Ipo Pricing

IPO PRICING Chapter-3

GENERAL INFORMATION OF THE STUDY

INTRODUCTION

IPO definition:

This report only focuses on IPOs of operating companies. An IPO is defined as: a company’s first offering of equity to the public.

IPO stands for Initial Public Offering and means the new offer of shares from a company which was previously unlisted. This is done by offering those shares to the public, which were held by the promoters or the private investors prior to the IPO. In the case when other investors or Promoter held the shares the stake holding comes down to the extent their shares are offered to the public. In other cases new shares are issued to the public and the shares, which are with the promoters stay with them. In both cases the share of the promoters in the total capital comes down.

For example say there are 100 shares in a company and 50 of these are offered to the public in an IPO then in such a case the promoter’s stake in the company comes down from 100% to 50%. In another case the company issues 50 additional shares to the public and the stake of the promoter comes down from 100% to 67%. Normally in an IPO the shares are issued at a discount to what is considered their intrinsic value and that’s why investors keenly await IPOs and make money on most of them. IPO are generally priced at a discount, which means that if the intrinsic value of a share is perceived to be Rs.100 the shares will be offered at a price, which is lesser than Rs.100 say Rs.80 during the IPO. When the stock actually lists in the market it will list closer to Rs.100. The difference between the two prices is known as Listing Gains, which an investor makes when investing in IPO and making money at the listing of the IPO. A Bullish Market gives IPO investors a clear opportunity to achieve long term targets in a short term phase.

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IPO PRICING

What is an IPO?

An IPO is the first sale of stock by a company to the public. A company can raise money by issuing either debt 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 Securities and Exchange Commission (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.

The first sale of stock by a private company to the public, IPO’s 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 obtains 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. IPO’s can be a risky investment. For the individual investor, it is tough to predict what the stock 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.


IPO PRICING Why Go Public?

Basically, going public (or participating in an "initial public offering" or IPO) is the process in which a business owned by one or several individuals is converted into a business owned by many. It involves the offering of part ownership of the company to the public through the sale of debt or more commonly, equity securities (stock). 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 businesses. 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. 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.


IPO PRICING

Primary and Secondary markets

In the primary market securities are issued to the public and the proceeds go to the issuing company. Secondary market is term used for stock exchanges, where stocks are bought and sold after they are issued to the public.

PRIMARY MARKET

The first time that a company’s shares are issued to the public, it is by a process called the initial public offering (IPO). In an IPO the company offloads a certain percentage of its total shares to the public at a certain price. Most IPO’S these days do not have a fixed offer price. Instead they follow a method called BOOK BUILDIN PROCESS, where the offer price is placed in a band or a range with the highest and the lowest value (refer to the newspaper clipping on the page). The public can bid for the shares at any price in the band specified. Once the bids come in, the company evaluates all the bids and decides on an offer price in that range. After the offer price is fixed, the company allots its shares to the people who had applied for its shares or returns them their money.

SECONDRY MARKET

Once the offer price is fixed and the shares are issued to the people, stock exchanges facilitate the trading of shares for the general public. Once a stock is listed on an exchange, people can start trading in its shares. In a stock exchange the existing shareholders sell their shares to anyone who is willing to buy them at a price agreeable to both parties. Individuals cannot buy or sell shares in a stock exchange directly; they have to execute their transaction through authorized members of the stock exchange who are also called STOCK BROKERS.


IPO PRICING

GLOBAL IPO MARKET

Accelerated globalization of capital continues to drive the record-setting world IPO markets of 2006–2007. Around the world, companies, investors, and stock exchanges think and act much more globally, often looking outside domestic markets for high growth opportunities. In the past 18 months, key IPO trends reflect the effects of globalization: flourishing stock markets awash in liquidity, vibrant growth in the emerging markets, escalating rivalry between the world’s stock exchanges, the rise of more world-class financial centers, the boom in large listings on local exchanges, and the proliferation of capital-raising options, especially private equity’s emergence as a key player behind so many large IPO’s. In 2007, globalizing capital and a surge in IPO ready companies worldwide are broadening the horizons of the world’s financial markets

GLOBAL IPO BY ACTIVITY


YEAR CAPITAL RAISED

NO. OF DEAL

Q1 ’04 $29 339Q2 ’04 $33 385Q3 ’04 $29 339Q4 ’04 $39 457Q1 ’05 $29 327Q2 ’05 $39 409Q3 ’05 $38 364Q4 ’05 $74 452Q1 ’06 $39 360Q2 ’06 $66 473Q3 ’06 $49 355Q4 ’06 $112 608Q1 ’07 $37 395Q2 ’07 $95 574

YEAR CAPITAL RAISED

NO. OF DEAL

Q3 ’07 $59 442Q4 ’07 $105 603Q1 ’08 $41 253Q2 ’08 $39 274Q3 ’08 $13 164Q4 ’08 $2 78Q1 ’09 $1 52Q2 ’09 $10 82Q3 ’09 $34 146Q4 ’09 $67 297Q1 ’10 $54 293Q2 ’10 $47 302Q3 ’10 $53 314Q4 ’10 $132 484

IPO PRICING

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IPO PRICING

GREATER CHINA

KEY TRENDS:

Greater China’s IPO markets launched mega–IPOs in 2006, with larger (but no longer super-sized) IPO’s in 2007.

HKSE led world exchanges in fundraising in 2006, and showcasing its world-class liquidity and corporate governance standards.

As global resources migrate to China, foreign investors grow more comfortable investing locally, especially in state-owned enterprises.

A dual-listing trend and budding rivalry emerges for the Hong Kong and Shanghai stock exchanges.

Many large Chinese companies offer shares to US institutional investors under Rule 144A.Driven by yet another year of rapid economic growth and robust secondary markets in 2006, Greater China’s IPO market soared to an all-time high, with US$56.6 billion raised in 175 offerings. With conspicuous success, the Hong Kong Stock Exchange (HKSE) hosted privatizations of China’s two largest state-owned banks — including the world’s largest IPO ever, the Industrial and Commercial Bank of China (ICBC) with US$21.9 billion raised, and the second largest offering, Bank of China (BOC) which raised US$11 billion. The ICBC issuance was also the first time in China that shares were dual-listed.

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IPO PRICING

INDIA

KEY TRENDS:

The strength of India’s economy, stock market, corporate profits, energy sector, and private equity fuel IPO’s in 2006 and 2007.

Indian exchanges hosted several billion-dollar IPO’s in 2006, all prime examples of the rise in localization.

Cross border activity and the role of foreign capital continue to grow.Enabling relatively easy access to global institutional capital, Qualified Institutional Placements (QIPs) gain immediate popularity.

The private equity rush into India has lead to a potential for many IPO exits.


IPO PRICING

GLOBAL IPO ACTIVITY BY INDUSTRY


Telecommunication, 3%Retail, 5%

Real Estate, 6%Media and En-

tertainment, 4%

Materials, 17%

Industrial , 10%Consumer Products and Services,

10%

Consumer Staples, 4%Enrgy and Power, 9%

Financials, 9%

Healthcare, 7%

High Technology, 15%

IPO PRICING

EUROPE

KEY TRENDS:

Europe’s IPO markets rose to an all-time high in 2006, and remain high-fl years in2007 bolstered by beefy deals, cross-border listings in London, and private equity.As the region’s high-growth story, Russia drives European IPO activity.

London has become the top listings destination for cross-border issuers seeking relatively quick and easy capital.

Europe’s junior exchanges, including London’s AIM, the Eurocent’s AlterNet, and Deutsche Brose’s Entry Standard, are thriving with small-cap activity.

The ballooning growth in European private equity is leading to more IPO exits, and sizeable public-to-private transactions.

Europe’s steady economic expansion, attractive stock prices relative to US peers, low interest rates, and vigorous secondary stock markets galvanized its IPO markets in 2006 and 2007. For the second year in a row, Europe’s exchanges attracted the most cross-border listings, especially Russian companies listing in London. Another key source of capital in Europe has been the large private equity firms.

Europe’s 2011 IPO markets are expected to improve, although still in a fragile state of recovery. Key drivers of 2011 European IPO markets will include further cross-border LSE listings, particularly in energy, mining and metals sectors, bank and corporate spin-offs, and East European privatizations as Polish, Czech Republic, and Russian governments seek to finance their fiscal deficits. European investors now appear keen to put money into equity.

The 2011 pipeline of potential IPO candidates is quite strong in the UK, Germany and Russia. In the UK, spinouts from banks both in the UK and overseas could lead to some of the largest IPOs. The LSE Main market will also launch cross-border listings from emerging market-facing companies with businesses in the BRICs, Kazakhstan, Latin America and Africa. With short-term commodity prices remaining robust, more mining, oil and gas companies will also list.

In 2010, European IPOs began to revive Market volatility led to discounted valuations In Europe, the UK and Polish exchanges led IPO markets. Europe’s energy and power sector raised the most capital European IPO exits by PE funds were fueled by healthy aftermarket returns. In 2010, European secondary fund-raisings were well-received


IPO PRICING

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IPO PRICING

MIDDLE EAST

KEY TRENDS:

After three years of record growth, most Middle East markets endured erratic performance in 2006, but seem to be steadier in 2007.

Factors leading to Middle East volatility include excess liquidity, irrational retail speculation and lack of market depth.

The Middle East IPO pipeline is expected to expand, with large-scale privatizations and infrastructural projects in the works.

The 2011 Middle East IPO outlook remains dim. Companies in many Middle East countries are wary of listing, frustrated by poor valuations, sluggish GDP growth prospects and political unrest. Other factors deflating IPO activity are depressed corporate earnings, low trading volumes, negative investor sentiment and insufficient demand for IPOs.

The Middle East IPO markets saw a flat trend in 2010, with 35 IPOs worth a total of US$3.3 billion, a 59% increase from 2009 by capital raised. Conventional bank financing, bonds and sukuks3 are likely to be the preferred mode of raising funds for regional corporations until the profitability of issuers and investor sentiment improve.

Companies in Saudi Arabia have consistently been far more willing to go public compared to other Middle East countries. Among other advantages, Saudi Arabian issuers have mandatory listing regulations, are able to take advantage of the low cost of capital secured through the market route and enjoy more positive investor reception.

In 2010, Africa saw a 406% jump in total proceeds, with 13 IPOs worth US$1.6 million. African IPO markets, driven by four South African deals in the health care and mining sectors.


IPO PRICING

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IPO PRICING

CIS/RUSSIA

KEY TRENDS:

Russian IPO markets fl ourish in 2006 and 2007, particularly in the commodities and fi nancial services sectors.

Larger Russian companies seek credibility and deeper liquidity by listing in London.Russian companies face uncertainty ahead with 2008 presidential elections, commodity prices, and corporate governance issues.

A GDR in London combined with a US Rule 144A offering is the most popular form of listing.As the private equity market remains undeveloped, IPOs are by far the most popular Russian exit strategy, with the best valuations.

Kazakhstan launches large IPOs in resources and banking sectors with several major banks expected to go public in 2007.


IPO PRICING

AUSTRALIA

KEY TRENDS:

Rising commodity prices and demand from Asia fuel thriving resources and energy sectors.A recent surge in private equity will lead to many IPO exits in next 12–24 months.

As Australian stock markets rise for the fourth year in a row, Australia’s stable economy, record corporate profi ts and booming resources sector have led to an extraordinarily active IPO market. In 2006, Australia launched 173 IPOs, raising US$4.2 billion, with many listings in the resources and energy sector. The largest Australian IPO of 2006 was explosives maker Dyno Nobel worth US$800 million.


IPO PRICING UNITED STATES

KEY TRENDS:Robust US markets garner the highest number of IPOs in 2006 and maintain momentum with a pipeline of high-quality deals in 2007.

Most global companies list at home, rather than in the US, as local markets grow more liquid and better regulated.

In the past 18 months, the vitality of the US stock market has whet investor appetite for risk, and spurred US-domiciled IPO numbers to record heights. Although some market watchers blame US regulations for the rise in non-US cross-border issuances, globalization of capital may be the primary force behind the trend as it has lead to stronger, more liquid,

competitive markets worldwide. For a truly global company, a US listing is still seen as the “gold standard” with access to the deepest pool of capital, a valuation premium, and strategic advantages.

Pent-up demand for capital by fast-growth companies is still driving US IPOs The growing US backlog contained 150 companies at the end of February 2011 2010 saw the highest yearly fundraising on US exchanges since 2007 as the US emerged

from the recession The fourth quarter of 2010 achieved the highest US quarterly total Many smaller US IPOs achieved strong first-day performance The US industrial and high-tech sector IPOs drew headlines. US PE- and VC-backed IPOs accounted for more than two-thirds of all US deals US exchanges saw numerous Chinese listings In 2010, US secondary markets raised US$169.2 billion, particularly as financial

sponsors sought further returns following their public offerings. Although 2010 raised less than the record amount (US$230.6 billion) raised in 2009, 2011 looks set to be an active year for follow-on offerings, especially as the U.S. Treasury is likely to continue to sell off much of its remaining stake in GM, which will be among the largest US share sales.


IPO PRICING

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IPO PRICING

IPO MARKET IN INDIA

The IPO Market in India has been developing since the liberalization of the Indian economy. It has become one of the foremost methods of raising funds for various developmental projects of different companies.

The IPO Market in India is on the boom as more and more companies are issuing equity shares in the capital market. With the introduction of the open market economy, in the 1990s, the IPO Market went through its share of policy changes, reforms and restructurings. One of the most important developments was the disassembling of the Controller of Capital Issues (CCI) and the introduction of the free pricing mechanism.

This step helped in developing the IPO Market in India, as the companies were permitted to price the issues. The Free pricing mechanism permitted the companies to raise funds from the primary market at competitive price.

The Central Government felt the need for a governed environment pertaining to the Capital market, as few corporate houses were using the abolition of the Controller of Capital Issues (CCI) in a negative manner. The Securities Exchange Board of India (SEBI) was established in the year 1992 to regulate the capital market. SEBI was given the authority of monitoring and regulating the activities of the bankers to an issue, portfolio managers, stockbrokers, and other intermediaries related to the stock markets. The effects of the changes are evident from the trend of the resources of the primary capital market which includes rights issues, public issues, private placements and overseas issues.

The IPO Market in India experienced a boom in its activities in the year 1994.

In the year 1995 the growth of the Indian IPO market was 32 %.

The growth was halted with the South East Asian crisis.

The markets picked up speed again with the introduction of the software stocks.


IPO PRICING

CURRENT POSITION OF INDIAN IPO MARKET

India is being lauded as the savior of the ailing global IPO market with $3.3 billion worth of proceeds from eight deals. This makes India the largest IPO market in the world so far this year.

1. According to Thomson Financial, the bulk of the volumes came from the biggest IPO deal so far this year — Reliance Power's $3 billion IPO on January 21, 2008.

2. On January 15, 2008, Reliance Power attracted $27.5 billion of bids on the first day of its IPO, equivalent to 10.5 times the stock on offer, thereby, creating India's IPO record. Its upper cut off price was

3. Rs. 450. The proposed IPO was to fund the development of its six power projects across the country.

4. Emaar MGF’s IPO, at $1.6 billion is estimated to be the second largest IPO in the world so far this year, behind Reliance Power's $3 billion IPO.

5. Thomson Financial data reveals that India accounts for 49.1% of global IPO proceeds at the moment, compared to just 3.7% same time last year. Significant, given that global IPOs declined 36.1% over the last one year.

6. The Indian capital market has performed quite well in 2007. It raised US$8.3 billion through 95 Initial Public Offers (IPOs). According to the Ernst & Young report, "Globalization - Global IPO Trend Report 2007" India was the fifth largest market in the world in terms of the number of IPOs and the seventh largest in terms of the proceeds for the year

7. It was the real estate sector which took the maximum advantage of the bullish stock market trends in 2007. According to the industry body Assocham, real estate players raised the maximum amount of funds from the capital market through IPOs last year. Realty firms picked up around 42.7% of the total funds generated through IPOs. Of the Rs.34, 119 crore raised in the primary market in the period starting from January 1, 2007 to mid-December, about Rs.14, 591 crore was raised by the realty firms.

8. An initial public offering (IPO) is the first sale of stock by a company to the public.


IPO PRICING

PRIMARY MARKET-GENESIS AND GROWTH

When a business entity needs money the general course of action that it follows is that it goes to the bank. However banks may not be ready to provide huge finance for a long time especially if the returns are not fixed. The best way to raise money is through offer of shares and for this: PRIMARY MARKET is the answer.

The Primary Market deals with the new securities which were previously not tradable to the public. The main function is to facilitate the transfer of resources from savers to entrepreneurs seeking to establish or to expand and diversify existing events. The mobilization of funds through the Primary Market is adopted by the state government and corporate sector. In other words the Primary Market is an integral part of the capital market of a country and together with the securities market. The development of security as well as the scope for higher productive capacity and social welfare depends upon the efficiency of the Primary Market.

We examine the relation between an ex ante measure of IPO growth prospects – the industrylevel analyst earnings growth forecast – and short- and long-run IPO performances, using a sample of 7,608 IPOs from 1982 to 2007. We find that in the period before the Internet bubble (1999-2000), IPOs in industries with high growth prospects earn high short-run and long-run returns up to three years after the IPO. Industry growth has the largest economic impact on longrun performance among all factors we consider including underwriter quality and offer proceeds. However, during the Internet bubble period, the effect of industry growth on long-run performance dramatically reverses so that IPOs in high-growth industries underperform in the long run. There is some weak evidence that this reversal has lingered in effect since the bust of the Internet bubble. Our evidence suggests that barring bubble period overreaction to growthprospects, IPO investors tend to underreact to industry growth prospects, leading to superior longrun performance for firms in high-growth industries.

