STUDY ON ‘MUTUAL FUND –NEW FUND OFFER V/S EQUITY INITIAL PUBLIC OFFER’

8/9/2019 STUDY ON MUTUAL FUND NEW FUND OFFER V/S EQUITY INITIAL PUBLIC OFFER

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Chapter: - 1

HISTORY OF COMPANY

1.1 History

1.2 Profile of Company1.3 Mission of company

1.4 Firms services

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1.1 HISTORY

Peninsular Capital Market Ltd a dream project by a group of

professionals ,and it became a reality in 1995.

The company was promoted by a team of experts led by Mr. T S

Anantharaman who is one of the luminaries of the stock broking field in the

country. Peninsular started its operation in 1996 by taking membership in NSE.

It added a step to its growth by becoming a Depository Participant of NSDL in

the year 1999 and took up a clearing membership of the derivative segment of

NSE in 2001. It became member in BSE in the year 2000. Now Peninsular has

become one of the largest trading networks in the country with more than 220

branches.

Peninsular Capital Market Ltd has promoted a wholly owned

subsidiary named, Peninsular Multi Comex Services Ltd, for promoting

commodity trading, it began operation in 2003 and now has become a player

of considerable repute having membership on the countrys leading

commodity exchanges NCDEX, MCS, NMCE and IPSTA.

Peninsular Capital Market has opened five more branches in

December-2005, taking the total number to 256. All these branches offer

equity, derivative and commodity trading, IPO, mutual fund, portfolio

management and depository services.

The new branches are Kaipamangalam and Mala in Thrissur district,

Kozhenchery in Pathanamthitta, Shanthi Colony and Anna Nagar West in

Chennai and Vishweshwaraya Nagar in Belgaum.

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A press release issued here said that the company has taken

membership in Dubai Gold and Commodity Exchange and started

operations on November 22.

Peninsular Capital in expansion mode :-

Hyderabad: The Kochi-based, Peninsular Capital Market Ltd (PCML), a

leading investment and financial services plans to double customer base to

one lakh from 50,000 and up its trading branches to 500 from the existing

240 across the country in the next 16 months.

The PCML Chairman, T.S. Anantharaman, explained the expansion

plans to newspersons here on Saturday after opening the second trading

terminal in Hyderabad and 21st in Andhra Pradesh. It proposes to set up

another 50 trading branches in the State before March 2007, he said.

According to the PCML Managing Director, Akshay Agarwal, the

company has decided to move from a franchisee-supported organisation

towards a hybrid system by adding to its list both business associates and

direct branches. Of the proposed network of 500 trading branches by March

2007, the company plans to have at least 100 directly owned branches, he

said.

Anantharaman said the company has recently obtained approval from

the Securities and Exchange Board of India for offering portfolio

management services.

The company has set a target of managing around Rs. 100 crore of

funds under the PMS scheme by March 2007.

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To focus on commodity: Having obtained membership of the Dubai

Gold and Commodities Exchange recently, the company proposes to focus

on investors in West Asia for its PMS operations.

According to Anantharaman, the trading volumes of Indian commodities

market are expected to surpass those of the capital market in the near future.

The company is planning to increase its presence in the commodity markets

by setting up of branches in agricultural regions of the country. PCML

currently has membership in three of the national commodity exchanges.

To support customers to have access to funds to augment their tradevolumes, it is aiming to introduce margin-funding facility in a big manner.

The company is bullish on opportunities in the area of margin funding, he

said.

IPO route: To raise funds required for meeting its aggressive

expansion plans, the company proposes to tap the markets. As a part of this,

PCML proposes to initially go in for private placement of equity for raising

around Rs 20 crore in the next couple of months.

The company proposes to mobilise around Rs 200 crore through

initial public offering sometime next fiscal, Anantharaman said.

(SEBI Reg No: INB 230881431) (SEBI Reg No: INB

010881432), (NSE F & O SEBI Reg No. INF: 230881431),(NSDL DP SEBI Reg No. IN-DP-NSDL 91-99)

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http://www.bseindia.com/index_op.htmhttp://www.nseindia.com/


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1.2 PROFILE OF THE COMPANY

1.) Name of the company:

PENINSULAR CAPITAL MARKET LTD.

2.) Registered office:

PENINSULAR CAPITAL MARKET LTD.

Veekshanam Road,

Cochin-682 035.

3.) Board of Directors:

Mr.Mr.T.S.Anantharaman Chairman

Mr.Mr.Akshay Agarwal M.D.

Mr.Mr. HARIHARAN Company President4). Bankers:

ICICI Bank

HDFC BankUTI Bank

MANAGEMENT TEAM

NAME DESIGNATION

Mr. HARIHARAN COMPANY PRESIDENT

Mr. Joseph Lukose Manager Administration

Smt. Girija Devi Manager Operations

Mr. Sojan Chacko Manager Finance & DeliveryMr. V.P Menon Manager Marketing

Mr. SanalKumar N Manager Public Relation Training

Mr. Girish Kumar K.S Manager - Commodities

Mr. Deepak Dharmadev Manager - Systems

Mr. Harishankar Asst. Manager - DP

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1.3 MISSION OF COMPANY

Our mission is to offer clients the best combination of advanced

trading software with high technology, low costs and low margin

requirements, efficient and secure back office fund administration, and a

broad array of products with high profit potential.

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1.4 FIRMS SERVICES

1. Mutual Fund:-

Peninsular Capital Market Ltd is aggressively marketing Mutual

Funds.

A Mutual Fund is a trust that pools the savings of a number of

investors who share a common financial goal. The money collected is

then invested in capital market instruments such as shares, debentures

and other securities. The income earned through these investments

and the capital appreciation realized are shared by its unit holders in

proportion to the number of units owned by them. Thus a Mutual

Fund is one of the most suitable investments for the common man as

it offers an opportunity to invest in a diversified, professionally

managed basket of securities at a relatively low cost. The flow chart

below describes broadly the working of a mutual fund.

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2. Equities & Derivatives :-

A Pioneer in the Indian capital markets, Peninsular Capital Market

Ltd. (PCML) launched its stock broking operations as a member of NSE

India in 1996, promoted by a group of professional and experienced

stockbrokers led by Mr. T.S. Anantharaman, eminent investment consultant

& financial columnist. Since then PCML has made tremendous strides,

making it one of the top trading and clearing members in NSE (both cash &

derivatives) and BSE.

Peninsular Capital Market Ltd. Benefited hugely from the Tech fueled

bull run of the late 90s becoming one of the top five broking firms in India

as well as the one with the largest countrywide trading network through a

very successful franchisee business model.

