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    RIZVI ACADEMY OF MANAGEMENT PANKAJ LIPARE

    INIITAL PUBLIC OFFER Page 1

    A

    Project report

    On

    Initial Public Offering

    In partial fulfillment of the requirements of

    the Summer Internship of

    Post Graduate Diploma in Business Management

    Through

    Rizvi Academy of Management

    under the guidance of

    Prof. Vishal Singhi

    Submitted by

    Pankaj Lipare

    PGDBM

    Batch: 20102012.

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    CERTIFICATE

    This is to certify that Mr. Pankaj Lipare, a student of Rizvi Academy of

    Management, of PGDBM III bearing Roll No. 66 and specializing in

    Finance has successfully completed the project titled

    Initial Public Offering

    under the guidance of Prof. Vishal Singhi in partial fulfillment of the

    requirement of Post Graduate Diploma in Business Management by Rizvi

    Academy of Management for the academic year 20102012.

    _______________

    Prof. Vishal Singhi

    Project Guide

    _______________

    Prof. Umar Farooq

    Academic Coordinator

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    ACKNOWLEDGEMENT

    I would like to express my gratitude towards my project guide Prof. Vishal Singhi

    without whose continuous guidance and encouragement this project would not

    have been possible.

    Also I would like to thank our director Dr. Kalim Khan who has provided us with

    the necessary infrastructure and guidance in the course of the project. Also I would

    like to take this opportunity to thank all the teaching as well as non-teaching staff

    for their continuous help and support.

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    EXECUTIVE SUMMARY

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    Table of Contents

    Topics Page No.

    IPOs (Initial Public Offerings) 2

    Regulations for IPOs 5

    Eligibility norms for making an IPO 7

    Disclosures/Offer Documents 10

    Pricing 13

    Types of Issues: Fixed Price & Bookbuilding 15

    Allocations in an IPO 20

    Understanding an offer document 22

    Applying in an IPO 25

    Allotments in IPO 33

    Anchor Investors 38

    Listing & Trading 39

    Key Intermediaries 40

    Filing Investor Grievances 43

    Other Aspects 43

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    IPOS (INITIAL PUBLIC OFFERINGS)

    What is an IPO?

    An IPO is when a company which is presently not listed at any stock exchange makes

    either a fresh issue of shares or makes an offer for sale of its existing shares or both for

    the first time to the public. Through a public offering, the issuer makes an offer for new

    investors to enter its shareholding family.

    The shares are made available to the investors at the price determined by the promoters of

    the company in consultation with its investment bankers.

    The successful completion of an IPO leads to the listing and trading of the companys

    shares at the designated stock exchanges.

    2003-04 to 2007-08 saw an active market for IPOs. Though the number of IPOs was

    small, the amounts being raised were increasing. Due to a huge downturn in the economy

    and the secondary market, the amount mobilised in 2008-09 nosedived to a meager Rs.

    2034 crore, through just 21 small IPOs. The year 2009-10 yet again witnessed a revival in

    the IPO market.

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    YEAR NO.OF

    IPOs

    AMOUNT

    (Rs.crore)

    2003-04 19 3191.10

    2004-05 23 14662.32

    2005-06 76 10797.88

    2006-07 76 23706.16

    2007-08 84 41323.45

    2008-09 21 2033.99

    2009-10 39 24948.31

    2010-11 52 33097.77

    2011-12

    (till 31 May 2011)

    10 2223.06

    SOURCE : PRIME Database

    Why does a company make an IPO?

    Going public provides an opportunity to the companies to raise cash for setting up a

    project or for diversification/expansion or sometimes for working capital or even to retire

    debt or for potential acquisitions. This is called fresh issue of capital where the proceeds

    of the issue go to the company.

    Companies also go public to provide a route for some of the existing shareholders

    including venture capitalists to exit fully or partially from the companys shareholding or

    for promoters to partially dilute their holding. This is called an offer for sale where the

    proceeds of the issue go to the selling shareholders and not to the company.

    Given below is the table of monies raised through issue of fresh capital and through

    offers for sale in IPOs.

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    YEAR FRESH CAPITAL OFFERS FOR

    SALE

    TOTAL

    NO.OF

    IPOs

    AMOUNT

    (Rs.crore)

    NO.OF

    IPOs

    AMOUNT

    (Rs.crore)

    NO.OF

    IPOs

    AMOUNT

    (Rs.crore)

    2003-04 16 1813.42 5 1377.68 19 3191.10

    2004-05 21 8099.59 9 6562.73 23 14662.32

    2005-06 76 9130.21 11 1667.67 76 10797.88

    2006-07 74 22745.44 12 960.72 76 23706.16

    2007-08 82 38634.65 9 2688.81 84 41323.45

    2008-09 21 1985.08 3 48.92 21 2033.99

    2009-10 39 21832.45 11 3115.86 39 24948.31

    2010-11 49 13240.57 14 19857.20 52 33097.77

    2011-12

    (till 31 May 2011)

    10 2223.06 0 0.00 10 2223.06

    SOURCE : PRIME Database

    Listing offers several benefits. For one, it increases the companys ability to raise debt at

    finer rates. The company also gets a continuing window for raising more capital, both

    from the domestic and overseas equity markets. Acquisitions also become simpler as

    instead of cash payouts, companies can use shares as a currency.

    Listing also lends liquidity to the stock, which is very critical for the success of employee

    stock ownership plans, which help to attract top talent.

    Of course, listing carries a considerable degree of prestige for the company.

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    REGULATIONS FOR IPOS

    Because of the public participation, SEBI oversees that such companies act in a

    reasonable and fair manner, especially with reference to the minority shareholders. For

    example, such companies should have a board of directors, where at least half the

    members are independent of the promoters/company. Moreover, companies have to

    comply with the listing agreement, which among other things, stipulate continuing

    disclosures in specified formats and frequency.

    SEBIs Role in IPOs/FPOs

    Any company making an IPO/FPO is required to file a draft offer document with SEBI

    for its observations. Draft offer document in respect of issues of size upto Rs. 100 crore

    shall be filed with the concerned regional office of the Board under the jurisdiction of

    which the registered office of the issuer company falls. Officials of SEBI at various levels

    examine the compliance with SEBI ICDR Regulations 2009 and ensure that all necessary

    material information is disclosed in the draft offer documents.

    The validity period of SEBIs observation letter is three months only i.e. the company has

    to open its issue within three months period.

    Does it mean that SEBI recommends an issue?

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

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

    made or for the correctness of the statements made or opinions expressed in the offer

    document.

    Does SEBI approve the contents of the offer document?

    Submission of offer document to SEBI should not in any way be deemed or construed

    that the same has been cleared or approved by SEBI. The Lead manager certifies that the

    disclosures made in the offer document are generally adequate and are in conformity with

    SEBI guidelines for disclosures and investor protection in force for the time being. This

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    requirement is to facilitate investors to take an informed decision for making investment

    in the proposed issue.

    Does the SEBI clearance tag make the IPO/FPO safe for the investors?

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

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

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

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

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

    before considering any investment. They are strongly warned against any tips or news

    through unofficial means.

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    ELIGIBILITY NORMS FOR MAKING AN IPO

    SEBI has stipulated the eligibility norms for companies planning an IPO which are as

    follows:

    a) Net tangible assets of at least Rs. 3 crore in each of the preceding three full years

    b) Distributable profits for at least three out of the immediately preceding five years

    c) Net worth of at least Rs. 1 crore in each of the preceding three full years

    d) The issue size should not exceed 5 times the pre-issue net worth

    e) If there has been a change in the companys name, at least 50% of the revenue for

    preceding one year should be from the new activity denoted by the new name

    Alternative routes

    Recognizing that many good companies, for one reason or the other, may not be able to

    comply with all the eligibility norms, two other alternative routes are available to such

    companies:

    Alternative I:

    (a) Issue shall be through book building route, with at least 50% to be mandatory

    allotted to the Qualified Institutional Buyers (QIBs). (b) The minimum post-issue face

    value capital shall be Rs. 10 crore or there shall be a compulsory market-making for at

    least 2 years

    OR

    Alternative II:

    (a) The project is appraised and participated to the extent of 15% by FIs/Scheduled

    Commercial Banks of which at least 10% comes from the appraiser(s).

