INTRODUCTION CAPITAL MARKET

Capital Market is an essential pre-requisite for industrial and commercial development of a country. Credit is generally required and supplied on short term and long term basis. The money market caters to the short term needs only. Capital market refers to the institutional arrangements which facilitate the borrowings and lending of long term funds. It consists of series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities. Capital market is further divided into three categories which are given below: 1) New Issue Market: NIM represents Primary market where new securities i.e. shares or bonds that have never been previously offered. 2) Secondary Market: Secondary market is a place where existing securities i.e. shares and debentures are traded. 3) Financial Institutions: Financial institutions provide medium and long term loans on easy installments to big business houses. Such institutions help in promoting new companies, expansion and development of existing companies.

SCENARIO OF PRIMARY MARKET

During both the earlier boons there was an availability of poor quality offerings in the market. As issuing companies were allowed freedom to price their offerings, shares were offered at a huge premium. Investors were left holding worthless talks as promoters walked off with cash taking the advantage of IPO market. Numerous fly by night operators had tapped the market and vanishing companies had become a norm. In fact many experts opine that this loss of credibility of technology boom of 90s, company tapping the market for IPO often changed the name to something related to technologies. These two left the investors bearing huge losses. Today things have changed for better SEBI has now set up stringent eligibility criteria for companies willing to tap the market.Its DIP (Disclosure and Investors Protection Guidelines) amended as recently as August 2011, created a mechanism of better disclosure and increased 1

transparency. The process of Book Building has become the norm after the change of rules, thus ensuring better transparency. Primary market in India has evolved over the years. Post liberalization and after the abolition of the office of controller of capital issues, public offers flooded the market. The number of public offerings coming to the market and the amount raised declined over the subsequent years. There was a brief revival thereafter which lasted for two years after which the market languished again. From mid 2010 the market witnessed a sleeve of initial public offers; the mobilization of funds has been definitely on masses scale.

PRIMARY MARKET
Primary market deals with new securities which were not previously available to the investors therefore the market makes available a new block of securities for public subscription. The new issue market is concerned with the floatation and disposal of new issue of shares and debentures through their allotment to persons and organizations. The new issue market represents the primary market where securities i.e. shares or bonds that have never been previously issued or offered. Both the new companies and existing one can raise capital on new issue market. Primary markets are where firms raised capital through the issuance of financial securities.The prime function of new issue market is to facilitate the transfer of funds from the willing investors to the entrepreneurs setting up new corporate enterprises or going in for expansion, diversification, growth or modernization. Besides helping corporate enterprises in securing their funds, the NIM canalizes the saving of individuals and others into investment.

INITIAL PUBLIC OFFERING

IPO is an acronym for Initial Public Offering. This is the first sale of stock by a company to the public. The company can raise money by either issuing debt or equity. If the company has never issued equity to the public is known as IPO. Corporate may raise capital in primary market by the way of an IPO, Rights Issue or Private Placement. An IPO is selling of securities to the public in primary market. This IPOs can be made through Book Building Method, Fixed Price Method or combination of both.

BOOK BUILDING PROCESS

The normal method of offering shares to the investing public at a price fixed by the issuer does not take into account the investors demand. On the other hand, the Book Building Method takes into account the demand for shares at various prices as an important input to finalize the offer price. BookBuilding is basically a capital issuance process used in IPO which aids price and demand discovery. It is a process used for marketing a public offer of equity share of a company. It is a mechanism where, during the period for which the book for IPO is opened, bids are collected from investors at various prices, which are above or equal to the floor price. The issue price is then determined after the bid closing date based on certain evaluation criteria.

GREEN SHOE OPTION

A company making an IPO of Equity shares through the Book building mechanism can avail of Green shoe option for stabilizing the post listing price of is shares. The Green shoe option means an option of allotting shares in access of the shares in the public issue and operating a post listing price stabilizing mechanism through a stabilizing agent. A Green shoe option is a clause contained in an underwriting agreement of an IPO. A Green shoe option which is also referred as over allotment provision, allows the underwriting syndicate to buy in an additional 15 % of the shares at the offering price if public demand for shares exceeds expectations and the stock trades above its offering price.

NEED OF THE STUDY

Readers of this project can have perfect knowledge of basics of primary market. This project can be used by researchers who want to study the trends in primary market in post liberalization period. Users can have thorough idea of five years area wise performance in primary market. People with observation and knowledge in primary market can have look on new inclusions like Book Building Process and Green Shoe Option.

SCOPE OF THE STUDY

The study covers only corporate securities of primary market excluding Euro Issues. Resource mobilization part of the project covers number of issues, amount raised sector wise distribution only and it did not cover response of public to various Public Issues during the study period. Book Building Process implications and its study belongs to year 2012 only. Green Shoe Option on post distinct period is change in Central Government i.e. May 2012.

OBJECTIVE OF THE STUDY

The objective of doing this project is mainly to make a thorough study and performance of primary market, from 2008-2012 with special reference to trends in primary market. To assess primary market trends for last five years in different sectors. To examine the factors affecting the performance of Indian primary market. To examine positive and negative growth in different sectors of primary market and major factors affecting it. The purpose also includes Book Building Process and Green shoe Option with regard to special case study. The comparative study of different ingredients in primary market and its performance.

METHODOLOGY OF THE STUDY

The method employed in the investigation depends on the purpose and scope of the study. Let us try to understand methodology.
1) RESEARCH DESIGN: Research design is some statement or specification of

procedures for collecting and analyzing the information required for the solution of some specific problem. Here the exploratory research is used as investigation is mainly concerned with determining the trends and positive and negative growth in different sectors in different times in primary market .Exploratory research is generally carried out by three sources of information A) Study of secondary sources B) Discussion with individuals C) Analyzing some specific areas.
2) DATA COLLECTION METHODS: The key for creating useful system are selectivity

in collection of data and linking that selectivity to the analysis and decision issue of the action to be taken. The accuracy of collected data is of great significance for drawing correct and valid conclusions from the investigation. The following are the main steps in data collection process a) Type of information required in the investigation b) Establishing the facts that are available at present and additional facts required. c) Identification of sources from where the information can be available. d) Selection of appropriate information i.e. collection method.

Primary data: primary data are generated in an investigation according to the needs of problem in head. Primary data is collected using case study methods. There are some set of Qualitative techniques used for collection of some socio economic information about some phenomenon. Secondary data: Secondary data can be defined as data collected by some one else for purpose other than solving the problem being investigated. Secondary data is collected from external sources which include information from published material of SEBI and some of the information is collected online. The data sources also include various books, journals, magazines, news papers, etc. The organization profile is collected from Branch Manager.

LIMITATIONS OF THE STUDY

A good report sells the results of the study. But every project has its own limitations. These limitations can be in terms of No depth analysis of government securities: Only corporate securities are studied. No depth analysis of government securities is undertaken. Government securities are taken only for comparison. Limited to a particular period: Data under consideration is taken from 2008-2012.Previous years are not taken into consideration. Partial fulfillment: Project studied doesnt fulfill all requirements because it does not study the whole primary market due to time availability and course requirement. It only fulfills the partial requirement as it studies only certain important aspects of primary market. Approximate results: The results are approximated, as no accurate data is available. Results of Book Building do not apply to all firms: Book Building case study results do not apply to all firms. It is also limited to a particular period.

