REGULATORY FRAMEWORK FOR IPOs

Eligibility Conditions for Companies Issuing Securities

The companies issuing securities offered through an offer document shall satisfy the

following at the time of filing the draft offer document with SEBI and also at the time of

filing the final offer document with the Registrar of Companies/ Designated Stock

Exchange:

Filing of offer document

No issuer company shall make any public issue of securities, unless a draft

Prospectus has been filed with the Board through a Merchant Banker, at least 30 days

prior to the filing of the Prospectus with the Registrar of Companies (ROC):

Provided that if the Board specifies changes or issues observations on the draft

Prospectus (without being under any obligation to do so), the issuer company or the Lead


Manager to the Issue shall carry out such changes in the draft Prospectus or comply with

the observation issued by the Board before filing the Prospectus with ROC.

Companies barred not to issue security

No 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 Board.

Application for listing

No company shall make any public issue of securities unless it has made

an application for listing of those securities in the stock exchange

Issue of securities in dematerialized form

No company shall make public or rights issue or an offer for sale of

securities, unless:

The company enters into an agreement with a depository for

dematerialization of securities already issued or proposed to be issued to the

public or existing shareholders; and

a. The company gives an option to subscribers/ shareholders/

investors to receive the security certificates or hold securities in

dematerialized form with a depository.

IPO Grading

No unlisted company shall make an IPO of equity shares unless the

following conditions are satisfied as on the date of filing of Prospectus with ROC:

a. the unlisted company has obtained grading for the IPO from at

least one credit rating agency

b. Disclosures of all the grades obtained, along with the rationale/

description furnished by the credit rating agency(ies) for each of

the grades obtained.

Eligibility Norms for IPO

An unlisted company may make an initial public offering (IPO) of equity shares

only if :-


The company has net tangible assets of at least Rs. 3 crores in each of the

preceding 3 full years (of 12 months each), of which not more than 50% is held in

monetary assets.

The company has a track record of distributable profits in terms of Section 205 of

the Companies Act, 1956, for at least three (3) out of immediately preceding five

(5) years.

The company has a net worth of at least Rs. 1 crore in each of the preceding 3 full

years (of 12 months each).

In case the company has changed its name within the last one year, at least 50% of

the revenue for the preceding 1 full year is earned by the company from the

activity suggested by the new name.

PROCEDURE FOR IPOs

Fixed Pricing versus True Pricing (Book- Building)

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

merchant banker agree on an “issue price”. Then the investor has a 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:

dubious issues get overpriced and

Good issues get under priced.

BOOK-BUILDING

A mechanism where, during period for which the IPO is open, bids are collected from

investors at various prices which are above or equal to the floor price (the minimum

price). The final price of the share is determined after the bid closing date, based on

certain evaluation criteria.

The SEBI (Disclosure and Investor Protection) Guidelines, 2000, define the term

`book-building' in a rather complex language as "a process undertaken by which 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 quantum of such

securities to be issued by means of a notice, circular, advertisement, document or

information memoranda or offer document.''

Book building process is a common practice used in most developed countries for

marketing a public offer of equity shares of a company. However, Book building acts as

scientific as well as flexible price discovery method through which a consensus price of

IPO’s may be determined by the issuer company along with the Book Running Lead

Manager (i.e. merchant banker) on the basis of feedback received from individual

investors as well as most informed investors (who are institutional and corporate investors

like, UTI, LICI, GICI, FIIs, and SFCI etc). The method helps to make a correct evaluation

of a company’s potential and the price of its shares.

In simple terms, book-building is a mechanism by which the issue price is discovered on

the basis of bids received from syndicate members/brokers and not by the

issuers/merchant bankers.

TYPES OF BOOKBUILDING

The issue of securities through Book building can be done in either of the following two

ways.

75% Book building

100% Book building

75% Book Building process:-

Under this type of public offer, the issue of securities has to be categorized into:

Placement portion category

Net offer to the public

The option of 75% Book Building is available to all body corporate that are

otherwise 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, underwriting is


mandatory to the extent of the net offer to the public. The issue price for the placement

portion and offers to public are required to be same

100% of the net offer to the public through Book Building process:-

The 100% of the net offer to the public, entire issue is made through Book

Building process. However, there can be a reservation or firm allotment to a maximum of

5% of the issue size for the permanent employees, shareholders of the company or group

companies, persons who, on the date of filing of the draft offer document with the Board,

have business association, as depositors, bondholders and subscribers to services, with the

issuer making an initial public offering.

The number of bidding centres, in case of 75% book building process should not

be less than the number of mandatory collection centres specified by SEBI. In case of

100% book building process, the bidding centres should be at all the places where the

recognised stock exchanges are situated.

PROCESS OF BOOK-BUILDING

The Book building is basically an auction of share. Book building essentially means that

the ‘book is being built.’ During the process on both the NSE & BSE, investors can watch

the book being built a chart shown indicates the bid price & the number of shares being

bid for. This helps the investors to know the market price. Following mentioned are the

main steps of Book building Process.

The company first appoints a book runner, i.e. merchant banker.

The book runner prepares & submits the draft documents to the SEBI &

obtains an acknowledgement card.

The issuer & book runner decide to offer shares at a price within a specified

price band (range).

Offer regarding the demand for securities at different price levels are invited

from syndicate members consisting of eligible brokers, merchant bankers,

underwriters, financial institutions, the bids. The advertisement should mention


the opening & closing dates for the bids. A bid is usually open for minimum 5

working days.

Based on the bids received, the issuer arrives at a final cut-off rate & the

allocation in consultation with BRLM.

The issuer & 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 final prospectus is filed with the registrar of companies along with the

procurement agreement.

The placement portion opens for subscription only after the prospectus is filed

with the ROC.

The placement portion closes a day before the opening of the public issue portion.

The public portion opens & the allotment & listing of puts is done. The price

determined in the Book building process is applicable to the public portion as

well. If the public portion stands oversubscribed, then the allotment is made on a

proportionate basis.

Book Building Process in India


The steps which are usually followed in the book building process can be summarized

below:

1. The issuer company proposing an IPO appoints a lead merchant banker as a

BRLM.

2. Initially, the issuer company consults with the BRLM in drawing up a draft

prospectus (i.e. offer document) which does not mention the price of the issues,

but includes other details about the size of the issue, past history of the company,

and a price band. The securities available to the public are separately identified as

“net offer to the public”.

3. The draft prospectus is filed with SEBI which gives it a legal standing.

4. A definite period is fixed as the bid period and BRLM conducts awareness

campaigns like advertisement, road shows etc.

5. The BRLM appoints a syndicate member, a SEBI registered intermediary to

underwrite the issues to the extent of “net offer to the public”.

6. The BRLM is entitled to remuneration for conducting the Book Building process.

7. The copy of the draft prospectus may be circulated by the BRLM to the

institutional investors as well as to the syndicate members.

8. The syndicate members create demand and ask each investor for the number of

shares and the offer price.

9. The BRLM receives the feedback about the investor’s bids through syndicate

members.

10. The prospective investors may revise their bids at any time during the bid period.

11. The BRLM on receipts of the feedback from the syndicate members about the bid

price and the quantity of shares applied has to build up an order book showing 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.

12. On receipts of the above information, the BRLM and the issuer company

determine the issue price. This is known as the market-clearing price.


13. The BRLM then closes the book in consultation with the issuer company and

determine the issue size of (a) placement portion and (b) public offer portion.

14. Once the final price is determined, the allocation of securities should be made by

the BRLM based on prior commitment, investor’s quality, price aggression,

earliness of bids etc. The bid of an institutional bidder, even if he has paid full

amount may be rejected without being assigned any reason as the Book Building

portion of institutional investors is left entirely at the discretion of the issuer

company and the BRLM.

15. The Final prospectus is filed with the registrar of companies within 2 days of

determination of issue price and receipts of acknowledgement card from SEBI.

16. Two 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.

17. The placement portion is closed a day before the opening of the public issue

through fixed price method. The BRLM is required to have the application forms

along with the application money from the institutional buyers and the

underwriters to the private placement portion.

18. The allotment for the private placement portion shall be made on the 2nd day from

the closure of the issue and the private placement portion is ready to be listed.

19. The allotment and listing of issues under the public portion (i.e. fixed price

portion) must be as per the existing statutory requirements.

20. Finally, the SEBI has the right to inspect such records and books which are

maintained by the BRLM and other intermediaries involved in the Book Building

process.

Pricing

Before establishment of SEBI in 1992, the quality of disclosures in the offer documents

was very poor.

The main drawback of free pricing was the process of pricing of issues. The issue price

was determined around 60-70 days before the opening of the issue and the issuer had no

clear idea about the market perception of the price determined.


In Book Building the price is determined on the basis of demand received or at price

above or equal to the floor price.

The Allotment Process through Book-building:

Step1- The Company will 'discover' its price

Earlier, the company determined a fixed price for the stock issue. The issue was marketed

to the general public through advertisements and a media campaign.

Today, companies prefer a book building process. Book building is the process of price

discovery. That means there is no fixed price for the share. Instead, the company issuing

the shares comes up with a price band. The lowest price is referred to as the floor and the

highest, the cap. 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.

Step2 - Players of the game

Three classes of investors can bid for the shares:

Qualified Institutional Buyers: QIBs include mutual funds and Foreign

Institutional Investors. At least 50% of the shares are reserved for this category.

Retail investors: Anyone who bids for shares under Rs 50,000 is a retail investor.

At least 25% is reserved for this category.

The balance bids are offered to high net worth individuals and employees of the

company.

OBJECTS OF THE OFFERING NEW IPO

Funds Requirement

Funding Plan (Means of Finance)

Appraisal

Schedule of Implementation

Funds Deployed


Sources of Financing of Funds already deployed

Details of Balance Fund Requirement

Interim Use of Funds

Basic Terms of Issue

Basis for issue price

Tax Benefits

ADVANTAGES & DRAWBACKS OF IPO

The Advantages of IPO are numerous. The companies are launching more and more

IPO’s to raise funds which are utilized for undertakings various projects including

expansion plans. The Advantages of IPO is the primary factor for the immense growth of

the same in the last few 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. All types of companies

with the idea of enhancing growth launch IPOs to generate funds to cater the

requirements of capital for expansion, acquiring of capital instruments, undertaking new

projects.