Peninsular played a path-breaking role in the implementation and

popularization of CTCL (computer to computer Link) trading technology as

early as 2000. The facility currently on offer from Peninsular offers the end

user, the privilege of trading across 5 different markets ( NSE-Equity, NSE-

Derivatives, BSE-Equity, MCX & NCDEX) on a single screen.

With trading services from over 225 locations in India, having

representation in 11 states, PCML holds the distinction of one of Indias

largest trading networks. The company combines the experience of veterans

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at the helm with the energy of a talented work force who leave no stone

unturned in their quest for customer delight.

Membership of NSE-CM, NSE-FO & BSE.

Trading on 5 different platforms (Commodity and Equity)

through a single screen.

Web enabled service including statements and e-contract notes.

One of the largest trading networks in India and spreading

further by the day.

Own private VSAT network for CTCL trading.

Choice of multiple internet trading systems.

Extremely competitive tariff structure.

3. PMS:-

Throughout its existence Peninsular has been proactively assisting

its clientele with their investments. With its dedicated in house research

department and licensed portfolio management division, Peninsular is fully

geared to undertake active management services on behalf of its clients.

Drawing on its considerable experience, the division helps you to make

and keep track of investments in the increasingly volatile financial markets

through a value based investment approach. Investors of all creeds are

sure to benefit by availing the services offered by Peninsular in this regard.

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2.1 INTRODUCTION OF MUTUAL FUND

Meaning: -

To state in simple words, a mutual fund collects the saving from smallinvestors, invest them in government & other corporate, securities & earn

income through interest & dividends, besides capital gains. It works on the

principle of small drops of water make a very much on its own.

Definition: -

The securities &b exchange Board of India ( mutual fund )

Regulation, 1993 defines a mutual fund as a fund established in the from

of a trust by a sponsor to raise monies by the trustees through the sale of

units to the public, under one or more schemes, for investing in securities in

accordance with these regulation.

Origin of the fund: -

The origin of the concept of mutual fund dates back to the very down

to commercial history. It is said that Egyptians & Phoenicians sold their

shares in vessels& caravans with a view to spreading the risk attached with

these risky ventures. The real credit of & colonial government trust of

London established in 1868. A large number of close ended mutual funds

were formed in the U.S.A. in 1930s. In India it began in the year 1964 with

the unit trust of India launching it first fund, the unit schemes 1964.

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2.2 TYPES OF FUNDS

In the investment market, one can find a variety of investors with

different needs, objectives & risk taking capacities. For instance, a

young businessman would like to get more capital appreciation for his

funds & he would be prepared to take greater risks than a person who is

just on the verge of his retiring age.

MUTUAL FUND

On the basis of on the basis ofExecution & operation yield & investment pattern

Close Open Income Growth Balance Specialized Money Taxation

Ended Ended Fund Fund Fund Mutual Market FundFund

Close-ended fund: -

Under this scheme, the corpus of the fund & its duration are prefixed.

In other words, the corpus of the fund & the number of units are determined

in advance, once the subscription reaches the pro-determined level, the entry

of investors is closed.

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Open-ended funds: -

It is just the opposite of close-ended fund. Under this scheme, the size

of the fund the period of the fund is not determined. The investors are free to

buy & sell any number of units at any point of time.

Income fund: -

As the very name suggests, this fund aims at generating &

distributing regular income to the members on a periodical basis.

Growth fund: -

Growth fund concentrate mainly on long run gains i.e., capital

appreciation. They do not offer regular income & aim at capital appreciation

in the long run.

Balanced fund: -

This is otherwise called income-cum-growth fund. It is nothing but

a combination of both income & growth fund. It aims at distributing regular

income as well as capital appreciation.

Specialized funds: -

Besides the above, a large number of specialized funds are in

existence aboard. The offer special scheme so as to meet the specific needsof specific categories of people like pensioners, widows etc. it also open for

NRI people.

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2.3 IMPORTANCE OF MUTUAL FUNDS

Channelising savings

Offering wide port folio

Providing better yield

Offering tax benefits

5 Promoting industrial development

6. Keeping the money market active

7. Supporting capital market.

8. Flexible investment Schedule

Risks for mutual funds: -

1. Market Risks

2. Scheme Risks

3. Investment Risks

4. Business Risk

5. Political Risk.

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2.4 INTRODUCTION OF EQUITY

Equity shares may be regarded as the backbone of capital structure ofa company. Equity shares don not carry any special right in respect of

dividend or return of capital in the event of the winding up the company.

Equity shareholders are the real risk bearers of companys business.

Definition: -

As Hoagland has put it the equity share holders are the residual

claimants against the assets & income of the corporation.

As Steven S.Anrever has remarked, The risks are more than balanced

by the opportunity to have a larger voice in the operation of the company,

but by the chance to participate in profits through dividend & by the

prospects of appreciation in the value of the share hold by them.

Advantages of equity shares to the company: -

1. No obligation to pay dividend

2. No charge on property

3. Refunding capital

4. Wide scope of marketability

5. High credit worthiness

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Disadvantages of Equity shares to the company: -

1. No trading on Equity

2. Over capitalization

3. Interference in management

4. Concentration of control

5. Speculation

Advantages of equity shares to investors: -

1. Higher dividends

2. Participation in management

3. Right shares

4. Benefits of coupons

5. Capital appreciation

Disadvantages of equity shares to investors: -

1. Uncertain return2. Low market value

3. Lacks liquidity

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Chapter: - 3

INTROUDUCTIONOF

MUTUAL FUND NFOAND

EQUITY IPO

3.1 Introduction of MF NFO

3.2 Key Elements of MF offer documents

3.3 Introduction of Equity IPO

3.4 Book Building

3.5 Process of Book Building

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3.1 INTRODUCTION OF MUTUAL FUND NEW

FUND OFFER

The first step is to check the most important document in mutual fund

investing the offer document. New fund offer comes in market fist time by

any bank or financial institutions. Ex. SBI, UTI etc.

In NFO each & every important detail is given. NFO opens & closes

for limited time period. It will re-opens again after short time. After

allotment of units the sponsor of mutual fund investing the collected money

from investors. They invest these funds in different companies. For this they

prepare good portfolio for investment. The objective of mutual fund may be

different as per scheme, but most of common objective of NFO is to provide

money to companies as well as to five growth & dividend investors with

minimum risk.

In MF NFO offer document very important document. A mutual Fund offer

document is legal document that must adhere to standards set forth by the

Securities Exchange Board of India (SEBI),the regulatory agency that

oversees the Indian Mutual Fund industry.