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    (b) The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a

    compulsory market-making for at least 2 years. In addition to satisfying the aforesaid

    eligibility norms, the company shall also satisfy the criteria of having at least 1000

    prospective allottees in its issue.

    Exemptions to certain category of entities from the eligibility norms

    The following categories of entities are eligible for exemption from entry norms.

    A banking company including a local area bank set up under the Banking Regulation Act,

    1949

    A corresponding new bank set up under the Banking Companies Act, 1970

    An infrastructure company

    Whose project has been appraised by a Public Financial Institution (PFI)

    Not less than 5% of the project cost is financed by any of the PFI

    Rights Issue by a listed company

    Minimum Public Shareholding Requirements

    Clause 40A of the BSE Listing Agreement requires at least 25% of the post issue paid up

    capital to be with the public (i.e. other than promoter and promoter group).

    As per rule 19(2) (b) of the Securities Contract (Regulation) Rules, a minimum of 25% of

    each class of security must be offered to the public for subscription. However, at least

    10% can be offered if the following 3 conditions are fulfilled:

    Minimum 2 MM securities (excluding reservations, firm allotment & promoter

    contribution) to be offered to the public

    Minimum offer sizeRs. 100 crores

    Issuance through book building with 60% QIB allocation

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    Continuous public shareholding since listing also needs to be maintained as per Clause

    40A of the listing agreement.

    The aforesaid requirement of maintaining minimum level of public shareholding on a

    continuous basis will not be applicable to government companies (as defined under

    Section 617 of the Companies Act, 1956), infrastructure companies (as defined under

    Chapter II Clause 14(4) of the SEBI ICDR Regulations 2009) and companies referred to

    the Board for Industrial and Financial Reconstruction.

    Note: Section 617 of the Companies Act, 1956 defines Government company as follows -

    Government Company means any company in which not less than 51% of the paid-up

    share capital is held by the Central Government, or by any State Government or

    Governments, or partly by the Central Government and partly by one or more State

    Governments, and includes a company which is a subsidiary of a Government company

    as thus defined.

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    DISCLOSURES/OFFER DOCUMENTS

    Since 1992, the entire IPO/FPO regulation is driven by disclosures-inform the investors

    as much as is possible and is relevant for him to take an informed investment decision.

    The disclosure requirements regarding the issuance of securities are covered in detail in

    the SEBI ICDR Regulations 2009.

    Types of Offer Documents

    Draft Offer Document

    It refers to the first document filed by companies with SEBI and stock exchanges for

    approval, who after reviewing, communicate their observations to the Company, which

    the company has to incorporate in the offer document. SEBI typically requires a period of

    30 days for processing a draft offer document. The draft offer document is placed by

    SEBI on its website. It is also placed on the websites of recognized stock exchanges

    where specified securities are proposed to be listed and merchant bankers associated with

    the issue for public comments for a period of at least 21 days. Furthermore, the issuer

    either on the date of filing the draft offer document with SEBI or on the next day has to

    make a public announcement in one English national daily newspaper, one Hindi national

    daily newspaper and one regional language newspaper at the place where its registered

    office is situated, disclosing to the public the fact of filing of draft offer document and

    inviting the public to give their comments to SEBI.

    The lead merchant bankers, after expiry of the above period (of at least 21 days), file

    with SEBI a statement giving information of the comments received by them or the issuer

    on the draft offer document during that period and the consequential changes, if any, to

    be made in the draft offer document.

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    Red herring prospectus

    A red herring prospectus (RHP) is a preliminary registration document that is filed with

    SEBI in the case of bookbuilding issue which does not have details of either price or

    number of shares being offered or the amount of issue. This means that in case price is

    not disclosed, the number of shares and the upper and lower price bands are disclosed.

    On the other hand, an issuer can state the issue size and the number of shares are

    determined later. In the case of book-built issues, it is a process of price discovery as the

    price cannot be determined until the bidding process is completed. Hence, such details

    are not shown in the Red Herring prospectus filed with ROC in terms of the provisions of

    the Companies Act. Only on completion of the bidding process, the details of the final

    price are included in the offer document. The offer document filed thereafter with ROC is

    called a prospectus.

    Offer Document

    It means the final prospectus in the case of a public issue/offer for sale which is filed and

    registered with the Registrar of Companies and the stock exchanges. An offer document

    covers all the relevant information required to be disclosed under various regulations and

    incorporates the observations of the Registrar of Companies and SEBI.

    Abridged Prospectus the memorandum as prescribed in Form 2A under sub-section (3) of

    section 56 of the Companies Act, 1956. It contains all the salient features of a prospectus.

    It accompanies the application form of public issues.

    Accessing draft offer documents before even the IPO/FPO is cleared by SEBI

    The draft offer document/letter of offer remains posted on SEBI website for a period of

    21 days from the date of filing the same to SEBI and can also be downloaded from there

    Public comments/complaints on the issuer company or others connected with the issue

    The objective of making an offer document public is to invite public comments. The

    comments should be submitted within 21 days of the filing of the draft offer document by

    the company with SEBI.

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    Obtaining full copy of the offer document

    Full copy of the offer document is available from the company, its lead managers and

    syndicate members. These are also available on the websites of SEBI, the lead managers,

    the stock exchanges and the company.

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    PRICING

    Any restrictions on pricing by companies?

    Since 1992, companies have been allowed to freely price their issues. SEBI does not play

    any role in deciding the price for issues. As such, the single prices in case of fixed price

    issue as well as the price band in the case of a bookbuilding issue are determined by the

    company. The companies are however required to give in the offer document a detailed

    justification of the price. The basis of issue price is disclosed in the offer document. The

    issuer is required to disclose in detail about the qualitative and quantitative factors

    justifying the issue price.

    Differential Pricing

    Pricing of an issue where one category is offered shares at a price different from the other

    category is called differential pricing. Differential pricing is permitted, subject to the

    following:

    (a) retail individual investors or retail individual shareholders [or employees entitled

    for reservation made under regulation 42 making an application for specified securities of

    value not more than two lakh rupees] may be offered specified securities at a price lower

    than the price at which net offer is made to other categories of applicants; provided that

    such difference is not more than 10% of the price at which specified securities are offered

    to other categories of applicants;

    (b) in case of a book built issue, the price of the specified securities offered to an

    anchor investor cannot be lower than the price offered to other applicants;

    (c) in case of a composite issue, the price of the specified securities offered in thepublic issue can be different from the price offered in rights issue and justification for

    such price difference needs to be given in the offer document.

    (d) In case the issuer opts for the alternate method of book building in terms of Part D

    of Schedule XI of the SEBI ICDR Regulations 2009, the issuer can offer specified

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    TYPES OF ISSUES: FIXED PRICE & BOOKBUILDING

    There are two types of issues :

    Fixed Price Issues

    An issuer company is allowed to freely price the issue. The basis of issue price is

    disclosed in the offer document where the issuer discloses in detail about the qualitative

    and quantitative factors justifying the issue price. The Issuer company can mention a

    price band of 20% (cap in the price band should not be more than 20% of the floor price)

    in the Draft offer documents filed with SEBI and actual price can be determined at a later

    date before filing of the final offer document with SEBI/ROCs.

    Price Discovery through Bookbuilding Process

    Book Building means a process undertaken by which a demand for the securities

    proposed to be issued by a body corporate is elicited and built up and the price for the

    securities is assessed on the basis of the bids obtained for the quantum of securities

    offered for subscription by the issuer. This method provides an opportunity to the market

    to discover the price for securities.

    The process is named so because it refers to collection of bids from investors, which is

    based on a price range. The issue price is fixed after the closing date of the bid.