INDUSTRIAL PROFILE STOCK MARKETS IN INDIA

Stock exchanges are the perfect type of market for securities whether of government and semi Govt bodies or other public bodies also for shares and debentures issued by the joint stock companies. In the stock market, purchases and sales are affected in conditions of free competition. Government securities are traded outside the trading ring in the form of over the counter sales or purchase. The bargains that are struck in the trading ring by the members of the stock exchanges are at the fairest prices determined by the basic loss of supply and demand. STOCK EXCHANGE Stock exchange means anybody individual whether incorporated or not constituted for the purpose of assisting, regulating or controlling the business of buying and selling or dealing in securities. The securities include. Shares of public company. Government securities Bonds.

HISTORY OF STOCK EXCHANGES

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meager and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century.

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By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60. In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87). At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidation. The only stock exchange operating in the 19th century were those of Mumbai setup in 1875 and Ahmadabad setup in 1894. These are organized as voluntary non-profit marking associations of brokers to regulate and protect their interests. Before the control on securities under the constitution in 1950, it was a state subject and the Bombay securities contracts (control) act of 1925 used to regulate trading in securities. Under this act, the Mumbai stock exchange was recognized in 1927 and Ahmadabad in 1937. During the war boom, a number of stock exchanges were organized. Soon after it became a central subject, central legislation was proposed and a committee headed by A.D.GORWALA went to into the bill for securities regulation on the basis of the committees recommendations and public discussion, the securities contract (regulation) act become law in 1956.

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VARIOUS STOCK EXCHANGES IN INDIA Presently there are 22 stock exchanges recognized under the securities contracts act 1956. Those are, Ahmadabad stock exchange. Bangalore stock exchange. Bhubaneswar stock exchange. Calcutta stock exchange. Cochin stock exchange. Coimbatore stock exchange. Delhi stock exchange. Geuwahati stock exchange. Jaipur stock exchange. Kanara stock exchange. Ludhiana stock exchange. Madras stock exchange. Madhya Pradesh stock exchange. Magadha stock exchange. 12

 Meerut stock exchange. Mumbai stock exchange. National stock exchange of India. OTC stock exchange of India. Pune stock exchange. Saurashtra Kutch stock exchange. Uttar Pradesh stock exchange. Vadodara stock exchange Previously 23 stock exchanges are there in India. Hyderabad stock exchange registration was cancelled so now it reached to 22.

FUNCTIONS OF STOCK EXCHANGE

Stock exchange is established into the main purpose of providing a market place for the members to deal in securities under well laid down regulations and to protect the interest of the investors. The main functions of stock exchange are It brings the companies and investors together so that the investors can put risk capital into companies and thus, companies can use the capital. It provides an orderly regulated market for securities. It provides continuous, ready and open market for selling and buying securities.

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 It promotes savings and investment in the economy by attracting funds from the investors. It facilitates take overs by means of acquiring majority of shares traded on the stock market. It acts as a clearing house of business information. It motivates the managers of well reputed companies, to retain their shares in A group, to improve performance. It induces the managers to improve performance for converting non-specified shares into specified shares in the exchange. It enables the investors to evaluate the net worth of their holdings. It also allows the companies to float their shares in the market.

TRADING PATTERN OF THE INDIAN STOCK MARKET

Trading in Indian stock exchanges are limited to listed securities of public limited companies. They are broadly divided into two categories, namely, specified securities (forward list) and non-specified securities (cash list). Equity shares of dividend paying, 14

growth-oriented companies with a paid-up capital of at least Rs.50 million and a market capitalization of at least Rs.100 million and having more than 20,000 shareholders are, normally, put in the specified group and the balance in non-specified group. Two types of transactions can be carried out on the Indian stock exchanges: spot delivery transactions "for delivery and payment within the time or on the date stipulated when entering into the contract which shall not be more than 14 days following the date of the contract" Forward transactions "delivery and payment can be extended by further period of 14 days each so that the overall period does not exceed 90 days from the date of the contract". The latter is permitted only in the case of specified shares. The brokers who carry over the outstanding pay carry over charges (cantango or backwardation) which are usually determined by the rates of interest prevailing. A member broker in an Indian stock exchange can act as an agent, buy and sell securities for his clients on a commission basis and also can act as a trader or dealer as a principal, buy and sell securities on his own account and risk, in contrast with the practice prevailing on New York and London Stock Exchanges, where a member can act as a jobber or a broker only. The nature of trading on Indian Stock Exchanges are that of age old conventional style of face-to-face trading with bids and offers being made by open outcry. However, there is a great amount of effort to modernize the Indian stock exchanges in the very recent times.

NSE (NATIONAL STOCK EXCHANGE)

The national stock exchange of India ltd has genesis in the report of high power study group on establishment of new stock exchanges, which recommended promotion of 15

a national stock exchange by financial institutions to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading financial institutions at the behest of the Govt of India and was incorporated in November 1992 as a tax paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the securities contract act, 1956 in April 1993, NSC commenced operations in the whole sale debt market (WDM) segment in june1994. The capital market (equities) segment commenced operations in November 1994 and operations in derivatives segment commences in June 2000.

NSCs mission is setting the agenda for change in the securities market in India. The NSC was setup with the objectives of: Establishing a nation wide trading facility for equities and debt instruments. Ensuring equal access to investors all over the country through an appropriate communication network. Providing a fair, efficient and transparent securities market to investors using electronic trading system. Enabling shorter settlement cycles and book entry settlement systems, and Meeting the current international standards of securities market. The standards set by NSE in terms of market practices and technology, have become industry benchmarks and are being emulated by other market participants. NSE is more than a mere market facilitator. Its that force which is guiding the industry towards new horizon and greater opportunities.

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BSE (BOMBAY STOCK EXCHANGE)

The stock exchange Mumbai, popularly known as BSE was established in 1875as The native share and stock broker association. It is the oldest in Asia, even older then the Tokyo stock exchange, which was established in 1878. It is a voluntary non profit association of persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its present status as the premier stock exchange in the country. It is the first stock exchange in the country to have obtained permanent recognition in 1956 from the Govt. of India under securities contract (regulation) act 1956. The exchange while providing an efficient and transparent market for trading in securities, debts and derivatives upholds the interests of the investors and ensures redresses of their grievances whether against the companies or its own member-brokers. It also strives to educate and enlighten the investors by conducting investor education programmers and making available to them necessary informative inputs. A governing board having 20 directors is the apex body, which decides the policies and regulates the affairs of the exchange. The governing board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an executive director &chief executive officer and a chief operating officer. The executive director as the chief executive officer is responsible for day-to-day administration of the exchange and the chief operating officer and other heads of department assist him.

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REGULATORY FRAME WORK OF STOCK EXCHANGE A comprehensive legal frame work was provide by the securities contract regulation act, 1956and securities exchange board of India 1952. Three tier regulatory structure comprising Ministry of finance The securities and exchange board of India Governing body.

MEMBERS OF THE STOCK EXCHANGE The securities contract regulation act 1956 has provided a uniform regulation for the admission of members in the stock exchanges. The qualifications for becoming a member of a recognized stock exchange are given below: The minimum age prescribed for the members 21 years. He should be an India citizen. He should not be convicted for fraud or dishonesty. He should be neither a bankrupt nor compound with the creditors. He should not be engaged in other business connected with a company. He should not be a defaulter of any other stock exchange. The minimum required education is a pass in 12th standard examination.

