good topic

1. A
Project Report
On
INITIAL PUBLIC OFFER
Dissertation submitted in partial fulfillment of the
Requirements for the award of degree of
MASTER OF BUSINEES ADMINISTRATION
BY
MOHD SHAREEF
H. T. NO. 417109672033
NIZAM INSTITUTE OF ENGINEERING AND
TECHNOLOGY
MBA DEPARTMENT
NEAR RAMOJI FILM CITY, DESHMUKHI,
NALGONDA DIST - 508284.
MBA (2009 -11)
1

2. DECLARATION
I, MOHD SHAREEF student of MBA at NIZAM INSTITUTE OF ENGINEERING AND
TECHNOLOGY (DBM), Declare That the Project Report entitled “INITIAL PUBLIC
OFFER “in. INDIA BULLS SECURITIES LIMITED SECUNDERABAD is
an original and bonafide work had done by me for the partial fulfillment of requirements for
the award of “Master of Business Administration” in Osmania University
This bonafide work undertaken by me is original and is done for educational
purpose and has not submitted to any other University or Institute for the award of any other
degree or diploma.
DATE:
PALCE: MOHD SHAREEF
2

3. ACKNOWLEDGEMENT
I wish to express my sincere thanks to the management of INDIA BULLS
SECURITIES LIMITED, for giving me this opportunity to do the project entitled “INITIAL
PUBLIC OFFER” in their esteemed organization.
I thank to Dr., Principal of NIZAM INSTITUTE OF ENGINEERING AND
TECHNOLOGY (DBM), and Coded for his constant encouragement in completing this
work.
I am grateful to my guide Mr. Taherullh Shareef and also other faculty members in
the department for their support, co-operation, guidance and encouragement.
Last but not least, I would like to express my heartfelt thanks to my parents, teachers
and friends for their valuable support and encouragement throughout the course of the
project work in its proper outcome.
Mohd shareef
3

4. ABSTRACT
REVIEW -1
IPO’s are particularly suitable investments for anyone who is looking for a large amount of
growth in short period of time for their capital. Before utilizing an IPO investment though,
considers performing an IPO valuation to ensure we are buying an investment that is worth
weir capital.
An evaluation is one of the most important steps we can possibly take
when we are considering an investment in the open marketplace. During this phase of the
investment process, look into a variety of different factors that can affect the financial
situation of the IPO we are interested in, this is an important step in how to IPO.
As we are scouring financial statements representing the company we are
investing in, should first analyze the value of the current assets of the company. Next, we
should analyze the value of the debt the company owes. Once we compare these two factors,
we will understand where the company currently stands financially speaking.
The best investments available are investments consisting of companies that
have far less debt than they do assets. If we can compare the assets of the company to its
debt and find that the current sale price of the company is less than that difference of these
two sums, we can be certain that we are evaluating a very valuable investment.
Of course, we should look into many other factors that can affect weir
investments too. The amount of income the company is receiving on an ongoing basis is one
of the most important factors we can consider. We should also analyze the value of the
expenses the company is currently facing due to operating costs. As we compare the amount
of income the company is pulling in compared to the amount of expenses it is paying out, we
will understand its current financial situation. As we probably already know, a company’s
income should far exceed the total expenses the company is experiencing each month and
each year.
Another important factor we should take into consideration as we are looking at an IPO
investment is the type of products and services the company offers. If, once we analyze the
4

5. company’s current product presentations, we will understand the type of company we are
looking at. If we would buy the products the company is selling on our own, we can be
certain that we are analyzing a high quality company.
Even though the financial records of a company are often the most important
pieces of data we can analyze when we are looking at the company as an investment, look
into other factors such as who the owners are of the company, the people releasing the IPO,
the reasons why they are releasing the IPO to the public, and other factors that may affect
the value of weir investment in the future.
As long as we take all these precautions into consideration as we are considering
investing into an IPO market, we will be investing into solid investments. As we perform
IPO valuation, dig as deep as we possibly can into the financial records in order to better
understand the many different aspects of the company. As long as we discover many
different instances that state the company is worth more than it is currently selling for, we
are purchasing a very valuable company through the IPO offering we are looking at.
ABSTRACT
REVIEW -2
Many companies try to raise capital for growth through a process called the Initial Public
Offer or IPO. Investing in these IPO’s can give us huge profits in short time frame.They are
great wealth creator tools. At the same time they can wipe out wear investments equally
quickly. So the IPO’s are high risk, high return avenues of investment. There are always
items to consider when investing in an IPO that can make them less risky.
Why do Companies launch IPO’s?
In the growth trajectory of any company there comes a time when it needs to make a huge
investment to grow to the next level. Whenever a company hits this point, it needs to look at
two options: raise debt through bonds where it will get the investment money, but it pays
interest and it needs to repay the debt eventually. Alternatively, go for an IPO where it
decides to share its profits in the coming years. Understanding this is very important when
investing in IPO’s; after all we will now become a part of its profits and losses.
Understanding the Company Performance
We must first look at the company value in absolute terms and its value as per the IPO issue
rates. The absolute company value is the difference between its asset value and debt.
Typically, the asset value must be significantly higher than the debt to indicate that it is
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6. financially healthy. Besides, the IPO value must be less than its absolute value for us to
make decent listing gains.
Apart from the company value, its annual performance too is a great
indicator. Some relatively new companies may not have a huge absolute value; however
they have good growth numbers in the past and show great promise for strong future growth
too. In such cases, we can still invest with a long term view and its value is bound to
increase.
On the side of caution, the thing that we need to look at is the legal problems
that the company currently faces. If there are too many legal issues with it, it could be a very
risky IPO to enter in. We are better off avoiding it till its legalities clear off and we can enter
the stock in secondary market.
Finally, we need to look at the market position of the company. A market
leader or a big player is a relatively safer bet than someone at the bottom of the chain. It is
not to say that unknown companies will not grow or make profit, but they are always higher
risk investments. If were aim is to cut down risks, we should avoid such companies.
Apart from these, we could also have current news, economic situation, etc
that could affect the stock listing and were potential gains. It is best to look at these on a case
by case basis that follow a general rule.
In summary, if we are looking to reduce risk in IPO’s, we must look at items to
consider when investing in an IPO. Simple checks that can protect weir money.
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7. Table of contents Page NO
1. INTRODUCTION
2. LITERATURE REVIEW
3. COMPANY PROFILE
4. DATA ANALYSIS AND INTERPRETATIONS
5. FINDINGS, SUGGESTION & CONCLUSION
11-20
21-36
37-46
47-81
82-86
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8. Table of tables Page No
1. SHAREHOLDING PATTERN OF RELIANCE POWER
2. LISTING DETAILS
3. LISTING DAY TRADITIONAL INFORMATION
4. BALANCE SHEET OF RELIANCE POWER LIMITED
5. SHAREHOLDING PATTERN OF COX AND KING’SALLOTMENT
6. LISTING DETAILS
7. LISTING DAY TRADING INFORMATION OF COX & KING’IPO
8. BALANCE SHEET OF COX & KING’S
53
54
55
63
70
71
71
77
8

9. Table of figures page NO
1. ISSUE PRICE OF RELIANCE POWER IPO
2. LISTING DAY OPENING PRICE OF RELIANCE POWER IPO
3. LISTING DAY LOW PRICE OF RELIANCE POWER IPO
4. LAST TRADED PRICE OF COX & KING’S IPO ON LISTING DAY
5. LAST TRADE OF RELIANCE POWER IPO ON LISTING DAY
6. ISSUE PRICE OF COX AND KING’S IPO
7. IPO LISTING DAY OPEN PRICE OF COX & KING’S
8. LISTING DAY LOW PRICE OF COX & KING’S IPO
9. CHART SHOWING LISTING DAY HIGH PRICE
10. LISTING DAY HIGH PRICE OF RELIANCE POWER IPO
56
57
58
59
60
72
73
74
75
76
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10. INDEX
TOPIC PAGE NO
Chapter -1 11-20
1.1 Introduction to FINANCE
1.2 Introduction to IPO
1.3 Scope of the Study
1.4 Objectives of study
1.5 Need and importance of study
Chapter-2 21-36
Literature Review
2.1 Decisions Involve In IPO
2.2 Dimensions in IPO
2.3 Concepts of IPO
Chapter-3 37-45
3.1 Company profile
Chapter-4 46-79
4.1 Data Analysis and Interpretations
4.2 Research Methodology
Chapter-5 80-83
5.1 Findings & Suggestion
5.2 Conclusion
5.3 Limitations of the Study
5.4 Bibliography
10

11. CHAPTER -1
INTRODUCTION
11

12. 1.1. INTRODUCTION:
Finance is the science of funds management. The general areas of finance
are business finance, personal finance, and public finance. Finance includes saving money
and often includes lending money. The field of finance deals with the concepts of time,
money, risk and how they are interrelated. It also deals with how money is spent and
budgeted.
One facet of finance is through individuals and business organizations, which
deposit money in a bank. The bank then lends the money out to other individuals or
corporations for consumption or investment and charges interest on the loans.
The general areas of finance are
1] Business finance which is used by companies
2] Personal finance which is used by individuals
3] Public finance which is used by governments.
WHAT IS FINANCIAL MARKET
Financial Markets are place where financial instruments are made to
purchase or sell indirectly through intermediaries. This may be a physical location (like the
NYSE) or an electronic system (like NASDAQ). Much trading of stocks takes place on an
exchange; still, corporate actions are outside an exchange, while any two companies or
people, for whatever reason, may agree to sell stock from the one to the other without using
an exchange.
Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on
a stock exchange, and people are building electronic systems for these as well, similar to
stock exchanges.
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13. Financial markets can be domestic or they can be international.
Types of financial markets
The financial markets can be divided into different subtypes:
A] Capital markets which consist of:
1] Stock markets, which provide financing through the issuance of shares or
common stock, and enable the subsequent trading thereof.
2] Bond markets, which provide financing through the issuance of bonds, and
enable the subsequent trading thereof.
B] Commodity markets, which facilitate the trading of commodities.
C] Money markets, which provide short term debt financing and investment.
1.2 INTRODUCTION TO IPO
Definition:
Initial public offering
Initial public offering (IPO), also referred to simply as a "public
offering" or "flotation," is when a company issues common stock or shares to the public for
the first time. They are often issued by smaller, younger companies seeking capital to
expand, but can also be done by large privately-owned companies looking to become
publicly traded.
In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it
determine what type of security to issue (common or preferred), best offering price and time
to bring it to market.
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14. An IPO can be a risky investment. For the individual investor, it is tough to predict what the
stock or shares will do on its initial day of trading and in the near future since there is often
little historical data with which to analyze the company. Also, most IPOs are of companies
going through a transitory growth period, and they are therefore subject to additional
uncertainty regarding their future value. However, in order to make money, calculated risks
need to be taken.
Reasons for listing
When a company lists its shares on a public exchange, it will almost
invariably look to issue additional new shares in order to raise extra capital at the same time.
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 stock market investors
to provide it with large volumes of capital for future growth. The company is never required
to repay the capital, but instead the new shareholders have a right to future profits distributed
by the company and the right to a capital distribution in case of dissolution.
The existing shareholders will see their shareholdings diluted as a proportion of the
company's shares. However, they hope that the capital investment will make their
shareholdings more valuable in absolute terms.
In addition, once a company is listed, it will be able to issue further shares via a rights issue,
thereby again providing itself with capital for expansion without incurring any debt. This
regular ability to raise large amounts of capital from the general market, rather than having
to seek and negotiate with individual investors, is a key incentive for many companies
seeking to list.
Introduction of IPO in context of Indian market
The Indian primary market has come a long way particularly in the last decade after
deregulation of the Indian economy in 1991-92. Both the primary and secondary markets
have had their fair share of reforms, structural cum policy changes time to time. The most
commendable being the dismantling of the Controller of Capital Issues (CCI) and
introduction of the free pricing mechanism. This changed the whole facet of Initial Public.
14