The information contained in the prospectus is intended to help you

understand. What types of securities a fund invests in and the investment

philosophy that investment manager uses in selecting individual securities

for the fund. The offer document will also provide information one the funds

income and expenses a review of historical performance, information about

year ability to purchase or redeem your units. The offer documents will also

outline any loads sales charges that may apply to your investment

transaction.

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Key Elements Of A Mutual Fund Offer Document:

The information contained in a mutual fund offer document is

presented in several sections.

Date of issue

Minimum Investment

Investment objective

Risk factors

Fees and Expenses

Tax information

Investor Serious

Benchmark Index

Dividend policy

Fund manager

Some other facilities

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3.2 INTRODUCTION OF EQUITY IPO

A corporate may raise capital in the primary market by way of an

initial public offer/ offering rights issue or private placement an initial public

offer is the selling of securities to the public in the primary market. It is the

largest sources of funds with long or indefinite maturity for the company.

The first public offering of equity shares of a company, which is

followed bye a listing of its shares on the stock market. Is called the initial

public sector (IPO)

What is book building?

Book Building is basically a capital issuance process used in Initial Public

Offer (IPO) which aids price and demand discovery. It is a process used for

marketing a public offer of equity shares of a company. It is a mechanism where,

during the period for which the book for the IPO is open, bids are collected from

investors at various prices, which are above or equal to the floor price. The process

aims at tapping both wholesale and retail investors. The offer/issue price is then

determined after the bid closing date based on certain evaluation criteria.

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The Process:

The Issuer who is planning an IPO nominates a lead merchant

banker as a 'book runner'.

The Issuer specifies the number of securities to be issued and

the price band for orders.

The Issuer also appoints syndicate members with whom orders

can be placed by the investors.

Investors place their order with a syndicate member who inputs

the orders into the 'electronic book'. This process is called'bidding' and is similar to open auction.

A Book should remain open for a minimum of 5 days.

Bids cannot be entered less than the floor price.

Bids can be revised by the bidder before the issue closes.

On the close of the book building period the 'book runner

evaluates the bids on the basis of the evaluation criteria whichmay include -

Price Aggression

Investor quality

Earliness of bids, etc.

The book runner and the company conclude the final price at which it

is willing to issue the stock and allocation of securities.

Generally, the number of shares are fixed, the issue size gets frozen

based on the price per share discovered through the book building

process.

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Allocation of securities is made to the successful bidders.

Book Building is a good concept and represents a capital market

which is in the process of maturing.

Corporate may raise capital in the primary market by way of an initial public

offer, rights issue or private placement. An Initial Public Offer (IPO) is the

selling of securities to the public in the primary market. This Initial Public

Offering can be made through the fixed price method, book building method

or a combination of both. In case the issuer chooses to issue securities

through the book building route then as per SEBI guidelines, an issuer

company can issue securities in the following manner:

100% of the net offer to the public through the book building route.

75% of the net offer to the public through the book building process

and 25% through the fixed price portion.

Under the 90% scheme, this percentage would be 90 and 10

respectively.

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Chapter: - 4

MUTUAL FUND NFO

V/sEQUITY IPO

Basic facts between MF-NFO & Equity IPO

MF Offer Document & Red Herring

ProspectusRegistration Procedure

Risk Factors

Price of Issue

Load & Brokerage

Check List Points

Management Body

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3. Time Limit: -

Equity IPO is without time bound. In equity IPO there is no entryand exist time limit. In mutual fund there are entry & exist restriction

time bound. Some are open ended & close-ended types of MFs are

there. There are again charges & commission of services for entry & exit

load.

4. Entry & exist load, other charges: -

MF cant bargain & not negotiate the exist & re-entry load. In equity

IPO onetime an IPO allotment is done depends on exist & re-entry on

individual basis. In equity IPO investors have many options for entry &

exist at anytime. They can do it with the help of broker who is registered

by the stock exchanges having license by SEBI (security exchange Board

of India)

5. Prospectus: -

MF NFOs prospectus does not specify the certain detail nor exactly

view where they are going to invest. Wide vision & many things are

uncovered & un notice. Equity IPO is clear companys profile & perfect

vision for where individual putting them money so people are know the

risk

6. Return & Risk: -

In MFNFO return are limited in the sense over period of time. People

get better return. But it is not always good return. Equity IPO can

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have very good return, faster return & have faster depreciation, it is

risky than MF. But universal low is that, more risk, more return.

7. Advice & guidance: -

In equity IPO individuals decision is there but in MF investors are

seeking advice & guidance from fund manager & from lead manager. In

MF people have not own idea but in IPO people have all rights & proper

guidelines.

8. Charges & brokerage: -

In MFs charges are different. Generally entry load is nil in MFNFO.

In IPO brokerage is there. In mutual fund exist load is there. In IPO

individual have to pay brokerage for out of shares. MF exist load is more

than the equity.

9. Effects: -

In MFNFO group of company in which MF is investing.

Immediate effects in MF like certain development climate, sector

change is take place but it is not affect the Mf too much. But in equity

all above causes take place and affects very much, because money is

invested in particular company & industry. And also such restrictions

are there Governments policy & taxation having direct impaction

company.

10. Illegal use: -

Illegal use of MF is not done generally. But in foreign it took place

one time in past. In equity most of company use the fund for it is own

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purpose like expansion, diversification etc but into some level. But

illegal use of fund is possible in equity also.

11. Is there any difference between issue of a mutual fund and

an initial public offering (IPO) of a company?

Yes, there is a difference. IPOs of companies may open at lower or higher

price than the issue price depending on market sentiment and perception of

investors. However, in the case of mutual funds, the par value of the units

may not rise or fall immediately after allotment. A mutual fund scheme takessome time to make investment in securities. NAV of the scheme depends on

the value of securities in which the funds have been deployed.

12. NAV v/s Price of an equity share

In case of companies, the price of its share is as quoted on the stock

exchange, which apart from the fundamentals, is also dependent on the

perception of the companys future performance & the demand-supply

scenario. And hence the market price is generally different from its book

value.

There is no concept as market value for the MF unit. Therefore, when we

buy MF units at NAV, we are buying at book value. And since we are

buying at the book value, we are paying the right price of the assets whether

it be Rs 10 or Rs.100. There is no such thing as a higher or lower price.

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4.2 MUTUAL FUND OFFER DOCUMENT

Many people today find that they are deluged with information about

investing. News programs provide updates on the stock market several times

a day. Through the Internet, individuals can check on the performance of

their investments at the click of a mouse. But one of the key sources of

investment information, and one that some investors may be tempted to

overlook, is the Mutual Fund Offer Document.