Initial public offering (IPO) investors constantly face a dilemma: more information is needed for IPO companies than for established public companies because of the high uncertaintyabout IPO valuation and growth prospects, yet the information about IPO firms is sparser. Recent interest in investing in the social network firms such as Facebook, Twitter and Groupon before they go public has highlighted the desire for more information about prospective IPO firms.1 In this paper, we investigate whether an intuitive but largely overlooked measure of IPO growth prospects – the growth prospects of the IPO firm’s industry – can help investors select IPOs. We pothesize that to the extent that investors with limited attention categorize an IPO by its industry in assessing its growth prospects, industry earnings growth rate should be a reasonable approximation for investors’ outlook on firm growth. We use the analyst long-term earnings growth


IPO PRICING forecast for the IPO firm’s industry as a proxy for the IPO’s growth potential, and examine whether industry growth prospects affect IPO short-run and long-run stock performances.

A priori , it is unclear how industry growth prospects should affect IPO stock performance, especially the long-run performance. One might expect high growth prospects to be associated with high information asymmetry or high risk, and therefore these IPOs should have high short-run returns due to the traditional arguments such as winner’s curse or information revelation of informed investors. However, theories based on information asymmetry or risk does not address the long-run performance of IPOs. In fact, when the aftermarket is fully rational, there should be no predictable relation between industry growth measures and long-run risk-adjusted stock performance.

Alternatively, one could hypothesize that IPO participants do not process information correctly, and may either underreact or overreact to earnings growth prospects. If they underreact to the growth prospects of IPOs, they may set the offer price and/or the first-day closing price too. low, for IPOs with high growth prospects. Under this underreaction scenario, IPOs with high growth prospects should have better long-run returns because of the initial underreaction to the positive growth potential. Conversely, if investors overreact to information about growth prospects, they may be overoptimistic about IPOs with high growth prospects at the time of the offer, leading to high short-run but poor long-run stock performance. In sum, theory does not have a clear prediction about the relation between industry growth and IPO returns. This needs be resolved empirically.

Using a sample of 7,608 IPOs from 1982 to 2007, we test whether industry growth prospects drive IPO stock performance. We use analyst long-term earnings forecast, valuedweighted across firms in each industry, to measure industry growth prospects. We examine the bubble period (01/1999-12/2000) observations separately, because investors may react to growth prospects differently or have a change in their objective functions during the bubble period, and standard Fama-French risk adjustment methodology may not be appropriate for Internet bubble IPOs (Ritter and Welch (2002)). We therefore break the full sample into three periods: prebubble, bubble, and post-bubble.

For the pre-bubble period observations, when we sort IPOs into three portfolios by industry growth in event time, we find that high growth IPOs have 65% higher mean styleadjusted (matched on size and book-to-market ratio) returns over a 2-year period after the offer than low growth IPOs. Furthermore, the effect is even stronger among larger IPOs: the 2-year abnormal return spread between low and high industry growth portfolios increases to a striking 191% when returns are value-weighted. However, the effect of industry growth prospects on long-run returns reverses during the bubble period: IPOs in high growth industries earn 52% (66%) lower equal-weighted (value-weighted) style-adjusted 2-year returns than IPOs in low growth industries. In both periods, industry growth is positively associated with short-run price performance, measured by either the offer price adjustment or the first-day returns. These results suggest that outside of the bubble period, investors tend to underreact to growth prospects of the IPO’s industry, which causes the continual superior return of IPOs in high growth industries. Conversely, investors appear to overreact to industry prospects in the bubble years.


IPO PRICING

We confirm our findings in multivariate tests that examine the effect of industry growth on both short-run and long-run returns. When we run event-time cross-sectional regressions of long-run risk-adjusted returns on industry growth and a host of controls, we find that industry growth has a significantly positive relation with long-run returns, confirming the portfolio test results. Strikingly, the multivariate tests suggest that among all the factors we examine (including underwriter reputation, the number of managing underwriters, and expected proceeds), industry growth has the strongest effect on long-run returns. For example, in the pre-bubble period (77.6% of the full sample), a one standard deviation increase in industry growth rate forecast leads to a 51% increase in 3-year style-adjusted return, larger than the next strongest effect of underwriter reputation, which has a corresponding impact of 40% on 3-year abnormal return. Again consistent with the portfolio test, the regression test also indicates that industry growth has a negative effect on the long-run performance of IPOs during the bubble years.

In the post-bubble period, there is some evidence that industry growth continues to have a negative effect on long-run returns up to 2 years after the offer, but the economic and statistical significance levels are much weaker compared to previous periods. (A summary of economic impact of the variables on short-run and long-run performances is provided in the Appendix Table.) In addition, post-bubble IPO withdrawals are more likely to be observed in high growth industries, in contrast with the opposite association between withdrawal and industry growth prior to and during the bubble.

In sum, our evidence suggests that barring bubble period overreaction to growth prospects, IPO investors tend to underreact to industry growth prospects, leading to the superior long-run performance for firms in high-growth industries. In the post-bubble period, investors appear to have a distaste for IPOs in high growth industries, presumably triggered by the burst of the Internet bubble.

Finally, the divergence of opinion theory posits that in an IPO market with restricted short selling prior to the offer, the IPO price is determined by the most optimistic investors. This biases the price upward in the short-run and leads to a reversal in the long-run as short-sales restrictions are relaxed. According to this theory, the divergence of opinion about industry growth prospects, not industry growth rate per se, leads to high short-run returns and low long-run performance of IPOs. In our event-time regressions, we control for an ex ante measure of divergence of investor opinion about industry growth – the standard deviation of analyst longterm growth forecast scaled by the mean forecast – among other controls. In the pre-bubble period, this variable is insignificant in the long-run return regressions, suggesting that it is the collective misreaction of the market to industry growth prospects rather than the divergence of opinion among investors that drives the differences in long-run IPO performance in normal times. However, there is some evidence that during and after the bubble, belief dispersion has a negative effect on long-run IPO returns, which is consistent with the interpretation that the Miller (1977) effect plays a limited role in IPO performance.


IPO PRICING

An important advantage of using an industry-level growth proxy is that it circumvents the need of identifying comparable firms, an often noisy process. Moreover, instead of relying on specific valuation multiples, all we require is that the industry-level growth is correlated with the IPO firm’s growth. This reduces misspecification problems both in identifying comparable firms and in specifying valuation metrics, while keeping the sample IPOs to a maximum. Valuation metrics are endogenous to investor reaction since these metrics use a market price which may already reflect investors’ reactions to growth prospects. Finally, our measure of growth prospects is ex ante to the IPO, which is critical for distinguishing hypotheses. (Section 2 offers a more detailed discussion on measures of growth prospects and divergence of opinion in relation to the literature.) These considerations help explain why we can uncover an economically significant driver of IPO stock performance with a relatively easy-to-construct measure of IPO growth prospects.

The rest of the paper is organized as follows. Section 2 develops the hypotheses and describes measures of industry growth prospects and divergence of opinion. Section 3 describes the data, methodology, and summary statistics of our IPO sample. Section 4 describes crosssectional tests on the short-run and long-run stock performances. Section 5 presents calendar-time long-run performance tests. Section 6 describes the effects of industry growth on IPO withdrawal. Section 7 discusses the interpretations of the empirical findings. Section 8 concludes.



MAJOR PLAYER OF IPO IN INDIA

Some of the leading IPOs in India include Reliance Power Limited IPO, Tulsi Extrusions Limited IPO, Onmobile Global Limited IPO, EMAAR MGF IPO, Future Capital Holdings Limited IPO and many more. All these IPOs have opened their subscriptions in 2008. India has saved almost 3.3 billion proceeds in the global IPO market through eight deals which has made it the largest IPO market across the globe. Reliance Power IPO has been the biggest contributor in this regard

The Initial Public Offering (IPO) is defined as the first set of stocks that are sold out by a company to the public in order to seek an expansion of the capital. The IPO is usually set up by the smaller or newly emerging companies but the large-scale companies also go for it in order to become publicly traded. The issuer is faced with important considerations like the security of the issue, price band offered for the same and the time for sale. It is a risky affair for any individual investor as he or she does not have any clue regarding the performance of the shares on the first day of sale.

Top Companies: An analysis

Reliance Power IPO has been issued by Reliance Power Limited. Reliance Power IPO was issued on 15th January, 2008 and closed on 18th January, 2008. Reliance Power Limited Company is planning to generate capital worth Rs. 11, 700 crores through the IPO. This makes it the largest IPO in the country as on 17th January, 2008. The price band of the equity shares of Reliance Power IPO has been fixed at Rs. 405- 450 per equity share. The total size of Reliance Power IPO is around 26 crores equity shares. Reliance Power IPO will be listed on the National Stock Exchange (NSE) and also on the Bombay Stock Exchange (BSE). The lead bankers of Reliance Power IPO are Enam Securities, Kotak Mahindra Capital Co, ABN Amro Rothschild, ICICI Securities, JP Morgan Chase & Co, UBS AG and Deutsche Bank AG.

The main objective of Reliance Power IPO is that the proceeds from the issue will be used to fund the power generation projects that the company plans to carry out.


IPO PRICING

BGR Energy System (India) Ltd. was incorporated in 1985. BGR Energy System (India) Ltd. is engaged in the business of producing and selling different kinds of equipments, services and systems for power, refinery, gas & oil, and petrochemical industries .BGR Energy IPO was issued on 5th December, 2007 and closed on 12th December, 2007. The total size of BGR Energy IPO is 9,136,000 equity shares of Rs. 10 each. Out of the total number of equity shares around 500,000 has been reserved for the employees of the company and about 8,636,000 have been issued to the public. The price band of BGR Energy IPO has been fixed between Rs. 425 and Rs. 480.

BGR Energy IPO was listed on the National Stock Exchange (NSE) and also on the Bombay Stock Exchange (BSE). The registrar of BGR Energy IPO was Intime Spectrum Registry Ltd. The lead managers of BGR Energy IPO were CLSA India, SBI Capital Markets, UBS Securities India, and Kotak Mahindra Capital. The minimum order quantity for BGR Energy IPO was fourteen shares. The maximum amount for subscription in BGR Energy IPO for the retail investor was Rs. 100,000.

The Cinemax India IPO was launched in the year 2006, for the purpose of expanding the company and setting up theater screens in different locations.

The Cinemax India IPO was launched with the purpose of utilizing the funds for meeting the requirements of the capital expenditure of establishing 19 new theater screens throughout the country, at an estimated cost of Rs 110.69 crores. The proceeds from the IPO would also be used for the general corporate purposes which include acquisitions.Cinemax India has filed its red herring prospectus with the Securities and Exchange Board of India (SEBI). Some the places where the Cinemax India is planning to set up theaters are Kolkata, Pune, Guwahati, Nasik, Panipat, Hyderabad, Ahmedabad, Siliguri, Bangalore, Indore, Nagpur, Faridabad, Ghaziabad, Ludhiana and Mumbai.

Cinemax India is one of the leading exhibition theater chains in India. It is operating in several locations throughout the country. All together in the year 2006 it had 33 screens in 10 different locations. Cinemax India is a part of the Kanakia Group. In the year 2006, the total annual income was Rs 438.60 million and the net profit was Rs 67.64 million.


IPO PRICING

ICICI Bank IPO was launched on June 18, 2007 a week after the opening of the DLF IPO. ICICI Bank raised Rs. 10,000 crores from investors from its Initial Public Offerings (IPO). ICICI Bank's domestic issue is part of a USD 5 billion capital raising program. ICICI IPO offered discount rates to its retail investors. The subscriptions of ICICI IPO closed on 22nd June 2007. One of the chief focuses of ICICI IPO was to generate interest among the retail investors keeping in view the prevailing market price of around Rs. 903. The ICICI Bank IPO has reportedly crossed the expected subscription amount by 10.5 times. The public offerings of the bank were subscribed by 11.5 times.

ICICI Bank has planned up to elevate another USD 2.5 billion from the issue of American Depository Receipts. ICICI Bank has also decided to raise money by selling off the shares of its investment company for insurance business. This selling off of shares of the investment company of ICICI Bank will be cleared by RBI and IRDA. In 2007, ICICI Bank has got the approval from the Foreign Investment Promotion Board (FIPB) to sell up to 24 percent equity in the ICICI investment company. The international investors will be endowed with 5 percent equity from ICICI Bank. The bank has also decided for a shifting of its assets in other subsidiaries namely ICICI Prudential Life Insurance, ICICI Lombard General Insurance and ICICI Prudential Asset Management.

Indian Bank was established on 15th August 1907 as a part of the Swadeshi Movement in India. Indian Bank IPO was issued in February 2007, almost 100 years after the bank was established. The issue of Indian Bank IPO was opened on 5th February, 2007 and closed on 9th February 2007. The size of the Initial Public Offering (IPO) of Indian Bank was 85,950,000 equity shares. It was done through 100 percent book building and had a face value of Rs.10. The retail segment was given 23,206,500. The price range varied from Rs.77 to Rs.91 and the tick size was Re.1. The minimum number of shares to be purchased was kept at 75. The retail investors were given the maximum subscription amount of Rs.100,000. The total size of Indian Bank IPO was estimated to be around Rs.782 crores.


IPO PRICING

Objectives of Indian Bank IPO

To fulfill the capital requirements for implementation of Base II standard. To provide capital adequacy for it's loan and investment portfolio section. To provide finance for developing business infrastructure.

Indian Bank has more than 22,000 employees. The Indian Bank has 1411 branches spread all across the country. Indian Bank offers diversified banking services and has three subsidiary companies. The foreign branches of Indian Bank are set up in Singapore and Colombo.

Kingfisher till date has not launched any IPO, but has expressed its wish to launch one soon. This IPO would be used to fund its aggressive expansion plans in India. The accumulated corpus would be utilized to fund its airline business and to payoff debt for its acquired liquor company Shaw Wallace & Company.

The brand Kingfisher is being owned by the business conglomerate United Breweries Group. The brand is being used for two business entities - Airlines and Alcoholic Beverage. The Airlines operates under the name of "Kingfisher Airlines" and the alcoholic beverage segment manufactures "Beer" and "Mineral Water" under the same brand name. Till now the company has not launched any IPO to fund its aggressive expansion plans, but plans to launch it in near future to raise capital. Dr Vijay Mallya is the Chairman and CEO of both the segments. The Chief of the United Breweries Holding Ltd (UBHL), Mr Vijay Mallaya, said that the group would come up with an Initial Public Offering in 2008 and would raise a total corpus of US$ 400 million. The Initial Public Offering of the Kingfisher Airlines would target a corpus of US$ 200 million and the rest would be raised through the IPO of the liquor business.Kingfisher Airline IPO, to be issued for the first time in the year 2008, to finance the airline's expansion and funding of A380s air fleet.


IPO PRICING

KNR Constructions Ltd. IPO has been issued by the company in order to fulfill various objectives such as to meet the company's requirement for working capital and to purchase equipments.KNR Constructions Ltd. was incorporated in 1995 and the company is engaged in the business of infrastructure project development. The company provides services of construction, engineering and procurement for various sectors like irrigation, highways & roads, and management of the infrastructure of urban water. As on 30th June 2007, KNR Constructions Ltd. had around twenty four projects in the various states of India that included Assam, Tamil Nadu, Uttar Pradesh, Karnataka, Andhra Pradesh and Madhya Pradesh.The issue of KNR Constructions Ltd. IPO was opened on 24th January and closed on 29th January, 2008. The total number of shares issued by KNR Constructions Ltd for its KNR Constructions Ltd. IPO is 7,874,570 equity shares at the face value of about Rs. 10 each. The company plans to raise through KNR Constructions Ltd. IPO around Rs. 142 crores from the Indian capital market. KNR Constructions Ltd. IPO has been listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The lead manager of KNR Constructions Ltd. IPO is Axis Bank Limited. The registrar of KNR Constructions Ltd. IPO is Intime Spectrum Registry Limited.

Manjushree Extrusions Ltd IPO was issued on 31st January, 2008 and it closed on 6th February, 2008. The various objectives of issuing Manjushree Extrusions Ltd IPO by the company were to use the proceeds to expand the operations of the company and also to meet the requirement of the working capital.The lead manager of Manjushree Extrusions Ltd IPO was Centrum Capital Limited. The registrar of Manjushree Extrusions Ltd IPO was Alpha Systems Private Limited and it was listed on the Bombay Stock Exchange (BSE). The total size of the equity share of Manjushree Extrusions Ltd IPO was around Rs. 23.07 crores. The face value of per equity share of Manjushree Extrusions Ltd IPO was Rs. 10. The maximum amount of subscription by the retail investor was around Rs. 100,000 in Manjushree Extrusions Ltd IPO. Manjushree Extrusions Ltd was incorporated on November 13th, 1987 and it is engaged in the production of plastic packaging items like containers and jars. Manjushree Extrusions Ltd manufactures products for multinational companies in various sectors like food processing, pharmaceutical, agrochemicals and FMCG. The net profit of Manjushree Extrusions Ltd came to Rs. 112.42 lacs in 2004- 2005. In 2005- 2006 this figure stood at Rs. 137.11 lacs and in the following year, 2006-2007, this figure increased to Rs. 282.32 lacs.