Major Advantages of IPO

IPO has a number of advantages. IPO helps the company to create a public awareness

about the company as these public offerings generate publicity by inducing their products

to various investors.

The increase in the capital: An IPO allows a company to raise funds for utilizing in

various corporate operational purposes like acquisitions, mergers, working capital,

research and development, expanding plant and

equipment and marketing.

Liquidity: The shares once traded have an assigned market value and can be resold.

This is extremely helpful as the company provides the employees with stock incentive

packages and the investors are provided with the option of trading their shares for a price.


Valuation: The public trading of the shares determines a value for the company and

sets a standard. This works in favor of the company as it is helpful in case the company is

looking for acquisition or merger. It also provides the share holders of the company with

the present value of the shares.

Increased wealth: The founders of the companies have an affinity towards IPO as it

can increase the wealth of the company, without dividing the authority as in case of

partnership.

Drawbacks of IPO’s

It is true that IPO raises huge capital for the issuing company. But, in order to launch an

Initial Public Offering (IPO), it is also necessary to make certain investments. Setting up

an IPO does not always lead to an improvement in the economic performance of the

company. A continuing expenditure has to be incurred after the setting up of an IPO by

the parent company. A lot of expenses have to be incurred in the form of legal fees,

printing costs and accounting fees, which are connected to the registering of an IPO. Such

expenses might cost hundreds of US dollars. Apart from such enormous costs, there are

other factors as well that should be taken into consideration by the company while

introducing an IPO.

Such factors include the rules and regulations involved to set up public offerings and this

entire process on the other hand involve a number of complexities which sometime

require the services of experts in relevant fields. Some companies hire experts to do the

needful to ensure a hassle-free execution of the task. After the IPO is introduced, the

expenses become a routine in every activity involved. Besides, the CEO of the company

would have to spend a lot of time in handling the SEC regulations or sometimes he hires

experts to do the same. All these aspects, if not handled with efficiency, prove to be some

major drawbacks related to the launch of IPOs.

The launch of IPO also brings about shareholders of the company. Shareholders have

ownership in the company. The primary owners of the company or the people holding

maximum 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 50 percent


share of the company. They have their individual demands to be met as they own a

certain percentage of stakes in the company. The SEC regulations require notifications

from the shareholders of the company, meetings, and also approvals from them while

making important business decisions.

A major risk with shareholders is that, they can sell off their stocks any time they want, in

case they see the price band of the stakes of that company is going down. This will lead to

a further drop of the value of shares in the market which in turn will decrease the overall

value of the company.

IPO Grading

IPO grading (initial public offering grading) is a service aimed at facilitating the

assessment of equity issues offered to public. The grade assigned to any individual issue

represents a relative assessment of the ‘fundamentals’ of that issue in relation to the other

listed equity securities in India. IPO grading is positioned as a service that provides ‘an

independent assessment of fundamentals’ to aid comparative assessment that would prove

useful as an information and investment tool for investors. Moreover, such a service

would be particularly useful for assessing the offerings of companies accessing the equity

markets for the first time where there is no track record of their market performance.

IPO grade assigned to any issue represents a relative assessment of the ‘fundamentals’ of

that issue in relation to the universe of other listed equity securities in India. This grading

can be used by the investor as tool to make investment decision. The IPO grading will

help the investor better appreciate the meaning of the disclosures in the issue documents

to the extent that they affect the issue’s fundamentals. Thus, IPO grading is an additional

investor information and investment guidance tool.

Credit Rating agencies (CRAs) like ICRA, CRISIL, CARE and Fitch Ratings who are

registered with SEBI will carry out IPO grading. SEBI 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 would be a one time assessment done at the time of the IPO and meant to

aid investors who are interested in investing in the IPO. The grade will not have any

ongoing validity.


SEBI GUIDELINES ON IPO GRADING

No unlisted company shall make an IPO of equity shares or any other security

which may be converted into or exchanged with equity shares at a later date,

unless the following conditions are satisfied as on the date of filing of Prospectus

(in case of fixed price issue) or Red Herring Prospectus (in case of book built

issue) with ROC:

The unlisted company has obtained grading for the IPO from at least one

credit rating agency;

Disclosures of all the grades obtained, along with the rationale/description

furnished by the credit rating agency(ies) for each of the grades obtained,

have been made in the Prospectus (in case of fixed price issue) or Red

Herring Prospectus (in case of book built issue); and

The expenses incurred for grading IPO have been borne by the unlisted

company obtaining grading for IPO.

Most of the market analysts have welcomed this move of SEBI as it will help the

investors in a volatile market to know whether the merchant banker has carried the

exercise in determining the price of an issue in a proper manner or not. It will also help

the investors in knowing whether the price of the issue is justified or not. They even said

that management of a good company will never get afraid of getting graded of their IPOs

if they are good. The only demerit of this step by the SEBI as said by many experts is that

there will be a slowdown in the number of IPOs coming out as grading will be a bit

lengthy process and there will be a cost-factor attached to it also.

FEATURES OF IPO GRADING

IPO grading covers both internal and external 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, size and growth of revenues,

competitive edge, technology, operating efficiency, liquidity and financial flexibility,

asset quality, accounting quality, profitability and hedging of risks. Among external

factors, the key one is the industry and economic/business environment for the issuer.

Here, it is important to note that internationally, the global rating agencies such as

Standard & Poors and Moodys do not perform grading of IPOs at all. While Standard &


Poors is the majority stakeholder in CRISIL Ltd, Moodys is the single biggest stakeholder

in ICRA Ltd. Similarly, the third global player Fitch IBCA (which acquired another

rating agency Dun & Bradstreet in 2000) 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

IPO grade Assessment

5/5 Strong fundamentals

4/5 Above average fundamentals

3/5 Average fundamentals

2/5 Below average fundamentals

1/5 Poor fundamentals

The process will ideally require 2-3 weeks for completion, so it may be a good

idea for companies to initiate the grading process about 6-8 weeks before the

targeted IPO date to provide sufficient time for any contingencies.

Cost Involved In IPO Grading

Though nothing has been declared officially but most of the credit rating has said

that IPO-grading would not cost much to the issuers. They would be charging 10 basis

points of the amount to be raised with a ceiling of about Rs 10-15 lakhs. Thus, even in the

case of a mega IPO, there would be a cap on fees, he noted. Around 100 IPOs hit the

market on an average every year. However, despite this seemingly big number, the total

receipts for the entire rating industry on account of grading fees would be only about Rs

10-15 crore.


Benefits of IPO Grading

There are various positive sides of an IPO grading. The most significant factors

that go in favor of IPO grading are:

(a) Professional and Independent Appraisal: IPO grading will create awareness

about the fundamentals of the company’s IPO and will provide focused company

information as a key input to prospective investors that will be helpful in taking an

investment decision, in a manner similar to what a credit rating is for debt

investors.

(b) Removal of Information Burden: Where disclosures of issues are large and

complex, a service analyzing and interpreting these disclosures independently and

quickly will be extremely useful in cutting through the clutter. Thus, the

usefulness of IPO grading would be particularly high for small investors as it will

serve as a guide about the company coming out with the issue.

(c) Impediment for Weak Companies: While fundamentally sound companies will

gain from the market, companies whose fundamentals are not very strong will be

impeded in building up speculative demand among investors. Such weak

companies will need to offer pricing, which will adequately compensate investors

for the risks they take. Therefore, IPO grading provides disincentives for weak

companies planning to come to the market to raise easy capital.

ROLE OF MERCHANT BANKERS IN IPO

Intermediary’s help corporations design securities that will be attractive to

investors, buy these securities from the corporations, and then resell them to savers in the

primary markets.

Merchant Bankers/ Lead Manager

Merchant bankers play an important role in issue management process. Lead

managers have to ensure correctness of the information furnished in the offer document.

They have to ensure compliance with SEBI rules and regulations as also Guidelines for

Disclosures and Investor Protection. To this effect, they are required to submit to SEBI a

due diligence certificate confirming that the disclosures made in the draft prospectus or


letter of offer are true, fair and adequate to enable the prospective investors to make a

well informed investment decision. The role of merchant bankers in performing their due

diligence functions has become even more important with the strengthening of disclosure

requirements and with SEBI giving up the vetting of prospectuses. Their functions are:

To act as intermediaries between the company seeking to raise money and the

investors. They must possess a valid registration from SEBI enabling them to do

this job.

They are responsible for complying with the formalities of an issue, like drawing

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 Book Running Lead Managers.

Post issue activities, like intimation of allotments and refunds, are their responsibility as

well.


ORIGIN OF INDIAN STOCK MARKET

The origin of the stock market in India goes back to the end of the eighteenth century

when long-term negotiable securities were first issued. However, for all practical

purposes, the real beginning occurred in the middle of the nineteenth century after the

enactment of the companies Act in 1850, which introduced the features of limited liability

and generated investor interest in corporate securities.

An important early event in the development of the stock market in India was the

formation of the native share and stock brokers 'Association at Bombay in 1875, the

precursor of the present day Bombay Stock Exchange. This was followed by the

formation of associations/exchanges in Ahmadabad (1894), Calcutta (1908), and Madras

(1937). In addition, a large number of ephemeral exchanges emerged mainly in buoyant

periods to recede into oblivion during depressing times subsequently.

Stock exchanges are intricacy inter-woven in the fabric of a nation's economic life.

Without a stock exchange, the saving of the community- the sinews of economic progress

and productive efficiency- would remain underutilized. The task of mobilization and

allocation of savings could be attempted in the old days by a much less specialized

institution than the stock exchanges. But as business and industry expanded and the

economy assumed more complex nature, the need for 'permanent finance' arose.