A mutual fund offer document is a legal document that must adhere to

standards set forth by the Securities Exchange Board Of India (SEBI), the

regulatory agency that oversees the Indian Mutual Fund industry. The

information contained in the prospectus is intended to help you understand

what types of securities a fund invests in and the investment philosophy that

the Investment Manager uses in selecting individual securities for the fund.

The offer document will also provide information on the funds income and

expenses, a review of historical performance, and information about your

ability to purchase or redeem your units. In addition, the offer document will

also outline any loads/sales charges that may apply to your investment

transactions.

By law, mutual fund companies are required to provide you with an offer

document before you make an initial investment. Before investing, take the

time to read this important document.

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Questions to ask before investing

A mutual fund offer document can help you answer the following questions:

In what does this scheme invest?

Is the scheme seeking income or capital growth?

What has been the rate of return?

What are the options available in the scheme (Growth / Dividend)?

Is the scheme an open ended / close ended scheme and if there is a

lock-in period applicable?

Key Elements of a Mutual Fund Offer Document

The information contained in a mutual fund offer document is presented in

several sections. As you read through these sections, youll want to evaluate

how well the fund matches your investment objectives. Heres a look at key

elements that are contained in an Offer Document.

Date of issue - A prospectus must be updated at least once

in two years.

Minimum investment - Mutual funds differ both in the

minimum initial investment required and the minimum for subsequent

investments.

Investment objective - This section states the investment

goal of the fund, from income to long-term capital appreciation, and may

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state the types of investments that the scheme invests in, such as

government bonds or common stocks. Be sure the schemes objective

matches your investment goal.

Investment policies - An offer document will outline the

general strategies the Investment Manager will use in selecting individual

securities. This section may provide further information about the

securities in which the scheme invests, such as ratings of bonds or the

types of companies considered appropriate for a fund.

Risk factors - Every investment involves some level of risk.

The scheme offer document will describe the risks associated withinvestments in the scheme.

Fees and expenses - Sales and management fees associated

with a mutual fund must be clearly listed.

Tax information An Offer Document will include

information on the tax treatment of dividend and capital gains, including

information on deduction of tax at source

Investor services - Unit holders may have access to certain

services, such as automatic reinvestment of dividends, systematic

investment plan (SIP), systematic withdrawal plans (SWP) and

systematic investment plan for corporate employees. This section of the

prospectus, usually near the back of the publication, will describe these

services and how you can take advantage of them.

An offer document generally ranges from 20 to 30 pages and includes a table

of contents. The scheme offer document may be amended from time to time

by attaching an addendum, which highlights the changes eg change in load

structure, introducing of a new facility etc. It is therefore important for

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investors to read the offer document in detail to be able to understand the

features of the scheme and get the best out of the services offered by the

Investment Manager.

RED HERRING PROSPECTUS

"Red Herring Prospectus" is a prospectus which does not have details of

either price or number of shares being offered or the amount of issue. This

means that in case the 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. An RHP

for and FPO can be filed with the RoC without the price band and the issuer,

in such a case will notify the floor price or a price band by way of an

advertisement one day prior to the opening of the issue. In the case of book-

built issues, it is a process of price discovery and the price cannot be

determined until the bidding process is completed. Hence, such details are

not shown in the Red Herring prospectus filed with the 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.

"Abridged Prospectus" means contains all the salient features of aprospectus. It accompanies the application form of public issues.

What does one mean by `Lock-in'?

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"Lock-in" indicates a freeze on the shares. SEBI Guidelines 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 IV of DIP guidelines.

How the word `Promoter' has been defined?

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 orprogramme 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 of the

promoter (i.e. 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 per cent or more of the equity capital or which holds 10 per cent 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 per cent or

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

the equity capital of the issuer company.

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4.3 REGISTRATION PROCEDURE

REGISTRATION OF MUTUAL FUND:-

All mutual funds are required to register with the securities and

exchanges board of India. Registration is intended to provide adequate and

accurate disclosure of material facts concerning the mutual fund, SEBI

regulations has laid down, an eligibility criteria u/s 7 , for the purpose of

grant of certificate of registration with a view to ensure that players have a

sound track record and general reputation of fairness and integrity in all their

business transactions.

Regulation states that the AMC shall have a minimum net worth of

Rs. 10 crores this is to serve both as an entry barriers as well as to enable the

AMC to provide for its own infrastructure such as office space, personnel

and systems independent of the sponsor.

Any shortfall in the net worth would have to be made up by the

sponsor immediately. The initial contribution to the net worth should be in

the form of cash and all assets should be held in the name of the AMC. This

is necessary to bring about a complete arms-length relationship with the

sponsor and its affiliates. In case the AMC wants to carry out other fund

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management business, it should satisfy the capital adequacy requirement for

each such business independently.

In case the AMC wishes to float assured return schemes or launch no

load funds, it should satisfy SEBI that its present net worth would be

adequate to meet any financial obligation which may arise and if required

the net worth should be increased.

What is the procedure for registering a mutual fund with

SEBI?

An applicant proposing to sponsor a mutual fund in India must submit an

application in form a along with a fee of Rs. 25,000. the application is

examined and once the sponsor satisfies certain conditions such as being inthe financial services business and processing positive net worth for the last

five years, having net profit in three out of the last five years and possessing

the general reputation of fairness and integrity in all business transactions, it

is required to complete the remaining formalities for setting up mutual fund.

These include inter alia, executing the trust deed and investment

management agreement, setting up a trustee company/board of trustees

comprising two thirds independent trustees, incorporating the Asset

Management Company (AMC) contributing to at least 40% of the net worth

of the AMC and appointing a custodian. Upon satisfying these conditions,

the registration certificate is issued subject to the payment of registration

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fees of Rs 25.00 lacs for details; see the SEBI (Mutual Funds) Regulations,

1986.

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REGISTRATION & ELIGIBILITY FOR AN IPO:-

A company can make a 100 percent retail issue provided it satisfied all of

the following conditions

It has a net tangible assets of at least Rs 3 crore in each of

the proceeding 3 years.

It has a track record of distribution profits for at least 3 out

of the immediately proceeding 5 years.

It has a net worth of al least Rs 1 crore in each of the

proceeding 3 financial years.

The issue size does not exceed five times the pre-issue net

worth.

In case an unlisted company does not satisfy any of the above conditions, it

can make an IPO of equity shares or convertibles only if it meets the

following two conditions The issue is made through the book building process, with at

least 50 percent of the issue size being allotted to the qualified

institutional buyers Failing which the full subscription monies shall be

refunded or the project has at least 15 percent participation by financial

institutions / scheduled banks and at least 10 percent of the issue size

shall be allotted to QIBs, failing which the full subscription monies

shall be refunded.