15. Around 80 IPO’s made its entry into stock market in this year,
which was never in the history of Indian capital market. Maximum number of issues
received enormous response from the investors. Coal India IPO which is raising around
15,000 crores is making its entry into stock market in this October, it is considered to be the
largest IPO ever made in the Indian history. Many experts are viewing that it’s going to
change the Indian economic scenario.
Industries raises finance from capital markets through various instruments like
1] Equity finance
2] Debt finance
IPO’S comes under equity finance and debt finance. During the last decade,
more than a third of the increase in net assets of large firms in Chile, South Korea, Malaysia,
Mexico, Taiwan and Thailand has been secured through equity issuance. This pattern
contrasts sharply with that of the industrial countries, in which equity financing during the
same period has accounted for less than 5 percent of the growth in net assets.
Future of the capital market
In the liberalized economic environment, the capital market is all set to play a highly critical
role in the process of economic development. The Indian capital market has to arrange funds
to meet the financial needs of both domestic and foreign resources. What is more critical is
that the changed environment is characterized by cutthroat competition. Ability of
enterprises to mobilize funds at cheap cost will determine their competitiveness.
Changes in the capital market
Four sets of changes in the Indian capital market can be identified which set the market of
the twenty-first century different from what obtained earlier. These can be categorized as
follows:
1] Introduction of new institutions
2] Introduction of new instruments
3] Changes in administrative control and regulatory framework
15

16. 4] Some recent initiatives
Introduction of New Institutions
The composition of the Indian capital market has undergone a total change. Till very recent
times, Bombay Stock Exchange dominated the capital market in India. The daily turnover on
the Bombay Stock Exchange (BSE) alone exceeded the total turnover of all other exchanges
put together. The BSE with the monopolistic claw like control over the market was posing a
severe constraint on the spread and diversification of the capital market culture. It was
content with practicing non-transparent time and resource consuming trading practices that
failed to evoke confidence among new investors, both in primary and secondary market. Its
trading practices were becoming somewhat totally out of tune with the ongoing
communication revolution in India and worldwide. In response to this, the most important
are the OTCEI and NSE. What is more important is that the NSE has worked as a catalyst of
change for other exchanges, which are introducing on-line trading systems.
Along with NSE, mutual funds have also emerged in the country. Different types of mutual
funds catering to the needs of different types of investors have been set up in the country.
The increasing growth of the capital market has witnessed the mergence of foreign
institutional investors (FIIs) as significant players. Their sale and purchase decisions are
already having a significant impact on the market conditions.
Along with these new players, a set of new supporting institutions have also emerged on the
horizon such as the Discount and Finance House of India, Securities Trading Corporation of
India, Stock Holding Corporation of India, settlement and depository systems, etc.
Introduction of New Instruments
Along with new institutions, new instruments have emerged on the capital market. These
encompass both the domestic instruments and foreign instruments. Many new instruments of
finance have already been introduced in recent years. Still, the current intensity of the Indian
financial market reveals that there is a tremendous scope to deploy new financing
instruments connected to equity, debentures, bonds, add-on products and derivatives. This
may require appropriate changes in certain economic legislations and the will on the part of
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17. the Indian corporate enterprises to take risks and tune their decision-making to the investor
psychology and market preferences.
Changes in Rules and Regulations
Responding to the changes in the environment, the administrative framework has also
undergone a total overhaul. The earlier chains have been totally removed. The Controller of
Capital Issues has been done away with. The Indian capital market has been left free to find
its own depth and strength. However, it is a paradox of a free market economy that
whenever chains are removed effective watchdogs have to be employed. This latter function
has now been entrusted to the Securities and Exchange Board of India. The SEBI in turn has
been laying down guidelines to be followed by different players in the different segments of
the market.
Some Recent Initiatives
• Buy-back of shares by corporate has been permitted; this will enable the promoters
of Indian companies to consolidate their positions.
• Disclosure of end use of funds rose in public issue in annual statements; it will
impart transparency to the manner in which the funds raised from the public are
deployed. This will also impose greater accountability on companies.
• One-time waiver of capital gains tax for corporatisation of stock broking tickets; this
will result in speeding up the pace of professionalisation of stock broking operations,
which will benefit investors.
• Provision of nomination facility in share certificates; this will ease procedures for
transfer of shares in the names of the nominee in case of death of the shareholder.
In short, the capital market has witnessed metamorphic changes in recent past and is all set
to meet the varied needs of the changed liberalized economic environment.
About Indian Brokerage Industry
Indian brokerage industry dates back to 1850s, but started growing strongly in the 1990s
17

18. after the creation of the regulatory body, the Securities Exchange Board of India (SEBI)
and incorporation of NSE. But competition is intense as there are far too many brokers -
almost double the number of brokers in the US - competing for a much smaller market.
The market is extremely fragmented with the top 5 firms accounting for only 14.6% of the
turnover share during FY08.
The brokerage market is largely retail and the retail investors are
spread across the country (with majority from Mumbai). Online trading channels can play an
important part in catering to the regional spread and has indeed shown good growth (30.6%
CAGR in number of internet enabled brokerage firms, 71.1% CAGR in number of
customers and 49.7%CAGR in share of total traded value since 2003). However, retail
investors have shown an over whelming preference for non-delivery based trading (70.8% of
the total cash market turnover during FY08). Intra-day trading makes physical distribution
channel necessary
Because it offers high market data latency and proximity to trading advice of the brokers/
Other investors. Growth in the number of sub-broker network reflects this (CAGR of
46.1%from 150 in 1993 to 44,074 in 2008) as expansion of sub-brokerage network means
less capital outgo for the brokers.
High competition has resulted in a steady compression of brokerage
commissions over the years and intensely since 2008 when Reliance Money, one of the new
entrants with a massive physical distribution network, dropped it to extremely low levels.
For a relatively young market, commissions are lower than even in the advanced markets. In
order to improve profitability, top firms have been consciously trying to broaden their
portfolio of services. But this is likely not to pay high dividends over the short to medium
term due to the economic, competitive and regulatory headwinds against these service lines.
Overall, from here, the industry will likely traverse the following path:
• Likely recovery of trading turnover in FY10.
• Further consolidation of the market share of the top 100 brokers. Possible decline in
the number of brokers but increase in the number of sub-brokers.
• Rise in market share of Reliance Money but muted industry profitability in the short
And medium term.
• Gain in FII market share by few of the top domestic brokerages. Their success is
Likely to draw in other players into this segment. Technology is a key success enabler
For this client category and the overall electronification of the industry will progress
18

19. Rapidly over the next few years.
Globalization and the Indian capital market
With the gradual opening up of the Indian economy, increasing importance of foreign
portfolio investment in the Indian markets and drastic reduction in import tariffs that has
exposed Indian companies to foreign competition, Indian capital market is acquiring a global
image. Till recently, participants in the Indian capital market could largely afford to ignore
what happened in other parts of the world. Share prices largely behaved as if the rest of the
world just did not exist.
At present, in sharp contrast to recent past, Indian capital market responds to all types of
external developments, like US bond yields, the value of the peso or for that matter of any
other currency, the political situation in China, or new petrochemical capacity in South
Korea, etc.
In short, the Indian capital market is on threshold of a new era. Gradual globalization of the
market will mean four things, as follows:
»The market will be more sensitive to developments that take place abroad.
»There will be a power shift as domestic institutions are forced to compete with the FIIs who
control the floating stock and are in control of the GDR market.
»Structural issues will come to the fore with a plain message: reform or despair.
»The individual investor in his own interest will refrain from both primary and secondary
market; he will be better off investing in mutual fund.
1.2 OBJECTIVES OF THE STUDY
1] To study in detail about the various methodologies that are involved in making an IPO,
such as fixed price issues, book built issues.
19

20. 2] To study on various stages involved in the process of IPO such as issue pricing, issue
structuring, procedural requirements of an IPO etc.
3] To study about RELIANCE POWER IPO and reasons for its failure.
4] To study about COX&KING’S IPO and reasons for its success.
1.3 SCOPE OF THE STUDY
1] To make an initial public offer (IPO), the companies have to look into the various aspects
like what guidelines it has to follow, the procedure for coming to Public issue of shares for
the proposed objective.
2] Scope of this project is limited to the guidelines and procedures for coming to an IPO.
3] Scope is limited to mentioned companies which came for an IPO and their strengths and
weaknesses for succeeding in an IPO.
1.4 NEED FOR THE STUDY
1] Study about IPO helps to know about the various procedures, requirements and need for
the company for making an IPO.
2] The process made through the analysis of success and failure of various IPO’s helps to
know about the attitude of investors towards the issue made.
20

21. CHAPTER -2
LITERATURE REVIEW
21

22. 2.1 What are the decisions involved in making an IPO
The IPO decision depends on the following two stages the pre IPO stage and
the post IPO stage. The pre IPO stage relates to the timing of an IPO decision, while the post
IPO stage is about continuance or discontinuance of the listed status. Timing of an IPO is a
strategic, financial and merchant banking decision.
• The strategic decision is to determine whether listing fits into the company’s overall
strategy and if so, whether the company is mature enough for it.
• The financial decision to make is to decide whether a company needs the capital
proposed to be raised, how much is to be raised and how effectively it should be
deployed.
• The merchant banking decision is made to determine the appropriate structure,
pricing, timing and marketing strategy for the IPO.
2.2 What are the dimensions in decisions involved in making an IPO?
STATEGIC DIMENSION
Strategically speaking a company should go for an IPO only when it is mature enough for it.
This depends on the following points:
• Does the company need the IPO as a liquidity event for its existing investors? In
other words, are there no private exit options available so that the IPO can be pushed
further into the future?
• Has the company matured enough to unlock the value?
• Is the company’s business model retail-oriented with a strong brand presence so as to
identify with the retail investor?
22