IPO PRICING

The Maruti IPO has set a price range of Rs. 125 per share above the Floor price of Rs. 115. The subscription for Maruti IPO opened on June 12, 2003 and closed on June 19, 2003. The response to Maruti IPO was overwhelming within the subscription period, which led to an over-subscription of the public offerings of Maruti by more than ten times. The government decided to shell out 85 percent shares of IPO to the non-institutional investors and 15 percent shares to the non-institutional high net-worth individuals. Consequently, government would get Rs.993 crores for 7.94 crores shares. But SEBI recommended that 60 percent can be given to the institutional investors but at least 40 percent should be allotted for the retail investors as well. The government has allotted 60 percent shares to the retail investors and 40 percent shares to the institutional investors. The shares were allotted to the individuals on a pro rata basis. The IPO of Maruti is claimed to be one of the biggest capital market transactions in recent years in India and also the largest Book Built IPO that has been implanted in India till date. Maruti IPO received more than 300,000 applications which is a record in the history of IPO in India. The majority of applicants to these comprise of the Indian retail investors. They received the allotments on the basis of the price range already fixed by the government. A huge number of institutional investors also paid a lot of importance in investing in Maruti.

The subscription of Power Grid Corporation of India IPO was opened from 10th September 2007 to 13th September 2007. The price range of Power Grid Corporation of India IPO was between Rs. 44 and Rs. 52. The proceeds from Power Grid Corporation IPO were submitted to the National Investment Fund (NIF). Citigroup, Kotak and Enam were the lead managers for the Power Grid Corporation IPO. Karvy Computershare private limited was the registrar for the Power Grid Corporation IPO.


IPO PRICING

In the year 2006, Power Grid Corporation of India Limited (PGCIL) reported a 28 percent jump in the net profit which amounted to Rs 1,009 crores. The company launched their IPO in 2007 and the subscription was opened from 10th September 2007 to 13th September 2007. The shares of the IPO of Power Grid Corporation of India had a price range of Rs. 44 to Rs. 52 per share. The funds raised from Power Grid Corporation IPO were submitted to the National Investment Fund (NIF). The lead managers of the IPO of Power Grid Corporation include Kotak, Citigroup and Enam. Power Grid Corporation of India (PGCIL) raised a capital of Rs 6,000 crores through the IPO. The proceeds from the IPO will be used to set up branches in almost 12 countries across the globe. A unit will be set up in China in order to provide consultancy services, accomplish several projects and operate transmission lines and grid network..

The Reliance Petroleum IPO was launched by Reliance Petroleum Limited, the petrochemical segment of the legendary Indian business conglomerate, Reliance Industries Limited. The Mukesh Ambani led Reliance Petroleum Limited plans to expand its present petrochemical business. The price band for the Reliance Petroleum IPO was fixed between Rs 57 and Rs 62 per equity share and it raised Rs 6,000 crores.

The main purpose of launching the Reliance Petroleum IPO was to fund its refinery project, which would be operational by the end of 2008. This refinery project of Reliance Petroleum would be an export oriented oil refinery in the special economic zone, annexed to its Jamnagar refinery in Gujarat. The said refinery would have a capacity of 580,000 barrels of crude oil per day. Further, it would also utilize a part of the accumulated fund for the setting-up of a polypropylene plant which would have a production capacity of 900,000 tons per annum. The Reliance Petroleum IPO was launched on 13th April 2006 and the bidding was closed on 20th April. The price band for the Reliance Petroleum IPO was fixed between Rs 57 and Rs 62 per equity share. This Initial Public Offering of the Reliance Petroleum raised Rs 6,000 crores. The Reliance Petroleum IPO issued 45 crores equity shares and raised Rs 2,790 crores at the upper end of the price band. The Reliance Petroleum IPO was very popular amongst retail investors, Petroleum IPO.


IPO PRICING

Techpro Systems IPO will be issued by Techpro Systems (TSL) which is engaged in taking up turnkey projects in the systems of bulk material handling. The total size of the issue of Techpro Systems IPO will be around Rs. 250 crores approximately. Techpro Systems IPO will be launched by the company Techpro Systems (TSL) and the total size of the issue will be worth about Rs. 250 crores approximately. Techpro Systems (TSL) plans to enter the Indian capital market with its Techpro Systems IPO which will be a book built issue.

Techpro Systems IPO will consist of 7,300,000 equity shares and it will comprise of around 22.33% of the paid- up post issue capital of Techpro Systems (TSL). The company has filed with SEBI its Draft Red Herring Prospectus in order to issue Techpro Systems IPO. The lead arrangers of Techpro Systems IPO are SBI and Kotak. Techpro Systems IPO is expected to be issued in the last week of January, 2008. Techpro Systems IPO will ensure that the company will have enough funds to take up developmental work and also to expand its operations.Techpro Systems (TSL) is engaged in undertaking projects of turnkey in systems bulk material handling that includes handling raw material systems for cement plants, power, and steel. Techpro Systems (TSL) manufactures various equipments like feeders, crushers, and screens and it also sets up conveyor systems.



PRODUCT PROFILE

Pricing of IPO

The underpricing of initial public offerings (IPO) has been well documented in different markets (Ibbotson, 1975; Ritter 1984; Levis, 1990; McGuinness, 1992; Drucker and Puri, 2007). While issuers always try to maximize their issue proceeds, the underpricing of IPOs has constituted a serious anomaly in the literature of financial economics. Many financial economists have developed different models to explain the underpricing of IPOs. Some of the models explained it as a consequence of deliberate underpricing by issuers or their agents. In general, smaller issues are observed to be underpriced more than large issue (Ritter, 1984; Ritter, 1991; Levis, 1990).

Historically, some of IPOs both globally and in the United States have been underpriced. The effect of "initial underpricing" an IPO is to generate additional interest in the stock when it first becomes publicly traded. Through flipping, this can lead to significant gains for investors who have been allocated shares of the IPO at the offering price. However, underpricing an IPO results in "money left on the table"—lost capital that could have been raised for the company had the stock been offered at a higher price. One great example of all these factors at play was seen with theglobe.com IPO which helped fuel the IPO mania of the late 90's internet era. Underwritten by Bear Stearns on November 13, 1998, the stock had been priced at $9 per share, and famously jumped 1000% at the opening of trading all the way up to $97, before deflating and closing at $63 after large sell offs from institutions flipping the stock. Although the company did raise about $30 million from the offering it is estimated that with the level of demand for the offering and the volume of trading that took place the company might have left upwards of $200 million on the table.

The danger of overpricing is also an important consideration. If a stock is offered to the public at a higher price than the market will pay, the underwriters may have trouble meeting their commitments to sell shares. Even if they sell all of the issued shares, if the stock falls in value on the first day of trading, it may lose its marketability and hence even more of its value.

Underwriters, therefore, take many factors into consideration when pricing an IPO, and attempt to reach an offering price that is low enough to stimulate interest in the stock, but high enough to raise an adequate amount of capital for the company. The process of determining an optimal price usually involves the underwriters ("syndicate") arranging share purchase commitments from leading institutional investors.

On the other hand, some researchers (e.g. Geoffrey C., and C. Swift, 2009) believe that IPOs are not being under-priced deliberately by issuers and/or underwriters, but the price-


IPO PRICING rocketing phenomena on issuance days are due to investors' over-reaction (Friesen & Swift, 2009).

Some algorithms to determine underpricing: IPO Underpricing Algorithms

Definition of ‘Issue price’

A company that is planning an IPO appoints lead managers to help it decide on an appropriate price at which the shares should be issued. There are two ways in which the price of an IPO can be determined: either the company, with the help of its lead managers, fixes a price (fixed price method) or the price is arrived at through the process of book building.

Note: Not all IPOs are eligible for delivery settlement through the DTC system, which would then either require the physical delivery of the stock certificates to the clearing agent bank's custodian, or a delivery versus payment (DVP) arrangement with the selling group brokerage firm.

Definition of 'Offer Price'

The price at which publicly issued securities are made available for purchase by the investment bank underwriting the issue. A security's offering price includes the underwriter's fee and any management fees applicable to the issue.

Underwriters analyze numerous factors when attempting to determine a security's offering price. Ideally, an investment bank should accurately assess the value of the securities and the underlying firm, raising funds for the issuing company and selling the securities to investors for a fair offering price’s

Definition of 'Current Price'

The "real time" price of a security trading on an exchange, as well as the most recent price of a security listed in an investment portfolio. In the case of a bond, a bond's current price will often be quoted as 10% of the par value of $1000.00. A bond that currently trades at $99 is really priced at $990.00. Current price also refers to the present price of a stock, currency, commodity, stamps or a precious metal.

Current price is the market value or the price at which goods are currently being sold in the market. Similar to market price, which is the price determined by buyers and


IPO PRICING sellers in an open market, the current price of a security is the price at which at a security is presently traded.

Definition of 'List Price'

1. The manufacturer's suggested retail price, determined by supply and demand, for consumer goods such as automobiles or electronics.

2. The initial asking price for a real estate property, such as a home, as determined by similar properties that have recently sold in the area. These comparison properties are known as comparables.

The list price can be thought of as the starting price for negotiations; it is not necessarily the price that the buyer will pay.

1. Products and product advertisements often include language such as "lists for $99; our price: $79." This means that the manufacturer expects the product to sell for $99, but the seller is willing to let it go below its list price (for $79 in this example). The list price is often included to make the customer feel as though he or she is getting a good deal.

2. Real estate properties include an asking price known as the list price. This dollar amount is included in the listing as the price that the seller would like to receive on the sale. If the list price, or asking price, is "firm," it means the seller is not willing to negotiate. Most times, however, the list price is set with the expectation that a potential buyer will offer less, and so the list price is preemptively set a bit higher than the seller actually expects. If a property is under high demand, the selling price can actually exceed the list price.


IPO PRICING

OVER PRICE AND UNDER PRICE

1. OVER PRICE

Definition

Overpricing is measured as the difference between the offer or opening price for the IPO’s stock and its closing price after the first day of trading scaled by the offer price. When the opening price exceeds the closing price, the IPO is said to be overpriced. The closing price is assumed to be the equilibrium or “true” value of the stock. In this case, the IPO firm will receive excess capital per share relative to the equilibrium value of the IPO’s stock (this is the opposite of under-pricing where the difference is negative, i.e., the offer price is lower than the equilibrium price). Since underpricing is often referred to as “money left on the table,” we may characterize overpricing as “money-put-in-the-coffers.” Let us now examine how overpricing may play out for the major players in the IPO launch. We are assuming that bookbuilding is used and that the IPO firm is WeB-Genes, a pharmaceutical-boutique holding a patent on a hot genome-product called Kur-Y’ail. Because of all the extremely positive scientific and clinical evidence, the FDA has fast-tracked Kur-Y’all. For this reason, WeB-Genes has been actively courted by many of the major investment bankers (IBs).

There are some possible reasons for overpricing where, by definition, the bookbuilding subscribers contribute an excess of funds to the IPO relative to the equilibrium price. Usually it is because there is a paucity of real information and an excess of reality-blurring exuberance and the investors in WeB-Genes get caught up in the hype and pay for it by accepting a stock price that is too high. This is essentially what happened in the mid-1990s relative to the dot.coms or what has been called the got.conned era.

Apropos to overpricing, according to the Financial Times: London (April 22, 2006, p. 17) “… one banker says: ‘Generally speaking, if a stock under per forms, it was because it was overpriced at the issue. It is a question of supply and demand. Sometimes you can’t get a quality level of institutional investors to support the stock in the after-market’.” Let us also consider the effect of overpricing from the IB perspective. The IB earns more on an overpriced offer than on an under-priced offer since they receive a percentage of the gross proceeds raised by the IPO firm. So it may seem that the IB will have an economic interest in overpricing. But this is actually not the case. Recall that in the bookbuilding process, the IB firm shops the IPO firm to potential investors. What keeps these potential investors interested in buying the IPOs is the fact that the IB usually offers them a bargain in that underpricing is the typical outcome. The IB firm would never intentionally overprice an IPO to collect a higher fee at the expense of its valued client base. This would be considered either financial high treason or evidence that the IB does not know what they are doing. In either case, the result of repeated overpricing by the IB is the same: a book with a lot of


IPO PRICING empty pages. (For related information see Underpricing, p. 487, and Bookbuilding, p. 47 and Lusk et al, 2006.)

2. UNDER PRICE

Definition of 'Under pricing'

The pricing of an initial public offering (IPO) below its market value. When the offer price is lower than the price of the first trade, the stock is considered to be underpriced. A stock is usually only underpriced temporarily because the laws of supply and demand will eventually drive it toward its intrinsic value.


IPO PRICING

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:


IPO PRICING

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.


IPO PRICING

Free-pricing abused

As controls over pricing of equity were abolished in 1992, prudence took a backseat as companies set about raising funds at fancy prices; the pricing was justified with helpful projections of profitability dished out even by ICICI, IDBI, IFCI, Kotak Mahindra and Enam Securities, leave alone the plethora of lesser-known investment banking outfits. The earnings projections were vastly out of tune with reality. There was no element of the risk of business cycle built into them; in many cases, it appeared as if the price had been fixed, and the revenue and earnings numbers generated to justify it. That the IDBI's stock traded at the offer price for just a couple of days over an eight-year period and, subsequently, well below that price, tells the tale of abuse of free-pricing. Not surprisingly, this put investors off; they had patronised such IPOs in a big way as the first few offers in the free-pricing mode — of IFCI, Bank of Baroda, Infosys and Satyam Computer — delivered value. Corporate greed was penalised, as investor apathy ensured that between 1998 and 2001, the number of IPOs/offers for sale could be counted on the fingers of one hand.

A colossal misconception

This period was also witness to a popular notion that equity was the cheapest source of the funding, as the premium element was perceived as carrying no cost. What companies failed to recognise in this process — they were also encouraged by investment banks seeking more IPO opportunities — was that their capital cost could only be the same as the investor's expected rate return. By assuming and assigning a zero-cost to the premium element, companies converted what is, inarguably, the most expensive source of finance to the cheapest one. This led to an overhang on equity across Corporate India, with funds being mobilised in the domestic and global markets through the issuance of global depository receipts. As this understanding of the cost was not clued to reality, it soon fell apart.


IPO PRICING

Capacity overhang

The primary market boom of the mid-1990s also ensured excess of a different kind: A fad for capacity creation across a range of commodities, with the possible exception of aluminium and copper. Cement and steel were good examples. Buoyed by high cement and steel prices, and expectations of consistent double-digit growth in demand that was attributed to liberalisation of the economy, several firms set up cement and steel capacities.

Binani Zinc, Sanghi Polesyter and the Rajan Raheja group and the DLF group (both cited backward integration to construction as the reason for their cement foray) set up large-sized cement units. Jindal Vijayanagar, Essar Steel, Bhushan Steel, Ispat Industries and Lloyds Steel completed the steel story. The effect of the overcapacity still exerts pressure on profitability. For instance, in cement, a better balance between demand and supply is expected only two years from now.

This binge effectively ensured that even in the small number of companies where projects were implemented — without exception marked by time and cost-overrun — investors have had nothing to show by way of wealth accretion. Only the IPOs of the past two-and-half years have changed that. If the ongoing bullish phase is used to perpetrate excesses, the consequences would not be any different. Corporate India needs to walk a different path now, both for its sake as well as in the interest of investors.

Qualified Institutions Placement

It is a private placement of equity shares or securities convertible in to equity shares by a listed company to Qualified Institutions Buyers only in terms of provisions of Chapter XIIIA of SEBI (DIP) guidelines. The Chapter contains provisions relating to pricing, disclosures, currency of instruments etc.


IPO PRICING TRENDS IN IPO

PRIMARY REASONS FOR A COMPANY GOING PUBLIC

Most people label a public offering as a marketing event, which it typically is. For the majority of firms going public, they need additional capital to execute long-range business models, increase brand name, to finance possible acquisitions or to take up new projects. By converting to corporate status, a company can always dip back into the market and offer additional shares through a rights issue.

PERFORMANCE IN 90s

Let us have a look at the general development of the Primary Markets in the nineties. There have been many regulatory changes in the regulation of primary market in order to save investors from fraudulent companies. The most path breaking development in the primary market regulation has been the abolition of CCI (Controller of capital issues). The aim was to give the freedom to the companies to decide on the pricing of the issue and this was supposed to bring about a self-managing culture in the financial system. But the move was hopelessly misused in the years of 1994-1995 and many companies came up with issues at sky-high prices and the investors lost heavily. That phase took a heavy toll on the investor’s sentiment and the result was the amount of money raised through IPO route.

1993-96: SUNRISE, SUNSET

With controls over pricing gone, companies rushed to tap the Primary Market and they did so, with remarkable ease thanks to overly optimistic merchant bankers and gullible investors. Around Rs20000 crores were raised through 4053 issues during this period. Some of the prominent money mobilizes were the so called ‘sunrise sectors’-polyester, textiles, finance, aquaculture. The euphoria spilled over to the Secondary Market. But reality soon set in. Issuers soon failed to meet projections, many disappeared or sank. Result: the small investor deserted both markets-till the next boom!

1998-2000: ICE ON A HOT STREAK

As the great Indian software story played itself out, software stocks led a bull charge on the bourses. The Primary Market caught up, and issues from the software markets flooded the market. With big IPOs from companies in the ICE (Information Technology, Communication and Entertainment) sectors, the average issue price shot up from Rs.5 crore in 1994-96 to


IPO PRICING Rs.30 crore. But gradually, hype took over and valuations reached absurd levels. Both markets tanked.