The minimum post issue nominal value of equity capital of

the company shall be Rs 10 crore or there shall be a compulsory market

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making for at least 2 years from the date of listing of the shares subject

to certain conditions.

What are the eligibility norms for making these issues?

SEBI has laid down eligibility norms for entities accessing the primary

market through public issues. There is no eligibility norm for a listed

company making a rights issue as it is an offer made to the exiting

shareholders who are expected to know their company.

The main entry norms for companies making a public issue (IPO or FPO)

are summarized as under:

Entry Norm I (EN I):

The company shall meet the following requirements

Net tangible assets of at least Rs 3. crores for 3 full years.

Distributable profits in at least three years

Net worth of al least Rs 1 crore in three years

If change in name, al least 50 % revenue for preceding 1

year should be from the new activity.

The issue size does not exceed 5 times the pre-issue networth to provide sufficient flexibility and also to ensure that genuine

companies do not suffer on account of rigidity of the parameters, SEBI

has provided two other alternative routes to company not satisfying any

of the above conditions, for accessing the primary market, as under:

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Entry norm I (EN I):

The company shall meet the following requirements

Net Tangible Assets of at least Rs 3 crore for 3 full years

Distributable profits in at least three years.

Net worth of at least Rs 1 crore in three years.

If changes in name, at least 50% revenue for preceding 1years should be from the new activity.

The issue size does not exceed 5 times the pre-issue net

worth.

To provide sufficient flexibility and also to ensure that

genuine companies do not suffer on account of rigidity of the parameters,

SEBI has provided two other alternative routes to company not satisfying

any of the above conditions, for accessing the primary market, as under.

Entry norm 2 (EN 2)

Issue shall be through book building route, with at least 50

% to be mandatory allotted to the qualified institutional buyers (QIBs).

The minimum post-issue face value capital shall Rs 10 crore

or there shall be a compulsory market making for at least 2 years.

Entry norm 3 (EN 3)

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The project is appraised and participated to the extent of

15% by FIs/Scheduled commercial banks of which at least 10 % comes

from the appraisers.

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.

4.4 RISK FACTORS

RISKS FOR MUTUAL FUNDS:-

Mutual funds are not free from risks. It is also because basically the mutual

funds also invest their funds in the stock market on shares which are volatile

in nature and are not risk free, hence, the following risks are inherent in their

dealings

Mutual Funds and securities investments are subject to market

risks and there is no assurance or guarantee that the objective of the

schemes will be achieved.

As with any securities, the NAV of the units issued under the

schemes can go up or down depending on the factors and forces

affecting the capital market.

Past performance of the sponsors, Asset Management

Company / Fund does not indicate future performance of the schemes

of the fund.

The Sponsors are not responsible or liable for any loss

resulting from the operation of the schemes beyond the contribution of

an amount of Rs. 22.2 lacs collectively made by them towards setting

up the fund an such other corrections and addition to the corpus set up

by the Sponsors.

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if the investment advice goes wrong, the fund has to suffer a lot. The

investment expertise of various funds are different and it is reflected on the

returns which they offer to investors.

4. Business Risk:-

The corpus of a mutual fund might have been invested in a companys

shares, if the business of that company suffers any set back it can not declareany dividend it may even go to the extent of winding up its business.

Though the mutual fund can withstand such a risk, its income paying

capacity is affected.

5. Political risk:-

Successive governments bring with them fancy new economic

ideologies and policies. It is often said that many economy decisions are

practically motivated. Changes in government bring in the risk of

uncertainty which every player in the financial services industry has to face.

So mutual funds are no exception to it.

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PRIME RISK FACTORS FOR IPO:-

Internal Risk:-

The company has been made party to a criminal proceeding that is pending.

The companys failure to successfully manage its

geographically diverse operations could adversely affect its business.

Inability to manage growth could disrupt the companys

business and reduce its profitability.

The companys inability to qualify for and win large integrated

engineering construction contracts and the risks associated with the

execution of such contracts could adversely affect its margins and

results of operations.

The companys business is dependent on a continuing

relationship with its clients and strategic partners.

On fixed price or turnkey contracts, the company is exposed to

significant construction risks that could cause it to incur losses.

The companys indebtedness and the conditions and restrictions

imposed by its financing agreements could adversely affect its ability to

conduct the business.

The company has high working capital requirements. Insufficient cash flows to meet required payments on the

companys debt and working capital requirements may have an adverse

effect on its results of operations.

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Sustained high equipment, materials or fuel costs may

adversely affect the companys results of operations.

The company faces significant competition in its business from

Indian and international engineering construction companies.

The companys operations are subject to hazards and other risks

and could expose it to material liabilities, loss in revenues and increased

expenses.

The companys inability to attract and retain skilled personnel

could adversely affect its business and results of operations.

The company could be adversely affected if it fails to keep pace

with technical and technological developments in the engineering

construction industry.

A significant part of the companys business transactions are

with government entities or agencies.

The companys results of operations could be adversely

affected by any disputes with its employees. There are certain legal proceedings against the companys

directors, promoters and group companies.

The company has certain contingent liabilities, which may

adversely affect its financial condition.

Certain of the companys subsidiaries and promoter group

companies have incurred losses in recent periods.

The company has in the last 12 months issued equity shares at a

price, which could be lower than the offer price.

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4.5 PRICE OF ISSUE

NET ASSET VALUE:-

The repurchase price is always linked to the Net Asset Value (NAV). The

NAV is nothing but the market price of each unit of a particular scheme in

relation to all the assets of the scheme. It can otherwise be called "the

intrinsic value" of each unit. This value is a true indicator of the

performance of the fund. If the NAV is more than the face value of the unit,

it clearly indicates that the money invested on that unit has appreciated and

the Fund has performed well. .

Illustration

For instance, Fortune Mutual Fund has introduced a scheme called

Millionaire Scheme. The scheme size is 100 crores. The value of each unitis Rs.10/-. It has invested all the funds in shares and debentures and the

market value of the investment comes to Rs.200 crores.

200 crores

Now NAV = x value of each unit

100 crores

= 2 x 10 = 20

Thus, the value of each unit of Rs.10/- is worth Rs.20.

Hence the NAV = Rs.20.

This NA V forms the basis for fixing the repurchase price and reissue

price.

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The investor can call up the Fund any time to find out the NAY. Some

MFs

Publish the NAV weekly in two or three leading daily newspapers.

Who decides the price of an issue for IPO?

