A

SUMMER TRAINING REPORT

ON
“AWARENESS & UNDERSTANDING OF INVESTORS FOR IPO”
FOR

RELIANCE MONEY, BARODA.

SUBMITTED BY
NIRAV MAHENDRABHAI SONI
MBA (SEMESTER – II)
ROLL NO: 950

GUIDED BY
PROF. SUBHASH YADAV
ACADEMIC YEAR
2009-2011
SUBMITTED TO

NARMADA COLLEGE OF MANAGEMENT

BHARUCH
AFFILIATED TO
GUJARAT TECHNOLOGICAL UNIVERSITY

1
2
 CERTIFICATE

TO WHOM SO EVER IT MAY CONCERN

This is to certify that Nirav Soni as a part of her curriculum has done
Summer Project in “Reliance Money, Baroda” under our guidance from
1/06/2010 to 17/07/2010 towards the partial fulfillment of the requirement for
the degree of Master of Business Administration of Gujarat
Technological University.

We are pleased to state that the training was successfully completed and the
report submitted was to our fullest satisfaction.

Thanking you,

Mr. Subhash Yadav Mrs. Trupti Almoula

(Faculty & Project Guide) (I/C Director)

3
 DECLARATION

I hereby declare that this project entitled “Awareness & Understanding of

Investors for IPO” undertaken at “Reliance Money, Baroda” submitted to
Narmada College of Management affiliated to Gujarat Technical University,
Ahmedabad. In the partial fulfillment of requirement of MBA (Master of
Business Administration) – degree has been completed by me under the
guidance of Prof. Subhash Yadav, Narmada College of Management,
Zadeshwar, Bharuch.

This project report is entirely an outcome of my own efforts and is not

submitted either in part or in whole to any other university or institute for any
other degree.

Place: Bharuch Nirav M.

Date: Soni

4
 ACKNOWLEDGEMENT

I sincerely acknowledge the help received from

various persons and sources in collecting data and
information in completing this Project.

The project report is entitled “Awareness &

Understanding of Investors for IPO”.

The entire project report owes its credit for the

guidance and encouragement rendered by my
mentor Mr. Dharmesh Patel, Branch Manager,
Reliance Money, Baroda. I record my sincere
thanks to him with deep gratitude.

I would like to thank our Incharge Director Mrs.

Trupti Almoula for giving me an opportunity to do
this project and for their valuable guidance in
successful completion of project.

I also take the opportunity to acknowledge my

sincere and deep sense of gratitude to the faculty
Prof. Subhash Yadav whose perception and
wisdom is always opened for us.

Last but not least I would like to thank all the

faculties of institute, friends and parents for their kind
co-operation throughout the project.

Nirav Soni

5
 PREFACE

As we all know IPO – INITIAL PUBLIC

OFFERING is the hottest topic in the current
industry, mainly because of India being a developing
country and lot of growth in various sectors which
leads a country to ultimate success. When we talk
about country’s growth which is dependent on the
kind of work and how much importance to which
sector is given. When we talk about industries
growth which leads the economy of country has to
be balanced and given proper finance so as to reach
the levels to fulfill the needs of the society. And
industries which have massive outflow of work and a
big portfolio then it’s very difficult for any company to
work with limited finance and this is where IPO plays
an important role.

This report talks about what IPO is, why

company go for IPO, what are the steps for issuing
IPO, Book-building process, how price is fixed, how
shares are allotted, what are primary and secondary
markets and also the important terms related to IPO.
It gives us idea of how IPO is driven in the market
and what are various factors taken into consideration
before going for an IPO. I tried to study investors’
knowledge, their awareness and understanding. It
also focuses on what steps investors take before
investing in IPO, whether they study any analysis of
IPO or they just invest their savings in IPO without
any concern. IPO has been one of the most
important sources of funds and plays important role
in growth of enterprise.

6
 Reliance money - Anil Dhirubhai Ambani
Group (ADAG) offers most dynamic web based
trading environment to its customers. The Reliance
Money stock trading websites uses special security
features 'Security Token', which makes you online
trading experience more secure without complexity.
Reliance ADAG provide the vast opportunities to the
new aspirants of the business administration.
Reliance Money is a single window that provides the
multisystem facilities of the financial Products. There
are many companies in the market which are
providing the financial product like insurance, demat
account services, mutual funds, general insurance,
Portfolio Management Services (PMS), Wealth
Management, Gold Coins, Money changing , Money
Transfer, and the others.

INDEX
Sr. no. Particulars Page no.
A. Certificate of Company I
B. Certificate of College II
C. Declaration III
D. Acknowledgement IV
E. Preface V
1 Executive Summary 8
2 Company Profile 9 – 14
2.1 About Reliance Capital 9
2.2 Reliance Capital Subsidiaries 10
2.3 About Reliance Money 11
Reliance Money Diversified
2.4 Business 13
Primary Products’ Portfolio Of
3 Reliance Money 15 – 29
3.1 Initial Public Offering (IPO) 15
3.2 Derivatives 16
3.3 Insurance 18
3.4 Equity 22
3.5 Mutual Fund 22