Entrepreneurs needed money for long term whereas investors demanded liquidity – the

facility to convert their investment into cash at any given time. The answer was a ready

market for investments and this was how the stock exchange came into being.

Stock exchange means any body of individuals, whether incorporated or not, constituted

for the purpose of regulating or controlling the business of buying, selling or dealing in

securities. These securities include:

(i) Shares, scrip, stocks, bonds, debentures stock or other marketable securities of a like

nature in or of any incorporated company or other body corporate;

(ii) Government securities; and

(iii) Rights or interest in securities.


The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE)

are the two primary exchanges in India. In addition, there are 22 Regional Stock

Exchanges. However, the BSE and NSE have established themselves as the two leading

exchanges and account for about 80 per cent of the equity volume traded in India. The

NSE and BSE are equal in size in terms of daily traded volume. The average daily

turnover at the exchanges has increased from Rs 851 crore in 1997-98 to Rs 1,284 crore

in 1998-99 and further to Rs 2,273 crore in 1999-2000 (April - August 1999). NSE has

around 1500 shares listed with a total market capitalization of around Rs 9, 21,500 crore.

The BSE has over 6000 stocks listed and has a market capitalization of around Rs 9,

68,000 crore. Most key stocks are traded on both the exchanges and hence the investor

could buy them on either exchange. Both exchanges have a different settlement cycle,

which allows investors to shift their positions on the bourses. The primary index of BSE

is BSE Sensex comprising 30 stocks. NSE has the S&P NSE 50 Index (Nifty) which

consists of fifty stocks. The BSE Sensex is the older and more widely followed index.

Both these indices are calculated on the basis of market capitalization and contain the

heavily traded shares from key sectors. The markets are closed on Saturdays and

Sundays. Both the exchanges have switched over from the open outcry trading system to

a fully automated computerized mode of trading known as BOLT (BSE on Line Trading)

and NEAT (National Exchange Automated Trading) System.

It facilitates more efficient processing, automatic order matching, faster execution of

trades and transparency; the scrip's traded on the BSE have been classified into 'A', 'B1',

'B2', 'C', 'F' and 'Z' groups. The 'A' group shares represent those, which are in the carry

forward system (Badla). The 'F' group represents the debt market (fixed income

securities) segment. The 'Z' group scrip's are the blacklisted companies. The 'C' group

covers the odd lot securities in 'A', 'B1' & 'B2' groups and Rights renunciations. The key

regulator governing Stock Exchanges, Brokers, Depositories, Depository participants,

Mutual Funds, FIIs and other participants in Indian secondary and primary market is the

Securities and Exchange Board of India (SEBI) Ltd.


ABOUT BSE

BSE Limited is the oldest stock exchange in Asia What is now popularly known as the

BSE was established as "The Native Share & Stock Brokers' Association" in 1875.

Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by

providing it with an efficient capital raising platform.

Today, BSE is the world's number 1 exchange in the world in terms of the number of

listed companies (over 4900). It is the world's 5th most active in terms of number of

transactions handled through its electronic trading system. And it is in the top ten of

global exchanges in terms of the market capitalization of its listed companies (as of

December 31, 2009). The companies listed on BSE command a total market capitalization

of USD Trillion 1.28 as of Feb, 2010.

BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000

certification. It is also the first Exchange in the country and second in the world to receive

Information Security Management System Standard BS 7799-2-2002 certification for its

BSE On-Line trading System (BOLT). Presently, we are ISO 27001:2005 certified, which

is a ISO version of BS 7799 for Information Security.

The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark

index. Exchange traded funds (ETF) on SENSEX, are listed on BSE and in Hong Kong.

Futures and options on the index are also traded at BSE.

BSE CONTINUES TO INNOVATE:

Became the first national exchange to launch its website in Gujarati and Hindi and

now Marathi

Purchased of Marketplace Technologies in 2009 to enhance the in-house

technology development capabilities of the BSE and allow faster time-to-market

for new products

Launched a reporting platform for corporate bonds christened the ICDM or Indian

Corporate Debt Market


Acquired a 15% stake in United Stock Exchange (USE) to drive the development

and growth of the currency and interest rate derivatives markets

Launched 'BSE STAR MF' Mutual fund trading platform, which enables exchange

members to use its existing infrastructure for transaction in MF schemes.

BSE now offers AMFI Certification for Mutual Fund Advisors through BSE

Training Institute (BTI)

Co-location facilities for Algorithmic trading

BSE also successfully launched the BSE IPO index and PSU website

BSE revamped its website with wide range of new features like 'Live streaming

quotes for SENSEX companies', 'Advanced Stock Reach', 'SENSEX View',

'Market Galaxy', and 'Members'

Launched 'BSE SENSEX MOBILE STREAMER'

With its tradition of serving the community, BSE has been undertaking Corporate

Social Responsibility (CSR) initiatives with a focus on Education, Health and

Environment. BSE has been awarded by the World Council of Corporate Governance the

Golden Peacock Global CSR Award for its initiatives in Corporate Social Responsibility

(CSR).

For more details & information, please visit our website: www.bseindia.com

LOGO


http://www.bseindia.com/

ABOUT NSE:

About the National Stock Exchange of India :

In the fast growing Indian financial market, there are 23 stock exchanges trading

securities. The National Stock Exchange of India (NSE) situated in Mumbai - is the

largest and most advanced exchange with 1016 companies listed and 726 trading

members.

The NSE is owned by the group of leading financial institutions such as Indian Bank or

Life Insurance Corporation of India. However, in the totally de-mutualised Exchange, the

ownership as well as the management does not have a right to trade on the Exchange.

Only qualified traders can be involved in the securities trading.

The NSE is one of the few exchanges in the world trading all types of securities on a

single platform, which is divided into three segments: Wholesale Debt Market (WDM),

Capital Market (CM), and Futures & Options (F&O) Market. Each segment has

experienced a significant growth throughout a few years of their launch. While the WDM

segment has accumulated the annual growth of over 36% since its opening in 1994, the

CM segment has increased by even 61% during the same period.

The National Stock Exchange of India has stringent requirements and criteria for the

companies listed on the Exchange. Minimum capital requirements, project appraisal, and

company's track record are just a few of the criteria. In addition, listed companies pay

variable listing fees based on their corporate capital size.

The National Stock Exchange of India Ltd. provides its clients with a single, fully

electronic trading platform that is operated through a VSAT network. Unlike most world

exchanges, the NSE uses the satellite communication system that connects traders from

345 Indian cities. The advanced technologies enable up to 6 million trades to be operated

daily on the NSE trading platform.


NSE HISTORY

The National Stock Exchange (NSE) is India's leading stock exchange covering various

cities and towns across the country. NSE was set up by leading institutions to provide a

modern, fully automated screen-based trading system with national reach. The Exchange

has brought about unparalleled transparency, speed & efficiency, safety and market

integrity. It has set up facilities that serve as a model for the securities industry in terms of

systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in terms of

microstructure, market practices and trading volumes. The market today uses state-of-art

information technology to provide an efficient and transparent trading, clearing and

settlement mechanism, and has witnessed several innovations in products & services viz.

demutualization of stock exchange governance, screen based trading, compression of

settlement cycles, dematerialization and electronic transfer of securities, securities

lending and borrowing, professionalisation of trading members, fine-tuned risk

management systems, emergence of clearing corporations to assume counterparty risks,

market of debt and derivative instruments and intensive use of information technology.

NSE’S MISSION

NSE's mission is setting the agenda for change in the securities markets in India. The

NSE was set-up with the main objectives of:

Establishing a nation-wide trading facility for equities, debt instruments and hybrids,

Ensuring equal access to investors all over the country through an appropriate

communication network,

Providing a fair, efficient and transparent securities market to investors using

electronic trading systems,

Enabling shorter settlement cycles and book entry settlements systems, and

Meeting the current international standards of securities markets.


The standards set by NSE in terms of market practices and technology have become

industry benchmarks and are being emulated by other market participants. NSE is more

than a mere market facilitator. It's that force which is guiding the industry towards new

horizons and greater opportunities.

LOGO

The logo of the NSE symbolizes a single nationwide securities trading facility ensuring

equal and fair access to investors, trading members and issuers all over the country. The

initials of the Exchange viz., N, S and E have been etched on the logo and are distinctly

visible. The logo symbolizes use of state of the art information technology and satellite

connectivity to bring about the change within the securities industry. The logo symbolizes

vibrancy and unleashing of creative energy to constantly bring about change through

innovation.

INDEX IN SHARE MARKETIndex consists of group of shares. Index denotes the direction of the entire market. Like

when people say market is going up or down then that means Index is going up or down.

Index consists of high market capitalization and high liquidity shares.

High Market capitalization shares - Companies having highest number of shares and

highest price of each share.

Market capitalization is calculated by multiplying current share price and number of

shares in the market.

High Liquidity shares - Shares in the market with high volumes.


Two types of Indices

1. Nifty and

2. Sensex

Nifty - Nifty consist of a group of 50 shares.

Sensex - Sensex consist of a group of 30 shares.

Stock exchanges mainly there are two exchanges in India.

1. NSE (National stock exchange) - Nifty is listed with NSE.

2. BSE (Bombay stock exchange) - Sensex is listed with BSE.

NSE and BSE are countries economic barometer.

Stock exchanges like NSE and BSE are the places where the trading of shares takes place.

ABOUT BULLS AND BEARS:

What are Bear?

Bear : An operator who expects the share price to fall

Bear Market : A weak and falling market where buyers are absent

What are Bulls?

Bull : An operator who expects the share price to rise and takes position in the

market to sell at a later date.

Bull Market : A rising market where buyers far outnumber the sellers

A bull market is one where prices are rising, whereas a bear market is one where

prices are falling. The two terms are also used to describe types of investors.

A stock market bull is someone who has a very optimistic view of the market; they may

be stock-holders or maybe investors who aggressively buy and sell stocks quickly. A bear

investor, on the other hand, is pessimistic about the market and may make more


conservative stock choices. Sometimes, the terms are used to refer to specific funds or

stocks. Bear market funds, for example, are those that are falling and faring poorly.