Indian primary market ushered in an era of free pricing in 1992. Following

this, the guidelines have provided that the issuer in consultation with

Merchant Banker shall decide the price. There is no price formula stipulated

by SEBI. SEBI does not play any role in price fixation. The company andmerchant banker are however required to give full disclosures of the

parameters which they had considered while deciding the issue price. There

are two types of issues one where company and LM fix a price (called fixed

price) and other, where the company and LM stipulate a floor price or a

price band and leave it to market forces to determine the final price (price

discovery through book building process).

What are Fixed Price offers?

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.

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b. What does price discovery through book

building process mean?

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 price for

securities.

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sector and believe that such a high risk strategy will pay off commensurate

returns. At the lower end of the risk-return spectrum are balanced funds,

which have a lower risk profile due to the debt component.

Having assessed the risk profile of the mutual fund scheme, you must now

see if there is a fit with your own risk profile. If your risk profile matches

that of the mutual fund, then you can consider investing in the NFO.

Asset Management Company:-

Mutual fund schemes are managed by the Asset Management Company

(AMC). Before you to consider investing in an NFO, look at the track record

of the AMC. Typically, the AMC must be backed by sponsors who have a

fair amount of experience in the financial services segment. Asset

management is serious business, because you are dealing with other peoples

hard-earned money. It calls for a certain level of integrity and responsibility.

If the AMC has been embroiled in a controversy in the past, then we suggest

you keep away from it, even if its schemes have put in a very good show.

Ultimately, track record of the AMC must be given its due and if does not

make the mark, then its not good enough to look after your money.

Fund manager:-

If the AMC passes the litmus test in terms of integrity, track record and

performance, then you must look at the fund manager of the mutual fund

NFO. The fund manager needs to be put under the scanner for the same

reason and on the same parameters as the AMC. So integrity and track

record are of paramount importance. Dont choose a fund manager because

of an exceptional performance during the last bull run. Almost all fund

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managers do a great job during a rally. See if the fund manager did an

equally competent job during the last market slide. In other words, look for

consistency over market upswings and downturns and not mere flash-in-the-

pan performances. Admittedly, details on both AMC and fund manager,

may not be easily available to an investor at grassroot level. For that, check

up with your mutual fund agent/consultant. And even if he does not know,

ask him why he is recommending the mutual fund NFO to you.

Expenses and charges:-

Mutual fund schemes (including NFOs) levy expenses and charges on theinvestor at two levels. One is at the time of investing (through an entry load),

which is earmarked to meet distribution/agency commission of your mutual

fund agent. (Remember your mutual fund agent makes money every time

you invest in a mutual fund scheme including NFOs, so he is an interested

party.). At the second level, mutual funds levy a string of charges like fund

management expenses, stock-trading expenses, administration expenses and

marketing expenses. These expenses are related to the working of the fund

and deducted from the net asset value (NAV) of the fund; so the NAV you

receive, is arrived at after subtracting these expenses. These expenses are

capped at 2.50% of the net assets and the AMC cannot levy a charge higher

than that level.

Often funds waive off entry load during the NFO to evoke higher investorinterest and response. In our view, that is not a good enough reason to invest

in an NFO. It is better to pay the entry load and go with a well-managed

fund than to invest in an average NFO minus the entry load.

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Your existing portfolio:-

Assuming that the mutual fund NFO passes all the criteria outlined so far, it

still has to make it to your existing portfolio. For that, there should be a void

in your existing portfolio that the NFO can fill. Many investors take to an

NFO only because it has everything going for it, forgetting that the portfolio

already has many look-alikes. There is hardly any point in having a

bouquet of mutual fund schemes in your portfolio working towards the same

investment objective. There is an unavoidable overlap in your portfolio,which goes against diversification and the size of your mutual fund portfolio

could get unmanageable.

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CHECK LIST POINTS OF EQUITY IPO FOR INVESTORS:

The Initial Public Offering or IPO market as it is known, received a

new lease of life in FY99. With high profile issues like Hughes Software and

TV-18 opening at more than 3 and 10 times their issue price respectively,

investors are flocking to the IPO market like never before. Companies,

which had earlier shied away from the capital market, are now returning

with a vengeance to satiate the appetite of investors.

Some of the over-subscription details of recent IPOs are mind-

boggling: TV-18 by 51 times, Glenmark by 55 times and HCL technology

by 27 times. Other software issues like Hughes and Polaris Software have

been oversubscribed by 15-20 times. The reason for this enthusiasm can be

attributed to the software boom that markets have witnessed over a past year

or so.

But should one just jump for an IPO as soon as it is announced? Here anattempt has been made to outline some issues that investors should look at

before they making investment decision.

Before investing in an IPO, investors are suggested to run a check on the

following factors:

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Who are the Lead Managers to the issue? Do Lead

Managers act as an indicator of the quality of the issue?

The Lead Managers act as a catalyst as they attempt to bring in some

credibility to the offer and their accountability is also very high. Remember

that the lead managers credibility could act only as an indicator to the

proposed issue, but does not assure success. There have been poor issues

from good merchant bankers in the past.

For the purpose of security, one can look for category one lead managers for

judging the quality of the issue that includes DSP Merrill Lynch, HSBC

Securities and Kotak Mahindra among others.

What is the promoter holding in the company? Is there any

participation from financial institutions or a venture capital firm?

Issues where post-issue promoters holding is more than 80% may indicate a

lack of liquidity in the stock since there are fewer shareholders trading fewer

shares.

Be careful of companies that have issued shares on a preferential basis to

promoters in high proportion, so as to increase their stake in the company.

Also find out if this is an offer for sale or a genuine Initial Public Offering.

In case of offer for sale, the issuing company may not benefit totally.

Look for companies in which venture capital firms or financial institutions

have participation or substantial interest. Also look for the shareholding

pattern. This would indicate the risk profile of the company and the

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expectation of the institution from the company. In case of institution, look

for nationalized banks and all India level financial institution such as ICICI,

IFCI IDBI etc.

Be careful of companies whose cost of project and means of finance have

not been appraised by banks or financial institutions.

Where is the company investing my money? Is it going to

give me good returns?

If the major portion of fund mobilized is being invested in land, buildings

(the so-called green field issues) be careful.

If the company is utilizing a portion of issue proceeds towards retiring high-

cost debts, it would benefit the company in terms of lower interest outflow

and therefore higher profitability. Also check the proportion of money that is

being invested in new projects that it is venturing into. This would give

some judgment on the estimated profitability of the company.

Which sector does the company operate? What is the

growth prospect of the company vis--vis the sector?