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COMPANY PROFILE
CD Equisearch is one of the leading brokerage houses with a strong presence in the institutional and HNI broking segment With over 30 years of experience, you could be sure of the best in class research, operations, backend support and above all, a name which inspires trust. At CD Equisearch, the emphasis is on transparent and clean dealings. This has earned us our clients' goodwill. This quality has stood the test of time and has helped us secure business from all quarters. At CD Equisearch, people are not weighed down by tradition. Rather, we are inspired by the rich heritage of the company. Here, business is conducted by building long term relationships with our clients and associates by laying emphasis on ethical and clean dealings. Here, people practice the gentle art of finance with professionalism, skill and transparency. At CD Equisearch, we do business quietly. Continued growth which is so essential in todays fast paced and ever changing capital market has been a constant feature at CD Equisearch. With an eye on the future and in keeping with the changing times, we at CD Equisearch have earned the investor's goodwill our most important asset, over the years. After having a track record of servicing Institutions and HNIs for over 3 decades, we are planning to foray into the growing retail segment in a big way. We would be expanding across the geography with a wide network of our regional offices, branches, franchisees and sub-brokers. We would be offering a complete basket in financial services. We are looking at ourselves amongst one of the top ten broking houses in India by 2014 . To achieve that, we have very aggressive plans of expansion.

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Mission & Vision

CD Equisearch is passionate about providing friendly customer services on the greens of the investing world. Following the highest standards of ethics is entrenched in the DNA of CD Equisearch. At CD Equisearch, the selection and recommendations of wealth creating opportunities are primarily based on the 3C principle:

Conservation of capital Consistent growth in value of investment over a period of time Continual cash inflow through handsome dividends

Our Guiding Principles...

We, at CD Equisearch believe that being on par in terms of price and quality only satisfies the customer. It is the customized service, which delights. The core values, which drive CD Equisearch to exceed customer service expectations, are:

TRUST TRANSPARENCY THOUGHT LEADERSHIP We believe that abiding by these values for over more than the past three decades

has helped us earn the goodwill that we enjoy today.

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MANAGEMENT
Chairman-Non Executive Director Director CFO Director (Group Companies) Mr. Chandravadan Desai Mr. Pranay Desai Mr. Jayesh Vora Mr. Nilesh Vasa

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PRIMARY MARKET, BBP AND GSO

PRIMARY MARKET

This project focuses on the relatively unexplored area of primary debt and equity markets in developing countries. Its broad goal is to begin the process of understanding how and why primary markets develop. Primary markets are where the firms raise capital through the issuance of financial securities traded after insurance. The research will examine the development of domestic primary market, focusing on macro economic factors. With the abolition of Control over Capital Issues prior approval of capital issue proposals by companies has been dispensed with. The companies are required now to be fair and honest to the investing public by disclosing all material facts along with the risk factors associated with their projects to the public. The present practice of brochure which is circulated widely to the investors along with application form has been replaced with abridged prospectus to be attached to the New Issue application forms. The word market can have different meanings but it is used most often as a catchall term to denote both primary and secondary market. In fact primary market and secondary market are both distinct terms that refers to the market where securities are created and the one in which they are traded among investors respectively. Knowing the functions of primary and secondary market are the key to understanding how stocks trade. Without them, the stock market would be much harder to navigate and much less profitable. We will help you to understand how these markets work and how they relate to individual investors. The primary market is that part of capital markets that deals with issuance of new securities. Companies, government or Public sector institutions can obtain funding through the sale of new stock or bond issue. This is typically done through a syndicate of securities dealers .The process of selling new issues to the investors is called Underwriting. In the case of new stock issue, this sale is called an IPO (Initial public 22

offering). Dealers earn a commission that is built into the price of the security, though it can be found in the prospectus. The market in which investors have the first opportunity to find a newly issued security. After the first purchases, subsequent trading is said to occur in secondary market. The primary market is where securities are created. It is in this market that firms sell (float) new stock and bonds to the public for the first time. For our purposes, you can think of a primary market as being synonymous with an IPO. Simply put, an IPO occurs when a private company sells stocks to the public for the first time.

METHODS OF FLOATING NEW ISSUES

The various methods which are used in floatation of new securities in the new issue market are 1) Public Issue / Offer through Prospectus 2) Offer for sale 3) Private Placement 4) Right Issues 5) Stock Exchange Pricing 6) Subscription by inside coteries
1) PUBLIC ISSUES:This is the most common method followed by joint stock companies

to raise capital through the issue of new securities. Under this method, the issuing company directly offers to the general public or institutions a fixed number of shares at a stated price through a document called prospectus. The purpose of raising the new capital is to finance some capital expenditure, it is usual for companies to issue a prospectus inviting the public to take up the new securities. Legally no public limited company can raise capital from public without issuing prospectus.
2) OFFER FOR SALE: Under this method the company sells the shares /securities to the

issue house / brokers at an agreed price. The issue house/brokers sell their shares / securities to the investors at a higher price. The company are relieved from the problem of 23

printing and advertisement of prospectus and making allotment of shares. Offer for sale is not common in India
3) PRIVATE PLACEMENT: The promoters sell their shares to their friends, relatives and

well wishers to obtain the minimum subscription which is a precondition for issue of shares to the public. Once this precondition for issue of shares is met, the issue house/brokers buy the securities out right with the intention of placing them with their clients afterwards. The issue house/brokers maintain their own list of clients and through customer contact sell the securities. The main disadvantage of this method is that the securities are not widely distributed to the large section of investors.
4) RIGHT ISSUES: Rights issue is a method of raising funds in the market by an existing

company. A right means an option to buy certain securities at a certain privileged price within a specified period. Shares so offered to the existing shareholders are called Right shares. Right shares are offered to the existing shareholders in a particular proportion to their existing shareholders. The company should abide with section 81 of the companies act. If the shareholders fail to take the Right shares within a specified period, the balance is to be equally distributed among applicants for additional shares. Any balance still left over may be disposed off in the market.
5) STOCK EXCHANGE PLACING: This method has been discontinued in India due to

strict regulations and statutory rules for listing of securities. According to it, A company used to place its shares privately with the aid of brokers, and then secured permission for dealing on stock exchange. This method involved little cost but often led to concentration of new shares in few hands.
6) SUBSCRITION BY INSIDE COTERIES: When a company goes to the new issue

market a certain percentage of the capital is kept in reserve for subscription by inside coteries.

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SEBI GUIDELINES FOR NEW ISSUE MARKET

The SEBI guidelines for different category of companies are as follows
NEW COMPANY: A new company is a company which has not completed twelve months

of production. These companies have to issue shares only at par.

PRIVATE AND CLOSELY HELD COMPANIES: Those companies having a track record

of consistent profitability for last three years are permitted to price their issues freely.
EXISTING LISTED COMPANIES:The existing limited companies will be allowed to

raise fresh capital by freely pricing its shares provided the promoters contribution is 50% on first 100 crores of issue.
DIFFERENTIAL PRICING: Issue to the public can be priced differentially as compared

to issue to right shareholders justification for the price difference should be mentioned in the offer document.
LOCK IN PERIOD: Lock in period is five years for promoters contribution from the date

of allotment or from commencement of commercial production whichever is later.