7
 3.6 Commodities 26
3.7 Offshore Investment 27
4 Share Market…. Overview 30
5 Research Project Report 34 – 70
Initial Public Offering (IPO) –
5.1 Overview 34 - 46
5.1.
1 Concept of IPO 34
5.1.
2 Introduction of IPO 34
5.1.
3 Procedure of IPO 36
5.1.4 Book Building Process – The Process
of Price Discovery (Basic Concept) 38
5.1.
5 Book Building Process 39
5.1.
6 How is the Price Fixed? 41
5.1.
6 How are the shares allotted? 42
5.1.
7 Documents Required 44
5.1.8 SEBI Guidelines, 2000 (Disclosure
and
Investor Protection (DIP) Guidelines) 45
5.1.
9 Players 45
5.1.
10 Structure of Offering 46
5.1.
11 Legal Consideration 46
5.2 Literature Review 47
5.3 Problem Formulation 48
5.4 Scope of the Study 48
5.5 Research Methodology 49
5.5.
1 Research Objectives 49
5.5.
2 Research Design 49
5.6 Interpretation & Analysis of Data 50
5.7 Findings 67
5.8 Limitations 69
5.9 Recommendations 69

8
6 Conclusion 71
7 Bibliography 72
8 References 72
9 Annexure 73

9
 EXECUTIVE SUMMARY

This project is focused on “Awareness &

Understanding of Investors for IPO” at Reliance
Money.

Reliance Money offers a comprehensive platform,

offering an investment avenue for a wide range of
asset classes. Its endeavor is to change the way
India transacts in financial markets and avails
financial services. Reliance Money offers a single
window facility, enabling us to access, amongst
others Equity, Equity and Commodity Derivatives,
Offshore Investments, IPOs, Mutual Funds, Life
Insurance and General Insurance products. Reliance
Money is the most cost-effective, convenient and
secures way to transact in a wide range of financial
products and services.

The prime objectives of this project is to know the

awareness of IPO amongst public, how much the
investors understand the IPO, upto what extent they
are interested in knowing IPO, what are their
investment preferences, what is the investors’
perception for IPO, what are their concepts of IPO,
whether they are having a full fledge knowledge of
IPO.

For this I have accepted Descriptive research

design. Primary Data is considered within the
territory area of Bharuch. The survey of 40 investors
is done with the help of a Structured Questionnaire.
The sample selection is Non-probability convenience
sampling.

The result of the survey is moderate. Respondents

apply for IPO but do not have a thorough knowledge

10
regarding IPO. Respondents apply for IPO on basis
of brokers’ advice. No personal study or market
analysis is done by them before investing.
Respondents are also not aware of their preference
amongst sector of IPO. They do not have any
preference. For this they are dependent on broker
again. So they do not take independent decision.
This happens as they are having lack of knowledge
of IPO.

For above findings, my recommendations include

organizing of awareness programmes for investors
so they get knowledge of IPO. Red Herring
Prospectus should be made legible with English and
local / regional language so that investors do not
avoid to read it as it is a vital part of IPO.

COMPANY PROFILE

About Reliance Capital

We all know the effect of the word Reliance on us. A

company which has entered almost every arena of
business and created wonders. Every project taken
up by the company turns into a golden project. The
company has something, which we can call as, The
Midas Touch. Reliance Capital Ltd is a part of the
Reliance - Anil Dhirubhai Ambani Group. Reliance
Capital is one of India’s leading and fastest growing
private sector financial services companies, and
ranks among the top 3 private sector financial
services and banking companies, in terms of net

11
worth. Reliance Capital has interests in asset
management and mutual funds, life and general
insurance, private equity and proprietary
investments, stock broking and other activities in
financial services. Reliance Capital has a wide
Structure that is as follows:

◙ India’s #1 Mutual Fund

◙ Among the top 3 private sector General

insurers

◙ Among the top 4 private sector Life insurers

◙ Over 18 million customers

◙ Niche consumer finance business

◙ One of India’s leading retail brokerages and

distributors of financial products

Reliance Capital Subsidiaries

12
13
 Reliance Money

Whenever it’s a Question of

Your MONEY…
.
.
.
.
.
.
.
.
.
.
.

The Answer is
“RELIANCE MONEY”

14
About Reliance Money

Reliance Money is a part of Reliance Capital that

comes under Anil Dhirubhai Ambani Group
(ADAG). It is a distribution and a broking house that
provides its customers with Online as well as Offline
Trading Facility. Reliance Money is the electronic
transaction platform associated with Reliance
Capital, one of India's leading and fastest growing
private, ranked amongst the top 3 private sector
financial services and banking companies, in terms
of net worth.

15
GROUP Anil Dhirubhai Ambani Group

CO. CHAIRMAN Mr. Anil Ambani

STARTED SINCE Publicly launched On: April

11, 2007

NO. OF More than 150 Branches

BRANCHES

NO. OF 700
FRANCHISEES

INDUSTRY TYPE Share Broking Firm

Equity

IPOs

Derivatives

PRODUCTS Commodities Trading

Mutual Funds

Insurance

Offshore Investment

16
Reliance Money offers a comprehensive platform,
offering an investment avenue for a wide range of
asset classes. Its endeavor is to change the way
India transacts in financial markets and avails
financial services. Reliance Money offers a single
window facility, enabling us to access, amongst
others Equity, Equity and Commodity Derivatives,
Offshore Investments, IPOs, Mutual Funds, Life
Insurance and General Insurance products. Reliance
Money is the most cost-effective, convenient and
secures way to transact in a wide range of financial
products and services.

◙ 949,000 plus broking accounts,

◙ 45,000 plus touch points, 3000 outlets in over
650 plus cities/towns
◙ Daily average turnover – Rs. 15.90 bn

17
Reliance Money Diversified Business

18
 PRODUCT PORTFOLIO OF
RELIANCE MONEY

Initial Public Offering (IPO)

Apply in Initial Public Offers (IPO’s) witho

going through the hassles of filling ANY
application form or paperwork.