23. • Is the company’s visibility in the market is sufficient enough for investors to perceive
its business model to the full extent and unlock value for its share holders through the
IPO?
Is the company confident of strong financial growth in the future so as to sustain the
pressure of constant market validation after?
The Financial Dimension
The next dimension of the IPO decision is a financial one. In capital intensive
industries and large industries such as heavy engineering, automobiles, infrastructure and
some other industries the business model is so large that going public could become
inevitable in order to maintain balance in the capital structure. They would require IPO and
some multiple rounds of offers after IPO to keep financing their growth and consolidation.
Therefore, in such cases, IPO and public offers are more of financing decisions than
strategic. The same is true of certain start-up businesses that need to look at an IPO more as
a source of finance than as a strategic move.
The second financial aspect relating to the IPO decision is to evaluate if unlocking value
through an IPO is the need of the hour or whether other options are available. Strategic sale
of equity happens through the private window that realizes better value for the company than
an IPO since private investors offer valuations significantly higher than what the company
gets from an IPO.
The third aspect of the financial decision is to evaluate how much capital is proposed to be
raised through the IPO and its deployment. Generally, IPO’s that have well laid out
investment plans sell better than those that do not have convincing application for the funds.
Investors need to be shown an investment avenue in the company that can generate the
expected return on their funds. Sometimes, the require of funds for the company could be
too large to be raised through an IPO without causing too much dilution of promoters stakes.
At such times, the company has to formulate an ideal issue structure in consultation with the
merchant banker and prune down the size of the issue if necessary.
The Merchant Banking Dimension
23

24. Lastly, the IPO is also driven by merchant banking considerations. Merchant
bankers take a call on the IPO proposal based on the business plan and financial position of
the company, expected future performance, prevailing conditions in the primary market,
expected issue pricing, size of the offer and post issue capital structure. The key drivers for
the merchant banker are the market conditions, own placement strength and the main selling
points in the issue.
On the other hand, if the promoters are bringing in additional contribution in the
issue at the same issue price, it adds to the marketability of the issue. Usually in strong
market conditions, merchant bankers tend to be aggressive and push companies to go public.
The logic put forward in such times is that when there is money for the taking at good
pricing, issuers go ahead and make use of best opportunity even if they have no use of for
the funds right away.
In depressed markets, it would be difficult for a company to plan an IPO and get a
good pricing and response for the issue. It would even difficult in such a market to find a
merchant banker who would be confident of selling the issue comfortably. Therefore, most
companies would defer their IPO plans even if they have matured enough and have a
requirement for funds.
To summarize and conclude the decision of IPO the following points are prominent.
• Timing is an important criterion in the IPO decision.
• The IPO decision should be taken considering the strategic, financial and merchant
banking considerations.
• For certain projects and business, going public is an imperative. In such cases, the
IPO should be structured to deliver the best results.
2.3 Key Concepts in IPO
• IPO- Initial Public Offer is the first public issue of fresh equity or convertibles by a
company due to which its share gets listed on the stock exchange.
• Public Issue - An invitation by a company to public to subscribe to the securities
offered through a prospectus.
24

25. • Offer for sale- An offer of securities by the existing share holders to the public for
subscription.
• Rights Issue - An issue of cap ital under sub-section (1) of sec 81 of the companies
Act, 1956 to be offered to the existing shareholders of the company through a letter
of offer.
• Preferential Allotment- An issue of capital made by a body corporate in pursuance
of a resolution passed under sub-sec (1A) of sec 81 of the companies Act, 1956.
• Private Placement- An offer made to select private investors known to the issuer
through a private arrangement to the exclusion of the general public.
• Lock-in- A specified time period during which shares are cannot be sold, transferred
and pledged in any way.
• QIBs- Qualified Institutional Buyers shall mean public financial institutions as
defined under sec 4A of companies Act, scheduled commercial banks, mutual funds,
foreign institutional investors registered with SEBI, venture capital funds and
insurance companies registered with SEBI, provident funds and pension funds with a
minimum corpus of Rs. 25 crore and state industrial development corps.
PROCEDURE, PRICING, STRUCTURING AND REQUIREMENTS OF
AN IPO
PROCEDURE FOR MAKING AN ISSUE
For making an IPO the following procedure has to be followed
1] Appointment of Lead Manager or Merchant Banker.
2] Issue pricing
3] Issue Structuring
4] Other requirements that are needed.
1] Appointment of Merchant Banker
25

26. A] Merchant bankers with valid registration certificates from SEBI have been provided with
statutory exclusivity in managing public offers such as IPO, rights and secondary issues of
equity as well as issues of debt securities.
B] Whenever there is an offer of securities to the public, the involvement of a merchant
banker is mandatory, subject to the minor exceptions. From a business perspective too, issue
management forms the biggest chunk of revenue for investment bankers in those years when
the primary market for public flotation is very vibrant.
C] In the overall process of issue management, the merchant banker plays a variety of roles
as an expert advisor to the management of the company, as an auditor who performs due
diligence on the company, as an event manager and coordinator to ensure timely completion
of the issue, as a watch dog for statutory compliance and as a person in fiduciary capacity
for the protection of the interests of investor.
2] Issue Pricing
The Securities and Exchange Board of India (SEBI) introduced
free pricing of shares for public offerings in 1992. As per the current guide lines (Disclosure
and Investor Protection guide lines 2000), every company either unlisted or listed, which is
eligible to make a public issue can freely price its shares.
1] The first step in formulating an issue structure is pricing of the issue. This is one
important thing done by the merchant banker in public offering. Appropriate price can not
only ensure success of the issue but provide good returns to the prospective investors as
well. Therefore, proper issue pricing can be a win-win situation for the company and
investor as well.
2] 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.
3] Investment banks, 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,
26

27. 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.
4] Pricing issue is done keeping in mind the qualitative features, and by using selective
multiples as benchmarks than through the conventional approach of the discounted cash
flow method. The usual parameters used are the Price to Earning Ratio and Price to Book
value Ratio. In addition to the above, the following points have to be kept in mind:
• Projected earnings of the company cannot be used as a justification for the issue
price in the offer document.
• The accounting ratios should be calculated after giving effect to the consequent
increase in capital on account of compulsory conversions outstanding, as well to
subscribe for additional capital shall be exercised.
• Comparison of all the accounting ratios of the issuer company as mentioned
3] Issue Structuring
The issue structure refers to the following points
• The face value of the share, the premium thereon and the final price. In book built
issues, the final price is not done until after the bidding is over, but a floor price is
determined.
• The minimum amount of subscription per applicant and the maximum.
• The terms of the issue with regard to payment of the offer price and eligibility
criteria for applicants.
• Firm allotments if any and any other details thereof, as per applicable DIP guide
lines.
• Net public offer.
• Underwriting, either mandatory or discretionary.
• Cost parameters for the issue and an acceptable issue budget.
The issue size and structure is determined as follows:
• The issue size = ‘promoters’ quota+ firm allotments + net public offer.
27

28. • Public offer = firm allotments + net public offer.
Net public offer = issue size – promoters quota – firm allotment
4] Other important requirements
A] Firm Allotments and Reservations
These are novel concepts that help in pre-marketing of a sizeable part of issue thereby
bringing down the risk in the issue. In a firm allotment, a particular investor or category of
them are approached in advance by the lead manager or the issuer of the company to
subscribe the issue on firm basis.
The provisions on firm allotments and reservations in IPO are as given below:
• The net public offer for issuing companies shall not be less than 25% of the post-
issue capital, except in case of IT and infrastructure companies it can be 10%.
• The issuer can make reservations on competitive basis or on firm basis for allotments
to the permanent employees, shareholders of group companies, mutual funds, foreign
institutional investors and banks.
• All firm allotments which have not subscribed after filling the prospectus shall be
brought in before opening the issue and treated as preferential one.
• All reserved categories can be adjusted with the net public offer as well.
B] Differential Pricing and Price Band
• Any unlisted company making an IPO for equity shares or convertibles may issue
such securities to applicants in the firm allotment category at a price different from
the price at which net offer to the public is made provided that the price at which the
security is offered to the applicant is higher than the price to the public issue made.
• A justification has to be furnished in the offer document on the price differential for
the firm allotment category.
28

29. • The issuer company can mention a price band of 20 %( the cap should not be more
than the floor by 20%) in the offer documents filed with SEBI and the actual price
can be determined at a later date before filing the offer document with the ROC.
C] Methodologies for Making Issues
Under the DIP guide lines, it is possible to make an IPO in the form of a
100% retail issue, a book built issue or as a bought out deal either for listing on the main
stock exchanges or on the OTC exchange. The different methods are explained as follows:
100% Retail (Fixed Price) Issues
Under this method, the issue is made by offering the same directly to
the investors from the public that could include the retail small investors as well as other
categories of investors. Using this method obviates the need to sell the issue initially to the
wholesale investors and them in turn marketing it to retail investors. The main advantage of
this system is that it is possible to get a wide dispersal of shareholding among the retail
investors that would add depth to the trading in the stock after listing. Secondly, it does not
require approaching QIB investors to subscribe to the issue, which could sometimes prove to
be difficult, as these investors need to be thoroughly convinced.
On the other hand, small investors can be persuaded easily if a reasonable short-term market
opportunity is visible in the issue. Due to apparent inflexibility in a fixed price issue, it has a
lot of uncertainty attached to it in difficult market conditions. Therefore, after the
introduction of the book built system of making issues most companies prefer to use that
route.
1] Mandatory Conditions for a 100% Retail Issue
A company can make an IPO of pure equity or convertibles only if it meets all of the
following conditions.
• The company has net tangible assets of at least Rs.3 crore in each of the preceding 3
full years, of which not more than 50% of the net tangible assets in mandatory assets.
• The company has a track record of having profits distributable as dividends as per
the provisions of section 205 of the companies Act out of its normal business activity
29