GUIDELINES FOR PUBLIC ISSUE:

Every application should be accompanied with an abridged prospectus. The risk factors should be highlighted in the abridged prospectus. Companys management, past history and present business of the firm should be highlighted in the prospectus. Justification for premium should be stated The public issues should be kept open for a minimum of three days and a maximum of ten working days. The quantum of issue should not exceed amount given in the prospectus Compliance report in the prescribed form should be submitted to SEBI within forty five days from the date of closure of issue. The gap between the closure date of various issues i.e. rights and public should not exceed thirty days. 25

RECENT TRENDS AND DEVELOPMENTS IN NEW ISSUE MARKET

The recent economical changes i.e. privatization, liberalization, foreign private participation, disinvestment in public sector have given a new direction to the capital market. The number of issues made and the amount of capital raised from the market has been phenomenal in the last decade. The public sector organizations like financial institutions, public sector undertaking have started dominating the primary market. In 1996-97, all public financial institutions including IDBI, IFCI, ICICI and many public sector backs have mobilized resources through public issue route. There is a major decline in the equity at premium issues over the years.
CAPITAL MOBILISED THROUGH DEBT: The late 90s have witnessed the bent of

capital market for the issue of debt as that period is characterized with high interest rates and negative returns from the secondary market.
MUTUAL FUNDS: New mutual funds were set up during the last decade. Many investors

are turning towards mutual funds to take the advantage of expertise in investments and lowering of investment risk. SEBI has dispensed with the requirement of a minimum promoters contribution and lock in for listed companies with a three year dividend track record in the past five years The market reforms include the introduction of electronic trading with the setting up of OCTEI and NSE. The process of Book building was encouraged and IPO through Book building has picked up. Credit rating was made mandatory for some issues. This step has built the customer confidence in the market. Qualitative changes included the introduction of new innovative financial instruments. Certain innovative financial instruments were designed to suit the investors requirement. With the globalization of business, foreign markets have welcomed Indian companies. The Indian companies have issued GDR (global depository receipts) and ADR (American depository receipts), foreign currency bonds, euro currency bonds etc.

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PROBLEMS OF NEW ISSUE MARKET

The problems of new issue market can be summarized as follows: The new issue market failed to mobilize adequate savings from the household sector. Only 10 % of the financial savings was mobilized. One reason for such failure is lack of awareness among these sector and private placement of capital by the companies. The new issue market has failed to communicate to the public the benefits of investing in new instruments. Merchant banks have failed to bridge the gap between the investors and the companies. They have failed to evaluate the projects taken up by companies, credentials of promoters, technical and managerial aspects, etc. this has led to customers being duped by companies. SEBI has now brought out stringent guidelines for companies and merchant bankers. Investment in capital markets are considered to be risky. So the risk adverse attitude of customer has diverted the investment from shares to fixed deposits and debentures. Abnormally high cost of flotation has kept away small companies from the primary market. access the NIM. Delay in allotment of shares, refunding of application money, posting of share certificates etc are common anomalies in NIM underwriters. Timing of an issue is very important. But companies failed to keep an eye on the other issues which are made during the same time. Thus crowding of new issues at one time has made the investor to select the one which he considered to be worthy. 27 New companies failed to gain the favor of underwriter. Caution investors have stayed away from new companies, which led to devolution on NIM has not reached to the semi urban and rural areas. An investor from this region has to spend additional cost for post and bank charges to

INITIAL PUBLIC OFFERING

IPO is an acronym for initial public offering. This is the first sale of stock by a company to the public. A company can raise money by issuing either debt or equity. If the company has never issued equity to the public, it is known as an IPO. Corporate may raise capital in the primary market by way of an IPO, right issue or private placement. Companies fall into two broad categories private and public. A privately held company has fewer shareholders. Anybody can come out and incorporate a private company, put in some money file the right legal documents and follow the reporting rules. Most small businesses are privately held, but large companies can be private too. IKEA, Dominos pizza and Hallmark cards are all privately held. It usually is not possible to buy shares in private company. The shares of private company are not offered to general public. On the other hand public companies can sell at least a portion of themselves to the public and trade on stock exchange. This is why doing an IPO is also referred to as going public. Public companies have thousands of share holders and are subjected to strict rules and regulations.

WHY GO PUBLIC?
Going public raises cash , being publicly traded also opens many financial doors .Because of increased scrutiny public companies can usually get better rates when they issue debt. As long as there is a market demand a public company can always issue more stock. Trading in open market means liquidity. Being on a major stock exchange carries a considerable amount of prestige. In past companies with strong fundamentals could 28

only qualify for an IPO, but Internet boom changed all this. Firms no longer needed strong financial and a solid history to go public. Instead, IPOs were done by smaller start ups seeking to expand their business. There is nothing to worry for expansion of IPO but most of these firms had never made a profit and didnt plan on being profitable any time. In cases like this companies might be suspected of doing an IPO just to make the founders rich. The IPO then becomes the end of the road rather than beginning.Howcan this happen? Remember an IPO is just selling stock; it is all about the sales job. If you can convince people to buy stock in your company, you can raise a lot of money. In our opinion IPOs came just to collect money are extremely risky and should be avoided.

IPO BASICS: HOW TO GET INTO AN IPO?

UNDERWRITING PROCESS: Getting a piece of a hot IPO is very difficult, if not

impossible. To understand why we need to know how an IPO is done, a process known as underwriting. When a company wants to go public, the first thing it does is hire an investment bank. A company could theoretically, sell its shares on its own but realistically, an investment bank is required. Underwriting is the process of raising money by either debt or equity. Underwriter acts as middlemen between companies and the investing public. The company and the investment bank will first meet to negotiate the deal. Items usually discussed includes the amount of money company will raise, the types of securities to be issued and all details in underwriting agreement. The deal can be structured in a variety of ways. For example, in a firm commitment deal the underwriter guarantees that a certain amount will be raised by buying the entire offer and then reselling to the public. In a best effort deal the underwriter sells the securities, but doesnt guarantee the amount rose. Once all sides agree to deal, the investment bank puts together a registration statement to be filed with SEC, governing bodies. This document contains information about offering as well as company information such as financial statements, management background, legal problems and insider holdings. The SEC then requires a cooling off period in which they investigate and make sure all material information has been disclosed. Once SEC approves the offering, a date is set when the stock will be offered to the public. 29

During the cooling off the period the underwriters put together what is known as red herring. This is an initial prospectus containing all information about the company except for the offer price and effective date , which arent known at the time with the red herring in hand , the underwriter and the company attempt to hype and build up interest for the issue. They go on a road show also known as the dog and pony show where the big institutional investors are courted. As an effective date approach the underwriter and company sit down and decide on the price. This is not an easy decision; it depends on the company, the success of the road show and most importantly current market conditions. Of course it is in both parties interest to get as much as possible. Finally the securities are sold on the stock market and money is collected from investors.
INDIVIDUAL INVESTOR: As you can see, the road to an IPO is an long and complicated

one. You may have noticed that individual investors are not involved until the very end, because small investors are not the target market. They do not have more cash and therefore hold little interest for the underwriters. If the underwriters think that an IPO will be successful they will usually pad the pockets of their favorite institutional client with shares at IPO price. The only way for individual investor to get shares is to have an account with one of the investment banks that is part of the underwriting syndicate. But an individual cannot expect to open an account with $1000 and be showered with an allocation. He has to be frequently trading client with a large account to get into a hot IPO.