When an unlisted company makes either a fresh

issue of securities ( Through primary markets ) or an
offer for sale of its existing securities or both for the
first time to the public then that is known as an IPO.
The first sale of stock by a private company to the
public is also an IPO. IPO’s are often issued by
smaller, younger companies seeking capital to
expand, but can also be done by large privately-
owned companies looking to become publicly
traded. In an IPO, the issuer obtains the assistance
of an underwriting firm, which helps it determine
what type of security to issue (common or preferred),
best offering price and time to bring it to market. IPO
is also referred to as a “public offering”.

19
Derivative

Don’t dread derivatives anymore. Choose

the contract and say go. For the first time
track your positions online, in real time.

In finance, a security whose price is dependent upon

or derived from one or more underlies assets. The
derivative itself is merely a contract between two or
more parties. Its value is determined by
fluctuations in the underlying asset. The most
common underlying assets include stocks,
bonds, commodities, currencies, interest rates and
market indexes. Most derivatives are characterized
by high leverage. Futures contracts, forward
contracts, options and swaps are the most common
types of derivatives. Because derivatives are just
contracts, just about anything can be used as an
underlying asset. Derivatives are generally used to
hedge risk, but can also be used for speculative
purposes. To hedge this risk, the investor could
purchase currency futures to lock in a specified
exchange rate for the future stock sale.

Derivatives are divided into basically two parts:

20
 • Futures
• Options

A. Futures: A financial contract obligating the

buyer to purchase an asset (or the seller to sell an
asset), such as a physical commodity or a financial
instrument, at a predetermined future date and price.
Futures contracts detail the quality and quantity of
the underlying asset; they are standardized to
facilitate trading on a futures exchange.
B. Options: A financial derivative which
represents a contract sold by one party (option
writer) to another party (option holder). The contract
offers the buyer the right, but not the obligation, to
buy (call) or sell (put) a security or other financial
asset at an agreed-upon price (the strike
price) during a certain period of time or on a specific
date (exercise date).

Options are consist of two things:

i. Call Option
ii. Put Option

a) Call: It is the period of time between the opening

and closing of some future markets wherein the
prices are established through an auction process.
Call is an option contract giving the owner the right
(but not the obligation) to buy a specified amount of
an underlying security at a specified price within a
specified time.

b) Put: Put is an option contract giving the owner

the right, but not the obligation, to sell a specified

21
amount of an underlying asset at a set price within a
specified time. The buyer of a put option estimates
that the underlying asset will drop below the exercise
price before the expiration date.

Insurance

Take advantage of investing in

Insurance products without going into
the hassles of doing any paperwork.
Click here to get started

There are good times and bad times during every

stage of our lives, and being financially prepared to
face all kinds of situations makes the journey of life a
lot easier and certainly more. The Financial Product
that helps in this is Insurance. Insurance is a

22
 contract (policy) in which an individual or entity
receives financial protection or
reimbursement against losses from an insurance
company. The company pools clients’ risks to
make payments more affordable for the insured.

Insurance is of two types:

• Life Insurance
• General Insurance

A. Life Insurance: This is the protection

against the loss of income that would result if
the insured passed away. The named
beneficiary receives the proceeds and is
thereby safeguarded from the financial impact
of the death of the insured. The goal of life
insurance is to provide a measure of financial
security for your family after you die. Life
insurance products offer comprehensive
financial. Solutions which besides offering
financial security also provide opportunity for
saving, investment & tax planning.

Life Insurance Products Offered by

Reliance Money:

Individual Plans Employee Benefit Plans

1. Savings (Endowment) 1. Risk (Protection)

23
 • Reliance Endowment Plan • Reliance Group Term
Assurance
• Reliance Special Endowment
Plan Policy

• Reliance Cash Flow Plan • Reliance EDLI Scheme

• Reliance Child Plan 2. Pensions

• Reliance Whole Life Plan • Reliance Group Gratuity

Policy
• Reliance Connect 2 Life Plan
• Reliance Group
2. Retirement Superannuation Policy
• Reliance Golden Years Plan

• Reliance Golden Years Plan

Value

• Reliance Golden Years Plan

Plus
3. Unit Linked

• Reliance Automatic Investment

Plan

• Reliance Money Guarantee

Plan

• Reliance Market Return Plan

4. Risk / Protection

• Reliance Term Plan

• Reliance Simple Term Plan

• Reliance Special Term Plan

• Reliance Credit Guardian Plan

• Reliance Special Credit
Guardian Plan

B. General Insurance:

General Insurance is a form of risk management,

primarily used to hedge against the risk of a

24
contingent loss of many articles and nominal things.
This is a single policy that may cover risks in one or
more of the categories set forth below. For example,
auto insurance would typically cover both property
risk (covering the risk of theft or damage to the car)
and liability risk (covering legal claims from causing
an accident).G.I. may be done for follows:

• Automobile Insurance
• Aviation Insurance
• Equipment Breakdown insurance
• Business insurance
• Crop Insurance
• Crime Insurance Credit Insurance etc.

Products Offered by Reliance

General Insurance:

Health
• Individual Mediclaim
• Group Mediclaim
• The policy covers
Fire
• Standard Fire and Special Perils
• Consequential Loss (Fire)
• Industrial All Risks
Engineering
• Erection All Risks/Storage-cum-Erection
• Contractor’s All Risks
• Contractor’s Plant and Machinery
• Machinery Breakdown Insurance
• Machinery Loss of Profits Insurance

25
• Boiler and Pressure Plant Insurance
• Electronic Equipment Insurance
Marine
• Marine Cargo Insurance

Motor
• Private Car Comprehensive

Liability
• Directors and Officers Liability
• Public Liability (Act)
• Public Liability
• Product Liability
• Professional Indemnity
• Workmen’s compensation

Travel
• Individual and Family
• Asia
• Student
• Corporate

Miscellaneous
• Industry Care
• Commercial Care
• Office Package
• Fidelity Guarantee
• Burglary and Housebreaking
• Money Insurance
• Householder’s Package

26
Equity

Trading made simple. Use our world-

class platform and research to invest
online. Leverage up to 5 times of the
available funds for intraday.