30. without reckoning extra-ordinary profits, for at least three out of the immediately
preceding five years.
• The company has a net worth of at least Rs one crore in each of the preceding three 3
full financial years.
• The aggregate size of the proposed issue and all previous issues made in the same
financial year by the company does not exceed five times its pre-issue net worth as
per the audited balance sheet of the last financial year.
• In case the company has changed its name within the last one year, at least 50% of
the revenue for the preceding 12 months is earned by the company from the activity
suggested by the new name.
Additional Conditions
An unlisted company not complying with any of the above conditions may make an IPO of
equity shares or convertibles only if it meets following conditions.
a. The project has at least 15% participation by financial institutions of which at
least 10%comes from the appraisers. In addition to this at least 10% of the
issue size is allotted to QIBs, failing which the full subscription monies shall
be refunded.
b. The minimum post-issue nominal value of equity capital of the company shall
be RS. 10 crore.
The mandatory conditions ensure that the company has a track record of at least 3 years with
minimum net worth and profit record. This would ensure that paper companies couldn’t go
public just after incorporation making tall claims of future business potential.
2].Promoters Contribution
SEBI has also introduced the concept of minimum promoters’ contribution to be present in
companies going public so that they become interested parties in preserving the interests of
the shareholders. In terms of DIP guide lines, following are the main points that apply to
promoters’ contribution in case of IPO’s:
• In an IPO the promoters’ contribution shall not be less than 20% of the post-
issue capital.
• The 20% in case of IPO, shares acquired by the promoter with in the
preceding one year for a price less than the IPO price shall be ignored.
30

31. • The minimum promoters’ contribution criterion does not apply to companies
with no promoters.
Promoters’ contribution where required to be brought in the issue shall be brought in one
day before the issue opens.
Book Built Issues
A book built mechanism allows the issuer company to make a public issue through the
process of ‘price discovery’ rather than through a price that is fixed beforehand. This
mechanism, to a large extent, overcomes the deficiency in the fixed price mechanism of over
pricing or under-pricing an issue. It however operates on the basis of a ‘floor price’, which is
fixed by the company in consultation with the merchant banker.
Companies now can make an issue to the extent of 100% or 75% of the net public offer as
they may decide, through the book built route. If the 75% route is followed, the price
applicable to the balance 25% under the retail route would be the issue price under the book
built portion. And under the 100% route, the entire issue happens through one bidding
process applicable to both categories investors.
Applicable Provisions for a Book-built Issue
In a book-built issue, reservation and firm allotment may be made only in respect of
permanent employees of the issuer company/promoting company and share holders of the
promoting companies to the extent they permitted in the DIP guide lines.
The other allocation norms for a 100% and 75% book-built issue are as listed below:
• Not more than 50% of the net public offer shall be allocated to QIBs.
• Not less than 25% of the net public offer shall be allocated to non-institutional
bidders.
• Not less than 25% issue shall be available for allocation to retail investors.
Lock-in of Shares
Lock-in of promoters’ shares and other share capital is also a novel concept brought in for
the purpose of preventing such shareholders in making unfair gains and exits from the
company. The provisions are as follows:
31

32. • The minimum promoters’ contribution of 20% shall be locked-in for 3 yrs from the
allotment date.
• Excess contribution by the promoters’ in an issue over what is required is shall be
lock-in for one year.
• Firm allotments made in any issue shall be locked in for one year. The amount
brought in by promoters to make good under-subscribed portion of firm allotments
would also be locked in for 3 years.
• The entire pre-issue capital in case of an IPO shall be locked in for one year.
Similarly, shares held by venture capitalists and shares held for more than one year
preceding the IPO and are being offered for sale in the IPO are excluded from lock-in
provisions.
D] Other Important Issue Requirements
• All new issues shall be in dematerialized form can also be made through online
interface following the necessary guide lines.
• The minimum application size shall be worth Rs. 2000. The maximum size of an
application can be equal to the net public offer.
• In an offer for sale, the entire subscription amount shall be brought in at the time of
application.
• If there are calls on shares, they should be completed within 12 months of the issue.
• Over-subscription of a maximum of 10% of the net offer to public can be retained.
• Buy back arrangements can be made with a minimum period of 6 months and for a
maximum of 1000 shares per allot tee.
• Issues should be opened within 365 days from the date of SEBI approval or after 21
days of filing with SEBI.
• IPO shall be kept open for a min of 3 days and max of 10 working days.
• Every company which has been subscribed by the investors and completed
Issue successfully should get listed within 15days after the closure of the issue.
1] The Stock Exchange Listing Agreement
32

33. Compliance with the stock exchange’s listing guide lines under its listing agreement is
also important in order to be able to seek listing of shares pursuant to an IPO.
The conditions for listing shares by an unlisted company pursuant to an IPO on the BSE
are listed below:
1. New companies can be listed on the exchange, if their issued and subscribed
equity capital after the public issue is equal to or more than Rs. 10 crore. In
addition to this, the company should have a post-issue net worth of Rs.20 crore.
2. For new companies in high technology sectors, the following criteria will be
applicable.
c. The total income/sales from the main activity should not be less than 75% of
the total income during the two preceding years.
d. The minimum post-issue paid-up capital should be Rs.5 crore.
e. The minimum market capitalization should be Rs.50 cores.
f. Post-issue net worth of Rs.20 crore.
2] The conditions for listing on the NSE are given below:
1. New companies can be listed on the exchange, if issued and subscribed capital after the
issue is equal to or more than Rs. 10 crore and post-issue net worth of Rs. 20 crore.
2. For new companies in knowledge based industries, the applicable capital criterion is Rs. 5
crore with a minimum market capitalization of Rs. 50 crore. The total income/sales should
not be less than 75% of the total income during the immediately two preceding years.
3. The applicant company should have a track record of three years of existence. If the
applicant is promoted by another company, that company should have the minimum
stipulated existence.
4. The application for listing in the case of an IPO shall be made within 6 months of the
closure of the issue.
5. The project should have been appraised by specified agencies such as the all India
financial institutions.
Role of Underwriters
IPO’s generally involve one or more investment banks as "underwriters."
The company offering its shares, called the "issuer," enters a contract with a lead underwriter
33

34. to sell its shares to the public. The underwriter then approaches investors with offers to sell
these shares.
The sale 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
• Self distribution of stock
In the business of initial public offering, the underwriting contract is the
contract between the underwriter and the issuer of the common stock. The following types of
underwriting contracts are most common
A] In the firm commitment contract the underwriter guarantees the sale of the issued stock at
the agreed-upon price. For the issuer, it is the safest but the most expensive type of the
contracts, since the underwriter takes the risk of sale.
b] In the best efforts contract the underwriter agrees to sell as many shares as possible at the
agreed-upon price.
c] Under the all-or-none contract the underwriter agrees either to sell the entire offering or to
cancel the deal.
d] Stand-by underwriting, also known as strict underwriting or old-fashioned underwriting
is a form of stock insurance: the issuer contracts the underwriter for the latter to purchase the
shares the issuer failed to sell under stockholders subscription and applications.
E] Procedural Aspects of an Issue
1. The first task is to hold a Board Meeting to consider the proposal for a public issue,
authorize the managing director to do all tasks relating to this issue and including
expenses for the issue.
34

35. 2. On the appointed day, the EGM is held and the shareholders pass a special resolution
under section 81(1A) of the companies Act authorizing the company to make public
issue.
3. Before embarking on an IPO, the first task is to identify the good merchant banker
who can be appointed as lead manager for the issue. The details of the company’s
project or fund raising plan are discussed with the merchant banker. After the
discussion the company finalizes the appointment and enters into a memorandum of
understanding with the lead manager.
4. The LM immediately on being appointed starts a due diligence on the company.
Usually they go through the all documents and certificates and every relevant
information for the issue.
5. In parallel, the LM starts preparation of the draft prospectus or offer document. All
disclosure requirements and DIP guide lines have to be filled in.
6. The LM advises the company in the appointments of other intermediaries for the
issue. These are the registrar to the issue, bankers to the issue, the printer and
advertising agency. The registrar and bankers have to be registered with SEBI.
7. The LM also draws up the issue budget estimated to be spent on the issue. The main
components of these are fees for LM, underwriters, registrar and banker, brokerage,
postage, stationery, issue marketing expenses and statutory costs.
8. The draft prospectus is finalized by the LM in all respects in consultation with the
management and placed before the board of directors for the approval so that it can
be issued for filing. The draft prospectus has to be accompanied by the memorandum
of understanding signed by the LM with the company.
9. Simultaneously, the company has to make listing applications to all stock exchanges
where the shares are proposed to be listed accompanied by at least 10 copies of the
draft prospectus. And that prospectus has to be made available to the public by the
LM. The LM should also obtain and furnish to SEBI, an in-principle listing approval
of the SEBI within 15 days of filing the draft offer documents with them.
10. The company has to enter into a tripartite agreement with the registrar and all
depositories-(presently NSDL or CDSL) for offering the facility of offering the
shares on dematerialized mode. Investors have to be given the facility to receive
allotments through any one of the depositories or in physical mode according to
option.
35

36. 11. Within 21 days, SEBI would come out with their observations on the prospectus. The
SEBI would also mention any changes that are to be changed in the prospectus. The
LM has to file a certificate with SEBI that all amendments and suggestions made by
the SEBI have been incorporated in the offer document.
12. Once the draft prospectus is ready in its final form, a board meet has to be held to
approve the filing of the same with ROC after being signed by all the directors.
13. This filing should be accompanied by all the material contracts pertaining to the issue
and the company and all other documents listed in the prospectus.
14. The marketing of the issue is usually co-coordinated by the LM with the advertising
agency.
15. Advertisements are regulated by DIP guidelines and the rules of the stock exchange.
16. The mandatory collection centers are finalized as per the SEBI guidelines in
consultation with the bankers and the LM.
17. The LM and the printer finalize the dispatch schedule to all SE, SEBI, collection
centers, investor associations, brokers and underwriters.
18. The marketing should be completed one week before the opening of the issue.
F] Post-Issue Procedures
1. In issues wherein there is more than one LM, it is usual to entrust the entire post-
issue responsibility to one LM in inter-se allocation.
2. There are two reports that are required to be furnished to SEBI by the post-issue LM
in the case of an IPO in the retail route in the prescribed form.
3. The main task of the post-issue LM is to coordinate the process of collection of
subscription figures from the bankers to the issue, processing of applications by the
registrar, dispatch of allotment letters and refund orders to all applicants with in time.
4. The issue is to be closed on the earliest closing date; the LM should ensure that issue
is fully subscribed before announcing closure.
5. In the case of devolved issues, the LM shall ensure that the underwriters honor their
commitments within 60 days from the date of closure of issue.
6. The LM has to ensure that all issue proceeds are kept in separate bank accounts as
provided in the companies Act and the funds are released to the company only after
obtaining listing approvals from the respective stock exchanges.
36

37. 7. The LM has to release an advertisement announcing the closure of the issue on the
last day.
8. The responsibility of finalizing the basis of allotment in a fair and proper manner lies
with the executive director of the designated stock exchange along with the post-
issue LM and the registrar.
9. The post issue LM shall ensure that the demat credit and refund orders to the allot
tees is completed within two working days after the basis of allotment is done.
10. The LM is responsible for following duties.
a. Refund of subscription money to all non-allot tees.
b. Refund of excess application money to all.
c. Attending to all investors grievances.
CHAPTER -3
37