POINTS TO BE CONSIDERED TO GET INTO AN IPO

NOHISTORY: Its hard enough to analyze the stock of an established company. An IPO

company is even trickier to analyze since there wont be a lot of historical information. The main source of data is Red herring prospectus, so make sure you examine this document carefully. Look for the usual information but also pay special attention to the management team and how they plan to use the funds generated from an IPO.
LOCK UP PERIOD: If you look at the charts following many IPOs, you will notice that

after few months the stock takes a sleep downturn, this is often because of lockup period.

30

When a company goes public, the underwriters make company officials and employees sign a lock up agreement. Lock up agreements are legally binding contracts between underwriters and insiders of the company, prohibiting them from selling any shares of stock for a specified period of time. The period can be anything from 3 to 24 months. 90 days is minimum period stated under rule, but lockup specified by the underwriters can last much stronger. The problem is when lockups expire all the insiders are permitted to sell their stock. The result is a rush of people trying to sell their stock to realize their profit. This excess supply can put severe downward pressure on the stock price.
FLIPPING: Flipping is reselling a hot IPO stock in the first few days to earn a good

profit. This is not easy to do and you will be strongly discouraged by your broker. The reason behind this is that, the companies want long term investors who hold their stock, not traders. There are no laws that prevent flipping, but your broker may black list you from future offering or just smile less when you shake hands. Of course, institutional investors flip stocks all the time and make big money. The double standard exists and there is nothing we can do about it as they have buying power. Because of flipping, it is a good rule not to buy shares of an IPO if you dont get in on the initial offering. Many IPOs that have big gains on the first day will come back to earth as the institutions take their profits.
AVOID THE HYPE-Its important to understand that underwriters are salesmen. The

whole underwriting process is intentionally hyped up to get as much attention as possible. Since IPOs only happen once for each company, they are often presented as once in a lifetime opportunities. Of course some IPO soar high and keep soaring. But many end up selling below their offering prices within the year. Dont buy a stock because it is an IPO do it because it is a good investment.

31

BOOK BUILDING PROCESS

The abolition of the capital issues control act, 1947 has brought a new era in the primary market in India. The control over the pricing of the issues, designing and tenure of capital issues were abolished. The issuers at present are free to make the price of issue. The main drawback of pricing was the process of pricing of issues. The issue price was determined around 60 to 70 days before the opening of the issue and the issuer had no clear idea abut the market perception of the price determined. The traditional fixed price method of tapping individual investor from two defects
Delay in initial public process. Under pricing/over pricing of issues.

In fixed price method, public offers do not have any flexibility in terms of prices as well as number of issues. From experience it can be stated that a majority of the public issues come through fixed price method are either under priced or over priced. Retail investors are unable to distinguish good issues from bad one. That is why book building mechanism, a new (product) process of price discovery has been introduced to overcome this limitation and determine issue price effectively. SEBI guidelines defines book building as a process undertaken by which a demand for the securities proposed to be issued by a corporate body is elicited and build up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document. Book building is basically a capital issuance process used in 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 a period fro which a book for IPO is open, 32

bids are collected from the 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.

FEATURES OF BOOK BUILDING PROCESS

Public offers in fixed price method involves a pre issue cost of 2-3 percent and carry the risk of failure if it does not receive 90 percent of total subscription. In Book building such cost and risk can be avoided because Issuer Company can withdraw the market if demand for security does not exist. Institutional investor like to participate largely in book built transactions as in this process the time taken for completion of entire process is less than the fixed price issues Here the price is determined on the basis of the demand received or at the price above or equal to the floor price whereas in fixed price option the price of issues is fixed first and then securities are offered to the investors. Book is built by book running lead manager to know the everyday demand whereas in case of fixed price of public issues, the demand is known at the close of the issue. Book should remain open for minimum of 5 days.

33

BOOK BUILDING PROCESS IN INDIA

The main parties who are directly associated with book building process are issuer company. BRLM (Book Running Lead Managers) and the syndicate members. The BRLM (merchant banker) and the syndicate members who are the intermediaries are both eligible to act as underwriters. The steps involved in book building process are as under: The issuer company proposing an IPO appoints a lead merchant banker as BRLM. Initially the issuer company consults with the book running lead manager in drawing up a draft prospectus which does not mention the price of the issues but includes other details about the size of the issues, past history of a company and a price band. The securities available to the public are separately identified as net offer to the public. The draft prospectus is filed with SEBI which gives it a legal standing. A definite period is fixed as a bid period and BRLM conducts awareness campaign like advertisements, road shows etc. The BRLM appoints a syndicate member, a SEBI register intermediary who underwrites the issues to the extent of net offer to the public. The BRLM is entitling to remuneration for conducting the book building process. The copy of draft prospectus may be circulated by BRLM to the institutional investors as well as to the syndicate members.

34

 The syndicate members create demand and ask each investor for the number of shares and offer price. The BRLM receives the feedback about the investors bid through syndicate members. The prospective investors may revise their bids at any time during the bid period. The BRLM on receipt of feedback from the syndicate embers about the bid price and quantity of share apply has to build up an order book showing the demand for the shares of the company at various prices. The syndicate members must also maintain a record book for orders received from institutional investors for subscribing to the issue of private portion. 12) On receipt of above information, the BRLM and the issuer company decides the issue price. This is known as market clearing price. 13) The BRLM then closes the book in consultation with the issuer company and determine the issue size of placement portion and public offer portion. Once the final price is determined the allocation of securities should be made by BRLM based on prior commitment, investors quality, price aggression, earliness of bids etc. the bid of an institutional bidder, even if he has paid full amount may be rejected without being assigned any reason as the book building portion of institutional investors is left entirely at the discretion of issuer company and the BRLM The final prospectus if filed with the registrar of companies within 2 days of determination of issue price and receipts of acknowledgement card from SEBI. Two different accounts for collection of application money, one for the private placement portion and the other for the public subscription should be opened by Issuer Company. The placement portion is closed a day before the opening of public issue through faxed price method. The BRLM is required to have the application forms along with application money from the institutional buyers and underwriters to the private placement portion.

35

 The allotment for the private placement portion shall be made on the second day from the closure of the issue and the private placement portion is ready to be listed. The allotment and listing of issues under the public portion i.e. fixed price portion must be as per the existing statuary requirements. Finally the SEBI has the right to inspect such records and books which are maintained by BRLM and the intermediaries involved in the Book building process.