Equity is Stock or any other security representing

an ownership interest.
Equity is a term whose meaning depends very much
on the context. In general, you can think of equity
as ownership in any asset after all debts
associated with that asset are paid off. An Investor
can invest his money in Equity in two ways i.e.
Online or Offline and for both, he needs a D-Mat
A/C.

Mutual Funds

Investing is just a click away, No more

paper work. Invest and track the
performance of the schemes you have
invested online.

27
An investment vehicle which is comprised of a pool
of funds collected from many investors for the
purpose of investing in securities such as stocks,
bonds, money market securities and similar assets.
Mutual funds are operated by money mangers, who
invest the fund’s capital and attempt to produce
capital gains and income for the fund’s investors. A
mutual fund’s portfolio is structured and maintained
to match the investment objectives stated in its
prospectus.

Reliance Mutual Funds

Reliance Mutual Fund, a part of the Reliance - Anil

Dhirubhai Ambani Group (R-ADAG) is one of the
fastest growing mutual funds in the country.
Reliance Mutual Fund offers investors a well-
rounded portfolio of products to meet varying
investor requirements. Reliance Mutual Fund has a
presence in over 80 cities across India, an investor
base of over 2 million and manages assets over Rs.
26,314 crore as on June 30, 2006.

Reliance Mutual Fund constantly endeavors to

launch innovative products and customer service
initiatives to increase value to investors. Reliance
Mutual Fund schemes are managed by Reliance
Capital Asset Management Ltd., a wholly-owned
subsidiary of Reliance Capital Ltd.

Reliance Vision Fund:

It was launched in October 1995. The fund invests in
large cap, highly liquid stocks with
good fundamentals and long-term

28
 prospects. Long-term investors,
looking at bringing stability in their
portfolio should invest in Reliance
Vision Fund.

Investment Objective of Reliance

Vision Fund:
The primary investment objective of the Scheme is
to achieve long-term growth of capital by investment
in equity and equity-related securities through a
research-based investment approach.

Choice of Plans:

A. Growth Plan: The Growth Plan is designed

for investors interested in capital appreciation
on their investment and not in regular income.
Accordingly, the scheme will not declare
dividends under the Growth Plan. The income
earned on the Growth Plan’s corpus will
remain invested in the Growth Plan.

The Growth Plan has two options :

• Growth Option : Under this Option, there
will be no distribution of income and the
returns to the investor is only by way of
capital gains/appreciation, if any, through
redemption at applicable NAV of the units
held by them.
• Bonus Option: The Growth Plan has a
Bonus Option.

B. Dividend Plan: The Dividend Plan has been

designed for investors who require regular
income in the form of dividends. Under the

29
 Dividend Plan, the Scheme will Endeavour to
make regular dividend payments to the unit
holders. Dividend will be distributed from the
available distributable surplus after the
deduction of TDS and applicable surcharge, if
any.

Dividend Plan has two options :

• Dividend Payout Option: Under this
option the Dividend declared under the
dividend plan will be paid to the unit
holders within 30 days from the
declaration of the dividend.
• Dividend Re-investment Option: The
Dividend Plan has a Reinvestment Option
whereby the dividend distributed under the
plan will be automatically reinvested at the
ex-dividend NAV on the transaction day
following the date of declaration of
dividend and additional units will be
allotted accordingly.

C. Systematic Investment Plan: Customer can

invest on a Monthly or Quarterly basis, a
minimum sum of Rs. 500/- or Rs. 1500/-
respectively and in multiples of Re.1/-
thereafter.

D. Systematic Withdrawal Plan: You can

withdraw from your investments on a Monthly
or Quarterly basis, a minimum sum of Rs.
500/- and in multiples of Rs.100/-thereafter.

30
 Schemes Offered by Reliance
Money:
1. Equity/Growth Schemes:-The aim of
growth funds is to provide capital appreciation
over the medium to long- term.
These Schemes are:
• Reliance Equity Fund
• Reliance Growth Fund
• Reliance Vision Fund
• Reliance Tax Saver
(ELSS)Fund
• Reliance Equity Opportunities
Fund
• Reliance Long Term Equity
Fund etc.

2. Debt/Income Schemes: - The aim of

income funds is to provide regular and steady
income to investors.
These schemes are:
• Reliance Interval Fund
• Reliance Income Fund
• Reliance Liquid Fund
• Reliance Liquid Plus Fund
• Reliance Fixed Horizon Fund III
• Reliance Monthly Income Plan
• Reliance Short Term Fund

31
 • Reliance Fixed Maturity Fund
Series-I
• Reliance Fixed Maturity Fund
Series-II etc.