    A company planning an IPO/FPO appoints a merchant bank as a book runner. A

    particular time frame is fixed as the bidding period. The book runner then builds an order

    book that collates bids from various investors. Potential investors are allowed to revise

    their bids at any time during the bidding period. At the end of bidding period the order

    book is closed and consequently the quantum of shares ordered and the respective pricesoffered are known. The determination of final price is based on demand at various prices.

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    Bookbuilding has become the preferred route of raising capital, as can be seen from the

    table below. Though there are fixed price issues, by amount, the bookbuilding IPO/FPOs

    dominate.

    YEAR BOOKBUILDING FIXED PRICE TOTAL

    NO.OF

    IPOs

    AMOUNT

    (Rs.crore)

    % NO.OF

    IPOs

    AMOUNT

    (Rs.crore)

    % NO.OF

    IPOs

    AMOUNT

    (Rs.crore)

    2003-04 9 2641.04 82.8 10 550.07 17.2 19 3191.10

    2004-05 15 14507.04 98.9 8 155.28 1.1 23 14662.32

    2005-06 53 10225.43 94.7 23 572.45 5.3 76 10797.88

    2006-07 65 23469.07 99.0 11 237.10 1.0 76 23706.16

    2007-08 74 41068.98 99.4 10 254.47 0.6 84 41323.45

    2008-09 17 1959.92 96.4 4 74.07 3.6 21 2033.99

    2009-10 39 24948.13 100.0 0 0.00 0.0 39 24948.13

    2010-11

    (till 31 May

    2011)

    50 32982.20 99.8 2 69.50 0.2 52 33051.70

    SOURCE : PRIME Database

    Open Bookbuilding

    In book-built issues, it is mandatory to have an online display of the demand and bids

    during the bidding period. This is known as open book system. (Under closed book

    building, the book is not made public and the bidders have to take a call on the price at

    which they intend to make a bid without having any information on the bids submitted by

    other bidders). As per SEBI, only electronic facility is allowed to be used in case of bookbuilding.

    Price Band

    The offer document may have a floor price for the securities or a price band within which

    the investors can bid. The spread between the floor and the cap of the price band can not

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    be more than 20%. In other words, it means that the cap should not be more than 120% of

    the floor price. The company decides the price band in consultation with the investment

    bankers, and typically after undertaking a pre-marketing exercise with some leading

    QIBs.

    The price band can have a revision. SEBI requires that any revision in the price band has

    to be widely disseminated by informing the stock exchanges, by issuing press release and

    also indicating the change on the relevant website and the terminals of the syndicate

    members. When the price band is revised, the bidding period has to be extended for a

    further period of three days, subject to the total bidding period not exceeding thirteen

    days.

    Floor Price

    Floor price is the minimum price at which bids can be made.

    Cut-off Price

    In Book building issue, the issuer is required to indicate either the price band or a floor

    price in the red herring prospectus. The actual discovered issue price can be any price in

    the price band or any price above the floor price. This issue price is called Cut off

    price. This is decided by the issuer and LM after considering the book and investors

    appetite for the stock. SEBI ICDR Regulations 2009 permit only retail individual

    investors to have an option of applying at cut off price.

    Final Issue Price

    The demand at various price levels within the price band is made available on the

    websites of the designated stock exchanges during the entire tenure of the issue and once

    the issue closes, the final price is determined by the issuer and made known to the

    investors.

    Minimum Number of Days for which an IPO/FPO Subscription List has to remain Open

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    Except as otherwise provided in the SEBI ICDR Regulations 2009, public issue shall be

    kept open for at least three working days but not more than ten working days including

    the days for which the issue is kept open in case of revision in price band.

    In case the price band in a public issue made through the book building process is

    revised, the bidding (issue) period disclosed in the red herring prospectus shall be

    extended for a minimum period of three working days, provided that the total bidding

    period shall not exceed ten working days.

    The public issue made by an infrastructure company, satisfying the requirements in

    Clause 2.4.1 (iii) of Chapter II may be kept open for a maximum period of 21 working

    days.

    Pure Auction as an Additional Bookbuilding Mechanism

    SEBI has decided to introduce an additional method of book building, to start with, for

    FPOs, in which the issuer would decide on a floor price and may mention the floor price

    in the red herring prospectus. If the floor price is not mentioned in the red herring

    prospectus, the issuer shall announce the floor price at least one working day before

    opening of the bid in all the newspapers in which the pre-issue advertisement was

    released.

    Qualified institutional buyers shall bid at any price above the floor price. The bidder who

    bids at the highest price shall be allotted the number of securities that he has bided for

    and then the bidder who has bided at the second highest price and so on, until all the

    specified securities on offer are exhausted. Allotment shall be done on price priority basis

    for qualified institutional buyers. Allotment to retail individual investors, non-

    institutional investors and employees of the issuer shall be made proportionately as

    illustrated in Schedule XI of SEBI ICDR Regulations 2009. Where, however the numberof specified securities bided for at a price is more than available quantity, then allotment

    shall be done on proportionate basis. Retail individual investors, non-institutional

    investors and employees shall be allotted specified securities at the floor price subject to

    provisions of Clause (d) of Regulation 29 of SEBI ICDR Regulations 2009. The issuer

    may:-

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    (a) place a cap either in terms of number of specified securities or percentage of issued

    capital of the issuer that may be allotted to a single bidder;

    (b) decide whether a bidder be allowed to revise the bid upwards or downwards in terms

    of price and/or quantity;

    (c) decide whether a bidder be allowed single or multiple bids.

    Fast Track Issues

    In order to enable well established and compliant listed companies to access Indian

    primary market in a time effective manner through follow-on public offerings and rights

    issues, SEBI introduced the concept of Fast Track Issues (FTIs) in November 2007. SEBI

    has relaxed certain requirements of FTIs such as reducing the average market

    capitalization of public shareholding of the issuer to Rs. 5000 crore from Rs. 10000 crore,

    pegging the annualized trading turnover to free float for companies whose public

    shareholding is less than 15% of the issued capital. In case the clause relating to

    composition of Board of Directors has not been complied with in one or more quarters, it

    need not be deemed as non compliance, provided the company is in compliance in this

    regard at the time of filing the offer document with stock exchange/ ROC and adequate

    disclosures are made in the offer document in this respect.

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    ALLOCATIONS IN AN IPO

    Fixed Price Issues

    There are two buckets in the fixed price IPO/FPOs: Investors applying for Rs. 2,00,000

    or more and Investors applying for upto Rs. 2,00,000.

    Bookbuilding Issues

    In a book built issue, allocation to Retail Individual Investors (RIIs), Non Institutional

    Investors (NIIs) and Qualified Institutional Buyers (QIBs) is in the ratio of 35:15: 50

    respectively.

    Definition of Retail Individual Investors (RIIs)

    Retail individual investor means an investor who applies or bids for securities of or for

    a value of not more than Rs. 2,00,000.

    Definition of Non Institutional Investors (NIIs)

    All applicants, other than QIBs or individuals applying for less than Rs. 2,00,000 are

    considered as NIIs. Typically, this category includes High Net Worth Individuals (HNIs)and corporate bodies.

    Definition of Qualified Institutional Buyers (QIBs)

    QIBs are those institutional investors who are perceived to possess expertise and the

    financial strength to evaluate and invest in the capital markets. A QIB is defined by SEBI

    as

    a) public financial institution as defined in section 4A of the Companies Act, 1956;

    b) scheduled commercial banks;

    c) mutual funds;

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    d) foreign institutional investor registered with SEBI and sub-account (other than a

    sub-account which is a foreign corporate or foreign individual) registered with

    SEBI;

    e) multilateral and bilateral development financial institutions;

    f) venture capital funds registered with SEBI.

    g) foreign venture capital investors registered with SEBI.

    h) state Industrial Development Corporations.

    i) insurance Companies registered with the Insurance Regulatory and Development

    Authority (IRDA).

    j) provident Funds with minimum corpus of Rs. 25 crores

    k) pension Funds with minimum corpus of Rs. 25 crores

    l) National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated

    November 23, 2005 of the Government of India published in the Gazette of India

    m) insurance funds set up and managed by army, navy or air force of the Union of

    India

    n) Insurance funds set up by Department of Posts, India such as Postal Life

    Insurance Fund (PLIF) and Rural Postal Life Insurance Fund (RPLIF)

    These entities are not required to be registered with SEBI as QIBs. Any entities falling

    under the categories specified above are considered as QIBs for the purpose of

    participating in primary issuance process.

