INTIAL PUBLIC OFFERINTIAL PUBLIC OFFERIPO

The first public offer of securities by a company after its inception of known as Initial Public Offering (IPO).

Why IPO?Why IPO?For financing capital expenditure.For working capital requirement.exit route for existing investors.For debt financing.

IPO expensesIPO expenses

Important steps in Public Important steps in Public IssueIssue

BOARD MEETING Meeting of Board to discuss Public Issue

1

LEAD MANAGERSMerchant banker who starts the issue in coordination

with the company

2

CO-MANAGERS Appointment of co-managers

3

ADVISORSAppointment of advisors for counseling purpose

4

UNDERWRITERSAgreement between capital issuing company

and underwriters whereby the underwriters guarantee to subscribe the whole or part of the issued capital

that would remain unsubscribed by the public against commission

-minimum subscription

5

BANKERSCollect the money, application form from applicants

-Escrow A/c - ASBA A/c

6

BROKERS AND PRINCIPAL BROKERS Appointment of brokers who facilitate the subscription

of the issueapplicable brokerage is 1.5 per  cent

7

REGISTERS TO THE ISSUE Appointment of Registrars for various post-issue tasks -collection of application forms, scrutiny of application forms, data management, financialisation of the basis of allotment, allotment letters, share certificates and

refund orders.compensation-is based on a piece-rate system

8

PROSPECTUSProspectus is an invitation to the public to subscribe to

its shares/debentures-Prospectus, AoA, MoA are sent to SEBI

9

APPLICATION TO STOCK EXCHANGE TO LIST SHARES

Company should submit an application to the Stock Exchange(s) for enlistment of securities offered to the

public by the said issue

10

REGISTRAR OF COMPANIES (ROC) On approval from the SEs and legal advisors,

underwriters, bankers, auditors, registrars and others a copy of the prospectus duly signed by the directors, alongwith other required documents as listed out in

the Companies Act, 1956 must be filed with the ROC.

11

PROSPECTUS AND APPLICATION FORM Printing of prospectus,21 says prior to first

announcement

12

INITIAL LISTING APPLICATION Company has to file the initial listing application with

SEs within 10 days of filing of the prospectus.

13

PROMOTIONAL CAMPAIGN Conferences for investors, brokers and press is held

by the company -advertisements are made in newspapers, televisions and periodicals.

14

STATUTORY ANNOUNCEMENTAtleast 10 days before the opening of the subscription list the statutory announcement of the issue has to be made. The opening date and the closing date and the

bank branches should be mentioned in this announcement as well as in the prospectus.

15

SUBSCRIPTION LISTSubscription list has to be kept open for atleast 3

working days and for a total period of not exceeding 10 working days

16

COLLECTION OF APPLICATIONS The bankers to the issue collect application money-The lead managers & registrars monitor the entire

situation

17

SEPARATE BANK ACCOUNT Separate Bank account is opened for collection of

funds-Escrow A/c

18

PROCESSING OF APPLICATIONScrutinize the applications

 Sorted on investments and coding done

19

MINIMUM SUBSCRIPTIONif the company does not receive a minimum of 90% of

the issue and from underwriters , the amount of subscription received is required to be refunded to the

applicantsThe company should refund the amount within 10

weeks of the closing of the subscription list and pay interest.

20

UNDERWRITERS LIABILITY segregate the applications , Compare the number of shares procured by each underwriter, Finally, credit the total number of shares in the general pool to the

underwriters

21

ALLOTMENT OF SHARESOne-half  - upto 1,000 shares

Balance one-half  for  larger applicationsThe “proportionate” system of allotment has to be

followed

22

OVER SUBSCRIPTIONThe over-subscribed amount should after the

finalization of allotment, refunded to the applicants within 10 weeks of the closure of subscription list.

23

COMPLIANCE REPORT within 45 days of the closure of issue, a compliance

certificate from statutory auditor is to be forwarded to SEBI

24

 LISTING detailed listing application alongwith the listing

agreement and the listing fees has to be submitted to the SEs

25

 ISSUANCE OF SHARE CERTIFICATESCompany should deliver  the share certificate within 3

months after the allotment of shares.

26

Some IPO ScamsSome IPO ScamsSuzlon Energy IPO: Rs 1,496.34 cr

(September 23-29, 2005)Key operators used 21,692 fictitious accounts to corner 3,23,023 shares which is equal to 3.74 per cent of the total number of shares allotted to retail individual investors.

Jet Airways IPO: Rs 1899.3 crore (Feb 18-24, 2005)Key operators used 1,186 fake accounts for cornering 20,901 shares which is equal to 0.52 per cent of the total number of shares allotted to retail investors.

National Thermal Power Corporation IPO Rs 5,368.14 crore (Oct 7-14, 2004).12,853 afferent accounts were used for cornering 27,50,730 shares representing 1.3 per cent of the total number of shares allotted to retail investors.

Tata Consultancy Services IPO: Rs 4,713.47 crore14,619 'benami' accounts were used to corner 2,61,294 shares representing 2.09 per cent of the total shares allotted to retail individual investors.

Employee Stock Option Employee Stock Option PlanPlan

(ESOP)

Specific type of are allotted shares below market price to the employees including managers of the company an option to buy shares of company

Lock in period

Benefits◦ Extra financial interest◦ Investment◦ Build up of sizeable capital

Sweat EquitySweat Equity

The equity that is created in a company or some other asset as a direct result of hard work by the owner(s) or employees.

Steps in Sweat EquitySteps in Sweat EquityApproval from BoD Allotted share fixation

Determining the form of allotment Determination of allotment price

Determination of instrument Identification of Employees Criteria formulation for employees Lock in period

Dissemination of information Settlement of dues

AdvantagesAdvantages

Employee relationsLoyaltyLabour participationHigher Employee

statusImproves

productivitySense of belongingIndustrial democracyParticipation

Profits and controlSalary +dividendCompensation

packageRetention of

efficient employeesEncouragement Sense of ownershipEmployee

confidence

DisadvantagesDisadvantages

Unfavorable Response

lower priceProfit affects moraleRemote rewardLeads to DisputeUnscrupulous

EmployeesWages over

ownership

Bonus preferenceLimited shareFall in pricesIncrease costsUnsound stock

marketSuccessful for

profit making companies