2001-2002-ALMOST CLOSED

There were hardly any IPOs and those who ventured, got a lukewarm response. A depressed Secondary Market had ensured that the doors for the Primary Market remained closed for the entire FY 2001-2002.There were hardly any IPOs in FY 2001-2002.

2002: QUALITY ON OFFER.

The Primary Market boom promises to be different. To start with, the cream of corporate India is queuing up, which ensures quality. In this fragile market, issue pricing remains to be conservative, this could potentially mean listing gains. This could rekindle the interest of small investors in stocks and draw them back into the capital market. The taste of gains from the primary issues is expected to have a spillover effect on the secondary market, where valuations today are very attractive.

2003: IPO-IMPROVED PERFORMANCE OVERALL!

Even as the secondary market moved into top gear in 2003 the primary market too scripted its own revival story, buoyed largely by the Maruti IPO which was oversubscribed six and a half times. In 2003 almost all primary issues did well on domestic bourses after listing, prompting retail investors to flock to IPO’s. All IPO’s, including Indraprastha Gas and TV Today Network which was oversubscribed 51 times showed the growing appetite for primary issues.

SEBI has taken enough care to force companies to make relevant disclosures for the investor to judge the quality of new issues. Besides, the companies themselves have been careful not to over-price the shares. On the contrary, some of the companies have deliberately under-priced them to let the issue get over-subscribed and to let the investor share some of the capital gain after listing. With the care taken by SEBI and the companies it is unlikely that the experience of 1995 will be repeated.

The latest development in the primary market has been the Indian players thirst for money satiating offshore


IPO PRICING

2007: INITIAL PUBLIC OUTBURST

In 2007, the Indian equity market was in full swing with the index gaining ~53% Y-o-Y and valuations edging beyond explanation. The total market capitalisation of the Indian stock market increased 8% (INR 5,230 bn) on the back of 96 new listings in 2007. 2007 stood out in the history of Indian capital markets with the highest funds raised through IPOs in any calendar year with maximum companies from the construction (16) and IT sectors (11).• Almost 61 of the 96 IPOs (63%) debuted in premium in CY 07 as compared to 54 out of 75 IPOs (72% of total IPOs) in 2006.

How the IPOs have fared in the past decade?


IPO PRICING

The key highlights of all public issues in 2007 include the following:

• Construction companies continue to dominate the IPO scene with as many as 16 companies getting listed, raising money to the tune of INR 154 bn as against INR 36.5 bn last year through 10 IPOs.

• Only 3 companies came out with FPOs this year compared to 20 companies last year. However, the absolute amount raised through FPOs increased significantly from INR 45 bn in 2006 to INR 107 bn. FPOs (as a proportion of total funds mobilized) declined to 24% from 31% last year.

• 61 of the 96 IPOs (63%) debuted in premium compared with 54 out of 75 IPOs (72% of total IPOs) in 2006.

• The simple average listing premium has improved to 29% from 24% last year. The average issue size weighted listing premium for IPOs in 2007 was 24% as against 31% premium in 2006.

• 22 IPOs in 2007 were oversubscribed by over 50x with the highest overall oversubscription of 158x in Religare Enterprises.

• DLF was the largest IPO in 2007 mobilizing INR 92 bn and ICICI Bank came up with the largest FPO of INR 100.5 bn. It was RPL in 2006 that came out with the biggest IPO for INR 27 bn and Bank of Baroda with the largest FPO of INR 16.3 bn.

• The highest listing gain of 242% was witnessed in Everonn Systems India with over all over subscription of 144x, while the worst listing was seen by Broadcast Initiatives, at a discount of 41%.

• Orbit corp, Everonn Systems, and MIC Electronics, have created the maximum wealth for investors in 2007 while, Abhishek mills, House of pearl fashion, and Asahi Songwon Colors eroded maximum wealth.


IPO PRICING

UPCOMING IPO IN THE MARKET

Upcoming Initial Public Offering (IPOs) in India at a glance:Initial Public Offer (IPO) in India, means the first sale by a private company of its shares to the public. Initial Public Offers (IPOs) in India, are usually issued by small companies but at the same time big private companies also go public by issuing their shares. The Upcoming IPOs in India are being issued by those private companies that want to sell their shares in the country's capital markets. Many companies are planning to launch their IPOs in the financial year 2009-2009.

Various companies issuing upcoming IPOs in India as on 3rd December, 2008 are:

UTI Asset Management Company Ltd whose lead manager is Sbicap Securities Ltd. Madhana Industries Ltd whose lead manager is Edelweiss Securities Ltd. Pipavav Shipyard Ltd whose lead manager is Citigroup Global Markets India Pvt. Ltd. Mahindra Holidays & Resorts India Ltd whose lead manager is HSBC Securities And

Capital Markets India Pvt. Ltd. Gammon Infrastructure Projects Ltd whose lead manager is Sharekhan Ltd. Resurgere Mines & Minerals India Ltd whose lead manager is Motilal Oswal

Securities Ltd. National Hydroelectric Power Corporation Ltd whose lead manager is Enam

Securities Pvt. Ltd. Kiridyes and Chemicals Ltd whose lead manager is Centrum Capital Ltd. Neel Metal Products Ltd whose lead manager is ICICI Securities Ltd. Jhaveri Flexo India Ltd whose lead manager is SREI Capital Markets Ltd. Gokul Refoils And Solvent Ltd whose lead manager is Intensive Fiscal Services Pvt.

Ltd. Pride Hotels Ltd. whose lead manager is Edelweiss Securities Ltd. Oil India Ltd. whose lead manager is Citigroup Global Markets India Pvt, Ltd. Man Infraconstruction Ltd. whose lead manager is Kotak Mahindra Capital Company

Ltd. Oswal Wollen Mills Ltd. whose lead manager is UTI Bank Ltd. TCG Lifesciences whose lead manager is Enam Securities Pvt. Ltd. Uma Precision Ltd. whose lead manager is Karvy Stock Broking Ltd. Future Ventures India Ltd. whose lead manager is Enam Securities Ltd. Alkali Metals Ltd. whose lead manager is Religare Securities Ltd. Multi Commodity Exchange India Ltd. whose lead manager is JM Morgan Stanley

Financial Services Pvt. Ltd. Cox & Kings (India) Ltd. whose lead manager is Enam Securities Ltd. Jaiprakash Power Ventures Ltd whose lead manager is Enam Securities Ltd. Aishwarya Telecom Ltd. whose lead manager is SREI Capital Markets Ltd.


IPO PRICING ACME Tele Power Ltd. whose lead manager is Kotak Securities Ltd. RNS Infrastructure Ltd. whose lead manager is ICICI Securities Ltd. Midvalley Entertainment Ltd. whose lead manager is Religare Securities Ltd. Ramsarup Lohh Udyog Ltd. whose lead manager is Microsec Capital Ltd. Edserv Soft at 20% lower circuit, witnesses 45 bulk deals Bharat Oman Refineries defers IPO Edserv witnesses 188 bulk deals, India Max sells 4 lk shrs Edserv IPO: Will 50% allotment to QIBs affect stock ahead? See FY09, FY10 EPS at Rs 15/sh: Edserv Softsystems EdServ Softsystems ends with 129% premium EdServ Softsystems lists at issue price of Rs 60 EdServ Softsystems to list on March 2 Crisil finds weak corporate governance structure in IPO cos BSNL\'s IPO plans still on cards: Scindia ING Vysya pays Rs 4 lakh to settle IPO case


IPO PRICING

BRIEF INTORDUCTION ON CURRENT POSITION OF INDIAN IPO MARKET

India is being lauded as the savior of the ailing global IPO market with $3.3 billion worth of proceeds from eight deals. This makes India the largest IPO market in the world so far this year.

According to Thomson Financial, the bulk of the volumes came from the biggest IPO deal so far this year — Reliance Power's $3 billion IPO on January 21, 2008.

On January 15, 2008, Reliance Power attracted $27.5 billion of bids on the first day of its IPO, equivalent to 10.5 times the stock on offer, thereby, creating India's IPO record. Its upper cut off price was Rs. 450. The proposed IPO was to fund the development of its six power projects across the country.

Emaar MGF’s IPO, at $1.6 billion is estimated to be the second largest IPO in the world so far this year, behind Reliance Power's $3 billion IPO.

Thomson Financial data reveals that India accounts for 49.1% of global IPO precedes at the moment, compared to just 3.7% same time last year. Significant, given that global IPOs declined 36.1% over the last one year.

The Indian capital market has performed quite well in 2007. It raised US$8.3 billion through 95 Initial Public Offers (IPOs). According to the Ernst & Young report, "Globalisation - Global IPO Trend Report 2007" India was the fifth largest market in the world in terms of the number of IPOs and the seventh largest in terms of the proceeds for the year

It was the real estate sector which took the maximum advantage of the bullish stock market trends in 2007. According to the industry body Assocham, real estate players raised the maximum amount of funds from the capital market through IPOs last year. Realty firms picked up around 42.7% of the total funds generated through IPOs. Of the Rs.34,119 crore raised in the primary market in the period starting from January 1, 2007 to mid-December, about Rs.14,591 crore was raised by the realty firms.


IPO PRICING

SEBI’S ROLE IN AN ISSUE


IPO PRICING Any company making a public issue or a listed company making a rights issue of value of

more than Rs 50 lakhs is required to file a draft offer document with SEBI for its

observations. The company can proceed further on the issue only after getting observations

from SEBI. The validity period of SEBI’s observation letter is three months only i.e. the

company has to open its issue within three months period

SEBI does not recommend any issue nor does take any responsibility either for the financial

soundness of any scheme or the project for which the issue is proposed to be made or for

the correctness of the statements made or opinions expressed in the offer document.

It is to be distinctly understood that submission of offer document to SEBI should not in any

way be deemed or construed that the same has been cleared or approved by SEBI. The Lead

manager certifies that the disclosures made in the offer document are generally adequate

and are in conformity with SEBI guidelines for disclosures and investor protection in force

for the time being. This requirement is to facilitate investors to take an informed decision

for making investment in the proposed issue.

The investors should make an informed decision purely by themselves based on the

contents disclosed in the offer documents. SEBI does not associate itself with any

issue/issuer and should in no way be construed as a guarantee for the funds that the

investor proposes to invest through the issue. However, the investors are generally advised

to study all the material facts pertaining to the issue including the risk factors before

considering any investment. They are strongly warned against any ‘tips’ or news through

unofficial means.


IPO PRICING SEBI Guidelines for IPOs

1. IPOs of small companies

Public issue of less than five crores has to be through OTCEI and separate guidelines apply for floating and listing of these issues.

(Public Offer By Small Unlisted Companies)

2. Size of the Public Issue

Issue of shares to general public cannot be less than 25% of the total issue, incase of information technology, media and telecommunication sectors this stipulation is reduced subject to the conditions that:

Offer to the public is not less than 10% of the securities issued. A minimum number of 20 lakh securities is offered to the public and Size of the net offer to the public is not less than Rs. 30 crores.

3. Promoter Contribution

Promoters should bring in their contribution including premium fully before the issue

Minimum Promoters contribution is 20-25% of the public issue. Minimum Lock in period for promoters contribution is five years Minimum lock in period for firm allotments is three years.

4. Collection centers for receiving applications

There should be at least 30 mandatory collection centers, which should include invariably the places where stock exchanges have been established.

For issues not exceeding Rs.10 crores (including premium, if any), the collection centres shall be situated at:-

O the four metropolitan centres viz. Bombay, Delhi, Calcutta, Madras; and o at all such centres where stock exchanges are located in the region in which the registered office of the company is situated.


http://www.indiamarkets.com/imo/finanavenues/Tree2/html/2t7.html

IPO PRICING 5. Regarding allotment of shares

Net Offer to the General Public has to be at least 25% of the Total Issue Size for listing on a Stock exchange.

It is mandatory for a company to get its shares listed at the regional stock exchange where the registered office of the issuer is located.

In an Issue of more than Rs. 25 crores the issuer is allowed to place the whole issue by book-building

Minimum of 50% of the Net offer to the Public has to be reserved for Investors applying for less than 1000 shares.

There should be atleast 5 investors for every 1 lakh of equity offered (not applicable to infrastructure companies).

Quoting of Permanent Account Number or GIR No. in application for allotment of securities is compulsory where monetary value of Investment is Rs.50,000/- or above.

Indian development financial institutions and Mutual Fund can be allotted securities upto 75% of the Issue Amount.

A Venture Capital Fund shall not be entitled to get its securities listed on any stock exchange till the expiry of 3 years from the date of issuance of securities.

Allotment to categories of FIIs and NRIs/OCBs is upto a maximum of 24%, which can be further extended to 30% by an application to the RBI - supported by a resolution passed in the General Meeting.

6. Timeframes for the Issue and Post- Issue formalities

The minimum period for which a public issue has to be kept open is 3 working days and the maximum for which it can be kept open is 10 working days. The minimum period for a rights issue is 15 working days and the maximum is 60 working days.

A public issue is effected if the issue is able to procure 90% of the Total issue size within 60 days from the date of earliest closure of the Public Issue. In case of over-subscription the company may have the right to retain the excess application money and allot shares more than the proposed issue, which is referred to as the ‘green-shoe’ option.

A rights issue has to procure 90% subscription in 60 days of the opening of the issue. Allotment has to be made within 30 days of the closure of the Public Issue and 42

days in case of a Rights issue. All the listing formalities for a public Issue has to be completed within 70 days from

the date of closure of the subscription list.


IPO PRICING 7. Despatch of Refund Orders

Refund orders have to be dispatched within 30 days of the closure of the Public Issue. Refunds of excess application money i.e. for un-allotted shares have to be made

within 30 days of the closure of the Public Issue.

8. Other regulations pertaining to IPO

Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public unless it is disinvestment in which case it is not applicable.

If the issue is undersubscribed then the collected amount should be returned back (not valid for disinvestment issues).

If the issue size is more than Rs. 500 crores voluntary disclosures should be made regarding the deployment of the funds and an adequate monitoring mechanism to be put in place to ensure compliance.

There should not be any outstanding warrants or financial instruments of any other nature, at the time of initial public offer.

In the event of the initial public offer being at a premium, and if the rights under warrants or other instruments have been exercised within the twelve months prior to such offer, the resultant shares will not be taken into account for reckoning the minimum promoter's contribution and further, the same will also be subject to lock-in.

Code of advertisement specified by SEBI should be adhered to. Draft prospectus submitted to SEBI should also be submitted simultaneously to all

stock exchanges where it is proposed to be listed.

9. Restrictions on other allotments

Firm allotments to mutual funds, FIIs and employees not subject to any lock-in period.

Within twelve months of the public/rights issue no bonus issue should be made. Maximum percentage of shares, which can be distributed to employees cannot be

more than 5% and maximum shares to be allotted to each employee cannot be more than 200.

9. Relaxations to public issues by infrastructure companies.


IPO PRICING

These relaxations would be applicable to Infrastructure Companies as defined under Section 10(23G) of the Income Tax Act, 1961, provided their projects are appraised by any Developmental Financial Institution (DFI) or IDFC or IL&FS. The projects must also have a participation of at least 5% of the project cost (in debt and/or equity) by the appraising institution.

The infrastructure companies will be exempted from the requirement of making a minimum public offer of 25 per cent of its securities.

The requirement of 5 shareholders per Rs. 1 lakh of offer is also waived in case of offerings by infrastructure companies.

For public issues by infrastructure companies, minimum subscription of 90% would no longer be mandatory provided disclosure is made about the alternate source of funding which the company has considered, in the event of under subscription in the public issue.

Infrastructure companies are permitted to freely price the offerings in the domestic market provided that the promoter companies along with Equipment Suppliers and other strategic investors subscribe to 50% of the equity at the same or a higher price than what is being offered to the public. Adequate disclosures about the justification for the pricing will be required to be made in the offer documents.

The Infrastructure Companies would be allowed to keep their issues open for 21 days. The relaxation would give infrastructure companies sufficient time to mobilise funds for their issues.

Infrastructure Companies would not be required to create and maintain a Debenture Redemption Reserve (DRR) in case of Debenture Issues.

SEBI's New Rules

-IPO grading has been made mandatory -The cost is to be borne by the companies, and not the investor protection funds of

stock exchanges -Grading to evolve into a product that covers all offerings of the companies -IPO grading process to be reviewed periodically -PAN number made compulsory for preferential allotment -Has authorized short selling by institutions -Listing agreement to be amended so that companies can send an abridged version of

annual reports, not the full annual reports -Disclosure standards tightened for real estate IPOs -Land banks will be determined on the basis of ownership, and not projections -All agreements regarding land bank to be made available for inspection


IPO PRICING

Reasons for listingWhen a company lists its securities on a public exchange, the money paid by investors for the newly issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of investors to provide itself with capital for future growth, repayment of debt or working capital. A company selling common shares is never required to repay the capital to investors.


IPO PRICING Once a company is listed, it is able to issue additional common shares via a secondary offering, thereby again providing itself with capital for expansion without incurring any debt. This ability to quickly raise large amounts of capital from the market is a key reason many companies seek to go public.

There are several benefits to being a public company, namely:

Bolstering and diversifying equity base Enabling cheaper access to capital Exposure, prestige and public image Attracting and retaining better management and employees through liquid equity

participation Facilitating acquisitions Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans,

etc.

Disadvantages of an IPOThere are several disadvantages to completing an initial public offering, namely:

Significant legal, accounting and marketing costs Ongoing requirement to disclose financial and business information


IPO PRICING Meaningful time, effort and attention required of senior management Risk that required funding will not be raised Public dissemination of information which may be useful to competitors, suppliers and

customers

ProcedureIPOs generally involve one or more investment banks known as "underwriters". The company offering its shares, called the "issuer", enters a contract with a lead underwriter to sell its shares to the public. The underwriter then approaches investors with offers to sell these shares.