BOOK BUILDING ISSUES IN INDIA

The practice of Book building is new to Indian capital market and the procedure is still evolving. When Book building was introduced in India the main objective was that Book building would help discover the right price for a public issue, which in turn would eliminate unreasonable issue pricing by greedy promoters. ICICI first used book building method for its Rs.1000 crores- bond issue in April 2007 followed Larsen & Toubro, TISCO, Hughes software, ONGC, TCS, NTPC etc in recent times Sl. No. Name of the issue SAL Steel 01 Limited Book Running Lead Manager 1) SBI Capital Market Ltd. 2)IL&FS Invest smart Ltd. Date of issue 01.11.2012 to 05.11.2012 Price Band Rs.12 to Rs.14 Issue size (Lakh shares) 420.00

36

02

NTPC Limited India bulls Financial services Ltd Tata consultancy services Ltd

1) ICICI Securities Ltd. 2) Enam Financial consults. 3) Kotak Mahindra Capital. 1) SBI Capital Markets Ltd. 2) DSP Merrill Lynch Ltd. 1) J.M.Morgan Stanley. 2) DSP Merrill Lynch. 3) JP Morgan India Pvt. Ltd. 1) J.M.Morgan Stanley. 2)Kotak Mahindra Capital 3) ICICI Securities Ltd. 1) Enam Financial Consults.

07.10.2012 to 14.10.2012 06.09.2012 to 10.09.2012 29.07.2012 to 05.08.2012 21.04.2012 to 28.04.2012 12.04.2012 to 19.04.2012 29.03.2012 to 07.04.2012 02.04.2012 to 07.04.2012

Rs.52 to Rs.62 Rs.16 to Rs.19 Rs.775 to Rs.900 Rs.63 to Rs.70 Rs.101 to Rs.110 Rs.155 to Rs.175 Rs.255 to Rs.295

8658.30

03

271.87

04

554.52

05

NDTV Ltd. Datamatics

173.01

06

Tech. Ltd Pharmaceuti 1) Enam Financial Consults. cals and 2) IL&FS Invest smart Ltd. chemicals ICICI Bank 1) DSP Merrill Lynch Ltd. 2) J.M.Morgan Stanley. Ltd. 3) Kotak Mahindra Capital.

103.00

07

34.33

08

1196.07

DIFFERENCE BETWEEN SHARE OFFERED THROUGH BOOKBUILDING AND THROUGH NORMAL PUBLIC ISSUE
In normal public issue method the price at which the securities are offered/allotted is known in advance to the investor whereas the price at which these securities will be offered/allotted is not known in advance to the investor in book building process. Only indicative price range is known. In normal public issue method demand for the securities offered is known only after the closure of the issue whereas in book building method demand for the securities offered can be known everyday as the book is built In normal issue method payment is made at the time of subscription wherein refund is given after allocation whereas in book building method payment is made only after allocation.

37

 In book building securities are offered a t prices above or equal to the floor prices, whereas securities are offered at a fixed price in case of normal public issues.

OFFER TO THE PUBLIC THROUGH BOOK BUILDING PROCESS

The oxford dictionary of business jumps from bonus shares to book keeping and then on book of primary entry without devoting an entry for book building. Book building is the process by which an underwriter attempts to offer an IPO based on demand form institutional investors. An underwriter builds a book by accepting orders from fund managers, indicating the number of shares they desire and the price they are willing to pay. Book maker is not the same as the book builder. The former takes bets and pays out money to the people who win. The IPO can be made through fixed price method, book building method or a combination of both. In case the issuer choose to issue securities through book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner.

A) 100 percent of the net offer to the public through book building route B) 75 percent of the net offer to the public through the book building process and 25 percent through fixed price portion. C) Under 90 percent scheme this percentages will be 90 and 10 respectively.
A) 100 % THROUGH BOOK BUILDING PROCESS: In the 100 percent of the net offer to

the public, entire issue is made through book building process. In case of 100 percent book building process, the bidding centers should be at all the places where recognized stock exchanges are situated.
B) 75 % THRUOGH BOOK BUILDING PROCESS: The option of 75 percent book

building is available through the book building process are indicated as placement portion category and securities available to public are identified as net offer to the public. In this 38

option, underwriting is mandatory to the extent of net offer to the public. The issue price for placement portion and offers to public are required to be same.
C) 90 % THROUGH BOOK BUILDING PROCESS: This option is not available in India.

TYPES OF INVESTORS
There are three kinds of investors in book building issue. The retail individual investor (RII), the non-institutional investor (NII) and the qualified institutional buyers (QIB). RII is an investor who applies for stocks for a value of not more than rupees 100000. Any bid exceeding this amount is considered in the NII category. NIIs are commonly referred to as high net worth individuals. On the other hand QIBs are institutional investors who posses the expertise and the financial muscle to invest in securities markets. Mutual funds, financial institutions, scheduled commercial banks, insurance companies, provident funds, state industrial development corporations fall under the definition of being a QIB. Each of these is allotted a certain percentage of total issue. The total allotment of RII category has to be at least 35 percent of the total issue. RII also have an option of applying at cut-off price. This option is not available to other classes of investors. NIIs are to be given at least 15 percent of the total issue and QIBs are to be issued not more than 50 percent of the total issue

REVERSE BOOK BUILDING PROCESS

The reverse book building is a mechanism provided for capturing the sell orders online basis from the shareholders through respective BRLMs which can be used by the companies intending to delist its shares through buy back process. In reverse book building scenario, the acquirer/company offers to buy back shares from the shareholders. The reverse book building is basically a process used for efficient price discovery. It is a mechanism where during the period for which the reverse book building is open offers are collected from the shareholders at various prices, which are above or equal to the floor price. The buy back price is determined after the offer closing date. Business process for delisting through book building is as follows 39

 The acquirer shall appoint designated BRLM for accepting offers form the shareholders The company/acquirer intending to delist its shares through book building process is identified by way of a symbol assigned to it by BRLM. Orders for the offer shall be placed by the shareholders only through the designated trading members, duly approved by the exchange. The designated trading members shall ensure that the security/shareholder deposit the securities offered with the trading members prior to the placement of an order. The offer shall be open for number of days The BRLM shall intimate the final acceptance price and provide the valid accepted order file to the National Securities Clearing Corporation Limited (wholly owned securities of NSE carrying out clearing and responsible for settlement operation.). SEBI guidelines shall be applicable to delisting of securities of companies and specifically apply to:

Voluntary delisting being sought by the promoters of a company. Any acquisition of shares of the company (either by a promoter or by any other person)or scheme or arrangement, by whatever name referred to, consequent to which the public shareholding falls below the minimum limit specified in the listing conditions or listing agreement that may result in delisting of securities. Promoters of the company who voluntarily seek to delist their securities from all or some of the stock exchanges. Case where a person in control of the management is seeking to consolidate his hol ding in a company in a manner which would result in the public share 40

holdings or in the listing agreement that may have affect of company being delisted. The companies which may be compulsorily delisted by stock exchanges Advantages of reverse book building provides following advantages It provides a fair, efficient and transparent method for collecting offer using latest electronic trading systems. The NSE system offers a nationwide bidding facility in securities. Cost involved in issue is far less than those in a normal IPO.

RED HERRING PROSPECTUS

A preliminary registration statement that must be filed with the SEC describing a new issue of stock and the prospects of the issuing company. "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 a prospectus. It accompanies the application form of public issues.