    All types of investors are required to bring in 100% of the application money as margin

    along with the application for securities in Public Issues. This has been done to avoid

    inflated demand in Public Issues and to provide a level playing field to all investors

    subscribing for securities.

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    UNDERSTANDING AN OFFER DOCUMENT

    This section basically deals with the contents in an offer document.

    Cover Page

    The Cover Page of the offer document covers full contact details of the issuer company,

    lead managers and registrars, the nature, number, price and amount of instruments

    offered and issue size, and the particulars regarding listing. Other details such as Credit

    Rating, risks in relation to the first issue, etc are disclosed if applicable.

    Risk Factors

    Here, the issuers management gives its view on the Internal and external risks faced by

    the company. Here, the company also makes a note on the forward looking statements.

    This information is disclosed in the initial pages of the document and it is also clearly

    disclosed in the abridged prospectus. It is generally advised that the investors should go

    through all the risk factors of the company before making an investment decision.

    Introduction

    The introduction covers a summary of the industry and business of the issuer company,

    the offering details in brief, summary of consolidated financial, operating and other data.

    General Information about the company, the merchant bankers and their responsibilities,

    the details of brokers/syndicate members to the Issue, credit rating (in case of debt issue),

    debenture trustees (in case of debt issue), monitoring agency, book building process in

    brief and details of underwriting Agreements are given here. Important details of capital

    structure, objects of the offering, funds requirement, funding plan, schedule of

    implementation, funds deployed, sources of financing of funds already deployed, sources

    of financing for the balance fund requirement, interim use of funds, basic terms of issue,

    basis for issue price, tax benefits are covered.

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    About Us

    This presents a review of on the details of the business of the company, business strategy,

    competitive strengths, insurance, industry-regulation (if applicable), history and corporate

    structure, main objects, subsidiary details, management and board of directors,

    compensation, corporate governance, related party transactions, exchange rates, currency

    of presentation dividend policy and management's discussion and analysis of financial

    condition and results of operations are given.

    Financial Statements

    Financial statement, changes in accounting policies in the last three years and differences

    between the accounting policies and the Indian Accounting Policies (if the Company has

    presented its Financial Statements also as per Either US GAAP/IAS are presented.

    Legal and Other Information

    Outstanding litigations and material developments, litigations involving the company and

    its subsidiaries, promoters and group companies are disclosed. Also material

    developments since the last balance sheet date, government approvals/licensing

    arrangements, investment approvals (FIPB/RBI etc.), all government and other approvals,

    technical approvals, indebtedness, etc. are disclosed.

    Other Regulatory and Statutory Disclosures

    Under this head, the following information is covered: authority for the Issue, prohibition

    by SEBI, eligibility of the company to enter the capital market, disclaimer clause,

    disclaimer in respect of jurisdiction, distribution of information to investors, disclaimer

    clause of the stock exchanges, listing, impersonation, minimum subscription, letters of

    allotment or refund orders, consents, expert opinion, changes in the auditors in the last 3

    years, expenses of the issue, fees payable to the lead managers, fees payable to the issue

    management team, fees payable to the registrars, underwriting commission, brokerage

    and selling commission, previous rights and public issues, previous issues for cash, issues

    otherwise than for cash, outstanding debentures or bonds, outstanding preference shares,

    commission and brokerage on, previous issues, capitalisation of reserves or profits,

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    option to subscribe in the issue, purchase of property, revaluation of assets, classes of

    shares, stock market data for equity, shares of the company, promise vis--vis

    performance in the past issues, mechanism for redressal of investor grievances.

    Offering Information

    Under this head, the following information is covered: Terms of the Issue, ranking of

    equity shares, mode of payment of dividend, face value and issue price, rights of the

    equity shareholder, market lot, nomination facility to investor, issue procedure, book

    building procedure if applicable, bid form, who can bid, maximum and minimum bid

    size, bidding process, bidding bids at different price levels, escrow mechanism, terms of

    payment and payment into the escrow collection account, electronic registration of bids,

    build up of the book and revision of bids, price discovery and allocation, signing of

    underwriting agreement and filing of prospectus with SEBI/ROC, announcement of

    statutory advertisement, issuance of confirmation of allocation note("can") and allotment

    in the issue, designated date, general instructions, instructions for completing the bid

    form, payment instructions, submission of bid form, other instructions, disposal of

    application and application monies, , interest on refund of excess bid amount, basis of

    allotment or allocation, method of proportionate allotment, dispatch of refund orders,

    communications, undertaking by the company, utilisation of issue proceeds, restrictions

    on foreign ownership of Indian securities, etc.,

    Other Information

    This covers description of equity shares and terms of the Articles of Association, material

    contracts and documents for inspection, declaration, definitions and abbreviations, etc.,

    Past Track Record of Defaults/Economic Offences

    Investors should also visit www.watchoutinvestors.com, a website aided and sponsored

    by the Ministry of Company Affairs under its Investor Education & Protection Fund. This

    website is a national registry of all entities and individuals who have been indicted by

    various regulators ( like MCA, RBI, SEBI, BSE,NSE etc) for an economic offence and/or

    for non-compliance laws/guidelines and/or who are no longer in the specified activity.

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    APPLYING IN AN IPO

    Prerequisites

    1. Demat Account

    An investor has the option to apply for and receive the shares in physical form. However,

    it is advisable to get the allotment in demat form as the shares issued through an IPO/FPO

    are tradable only in the demat form. In any case, for all IPO/FPOs of any security of issue

    size of Rs. 10 crore or more, issues have to be compulsorily be only in dematerialized

    form, while QIBs and large investors (applying for more than Rs. 2,00,000), can apply

    only in demat form.

    There are two depositories in the country-National Securities Depository Ltd. (NSDL)

    and Central Depository Services ( India) Ltd. (CDSL) .Both have An extensive network

    of authorized Depository Participants (DPs). An investor can open a demat account with

    any of these DPs.

    The investor should fill in his the correct DP ID and Client ID details in the application

    forms.

    2. Permanent Account Number (PAN)

    Where the bids are for Rs. 50,000 or more, the bidder, or in case of a bid in joint names,

    each of the bidders, should mention his/her PAN allotted under the Income Tax Act. The

    copy of PAN card or PAN allotment letter is required to be submitted with the

    application form. Applications without this information and documents are treated

    incomplete and are liable to be rejected. (For more details, the investors should read the

    application form)

    3. Bank Account/DD

    Applications for IPO/FPOs are valid only if payment is made through a cheque or a

    demand draft. Application money cannot be paid in cash.

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    Process of Applying in an IPO/FPO

    An investor needs to first obtain an IPO/FPO application form. Forms are normally

    available from share brokers, lead managers, syndicate members and collecting banks.

    Application forms can also be picked up from the vendors at major commercial streets in

    most towns (for example outside the Bombay Stock Exchange)

    In the case of fixed price issues, the application form along with a cheque/demand draft

    for the requisite amount has to be deposited with the designated collecting bankers to the

    issue, whose names and addresses are printed on the application form.

    Application forms should be filled carefully as incomplete/incorrect forms can be

    rejected due to incomplete details

    ASBA

    In an endeavour to make the existing public issue process more efficient, SEBI

    introduced a supplementary process of applying in public issues, viz., the Applications

    Supported by Blocked Amount (ASBA) process. The ASBA process is available in all

    public issues made through the book building route, as well as for all rights issues. ASBA

    co-exists with the current process, wherein cheque is used as a mode of payment.