38. Company profile
Introduction
Indiabulls is India’s leading Financial, Real Estate and Power Company with a wide
presence throughout India. They ensure convenience and reliability in all their products and
services. Indiabulls has over 640 branches all over India. The customers of Indiabulls are
more than 4,50,000 which covers from a wide range of financial services and products from
securities, derivatives trading, depositary services, research & advisory services, consumer
secured & unsecured credit, loan against shares and mortgage & housing finance. The
company employs around 4000 Relationship managers who help the clients to satisfy their
customized financial goals. Indiabulls entered the Real Estate business in the year 2005 with
its group of companies. Large scale projects worth several hundred million dollars are
evaluated by them.
Indiabulls Financial Services Ltd is listed on the National Stock Exchange (NSE),
Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The market
38

39. capitalization of Indiabulls is around USD 2500 million (29th
December, 2006). Consolidated
net worth of the group is around USD 700 million. Indiabulls and its group companies have
attracted USD 500 million of equity capital in Foreign Direct Investment (FDI) since March
2000. Some of the large shareholders of Indiabulls are the largest financial institutions of the
world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon
Capital.
Growth of Indiabulls
Year 2000-01:
One of India’s first trading platforms was set up by Indiabulls Financial Services Ltd. with
the development of an in-house team.
Year 2001-03:
The service offered by Indiabulls was increased to include Equity, F&O, Wholesale Debt,
Mutual fund, IPO Financing/Distribution and Equity Research.
Year 2003-04:
In this particular year Indiabulls ventured into Distribution and Commodities Trading
business.
Year 2004-05:
• This was one of the most important years in the history of Indiabulls. In this year:
• Indiabulls came out with its initial public offer (IPO) in September 2004.
• Indiabulls started its Consumer Finance business.
• Indiabulls entered the Indian Real Estate market and became the first company to
bring FDI in Indian Real Estate.
• Indiabulls won bids for landmark properties in Mumbai.
Year 2005-06:
In this year the company acquired over 115 acres of land in Sonepat for residential
home site development. The world renowned investment banks like Merrill Lynch and
Goldman Sachs increased their shareholding in Indiabulls. It also became a market leader in
securities brokerage industry, with around 31% share in Online Trading. The world’s largest
39

40. hedge fund, Farallon Capital and its affiliates committed Rs. 2000 million for Indiabulls
subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance Ltd. In the
same year, the Steel Tycoon Mr. L N Mittal promoted LNM India Internet venture Ltd.
acquired 8.2% stake in Indiabulls Credit Services Ltd.
Year 2006-07:
In this year, Indiabulls Financial Services Ltd. was included in the prestigious
Morgan Stanley Capital International Index. Indiabulls Financial Services Ltd. was benefited
with the Farallon Capital agreeing to invest Rs. 6,440 million in it. The company also
received an “in principle approval” from Government of India for development of multi
product SEZ in the state of Maharashtra. Indiabulls Financial Services Ltd acquired 100% of
the equity share capital of Noble Realtors Pvt. Ltd. Noble Realtors is a Company engaged in
the business of construction and development of real estate projects. Indiabulls Real Estate
Business was demerged to become a separate entity called Indiabulls Real Estate Ltd. The
Board of Indiabulls Financial Services Ltd., Resolved to Amalgamate Indiabulls Credit
Services Ltd and demerge Indiabulls Securities Limited.
Year 2008-09:
Several developments across its group companies have propelled indiabulls
forward and are expected to continue to power the rise of this conglomerate. Indiabulls
financial services limited has recently signed a joint venture agreement with sogecap, the
insurance arm of Society General for its upcoming life insurance venture. At the same time
it has also signed a Memorandum of understanding with MMTC.
On the asset management front, the company has received formal approval
uhby7hbfrom SEBI and is expected to shortly launch its first NFO.Indiabulls enter in to
Public issue for his Indiabulls power Ltd.
Promoters for Indiabulls
Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal are the promoters of Indiabulls
Financial Services Limited. While Sameer Gehlaut will have a 23.0% stake in the company
post the IPO, Rajiv Rattan and Saurabh Mittal will have a post issue holding of 11.5% and
40

41. 10.1% respectively. All the three promoters of the company are engineering graduates while
Saurabh Mittal is a management graduate as well.
ABOUT THE COMPANY
INDIA BULLS
India bulls Group is one of India’s top Business houses with businesses spread over
Real Estate, Infrastructure, Financial Services, Securities and Power sectors. The group
companies are listed on important Indian and Overseas markets. India bulls has been
conferred the status of a “Business Super brand” by The Brand Council, Super brands India.
India bulls Financial Service
India bulls Financial Services is an integrated financial services powerhouse
providing Consumer Finance, Housing Finance, Commercial Loans, Life Insurance,
Asset Management and Advisory services. India bulls Financial Services Ltd is
amongst 68 companies constituting MSCI - Morgan Stanley India Index. India bulls
Financial is also part of CLSA’s model portfolio of 30 Best Companies in Asia. India
bulls Financial Services signed a joint venture agreement with Toecap, the insurance
arm of Society General for its upcoming life insurance venture. India bulls Financial
Services in partnership with MMTC Limited, the largest commodity trading
company in India, is setting up India’s 4th Multi-Commodities Exchange.
India bulls Real Estate Limited
India bulls Real Estate Limited is India’s third largest property company with
development projects spread across residential projects, commercial offices, hotels, malls,
and Special Economic Zones (SEZs) infrastructure development. India bulls Real Estate
partnered with Carillon Capital Management LLC of USA to bring the first FDI into real
estate. India bulls Real Estate is transforming 14 million sq ft in 16 cities into premium
quality, high-end commercial, residential and retail spaces. India bulls Real Estate has
diversified significantly in the following business verticals within the real estate space: Real
Estate Development, Project Advisory & Facilities Management: Residential, Commercial
(Office and Malls) and SEZ Development. Power: Thermal and Hydro Power Generation.
India bulls Securities Limited
41

42. Indiabulls Securities Limited is India’s leading capital markets company with all-
India Presence and an extensive client base. India bulls Securities possesses state of the art
trading platform, best broking practices and is the pioneer in trading product innovations.
Power India bulls, in-house trading platform, is one of the fastest and most efficient trading
platforms in the country. India bulls Securities Limited is the first and only brokerage house
to be assigned the highest rating BQ – 1 by CRISIL.
The company through various types of brokerage accounts provides product and
services related to purchase and sale of securities listed in NSE and BSE. It also provides
depository services, equity research services, mutual fund, and IPO distribution to its clients.
The company provides these services through on-line and off-line distribution channel.
The Team:
Indiabulls Securities Ltd, main strength lies in its formidable team. This team
comprising highly qualified and experienced personnel has been responsible for the overall
management of the company and has provided direction in diverse areas of business
strategy, operating management, regulatory reporting, human resources development and
product development.
Indiabulls Group entities in India
• Indiabulls Capital Services Ltd.
• Indiabulls Commodities Pvt. Ltd.
• Indiabulls Credit Services Ltd.
• Indiabulls Finance Co. Pvt. Ltd
• Indiabulls Housing Finance Ltd.
• Indiabulls Insurance Advisors Pvt. Ltd.
• Indiabulls Resources Ltd.
• Indiabulls Securities Ltd.
• Indiabulls Power Ltd.
42

43. Senior Vice President
Yuv Raj Singh
Regional Manager
Dashmeet Singh
Branch Manager
Senior Sales Manager
Sujeet Roy Chowdary
Sujeet Roy Chowdary
Support System
Vishal
Sales Function
Subrot
RM/SRM
Satish Kumar
S
ARM
Raja
Local Compliance
Officer
Chary
Back Office
Executive
Ifran Khan
Dealer
Badri Nath
43

44. Mission statement: To establish a base of 1 million satisfied customers by 2010. They will
create this by being a responsible and trustworthy partner
Corporate action: An Approach to Business that reflects Responsibility, Transparency and
Ethical Behavior. Respect for Employees, Clients & Stakeholder groups
Indiabulls financial service offers:
1] SME finance
2] Mortgage loans
3] Commercial vehicle loans
4] Farm equipment loans
5] Commercial credit loans
6] Loan against shares and
7] Third part distribution of insurance products.
Broking: Equity, Derivatives, Commodities, Currency Derivatives.
Distribution: Mutual funds, IPO’s, Home loans, Insurance.
Companies History in India
In 1999, three IIT-Delhi alumni Sameer Gehlaut, Rajiv Rattan and Saurabh
Mittal acquired Orbis; a Delhi based stock broking company. Weng entrepreneur Sameer
Gehlaut established Indiabulls in 2000, after acquiring orbis Securities, a stock brokerage
company in Delhi. The group started its operations from a small office near Hauz Khas bus
44

45. terminal in Delhi. The office had a tin roof and two computers. The idea of leveraging
technology for trading stocks led to the creation of India bulls Incorporated on 10th January
2000, it was converted into a public limited company on 27th February 2004.
The company had achieved the distinction of becoming only the second
brokerage firm in India to be granted this consent. The challenges facing it were immense
not least of all the mind set of investors who were called to make the big leap from
traditional stock trading to a completely online interface. Having overcome this resistance,
the company later expanded its service portfolio to include equity, F&O, wholesale debt,
mutual fund distribution and equity research.
In 2003/04, India bulls ventured into insurance distribution and commodity trading. It
successfully floated its IPO in September 2004 and in the same year entered the consumer
finance segment. Real estate, the new sunrise industry, was the next frontier for India bulls.
In 2004/05, it entered this sector. But it wasn’t just real estate that was booming.
Opportunities were opening up in retail and infrastructure as well. To cement its position in
the Indian business and industry firmament,
India bulls acquired Pyramid Retail In 2007 and marked its presence in the power sector by
launching India bulls Power
Recent Developments
Several developments across its group companies have propelled India bulls forward and are
expected to continue to power the rise of this conglomerate.
India bulls Financial Services Limited has recently signed a joint venture agreement with
Toecap, the insurance arm of Society General (Soigné) for its upcoming life insurance
venture.
At the same time it has also signed a Memorandum of Understanding with MMTC, the
largest commodity trading house in India, to establish a Commodities Exchange with 26%
Ownership held by MMTC.
On the asset management front, the company has received formal approval from SEBI and is
expected to shortly launch its first NFO.
45

46. Board of directors
Following Is the List of Members as On November -4, 2009
Mr. Samper Gelato Chairman & CEO
Gagman Bang Executive Director
Rajiv Rattan CEO
Shams her Singh Director
Aishwarya Katoch Director
Karan Singh Director
Prem Prakash Mird Director
46