3. Sector Specific Schemes:- These are

the funds/schemes which invest in the securities
of only those sectors or industries as specified in
the offer documents. E.g. Pharmaceuticals,
Software, Fast Moving Consumer Goods
(FMCG), Petroleum stocks, etc.
These schemes are:
• Reliance Banking Fund
• Reliance Pharma Fund
• Reliance Diversified Power
Sector Fund
• Reliance Media & Entertainment
Fund
Commodities

In a market that's growing at 400% pe

annum.
We offer:

• 1. Lowest cost of trading

• 2. Trade till 11:30 in the night

A commodity is something that is relatively easily

traded, that can be physically delivered, and that can
be stored for a reasonable period of time. It is a
characteristic of commodities that prices are
determined on the basis of an active market, rather
than by the supplier (or other seller) on a “cost-plus”

32
basis. Examples of commodities include not only
minerals and agricultural products such as iron ore,
crude oil, ethanol, sugar, coffee, aluminum, rice,
wheat, gold, diamonds, or silver, but also so-called
“commoditized” products such as personal
computers. In the original and simplified sense,
commodities were things of value, of uniform quality,
that were produced in large quantities by many
different producers; the items from each different
producer are considered equivalent. It is the contract
and this underlying standard that define the
commodity, not any quality inherent in the product.

Commodities exchanges include:

• Chicago Board of Trade

• Euronext.liffe
• London Metal Exchange
• New York Mercantile Exchange.
• Multi Commodity Exchange

Offshore Investment

Offshore investment is the keeping of money in a

jurisdiction other than one’s country of residence.
Offshore jurisdictions are a commonly accepted
solution to reducing excessive tax burdens levied in
most countries to both large and small scale
investors alike. Selected offshore domiciles are
superficially viewed by some as havens used by to
conceal or protect illegally acquired money from law
enforcement in the investor’s country. Although this

33
may be the case, legitimate investors also take
advantage of higher rates of return or lower rates of
tax on that return offered by operating via such
domiciles. The advantage to this is that such
operations are both legal and less costly than the
solutions offered in the investor’s country - or
“onshore”. Locations favored by investors for low
rates of tax are known as offshore financial
centers.

Scheme Offered By Reliance Money:

Reliance Money, the financial services arm of
the Anil Dhirubhai Ambani Group, is
partnering with UK-based CMC Markets, a
global player in the online derivatives trading
segment, to bring overseas investment
products to Indian investors. This tie-up will
enable customers’ of Reliance Money to gain
access to several offshore products including
— foreign equities, currency and commodities
within the RBI-mandated limits. The central
bank currently permits a single Indian resident
to invest up to $50,000 (Rs. 22.5 Lakh)
overseas per year, which has been raised
from the earlier $25,000. For instance, an
investor with Reliance Money can buy Corus
shares through an account created for him or
her by CMC. The shares will then be credited
to the account. If the investor wants to sell, he
follows the same procedure, places an order
and the shares in the account are offloaded in
the market.

34
Credit Cards offered by Reliance Money:

Reliance-Anil Dhirubhai Ambani group has joined

hands with Citi bank to launch reliance credit card. In
addition to usual benefits available with regular
credit cards, reliance credit cards come free for life,
and provide a host of benefits and reward points as
part of a unique loyalty program. Reliance credit
cards also offer complimentary vouchers for usage
at Reliance World Outlets and Adlabs Multiplexes,
Cash Advance Facility, Free Utility Bill Payment
Facilities, Hospital Allowance, Free towing of
Vehicles, and Zero Fuel Surcharge at IOC Petrol
Pumps. Reliance Credit Cards are available in two
categories - Silver and Gold.

Highlights:

 Free for Life Card.

 Limit:- Silver Credit Card – up to
Rs.30,000 & Gold Credit Card – (>)
Rs.3,00,000.
 Get 0% Fuel Surcharge at IOC Outlets.

35
 Get complimentary joining vouchers of
Reliance World outlets (For Broad Band Surfing
and Online Trading) and Adlabs (For Food)
worth Rs.100 each with the Reliance Silver
Card and worth Rs.200 each with the Reliance
Gold Card.
 Reliance Money provides free Gift
Vouchers to its Credit Card Holder i.e. Gift
Voucher of Rs.400 with Gold Credit Cards and
Gift Voucher of Rs.200 with Silver Credit Cards.
 Get an allowance of Rs.500 per day,
on hospitalization with the Reliance Gold Card.
 Pay bills of Reliance ADAG companies
- Reliance Post Paid Bills, Reliance Energy
Electricity Bills, Insurance Premier, Recharge of
Mobile Pre-paid Cards and also for other utility
companies on an ongoing basis by signing up
once.
 Customer can opt for free Photo Credit
Card for added Security.
 Reliance Credit Card holders can
receive up to 5 add-on cards at no additional
charges, free email statements, free alerts, and
will be able to transfer money from one Visa
Card to another using Citibank Online.
 Reliance Money Provides with Zero
Loss card Liability i.e. Customer just need to
give a call at the helpline no. and thus he gets a
reference no. After that he does not have the
liability for increasing credit limit in his card.

36
37
Share Market…. Overview

Share Market Overview would give an overall idea

about the share market, its participants, types; etc.
Share market is the market for securities where
organized issuance and trading of shares takes
place. It plays an important role in canalizing capital
from the investors to the business houses which
consequently leads to the availability of funds for
business expansion. Shares are certificates which
represent ownership rights of the holder in a
company.

Basically, Share Market can be divided into two parts:-

1. Primary Market: It is the market where new

issues of securities are offered to the investors.

2. Secondary Market: An investor of a secondary

market buys a security from another participant of
the same and not from any issuing corporation (as in
case of Primary Market).

Generally, stocks are of two types:-

a) Common Stock:
It gives an ownership right to the holders of the
stock. The holders are entitled to receive dividends
whenever the company announces.

b) Preferred Stock:
These stocks also give ownership right to its holders.
Its holders enjoy the privilege of receiving dividends
from the company in preference to any other
common share holders.