GREEN SHOE OPTION

41

In most of the case it is experienced that IPO through book building method in India turns out to be over priced or under priced after their listing and ultimately the small investor becomes the net loser. If the prices in open market fall below the issue price, small investors may start selling their securities to minimize losses. Therefore there was a vital need of a market stabilizer to smoothen swing in the open market price of newly listed shares after an IPO. Market stabilization is the mechanism by which stabilizing agent acts on behalf of the issuer company, buys a newly issued securities for the limited purpose of preventing a decline in the new securities in open market price in order to facilitate its distribution to the public. It can prevent the IPO from huge price fluctuation and save investors from potential loss. Such mechanism is known as Green Shoe Option. Green Shoe Option can rectify the demand and supply imbalances and can stabilize the price of the stock. It owes its origin to the green shoe option company, which used this option for the first time in the world. SEBI recognized GSO system of initial public 2004 August. According to SEBI Guidelines A company desirous of availing GSO shall pass the resolution in the general body meeting authorizing the public issue, seek authorization, also for possibility of allotment of further shares to the stabilizing agent. The company shall appoint one of the Lead book runners among the issue management team as stabilizing agent, will be responsible for price stabilization process if required. The stabilizing agent shall enter into an agreement with the promoters who will lend their share, specifying the maximum number of shares that may be borrowed from the promoters, which shall not be in excess of fifteen percent of the total issue size. The stabilization mechanization shall be available for the period disclosed by the company in the prospectus, which shall not exceed 30 days from the date when trading permission was given by the exchanges. Ideally, with the intervention of the stabilizing agent the share price should not fall below the issue price for a period of 30 days from the listing date. Due to this option, the investor has a time period of 30 days up to which he is safe and his chances of incurring the losses are minimum. A GSO is a clause contained in the underwriting agreement of IPO. The GSO is also referred to as an overallotment provision, allows the underwriting syndicate to buy

42

up an additional 15 % of the shares at the offering price if public demand for the shares exceeds expectations and the stock trades above its offering price.
The GSO provides extra incentive for the underwriters of a new stock offering. In addition this investment banks, brokerages and other financing parties also often exercise the GSO the cover some of the short position. They may have created an effort to maintain a stable market after a new stock begins to trade as well as to meet after market demand.

AN INTERESTING FACT
The Green shoe company was the first issuer to allow the overallotment option to its underwriters, hence the name. The provision that has become standard in firm commitment underwriting is the overallotment option or green shoe option. Where the company and other sellers of securities grant and option to the underwriters to purchase additional shares (around 15 % in total offerings) on the same term as the original shares offer to the underwriters. The GSO allows the underwriters to exercise significant market clout in stabilizing activities during a 30 day period immediately following a public offering. The over allotment gives the underwriters buying power to cover their short position in order to stem a falling stock price, without the risk of having to buy stock at higher prices to cover their short position is the stock price increases

RESOURCE MOBILIZATION FROM PUBLIC ISSUES (IPOS) (2008-2012) (TABLE: 1)

(Rs. In crores)

43

AVG AMT NUMBER OF YEAR ISSUES GROWTH (NO & %) AMOUNT GROWTH (NO & %) MOBILISED (AMT/NO OF ISSUES) 2008 51 0 63 2009 114 (123.52%) (44) 2010 7 (-86.27%) (45) 2011 6 (-88.23%) (34) 2012 17 (-66.66%) 3277 1038 1202 2722 2719 0 3 (0.11%) (1517) (-55.79%) (1681) (-61.83%) 558 (20.52%) 192.76 173.00 171.71 23.87 53.31

44

INTERPRETATION
From the above graph, in the year 2008 number of issues in IPOs was 51 and the amount raised was Rs.2719 crores whereas in the next year the number of issues doubled to 114 and the amount remained same. Hence we can say that in year 2008 companies with small capital entered in the market. In the years 2010 2011 and 2012 the number of issues in IPOs were small and the amount raised was large this shows that the less number of companies with strong financial background entered the market
The average amount mobilized in IPOs in years 2008 and 2009 shows that more small companies entered the market whereas from year 2010 we can observe large companies entered in them

45

RESOURCE MOBILIZATION FROM PUBLIC ISSUES (ISSUED BY LISTED COMPANIES: PUBLIC ISSUES) (2008-2012) (TABLE: 1.1)
(Rs. in crores)
AVG AMT YEAR NUMBER OF ISSUES GROWTH (NO & %) AMOUNT GROWTH (NO & %) MOBILISED (AMT/NO OF ISSUES) 2008 14 0 (4) 2009 2010 2011 2012 10 13 8 16 (-28.57%) (1) (-7.14%) (6) (-42.85%) 2 (14.28%) 2656 5300 2600 15073 3538 0 (882) (-24.92%) 1762 (49.80%) (938) (-26.51%) 11535 (326.03%) 265.60 407.69 325.00 942.06 252.71

46

INTERPRETATION
From the above graph in public issues we can notice from year 2008 to 2011 that number of issues was 14, 10, 13 and 8 respectively and the amount mobilized was Rs.3538, 2656, 5300 and 2600 crores respectively. From this we can say that less number of companies with strong financial base entered the market. In year 2012 the number of public issues increased to 16 and the amount mobilized also increased subsequently from Rs.2600 crores in 2011 to Rs.15073 crores in 2011-12. This shows that large companies with huge capital entered the market

47

RESOURCE MOBILIZATION FROM PUBLIC ISSUES (ISSUED BY LISTED COMPANIES: RIGHT ISSUES) (2008-2012) TABLE: 1.2
(Rs. in crores)
AVG AMT YEAR NUMBER OF ISSUES GROWTH (NO & %) AMOUNT GROWTH (NO & %) MOBILISED (AMT/NO OF ISSUES) 2008 28 0 (1) 2009 2010 2011 2012 27 15 12 19 (-3.57%) (13) (-46.42%) (16) (-57.14%) 9 (32.14%) 729 1041 431 1708 1560 0 (831) (-53.26%) (519) (-33.26%) (1129) (-72.37%) 148 (9.48%) 27.00 69.40 35.91 89.89 55.71

48

INTERPRETATION
From the above graph Right issues decreases subsequently form year 2008 to 2012. In the year 2008 the number of issues were 28 and the amount was Rs.1560 crores which remains same in 2008, but the amount decreased from Rs.1560 crores to Rs.729 crores in the following years. This shows that in year 2009 small companies entered the market.

From the graph we can observe that in 2010 the number of right issues was 15 as compared to 2009 which was 27 but the amount gradually increased to Rs.1041 crores from Rs.729 crores. This shows that in year 2008 large companies with huge capital entered the market.

In the year 2011 and 2012 the number of right issues were 12 and 19 respectively but the amount was Rs.431 crores and Rs.1708 crores respectively which shows high difference. This means that in year 2011 small companies with less capital and in year 2008 large companies with high financial background entered the market.

49

SECTOR WISE DISTRIBUTION OF RESOURCESMOBILISED (PRIVATE SECTOR) (2008-2012) TABLE: 2

(Rs. in crores)
AVG AMT YEAR NUMBER OF ISSUES GROWTH (NO & %) AMOUNT GROWTH (NO & %) MOBILISED (AMT/NO OF ISSUES) 2008 90 0 58 2009 2010 2011 2012 148 30 18 34 (64.44%) (60) (-66.66%) (72) (-80.00%) 56 (-62.22%) 5893 6602 1897 3934 7604 0 (1711) (-22.50%) (1002) (-13.17%) (5707) (-75.05%) (3670) (-48.26%) 39.81 220.06 105.38 115.70 84.48

50

INTERPRETATION
From the above graph in Private sector number of issues was highest in 2009 i.e. 148 but amount raised was only Rs.5893 crores that means more number of small private companies entered the market. In year 2009-10 numbers of issues were only 30 but amount mobilized was Rs.6602 crores. In the year 2009-10 more financially stable companies entered the market in Private secto

51

SECTOR WISE DISTRIBUTION OF RESOURCESMOBILISED (JOINT SECTOR ) (2008-2012) TABLE: 2.1

(Rs. in crores)
AVG AMT YEAR NUMBER OF ISSUES GROWTH (NO & %) AMOUNT GROWTH (NO & %) MOBILISED (AMT/NO OF ISSUES) 2008 1 0 1 2009 2010 0 0 (-100 %) 0 0 0 14 0 (14) (-100 %) 0 0 0 14

2011

2012

52

INTERPRETATION
From the above graph Joint sector declined after year 2008-2009 it mobilized only Rs.14 crores in year 2008-2009 and then decline subsequently.