Investors sometimes refer to bull stocks to describe securities that are aggressively rising

and making their investors money.

Knowing what is meant by the bear and bull market can help you understand whether the

market is currently rising or falling. There is no need to get frightened by a bear market

indicator; however, as experts agree that the market is cyclical. When prices start falling,

they will eventually rise too.

WHAT DRIVES BEAR AND BULL MARKETS?

The stock market is affected by many economic factors. High employment levels, strong

economy, and stable social and economic conditions generally build investor confidence

and encourage investors to put their money in the stock market. Often, this can bolster

bull markets. Also, new technologies and companies that encourage investors to put their

money in stocks can create bull markets. For example, in the 1990s, the dot com craze

encouraged many investors to put their money in stocks that they felt would keep

increasing. In some cases, a bullish market is simply self-perpetuating. Since the market

is doing well, it only encourages investors to invest more money or to start investing.

On the other hand, discouraging economic or social political changes in a society can

push the market down. Sudden instability or unemployment -- or even fears of

unemployment caused by wars and other problems -- can start to make investors more

conservative and therefore lead to bear markets. Of course, again this becomes a self-

perpetuating trend. As the economy slows down, companies begin downsizing. Increased


unemployment makes people far less willing to gamble on the stock market. Sometimes,

a panic caused by dire predictions about the market can also create bearish conditions.

WHAT DOES BULL AND BEAR MEAN IN STOCK MARKET?

1. In the simplest terms, a bear market is a downward trend that is long term, usually

measured in months. The term is generally applied to the stock market and may

include some variations, but the low points are not historically low and the high

points are not historically high.

2. A bull market, in contrast, is a trend of similar duration but in an upward

direction. Again, the high points are not at historic levels and the low points are

not the lowest in market history. For both a bear and a bull market, other

definitions may be more general or more specific, depending on the economist or

study issuing the statement.

3. The animal names assigned to these trends are accepted as accurate, for the most

part, because a positive market in which people are more aggressive is compared

to the traits of a healthy, active bull. Bears, on the other hand, are sometimes seen

as moving more slowly, especially in certain weather situations.

4. Yet another explanation has to do with the trading of real bear skins, with traders

in the middle betting on the price dropping as they sold skins they didn’t possess

at the time. These men were sometimes called bears. Others have explained the

two terms as coming from the classic battles of earlier times that pitted a bull

against a bear.

5. Just about everyone who reads a newspaper or watches television news is familiar

with bull markets and bear markets. Most people don’t concern themselves with

the origins of the words and their application to trading in company stock.

Investors act on the belief (or faith) that the market will continue to improve,

giving them incentive to become active.

6. On the other side of the coin, when investors feel that prices are going to drop or

see that they are in a downward trend, they do not hold the same positive outlook

and lose faith in the market temporarily. Reliable investment counselors and

financial advisers are quick to explain that bear and bull market assessments don’t


adhere to any hard-and-fast rules. As with many financial and economic actions,

there is psychology of the individual to consider.

7. In other words, a person or group might act as if they are in a bear or bull market

based on their own assessment. If a significant number of investors act, the

combined weight of the action might push the market in a particular direction.

This could enhance a bear trend or bull trend, if not actually create the momentum

to start such a market. This could only be determined over a longer period of time

however, so hindsight is always better when assigning these terms.

8. The Great Depression was certainly an extreme example of a bear market because

the average price of stocks dropped almost out of sight over a three-year period.

Economists consider the period from the early 1990s to 2000 the longest bull

market. Numerous techniques are used to soften the blows of a bear market or to

take advantage of a bull market.

HOW TO PREDICT BEAR AND BULL MARKETS?

The easiest way to predict both types of markets is to realize that what goes up must come

down. That is, if the market is rising, then you know that at some point it will start to fall

again. Similarly, if the market is currently falling, you can be certain that eventually it

will pick up again. There are no precise ways to predict either bull or bear markets,

although general social economic situations can help you to determine what will happen.

A country which wages a war will experience bullish market conditions as government

contracts create more jobs and boost investor confidence if their expectation is to win.

Sudden international crises push the market downward and create bearish conditions.

News is very often a good indicator of where investors are headed. The reports will

inform about loss of investor confidence as well as sudden economic downturns that may

affect the market. If you notice from stock market research that several indexes have

changed by 15% to 20%, you can be sure that market direction is changing. When you


notice such changes, it is time to sit up and take notice. You may be headed for a bullish

or bearish market.

MARKET CONDITIONS IN BOTH CASES

While referring to markets is either bull or bear is very general, there are certain types of

specific markets conditions that exist in both markets. For example, a bullish market is

often accompanied by a sudden increase demand for securities and smaller supplies of the

same securities. This is because more investors are willing to buy securities while fewer

wish to sell. This, of course, only pushes prices higher. The very opposite is true in a

bearish market.

The investor's behavior is another condition prevalent in both markets. In bullish markets,

there's a sudden increase interest in the stock market. More people are hopeful about

possible profits on the stock market and most people are optimistic about economic

conditions. In a bearish market, investors are not very confident and therefore invest less.

INVESTING DURING BEAR AND BULL MARKETS

New investors often assume that they need to avoid investing during bear markets, and

invest heavily during bull markets. This is not the case. Experienced investors know that

you need to be able to invest in any sort of market condition, provided that you do so

wisely. Each investor has a different strategy for dealing with a bull market or bearish

markets. Many investors try to take advantage of bull markets by buying stocks as soon as

the market gets bullish, and then starting to sell when prices seem to have reached their

peak. The difficulty, of course, is that it is almost impossible to tell when the trend is

beginning and when it will peak. In general, investors can take more chances with the

market during a bullish phase. Since overall prices will rise, the chances of making a

profit are good.

In bearish market conditions, prices are falling and the possibility of loss is pretty good.

What is worse, it is not always possible to tell when bearish conditions will end.

Therefore, if you invest during such market conditions, you may have to suffer some

losses before bullish times return and you're able to realize a profit. For this reason, many

investors decide on short selling or fixed income securities and other more conservative


types of investment. Defensive stocks are another good option that remain stable during

bearish conditions. On the other hand, some investors see bearish market conditions as an

ideal time to invest in more stocks. Since many people are selling off their stocks --

including valuable blue-chip stocks -- at low prices, it is possible to set up long-term

investments that will prove valuable during bullish times.

While every investor loves to see the upswing in prices during a bull market, the wise

investor will be able to handle a bear market as well. Whether you are just beginning to

invest or are an experienced investor, learning to deal with various market conditions you

need not panic but decide patiently on investment.

ABOUT SEBI:

WHAT IS SEBI ?

Securities and Exchange Board of India (SEBI) is an apex body for overall development

and regulation of the securities market. It was set up on April 12, 1988. To start with,

SEBI was set up as a non-statutory body. Later on it became a statutory body under the

Securities Exchange Board of India Act, 1992. The Act entrusted SEBI with

comprehensive powers over practically all the aspects of capital market operations.

ROLE / FUNCTIONS OF SEBI

1. To protect the interests of investors through proper education and guidance as

regards their investment in securities. For this, SEBI has made rules and

regulation to be followed by the financial intermediaries such as brokers, etc.

SEBI looks after the complaints received from investors for fair settlement. It also

issues booklets for the guidance and protection of small investors.

2. To regulate and control the business on stock exchanges and other security

markets. For this, SEBI keeps supervision on brokers. Registration of brokers and

sub-brokers is made compulsory and they are expected to follow certain rules and

regulations. Effective control is also maintained by SEBI on the working of stock

exchanges.

3. To make registration and to regulate the functioning of intermediaries such as

stock brokers, sub-brokers, share transfer agents, merchant bankers and other


intermediaries operating on the securities market. In addition, to provide suitable

training to intermediaries. This function is useful for healthy atmosphere on the

stock exchange and for the protection of small investors.

4. To register and regulate the working of mutual funds including UTI (Unit Trust of

India). SEBI has made rules and regulations to be followed by mutual funds. The

purpose is to maintain effective supervision on their operations & avoid their

unfair & anti-investor activities.

5. To promote self-regulatory organization of intermediaries. SEBI is given wide

statutory powers. However, self-regulation is better than external regulation. Here,

the function of SEBI is to encourage intermediaries to form their professional

associations and control undesirable activities of their members. SEBI can also

use its powers when required for protection of small investors.

6. To regulate mergers, takeovers and acquisitions of companies in order to protect

the interest of investors. For this, SEBI has issued suitable guidelines so that such

mergers and takeovers will not be at the cost of small investors.

7. To prohibit fraudulent and unfair practices of intermediaries operating on

securities markets. SEBI is not for interfering in the normal working of these

intermediaries. Its function is to regulate and control their objectional practices

which may harm the investors and healthy growth of capital market.

8. To issue guidelines to companies regarding capital issues. Separate guidelines are

prepared for first public issue of new companies, for public issue by existing listed

companies and for first public issue by existing private companies. SEBI is

expected to conduct research and publish information useful to all market players

(i.e all buyers and sellers).

9. To conduct inspection, inquiries & audits of stock exchanges, intermediaries and

self-regulating organizations & to take suitable remedial measures wherever

necessary. This function is undertaken for orderly working of stock exchanges &

intermediaries.

10. To restrict insider trading activity through suitable measures. This function is

useful for avoiding undesirable activities of brokers and securities scams.


STOCK & EXCHANGE BOARD OF INDIA

Regulation Of Business In The Stock Exchanges

Under the SEBI Act, 1992, the SEBI has been empowered to conduct inspection of stock

exchanges. The SEBI has been inspecting the stock exchanges once every year since

1995-96. During these inspections, a review of the market operations, organizational

structure and administrative control of the exchange is made to ascertain whether:

the exchange provides a fair, equitable and growing market to investors

the exchange's organization, systems and practices are in accordance with the

Securities Contracts (Regulation) Act (SC(R) Act), 1956 and rules framed there

under

the exchange has implemented the directions, guidelines and instructions issued

by the SEBI from time to time

The exchange has complied with the conditions, if any, imposed on it at the time

of renewal/ grant of its recognition under section 4 of the SC(R) Act, 1956.