47. Saurabh K Mittal Executive Director
CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
47

48. DATA ANALYSIS AND INTERPRETATION OF TWO COMPANIES
IPO’S
1] RELIANCE POWER IPO
2] COX&KING’S IPO
4.1COMPANY – RELIANCE POWER LIMITED
COMPANY PROFILE
Reliance Power Limited is under the Anil Ambani Group and it
is involved in the business of developing large and medium size power projects. The
company was incorporated in January 1995 as Bawana Power Private Limited and changed
its name to Reliance Delhi Power Private Limited in February 1995. Later, it changed its
name to Reliance EGen Private Limited in January 2004, to Reliance Energy Generation
Limited in March 2004, and to Reliance Power Limited in July 2007.
Reliance Power
Limited has plans developing around thirteen large and medium sized power projects. The
48

49. projects that are being developed by Reliance Power Limited are located in southern India,
western India, north- eastern India and northern India. The total installed power generation
capacity of all the thirteen power projects would be around 28,200 MW.
A] Reliance Power will have a diversified project portfolio in terms of geography, fuel mix
and technology.
B] Along with its subsidiaries, it is presently developing 13 medium and large-sized power
projects with a combined planned installed capacity of 33,480 MW.
C] Nine of the proposed thirteen projects are coal-fired or gas-based and two of those have
fuel security; the rest are yet to be finalized for such huge capacity, fuel linkage is of
paramount importance. It is presently dealing with Mundra, Sesan and Krishna patnam
power projects. Total project outlay is 1, 12,127 crores and post IPO net worth of 13,707
crores. The company website identifies project sites broadly to be located in western India
(12,220 MW), northern India (9,080 MW) and northeastern India (4,220 MW) and southern
India (4,000 MW). They include six coal-fired projects (14,620 MW) to be fueled by
reserves from captive mines and supplies from India and abroad, two gas-fired projects
(10,280 MW) to be fueled primarily by reserves from the Krishna Godavari basin (the "KG
Basin") off the east coast of India, and four hydroelectric projects (3,300 MW), three of
them in Arunachal Pradesh and one in Uttarakhand.
Projects under Development
• Rosa stage -2
• Butubori power project
• Sesan UMPP
• Krishnapatnam UMPP
• Tilaiya UMPP
• Chithrangi Power Project
• Gas Based Power Project
• TATO HEPP
• SIYOM HEPP
• Urthing Soba HEPP
• Other Hydro Electric Power Projects
49

50. • Kalai-2 HEPP
• Amulin HEPP
• Emini HEPP
• Mithundan HEPP
Project going on all over India
50

51. CHAIRMAN'S PROFILE
Anil D. Ambani son of LATE.SHRI Dhirubhai Ambani Regarded as one of the foremost
corporate leaders of contemporary India, Shri Anil D Ambani, 48, is the chairman of all
listed companies of the Reliance ADA Group, namely, Reliance Communications, Reliance
Capital, Reliance Energy and Reliance Natural Resources limited.
He is also Chairman of the Board of Governors of Dhirubhai Ambani Institute of
Information and Communication Technology, Gandhi Nagar, Gujarat.
Till recently, he also held the post of Vice Chairman and Managing Director of Reliance
Industries Limited (RIL), India’s largest private sector enterprise.
Anil D Ambani joined Reliance in 1983 as Co-Chief Executive Officer, and was centrally
involved in every aspect of the company’s management over the next 22 years.
He is credited with having pioneered a number of path-breaking financial innovations in the
Indian capital markets. He spearheaded the country’s first forays into the overseas capital
51

52. markets with international public offerings of global depositary receipts, convertibles and
bonds. Starting in 1991, he directed Reliance Industries in its efforts to raise over US$ 2
billion.
ABOUT THE ISSUE
Anil Ambani- owned Reliance Power Ltd’s mega initial public offer
(IPO) was opened for subscription on 15th January 2008 to raise Rs 11,500 crore. The
company proposed to issue 26 crore equity shares of Rs. 10 each, including
promoters’ contribution of 3.2 crore shares allotted at the IPO price. The balance 22.8 crore
equity shares constituted the net issue to the public. The price band for the book building
was Rs 405 to Rs 450 for every fully paid up share of Rs 10 each. The issue was managed by
UBS, ABN AMR, JPMorgan, Deutsche Bank, Enam Securities, ICICI Securities, JM
Financial, and Kotak Mahindra Capital. Macquarie and SBI Capital Markets are co-
managers. This was the largest IPO ever.
Reliance Power IPO Analysis
Price Band: Rs. 405 - 450 per share
Issue opened between: January 15 - 18, 2008
Book Running Lead Managers:
52

53. Kotak,
UBS,
Enamsecurities
To List on: NSE and BSE
Market Cap post-listing: Rs. 1017 billion or $25.7 billion (based on the cap price)
With the high promoter holding of around 90% post-listing is a positive,
it has been viewed negatively from the point of view of minority shareholders, since the
latter will enter the company @ Rs450 per share vis-à-vis promoters average cost of Rs16.92
per share.
Given the long gestation period of projects, which are likely to get
commissioned from FY10 onwards, we have considered non-earnings related valuation
parameters. The valuation of the IPO in terms of price/book (7.4x FY08E) appears
expensive NTPC (2.8x) and Tata Power (4.5x).
The issue appears expensive, also on the basis of asset valuation in FY13. It
is only on the basis of FY17 estimates, that the issue looks attractive. The aggression and
track record of the promoter group in shareholder wealth creation in all its
businesses including telecommunications, power distribution, financial services and
entertainment is likely to have a positive rub-off effect on this IPO as well.
BOARD OF DIRECTORS:
NAME DESIGNATION
ANIL DHIRUBHAI AMBANI Chairman/Chairperson
S.L RAO Director
YOGENDER NARAIN Director
K.H.MANKAD Whole time Director
J.L.BALAJI Director
V.K.CHATURVEDI Director
53

54. SHAREHOLDING PATTERN OF RELIANCE POWER
Holder's Name No of Shares % Share Holding
Promoters 2032000000 84.78%
General Public 189394359 7.90%
ForeignInstitutions 89934206 3.75%
Other Companies 37277971 1.56%
Financial Institutions 36956145 1.54%
Banks and Mutual Funds 7953273 0.33%
Foreign NRI 3284046 0.14%
TOTAL 100%
SUBSCRIPTION DETAILS
Reliance Power Initial Public Offering has closed with 73 times
overbooking as against the released shares on January 18 breaking over all records in the
Indian stock history as bourses informed media.
The retail investor’s quota was subscribed by 15 times. Anil Ambani backed
Reliance Power Ltd has raised nearby $180 billion (Rs.7, 52,000 crores) for its shares worth
offered price of $2.9 billion {Rs.122crore}. For making better comfort to retail investors,
Reliance Anil Dhirubhai Ambani Group, ADAG has provided two options to them, either
they can submit the entire price (Rs.430) of the asking lot or they can only deposit the one-
quarter price (Rs.115) of the asking shares. The rest price of the shares can be submitted
after getting the allotment of the shares.
Besides, R-Power has also provided a subsidy of Rs.20 for each share of
Reliance Power IPO to the retailers. Thus the retailer investors have submitted
approximately Rs. 50,000crores collectively. Several public sector banks have also
subscribed the offer joylessly tremendously. Punjab National Bank, State Bank of India,
Bank of India and Indian Overseas Bank put in bids worth Rs 1,500-2,000 crore. Reliance
Power had offered a total of 228-milion equity shares with face value of Rs.10 each in the
price band of Rs.405-450 for the public through 100% book-building process. It has targeted
to collects much as Rs 11,700-crore from this offer, which has now gone beyond Rs.75, 000-
crore from this collected money.
54

55. The total collected price has been more than that of the combined
market capitalization of companies listed in Portugal and the Czech Republic as Bloomberg.
ALLOTMENT DETAILS
Over 41.7 lakh successful bidders in the retail category will get around 15
shares each while approximately 4.5 lakh retail investors who bid for less than 225 shares
would not get any shares according to the allocation as approved.
The excess application money of approximately Rs one lakh crore received
from the investors is being refunded to the investors. Post allotment Reliance Power has
approximately 42 lakh shareholders.
LISTING DETAILS
Listing Date: Monday, February 11, 2008
BSE Scrip
Code:
532939
NSE Symbol: RPOWER
Listing In: A Group
Sector: Power - Generation and Supply
ISIN: INE614G01033
Issue Price: Rs. 450.00 Per Equity Share
Face Value: Rs. 10.00 Per Equity Share
TABLE -1
LISTING DAY TRADING INFORMATION
BSE NSE
Issue Price: Rs. 450.00 Rs. 450.00
Open: Rs. 547.80 Rs. 530.00
Low: Rs. 355.05 Rs. 355.30
High: Rs. 599.90 Rs. 530.00
Last Trade: Rs. 372.50 Rs. 372.30
Volume:
63,882,239 134,392,544
55

56. CHART – .1
ISSUE PRICE OF RELIANCE POWER IPO
INTERPRETATION
The above bar diagram shows the issue price of Reliance Power IPO in
both BSE and NSE. X-axis represents the exchanges traded {i.e. BSE AND NSE} and Y-
axis represents issue price amount {i.e. 450 in both exchanges}.
56

57. CHART -2
LISTING DAY OPENING PRICE OF RELIANCE POWER IPO
INTERPRETATION
The above chart shows the listing day opening price of RELIANCE
POWER IPO. Here X- axis represents exchanges traded and Y-axis represents the opening
price in both the exchanges. {I.e. Rs 547.80 in BSE and Rs530 in NSE].It opened at a
premium in both the exchanges as there was more demand among the investors.
57

58. CHART-3
LISTING DAY LOW PRICE OF RELIANCE POWER IPO
INTERPRETATION
The above chart shows the listing day low price of
RELIANCE POWER IPO. Here X- axis represents exchanges traded and Y-axis represents
the listing day low price in both the exchanges. {I.e. Rs 355.05 in BSE and Rs355.30 in
NSE].It’s because of heavy selling pressure created by the investors as they want to come
out of the stock with profits.
58

59. CHART-.4
LISTING DAY HIGH PRICE OF RELIANCE POWER IPO
INTERPRETATION
The above chart shows the listing day low price of RELIANCE
POWER IPO. Here X- axis represents exchanges traded and Y-axis represents the listing
day high price in both the exchanges. {I.e. Rs 599.90 in BSE and Rs530 in NSE].
59

60. CHART-5
LAST TRADE OF RELIANCE POWER IPO ON LISTING DAY
INTERPRETATION
The above chart shows the listing day low price of
RELIANCE POWER IPO. Here X- axis represents exchanges traded and Y-axis represents
the last trading price of reliance power on listing day in both the exchanges. {I.e. Rs 372.50
in BSE and Rs372-30 in NSE].
60