IPO PRICING The sale (allocation and pricing) of shares in an IPO may take several forms. Common methods include:

Best efforts contract Firm commitment contract All-or-none contract Bought deal Dutch auction

A large IPO is usually underwritten by a "syndicate" of investment banks led by one or more major investment banks (lead underwriter). Upon selling the shares, the underwriters keep a commission based on a percentage of the value of the shares sold (called the gross spread). Usually, the lead underwriters, i.e. the underwriters selling the largest proportions of the IPO, take the highest commissions—up to 8% in some cases.

Multinational IPOs may have many syndicates to deal with differing legal requirements in both the issuer's domestic market and other regions. For example, an issuer based in the E.U. may be represented by the main selling syndicate in its domestic market, Europe, in addition to separate syndicates or selling groups for US/Canada and for Asia. Usually, the lead underwriter in the main selling group is also the lead bank in the other selling groups.

Because of the wide array of legal requirements and because it is an expensive process, IPOs typically involve one or more law firms with major practices in securities law, such as the Magic Circle firms of London and the white shoe firms of New York City.

Public offerings are sold to both institutional investors and retail clients of underwriters. A licensed security salesperson (Registered Representative in the USA and Canada) selling shares of a public offering to his clients is paid a commission from their dealer rather than their client. In cases where the salesperson is the client's advisor it is notable that the financial incentives of the advisor and client are not aligned.

In the US sales can only be made through a final prospectus cleared by the Securities and Exchange Commission.

Investment dealers will often initiate research coverage on companies so their Corporate Finance departments and retail divisions can attract and market new issues.

The issuer usually allows the underwriters an option to increase the size of the offering by up to 15% under certain circumstance known as the green shoe or overallotment option.

A venture capitalist named Bill Hambrecht has attempted to devise a method that can reduce the inefficient process. He devised a way to issue shares through a Dutch auction as an attempt to minimize the extreme under pricing that underwriters were nurturing. Underwriters, however, have not taken to this strategy very well which is understandable given that auctions are threatening large fees otherwise payable. Though not the first company to use Dutch auction,


IPO PRICING Google is one established company that went public through the use of auction. Google's share price rose 17% in its first day of trading despite the auction method. Brokers close to the IPO report that the underwriters actively discouraged institutional investors from buying to reduce demand and send the initial price down. The resulting low share price was then used to "illustrate" that auctions generally don't work.

Perception of IPOs can be controversial. For those who view a successful IPO to be one that raises as much money as possible, the IPO was a total failure. For those who view a successful IPO from the kind of investors that eventually gained from the under pricing, the IPO was a complete success. It's important to note that different sets of investors bid in auctions versus the open market—more institutions bid, fewer private individuals bid. Google may be a special case; however, as many individual investors bought the stock based on long-term valuation shortly after it launched its IPO, driving it beyond institutional valuation.

Chapter-4

Introduction of the study


IPO PRICING

TOPIC: Study of offer price, listed price and market price for selected stock a perspective on influence of offer price.

2.1 NATURE OF RESEARCH:-

“Marketing research as the systematic design, collection, and analysis and reporting of data and findings relevant to specific marketing situations facing the company.”

-CRISP R.D

“Marketing research IS the systematic recording and analyzing of data about problems relating to marketing”

-American Marketing Association

2.1 REVIEW AND LITERATURE

ADVANTAGES & DRAWBACKS OF IPO


IPO PRICING

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.


IPO PRICING

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 PRICING

EXAMPLE OF SOME PUBLISHED ISSUE’S

Indian Bank IPO on the anvil-India Business-Business-The Times of India

India is world's 8th largest IPO market- The Times of India

India Inc's fund raising via IPO in 2008 dips to 3-yr low- The Economic Time

IPO market to boom in second half- The Economic Time

India Inc raises over Rs 45,000 cr in IPOs, follow-ons in 2007- The Hindu


IPO PRICING

2.2 background of the study

The background of the study is the study of offer price, listed price and current price in the perspective of influence of offer price.

2.3 Research Objectives:-

As I have given above topic by IPO pricing have to collect information, which is useful for completion of my objective of this research. My objectives of this research are as follow:-

♠ To determine the fluctuation arising in share price.

♠ To know the study of fluctuation in the share price

♠ To study the market position all Indian company listed during 2008 to2011.

♠ To study the major players in all Indian company during listed 2008 to2011.

♠ To study of offer price, market price and offer price

2.4 Limitations Of survey:-

♠ The sample size taken were only 60

♠ The survey was done just in 2008 to02011 because the survey is done not more than

four years.

♠ The analysis and interpretation are written on the basis of my experience which can

also be wrong.

♠ Findings and the study are based on the assumption that the respondents have given

correct information.


IPO PRICING 2. HYPOTHESIS

PAST/ PRESENT/ FUTURE OF IPO

India’s rapid economic growth, robust corporate profit stability, and a four-year bull run on Bombay’s Stock Exchange (BSE), continue to fuel India’s strong IPO markets. “Keen investor interest in India’s strong growth story has been real acted in the attractive valuations and key price/earnings multiples garnered by Indian companies,” says R. Balanchine, IPO Leader, Strategic Growth Markets, Ernst & Young India. In 2006, India’s markets launched 78 IPO’s and raised US$7.23 billion. Currently, India’s exchanges rank eighth in the world for numbers of IPO’s and value in 2006. Despite a May 2006 market tumble that erased more than US$100 billion in value in the BSE and sparked concerns that the four-year Indian stock rally was over, Indian IPO activity quickly resumed its upward momentum. In 2006, India’s IPO market has been fairly broad-based, although energy companies dominated with more than 50% share of funds raised. In 2006, India’s largest IPO was petroleum rife nine company, Reliance Petroleum, which raised US$1.8 billion, followed by the oil production and exploration company, Cairn Energy, which raised US$1.3 billion. Real estate IPO’s also generated stellar returns for investors.

In the United States, during the dot-com bubble of the late 1990s, many venture capital driven companies were started, and seeking to cash in on the bull market, quickly offered IPO’s. Usually, stock price spiraled upwards as soon as a company went public. Investors sought to get in at the ground-level of the next potential Microsoft and Netscape.

Initial founders could often become overnight millionaires, and due to generous stock options, employees could make a great deal of money as well. The majority of IPOs could be found on the NASDAQ stock exchange, which lists companies related to computer and information technology. However, in spite of the large amounts of financial resources made available to relatively young and untested firms (often in multiple rounds of financing), the vast majority of them rapidly entered cash crisis. Crisis was particularly likely in the case of firms where the founding team liquidated a substantial portion of their stake in the firm at or soon after the IPO (Mudambi and Treichel, 2005).

This phenomenon was not limited to the United States. In Japan, for example, a similar situation occurred. Some companies were operated in a similar way in that their only goal was to have an IPO. Some stock exchanges were set up for those companies, such as Osaka Securities Exchange.


IPO PRICING Perhaps the clearest bubbles in the history of hot IPO markets were in 1929, when closed-end fund IPOs sold at enormous premiums to net asset value, and in 1989, when closed-end country fund IPOs sold at enormous premiums to net asset value. What makes these bubbles so clear is the ability to compare market prices for shares in the closed-end funds to the value of the shares in the funds' portfolios. When market prices are multiples of the underlying value, bubbles are likely to be occurring.

A Brief Note on Future of IPOs in India

The IPO industry in India has received a major boost in the current year especially with the emergence of Reliance Power IPO on 15th January 2008. Apart from Reliance Power, another IPO which brought in major capital is Kishore Biyani-led Future Group's financial services arm. This IPO has been a recipient of 17.36 crores equity shares as bidding as compared to 6,422,000 equity shares on offer. The public offerings of the IPO of Kishore Biyani-led Future Group's financial services arm are estimated to rise around Rs. 490 crores future capital. The price range fixed for the Equity shares of this IPO varies between Rs. 700 to Rs. 765. The subscription for the issue of this IPO was opened from 11th January 2008 to 16th January 2008. Future of IPOs in India is quite bright as the Future Capital Holdings in India are expected to rise up to USD 124 million by the end of 2008. Future Capital, the financial services arm of the diversified Future Group is expected to divest around 10.16 percent of its capital which accounts for around 6.4 million shares in the IPO market. In the year 2007, the IPO market in India has been estimated to raise USD 8.2 billion from 88 IPOs as compared to USD 4.7 billion in the previous year. It contributed largely in the growth of stock market which rose by 47 percent. Assuming a major hike in the Indian IPOs, the government has confirmed the opening of the Oil India IPO by March 2008. The IPO of Oil India Limited has been reported to raise Rs.1500 crores and will hit the capital market in March 2008.


IPO PRICING

WHAT ARE THE CRITICAL AREAS TO FOCUS

Compliance with SEBI Guidelines

90% subscription of the issue

Underwriting Agreements

Firm Allotments

Listing approvals from the Stock Exchanges

ROC approval for the prospectus

Advertising and Road Shows

Statutory advertisements

In-time allotments and refunds

Listing of the shares with the Exchanges



RESEARCH METHODOLOGY

2.6.6 Research DesignI have taken descriptive research in the research survey.

2.7 Research design:In the research I have taken descriptive research. Research design can be described as an

outline of a research project working or a pattern. In a research design, there are series of

prior decision that together provide a master plan for completing a research project.

Research design is proved to be a bridge between what has been established and what is to

be done in conduct of the studies. Research design should be compressive and it should

provide which method to be used and what work to be done.

Research design can be grouped into three categories.

Exploratory

Descriptive

Cross sectional studies

So, I taken descriptive research for the research study

(A) Exploratory

An exploratory research focuses on the discovery of ideas and is generally based on secondary

data; it is preliminary investigation, which does not have rigid design. This is because researcher

engaged in an exploratory study may have to change his focus as a result of new ideas and

relationship among the variables.


IPO PRICING Why Exploration?

o One of the reasons is that the area of my investigation was new; this is my first study of

investigation in the automobile sector.

o Here company did not have any clarity about the problem statement. What should be

researched what should be not?

o Also due to time constrains, It saved time because it helped me to clarify the situation

more precisely.

(B) Descriptive

A descriptive study is undertaken when the researcher wants to know the characteristics of

certain groups such as age, sex, education level, income, occupation, etc in contrast to

exploratory studies descriptive study are well structured.

(C) Cross-Sectional Studies:

“Cross-sectional studies are used when the research is carried out in a particular time only.”

A cross-sectional study is concerned with a sample of element from a given population. Cross-

sectional studies are two types – field studies and survey method. Although the distinction

between them is not clear-cut, there are some practical difference, which needs different

technique and skill.

2.6.5 Data sources:-


IPO PRICING Data sources are the sources for collecting the data for the research plan. There are two types of

data a source first is primary data sources and second is secondary data sources.

♠ Primary data sources.

This type of data collected by the researcher directly from the respondent, fresh data

researched etc. for their project.

In my report I collected the data directly from respondents.

♠ Secondary data sources

This type of data collected by the researcher indirectly from the past researches,

television, internet, radio, newspaper, annual reports, industrial reports, company reports

etc. for their project.

In secondary data I got the data from television and news paper.

2.5 Data collection:- Primary data can be collected in three ways: through

♠ Observational research

♠ Behavioral data and

♠ Experiments.

From this research approaches I used survey research approach in my survey

2.6.1sampling unit:-

♠ My target segment in all the respondent of using listed during 2008 to 2011.

2.6.2sampling size:-


IPO PRICING ♠ 60 Respondents.

2.6.4 Sampling procedure:-♠ Convenience Sampling

2.8 Research instruments:-

Marketing researchers have a choice of three main research instruments in collecting

primary data:

♠ Qualitative measures

♠ Technological Devices

♠ Questionnaires

In the research instruments there are three types of instruments but I m including only the

Questionnaires which are collecting from the primary data.

♠ Questionnaires:-

In the research instruments questionnaires is the most important part. The questionnaires consist

of a set of questions presented in front of respondance because of its flexibility.

In the questionnaires there are two types of questions.

♠ Open end questions:-

♠ Close end questions:-

2.9 purposes:-

“Study of offer price, listed price and market price for selected stock a perspective on influence of offer price”

I HAVE TAKEN 60 INDUSTRIES TO RESEARCH

Company Name Listing Date Offer Price

List Price

Listing High

Listing Low

Current Price

% of gain & loss


IPO PRICING Indo Thai Securities Limited ( Indo Thai Securities IPO )

02-Nov-11 84 75 98.9 18.85 12.4-85.24

M and B Switchgears Ltd ( M and B Switchgears IPO )

20-Oct-11 186 180 356 118.65 52.55-71.75

Flexituff International Ltd ( Flexituff International IPO )

19-Oct-11 155 155 185.4 142 247.20+59.48

Taksheel Solutions Ltd ( Taksheel Solutions IPO ) 19-Oct-11 150 157.4 185 38.5 13.69 -90.87Onelife Capital Advisors Ltd ( Onelife Capital Advisors IPO )

17-Oct-11 110 115 173 114 257+133.64

Tijaria Polypipes Ltd ( Tijaria Polypipes IPO ) 14-Oct-11 60 62 67.8 16.05 9.54 -84.1RDB Rasayans Ltd ( RDB Rasayans IPO ) 07-Oct-11 79 85 93 19.8 8.30 -89.49Prakash Constrowell Ltd 04-Oct-11 138 147.6 241.5 122.3 178 +28.99PG Electroplast Ltd 26-Sep-11 210 177.5 459.05 177.5 158.6 -24.48SRS Limited 16-Sep-11 65 55 61.4 33.1 34.55 -46.85TD Power Systems Ltd 08-Sep-11 261 251.6 308.75 242 227.75 -12.74Brooks Laboratories Ltd 05-Sep-11 100 110 131.1 57.75 14.28 -85.72Tree House Education & Accessories Ltd 26-Aug-11 153 132.8 161.5 104.15 219 +43.14L&T Finance Holdings Ltd 12-Aug-11 59 50 52.45 49.8 46.75 -20.76Inventure Growth & Securities Ltd 04-Aug-11 117 119 225 91.55 155.15 +32.61Bharatiya Global Infomedia Ltd 28-Jul-11 82 84 84 27.15 8.68 -89.41Readymade Steel India Ltd 13-Jul-11 108 115 117.75 62.3 66.50 -38.43Punjab & Sind Bank 30-Dec-10 120 144 146.7 126.2 67.50 -43.75Ravikumar Distilleries Ltd 27-Dec-10 64 80.35 90.1 78.4 15.80 -75.31A2Z Maintenance & Engineering Services Ltd 23-Dec-10 410 390 398.9 318.6 108.50 -73.54Claris Lifesciences Limited 20-Dec-10 235 224.4 228 203 117.45 -50.02Shipping Corporation of India Ltd 15-Dec-10 140 137.7 137.7 132.45 57.75 -58.75Manganese Ore India Limited - MOIL 15-Dec-10 375 590 562.25 460.7 389.10 +-3.76RPP Infra Projects Ltd 06-Dec-10 75 75 80.4 67.35 58.35 -22.2Power Grid Corporation of India 25-Nov-10 90 95 97 94.8 100.05 +11.17Gravita India Limited 16-Nov-10 125 218.75 248.65 206.6 510 +308Coal India Limited 04-Nov-10 245 287.75 344.75 287.45 349 +42.45Gyscoal Alloys Ltd 27-Oct-10 71 104.85 106.15 80.05 15. -78.87Prestige Estates Projects Ltd 27-Oct-10 183 192.9 207.1 190 74.25 -59.43BS Transcomm Limited 27-Oct-10 257 249 391.7 249 145.50 -43.39


IPO PRICING Oberoi Realty Limited 20-Oct-10 260 280 299 269.8 265.1 +1.96Commercial Engineers & Body Builders 18-Oct-10 127 119 142.55 106.35 63.10 -50.31Cox and Kings India Limited

11-Dec-09 330 434 434.8 420.55 179.90-45.48

Indiabulls Power Limited 30-Oct-09 45 45.05 45.05 35.35 13.35 -70.33Euro Multivision Ltd 15-Oct-09 75 70 70 53.55 6.21 -91.72Pipavav Shipyard Limited 09-Oct-09 60 60.05 64.7 53.85 79.8 +33Oil India Limited 30-Sep-09 1050 1019 1173.3 1080.34 1157 +10.19Globus Spirits Ltd. 23-Sep-09 100 110 111.3 89.3 106.40 +6.4Jindal Cotex Ltd 22-Sep-09 75 75 93.45 75 64.15 -14.47NHPC Limited 01-Sep-09 36 39 39.75 36.6 88.05 +144.58Adani Power Limited 20-Aug-09 100 105 108 99 82.5 17.5Raj Oil Mills Limited 12-Aug-09 120 125.05 133.7 115.6 12.65 -89.46Excel Infoways Limited 03-Aug-09 85 93.05 110 86 18.70 -78Mahindra Holidays & Resorts India Ltd.