53

SECTOR WISE DISTRIBUTION OF RESOURCESMOBILISED (PUBLIC SECTOR) (2008-2012) TABLE: 2.2

(Rs. in crores)
AVG AMT YEAR NUMBER OF ISSUES GROWTH (NO & %) AMOUNT GROWTH (NO & %) MOBILISED (AMT/NO OF ISSUES) 2008 2 0 1 2009 2010 2011 2012 3 5 8 18 (50 %) (3) (150 %) (6) (300 %) 16 (800 %) 215 941 2173 16125 200 0 15 (7.50%) 741 (370.50%) 1973 (986.50%) 15925 (7962.50%) 705.00 188.20 271.62 895.83 100.00

54

INTERPRETATION
From the above graph the issues were very small in Public sector, the average amount mobilized is good. it means Public companies with high financial background came to the market especially in year 2011-12 very big companies entered the market. sPublic sector units have shown less participation i.e. 2 issues in year 2011-12 it slowly increased in year 2008-12 to 3 issues and then 5 and 8 issues in years 2009-10 and 2010-11 respectively then it subsequently increased to 18 issues in the year 2011-12.

55

INDUSTRY WITH RESOURCE MOBILIZATION (in (2008-2012) TABLE: -3

%)

INDUSTRY BANKING / FIS CEMENT & CONSTRUCTIO N CHEMICAL ENTERTAINM ENT FINANCE INFORMATION TECHNOLOGY PAPER AND PULP PLASTIC TELECOM TEXTILE OTHERS TOTAL

2008 51.67 4.31

2009 51.40 1.35

2010 68.16 0.35

2011 84.58 0.75

2012 15.48 0.00

2.32 1.65 1.59 19.79 0.18 0.09 0.96 1.19 17.21 100.00

0.52 7.49 7.20 13.16 0.00 0.07 15.10 0.00 3.72 100.00

2.48 0.00 0.43 0.51 0.00 0.00 11.05 0.99 16.03 100.00

0.38 0.00 0.72 5.58 0.00 5.34 0.00 0.00 2.65 100.00

7.34 0.76 0.35 2.82 0.00 0.00 0.00 0.24 73.00 100.00

56

INTERPRETATION
from the above graph Banks and FIs garnered 51.67 % of the total amount raised during 2008 and it increased to 68.16 % and 84.58 % in year 2010 and 2011 respectively whereas in 2012 it declined subsequently to 15.48 %. Finance mobilized 7.20 % in 2009 and then there was a great significant fall and it came to 0.35 % in the year 2012. Telecom sectors share in resource mobilization was 15.10 % and 11.05 %in the years 2009 and 2010 and declined to nil in the years later. Chemical sector has shown growth in the year 2012. It mobilized 7.34 % of share in 2012 as compared to other years from 2008 to 2011.

57

RESOURCES RAISED IN CORPORATE DEBT MARKET (2008-2012) TABLE: 4

YEAR PUBLIC ISSUES PRIVATE PLACEMENT TOTAL DEBT PRIVATE PLACEMENT % 2008 2009 2010 2011 2012 4698 4139 5341 4693 4624 54701 52434 46220 48424 48428 59399 56573 51561 53117 52752 92.09 92.68 89.64 91.16 91.80 TOT RESOURCE MOBILIZATION IN PM 62734 59057 52643 54155 70573

(Rs. in crores)
SHARE OF DEBT IN TOT RESOURCE MOBILIZATION 95.23 95.80 97.94 98.08 74.75

58

INTERPRETATION
From the graph we can clearly observe that the share of Private placement is very high when compared to Public issues. We can observe that public issues are approximately one-tenth of Private placement on an average. The Private placement was maximum in the year 2008 which was Rs.54701 crores whereas minimum was in the year 2010 i.e. Rs.46220 crores. The public issue was highest in 2009 i.e. Rs.5341 crores. In the years 2010, 2011, 2012 public issues were almost same and in the year 2009 it was lowest to Rs.4139 crores.

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FINDINGS & CONCLUSIONS:

It can be observed that it is safe for the general public to invest in different sectors of primary market in present than in the past because SEBI has been introduced and it controls the operations and working of new issue market We can observe that new issue market is still prevailing in urban and Semi-urban areas. It has not reached rural areas. The response from investors is an indication of strengthened primary market. We can observe much of the contribution of savings in primary market is through Private placement. Primary market returns are very attractive in short period especially on the day of listing. But investors in IPOs should take wise decision in choosing the best company. In the domestic IPOs the Government securities issues are performing well during the study period compare to private IPOs. Abnormal growth in resource mobilization through listed companies. Public issues are observed between 2008 to 2012. Other areas resources mobilization is not satisfactory especially Rights issue. Institutional public issues are performing well with satisfactory level of growth during the study period. Book building is not a complete perfect mechanism because floor price and cap price is fixed below /above which no bid is accepted The Green shoe option is a good move because it aims at stabilizing the post listing of share price for a period of 30 days but it too has exceptions when there is a free fall in share prices No specific direction to stabilizing agent as far as entry and exit of control the prices and investment amount limitations.

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SUGGESTIONS
SEBI should frame rules for investment limits to stabilize the price by stabilizing agent. More awareness and transparency required as far as Book building process with reference to fixing price of an IPO 3) Primary market should provide the required red hearing prospectus at required places for awareness to investors

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ADDENDA SHARE OF DIFFERENT SECTORS IN PRIMARY MARKET

(Rs in crores)

ISSUES

2008

2009

2010

2011

2012

CORPORATE SECURITIES

72450

78396

74403

75241

69503

DOMESTIC ISSUES

68963

74199

72061

71814

66465

PUBLIC ISSUES NON GOVT PUBLIC COMPANIES GOVT COMPANIES BANKS & FIS

7817

6108

7112

4070

20060

5153

4890

5692

1877

3210

2551

1472

1420

2989

3880

PRIVATE PLACEMENT

54701

52434

46220

48423

48428

EURO ISSUES

3487

4197

2342

3426

3098

GOVT SECURITIES

113336

128483

152508

181979

198157

CENTRAL GOVT

99630 62

115183

113801

151126

147636

STATE GOVT

13706

13300

18707

30853

50521

TOTAL

185786

206879

226911

257220

267660

BIBLIOGRAPHY
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BOOKS M.Y.KHAN Financial systems & Services SHARMA & GUPTA Business organization & mgt V.A.AVADHANI Financial services in India WEBSITES
www.bseindia.in www.nseindia.com

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