The growth of the company in proportion to the growth of the market in

which it operates has to be seen. Also look out for its market share or the

projected market share vis--vis domestic competition. For example, figures

of global software market or Indian software market do not indicate the

exact future growth potential of the company since it is inclusive of all

products and services. Export projection of the sector need not necessarily

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reflect the export potential of the company. See what the company is

exporting and export income as a percentage of sales.

Each sector has its own internal and external factors that influence the

operation of the company. For example, software sector is vulnerable to high

employee turnover.

Do the promoters have enough experience?

Do the promoters have previous experience in transforming organizations

from the grass root level in the same industry to a successful business? What

is the experience they have in the sector the company is operating in or any

other sector. Promoter experience is very crucial.

Also check out the profitability of any subsidiary or affiliate company in

which promoters have a stake or substantial interest. This would enable us to

ascertain the managements efficiency in terms of managing organizations.

Check for litigations against the promoters, nature of litigation and the

promoters extent of liability, if any.

Will the money invested yield maximum returns? Are the

profit projections achievable?

Ask yourself these questions: -

What is the sales growth projected by the company vis--vis

others in the sector and the industry growth rate? If the market is growing

at 20%, it does not mean that the company would grow by 20%. Lets

take a hypothetical example. X Company manufactures paints. Assume

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that the market is growing at 12% per annum. If sales of the company

grew by, lets say 6%, it means that the company is growing at the rate of

0.5 x the industry growth. This would help you in ascertaining growth

potential of the company.

Are the margins projected comparable with other companies in

the same sector?

Is there any unusual costs or unusual rise in other income

(recurring/non-recurring)? Some companies show an unusual rise in their

sales and net profits by 5-10 times. Justify this by comparing the sales

growth figure. Check the competitive scenario of the industry. If the company

is claiming that it is competing with e-enabled service providers, check

out what type of e-enabling services they provide. Addressing

competition at a macro level may reflect the exact picture.

How do I justify the price of the issue?

To justify pricing,

Compare: -

The price to earnings ratio (this is price that the issue is

offered upon earnings per share) which would throw light on

the pricing of the issue.

operating margins (this is the income from operation less

expenses from operation),

Market capitalization (it is the number of share multiplied by

the price at which it is offered) with the current companies in

the sector that are listed in the market.

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Does the company enjoy tax benefits:-

Companies with foreign exchange earnings are entitled to certain

exemptions. If the companys factory is in backward regions, they are

entitled for subsidies as well as some tax exemptions. Lower

incidence of tax benefits companies as their cash flows are increased

to that extent.

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4.8 MANAGEMENT BODY

ORGANIZATION OF THE FUND:-

The structure of mutual fund operations in India envisages a three tier

establishment namely.

1. A sponsor institution to promote the fund

2. A team of trustees to oversee the operations and to provide checks for

the efficient, profitable and transparent operations of the fund and

3. An asset management company (AMC) to actually deal with the

funds.

Sponsoring Institution:-

The company which sets up the mutual fund is called the sponsor. The

SEBI has laid down certain criteria to be met by the sponsor. These criteria

mainly deal with adequate experience, good past track record, net worth etc.

Trustees

Trustees are people with long experience and good integrity in their

respective fields. They carry the crucial responsibility of safeguarding the

interest of investors. For this purpose, they monitor the operations of the

different schemes. They have wide ranging powers and they can even

dismiss assets management companies with the approval of the SEBI.

Asset management company (AMC)

The AMC actually manages the funds of the various schemes. The

AMC employs a larges and to do agent and investor servicing. Infect, the

success of any mutual fund depends upon the efficiency of this AMC. The

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AMC submits a quarterly report on the functioning of the mutual fund to the

trustees who will guide and control the AMC.

INTERMEDIARIES IN AN ISSUE:-

Merchant Bankers to the issue or Book Running Lead Managers (BRLM),

syndicate members, Registrars to the issue, Bankers to the issue, Auditors of

the company, Underwriters to the issue, Solicitors, etc. are the intermediaries

to an issue. The issuer discloses the addresses, telephone/fax numbers and

email addresses of these intermediaries. In addition to this, the issuer also

discloses the details of the compliance officer appointed by the company for

the purpose of the issue.

What is the role of a Lead Manager? (pre and post

issue)

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

of companys operations/ management/ business plans/ legal etc. Otheractivities 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 finalization 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.

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The post issue activities including management of escrow accounts, co-

ordinate non-institutional allocation, intimation of allocation and dispatch of

refunds to bidders etc are performed by the LM. The post Offer activities for

the Offer will involve essential follow-up steps, which include the

finalization 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.

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Chapter: - 5

FINDINGS

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NFOs - Mutual Fund new kids are doing well :-

In the last one-year we have seen surge in the number of Equity IPOs &

Mutual Fund NFOs launched. This is because there is a significant jump in

profits of small & medium sized companies & so many loss-making

companies have been restructured and now making profits. These companies

are looking for expansion & to support their future plans these companies

are looking at IPO option. This has created good opportunity to invest in the

new companies, which are growing at fast rate. New Mutual Fund schemes

launched also got the more options to invest collected money in various old

as well as new companies. This year so many Mutual Fund NFOs have

collected money in excess of Rs1000Cr & some of them had even crossed

Rs2000Cr mark. Some of the existing schemes with highest AUMs are

looking small if we look at these collections by MF NFOs.

Collection of Mutual fund NFOs lunch in 2005 Rs. (in crore)

SBI magnum multi cap fund 2102

Franklin india flexi cap fund 1950

Reliance Equity opportunities fund 1761

Fidelity Equity fund 1495

Prudential ICICI Infrastructure fund 1418

HDFC Premier multi-cap fund 1328

Standard Chartered Classic equity fund 1043

67

Rs. (in crore

2102

1950

17611495

1418

1328

1043

SBI magnum m ulti cap fund

Franklin india flexi cap fund

Reliance Equity opportunities fu

Fidelity Equity fund

Prudential ICICI Infrastructure fu

HDFC Premier multi-cap fund

Standard Chartered Classic equ

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Floating a NFO at the right time when markets are in correction phase &

investing the collected money on correction is proved as very successful

strategy in the last one year. This is evident as newly launched Mutual Fund

NFOs have outperformed various indices & able to generate good returns.

The below table indicates good performance given by MF NFOs. Therefore

Its a good idea to invest in NFOs which could create wealth for investors

like you.

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Performance of NFOs launched in 2005:-

ABN Amro has given over 28% annualised returns followed by HSBC

Midcap Fund which has given 27% annualised returns. The third in this

category is Chola Multicap Fund, which has generated over 24% annualised

returns since inception.