38
Trading:
Share market is the market for securities where
organized issuance and trading of shares takes
place. Shares are certificates which represent
ownership rights of the holder in a company. It plays
an important role in channelizing capital from the
investors to the business houses which
consequently lead to the availability of funds for
business expansion.

Shares in the Share Market are traded through:-

(a) Stock Exchange: These are organized market

places where stocks, bonds are other equivalents
are traded between the buyers and sellers where
exchange acts as counter-party to both the
participants in case of any default.

(b) Over - the - Counter (OTC): These are not

centralized exchanges and the trade takes place
through a network of dealers.

There are mainly two types of trading:-

1. Intraday trading: In this type of trading an

investor buy and sell stocks during the same day.
Intraday Traders are of two types :-

i. Scalp Traders: Investors who perform many

trades per day for scalping out small profits
out of the bid-ask spread, from each trade are
known as scalp traders.
ii. Momentum Traders: Investors who pounce
on those stocks which move significantly in

39
 one direction and book desired profit are
called momentum traders. They do this within
a day.

2. Delivery trading: In this type of trading an

investor buys the share for holding purposes.
Delivery Traders are :-

Technical Traders: They believe that buying/selling

signals are present within the graphs and charts of
the stock.

Fundamental Traders: They perform trade on the

basis of study of fact-sheets of the company like
historical profit graph, balance sheet, anticipated
earning reports, stock splits, mergers and
acquisitions, etc.

Swing Traders: They are basically fundamental

traders who take delivery of trades for a span of
short period generally more than one day.

Share Broking Company offers two types of share

trading facilities:-

(a) Offline Share Trading: In this form of trading the

customer has to place order to the dealer of the
stock broking firm either in person or over phone.
Offline trading is the main form of investing the
money in securities. Offline trading offers many
benefits as well.

40
1. The one benefit that an investor appreciates the
most is that they are not alone when making
investment decisions.

2. There are experienced and professional

brokerage companies that handle their investments
for them.

3. Investors are not faced with the challenge of

making these vital investment decisions; especially,
if they do not have the experience necessary to
make the appropriate investments.

4. Also, there is someone there to answer any

questions that may cause concerns.

(b) Online Share Trading: The client could place

his order on his own from any place he wants,
provided he has a computer with an Internet
connection. Online Trading has made it easy for
private investors to gain straight access to a range of
different security markets that were, at one point,
only reserved by the use of investment
professionals. Online trading has dramatically
changed over the last decade. It continues to be
redefined. Services have expanded to include
integrated management of additional financial
accounts. It has subsequently expanded in
conjunction with ground-breaking improvements to
the traditional trading interface, such as telephone
interface systems. There are several wonderful
reasons to invest online rather than offline trading.

41
1. Instant online access: - You can gain instant
access to your account, the value of your portfolio
updates immediately before your eyes.

2. Enter online trades at anytime during Market

hours: - You can enter online trades at anytime and
from anywhere. This is very convenient if you live in
a different time zone than the country you are
trading in. It especially fits for investors with busy
schedules.

3. With online trading you are in charge: - You

are in control of your investments. No sales pitches
and no hassle. You decide where to invest your
money.

Thus, online stock trading is the easy way to buy

and sell shares from the comfort of your home.
Finding a company that provides us with a secure
trading account can be difficult. There are many
companies that offers us excellent services for
trading, but we need to find which will meet our
needs and requirements .Instead of going with a
company based on their reputation we should see
what they can offer us because our needs as a
trader will be radically different from someone
traders who have different levels of experience and
who have different proclivities toward risk and
security. It’s not that we always want to look
towards the most economical rate of trading rather
work with a reputed organization like “RELIANCE
MONEY”.

42
 RESEARCH PROJECT REPORT

Initial Public Offering (IPO)

Concept of IPO

An initial public offering (IPO) referred to

simply as an "offering" or "flotation," is when a
company (called the issuer) issues common stock or
shares to the public for the first time. They are often
issued by smaller, younger companies seeking
capital to expand, but can also be done by large
privately-owned companies looking to become
publicly traded.

In an IPO the issuer may obtain the

assistance of an underwriting firm, which helps it
determine what type of security to issue (common or

43
preferred), best offering price and time to bring it to
market.

An IPO can be a risky investment. For the

individual investor it is tough to predict what the
stock or shares will do on its initial day of trading and
in the near future since there is often little historical
data with which to analyze the company. Also, most
IPOs are of companies going through a transitory
growth period, and they are therefore subject to
additional uncertainty regarding their future value.

Introduction of IPO

IPO stands for Initial Public Offering and

means the new offer of shares from a company
which was previously unlisted. This is done by
offering those shares to the public, which were held
by the promoters or the private investors prior to the
IPO. In the case when other investors or Promoter
held the shares the stake holding comes down to the
extent their shares are offered to the public. In other
cases new shares are issued to the public and the
shares, which are with the promoters stay with them.
In both cases the share of the promoters in the total
capital comes down.

For example say there are 100 shares in a

company and 50 of these are offered to the public in
an IPO then in such a case the promoter’s stake in
the company comes down from 100% to 50%. In
another case the company issues 50 additional

44
shares to the public and the stake of the promoter
comes down from 100% to 67%.

Normally in an IPO the shares are issued at a

discount to what is considered their intrinsic value
and that’s why investors keenly await IPOs and
make money on most of them. IPO are generally
priced at a discount, which means that if the intrinsic
value of a share is perceived to be Rs.100 the
shares will be offered at a price, which is lesser than
Rs.100 say Rs.80 during the IPO. When the stock
actually lists in the market it will list closer to Rs.100.
The difference between the two prices is known as
Listing Gains, which an investor makes when
investing in IPO and making money at the listing of
the IPO. A Bullish Market gives IPO investors a clear
opportunity to achieve long term targets in a short
term phase.