16-Jul-09 325 370 374.5 311.35 298-8.31

Edserv Softsystems Ltd 02-Mar-09 60 55 134.9 55 43.85 -26.92Alkali Metals Ltd 06-Nov-08 103 90 179.3 90 34.55 -66.46Chemcel Biotech Limited 13-Oct-08 16 16 16 4.75 3.01 -81.1920 Microns Limited 06-Oct-08 55 80 80 31.6 64.30 +16.91Austral Coke & Projects Limited 04-Sep-08 196 206 308.8 206 1.30 -99.34Resurgere Mines & Minerals India Limited 01-Sep-08 272 272.05 562.8 272.05 0.22 -99.92Nu Tek India Limited 27-Aug-08 192 201.1 225 194 0.95 -99.51Vishal Information Technologies Limited 11-Aug-08 150 166 194.5 163 4.84 -96.77Birla Cotsyn India Limited 30-Jul-08 14 14.7 17.5 8.55 0.34 -97.57Somi Conveyor Beltings Limited 24-Jul-08 35 37.65 37.65 24.7 11.17 -68.09KSK Energy Ventures Limited 14-Jul-08 255 220 234.8 176 48.60 -80.94Lotus Eye Care Hospital Limited 11-Jul-08 38 40 40 32.5 8.6 77.37First Winner Industries Limited 08-Jul-08 125 125 125 80.5 14 88.8Archidply Industries Limited 04-Jul-08 80 74.55 74.55 48.8 13.35 83.31Avon Weighing Systems Limited 03-Jul-08 10 13.9 20 11.35 2.91 70.9Sejal Architectural Glass Limited 01-Jul-08 115 110 139.8 77.55 14.35 87.52


IPO PRICING

Chapter-6


IPO PRICING

Company have deffrent types of offer price that have below discribed the analysis of offer price which have deffrent types of offer price that have 37 no. company have high price and 59 no. company have low price of offer price that have 20% have above 200 share price and 80% have below 200 share price in the below graph howmany company have maximum share price.

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 580

200

400

600

800

1000

1200

Offer Price

Company have deffrent types of current price that have below discribed the analysis of current price which have deffrent types of offer price that have 37 no. company have high price and 60 no. company have low price of current price that have 16.66% have above 200 share price and 83.34% have below 200 share price in the below graph howmany company have maximum growth.


IPO PRICING

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 590

200

400

600

800

1000

1200

Current Price

Company have deffrent types of listed price that have below discribed the analysis of listed price which have deffrent types of listed price that have 37 no. company have high price and 59 no. company have low price of listed price that have 20% have above 200 share price and 80% have below 200 share price I the below graph that consider what is share price at the time of listed.

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 580

200

400

600

800

1000

1200

Listed Price

In the below graph that we considered the deffrence of listed price, current price and offer price

DCEFFERENCES BETWEEN OFFER PRICE, CURRENT PRICE AND LISTED PRICE


IPO PRICING

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 580

500

1000

1500

2000

2500

3000

3500

Current PriceListed PriceOffer Price

Indo Thai Securities Limited (Indo Thai Securities IPO)

Offer Price List Price Current Price0

10

20

30

40

50

60

70

80

90

Chart Title

Axis Title

InterpretationWe show in the above graph we understand that offer price 84 and listed price 75 when current price 12.4 show that there is so much difference so that company’s growth is goes down and create losses.

M and B Switchgears Ltd (M and B Switchgears IPO)


IPO PRICING


20

40

60

80

100

120

140

160

180

200

Chart Title

Axis Title

InterpretationWe show in the above graph offer price is 186 is high so that current price is goes down so that company creates losses. Listed price is no more goes down.Flexituff International Ltd (Flexituff International IPO)


50

100

150

200

250

Chart Title

Axis Title

InterpretationIn the above graph we can show that the offer price and list price is 155 and the current price is 247.2 is high so company creates growth.

Taksheel Solutions Ltd (Taksheel Solutions IPO)


IPO PRICING


20

40

60

80

100

120

140

160

Chart Title

Axis Title

Interpretation

We show in the above graph we understand that offer price 150 and listed price 157.4 when current price 13.69 show that there is so much difference so that company’s growth is goes down and create losses.

Onelife Capital Advisors Ltd (Onelife Capital Advisors IPO)

InterpretationWe show in the above graph we understand that offer price 110 when current price 257 show that there so that company’s growth is increases and create profit. Listed price as much as little increase.



50

100

150

200

250

300

Chart Title

Axis Title

IPO PRICING Punjab & Sind Bank


20

40

60

80

100

120

140

160

Chart Title

Axis Title

InterpretationWe show in the above graph we understand that offer price 120 when current price 67.5 show that there is so much difference so that company’s growth is goes down and create losses. When listed price is increase.

Ravikumar Distilleries Ltd

offer price list price current price0

10

20

30

40

50

60

70

80

90

Chart Title

Axis Title

Interpretation


IPO PRICING We show in the above graph we understand that offer price 64 when current price 15.8 show that there is so much difference so that company’s growth is goes down and create losses. When during listed share price is high.

A2Z Maintenance & Engineering Services Ltd

InterpretationWe show in the above graph we understand that offer price 410 and listed price 390 and current price 108.5 which is shows that price is going down.

Claris Lifesciences Limited


50

100

150

200

250

Chart Title

Axis Title



50

100

150

200

250

300

350

400

450

Chart Title

Axis Title

IPO PRICING InterpretationWe show in the above graph we understand that offer price 235 and listed price 224.4 and current price 117.45 which is shows that price is going down which creates loss .

Shipping Corporation of India Ltd


20

40

60

80

100

120

140

Chart Title

Axis Title

InterpretationWe show in the above graph we understand that offer price 140 and listed price 137.7 and current price 57.75 which is shows that price is going down and growth is going down.

Cox and Kings India Limited


50

100

150

200

250

300

350

400

450

Chart Title

Axis Title


IPO PRICING InterpretationWe show in the above graph we understand that offer price 410 and listed price 434 and current price 108.5 which is shows that price is going down and growth is going down.

Indiabulls Power Limited


5

10

15

20

25

30

35

40

45

50

Chart Title

Axis Title


Euro Multivision Ltd


10

20

30

40

50

60

70

80

Chart Title

Axis Title



Pipavav Shipyard Limited


10

20

30

40

50

60

70

80

Chart Title

Axis Title

InterpretationWe show in the above graph we understand that offer price 60 and listed price 60.05 and current price 79.8 which is shows that price is increases and growth is increases.

Oil India Limited


1000

1050

1100

1150

1200

Chart Title

Axis Title


IPO PRICING InterpretationWe show in the above graph we understand that offer price 1050 and listed price 1019 and current price 1157 which is shows that price is increases and growth is increases.

Alkali Metals Ltd


20

40

60

80

100

120

Chart Title

Axis Title

InterpretationWe show in the above graph we understand that offer price 103 and listed price 90 and current price 34.55 which is shows that price is going down and growth is going down.

Chemcel Biotech Limited


2

4

6

8

10

12

14

16

Chart Title

Axis Title



20 Microns Limiteds


10

20

30

40

50

60

70

80

Chart Title

Axis Title

InterpretationWe show in the above graph we understand that offer price 55 and listed price 80 and current price 64.3 which is shows that price is increases and growth is increases.

Austral Coke & Projects Limited


50

100

150

200

250

Chart Title

Axis Title



Resurgere Mines & Minerals India Limited


50

100

150

200

250

300

Chart Title

Axis Title


Particular Listing date Offer price

Listing price

Listing high

Listing low

Current price

% of gain or loss

1Indo Thai Securities Limited ( Indo Thai

Securities IPO ) Finance & Investments

02-Nov-11 84 75 98.9 18.85 12.4

-85.241Onelife Capital Advisors

Ltd ( Onelife Capital Advisors IPO ) Finance &

Investments

17-Oct-11 110 115 173 114 257

+133.641L&T Finance Holdings

Ltd Finance & Investments12-Aug-11 59 50 52.45 49.8 46.75 -20.76

1Inventure Growth & Securities Ltd Finance &

Investments

04-Aug-11 117 119 225 91.55 155.15 +32.61

1Punjab & Sind Bank Finance - Banks - Public Sector

30-Dec-10 120 144 146.7 126.2 67.50 -43.75


IPO PRICING

Indo Thai

Secu

rities

Limite

d

Onelife

Capita

l Advis

ors Ltd

L&T F

inance

Holdings

Ltd

Inventu

re G

rowth

& Se

curiti

es Lt

d

Punjab &

Sind Ban

k

-100

-50

0

50

100

150

Series1

Interpretation

We show in the above graph we understand that onelife capital advisors ltd. has high growth where indo thai securities limited has lowest growth.

PARTICULAR LISTING DATE

OFFER PRICE

LISTING PRICE

LISTING HIGH

LISTING LOW

CURRENT PRICE

% of gain or loss

2M and B Switchgears Ltd ( M and B

Switchgears IPO ) Electric Equipment - Transformers

20-Oct-11 180 - 186

180 356 118.65 52.55 -71.75

2TD Power Systems Ltd Electric Equipment -

Gensets/Turbines

08-Sep-11 256 - 261

251.6 308.75 242 227.75 -12.74

SRS LimitedElectric Diversified

16-Sep-11 58 - 65 55 61.4 33.1 34.55 -46.85


IPO PRICING

2M and B Switchgears Ltd 2TD Power Systems SRS LimitedEle

-80

-70

-60

-50

-40

-30

-20

-10

0

Series1

Interpretation

We show in the above graph we understand that TD Power Systems Ltd has high growth where M and B Switchgears Ltd has lowest growth.

2PG Electroplast Ltd 26-Sep-11 190 - 210 177.5 459.05 177.5 158.6 -24.48Gravita India Limited 16-Nov-10 120 - 125 218.75 248.65 206.6 510 +308A2Z Maintenance &

Engineering23-Dec-10 400 - 410 390 398.9 318.6 108.50 -73.54

15Power Grid Corporation of India Transmission/Equipment

25-Nov-10 85 - 90 95 97 94.8 100.05 +11.17

18Gyscoal Alloys Ltd Steel - Rolling 27-Oct-10 65 - 71 104.85 106.15 80.05 15. -78.8720Cox and Kings India Limited Travel Agen. / Tourism Deve. / Amusement

Park

11-Dec-09 316 - 330 434 434.8 420.55 179.90 -45.48

23Mahindra Holidays & Resorts 16-Jul-09 275 - 325 370 374.5 311.35 298 -8.31


IPO PRICING India Ltd. Hotels, Resorts & Restaurants

Interpretation

We show in the above graph we understand that Gravita India Limited has high growth where Gyscoal Alloys Ltd has lowest growth.

3Flexituff International Ltd ( Flexituff International IPO )

Packaging - Metalic/Plastics/Others19-Oct-11 145 - 155 155 185.4 142 247.20

+59.483Tijaria Polypipes Ltd

( Tijaria Polypipes IPO ) Plastics - Pipes/Tubes

14-Oct-11 60 62 67.8 16.05 9.54 -84.1

3RDB Rasayans Ltd ( RDB Rasayans IPO ) Packaging -

Metalic/Plastics/Others

07-Oct-11 72 - 79 85 93 19.8 8.30 -89.49


PG Electr

oplast Lt

d

Gravita

India Lim

ited

A2Z Main

tenan

ce & En

gineer

ing Serv

ices L

td l

Power Grid

Corporation of In

dia

Gyscoal A

lloys

Ltd

20Cox and Kings

India Limite

d

Mahindra

Holidays

& Resorts

India Ltd.

-100-50

050

100150200250300350

Series1Series2

IPO PRICING

Interpretation

We show in the above graph we understand that Flexituff International Ltd has high growth where RDB Rasayans Ltd has lowest growth.

5Prakash Constrowell Ltd Construction & Contracting 04-Oct-11 130 - 138 147.6 241.5 122.3 178 +28.99

5RPP Infra Projects Ltd Construction & Contracting

06-Dec-10 68 - 75 75 80.4 67.35 58.35 -22.2

5Oberoi Realty Limited Construction & Contracting

20-Oct-10 253 - 260 280 299 269.8 265.1 +1.96


3Flexituff International Ltd 3Tijaria Polypipes Ltd 3RDB Rasayans Ltd

-100

-80

-60

-40

-20

0

20

40

60

80

Series1

IPO PRICING

Prakash Constrowell Ltd RPP Infra Projects Ltd Oberoi Realty Limited

-30

-20

-10

0

10

20

30

40

Series1

Interpretation

We show in the above graph we understand that Prakash Constrowell Ltd has high growth where RPP Infra Projects Ltd has lowest growth.

6Brooks Laboratories Ltd Pharmaceuticals 05-Sep-11 90 - 100 110 131.1 57.75 14.28 -85.72

12Lotus Eye Care Hospital Limited Hospitals & Medical Services

11-Jul-08 36 - 38 40 40 32.5 8.6 77.37


IPO PRICING

6Brooks Lab

oratorie

s Ltd Pharm

aceutical

s

12Lotus Eye

Care Hospita

l Limited

Hospitals &

Medica

l Servi

ces

-100

-80

-60

-40

-20

0

20

40

60

80

100

Series1

Interpretation

We show in the above graph we understand that Lotus Eye Care Hospital Limited Ltd has high growth where Brooks Laboratories Ltd has lowest growth.

7Tree House Education & Accessories Ltd Services - Others

26-Aug-11 135 - 153 132.8 161.5 104.15 219 +43.14

7 Somi Conveyor Beltings Limited Miscellaneous

24-Jul-08 35 37.65 37.65 24.7 11.17 -68.09

7Archidply Industries Limited Decoratives - Wood Based

04-Jul-08 70 - 80 74.55 74.55 48.8 13.35 83.31


IPO PRICING 7Avon Weighing Systems

LimitedTrading03-Jul-08 10 13.9 20 11.35 2.91 70.9

7Sejal Architectural Glass Limited Glass & Glass Products

01-Jul-08 105 - 115 110 139.8 77.55 14.35 87.52

Tree House Education & Accessories Ltd

Somi Conveyor Beltings Lim

ited

Archidply Industries Limited

Avon Weighing System

s Limited

Sejal Architectural Glass Limited

-80-60-40-20

020406080

100

Series1

Interpretation

We show in the above graph we understand that Sejal Architectural Glass Limited has high growth where Somi Conveyor Beltings Limited has lowest growth.

8Bharatiya Global Infomedia Ltd: Computers – Software 28-Jul-11 75 - 82 84 84 27.15 8.68 -89.41

8Edserv Softsystems Ltd Computers - Software

02-Mar-09 55 - 60 55 134.9 55 43.85 -26.92


IPO PRICING

Bharatiya Global Infomedia Ltd: Edserv Softsystems Ltd

-100

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

Series1

Interpretation

We show in the above graph we understand that Lotus Eye Care Hospital Limited Ltd has high growth where Bharatiya Global Infomedia Ltd: has lowest growth.

10Ravikumar Distilleries Ltd Beverages & Distilleries 27-Dec-10 56 - 64 80.35 90.1 78.4 15.80 -75.31


IPO PRICING 10Globus Spirits Ltd.

Beverages & Distilleries23-Sep-09 90 - 100 110 111.3 89.3 106.40 +6.4

Ravikumar Distilleries Ltd Globus Spirits Ltd.

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

Series1

Interpretation

We show in the above graph we understand that Globus Spirits Ltd. has high growth where Ravikumar Distilleries Ltd has lowest growth.


IPO PRICING 13Shipping Corporation of

India Ltd Shipping 15-Dec-10 135 - 140 137.7 137.7 132.45 57.75 -58.75

13Pipavav Shipyard Limited Ship - Docks/Breaking/Repairs

09-Oct-09 55 - 60 60.05 64.7 53.85 79.8 +33

Shipping Corporation of India Ltd Pipavav Shipyard Limited

-80

-60

-40

-20

0

20

40

Series1

Interpretation

We show in the above graph we understand that Lotus Pipavav Shipyard Limited has high growth where Shipping Corporation of India lowest growth.


IPO PRICING

Interpretation

We show in the above graph we understand that RPP Infra Projects has high growth where Oberoi Realty Limited has lowest growth.


RPP Infra Projects Ltdg Oberoi Realty Limited

-25

-20

-15

-10

-5

0

5

Series1

14RPP Infra Projects LtdConstruction & Contracting 06-Dec-10 68 - 75 75 80.4 67.35 58.35 -22.2


20-Oct-10 253 - 260 280 299 269.8 265.1 +1.96

IPO PRICING

BS Transcomm Limited Nu Tek India Limited

-120

-100

-80

-60

-40

-20

0

Series1

Interpretation

We show in the above graph we understand that BS Transcomm Limited has high growth where Nu Tek India Limited has lowest growth.


BS Transcomm Limited 27-Oct-10 248 - 257 249 391.7 249 145.50 -43.39

Nu Tek India Limited 27-Aug-08 170 - 192

201.1 225 194 0.95 -99.51

IPO PRICING

Jindal Cotex Ltd 22-Sep-09 70 - 75 75 93.45 75 64.15 -14.47Mahindra Holidays &

Resorts India Ltd.16-Jul-09 275 -

325370 374.5 311.35 298 -8.31

First Winner Industries Limited

08-Jul-08 115 - 125

125 125 80.5 14 88.8

Jindal C

otex Ltd

Mahindra

Holidays

& Resorts

India Ltd.

First W

inner Industr

ies Lim

ited

-20

0

20

40

60

80

100

Series1

Interpretation

We show in the above graph we understand that First Winner Industries Limited has high growth where Jindal Cotex Ltd has lowest growth.


IPO PRICING

Alkali Metals Ltd 06-Nov-08 86 - 103 90 179.3 90 34.55 -66.46Chemcel Biotech Limited 13-Oct-08 16 16 16 4.75 3.01 -81.19

Alkali Metals Ltd Chemcel Biotech Limited

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

Series1

Interpretation

We show in the above graph we understand that Alkali Metals Ltd has high growth where Chemcel Biotech Limited has lowest growth.