61. Conclusion
The stock which has been issued for a price of Rs450 has been listed at Rs 372 in both the
exchanges which are 18% lower than its issue price. It has made its opening at Rs 547.80 in
BSE and Rs 530 in NSE AND AN INTRADAY LOW OF Rs355.05 in BSE and Rs 355.50
in NSE.The intraday high of the stock is Rs 599.90 in BSE and Rs 530 in NSE.The volumes
were above 6 lakhs in BSE and ABOVE 14 lakhs in NSE.The data clearly shows that the
stock made a flop show in its listing day although people were expecting it to be listed
double the issue price. This clearly tells that Reliance POWER IPO is failed at its entry into
stock market.
Performance of Reliance Power Stock after IPO
Reliance Power IPO which was listed on Feb 11th
2008 has been showing
poor performance since its listing. The company’s IPO has been closed 73 times
overbooking and raised around 7, 52000 crores against its issue of equity shares worth 122
crores
1] The listing price was around Rs 372 in both BSE and NSE which is approximately 18%
lower than its issue price; considerably the stock price has been declining after this.
Taking the failure of the IPO into consideration Reliance Power Ltd
has announced that the Board of Directors of the Company at its meeting held on February
24, 2008, has approved a proposal for issuing free bonus shares to all categories of
shareholders, excluding the promoter group (comprising of Reliance Energy Ltd. and the
ADA Group), in the ratio of 3 shares for every 5 shares held, subject to necessary approvals.
The proposed bonus offering will result in reduction of the cost of Reliance Power shares is
61

62. Rs 269 per share for retail investors and Rs281 per share for other investors
In a related development, Mr. Anil D Ambani, Chairman, Reliance ADA
Group, on February 24, 2008 simultaneously announced a voluntary contribution of 2.6% of
his shareholding in Reliance Power to Reliance Energy Ltd., to protect the Company from
any dilution of its existing 45% stake in Reliance Power, as a result of the bonus proposal.
Accordingly, Reliance Energy’s stake in Reliance Power will be maintained at the existing
level of 45%, and the revised shareholding pattern of Reliance Power will be as follows:
-----------------------------------------------
Previous Existing
-----------------------------------------------
Anil D Ambani 45% 40%
Reliance Energy 45% 45%
Public shareholders 10% 15%
-----------------------------------------------
The reduction of Mr. Ambani’s shareholding in Reliance Power by 5% from
45% to 40%, represents a contribution of nearly Rs 5,000 crore (US$ 1.2 billion) by him, in
favor of nearly 6 million investors in Reliance Energy and Reliance Power. Even after
this, there was no improvement; the share price fell to Rs 235 on the day of listing of bonus
shares. This even made loss to investors who bought bonus shares as they could get the
shares at lower price in exchanges.
Reliance Power Limited Key Recent Developments
May 03, 2010: India Awards Four Ultra Mega Power Projects
Jan 29, 2010: Reliance Power Reports Net Profit of INR1.33 Billion in Q3 Fiscal 2010
Jan 18, 2010: Indian Supreme Court to Resume the Case on Reliance Power's 7,840 MW
Gas-Fired Power Project
62

63. Jan 17, 2010: The 4,000 MW UMPP to Get a Separate Transmission Link In Andhra
Pradesh, India
Dec 28, 2009: Reliance Power Commissions Rosa Thermal Power Plant
Balance Sheet of Reliance Power Limited
Balance Sheet of Reliance Power ------------------- in Rs. Cr. -------------------
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 0.05 200.04 2,259.95 2,396.80 2,396.80
Equity Share Capital 0.05 200.04 2,259.95 2,396.80 2,396.80
Share Application Money 102.36 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves -0.15 0.02 11,282.72 11,396.01 11,669.24
Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Net worth 102.26 200.06 13,542.67 13,792.81 14,066.04
Secured Loans 0.00 0.00 0.00 0.00 0.00
Unsecured Loans 0.00 0.00 0.00 0.00 0.00
Total Debt 0.00 0.00 0.00 0.00 0.00
Total Liabilities 102.26 200.06 13,542.67 13,792.81 14,066.04
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths
Application Of Funds
Gross Block 66.77 67.27 67.41 78.18 81.16
Less: Accum. Depreciation 0.76 1.00 1.06 1.58 2.40
Net Block 66.01 66.27 66.35 76.60 78.76
Capital Work in Progress 35.86 53.57 61.14 55.84 55.30
Investments 0.01 41.28 8,489.75 6,282.71 7,213.04
Inventories 0.00 0.00 0.00 0.00 0.00
Sundry Debtors 0.00 2.25 0.00 0.00 0.00
Cash and Bank Balance 0.58 0.72 361.11 14.37 98.21
Total Current Assets 0.58 2.97 361.11 14.37 98.21
Loans and Advances 0.35 40.68 4,988.93 7,407.58 1,656.40
Fixed Deposits 0.00 0.05 0.05 0.06 0.00
Total CA, Loans & Advances 0.93 43.70 5,350.09 7,422.01 6,754.61
Deffered Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 0.53 3.53 423.86 43.05 33.60
Provisions 0.02 1.25 0.79 1.30 2.08
63

64. Total CL & Provisions 0.55 4.78 424.65 44.35 35.68
Net Current Assets 0.38 38.92 4,925.44 7,377.66
6,718.9
3
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
Total Assets 102.26 200.04 13,542.68 13,792.81 14,066.03
Contingent Liabilities 0.70 9.03 8.57 8.13 0.00
Book Value (Rs) -19.22 10.00 59.92 57.55 58.69
Future Growth Estimates of the Company
The company made a net profit of 33 billion in FY2010.The revenue is
generated through Rosa phase 1 project which had a capacity to produce 300 MW.The
company is preparing to produce above 2800 MW in FY2012.It gets its amount invested in
all its projects and enormous profits after second half of 2020 decade. It aims an EPS of
Rs42 by that time whereas its present EPS is 1.42 and the company could generate 33,800
MW by that time. Investors who think to invest in this share should wait until that time to
reap good profits. At resent the stock is quoting at Rs 158 with 52 week high of around Rs
190 and Low of Rs 135 in both the exchanges. The company is facing competition from
public enterprises like Power Grid Corporation, private enterprises like Adani power, JSW
power etc. Reliance Power is also planning to set up gas-based projects in full steam and has
plans to add 10,000 MW capacity in the future. With this, the company's total generation
capacity from all sources of energy would touch 35,000 MW by 2017.
64

65. 4.2 Company – COX & KING’S
Company Profile- COX &KING’S is an U.K based organization founded by COX in 1763
in Yorkshire, it has been operating in subcontinents and is one of the most recognized
holiday brands today. The principal services offered by the company are:
• Destination Management
• Outbound Tourism
• Business Travel
• Incentive & Conference Solutions
• Domestic Holidays
• NRI
• Trade Fairs
• Foreign Exchange
65

66. • Insurance
C&K designs travel packages for both individuals and groups, for their
domestic and international leisure travel.
1] The company makes travel arrangements for corporate clients to cater to their business
meetings, conferences, events, and as an incentive for their employees and business partners.
2] The company also provides value-added services, such as customizing travel plans for
NRI customers, travel arrangements for Trade Fairs and providing private air charter
services. Besides, C&K offers travel-related foreign exchange and payment solutions.
3] The company is one of the first travel companies in India to be granted a license as an
Authorized Dealer - Category -2, under the new licensing regime.
4] Within Leisure Travel, the company has three sub-segments, Outbound Travel, Inbound
Travel and Domestic Travel. The Inbound Travel business represents destination
management services that cover all aspects of ground tour arrangements required by tour
operators across the world. The Domestic and Outbound Travel businesses include the
selling of holiday packages for travel in India and overseas, respectively. Under Corporate
Travel, a full range of business travel services, through a team of dedicated relationship
managers, is offered.
In India, C&K has been operating since 1905 and has 255 points of presence,
covering 164 locations, through a mix of branch sales offices, franchised sales shops,
General Sales Agents (Gas) and Preferred Sales Agents (Pass). The company has 14 branch
sales offices located in Mumbai, New Delhi, Chennai, Kolkata, Bangalore, Hyderabad,
Ahmadabad, Jaipur, Kochi, Pune, Nagpur and Goa. Besides, it also operates through 56
franchised sales shops spread across India. The company has a global presence, with
operations in 19 countries (besides India) through subsidiaries, branch offices and
representative offices (in the UK, Australia, New Zealand, Japan, US, UAE, Singapore and
Hong Kong). Over the period of FY2006-09, the company has made 6 acquisitions, and it
will continue to explore various opportunities for inorganic growth in the future.
66

67. FOUNDER’S PROFILE
Cox was born in Yorkshire in 1718. His father, Joshua, had made a good living as a lawyer
and had moved from his birthplace in Clent in Worcestershire to Yorkshire. He then bought
an estate near Quarley in Hampshire. There is little documentary evidence of the early life of
Richard Cox, although he must have received an excellent education after which he came
into the service of the English General, Lord Ligonier, as a clerk in the early 1740s. He was
clearly exceptionally good at making important contacts with all echelons of the army and
society, and in 1747 he married Caroline Codrington, daughter of Sir William Codrington
who was an established military figure.
Cox’s career really took off when Lord Ligonier led the Flanders campaigns of the War of
the Austrian Succession. In one letter sent back to London, Richard Cox makes a demand
that “suitable winter provisions and housing should be made available for the three English
companies” and he became ever increasingly entwined with the organization of provisions
and the general welfare of the troops. Ligonier, in turn, thought the world of his 'beloved Mr.
Cox', making him his private secretary in the late 1740s. Ligonier went on to become the
Colonel of the First Foot Guards (Grenadier Guards) in 1757, and rewarded Richard Cox
with the post of 'military agent' after the incumbent died in May 1758. Thus was born Cox &
Co, the forebear of Cox & Kings.
Company Overview
67

68. Cox and Kings (C&K) is a global tour operator, deriving around 90% of its revenues from
the leisure segment. The company has a strong presence in the emerging and developed
markets, and offers travel, forex and visa services. The company is
1] Well-positioned to gain market share on the back of a strong brand franchise and a
presence across the value-chain: C&K has a history of over 250 years, making it one of the
oldest travel brands in the world. Over the years, the company has built a strong brand
franchise for itself in overseas markets as well as in India. The travel market is highly
fragmented, with a large number of travel agents catering to most of the demand. C&K's
strong brand, coupled with services across the value-chain would act as a key driver in
garnering a higher market share in the future.
2] C&K's focus on emerging markets to help garner higher growth: C&K derives over
half of its earnings from the emerging markets and is focused on increasing its presence in
other high growth geographies mainly the Middle-East and South-East Asia. The company is
poised to benefit from a strong growth in demand for outbound and inbound services in
these areas, enabling it to achieve a high growth rate in the future.
3] Tourism industry (especially in emerging markets) to witness robust growth:
According to WTTC (World Travel and Tourism Council) estimates, the world travel and
tourism industry is expected to clock a CAGR of 4% over FY2009-2019E. The growth rate
is expected to be much higher in the case of emerging markets, mainly India, the Middle-
East and South-East Asia. According to WTTC estimates, the tourism industry in India, the
Middle-East and South-East Asia is likely to witness a CAGR of 8% over FY2009-2019E.
4] Outlook and Valuation: Over FY2006-09, C&K's Revenues and PAT have witnessed a
CAGR of 65.6% and 80.7%, respectively; these, however, have also been aided by the five
acquisitions it has made across the globe since 2006. Going ahead C&K's Top-line PAT to
witness a CAGR of 27.4% and 37.7% over FY2009-11E, respectively On the lower and
upper end of the price band, the stock would quote at 16.5x and 17.3x its post diluted
FY2011E estimates, respectively.
AWARDS & RECOGNITION:
68