IPO is a way for a company to raise money

from investors for its future projects and get listed to
Stock Exchange. Or An Initial Public Offer (IPO) is
the selling of securities to the public in the primary
stock market.

Company raising money through IPO is also

called as company ‘going public'.

From an investor point of view, IPO gives a

chance to buy shares of a company, directly from
the company at the price of their choice (In book
build IPO's). Many a times there is a big difference
between the price at which companies decides for its
shares and the price on which investor are willing to

45
buy share and that gives a good listing gain for
shares allocated to the investor in IPO.

From a company perspective, IPO help

them to identify their real value which is decided by
millions of investor once their shares are listed in
stock exchanges. IPO's also provide funds for their
future growth or for paying their previous borrowings.

Principal steps in an IPO

 Approval of BOD: Approval of BOD is required

for raising capital from the public.

 Appointment of lead managers: the lead

manager is the merchant banker who
orchestrates the issue in consultation of the
company.

 Appointment of other intermediaries:

• Co-managers and advisors
• Underwriters
• Bankers
• Brokers and principal brokers
• Registrars

 Filing the prospectus with SEBI: The

prospectus or the offer document communicates
information about the company and the proposed
security issue to the investing public. All the
companies seeking to make a public issue have
to file their offer document with SEBI. If SEBI or
public does not communicate its observations
within 21 days from the filing of the offer

46
document, the company can proceed with its
public issue.

 Filing of the prospectus with the registrar

of the companies: once the prospectus have
been approved by the concerned stock
exchanges and the consent obtained from the
bankers, auditors, registrar, underwriters and
others, the prospectus signed by the directors,
must be filed with the registrar of companies, with
the required documents as per the companies
act 1956.

 Printing and dispatch of prospectus: After

the prospectus is filed with the registrar of
companies, the company should print the
prospectus. The quantity in which prospectus is
printed should be sufficient to meet requirements.
They should be send to the stock exchanges and
brokers so they receive them at least 21 days
before the first announcement is made in the
news papers.

 Filing of initial listing

application: Within 10 days of filing the
prospectus, the initial listing application must be
made to the concerned stock exchanges with the
listing fees.

 Promotion of the issue: The

promotional campaign typically commences with
the filing of the prospectus with the registrar of
the companies and ends with the release of the
statutory announcement of the issue.

47
 Statutory announcement: The
issue must be made after seeking approval of the
stock exchange. This must be published at least
10 days before the opening of the subscription
list.

 Collections of applications:
The Statutory announcement specifies when the
subscription would open, when it would close,
and the banks where the applications can be
made. During the period the subscription is kept
open, the bankers will collect the applications on
behalf of the company.

 Processing of applications:
Scrutinizing of the applications is done.

 Establishing the liability of

the underwriters: If the issue is
undersubscribed, the liability of the underwriters
has to be established.

 Allotment of shares:
Proportionate system of allotment is to be
followed.

 Listing of the issue: The detail

listing application should be submitted to the
concerned stock exchange along with the listing
agreement and the listing fee. The allotment
formalities should be completed within 30 days.

48
Book building Process - The process of
price discovery (Basic concept)

• The company does not come out with a fixed

price for its shares; instead, it indicates a price
band that mentions the lowest (referred to as the
floor) and the highest (the cap) prices at which a
share can be sold.

• Bids are then invited for the shares. Each

investor states how many shares s/he wants and
what s/he is willing to pay for those shares
(depending on the price band). The actual price
is then discovered based on these bids. As we
continue with the series, we will explain the
process in detail.

• According to the book building process, three

classes of investors can bid for the shares:
 Qualified Institutional Buyers: Mutual
funds and Foreign Institutional Investors.
 Retail investors: Anyone who bids for
shares under Rs 50,000 is a retail investor.
 High net worth individuals and
employees of the company.

• Allotment is the process whereby those who

apply are given (allotted) shares. The bids are
first allotted to the different categories and the
over-subscription (more shares applied for than
shares available) in each category is determined.

49
 Retail investors and high net worth individuals
get allotments on a proportional basis.

Example:
Say, a retail investor has applied for five
shares in an issue, and the retail category has been
over-subscribed 10 times. The investor is entitled to
half a share. Since that isn't possible, it may then be
decided that every 1 in 2 retail investors will get
allotment. The investors are then selected by lottery
and the issue allotted on a proportional basis. That is
why there is no way you can be sure of getting an
allotment.
BOOK BUILDING PROCESS

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.

50
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

51
 '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 which may include -
• Price Aggression
• Investor quality
• Earliness of bids, etc.

 The book runner the company concludes the

final price at which it is willing to issue the
stock and allocation of securities.

 Generally, the numbers of shares are fixed;

the issue size gets frozen based on the price
per share discovered through the book
building process.

 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.

Book-building is all about letting the company

know the price at which you are willing to buy the

52
stock and getting an allotment at a price that a
majority of the investors are willing to pay. The price
discovery is made depending on the demand for the
stock.
The price that you can suggest is subject to a
certain minimum price level, called the floor price.
For instance, the floor price fixed for the Maruti's
initial public offering was Rs 115, which means that
the price you are willing to pay should be at or above
Rs 115.
In some cases, as in Biocon, the price band
(minimum and maximum price) at which you can
apply is specified. A price band of Rs 270 to Rs 315
means that you can apply at a floor price of Rs 270
and a ceiling of Rs 315.
If you are not still very comfortable fixing a price,
do not worry. You, as a retail investor, have the
option of applying at the cut-off price. That is, you
can just agree to pick up the shares at the final price
fixed. This way, you do not run the risk of not getting
an allotment because you have bid at a lower price.
If you bid at the cut-off price and the price is revised
upwards, then the managers to the offer may reduce
the number of shares allotted to keep it within the
payment already made. You can get the application
forms from the nearest offices of the lead managers
to the offer or from the corporate or the registered
office of the company.