IPO PRICING

Excel Infoways Limited Readymade Steel India Ltd

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

Series1

Interpretation

We show in the above graph we understand that Excel Infoways Limited Ltd has high growth where Readymade Steel India Ltd has lowest growth.


Excel Infoways Limited 03-Aug-09 80 - 85 93.05 110 86 18.70 -78Readymade Steel India Ltd 13-Jul-11 90 - 108 115 117.75 62.3 66.50 -38.43

IPO PRICING

KSK Energy Ventures Limited 14-Jul-08 240 -

255 220 234.8 176 48.60 -80.94Indiabulls Power Limited 30-Oct-09 40 - 45 45.05 45.05 35.35 13.35 -70.33

NHPC Limited 01-Sep-09 30 - 36 39 39.75 36.6 88.05 +144.58Adani Power Limited 20-Aug-09 90 - 100 105 108 99 82.5 17.5KSK Energy Ventures

Limited14-Jul-08 240 -

255220 234.8 176 48.60 -80.94

KSK En

ergy V

entures

Limited

Indiabulls

Power Lim

ited

NHPC Limite

d

Adani P

ower Lim

ited

KSK En

ergy V

entures

Limited

-100

-50

0

50

100

150

200

Series1

Interpretation

We show in the above graph we understand that NHPC Limited has high growth where KSK Energy Ventures Limited has lowest growth.


IPO PRICING

1Indo Thai Securities Limited ( Indo Thai

Securities IPO ) Finance & Investments

02-Nov-11 70 - 84 75 98.9 18.85 12.4

-85.241Onelife Capital Advisors

Ltd ( Onelife Capital Advisors IPO ) Finance &

Investments

17-Oct-11 100 - 110 115 173 114 257

+133.641L&T Finance Holdings

Ltd Finance & Investments12-Aug-11 51 - 59 50 52.45 49.8 46.75 -20.76

1Inventure Growth & Securities Ltd Finance &

Investments

04-Aug-11 110 - 117

119 225 91.55 155.15 +32.61

1Punjab & Sind Bank Finance - Banks - Public Sector

30-Dec-10 113 - 120

144 146.7 126.2 67.50 -43.75

Indo Thai Securities Limited

Onelife Capital Advisors Ltd

L&T Finance Holdings Ltd

Inventure Growth & Securities Ltd

Punjab & Sind Bank

0

50

100

150

200

250

300

offer pricelisted pricecurrent price

InterpretationWe show in the above graph we understand that Onelife Capital Advisors Ltd has high growth where Indo Thai Securities Limited has lowest growth we show in the above graph offer price, listed price and current price.


Offer price listed price current price

IPO PRICING

Offer price listed price current price

3Flexituff International Ltd ( Flexituff International IPO )

Packaging - Metalic/Plastics/Others19-Oct-11 145 - 155 155 185.4 142 247.20

+59.483Tijaria Polypipes Ltd

( Tijaria Polypipes IPO ) Plastics - Pipes/Tubes

14-Oct-11 60 62 67.8 16.05 9.54 -84.1

3RDB Rasayans Ltd ( RDB Rasayans IPO ) Packaging -

Metalic/Plastics/Others

07-Oct-11 72 - 79 85 93 19.8 8.30 -89.49

Flexituff In-ternational

Ltd

Tijaria Polypipes Ltd

RDB Rasayans Ltd

0

50

100

150

200

250

offer price

listed price

current price

Interpretation

We show in the above graph we understand that Onelife Capital Advisors Ltd has high growth where Indo Thai Securities Limited has lowest growth we show in the above graph offer price, listed price and current price.


IPO PRICING

M and B Switchgears Ltd ( M and B Switchgears IPO ) Electric Equipment - Transformers

20-Oct-11 180 - 186 180 356 118.65 52.55 -71.75

2TD Power Systems Ltd Electric Equipment - Gensets/Turbines

08-Sep-11 256 - 261 251.6 308.75 242 227.75 -12.74

SRS LimitedElectric Diversified 16-Sep-11 58 - 65 55 61.4 33.1 34.55 -46.85

M and B Switchgears Ltd TD Power Systems Ltd SRS LimitedElec0

50

100

150

200

250

300


Interpretation

We show in the above graph we understand that Onelife Capital Advisors Ltd has high growth where Indo Thai Securities Limited has lowest growth we show in the above graph offer price, listed price and current price.


IPO PRICING

2PG Electroplast Ltd 26-Sep-11 190 - 210 177.5 459.05 177.5 158.6 -24.48Gravita India Limited 16-Nov-10 120 - 125 218.75 248.65 206.6 510 +308A2Z Maintenance &

Engineering23-Dec-10 400 - 410 390 398.9 318.6 108.50 -73.54

15Power Grid Corporation of India Transmission/Equipment

25-Nov-10 85 - 90 95 97 94.8 100.05 +11.17

18Gyscoal Alloys Ltd Steel - Rolling 27-Oct-10 65 - 71 104.85 106.15 80.05 15. -78.8720Cox and Kings India Limited Travel Agen. / Tourism Deve. / Amusement

Park

11-Dec-09 316 - 330 434 434.8 420.55 179.90 -45.48

23Mahindra Holidays & Resorts India Ltd. Hotels, Resorts & Restaurants

16-Jul-09 275 - 325 370 374.5 311.35 298 -8.31

PG Electroplast Ltd

Gravita India Limited

A2Z Maintenace & Engineerig Services Ltd

Power Grid Corporation of India

Gyscoal Alloys Ltd

Cox and Kings India Limited

Mahindra Holidays & Resorts

0100200300400500600


Interpretation

We show in the above graph we understand that TD Power Systems Ltd has high growth where M and B Switchgears Ltd has lowest growth.c


IPO PRICING

5Prakash Constrowell Ltd Construction & Contracting 04-Oct-11 130 - 138 147.6 241.5 122.3 178 +28.99

5RPP Infra Projects Ltd Construction & Contracting

06-Dec-10 68 - 75 75 80.4 67.35 58.35 -22.2


20-Oct-10 253 - 260 280 299 269.8 265.1 +1.96

Prakash Constrowell Ltd RPP Infra Projects Ltd g Oberoi Realty Limited 0

50

100

150

200

250

300


Interpretation

We show in the above graph we understand that Prakash Constrowell Ltd has high growth where RPP Infra Projects Ltd has lowest growth.


IPO PRICING

6Brooks Laboratories Ltd Pharmaceuticals 05-Sep-11 90 - 100 110 131.1 57.75 14.28 -85.72

12Lotus Eye Care Hospital Limited Hospitals & Medical Services

11-Jul-08 36 - 38 40 40 32.5 8.6 77.37

Brooks Laboratories Ltd Lotus Eye Care Hospital Limited 0

20

40

60

80

100

120


Interpretation



IPO PRICING

7Tree House Education & Accessories Ltd Services - Others

26-Aug-11 135 - 153 132.8 161.5 104.15 219 +43.14

7 Somi Conveyor Beltings Limited Miscellaneous

24-Jul-08 35 37.65 37.65 24.7 11.17 -68.09

7Archidply Industries Limited Decoratives - Wood Based

04-Jul-08 70 - 80 74.55 74.55 48.8 13.35 83.31

7Avon Weighing Systems LimitedTrading

03-Jul-08 10 13.9 20 11.35 2.91 70.9

7Sejal Architectural Glass Limited Glass & Glass Products

01-Jul-08 105 - 115 110 139.8 77.55 14.35 87.52

Tree House Education & Accessories Ltd

Somi Conveyor Beltings Lim

ited

Archidply Industries Limited

Avon Weighing System

s Limited

Sejal Architectural Glass Limited

050

100150200250

offer pricelisted pricecurent price

Interpretation


IPO PRICING We show in the above graph we understand that Lotus Eye Care Hospital Limited Ltd has high growth where Brooks Laboratories Ltd has lowest growth.

8Bharatiya Global Infomedia Ltd: Computers – Software 28-Jul-11 75 - 82 84 84 27.15 8.68 -89.41

8Edserv Softsystems Ltd Computers - Software

02-Mar-09 55 - 60 55 134.9 55 43.85 -26.92

Bharatiya Global Infomedia Ltd: Edserv Softsystems Ltd 0

10

20

30

40

50

60

70

80

90


Interpretation



IPO PRICING

10Ravikumar Distilleries Ltd Beverages & Distilleries 27-Dec-10 56 - 64 80.35 90.1 78.4 15.80 -75.31

10Globus Spirits Ltd. Beverages & Distilleries

23-Sep-09 90 - 100 110 111.3 89.3 106.40 +6.4

Ravikumar Distilleries Ltd Globus Spirits Ltd. 0

20

40

60

80

100

120


Interpretation



IPO PRICING

13Shipping Corporation of India Ltd Shipping 15-Dec-10 135 -

140 137.7 137.7 132.45 57.75 -58.7513Pipavav Shipyard Limited

Ship - Docks/Breaking/Repairs09-Oct-09 55 - 60 60.05 64.7 53.85 79.8 +33

Shipping Corporation of India Ltd Pipavav Shipyard Limited 0

20

40

60

80

100

120

140


Interpretation

We show in the above graph we understand that Pipavav Shipyard has high growth where Shipping Corporation of India has lowest growth.


IPO PRICING

RPP Infra Projects Ltdg Oberoi Realty Limited 0

50

100

150

200

250

300


Interpretation

We show in the above graph we understand that Oberoi Realty Limited has high growth where RPP Infra Projects lowest growth.


14RPP Infra Projects LtdConstruction & Contracting 06-Dec-10 68 - 75 75 80.4 67.35 58.35 -22.2


20-Oct-10 253 - 260 280 299 269.8 265.1 +1.96

IPO PRICING

BS Transcomm Limited 27-Oct-10 248 - 257 249 391.7 249 145.50 -43.39

Nu Tek India Limited 27-Aug-08 170 - 192

201.1 225 194 0.95 -99.51

BS Transcomm Limited Nu Tek India Limited 0

50

100

150

200

250

300


Interpretation

We show in the above graph we understand that BS Transcomm Limited Ltd has high growth where Nu Tek India Limited has lowest growth.


IPO PRICING

Jindal Cotex Ltd 22-Sep-09 70 - 75 75 93.45 75 64.15 -14.47Mahindra Holidays &

Resorts India Ltd.16-Jul-09 275 -

325370 374.5 311.35 298 -8.31

First Winner Industries Limited

08-Jul-08 115 - 125

125 125 80.5 14 88.8

Jindal C

otex Ltd

Mahindra

Holidays

& Resorts

India Ltd.

First W

inner Industr

ies Lim

ited

050

100150200250300350400


Interpretation

We show in the above graph we understand that First Winner Industries Limited Ltd has high growth where Jindal Cotex Ltd has lowest growth.


IPO PRICING

Alkali Metals Ltd 06-Nov-08 86 - 103 90 179.3 90 34.55 -66.46Chemcel Biotech Limited 13-Oct-08 16 16 16 4.75 3.01 -81.19

Alkali Metals Ltd Chemcel Biotech Limited 0

20

40

60

80

100

120


Interpretation

We show in the above graph we understand that Alkali Metals Ltd has high growth where Chemcel Biotech Limited has lowest growth.


IPO PRICING

KSK Energy Ventures Limited 14-Jul-08 240 -

255 220 234.8 176 48.60 -80.94Indiabulls Power Limited 30-Oct-09 40 - 45 45.05 45.05 35.35 13.35 -70.33

NHPC Limited 01-Sep-09 30 - 36 39 39.75 36.6 88.05 +144.58Adani Power Limited 20-Aug-09 90 - 100 105 108 99 82.5 17.5KSK Energy Ventures

Limited14-Jul-08 240 -

255220 234.8 176 48.60 -80.94

KSK En

ergy V

entures

Limited

Indiabulls

Power Lim

ited

NHPC Limite

d

Adani P

ower Lim

ited

KSK En

ergy V

entures

Limited

0

50

100

150

200

250


Interpretation


IPO PRICING We show in the above graph we understand that NHPC Limited has high growth where KSK Energy Ventures Limited has lowest growth.

Chapter-7

S.W.O.T. ANALYSIS OF CHEVROLET PVT. LTD.

STRENGHTS

♠ Many companies include the IPO.

♠ There are main advantages of that to know the growth.

♠ There are main advantages of to achieve the goal.

♠ To understand the market position.

♠ Help in need of the money and requirement

♠ It fulfill of requirement of money

♠ Profit maximization

WEAKNESSES

♠ No good performance

♠ Very difficult in calculation

♠ Its process is longer.

♠ Its rules are more complex and rigid.


IPO PRICING ♠ There are more waiting for increases the price

♠ There are more fluctuate

♠ It’s can’t identified its price

OPPORTUNITIES

♠ There are many opportunity

♠ There are getting high profit and high price

♠ it’s have possibility to earn high profit in a few time

♠ its help in taking high profit and fulfillment of requirement of money

♠ it’s have high economic growth

♠ increasing capacity of the company

♠ High money power.

♠ Credit worthiness

♠ Profit maximization

THREATS

♠ Small companies have impossible.

♠ That is very risky.

♠ More money is needed to investment.

♠ They have to secure documentation of the transaction.


IPO PRICING ♠ There are more rules and regulation to have followed.

♠ High fluctuation.

A SWOT Analysis of the IPO Approach

An initial Public Offering (IPO) involves a private company for the first time selling its stocks to members of the public. It has for long been a popular means of raising capital, especially for financing their expansion programs (Draho, 2006). An IPO could be advisable for Riordan manufacturing. However, the challenges that it poses also need to be assessed. This paper seeks to provide a SWOT analysis of the IPO approach in relation to Riordan Manufacturing Company.

Strengths The IPO approach will provide the company with a chance for massive injection of capital. This is unlike for instance reliance on private capital as is commonly the case. Considering the large number of participants, there is the assurance of a large amount of funds being raised. It also offers liquidity to all stakeholders. There is usually the issuance of restricted stock. This is not transferable and the moment the company goes public, the liquidity of stocks makes them highly attractive. In the case of the company, liquidity of stock implies that there will be extra funds to pay employees, find new partners or reinvest. An IPO provides a chance for the exit of investors and employees. Once implemented, an IPO gives an opportunity for the selling of shares and recouping of investments. In the same way, for the employee and the founder, such an offer offers a chance for making a good profit (Kleeburg, 2005)

Weaknesses One major weakness of the approach is its time and financial costs. It is long and tedious. It involves a lot of documentation and expertise hence fees. Insurance and other such expenses are also factored in. The cost of the process can be up to ten per cent of the amount raised in a process lasting up to six of months. An IPO also causes restrictions on publicity. Authorities require that companies maintain a period referred to as the quit period. This happens after the registration process is complete. During this time, communication with the public is checked to avoid hyping of the company. The company has to ensure that everything said is as contained inn the declarations and avoid talk that could negatively affect stocks (Draho, 2006).

Opportunities According to Kleeburg (2005), the stronger resultant capital base will facilitate company


IPO PRICING development. There will be a chance for Riordan to pursue greater Research and Development and also to acquire interests in other companies. There is also the opportunity for greater market recognition. With floatation, there is creation of more visibility. There is usually the general perception that a floated company is more stable. The measures taken by authorities to ensure transparency help to secure more

investors in future.

Threats Among the threats posed is an increased possibility of litigation.

CHAPTER-8

FINDINGS AND RECOMMENDATION

By this research I find some statement which is as under.

♠ Now a day approximately only 152company listed during 2008 to2011.

♠ In research time I am finding that many company have no aware of its advantage.

♠ Customer has not provided good benefit from that.

♠ All most the customers and customer have satisfied with current position.

♠ There are not reachable media used to uploaded live and current data.

♠ IPO PRICING center is easily available in the Indian market.

♠ Some customer deep image of IPO.

♠ Some customer deep image of growth of the company and get good benefit.

♠ Some customer have deep image of other stock exchange and not registered under

IPO.

♠ There are more rigid and complex rules and regulation have to follow from SEBI

there have to pass from more and long process.


IPO PRICING ♠ There are no. of media have uploaded online price of the company.

♠ There are seven company have price is above two hundred. And only one company

have high price which is Oil India Limited rs.1157.

♠ Onelife Capital Advisors Ltd has highest growth +133% and Resurgere

Mines & Minerals India Limited negative growth -99.92%

RECOMMANDATION:-

♠ To do more Advertising for the product and give more advertisement on different

channels like star, color, zee TV, radio, news paper. because most of people see these

channels and give the advertise at noon and night time because women are free in

noon and man are free at night time

♠ To make effective Advertising

♠ There are more fluctuate so there are more difficult to judgment.

♠ IPO Company should have to include all the Indian company.

♠ There difficulty in find the growth of the company.

♠ To increase more feature in the product and value added services like easy availability

of liquidation of share price and currency.

♠ To provide good services to every customer.

♠ Company should introduce advantage to invest in the company.

♠ There have to provide the benefit of high purchase of share.


IPO PRICING ♠ To provide the chances of the company to get high growth of the company.

♠ Companies have to remove the negative impression of the losses in the investment in

the company.

♠ The firm should increase its advertisement in the local channels and newspaper that

shall help customers to know about the different share price.

Chapter -9Conclusion

Findings and Conclusions:

These past 42 days been a learning experience, not only I learnt how the corporate world is but along with that I learnt how to cope up with problems, what is the level of quality that is required in corporate. This has been one the most cherishing experience of my life.

I even learnt the importance of customers and how convince them in the marketing only and how to achieve the win-win situation in the market There are even more learnt about medicine and its advantage.