69. Over the years Cox & Kings has been conferred with numerous awards that
stand testimony to its excellent service.
1] "Most admired tour operator 2010" awarded by SATTE (2010)
2] “First Runner Up” in the Best Large Tour Operator category awarded by the Telegraph
Ultra Travel luxury survey UK 2010.
3] “First Runner Up” in the Favorite Tour Operator category awarded by Condé Nast
Traveller Readers’ Choice Awards (2010).
4] “Best Domestic Tour Operator” awarded by the Abacus TAFI TravelBiz Monitor Awards
(2009).
5] “Best Inbound Tour Operator” awarded by the Abacus TAFI TravelBiz Monitor Awards
(2009).
6] “The Number One Brand in India” based on a survey conducted by research agency,
TNS and co-funded by Media magazine, ranking it 152 amongst the top 1,000 brands in the
Asia Pacific region - Australia, China, India, Japan, Hong Kong, Korea, Malaysia,
Singapore, Taiwan and Thailand.
ISSUE DETAILS
Issue Open: Nov 18, 2009 – Nov 20, 2009
Issue Type: 100% Book Built Issue IPO
Issue Size: 18,496,640 Equity Shares of Rs. 10
Issue Size: Rs. 584.49 – 610.39 Crore
Face Value: Rs. 10 per Equity Share
Issue Price: Rs. 316 – Rs. 330 per Equity Share
Market Lot: 20 Shares
69

70. Minimum Order Quantity: 20 Shares
Listing At: BSE, NSE
Lead Manager- India Infoline Limited
Objects of the Issue:
The objects of the Issue are to achieve the benefits of listing on the Stock
Exchanges & to raise capital to:
1. Repayment of Loans;
2. Acquisitions & Other Strategic Initiatives;
3. Investment in Overseas Subsidiaries;
4. Investment in Corporate Office & Upgrading our existing Operations;
5. General Corporate Purposes.
Shareholding Pattern of Cox and King’s
Holder's Name No of Shares % Share Holding
Promoters 26475348 42.08%
ForeignInstitutions 13935398 22.15%
ForeignPromoter 13565532 21.56%
NBanksMutualFunds 4218609 6.70%
General Public 1767002 2.81%
OtherCompanies 1454667 2.31%
Foreign Companies 760648 1.21%
Financial Institutions 342479 0.54%
Foreign Industries 205424 0.33%
Foreign NRI 118992 0.19%
Others 78843 0.13%
Total
100%
SUBSCRIPTION DETAILS
70

71. Cox and Kings IPO closed for subscription and got a decent response from investors
especially QII investors. Analysts said that it is a good issue for long term investors. The
IPO has got subscribed by over 6 times. Retail segment though did not get fully subscribed.
At the close of the day,
QII segment got subscribed by 9.95 times
NII segment got subscribed by 10.7 times
Retail segment got subscribed by 0.98 times
Employee reservation got subscribed by 0.10 times.
The figures above suggest that it has got good response from the
entire investors segment, which made the company to go forward through the issue. Many
experts suggested this IPO as the company got huge potential to grow.
Allotment
A person who applied for 6 shares got one share of Cox & King’s
LISTING DETAILS
Listing Date: Friday, December 11, 2009
BSE Scrip Code: 533144
NSE Symbol: COX&KINGS
Listing In: 'B' Group of Securities
Sector:
ISIN: INE008I01018
Issue Price: Rs. 330.00 Per Equity Share
Face Value: Rs. 10.00 Per Equity Share
TABLE -3
LISTING DAY TRADING INFORMATION OF COX & KING’S IPO
BSE NSE
Issue Price: Rs. 330.00 Rs. 330.00
Open: Rs. 304.10 Rs. 343.20
Low: Rs. 304.10 Rs. 343.20
High: Rs. 433.45 Rs. 433.90
Last Trade: Rs. 426.05 Rs. 425.40
Volume: 16,954,687 29,896,728
71

72. CHART -6
ISSUE PRICE OF COX AND KING’S IPO
INTERPRETATION
The above bar diagram shows the issue price of COX & KING’S IPO in
both BSE and NSE.x-axis represents the exchanges traded { i.e. BSE AND NSE} and Y-
axis represents issue price amount { i.e. Rest 330.00 in both exchanges }
72

73. CHART -7
IPO LISTING DAY OPEN PRICE OF COX & KING’S
INTERPRETATION
The above chart shows the listing day opening price of COX & KING’S
IPO. Here X- axis represents exchanges traded and Y-axis represents the opening price in
both the exchanges. {I.e. Rs 304.10 in BSE and Rs 343.20in NSE].
73

74. CHART -8
LISTING DAY LOW PRICE OF COX & KING’S IPO
INTERPRETATION
The above chart shows the listing day opening price of COX & KING’S
IPO. Here X- axis represents exchanges traded and Y-axis represents the listing day’s low
price in both the exchanges. {I.e. Rs 304.10 in BSE and Rs343.20in NSE].
74

75. CHART -9
CHART SHOWING LISTING DAY HIGH PRICE
LISTING DAY HIGH PRICE OF COX & KING'S
433.2
433.3
433.4
433.5
433.6
433.7
433.8
433.9
434
bse nse
Series1
INTERPRETATION
The above chart shows the listing day high price of COX & KING’S stock.
Here X- axis represents exchanges traded and Y-axis represents the last traded price of COX
& KING’S IPO on listing day in both the exchanges. {I.e. Rs 433.45 in BSE and Rs433.90
in NSE].
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76. CHART -10
LAST TRADED PRICE OF COX & KING’S IPO ON LISTING DAY
INTERPRETATION
The above chart shows the listing day opening price of COX & KING’S
IPO. Here X- axis represents exchanges traded and Y-axis represents the last traded price of
COX & KING’S IPO on listing day in both the exchanges. {I.e. Rs 426.05 in BSE and
Rs426 and 425.40 in NSE].
Conclusion
From the data and interpretation it can be analyzed that the stock is listed at
a premium of around 30%.This shows that the IPO of the company is success, with volumes
of above 16 lakes in BSE and above 29 lakhs in NSE.
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77. Performance of Cox & King’s Stock after Its IPO
COX & KING’S IPO which was listed on 11 th
DECEMBER 2009
has been showing consistent performance till now. The listing price of COX & KING’S was
Rs426 and 425 in both BSE and NSE.52 week high of the stock is Rs 530 and its low is
Rs364.There has been an increase in FII’S investments in the company after its listing which
was a huge success.
Balance Sheet of Cox & King’s
77

78. 78
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 5.44 5.44 27.93 27.93 62.92
Equity Share Capital 5.44 5.44 27.93 27.93 62.92
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 48.52 69.60 120.23 157.75 636.02
Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Net worth 53.96 75.04 148.16 185.68 698.94
Secured Loans 45.75 27.21 50.24 82.63 145.67
Unsecured Loans 18.59 30.00 71.30 102.02 90.00
Total Debt 64.34 57.21 121.54 184.65 235.67
Total Liabilities 118.30 132.25 269.70 370.33 934.61
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

79. Utilization of IPO Proceeds
As on March 31, 2010, amount raised through public issue has been utilised by the Company
toward the following objects of the issue:
(Rs. in Lakhs)
Particulars Utilisation
1 Repayment of Loans 8,470.00
Acquisitions & Other Strategic 2 1,600.00
Initiatives
3 Investment in Overseas Subsidiaries 887.00
Investment in Corporate Office &
4 Upgrading our existing Operations 203.00
5 General Corporate Purposes 4,557.00
6 Meeting Fresh Issue related 5,817.38
Expenses
Total 21,534.38
Pending utilisation, the balance proceeds have been temporarily invested in Mutual Funds,
Fixed Deposit and Bank Accounts.
79
12 mths 12 mths 12 mths 12 mths 12 mths
Application Of Funds
Gross Block 18.13 25.84 30.93 39.95 44.29
Less: Accum. Depreciation 9.62 12.61 16.22 20.76 24.94
Net Block 8.51 13.23 14.71 19.19 19.35
Capital Work in Progress 4.57 0.57 2.54 3.66 7.34
Investments 35.87 61.71 98.59 109.53 323.41
Inventories 1.14 1.90 4.05 3.53 5.58
Sundry Debtors 44.55 74.08 154.22 184.96 209.03
Cash and Bank Balance 26.60 15.42 35.06 27.58 201.06
Total Current Assets 72.29 91.40 193.33 216.07 415.67
Loans and Advances 90.22 95.63 139.86 222.37 262.51
Fixed Deposits 0.00 0.00 0.00 0.00 0.00
Total CA, Loans & Advances 162.51 187.03 333.19 438.44 678.18
Deferred Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 78.16 102.56 132.70 129.04 77.07
Provisions 15.01 27.72 46.65 71.45 16.59
Total CL & Provisions 93.17 130.28 179.35 200.49 93.66

80. Future Growth Estimates of the Company
At present the stock is quoting at Rs567 in BSE and NSE
with 52 week high of Rs 630 and low of Rs 304 in both the exchanges. The company
acquired East India Company in 2009 and Australian based Benjour previously owned by
U.K giant TUI in January 2010.The Company is expected to make a CAGR of 24.7 and
37.6% during FY2009-11. On the lower and upper end of the price band, the stock would
quote at 16.5x and 17.3x its post diluted FY2011E estimates, respectively. The company has
made a PAT of above 5008 crore in 2010 u/s 3029 crore in 2009.At present the book value
of the stock is Rs 111.Company is facing a stiff competition from Thomas Coo
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Net Current Assets 69.34 56.75 153.84 237.95 584.52
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
Total Assets 118.29 132.26 269.68 370.33 934.62
Contingent Liabilities 0.00 0.00 0.00 0.00 15.75
Book Value (Rs) 99.18 137.94 53.05 66.49 111.08

81. CHAPTER -5
FINDINGS AND SUGGESTIONS
81