During the year 1997-98, inspection of stock exchanges was carried out with a special

focus on the measures taken by the stock exchanges for investor's protection. Stock

exchanges were, through inspection reports, advised to effectively follow-up and redress

the investors' complaints against members/listed companies. The stock exchanges were

also advised to expedite the disposal of arbitration cases within four months from the date

of filing.

During the earlier years' inspections, common deficiencies observed in the functioning of

the exchanges were delays in post trading settlement, frequent clubbing of settlements,

delay in conducting auctions, inadequate monitoring of payment of margins by brokers,

non-adherence to Capital Adequacy Norms etc. It was observed during the inspections

conducted in 1997-98 that there has been considerable improvement in most of the areas,

especially in trading, settlement, collection of margins etc

.


Standard & Poor’s Relation with Stock Market

The company traces its history back to 1860, with the publication by Henry Varnum

Poor of History of Railroads and Canals in the United States. This book was an attempt to

compile comprehensive information about the financial and operational state of U.S.

railroad companies. Henry Varnum went on to establish H.V. and H.W. Poor Co. with his

son, Henry William, and published annually updated versions of this book.

In 1906, Luther Lee Blake founded the Standard Statistics Bureau, with the view to

providing financial information on non-railroad companies. Instead of an annually

published book, Standard Statistics would use 5" x 7" cards, allowing for more frequent

updates.

In 1941, Poor and Standard Statistics merged to become Standard & Poor's Corp. In 1966,

the company was acquired by The McGraw-Hill Companies, and now encompasses the

Financial Services division.

Credit ratings

As a credit-rating agency (CRA), the company issues credit ratings for the debt of public

and private corporations. It is one of several CRAs that have been designated a nationally

recognized statistical rating organization by the U.S. Securities and Exchange

Commission.

It issues both short-term and long-term credit ratings.

Long-term credit ratings


http://en.wikipedia.org/wiki/File:World_countries_Standard_%26_Poor%27s_ratings.png

Sovereigns listings by Standard & Poor's as of August 2011.

Green - AAA

Turquoise - AA

Lighter blue - A

Darker blue - BBB

Purple - BB

Red – B

Grey - not rated

The company rates borrowers on a scale from AAA to D. Intermediate ratings are offered

at each level between AA and CCC (e.g., BBB+, BBB and BBB-). For some borrowers,

the company may also offer guidance (termed a "credit watch") as to whether it is likely

to be upgraded (positive), downgraded (negative) or uncertain (neutral).

Investment Grade

AAA: An obligor rated 'AAA' has extremely strong capacity to meet its financial

commitments. 'AAA' is the highest issuer credit rating assigned by Standard &

Poor's.

AA: An obligor rated 'AA' has very strong capacity to meet its financial

commitments. It differs from the highest-rated obligors only to a small degree.

Includes:

AA+: equivalent to Moody's Aa1 (high quality, with very low credit risk, but

susceptibility to long-term risks appears somewhat greater)

AA: equivalent to Aa2

AA-: equivalent to Aa3

A: An obligor rated 'A' has strong capacity to meet its financial commitments but

is somewhat more susceptible to the adverse effects of changes in circumstances

and economic conditions than obligors in higher-rated categories.

A+: equivalent to A1

A: equivalent to A2

BBB: An obligor rated 'BBB' has adequate capacity to meet its financial

commitments. However, adverse economic conditions or changing circumstances

are more likely to lead to a weakened capacity of the obligor to meet its financial

commitments.


Non-Investment Grade (also known as junk bonds)

BB: An obligor rated 'BB' is less vulnerable in the near term than other lower-

rated obligors. However, it faces major ongoing uncertainties and exposure to

adverse business, financial, or economic conditions, which could lead to the

obligor's inadequate capacity to meet its financial commitments.

B: An obligor rated 'B' is more vulnerable than the obligors rated 'BB', but the

obligor currently has the capacity to meet its financial commitments. Adverse

business, financial, or economic conditions will likely impair the obligor's

capacity or willingness to meet its financial commitments.

CCC: An obligor rated 'CCC' is currently vulnerable, and is dependent upon

favorable business, financial, and economic conditions to meet its financial

commitments.

CC: An obligor rated 'CC' is currently highly vulnerable.

C: highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to

pay out on obligations

CI: past due on interest

R: An obligor rated 'R' is under regulatory supervision owing to its financial

condition. During the pendency of the regulatory supervision, the regulators may

have the power to favor one class of obligations over others or pay some

obligations and not others.

SD: has selectively defaulted on some obligations

D: has defaulted on obligations and S&P believes that it will generally default on

most or all obligations

NR: not rated

Short-term issue credit ratings

The company rates specific issues on a scale from A-1 to D. Within the A-1 category it

can be designated with a plus sign (+). This indicates that the issuer's commitment to

meet its obligation is very strong. Country risk and currency of repayment of the obligor

to meet the issue obligation are factored into the credit analysis and reflected in the issue

rating.


A-1: obligor's capacity to meet its financial commitment on the obligation is

strong

A-2: is susceptible to adverse economic conditions however the obligor's capacity

to meet its financial commitment on the obligation is satisfactory

A-3: adverse economic conditions are likely to weaken the obligor's capacity to

meet its financial commitment on the obligation

B: has significant speculative characteristics. The obligor currently has the

capacity to meet its financial obligation but faces major ongoing uncertainties that

could impact its financial commitment on the obligation

C: currently vulnerable to nonpayment and is dependent upon favorable business,

financial and economic conditions for the obligor to meet its financial

commitment on the obligation

D: is in payment default. Obligation not made on due date and grace period may

not have expired. The rating is also used upon the filing of a bankruptcy petition.


THE COMPANY PROFILE


The birth of Karvy was on a modest scale in 1981. It began with the vision and

enterprise of a small group of practicing Chartered Accountants who founded the

flagship company …Karvy Consultants Limited. We started with consulting and

financial accounting automation, and carved inroads into the field of registry and

share accounting by 1985. Since then, we have utilized our experience and

superlative expertise to go from strength to strength…to better our services, to

provide new ones, to innovate, diversify and in the process, evolved Karvy as one

of India’s premier integrated financial service enterprise.

Thus over the last 20 years Karvy has traveled the success route,

towards building a reputation as an integrated financial services provider, offering a wide

spectrum of services. And we have made this journey by taking the route of quality

service, path breaking innovations in service, versatility in service and finally totality in

service.

KARVY is a premier integrated financial services provider and ranked among the top

five in the country in all its business segments, services over 16 million individual

investors in various capacities, and provides investor services to over 300 corporate,

comprising the who is who of Corporate India. KARVY covers the entire spectrum of

financial services such as Stock broking, Depository Participants, Distribution of financial

products like mutual funds, bonds, fixed deposit, Merchant Banking & Corporate

Finance, Insurance Broking, Commodities Broking, Personal Finance Advisory Services,

placement of equity, IPOs, among others. Karvy has a professional management team and

ranks among the best in technology, operations, and more importantly, in research of

various industrial segments.

Quality Policy

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by

combining its human and technological resources, to provide superior quality financial

services. In the process, Karvy will strive to exceed Customer's expectations.

Quality Objectives

As per the Quality Policy, Karvy will:


Build in-house processes that will ensure transparent and harmonious

relationships with its clients and investors to provide high quality of services.

Establish a partner relationship with its investor service agents and vendors that

will help in keeping up its commitments to the customers.

Provide high quality of work life for all its employees and equip them with

adequate knowledge & skills so as to respond to customer's needs.

Continue to uphold the values of honesty & integrity and strive to establish

unparalleled standards in business ethics.

SECTOR OF KARVY:

1. KARVY CONSULTANTANTS LIMITED: Deals in Registrar and Transfer

Agent.

We have traversed wide spaces to tie up with the world’s largest transfer agent, the

leading Australian company, ComputershareLimited. The company that services more

than 75 million shareholders across 7000 corporate clients and makes its presence felt in

over 12 countries across 5 continents has entered into a 50-50 joint venture with us.

With our management team completely transferred to this new entity, we will aim

to enrich the financial services industry than before. The future holds new arenas of client

servicing and contemporary and relevant technologies as we are geared to deliver better

value and foster bigger investments in the business. The worldwide network of Computer

share will hold us in good stead as we expect to adopt international standards in addition

to leveraging the best of technologies from

around the world.

2. KARVY SECURITIES LIMITED: Deals in distribution of various investment

products, viz., equities, mutual funds, bonds and debentures, fixed deposits, insurance

policies for the investor.

3. KARVY INVESTOR SERVICE LIMITED: Deals in issue management, investment

banking and merchant banking.

4.KARVY STOCK BROKING LIMITED: Deals in buying and selling equity shares

and debentures on the National Stock Exchange(NSE), the Hyderabad Stock

Exchange(HSE) and the over The Counter Exchange of India(OTCEI).


PRODUCTS & SERVICES

With greater choices comes greater value. KARVY offers you more choices by

providing a wide array of products and personalized services, so you can take

charge of your financial future with confidence.

So whether you are a new investor or a seasoned one, we have the resources and

advice you would need to make smart, well-researched investments. You have the

option to choose the level support you would like from us:

Invest Independently – If you are an independent investor and prefer calling your own

shots, you can access our extensive Market Research section for relevant, in-depth

resources and support.

SERVICES

Take our advice – If you are new to the world of investing, or are unable to do

your own research due to time constraints, our highly experienced team of advisors

will help you get started and meet your financial goals.

Day Trading – If you thrive on the thrill of riding the market wave on a daily

basis, we offer our Day Traders the resources you would need to strategize, buy and

sell conveniently.

KARVY’s products and services are geared towards meeting your individual financial

requirements. To find out more about a product / service, click on it from the menu on the

left.