I can conclude by saying that this project has allowed me to learn new things in life and given a fresh hand exposure in the corporate world. It has also allowed me to apply all the theoretical studies into practical situations. This will help me learn the practical implications of the theory that I will be learning in my next level.

Lastly, I would say that my project in ‘IPO PRICING’ has turned out to be a great learning experience rather than a grilling experience as the company believes in quality and not in Quantity. It’s have to difficult to manage the business and also have to know about the important of IPO PRICING also have to know about the different company invest and listing on IPO. I hope to gain immense knowledge and experience in semester four.

My main aim would be to grow along with the growth of the company and give them my best.

I would like to conclude that my experience with ‘IPO PRICING’ suggests that I am being covered at every step by my Company Guide as well as Faculty Guide when I faced any difficulty and I am confident of achieving the targets given to me and preparing the

Initial public offerings, an acquisition, and a merger are three key capital execution elements that carry a certain air of excitement when looking to expand an organization's operations. The success


IPO PRICING of these three (3) elements will be dependent on the company's management team, public's judgment, increased market power, wealth and growth opportunities, and technological advancements. Selecting the most excellent organizational strategy to expand the operations capital is critical to the success of organizations seeking capital to expand their operations.

Chapter-10

Bibliography

Web Based www.investopedia.com www.sebi.com www.vivro.net www.intimespectrum.com www.pratibhagroup.com www.moneycontrol.com

Book Based Share Market Book By Tarun Shah IPO Decision By Jason Draho

Industry Based Pratibha Group Of Companies

1. Aggarwal R, Leal R, & Leonardo H (1993) “The After Market Performance of Initial Public Offerings in Latin America” Financial Management, Spring PP 42-53


http://www.moneycontrol.com/

http://www.pratibhagroup.com/

http://www.intimespectrum.com/

http://www.vivro.net/

http://www.sebi.com/

http://www.investopedia.com/

IPO PRICING 2. Allen Franklin & Faulhaber G.R. (1989) “Signaling by under pricing in the IPO Market” Journal of Financial Economics, 23, 303-323

3. Baral Susant Kumar & Obaidullah Mohmmed (1998) “Short-run Price Behavior of IPOs in India: Some Empirical Findings” UTI Institute of Capital Markets

Chapter-11

Annexure

ALL COMPANIES 2007 to2011 LISTED, OFFER AND CURRENT PRICES

Company Name Listing Date Offer Price List Price

Listing High

Listing Low

Current Price

Indo Thai Securities Limited ( Indo Thai Securities IPO )

02-Nov-11 70 - 84 75 98.9 18.85 12.4

M and B Switchgears Ltd ( M and B Switchgears IPO )

20-Oct-11 180 - 186 180 356 118.65 52.55

Flexituff International Ltd ( Flexituff International IPO )

19-Oct-11 145 - 155 155 185.4 142 247.20

Taksheel Solutions Ltd ( Taksheel Solutions IPO ) 19-Oct-11 130 - 150 157.4 185 38.5 13.69

Onelife Capital Advisors Ltd ( Onelife Capital Advisors IPO )

17-Oct-11 100 - 110 115 173 114 257

Tijaria Polypipes Ltd ( Tijaria Polypipes IPO ) 14-Oct-11 60 62 67.8 16.05 9.54

RDB Rasayans Ltd ( RDB Rasayans IPO ) 07-Oct-11 72 - 79 85 93 19.8 8.30

Prakash Constrowell Ltd 04-Oct-11 130 - 138 147.6 241.5 122.3 178PG Electroplast Ltd 26-Sep-11 190 - 210 177.5 459.05 177.5 158.6SRS Limited 16-Sep-11 58 - 65 55 61.4 33.1 34.55

TD Power Systems Ltd 08-Sep-11 256 - 261 251.6 308.75 242 227.75

Brooks Laboratories Ltd 05-Sep-11 90 - 100 110 131.1 57.75 14.28


IPO PRICING Tree House Education & Accessories Ltd 26-Aug-11 135 - 153 132.8 161.5 104.15 219

L&T Finance Holdings Ltd 12-Aug-11 51 - 59 50 52.45 49.8 46.75Inventure Growth & Securities Ltd 04-Aug-11 110 - 117 119 225 91.55 155.15

Bharatiya Global Infomedia Ltd 28-Jul-11 75 - 82 84 84 27.15 8.68

Readymade Steel India Ltd 13-Jul-11 90 - 108 115 117.75 62.3 66.50

Rushil Decor Ltd 07-Jul-11 63 - 72 81.25 124.05 75 135Birla Pacific Medspa Ltd 07-Jul-11 10 - 11 10.1 30.7 10.1 5.5Timbor Home Ltd 22-Jun-11 54 - 63 72 94.5 72 24.30VMS Industries Ltd 14-Jun-11 36 - 40 46.25 48.5 24.9 33.20Aanjaneya Lifecare Ltd 27-May-11 228 - 240 229.45 319.2 229.45 495Power Finance Corporation Ltd 27-May-11 193 - 203 196 200.7 191.5 160.25

Sanghvi Forging & Engineering Ltd 23-May-11 80 - 85 88 116.8 86.5 26.80

Innoventive Industries Ltd 13-May-11 117 - 120 110 114.85 86.3 88

Servalakshmi Paper Ltd 12-May-11 27 - 29 29 48.7 17.7 5.45Future Ventures India Ltd 10-May-11 10 - 11 9 9.65 7.9 8.90Paramount Printpackaging Ltd 09-May-11 32 - 35 36.5 37.9 24.8 7.35

Muthoot Finance Ltd 06-May-11 160 - 175 196.6 198.9 161.4 161.50Shilpi Cable Technologies Ltd 08-Apr-11 65 - 69 78 84.7 45.4 12

PTC India Financial Services Ltd 30-Mar-11 26 - 28 26.75 27 23.5 11.30

Lovable Lingeries Ltd 24-Mar-11 195 - 205 240 278.9 240 383.70Sudar Garments Ltd 11-Mar-11 72 - 77 84 115.5 84 69.20Fineotex Chemical Ltd 11-Mar-11 60 - 72 86.6 147 86.6 54AcroPetal Technologies Ltd 10-Mar-11 88 - 90 92 140 87.4 13.94

Omkar Speciality Chemicals Ltd 10-Feb-11 95 - 98 95 101 42.5 54.50

Midvalley Entertainment Ltd 27-Jan-11 64 - 70 73 76.5 55 58

C Mahendra Exports 20-Jan-11 95 - 110 114 121 110 144.Shekhawati Poly-Yarn Ltd 12-Jan-11 30 50 69.7 30.7 23.65Punjab & Sind Bank 30-Dec-10 113 - 120 144 146.7 126.2 67.50Ravikumar Distilleries Ltd 27-Dec-10 56 - 64 80.35 90.1 78.4 15.80

A2Z Maintenance & Engineering Services Ltd 23-Dec-10 400 - 410 390 398.9 318.6 108.50

Claris Lifesciences Limited 20-Dec-10 228 - 235 224.4 228 203 117.45

Shipping Corporation of India Ltd 15-Dec-10 135 - 140 137.7 137.7 132.45 57.75

Manganese Ore India Limited - MOIL 15-Dec-10 340 - 375 590 562.25 460.7 389.10

RPP Infra Projects Ltd 06-Dec-10 68 - 75 75 80.4 67.35 58.35


IPO PRICING Power Grid Corporation of India 25-Nov-10 85 - 90 95 97 94.8 100.05

Gravita India Limited 16-Nov-10 120 - 125 218.75 248.65 206.6 510Coal India Limited 04-Nov-10 225 - 245 287.75 344.75 287.45 349Gyscoal Alloys Ltd 27-Oct-10 65 - 71 104.85 106.15 80.05 15.Prestige Estates Projects Ltd 27-Oct-10 172 - 183 192.9 207.1 190 74.25

BS Transcomm Limited 27-Oct-10 248 - 257 249 391.7 249 145.50Oberoi Realty Limited 20-Oct-10 253 - 260 280 299 269.8 265.1Commercial Engineers & Body Builders 18-Oct-10 125 - 127 119 142.55 106.35 63.10

Bedmutha Industries Limited 14-Oct-10 95 - 102 113.5 204 98 31.05

Sea TV Network Limited 14-Oct-10 90 - 100 120 17.80Ashoka Buildcon Limited 14-Oct-10 297 - 324 342 362.7 308.1 200VA Tech Wabag Limited 13-Oct-10 1230-1310 1655 1802.6 1682.75 361Cantabil Retail India Limited 12-Oct-10 127 - 135 133.8 133.8 102.1 17.60

Tecpro Systems Limited 12-Oct-10 340 - 355 399.4 454.25 398 172.20Gallantt Ispat Limited 11-Oct-10 50 67.8 85.8 60.2 36.55Ramky Infrastructure Limited 08-Oct-10 405 - 468 450 460 345.05 209

Orient Green Power Company Ltd. 08-Oct-10 47 - 55 45.7 46.6 38.3 12.60

Electrosteel Steels Limited 08-Oct-10 10 - 11 12.35 12.35 9.35 6.40

Eros International Media Limited 06-Oct-10 158 - 175 213.35 217.7 178.6 198.10

Career Point Infosystems Limited 06-Oct-10 295 - 310 461 674 450 263

Microsec Financial Services 05-Oct-10 113 - 118 130 142 108.55 27.40

Tirupati Inks Limited 01-Oct-10 41 - 43 53.95 61.45 35.7 6.75Indosolar Limited 29-Sep-10 29 - 32 27.7 27.7 22.9 5.46Gujarat Pipavav Port Ltd 09-Sep-10 42 - 48 56.1 58 52 60.65Prakash Steelage Ltd 25-Aug-10 100 - 110 118.55 201.9 117 123.95Bajaj Corp Ltd 18-Aug-10 630 - 660 760 816.95 747.65 101.05SKS Microfinance Ltd 16-Aug-10 850 - 985 1036 1159.9 1036 92.85Engineers India Ltd 12-Aug-10 270 - 290 315 350 321.6 232.60Midfield Industries Ltd 04-Aug-10 126 - 133 159.4 49.80Jaypee Infratech Ltd 21-May-10 102 - 117 98.5 98.5 90 41.25SJVN Ltd 20-May-10 23 - 26 27.1 27.1 24 19Mandhana Industries Ltd. 19-May-10 120 - 130 132.7 139.15 130 231.50Tarapur Transformers Ltd 18-May-10 65 - 75 75 97.45 54.3 18.40Nitesh Estates Ltd 13-May-10 54 - 56 54 58 48.4 16.91Talwalkars Better Value Fitness Ltd 10-May-10 123 - 128 147.95 168.9 132 137.05

Goenka Diamond & Jewels Limited 16-Apr-10 135 - 145 124 141 92.2 44.40

Intrasoft Technologies Limited 12-Apr-10 137 - 145 150 167.4 124 53.95

Shree Ganesh Jewellery 09-Apr-10 260 - 270 258.85 258.85 160.65 99.45


IPO PRICING House LimitedPersistent Systems Ltd 06-Apr-10 290 - 310 361.6 447.3 361.6 320.05Pradip Overseas Ltd 05-Apr-10 100 - 110 115 122.7 102.15 104.10IL&FS Transportation Networks Ltd 30-Mar-10 242 - 258 266.7 299 266.7 185

Vascon Engineers Limited 15-Feb-10 165 - 185 156 171.95 145.1 46.40Syncom Healthcare Limited 15-Feb-10 65 - 75 89.9 107.2 85.75 13.30

MBL Infrastructures Ltd. 11-Jan-10 165 - 180 185 219.4 185 147D B Corp Ltd 06-Jan-10 185 - 212 250 256.5 224 184.95Godrej Properties Ltd 05-Jan-10 490 - 530 511 586.8 502.15 651.35JSW Energy Ltd 04-Jan-10 110 - 115 106 106.35 100 43.4Oberoi Realty Limited 20-Oct-10 253 - 260 280 299 269.8 265.1Commercial Engineers & Body Builders 18-Oct-10 125 - 127 119 142.55 106.35 63.10

Cox and Kings India Limited 11-Dec-09 316 - 330 434 434.8 420.55 179.90

Indiabulls Power Limited 30-Oct-09 40 - 45 45.05 45.05 35.35 13.35Euro Multivision Ltd 15-Oct-09 70 - 75 70 70 53.55 6.21Pipavav Shipyard Limited 09-Oct-09 55 - 60 60.05 64.7 53.85 79.8Oil India Limited 30-Sep-09 950-1050 1019 1173.3 1080.34 1157Globus Spirits Ltd. 23-Sep-09 90 - 100 110 111.3 89.3 106.40Jindal Cotex Ltd 22-Sep-09 70 - 75 75 93.45 75 64.15NHPC Limited 01-Sep-09 30 - 36 39 39.75 36.6 88.05Adani Power Limited 20-Aug-09 90 - 100 105 108 99 82.5Raj Oil Mills Limited 12-Aug-09 100 - 120 125.05 133.7 115.6 12.65Excel Infoways Limited 03-Aug-09 80 - 85 93.05 110 86 18.70Mahindra Holidays & Resorts India Ltd. 16-Jul-09 275 - 325 370 374.5 311.35 298

Edserv Softsystems Ltd 02-Mar-09 55 - 60 55 134.9 55 43.85Alkali Metals Ltd 06-Nov-08 86 - 103 90 179.3 90 34.55Chemcel Biotech Limited 13-Oct-08 16 16 16 4.75 3.0120 Microns Limited 06-Oct-08 50 - 55 80 80 31.6 64.30Austral Coke & Projects Limited 04-Sep-08 164 - 196 206 308.8 206 1.30

Resurgere Mines & Minerals India Limited 01-Sep-08 263 - 272 272.05 562.8 272.05 0.22

Nu Tek India Limited 27-Aug-08 170 - 192 201.1 225 194 0.95Vishal Information Technologies Limited 11-Aug-08 140 - 150 166 194.5 163 4.84

Birla Cotsyn India Limited 30-Jul-08 12 - 14 14.7 17.5 8.55 0.34Somi Conveyor Beltings Limited 24-Jul-08 35 37.65 37.65 24.7 11.17

KSK Energy Ventures Limited 14-Jul-08 240 - 255 220 234.8 176 48.60

Lotus Eye Care Hospital Limited 11-Jul-08 36 - 38 40 40 32.5 8.6

First Winner Industries Limited 08-Jul-08 115 - 125 125 125 80.5 14

Archidply Industries Limited 04-Jul-08 70 - 80 74.55 74.55 48.8 13.35

Avon Weighing Systems 03-Jul-08 10 13.9 20 11.35 2.91


IPO PRICING LimitedSejal Architectural Glass Limited 01-Jul-08 105 - 115 110 139.8 77.55 14.35

Bafna Pharmaceuticals Limited 27-Jun-08 40 43.8 47.2 37.3 41.64

Niraj Cement Structurals 19-Jun-08 175 - 190 185 197.9 169.9 16.95Anu's Laboratories Limited 04-Jun-08 200 - 210 260 288.4 256.6 2

Gokul Refoils and Solvent Ltd 04-Jun-08 175 - 195 203.45 222.3 176.3 81.40

Aishwarya Telecom Limited 07-May-08 32 - 35 50.1 93 50.1 8

Kiri Dyes & Chemicals Limited 22-Apr-08 125 - 150 184 228.7 156.15 80

Titagarh Wagons Limited 21-Apr-08 540 - 610 540 734.7 540 426.05Sita Shree Food Products 07-Apr-08 27 - 30 35 46.7 33.95 6.35Gammon Infrastructure Projects 03-Apr-08 167 - 200 180 180 147.6 13.45

V-Guard Industries Ltd 13-Mar-08 80 - 85 90 98.95 72.6 182.15Rural Electrification Corporation 12-Mar-08 90 - 105 125 128.4 118.85 168.95

GSS America Infotech Ltd 07-Mar-08 400 - 440 380 540 370 52Manjushree Extrusions Ltd 28-Feb-08 45 48 66 47 80.80

Tulsi Extrusions Limited 25-Feb-08 80 - 85 93.45 143.45 93.45 10.46IRB Infrastructure Developers 25-Feb-08 185 - 220 170.05 209 167.3 158.50

Shriram EPC Limited 20-Feb-08 290 - 330 320 377 251 99.85Bang Overseas Ltd 20-Feb-08 200 - 207 250 269.9 168.55 13.80OnMobile Global Ltd 19-Feb-08 425 - 450 440 513.6 440 75.60KNR Constructions Ltd 18-Feb-08 170 - 180 180 199 151.15 113.75Cords Cable Industries Ltd 13-Feb-08 125 - 135 143 151 110.2 31.50

J Kumar Infraprojects Ltd 12-Feb-08 110 - 120 100 103.8 96.7 174Reliance Power Ltd 11-Feb-08 405 - 450 530 530 355.3 93.40Future Capital Holdings Ltd 01-Feb-08 700 - 765 1044 1100 826.1 125.30

Porwal Auto Components 14-Jan-08 68 - 75 79.85 120 76 6.81Precision Pipes 11-Jan-08 140 - 150 160 160 134 71.50Aries Agro Limited 11-Jan-08 120 - 130 264.7 251.4 215.05 75Manaksia Limited 08-Jan-08 140 - 160 175.3 212 161.7 51.10Burnpur Cement Limited 03-Jan-08 12 18.45 48.05 18.45 6.50BGR Energy Systems Limited 03-Jan-08 425 - 480 801 988 801 228.25


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