    The main features of ASBA process are as follows:

    a. Meaning of ASBA: ASBA is an application for subscribing to an issue, containing an

    authorisation to block the application money in a bank account.

    b. Availability of ASBA bid-cum application forms: Investors can obtain ASBA bid-

    cum-application forms from Self Certified Syndicate Banks (SCSBs). These forms are

    also easily available to investors from the website of BSE or NSE.

    i. Self Certified Syndicate Bank (SCSB)

    SCSB is a bank which offers the facility of applying through the ASBA process. A bank

    desirous of offering ASBA facility shall submit a certificate to SEBI, for inclusion of its

    name in SEBIs list of SCSBs. The said list will be displayed by SEBI on its website at

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    www.sebi.gov.in. ASBAs can be accepted only by SCSBs, whose names appear in the

    list of SCSBs displayed in SEBIs website. On inclusion in the list of SCSBs, a bank

    shall commence its activities as an SCSB w.e.f. the 1st or 15th of a month, whichever is

    earlier, from the date of such inclusion. It shall then be deemed to have entered into an

    agreement with the issuer and shall be required to offer the ASBA facility to all its

    account holders for all issues to which ASBA process is applicable.

    Given below is the list of Banks which have been authorized to accept ASBAs in all

    issues as on May 02, 2011.

    SR. No. NAME OF THE BANK

    1. ALLAHABAD BANK

    2. ANDHRA BANK

    3. AXIS BANK LTD.

    4. BANK OF AMERICA,N.A.

    5. BANK OF BARODA

    6. BANK OF INDIA

    7. BANK OF MAHARASHTRA

    8. BNP PARIBAS

    9. CANARA BANK

    10. CENTRAL BANK OF INDIA

    11. CITIBANK N.A.

    12. CITY UNION BANK LTD.

    13. CORPORATION BANK

    14. DEUTSCHE BANK AG

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    15. FEDERAL BANK LTD.,THE

    16. HDFC BANK LTD.

    17. HONGKONG & SHANGHAI BANKING CORP.LTD.,THE

    18. ICICI BANK LTD.

    19. IDBI BANK LTD.

    20. INDIAN BANK

    21. INDIAN OVERSEAS BANK

    22. INDUSIND BANK LTD.

    23. JP MORGAN CHASE BANK,N.A.

    24. KALUPUR COMMERCIAL CO-OPERATIVE BANK LTD.,THE

    25. KARUR VYSYA BANK LTD.,THE

    26. KOTAK MAHINDRA BANK LTD.

    27. NUTAN NAGARIK SAHAKARI BANK LTD.

    28. ORIENTAL BANK OF COMMERCE

    29. PUNJAB NATIONAL BANK

    30. SOUTH INDIAN BANK LTD.,THE

    31. STANDARD CHARTERED BANK LTD.

    32. STATE BANK OF BIKANER & JAIPUR

    33. STATE BANK OF HYDERABAD

    34. STATE BANK OF INDIA

    35. STATE BANK OF TRAVANCORE

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    36. SYNDICATE BANK

    37. TAMILNAD MERCANTILE BANK LTD.

    38. UCO BANK

    39. UNION BANK OF INDIA

    40. UNITED BANK OF INDIA

    41. VIJAYA BANK

    42. YES BANK LTD.

    An SCSB shall identify its Designated Branches (DBs) at which an ASBA investor shall

    submit ASBA and shall also identify the Controlling Branch (CB) which shall act as a

    coordinating branch for the Registrar to the Issue, Stock Exchanges and Merchant

    Bankers. The SCSB, its DBs and CB shall continue to act as such, for all issues to which

    ASBA process is applicable. The SCSB may identify new DBs for the purpose of ASBA

    process and intimate details of the same to SEBI, after which SEBI will add the DB to the

    list of SCSBs maintained by it. The SCSB shall communicate the following details to

    Stock Exchanges for making it available on their respective websites; these details shall

    also be made available by the SCSB on its website:

    (i) Name and address of the SCSB

    (ii) Addresses of DBs and CB and other details such as telephone number, fax

    number and email ids.

    (iii) Name and contact details of a nodal officer at a senior level from the CB.

    ii BSE/NSE websites

    Investors can download and print ASBA application forms from the websites of the

    Stock Exchanges i.e. Bombay Stock Exchange (BSE) and National Stock Exchange

    (NSE) which provideact as an electronic interface for ASBA facility i.e. Bombay Stock

    Exchange (BSE) and National Stock Exchange (NSE). Each ASBA form, so downloaded,

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    shall have a unique application number and can be used for making ASBA applications in

    public issues. The ASBA form for a specific public issue is made available on the

    websites of the Stock Exchanges at least one day before opening of a particular public

    issue. Investors will also have online access to soft copy of the abridged

    prospectus/prospectus of the public issue. For revisions of bids, investors can take print

    of a bid revision form.

    The unique application number on the form is important from a control and processing

    perspective point of view. Therefore, applications made using photocopy of the

    downloaded form shall not be accepted.

    A hyperlink to the websites of BSE or NSE websites for this facility is also provided on

    the websites of Merchant Bankers and SCSBs.

    c. ASBA Process in brief

    An ASBA investor shall submit an ASBA physically or electronically through the

    internet banking facility, to the SCSB with whom the bank account to be blocked is

    maintained. Syndicate/Sub-Syndicate members may also procure ASBA forms from the

    investors and submit it to SCSBs (Syndicate / Sub- Syndicate members would be

    required to upload the bid and other relevant details of such ASBA forms in the bidding

    platform provided by the stock exchanges and forward the same to the respective SCSBs.

    SCSBs shall carry out further action for such ASBA forms such as signature verification,

    blocking of funds etc. and forward these forms to the registrar to the issue).

    The application money shall remain blocked in the bank account till finalisation of the

    basis of allotment in the issue or till withdrawal/ failure of the issue or till withdrawal/

    rejection of the application, as the case may be. The application data shall thereafter be

    uploaded by the SCSB in the electronic bidding system through a web enabled interfaceprovided by the Stock Exchanges. Once the basis of allotment is finalized, the Registrar

    to the Issue shall send an appropriate request to the SCSB for unblocking the relevant

    bank accounts and for transferring the requisite amount to the issuers account. In case of

    withdrawal/ failure of the issue, the amount shall be unblocked by the SCSB on receipt of

    information from the pre-issue merchant bankers.

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    ASBA facility in rights issue shall enable a shareholder of the company as on record date

    to apply through ASBA mode by selecting the option of ASBA either (i) in Part A of the

    application form of rights issue, or (ii) in the plain paper application as to whether they

    desire to avail of the ASBA option, to the Self Certified Syndicate Bank (SCSB) with

    whom the bank account to be blocked, is maintained.

    d. Obligations of the Issuer

    The issuer shall ensure that adequate arrangements are made by the Registrar to the Issue

    to obtain information about all ASBAs and to treat these applications similar to non-

    ASBA applications while finalizing the basis of allotment, as per the procedure specified

    in the Guidelines.

    e. Applicability of ASBA process

    ASBA process shall be applicable to all public issues and rights issues which provide for

    not more than one payment option. The ASBA facility has been made mandatory for non-

    retail investors (Qualified Institutional Buyers and Non-Institutional Investors) making

    applications in public/rights issues with effect from May 01, 2011.

    Applying for IPO/FPOs on the Internet

    Websites of various brokerage firms now allow the facility to their clients to apply for

    IPO/FPOs online.

    Withdrawal of an Application after Closure of an IPO/FPO

    The Indian laws allow for a withdrawal of an application before the date of allotment.

    Proof a Bidder can Request from a Trading Member for Entering Bids

    The syndicate member returns the counterfoil with the signature, date and stamp of the

    syndicate member. The investor can retain this as a sufficient proof that the bids have

    been taken into account.

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    Changing/Revising the Bids

    The investor can change or revise the quantity or price in the bid using the form for

    changing/revising the bid that is available along with the application form. However, the

    entire process of changing of revising the bids should be completed within the date of

    closure of the issue.

    Knowing about IPO/FPOs currently open or are about to hit the market

    Every week SEBI issues press releases for information of the public, details of offer

    documents filed with SEBI and observations issued.

    At what Price should a Retail Investor apply?

