Howrah, March 27, 2008

Mahavir Lunawat

ICSI-EIRC Investor Awareness Program

on IPO Basics

Presentation OutlineIPO - Basic Concepts

Key Players & Documents

IPO Process

Statutory Framework

Areas of Investor Grievance

Basic Concepts

I P O – Investor Perspective

Capital Issues – Types

Public Offer of shares through book building mechanism is designed to ascertain demand for the shares at various price levels within a price-band to facilitate discovery of the Issue Price

Book Building

Price Band : The investors are informed of the price band for bidding The lower end of the price band is the floor price and the upper end of the price band is the cap price. The cap price should not be more than 20% of the floor price. The investors can bid at any price in multiples of Rs.1 within the price band

Basics

KEY

CONCEPTS

Red Herring Prospectus : Prospectus without issue price and size of the issue

Margin Amount : The money collected along with the application is referred to as margin amount. QIBs have to pay 10% margin only

Minimum Lot Size : The minimum lot size of the shares that can be bid shall be determined in such a manner that the amount payable at the floor price and cap price shall be in the range of Rs. 5000 to 7000. Bids should be for the minimum lot size or multiples there of

Basics

KEY

CONCEPTS

Bidding Centers : Bidding centers are essentially broking outfits associated with the Book Running Lead Managers / Syndicate Members. They have on-line connectivity to either or both of BSE and NSE. Investors may participate in the bidding process by submitting application forms to any of the designated bidding centers.

Revision of Bids :• Book building process provides for revision of the “options”

both in respect of the quantum of shares and / or the bid price to all categories of investors.

• The investors can revise their bids any number of times before the closure of the issue.

• However, for every revision they are required to go to the same bidding center where the original bid / earlier revision was registered.

• The revision bid form provided alongwith the application form. • If there is an upward revision (in terms of shares and / or price)

the investors are required to pay the differential amount along with the revised bid

• Lower revision – Excess money Only at the time of refund

Basics

KEY

CONCEPTS

Cut-off Price : Retail individual bidders can bid at “cut off” price, in which case, they need not indicate the specific price and yet become eligible to be considered for allotment irrespective of the issue price finally decided through the price discovery process. They must pay the margin amount calculated at the ceiling price

Basics

KEY

CONCEPTS

Basis of Allotment : The allotment shall be made on proportionate basis to the investors. The number of shares allotted shall not be less than minimum lot prescribed and thereafter in multiples of one share. Where the shares available for allotment to any category is less than the minimum lot prescribed, on the basis of drawal of lots, the successful investors in that category shall be identified

Process

I P O

Process

Investor Bidding Center RTI Inward

Preparation of BasisGeneration and Creation of Allotment as per basis,

Printing of Refund Orders

BankApplication Form

Electronic Data Capture

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Verification ReconciliationData Analysis

Registration of bids

NSE / BSE

Statutory FrameworkI P O

IPO – Regulatory FrameworkRegulatory Framework

• SEBI (DIP) Guidelines, 2000SNAPSHOT

Depositories Act, 1996

Securities Contracts (Regulation) Act, 1956 and Rules, 1957

Companies Act, 1956Companies (Issue of Share Certificates) Rules, 1960

Stamp Act

Listing Agreement and Stock Exchanges’ Regulations

Foreign Exchange Management Act, 1999 and Regulations

Key Players & Documents

I P O

Key Players

The InvestorsThe IssuerBook Running Lead ManagersCredit rating AgencySyndicate MembersBidding CentersEscrow BankersRegistrarsPrintersAdvertisement Agencies

With the support ofThe Stock ExchangesThe DepositoriesThe Postal System

Investors

• Categories of InvestorsQualified Institutional InvestorsNon Institutional InvestorsRetail Individual Investors

Key Documents

• Offer Document– Draft Red Herring Prospectus– Red Herring Prospectus– Prospectus

• Agreements– MOU with BRLMs– MOU with RTI and STA– Escrow Agreement– Syndicate Agreement– Agreement with Post Monitoring Agency

• Comfort Letters from Auditors &Due Diligence Certificates from BRLMs

Prospectus

• Read the Prospectus– Important Aspects

• Abridged Version in Application Form

Areas of

Investor Grievance

I P O

Post IPO Matters

Grievances

IPO – Rejections IPO – Rejections

Post IPO Matters

INVESTOR GRIEVANCE

IPO – Grounds of Rejections

PAN Not provided HNI at cut-off Applications not bid but bankedApplications bid but not banked

Client ID / DP ID Not provided

Mistakes in Client ID / DP ID – EscrowMore than one applicationPayment method mismatch

Unsigned Application Form

Bids outside the price band

Bids for shares lower than the minimum application

BE CAREFUL

Post IPO Matters

Refunds not gone through Shares in Pool Account Postal return undeliverableWrong credit / dual credit

Improper Reconciliation

BECAREFUL

Summary of Various remedies

RemedyCivil Remedy Criminal Remedy

Against the company

Against the directors, promoters & experts

Rescission of contract Claim for

damageDamages Comp. u/s

62Damage non-comp Sec 56

Fraudulent mis-rep. Innocent

mis-rep.

SEBI ROC Court Investor Forum

Must know the Facts in DetailKnow about the company & management reasonablyFill in Application Form properlySubmit the Application Form on timeCheck with the broker after submissionLiaise with the Registrar to the Issue

Dear InvestorsKeys to Success – Follow the Basics !

THANK YOU !