DEPOSITORY SERVICES :

We offer Depository facilities to facilitate a seamless transaction platform as a part of our

value-added services for our clients. KARVY is a depository participant with the Central

Depository Services (India) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL)

for trading and settlement of dematerialized shares


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WEALTH MANAGEMENT SERVICES

It is our aim to empower clients by helping them to diversify their investments. To

this end, KARVY has added a range of products such as Mutual Funds, Insurance

and online facilities to its offerings.

We meet our clients on an individual basis and analyse important factors such as

your risk appetite, investment horizon and your existing investments before

making our recommendations as to what clients should invest in. The fund and

scheme selection is then done after conducting in- depth research on parameters

like risk adjusted returns, rolling returns, volatility and portfolio churn. We are

also in close contact with fund houses as well as insurance agencies and are

therefore always cognisant with new offerings and occurrences in the market and

like to keep our clients updated on the same.

Our clients can pick from Mutual Funds, IPOs, and Insurance products.

Our Wealth Management Services include Portfolio Management Services (PMS)

PRODUCTS

EQUITIES :

Our experienced trading consultants and advanced trading tools will provide the support

you need to achieve your long-term goals via the stock markets. We trade on the BSE,

NSE and CN and our website has facilities such as live stock tickers, news updates, and

more, to help our clients stay in the know. We also provide NRI specific services to meet

the needs of our clients who live abroad

COMMODITIES:

Indian markets have recently thrown open a new avenue for investors and traders

to participate: COMMODITY DERIVATIVES. For those who want to diversify

their portfolios beyond shares, bonds and real estate, commodities are the best

option.


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http://www.networthstock.com/insurance.aspx

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Commodities actually offer immense potential to become a separate asset class for

market-savvy investors, arbitrageurs and speculators. They are also easy to understand as

far as fundamentals of demand and supply are concerned. Historically, pricing in

commodities futures has been less volatile compared with equity and bonds, thus

providing an efficient portfolio diversification option.

KARVY now offers to investors a platform to trade in COMMODITY

FUTURES. As a member of the Multi Commodity Exchange of India Ltd. and of

the National Commodity and Derivative Exchange, we offer futures trading in 10

commodities (gold, silver, castor, soya, canola/mustard oil, crude palm oil, RBD

palmolein and cotton) – NCDEX and in gold, silver and castor seed, rubber

through MCX.

MARKET RESEARCH:

Information is power. At KARVY, it is also at your fingertips!

KARVY is powered by a top-notch research team that penetrates and investigates

the market to provide you with reliable, relevant information that helps you make

intelligent investment decisions. Our commitment to keeping you updated on the

latest market conditions stems from our desire to give you the option to invest in

ways that are the most suitable to you.

To explore our research reports in the category of your interest, please select it from the

list on your right.

Market Musing

Company Reports

Theme Based Reports

Weekly Notes

IPOs / FPO

Sector Reports

Stock Stance

Pre-quarter/Updates

Commodity

Research Recommendation Card

Pivot Points


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INVESTOR HANDBOOK:

Registrars and Transfer Agent

(Share transfers and communications regarding share certificates, dividends and change

of address)

Purva Sharegistry (India) Pvt. Ltd.

9, Shiv Shakti Industrial Estate,

Ground Floor, Sitaram Miill Compound,

J R Boricha Marg, Lower Parel,

Mumbai - 400 011.

Tel No.: 23016761,

Fax No.: 22626407

E-Mail: [email protected]

Listing of Equity Shares on Stock Exchange at:

Bombay Stock Exchange Limited,

Mumbai (BSE) Phiroze Jeejeebhoy Towers,

Dalal Street, Mumbai – 400 001

PORTFOLIO MANAGEMENT SERVICES

KARVY PMS will help you achieve your objective of preserving and

growing capital by conducting a thorough analysis of your investment needs,

returns expected and risk taking ability. Our focus is to craft a basket of Stocks,

Bonds, and Mutual Funds through strong research and corporate interface,

keeping in mind your risk-profile in specific relation with the ever-changing

marketing dynamic.


mailto:[email protected]

Investment Philosophy

We focus on a Bottom – Up approach to stock picking. The stock selection

process starts with fundamental analysis of companies and includes management

meeting and plant visits to get a first hand feel of the company, rather than

depending solely on quantitative analysis. The investment process is fairly

rigorous and includes qualitative as well as quantitative criteria and builds upon

the decade long experience of KARVY in Indian equity markets.

Who is it for?

Our offering is ideal for high net-worth customers -

Who are investing in Indian equities

Who desire to create wealth over longer period

Who appreciate a high level of personalized service

Benefits of being with KARVY PMS

Portfolio Management with a difference Every investor, whether individual or corporate,

has unique needs based on their objectives and risk profiles. We recognize the difference

and design tailored investment advice to achieve specific investment objectives.

Professional Management- We offer professional management of your equity

portfolio with an aim to deliver consistent returns while controlling risk.

Continuous Monitoring- We recognize that portfolios need to be constantly

monitored and periodically churned to optimize the results.

Risk Control- The portfolios are managed through a strong research driven

investment process with complete transparency and highest standards of service.

Transparency- You will get regular account statements and performance reports

on a monthly basis/ That's not all; web-enabled access ensure that you are just a

click away from all information relating to your investment.


Hassle Free Operation- Our Portfolio Management Service relieves you from all

the administrative hassles of your investments. We provide periodic reporting on

the performance and other aspects of your portfolio.

Dedicated Relationship Manager- Our Relationship Managers specialize in

providing personal investment management services to achieve your investment

objective.

Infrastructure

• A corporate office and 3 divisional offices in CBD of Mumbai which houses state-

of-the-art dealing room, research wing & management and back offices.

• All of 107 branches and franchisees are fully wired and connected to hub at

Corporate office at Mumbai. Add on branches also will be wired and connected to

central hub

• Web enabled connectivity and software in place for net trading.

• 60 operative ID’s for dealing room

• State of the Art accounting and billing system, on line risk management system in

place with 100% redundancy back up.

In house technology back up team to ensure un-interrupted connectivity


Milestones of Karvy


INDUSTRY PROFILE:

Following diagram gives the structure of Indian financial system:

FINANCIAL MARKET


Financial markets are helpful to provide liquidity in the system and for smooth

functioning of the system. These markets are the centers that provide facilities for buying

and selling of financial claims and services. The financial markets match the demands of

investment with the supply of capital from various sources.

According to functional basis financial markets are classified into two types.

They are:

Money markets (short-term)

Capital markets (long-term)

According to institutional basis again classified in to two types. They are

Organized financial market

Non-organized financial market.

The organized market comprises of official market represented by recognized

institutions, bank and government (SEBI) registered/controlled activities and

intermediaries. The unorganized market is composed of indigenous bankers,

moneylenders, individual professional and non-professionals.

MONEY MARKET:

Money market is a place where we can raise short-term capital.

Again the money market is classified in to

Inter bank call money market

Bill market and

Bank loan market Etc.

E.g.; treasury bills, commercial papers, CD's etc.

CAPITAL MARKET:

Capital market is a place where we can raise long-term capital.

Again the capital market is classified in to two types and they are

Primary market and

Secondary market.

E.g.: Shares, Debentures, and Loans etc.


P RIMARY MARKET:

Primary market is generally referred to the market of new issues or market for

mobilization of resources by the companies and government undertakings, for new

projects as also for expansion, modernization, addition, diversification and up

gradation. Primary market is also referred to as New Issue Market. Primary market

operations include new issues of shares by new and existing companies, further and

right issues to existing shareholders, public offers, and issue of debt instruments such

as debentures, bonds, etc.

The primary market is regulated by the Securities and Exchange Board of India (SEBI

a government regulated authority).

Function:

The main services of the primary market are origination, underwriting, and

distribution. Origination deals with the origin of the new issue. Underwriting contract

make the shares predictable and remove the element of uncertainty in the

subscription. Distribution refers to the sale of securities to the investors.

The following are the market intermediaries associated with the market:

1. Merchant banker/book building lead manager

2. Registrar and transfer agent

3. Underwriter/broker to the issue

4. Adviser to the issue

5. Banker to the issue

6. Depository

7. Depository participant

Investors’ protection in the primary market:

To ensure healthy growth of primary market, the investing public should be protected.

The term investor protection has a wider meaning in the primary market. The

principal ingredients of investors’ protection are:

Provision of all the relevant information

Provision of accurate information and

Transparent allotment procedures without any bias.


SECONDARY MARKET:

The primary market deals with the new issues of securities. Outstanding securities

are traded in the secondary market, which is commonly known as stock market or stock

exchange. “The secondary market is a market where scrip’s are traded”. It is a

market place which provides liquidity to the scrip’s issued in the primary market. Thus,

the growth of secondary market depends on the primary market. More the number of

companies entering the primary market, the greater are the volume of trade at the

secondary market. Trading activities in the secondary market are done through the

recognized stock exchanges which are 23 in number including Over The Counter

Exchange of India (OTCE), National Stock Exchange of India and Interconnected Stock

Exchange of India.

Secondary market operations involve buying and selling of securities on the stock

exchange through its members. The companies hitting the primary market are mandatory

to list their shares on one or more stock exchanges in India. Listing of scrip’s provides

liquidity and offers an opportunity to the investors to buy or sell the scrip’s.

The following are the intermediaries in the secondary market:

1. Broker/member of stock exchange – buyers broker and sellers broker

2. Portfolio Manager

3. Investment advisor

4. Share transfer agent

5. Depository participants.


CASE STUDY ON COAL INDIA IPOs EFFECT ON STOCK MARKET

Coal India Limited is the largest coal producing company in the world, based on raw coal

production of 431.26 million tons in fiscal 2010. Coal India produce non-coking coal and

coking coal of various grades for diverse applications.