    A retail investor is not required to make his bid at a specific price. Since he is not able to

    take a call on the right price, he should use the cut-off option. This would ensure that his

    application will be considered valid at all prices, including the final price decided by the

    issuer. For making bids at cut-off price, the payment has to be made at the highest price

    of the price band. In case a lower price is finalized or in case the investor is an

    unsuccessful allottee or is allotted lesser shares than applied for, he would get the

    necessary refund.

    How to improve the chances of allotment in an IPO/FPO?

    As most IPO/FPOs get oversubscribed, a retail investor is often disappointed in not

    getting any allotments or getting miniscule allotments. If an investor has decided on

    investing in a specific IPO/FPO based upon merits, he should commit as much resources

    as he can to that IPO/FPO. He should apply for as many shares as possible, within the

    limit of Rs. 2,00,000. It would also be worthwhile to apply in the names of all family

    members, provided all of them are applying from their own accounts and all of them have

    a valid demat account.

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    ALLOTMENTS IN IPOS

    Firm Allotments

    A company making an issue to public can reserve some shares on allotment on firm

    basis for some categories as specified in SEBI ICDR Regulations 2009. Allotment on

    firm basis indicates that allotment to the investor is on firm basis. SEBI ICDR

    Regulations 2009 provide for maximum 25% of shares which can be reserved on firm

    basis. The shares to be allotted on firm allotment category can be issued at a price

    different from the price at which the net offer to the public is made provided that the

    price at which the security is being offered to the applicants in firm allotment category is

    higher than the price at which securities are offered to public.

    Reservations on a Competitive Basis

    Reservation on Competitive Basis means reservation wherein specified securities are

    allotted in proportion of the number of specified securities applied for in respect of a

    particular reserved category to the number of specified securities reserved for that

    category.

    In case of an issue made through the book building process, the issuer may make

    reservation on competitive basis out of the issue size excluding promoters contribution

    and net offer to public in favour of the following categories of persons:

    (a) employees; and in case of a new issuer, persons who are in the permanent and full

    time employment of the promoting companies excluding the promoters and an immediate

    relative of the promoter of such companies

    (b) shareholders (other than promoters) of:

    (i) listed promoting companies, in case of a new issuer; and

    (ii) listed group companies, in case of an existing issuer

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    Provided that if the promoting companies are designated financial institutions or

    state and central financial institutions, the shareholders of such promoting companies

    shall not be eligible for the reservation on competitive basis;

    (c) persons who, as on the date of filing the draft offer document with the Board, are

    associated with the issuer as depositors, bondholders or subscribers to services of the

    issuer making an initial public offer

    Provided that the issuer shall not make the reservation to the issue management team,

    syndicate members, their promoters, directors and employees and for the group or

    associate companies of the issue management team and syndicate members and their

    promoters, directors and employees;

    In case of an issue made other than through the book building process, the issuer may

    make reservation on competitive basis out of the issue size excluding promoters

    contribution and net offer to public in favour of the following categories of persons:

    (a) employees; and in case of a new issuer, persons who are in the permanent and full

    time employment of the promoting companies excluding the promoters and an immediate

    relative of the promoter of such companies

    (b) shareholders (other than promoters) of:

    (i) listed promoting companies, in the case of a new issuer; and

    (ii) listed group companies, in the case of an existing issuer

    Provided that if the promoting companies are designated financial institutions or

    state and central financial institutions, the shareholders of such promoting companies

    shall not be eligible for the reservation on competitive basis.

    In case of a further public offer (not being a composite issue), the issuer may make

    reservation on competitive basis out of the issue size excluding promoters contribution

    and net offer to public in favour of retail individual shareholders of the issuer.

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    In case of rights issues, the issuer may make reservation for employees subject to the

    condition that value of allotment to any employee shall not exceed two lakh rupees.

    The reservation on competitive basis shall be subject to following conditions:

    (a) the aggregate of reservations for employees shall not exceed 5% of the post issue

    capital of the issuer

    (b) reservation for shareholders shall not exceed 10% of the issue size

    (c) reservation for persons who as on the date of filing the draft offer document with

    the Board, have business association as depositors, bondholders and subscribers to

    services with the issuer making an initial public offer shall not exceed 5% of the issue

    size

    (d) no further application for subscription in the net offer to public category shall be

    entertained from any person (except an employee and retail individual shareholder) in

    favour of whom reservation on competitive basis is made

    (e) any unsubscribed portion in any reserved category may be added to any other

    reserved category and the unsubscribed portion, if any, after such inter-se adjustments

    among the reserved categories shall be added to the net offer to the public category

    (f) in case of under-subscription in the net offer to the public category, spill-over to

    the extent of under-subscription shall be permitted from the reserved category to the net

    public offer category

    (g) value of allotment to any employee in pursuance of reservation made under sub-

    regulations (1) or (2), as the case may be, shall not exceed two lakh rupees

    In the case of reserved categories, a single applicant in the reserved category may make

    an application for a number of specified securities which exceeds the reservation.

    Any Preference while doing the Allotment?

    No, there cannot be any discretion in the allotment process. Prior to the SEBI Circular on

    DIP Guidelines dated September 19, 2005, the allotment to the Qualified Institutional

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    Buyers (QIBs) was on a discretionary basis. This however has been amended and all

    allottees are allotted shares on a proportionate basis within their respective categories.

    Basis of Allotment

    In case of over-subscription in a fixed price issue, the allotment is done on a

    proportionate basis.

    In the case of a bookbuilding issue, after its closure, the bids received are aggregated

    under different categories, such as reserved allotments, Qualified Institutional Buyers

    (QIBs), Non-Institutional Buyers (NIIs) and Retail Individual Investors. The

    oversubscription ratios are calculated for each of the categories against the shares

    reserved for each of the categories in the offer document. Within each of these segments,

    the bids are segregated into different categories based on the number of shares applied

    for. The oversubscription ratio is then applied to the number of shares applied for and the

    number of shares to be allotted for applicants in each of the buckets is determined. Then,

    the number of successful allottees is determined.

    In the case of a fixed price issue, after its closure, the applications received are

    aggregated under two categories; applications below Rs. 2,00,000 and those above this

    amount. The oversubscription ratios are calculated for each of the categories against the

    shares reserved for each of the categories in the offer document. Within each of these

    segments, the bids are segregated into different categories based on the number of shares

    applied for. The oversubscription ratio is then applied to the number of shares applied for

    and the number of shares to be allotted for applicants in each of the buckets is

    determined. Then, the number of successful allottees is determined.

    Number of Days for an Investor to Receive the Refund Order/Allotment Advice

    Companies are required to finalize the basis of allotment within 30 days from the closure

    of the issue in case of a fixed price issue and within 15 days from the closure of the issue

    in case of a book building issue or else they are liable to pay interest at the rate of 15%

    per annum. The refund orders/allotment advice is dispatched within two working days of

    finalizing the basis of allotment.

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    ANCHOR INVESTORS

    Out of the portion available for allocation to Qualified Institutional Buyers, up to 30%

    may be allocated to Anchor Investors subject to the following:

    Anchor Investors shall necessarily be Qualified Institutional Buyers who make an

    application for a value of ten crore rupees or more in a public issue made through the

    book building process in accordance with the SEBI ICDR Regulations 2009.

    One-third of the Anchor Investor portion shall be reserved for domestic mutual

    funds.

    The bidding for Anchor Investors shall open one day before the issue opens and

    shall be completed on the same day.

    Allocation to Anchor Investors shall be on a discretionary basis subject to

    minimum number of 2 investors for allocation of upto Rs.250 crore and 5 investors for

    allocation of more than Rs.250 crore.

    The number of shares allocated to Anchor Investors and the price at which the

    allocation is made, shall be made available in public domain by the merchant bankerbefore opening of the issue.

    If the price fixed for the public issue through book building process is higher than

    the price at which the allocation is made to Anchor Investors, the additional amount shall

    be paid by the Anchor Investors. However, if the price fixed for public issue is lower than

    the price at which the allocation is made to Anchor Investors, difference shall not be

    payable to the Anchor Investors.