Performance of NFOs launched in 2005

NFO Corpus Returns Absolute %Annulised

Returns

Scheme Name NAV Date (Rs Cr) 3 Months 6 Months Since Inception

ABN AMRO Opportunities Fund 12.1 30-Mar-05 225.8 8.3 28.5 28.5

HSBC Midcap Equity Fund 12.7 03-May-05 398.1 7.0 - 27.0

Chola Multi Cap Fund 12.4 10-Jan-05 73.1 0.3 20.2 24.3

SBI Magnum Midcap Fund 12.3 17-Mar-05 417.0 4.8 20.4 23.8

Kotak Midcap Fund 12.6 28-Jan-05 345.6 3.3 21.4 23.7

Sundaram SMILE Fund 12.1 21-Jan-05 339.1 (1.6) 18.1 21.1

HDFC Premier Multi - Cap Fund 11.7 21-Mar-05 1242.3 0.5 17.9 19.4

Franklin India Flexi Cap Fund 11.9 09-Feb-05 2078.7 3.7 25.4 19.1

Fidelity Equity Fund 11.9 19-Apr-05 2543.9 (0.4) - 19.0

Reliance Index Fund - Sensex Plan 11.9 02-Feb-05 0.5 1.6 25.2 18.8

ING Vysya Midcap Fund 11.6 09-May-05 103.8 4.3 - 15.6

Reliance Equity Opportunities

Fund

11.5 07-Mar-05 1862.4 (2.1) 17.4 15.4

Tata Service Industries Fund 11.4 10-Mar-05 241.7 (0.4) 13.4 11.5

PRINCIPAL Focussed AdvantageFund

10.7 22-Feb-05 133.4 0.8 14.8 7.1

LIC MF Opportunities Fund 10.6 21-Feb-05 38.8 0.7 16.4 6.5

Prudential ICICI Blended Plan 10.3 18-May-05 1050.6 1.8 - 3.1

NFO Average 1.1 19.7 7.3

S&P Nifty 2316.1 (0.1) 19.3

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EQUITY IPOS OPPORTUNITIES UNLIMITED:-

Indian companies, enthused by the strong growth in domestic demand as

well as increasing opportunities in the global marketplace, are increasingly

looking at the capital markets to fund their growth plans. In the years 2004

2005 more than 90% of the equity IPOs have given above average returns

compare to other investment products & secondary market. Year 2005

promises another good year for equity IPOs with growing Indian economy

& increasing awareness towards Indian Equitys among Indian & global

investors.

Year 2004 generated Rs 30,511 crore, which is the highest-

ever in the history of the Indian capital market.

The issues slated to hit the markets are across sectors - Oil &

gas, Telecom, Power, Chemicals, Banking, Technology, Finance,

Infrastructure and even Aviation.

Public issues lined up to hit the markets in 2005 include

follow-on offers from PSUs like BHEL, Neyveli Lignite, ONGC, RCF

and SCI.

As far as sectors go, the telecom sector will see lots of action

in 2005. Telecom companies like BPL Comm., Hutch, Idea, Reliance

Info & Tata Tele are expected to come out with IPOs.

Other issues are likely are AB Corp, Air Deccan, Yes Bank,

Fortis Healthcare, GE Capital International, IL&FS Investsmart, MTR

Foods, Shantha Biotech, Shoppers' Stop & Sify.

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298%. Indiabulls, for example, had a premium of 25% on listing but now its

price has gone up by 328%.

IPOS PERFORMANCE SNAPSHOT

Company IPO Price (Rs) Latest Price (Rs) Listing Date Gain/(Loss) % Gain/(Loss) % (A)Gateway Dist 72 123 31-Mar-05 71 2165

India Bulls 19 115 24-Sep-04 503 917

Bharti Shipyard 66 148 30-Dec-04 124 438

PTC 16 48 07-Apr-04 200 198

NDTV 70 182 19-May-04 160 178

Jet 1100 1251 14-Mar-05 14 173

Petronet LNG 15 42 26-Mar-04 179 171

TCS 850 1381 25-Aug-04 62 99

UTV 130 139 17-Mar-05 7 99

NTPC 62 85 11-Nov-04 37 89

Indoco Remedies 245 297 14-Jan-05 21 88

PCS 230 355 25-Feb-04 54 48ICICI Bank 280 408 22-Apr-04 46 47

Bank of Maharashtra 23 33 12-Apr-04 45 45

Biocon 315 421 07-Apr-04 34 33

ONGC 713 885 08-Apr-04 24 24

GAIL 176 212 25-Mar-04 21 20

PNB 390 393 27-Mar-05 1 19

(ONGC, GAIL issue prices adjusted for the 5% discount to retail investors, A - Annualised)

In this scenario one cannot stay away from Equity IPOs. One should invest

regularly & hold as much as possible if the companys fundamentals are

good.

(source:- www.indiainfoline.com)

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SUGGESTIONS

If investors are safe player then mutual fund are good options

because they give good return compaire to bank deposit.

In mutual fund balance scheme is there so it gives return.

If you are short gainer then equity IPO is good.

As long investors IPO is also good.

In mutual fund electronic clearance is there so investors can

take his/her dividend by using ATM card. You can use this facility.

Investors of mutual fund equity IPO first they have to read

check list point then invest.

In mutual fund investors have to select fund & investment

money according return & risk time.

First maintain flexible portfolio which good return with

minimum level of risk.

Some time some IPO are mislead to investors so be aware form

it.

Sometimes some IPOs price band is low but when share is

listed in market it opens with high price, some times it opens with

discount

In IPO, investors try to sale out share after listing of share to

take advantage of increase of price and try to earn profit

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Invest your money in mutual fund or in equity share after

reading offer document as well as red herring prospectus for equity

share.

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Chapter: - 7

BIBILOGRAPHY

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BOOKS:-

E. Gordon & Dr. K. Natarajan, Financial Markets & Services,

Himalaya Publication House, Second Revised Edition 2003.

Prasanna Chandra, Financial Management Theory & Practice,

TATA McGraw- Hill Publication Company Ltd, 6th Edition

Websites:-

www.NSE.com

www.sebi.gov.in

www.indiainfoline.com

www.moneycontrol.com
http://www.nse.com/http://www.sebi.gov.in/http://www.indiainfoline.com/http://www.moneycontrol.com/http://www.nse.com/http://www.sebi.gov.in/http://www.indiainfoline.com/http://www.moneycontrol.com/

Documents

STUDY ON ‘MUTUAL FUND –NEW FUND OFFER V/S EQUITY INITIAL PUBLIC OFFER’