As of March 31, 2010, Coal India operated 471 mines in 21 major coalfields across eight

states in India, including 163 open cast mines, 273 underground mines and 35 mixed

mines (includes both open cast and underground mines). They also operated 17 coal

beneficiation facilities with an aggregate designed feedstock capacity of 39.40 million

tons per annum. Company intend to develop an additional 20 coal beneficiation facilities

with an aggregate additional proposed feedstock capacity of 111.10 million tons per

annum. Besides this, They provided 85 hospitals and 424 dispensaries.

The Indian Institute of Coal Management (IICM) operates under CIL and imparts multi

disciplinary management development programs executives.

Coal India's major consumers are the power and steel sectors. Others include cement,

fertilizer, brick kilns etc.

Objects of the Issue:

The objects of the Offer are to carry out the divestment of 631,636,440 Equity Shares by

the Selling Shareholder and to achieve the benefits of listing the Equity Shares on the

Stock Exchanges.

Coal India Ltd IPO Grading / Rating

CRISIL has assigned an IPO Grade 5 to Coal India Ltd IPO. This means as per CRISIL

company has 'Strong fundamentals'. CRISIL assigns IPO grading on a scale of 5 to 1,

with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals

Strengths


Coal India, a navratna public sector undertaking under the Ministry of Coal, Government

of India, is the largest raw coal producing company as well as largest coal reserve holder

in the world.

CIL operated 471 mines in 21 major coalfields across eight states in India as of March 31,

2010 producing non-coking coal and coking coal of various grades for diverse

applications. While non-coking coal is used in thermal power plants and the cement

industry, coking coal is largely used in metallurgical industry. In FY 2010, about 91.6%

of the total coal produced was of non-coking coal and the balance was coking coal.

CIL is largest coal producer in the country as well as in the world with its production for

FY 2010 at about 431.26 million tons, which represents 82% of India’s coal production.

Further the company is also the largest coal reserve holder in the world as of April 1,

2010, with about 18862.9 million tons of total reserves and 64218 million tons of total

resources. India is the world’s third largest producer and consumer of coal given strong

growth in economy. The demand for coal in the country is expected to grow to 713

million tons per annum in 2011-12 compared to 600 million tons per annum in FY 2009-

10 on the back strong demand from sectors such as power and other energy intensive

industries such as steel and cement. However the country’s coal production is expected to

grow to 630 million tons by 2011-12, thus leaving a shortage of about 83 million tons.

Thus, if there is any limitation for growth it is the inability of the company to pace its

production inline with the demand growth for coal in the country.

Valuation

Consolidated sales of the company for the fiscal ended March 2010 was higher by 14% to

Rs 46689.29 crore and the net profit was up by 142% to Rs 9833.70 crore, albeit on a

lower base. The EPS for the fiscal was Rs 15.2. The offer price band of Rs 225-245

discounts the FY2010 consolidated earning by 14.8-16.1 times, which is largely in line

with the P/Es at which other global coal majors (especially Asian) are trading. However,

while other global majors’ earnings are more sensitive to fluctuations and cyclicality in

coal prices, Coal India’s earnings are largely immune to global coal price fluctuations as

Indian coal prices as directly/indirectly determined/influenced by government and are


much lower than international prices and their trend does not bear any relationship with

global coal prices. In that sense Coal India may be treated as utility company rather than a

commodity company. Other such Indian utilities like NTPC, Power Grid Corporation and

Gail trades around FY 2010 P/E of 20.

It is expected that there will be strong post-listing interest in the scrip even at higher P/E

multiple due to strong institutional (especially FII) demand as it is the only Indian stock

which gives exposure to the Indian coal industry and the scrip’s likely inclusion in

leading Indian and global indices. Thus scarcity premium and index company premium

can spice up the scrip post listing.

Issue Highlights : Coal India

Sector Mining

Offer Size

Offer for Sale (no of shares) 631636440

Fresh Issue Nil

Price Band (in Rs) ** 225-245

Post- Issue Equity (Rs Crore) 6316.36

Post-Issue Promoter stake (%) 89.99

Issue Open date 18/10/2010

Issue Close date (for QIB bidders) 20/10/2010

Issue Close date (for non-QIB bidders) 21/10/2010

Listing BSE, NSE

** Eligible employees and retail investor will get 5% discount on offer price

Advertisement Issued on: 06/10/2010. (Before 10 working days of issues opening)

Allotment of IPOs on : 04/11/2010. (after 12 working days off issues closed)

LISTING DAY DATA

Open - 288.00

High - 345.00

Close - 342.00

Low - 287.00


Volume - Rs. 63241006728.00

Indian IPO sector has seen a lot of action since the Coal India Limited filed for an initial

public offering. The IPO was oversubscribed for 15 times signaling other government-

owned companies to jump into the IPO market and make history. Government-run

companies like Power Grid, ONGC, Steel Authority of India and India Oil Corporation

are planning to enter the markets very soon.

CIL IPO highlights

Coal India IPO is the biggest IPO in India so far.

Coal India IPO succeeded due to the ever-increasing trust of investors in the

Company –Coal India Ltd.

Steady improvements in Coal India Ltd’s performance and quality have been two

major hallmarks of this IPO.

Both foreign and domestic investors have shown robust confidence as far as the

company’s credibility is concerned.

The CIL IPO has received maximum bids up till now.

Indian Government has sold 631.6 million shares in the IPO so far.

Investors has borrowed heavy money to subscribe for the Coal IPO shares, the

price band was kept between Rs. 225 to 245.

The Indian capital market and stock futures turned back into gold since the subscription

of CIL IPO began. The initial public offer mobilized 236,000 crore going far beyond the

estimated target of 15,500 crore.


Coal India IPO Analysis – Strong IPO – Must Invest

A big-bang initial public offer (IPO) of shares by Coal India Ltd closed on Thursday with

a thumping collection of Rs 236,148 crore, 15.2 times the targeted amount, but it fell

short of a record set by Reliance Power Ltd set in January 2008. Reliance Power’s

collections had totalled Rs 254,472 crore CIL will get to keep only Rs 15,745 crore of the

money offered, while the rest will be returned. Foreign institutional investors have bet big

on the issue and the refund is expected by some market experts to be put in other shares in

the market.

Both institutional and retail investors jumped in to take advantage of the issue, betting on

what many said was an attractive price and vast coal reserves underlying the company,

which is the world’s largest coal mining firm. The exact price is yet to fixed, but the

upper limit of the band is Rs 245 per share. The shares will list in November.

“Institutional participation was on expected lines but retail participation is encouraging

for this size of issue,” said Sanjay Sharma, head of equities at Deutsche Bank’s Indian

unit, one of the lead managers of the issue.

“Every issue has its challenge but a great issue at a great price makes it easier to sell,”

said S. Subramanian, managing director of Enam Investment Banking, another lead

manager.

The qualified institutional buyers (QIB) portion of the issue that closed for subscription

on Wednesday was subscribed 24.7 times and sources close to the issue said the retail

portion got subscribed over 2 times and the non-institutional subscription was covered 24

times. The official, final break-up was expected later at night.

IPO experts said the issue showed market strength. “It shows that if the issue is good and

priced well retail investors will invest into the issue and they came to invest beginning the

first day of the issue,” said Prithvi Haldea, MD, Prime Database, which tracks IPO’s.



big bang

Rs 15,475 crore

Amount Coal India plans to raise at upper end of price band of

between Rs 225 and Rs 245

Rs 236,148 crore

Amount collected by the IPO in offers made over four days —

15.2 times the targeted amount.

ANALYSIS OF CIL IPOs BEFORE PRESS ADVERTISEMENT

Sensex & Nifty Indices Before the Press Note Release of CIL IPOs

The below chart shows the fluctuations in stock markets, before the Press Note Release.

This chart shows the fluctuations between 01-09-2010 to 06-10-2010.

The below chart consists with both indices(NIFTY & SENSEX).

In this case study I found that from the above chart, the above chart clearly shows the

fluctuations in stock market indices. These indices show the fluctuations before the Press

Note Release of CIL. In this period investors don’t have any knowledge about CIL IPOs.

They don’t have any knowledge that CIL will issue IPO in the future.

In this period, the fluctuations of stock market indices are clearly shows that the market is

going in positive way. Sensex & Nifty both are showing in positive sign to stock market.

In this particular time period both indices are showing positive sign to investor to invest


money into the stock market. When both indices, are moving in positive way that time

countries economical position will be increased. And in this period all companies having

similar type of markets for there shares.

We can conclude from the above chart, the stock market is working normally and both

indices are showing positive sign to invest money into the market. In this particular time

period there is no effect of CIL because CIL not issued the press note at all in publication

ANALYSIS OF CIL IPOs AFTEER PRESS ADVERTISEMENT

Sensex & Nifty Indices After the Press Note Release of CIL IPOs

The below chart shows the fluctuations in stock markets, after the Press Note Release.

This chart shows the fluctuations between 07-10-2010 to 17-10-2010.

In these periods of time all investors are having the knowledge of CIL IPOs. They knows

about the CIL IPOs will be issued in the future and they know they knows the total


information related to CIL IPOs. Such as issues opening and closing date, date of

allotment of IPOs, refund of amount date, IPO price, premium, and etc..

In this time period the stock market fluctuations in starting days showing somewhat

negative sign but that negative sign in market is in common. When the date of issuing

will be coming soon those time in market the signs are falling down because investors

want to shift there investment from one companies to another. In this period investors are

selling there old securities to buy new securities (means CIL IPO’s) in future in primary

market, that’s why the indices are falling down more before two days of IPO’s issuing.

So we can conclude that CIL IPOs effect is their in Stock Market. That’s why all

investors withdraw the amount before 2 days to buy CIL IPOs. The main reasons to buy

CIL IPOs are as follows;

Positive talk and news related to CIL IPOs.

India is the 3rd largest Coal Producer Country in the world.

Coal India Limited is Worlds Largest and Coal Producer Company.

One of the Largest IPOs issue.

CIL is undertaken by Government & etc..

There are so many other factors also influence the investors to buy the CIL IPOs.