    There shall be a lock-in of 30 days on the shares allotted to the Anchor Investors

    from the date of allotment in the public issue.

    No person related to the book running lead managers/ promoters/promoter group

    in the concerned public issue or the book running lead managers to the concerned public

    issue can apply under Anchor Investor category.

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    The parameters for selection of Anchor Investors shall be clearly identified by the

    merchant banker and shall be available as part of records of the merchant banker for

    inspection by SEBI.

    The applications made by Qualified Institutional Buyers under Anchor Investor

    category and under Non Anchor Investor category may not be considered as multiple

    applications.

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    LISTING & TRADING

    Number of Days for a Company to get its Securities Listed after the Issue

    The post-issue lead manager ensures that all steps for completion of the necessary

    formalities for listing and commencement of trading at all stock exchanges where the

    securities are to be listed are taken within 7 working days of finalisation of basis of

    allotment.

    With effect from May 1, 2010 the time between public issue closure and listing has been

    reduced to 12 days from existing of up to 22 days.

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    KEY INTERMEDIARIES

    Merchant Bankers

    A Merchant Banker possessing a valid SEBI registration in accordance with the SEBI

    (Merchant Bankers) Regulations, 1992 is eligible to act as a Book Running Lead

    Manager to an issue.

    In the pre-issue process, the Lead Manager (LM) takes up the due diligence of companys

    operations/ management/ business plans/ legal etc. Other activities of the LM include

    drafting and design of Offer documents, Prospectus, statutory advertisements and

    memorandum containing salient features of the Prospectus. The BRLMs shall ensure

    compliance with stipulated requirements and completion of prescribed formalities with

    the Stock Exchanges, RoC and SEBI including finalisation of Prospectus and RoC filing.

    Appointment of other intermediaries viz., Registrar(s), Printers, Advertising Agency and

    Bankers to the Offer is also included in the pre-issue processes. The LM also draws up

    the various marketing strategies for the issue.

    The post issue activities including management of escrow accounts, coordinate non-

    institutional allocation, intimation of allocation and dispatch of refunds to bidders etc areperformed by the LM. The post Offer activities for the Offer will involve essential

    follow-up steps, which include the finalisation of trading and dealing of instruments and

    dispatch of certificates and demat of delivery of shares, with the various agencies

    connected with the work such as the Registrar(s) to the Offer and Bankers to the Offer

    and the bank handling refund business. The merchant banker shall be responsible for

    ensuring that these agencies fulfill their functions and enable it to discharge this

    responsibility through suitable agreements with the Company.

    Syndicate Members

    The Book Runner(s) may appoint those intermediaries who are registered with the Board

    and who are permitted to carry on activity as an Underwriter as syndicate members. The

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    syndicate members are mainly appointed to collect and entire the bid forms in a book

    built issue.

    Registrars

    The Registrar finalizes the list of eligible allottees after deleting the invalid applications

    and ensures that the corporate action for crediting of shares to the demat accounts of the

    applicants is done and the dispatch of refund orders to those applicable are sent. The Lead

    manager coordinates with the Registrar to ensure follow up so that that the flow of

    applications from collecting bank branches, processing of the applications and other

    matters till the basis of allotment is finalized, dispatch security certificates and refund

    orders completed and securities listed.

    Bankers to the Issue

    Bankers to the issue, as the name suggests, carries out all the activities of ensuring that

    the funds are collected and transferred to the Escrow accounts. The Lead Merchant

    Banker shall ensure that Bankers to the Issue are appointed in all the mandatory

    collection centers as specified in SEBI ICDR Regulations 2009. The LM also ensures

    follow-up with bankers to the issue to get quick estimates of collection and advising the

    issuer about closure of the issue, based on the correct figures.

    Some of the Bankers have joined the new ASBA process

    Issue Stationery Printers

    These are firms that specialize in printing of issue stationery-offer documents, abridged

    prospectuses and application forms, and in subsequently dispatching these to the

    designated points.

    IPO Grading Agencies

    IPO grading has been made mandatory by SEBI as an endeavor to make additional

    information available for the investors in order to facilitate their assessment of equity

    issues offered through an IPO. IPO grades are assigned by a Credit Rating Agency

    registered with SEBI.

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    FILING INVESTOR GRIEVANCES

    Most of the issue complaints pertain to non-receipt of refund or allotment, or delay in

    receipt of refund or allotment and payment of interest thereon. These complaints shall be

    made to the post issue Lead Manger, who in turn will take up the matter with registrar to

    redress the complaints. In case the investor does not receive any reply within a reasonable

    time, investor may complain to SEBI, Office of investors Assistance.

    Investors can also lodge their complaints at www.investorhelpline.in, a website aided and

    sponsored by the Ministry of Company Affairs under its Investor Education & Protection

    Fund.

    OTHER ASPECTS

    Lock-in

    Lock-in indicates a freeze on the shares. SEBI ICDR Regulations 2009 have stipulated

    lock-in requirements on shares of promoters mainly to ensure that the promoters or main

    persons, who are controlling the company, shall continue to hold some minimum

    percentage in the company after the public issue. The requirements are detailed in

    Chapter III Part IV of SEBI ICDR Regulations 2009.

    Promoter

    The promoter has been defined as a person or persons who are in over-all control of the

    company, who are instrumental in the formulation of a plan or programme pursuant to

    which the securities are offered to the public and those named in the prospectus as

    promoters(s). It may be noted that a director / officer of the issuer company or person, if

    they are acting as such merely in their professional capacity are not be included in the

    definition of a promoter. 'Promoter Group' includes the promoter, an immediate relative

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    of the promoter (i.e. any spouse of that person, or any parent, brother, sister or child of

    the person or of the spouse). In case promoter is a company, a subsidiary or holding

    company of that company; any company in which the promoter holds 10% or more of the

    equity capital or which holds 10% or more of the equity capital of the Promoter; any

    company in which a group of individuals or companies or combinations thereof who

    holds 20% or more of the equity capital in that company also holds 20% or more of the

    equity capital of the issuer company. In case the promoter is an individual, any company

    in which 10% or more of the share capital is held by the promoter or an immediate

    relative of the promoter' or a firm or HUF in which the 'Promoter' or any one or more of

    his immediate relative is a member; any company in which a company specified in (i)

    above, holds 10% or more, of the share capital; any HUF or firm in which the aggregate

    share of the promoter and his immediate relatives is equal to or more than 10% of the

    total, and all persons whose shareholding is aggregated for the purpose of disclosing in

    the prospectus "shareholding of the promoter group"

    The details are provided in the SEBI ICDR Regulations 2009.

    Promoter's Contribution and Lock-in

    In case of an IPO/FPO, the promoters have to necessarily offer at least 20% of the post

    issue capital. In case of public issues by listed companies, the promoters shall participate

    either to the extent of 20% of the proposed issue or ensure post-issue share holding to the

    extent of 20% of the post-issue capital.

    In case of any issue of capital to the public the minimum contribution of promoters shall

    be locked in for a period of three years, both for an IPO/FPO and public issue by listed

    companies. In case of an IPO/FPO, if the promoters' contribution in the proposed issue

    exceeds the required minimum contribution, such excess contribution shall also be locked

    in for a period of one year. In addition, the entire pre-issue share capital, or paid up share

    capital prior to IPO/FPO, and shares issued on a firm allotment basis along with issue

    shall be locked-in for a period of one year from the date of allotment in public issue.

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    Greenshoe Option

    A Green Shoe option means an option of allocating shares in excess of the shares

    included in the public issue and operating a post-listing price stabilizing mechanism for a

    period not exceeding 30 days in accordance with the provisions of Chapter III Part V of

    SEBI ICDR Regulations 2009, which is granted to a company to be exercised through a

    Stabilizing Agent. This is an arrangement wherein the issue would be over allotted to the

    extent of a maximum of 15% of the issue size. From an investors perspective, an issue

    with green shoe option provides more probability of getting shares and also that post

    listing price may show relatively more stability as compared to market.