That’s why all investors withdraws the amount. The all above factors influence the

stock markets in after press release. In this particular time period stock markets falling

down rapidly with the effect of CIL IPOs.


ANALYSIS OF CIL IPOs ISSUES OPEN AND CLOSE

Sensex & Nifty Indices between the periods of CIL IPOs issued –closed.

The below chart shows the fluctuations in stock markets, when CIL IPO’s issued in

markets. This chart shows the fluctuations between 18-10-2010 to 21-10-2010.

CIL IPOs issued on 18-10-2010. These IPOs opened for QIB bidders for 3 days means

18th Oct’ 2010 to 20th Oct’ 2010. For NON Bidders for issues closed on 20th Oct’ 2010.

In the above chart, you can clearly observe that the fluctuations in stock market are very

high. And Both indices are reached at the lowest point of the 4 days and this point only is

lowest point of past 2 months of market. The main reason to fall down the both indices

reaches at the very least point of the past 2 months.

You can understand that CIL IPOs affects the more on stock market because all investors

want to buy the IPOs of CIL.


Investors also expected these IPO’s will be gives good returns with in a short time period.

The actual PAR value means face value of each IPO is only Rs. 10/- but the premium

only contained before issuing of IPO’s is 235. This is also one of the positive sign to

invest money in CIL IPO’s.

So in this period all investors are withdraws their money from other securities and invest

that money into the CIL IPOs. That is the main reason to fall down the Stock Market to

least of the past 2 months.


ANALYSIS OF CIL IPOs AFTER CLOSING THE ISSUE OF AN IPOs

Sensex & Nifty Indices after closing the CIL IPOs.

The below chart shows the fluctuations in stock markets, when CIL IPO’s issues are

closed .This chart shows the fluctuations between 22-10-2010 to 3-11-2010.

The above chart clearly shows the effect of CIL IPOs on stock market. After closing the

IPOs date. Automatically market indices are rising slowly because all investors are

investing in other securities again. In the last day the indices are raised very high because

on that they CIL are refunding amount who are not allotted with the shares. So, who

didn’t get allotment in CIL IPO’s they are investing that money in other shares that’s why

market indices are showing more positive end of the chart means where investors getting

refund their amount back.


ANALYSIS OF CIL IPOs, WHEN IPOs ALLOTTED AND LISTED IN STOCK EXCHANGE

Sensex & Nifty Indices after Allotting and Listing the CIL IPOs.

The below chart shows the fluctuations in stock markets, when CIL IPO’s allotted shares

to their investors and listed in stock exchange. This chart shows the fluctuations between

04th Nov’10 to 20th Nov’ 2010.

The above chart clearly explain that, the share market indices are playing consistent role

in starting because who didn’t allotted with shares of CIL they are interesting to buy the

shares but after some time automatically indices are falling down because the effect of

CIL has gone. That’s why indices are falling down slowly in that period.


ANALYSIS OF CIL IPOs PARTCUALR ONE MONTH PERIOD DURING IPOs ISSUED

Sensex & Nifty Indices for one month when CIL IPOs are issued.

The below chart shows the fluctuations in stock markets, when CIL IPOs allotted shares

to their investors .

This chart shows the fluctuations between 04th Nov’10 to 20th Nov’ 2010.

The above chart clearly shows that particular month of indices when the CIL IPOs are

issued. From the above chart you can conclude that CIL IPOs are affecting the share

market. And during the CIL IPOs issued period only the both indices are fall down lowest

of the particular month means all investors are affected with CIL IPO’s and this effect is

shows with all another listed companies. That’s why the both indexes are fall down

lowest in that particular issued time on 19th Oct’2010.


OVER ALL COAL INDIA PERFORMANCE INDEX

The above hart shows the overall performance of CIL Share.

BSE : Oct 25, 2011 17:00

Open Price 325.00 Volume 424758

High Price 326.00 52 Wk High 422.30

Low Price 320.80 52 Wk Low 287.45

Prev. Close 324.65

NSE : Oct 25, 2011 17:00

Open Price 324.20 Volume 3614659

High Price 325.80 52 Wk High 422.35

Low Price 320.55 52 Wk Low 289.00

Prev. Close 324.55

These both indices are shown the one year growth of CIL Share. When CIL allotted the

share value is Rs. 245. With in the one year duration the CIL share value become Rs.

325. means it increases nearly Rs. 32% with in the year.


In this year only the share of CIL reaches the Rs.422. means it gives nearly 72% returns

in particular time period. These returns are very high returns with in year.

The above all factors are explain about how IPOs will effects the Stock Market.

So, we can conclude that IPOs effect the Stock Market.

Major Factors which influence the Stock Market when IPOs issued.

Companies Image and Goodwill.

Positive Talk and NEWS on Coal India Limited IPOs.

World Largest Coal Producer Company.

CIL undertaken by Govt, of India.

India is the 3rd largest Coal Producer in the world.

Biggest IPO issue from past few years.

And So many other factors influence the Stock Markets. These reasons only effect the more on Stock Market fluctuations when IPOs issued.


FINDINGS

1. An IPO company is difficult to analyze since there isn't a lot of historical info.

2. An IPO is the first sale of stock by a company to the public.

3. It can be observed that CIL IPO’s affects the more on Stock Market.

4. A strong IPO can effects the more on Stock Market.

5. A Single strong IPO can effects the all other companies.

6. A strong IPO can change the investors mind set to invest money.

7. 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.

8. An IPO is a costly undertaking. A typical firm may spend about 15-25% of the

money raised on direct expenses. Even more resources are spent indirectly

(management time, disruption of business).

9. Only few companies were able to perform positive returns at the end of 1 year.

10. Only few companies can gain the excess capital with in the short time.

11. Investors mind set attracted towards investment of an IPO on the basis of image,

popularity, positive talk & news & etc.. information related to IPOs.

12. Only few investors will consider the technical factors of IPOs.

13. The investor faces limited risk in the secondary market. He is adequately

protected from counter party risks by the stock exchange. But he needs much

more protection and safeguards in the primary market.

14. According 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.

15. A strong IPOs effect is also limited time in Stock Market,

16. Investors evaluate an IPO maximum from Promoters of the company, prevailing

Market Trend & Recent IPO performance & Issue Size of the IPO and minimum

from Suppliers of the company, Listing in Well Known Stock exchanges &

Media Advertisements.


SUGGESTIONS

The investment in IPO can prove too risky because the investor does not know

anything about the company because it is listed first time in the market so its per-

formance cannot be measure.

Investors of the secondary market must take part in the primary markets as it

has been seen that IPO activity in Indian Stock Market has been tremendously

growing. And IPO is the safest stock market investment.

On the other hand it can be said that the higher the risk higher the returns earned.

So we can say that the though risky if investment is done then it can give higher

returns as well. For example- we can take the example of Coal India Limited.

The Investors invested in huge amounts with the faith that they will get good

returns but nothing happened so when the IPO got listed. So 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 always rewarded with the higher returns. So higher the

risk the more the returns rewarded for it.

“We can fairly predict the future, but can’t make it happen as it is.”

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 Stock Market has been tremendously

growing. And IPO is the safest stock market investment.

Over subscription should be treated as indication of success of the issue.

Investors must analyze all the sectors before investing in the IPO, in order to get

maximum returns.

Investors should take into consideration the promoters of the business, the

prevailing market trend & Recent 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. As


sometimes a fundamentally strong company may not provide good returns due to

some reasons as in case of Cairn India Ltd.

Before 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 growth

potential of the sector. It is evident from the different IPO performances of Idea

cellular Ltd. & Spice Communications Ltd. even when they both belong to the

growing Telecom sector.

Companies issue their shares information through newspapers prospectus. The is

not reached to illiterate persons. Then illiterate person also become the investors

in the company this is useful to be company as well as public.

IPO is used by a company to raise its funds. The extra 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 way to get more money for long term

investments.


CONCLUSIONS

Broadly speaking, companies are either private or public. Going public means a

company is switching from private ownership to public ownership.

Getting in on a hot IPO is very difficult, if not impossible.

The process of underwriting involves raising money from investors by issuing

new securities.

Thus we have studied about the organization and various forms of organizations.

How the funds can be raised is studied so as to know the effective way of

accessing capital for the organization.

The study about IPO and its methods helped us to know the different ways of

going for an IPO.

Analysis of financial markets helped to know about the various types of markets.

The advantages and disadvantages of going for an IPO are studied.

Thus the overall knowledge about IPO is gathered.

An IPO company is difficult to analyze since there isn't a lot of historical

informantion

IPO is used by a company to raise its funds. The extra 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 way to get more money for long term

investments.


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

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

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 over allotment 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.

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

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,

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.


BOOKS

Khan M. Y and Jain. P.K (2005). Financial management. Pearson publications.

IM Pandey, 2010,Financial Management. Vikas Publication.

Ross Westerfield jaffe. Corporate Finance, 7th Ed, TMH Publishers.

Dhanesh Khatri, 2010,Security Analysis. Macmillan Publishers.

Financial services

JOURNALS

Indian Journal of Finance – Feb’ 2011.

Journal of Emerging Market Finance- December’ 2011

Journal of the American Mathematical Society’2007

Journal of the Financial Econometrics’2010

REFERENCES

http://www.google.co.in

http://www.crisil.com

http://iporatings.in

http://www.ipostatus.com

http://www.moneycontrol.com

http://www.besindia.com

http://www.sebi.gov.in

http://www.moneycontrol.com/nifty/nse/nifty-live

http://www.nirmalbang.com/ipo/closed-issues.aspx

http://money.rediff.com

http://www.scribd.com

http:// www.nseindia.com


http://www.nseindia.com/

http://www.scribd.com/

http://money.rediff.com/

http://www.nirmalbang.com/ipo/closed-issues.aspx

http://www.moneycontrol.com/nifty/nse/nifty-live

http://www.sebi.gov.in/

http://www.besindia.com/

http://www.moneycontrol.com/

http://www.ipostatus.com/

http://iporatings.in/

http://www.crisil.com/

http://www.google.co.in/

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