    The name comes from the fact that Green Shoe Company was the first to issue this type

    of option.

    Safety Net

    Any safety net scheme or buy-back arrangements of the shares proposed in any public

    issue shall be finalized by an issuer company with the lead merchant banker in advance

    and disclosed in the prospectus. Such buy back or safety net arrangements shall be made

    available only to all original resident individual allottees limited up to a maximum of

    1000 shares per allottee and the offer is kept open for a period of 6 months from the last

    date of dispatch of securities.

    Underwriting

    There are two types of underwriting.

    Hard Underwriting

    Hard underwriting is when an underwriter agrees to buy his commitment at its earliest

    stage. The underwriter guarantees a fixed amount to the issuer from the issue. Thus, in

    case the shares are not subscribed by investors, the issue is devolved on underwriters and

    they have to bring in the amount by subscribing to the shares. The underwriter bears a

    risk which is much higher in soft underwriting.

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    Soft Underwriting

    Soft underwriting is when an underwriter agrees to buy the shares at later stages as soon

    as the pricing process is complete. He then, immediately places those shares with

    institutional players. The risk faced by the underwriter as such is reduced to a small

    window of time. Also, the soft underwriter has the option to invoke a force Majeure (acts

    of God) clause in case there are certain factors beyond the control that can affect the

    underwriters ability to place the shares with the buyers.

    Frequently Asked Questions on IPO Grading

    All details regarding operational aspects of IPO grading like, grading methodology,

    validity of grading, scope of grading etc, as given below are based on the information

    obtained from the Credit Rating Agencies(CRAs) (including their FAQs) and are meant

    only for general informational purpose regarding the overall functioning of the IPO

    Grading system.

    Specific details regarding IPO grading may be obtained directly from the respective

    Credit Rating Agencies.

    What is IPO Grading?

    IPO grading is the grade assigned by a Credit Rating Agency registered with SEBI, to the

    initial public offering/ follow on public offering (IPO) of equity shares or any other

    security which may be converted into or exchanged with equity shares at a later date. The

    grade represents a relative assessment of the fundamentals of that issue in relation to the

    other listed equity securities in India. Such grading is generally assigned on a five-point

    point scale with a higher score indicating stronger fundamentals and vice versa as below.

    IPO grade 1: Poor fundamentals

    IPO grade 2: Below-average fundamentals

    IPO grade 3: Average fundamentals

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    IPO grade 4: Above-average fundamentals

    IPO grade 5: Strong fundamentals

    IPO grading has been introduced as an endeavor to make additional information available

    for the investors in order to facilitate their assessment of equity issues offered through an

    IPO.

    By when is an Issuer required to obtain the grade for the IPO?

    IPO grading can be done either before filing the draft offer documents with SEBI or

    thereafter. However, the Prospectus/Red Herring Prospectus, as the case may be, must

    contain the grade/s given to the IPO by all CRAs approached by the company for grading

    such IPO. Further information regarding the grading process may be obtained from the

    Credit Rating Agencies

    Who bears the cost of the IPO grading process?

    The company desirous of making the IPO is required to bear the expenses incurred for

    grading such IPO.

    Is grading optional?

    No, IPO grading is not optional. A company which has filed the draft offer document for

    its IPO with SEBI, on or after 1st May, 2007, is required to obtain a grade for the IPO

    from at least one CRA.

    Can the issuer company reject an IPO grade?

    IPO grade/s cannot be rejected. Irrespective of whether the issuer finds the grade given

    by the rating agency acceptable or not, the grade has to be disclosed as required under the

    SEBI ICDR Regulations 2009. However the issuer has the option of opting for another

    grading by a different agency. In such an event all grades obtained for the IPO will have

    to be disclosed in the offer documents, advertisements etc.

    Will IPO grading delay the process of issue?

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    IPO grading is intended to run parallel to the filing of offer document with SEBI and the

    consequent issuance of observations. Since issuance of observation by SEBI and the

    grading process, function independently, IPO grading is not expected to delay the issue

    process.

    What are the factors that are evaluated to assess the fundamentals of the issue while

    arriving at the IPO grade?

    The IPO grading process is expected to take into account the prospects of the industry in

    which the company operates, the competitive strengths of the company that would allow

    it to address the risks inherent in the business (es) and capitalise on the opportunities

    available, as well as the companys financial position.

    While the actual factors considered for grading may not be identical or limited to the

    following, the areas listed below are generally looked into by the rating agencies, while

    arriving at an IPO grade

    Business Prospects and Competitive Position

    i. Industry Prospects

    ii. Company Prospects

    Financial Position

    Management Quality

    Corporate Governance Practices

    Compliance and Litigation History

    New ProjectsRisks and Prospects

    It may be noted that the above is only indicative of some of the factors considered in the

    IPO grading process and may vary on a case to case basis.

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    Does IPO grading consider the price at which the shares are offered in the issue?

    No. IPO grading is done without taking into account the price at which the security is

    offered in the IPO. Since IPO grading does not consider the issue price, the investor

    needs to make an independent judgment regarding the price at which to bid for/subscribe

    to the shares offered through the IPO.

    Where can one find the grades obtained for the IPO and details of the grading

    process?

    All grades obtained for the IPO along with a description of the grades can be found in the

    Prospectus. Abridged Prospectus, issue advertisement or any other place where the issuer

    company is making advertisement for its issue. Further the Grading letter of the Credit

    Rating Agency which contains the detailed rationale for assigning the particular grade

    will be included among the Material Documents available for Inspection.

    Does an IPO grade, which indicates above average or strong fundamentals mean

    one could subscribe safely to the issue?

    An IPO grade is NOT a suggestion or recommendation as to whether one should

    subscribe to the IPO or not. IPO grade needs to be read together with the disclosures

    made in the prospectus including the risk factors as well as the price at which the shares

    are offered in the issue.

    How does one interpret the IPO Grades?

    The grades are allocated on a 5-point scale, the lowest being Grade 1 and highest Grade

    5.The meaning of these grades have been explained under Question 1 in this FAQ.

    How does IPO Grading help in deciding about investing in an IPO?

    IPO Grading is intended to provide the investor with an informed and objective opinion

    expressed by a professional rating agency after analyzing factors like business and

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    financial prospects, management quality and corporate governance practices etc.

    However, irrespective of the grade obtained by the issuer, the investor needs to make

    his/her own independent decision regarding investing in any issue after studying the

    contents of the prospectus including risk factors carefully.

    What is the role of SEBI in IPO grading exercise?

    SEBI does not play any role in the assessment made by the grading agency. The grading

    is intended to be an independent and unbiased opinion of that agency.

    Will IPO Grading given by CRAs be a parameter for SEBI to issue its observations?

    The grading is intended to be an independent and unbiased opinion of a rating agency.

    SEBI does not pass any judgment on the quality of the issuer company. SEBIs

    observations on the IPO document are entirely independent of the IPO grading process or

    the grades received by the company.

    Which credit rating agencies are registered with SEBI?

    The following four credit rating agencies are registered with SEBI.

    Credit Analysis & Research Ltd.

    4th Floor, Godrej Coliseum

    Somaiya Hospital Road

    Off Eastern Express Highway

    Sion (East)

    Mumbai-400022

    http://www.careratings.com

    ICRA Ltd.

    1105, Kailash Building, 11th Floor

    26, Kasturba Gandhi Marg

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    New Delhi-110 001

    http://www.icra.in

    CRISIL Ltd.

    CRISIL House

    121-122 Andheri Kurla Road

    Andheri (East)

    Mumbai400093

    http://www.crisil.com

    Fitch Ratings India Pvt.Ltd.

    Apeejay House, 6th Floor

    3, Dinshaw Vachha Road

    Churchgate

    Mumbai-400020

    http://www.fitchindia.com

    Brickwork Ratings India Pvt.Ltd.

    #39/2,Sagar Complex,2nd Floor

    Bannerghatta Road

    Near Diary Circle

    Bangalore-560029

    http://www.brickworkratings.com