How is the price fixed?

All the applications received till the last date are

analyzed and a final offer price, known as the cut-off

53
price is arrived at. The final price is the equilibrium
price or the highest price at which all the shares on
offer can be sold smoothly.
If your price is less than the final price, you will
not get allotment. If your price is higher than the
final price, the amount in excess of the final price
is refunded if you get allotment. If you do not get
allotment, you should get your full refund of your
money in 15 days after the final allotment is
made. If you do not get your money or allotment
in a month's time, you can demand interest at 15
per cent per annum on the money due.
How are shares allocated?

• As per regulations, at least 25 per cent of the

shares on offer should be set aside for retail
investors. Fifty per cent of the offer is for qualified
institutional investors. Qualified Institutional
Bidders (QIB) are specified under the regulation
and allotment to this class is made at the
discretion of the company based on certain
criteria.

• QIBs can be mutual funds, foreign institutional

investors, banks or insurance companies. If any
of these categories is under-subscribed, say, the
retail portion is not adequately subscribed, then
that portion can be allocated among the other
two categories at the discretion of the
management. For instance, in an offer for two
lakh shares, around 50,000 shares (or generally
25 per cent of the offer) are reserved for retail
investors. But if the bids from this category are
received are only for 40,000 shares, then 10,000

54
shares can be allocated either to the QIBs or
non-institutional investors.

• The allotment of shares is made on a pro-rata

basis. Consider this illustration: An offer is made
for two lakh shares and is oversubscribed by
times, that is, bids are received for six lakh
shares. The minimum allotment is 100 shares.
1,500 applicants have applied for 100 shares
each; and 200 applicants have bid for 500 shares
each. The shares would be allotted in the
following manner:

• Shares are segregated into various

categories depending on the number of shares
applied for. In the above illustration, all investors
who applied for 100 shares will fall in category A
and those for 500 shares in category B and so
on.

• The total number of shares to be allotted in

category A will be 50,000 (100*1500*1/3). That
is, the number of shares applied for (100)*
number of applications received (1500)*
oversubscription ratio (1/3). Category B will be
allotted 33,300 shares in a similar manner.

• Shares allotted to each applicant in category

A should be 33 shares (100*1/3). That is, shares
applied by each applicant in the category
multiplied by the oversubscription ratio. As, the
minimum allotment lot is 100 shares, it is
rounded off to the nearest minimum lot.
Therefore, 500 applicants will get 100 shares
each in category A — total shares allotted to the

55
category (50,000) divided by the minimum lot
size (100).

• In category B, each applicant should be

allotted 167 shares (500/3). But it is rounded off
to 200 shares each. Therefore, 167 applicants
out of 200 (33300/200) would get an allotment of
200 shares each in category B.

• The final allotment is made by drawing a lot

from each category. If you are lucky you may get
allotment in the final draw.

• The shares are listed and trading commences

within seven working days of finalization of the
basis of allotment. You can check the daily status
of the bids received, the price bid for and the
response form various categories in the Web
sites of stock exchanges. This will give you an
idea of the demand for the stock and a chance to
change your mind. After seeing the response, if
you feel you have bid at a higher or a lower price,
you can always change the bid price and submit
a revision form.

• The traditional method of doing IPOs is the

fixed price offering. Here, the issuer and the
merchant banker agree on an "issue price" - e.g.
Rs.100. Then one have the choice of filling in an
application form at this price and subscribing to
the issue. Extensive research has revealed that
the fixed price offering is a poor way of doing
IPOs. Fixed price offerings, all over the world,
suffer from `IPO under pricing'. In India, on
average, the fixed-price seems to be around 50%
below the price at first listing; i.e. the issuer

56
 obtains 50% lower issue proceeds as compared
to what might have been the case. This average
masks a steady stream of dubious IPOs who get
an issue price which is much higher than the
price at first listing. Hence fixed price offerings
are weak in two directions: dubious issues get
overpriced and good issues get underpriced, with
a prevalence of under pricing on average.

What is needed is a way to engage in serious

price discovery in setting the price at the IPO. No
issuer knows the true price of his shares; no
merchant banker knows the true price of the shares;
it is only the market that knows this price. In that
case, can we just ask the market to pick the price at
the IPO?

Imagine a process where an issuer only

releases a prospectus, announces the number of
shares that are up for sale, with no price indicated.
People from all over India would bid to buy shares in
prices and quantities that they think fit. This would
yield a price. Such a procedure should innately
obtain an issue price which is very close to the price
at first listing -- the hallmark of a healthy IPO market.

Documents Required

• A company coming out with a public issue

has to come out with an Offer Document/
Prospectus.

• An offer document is the document that

contains all the information you need about the
company. It will tell you why the company is

57
 coming is out with a public issue, its financials
and how the issue will be priced.

• The Draft Offer Document is the offer

document in the draft stage. Any company
making a public issue is required to file the draft
offer document with the Securities and Exchange
Board of India, the market regulator.

• If SEBI demands any changes, they have to

be made. Once the changes are made, it is filed
with the Registrar of Companies or the Stock
Exchange. It must be filed with SEBI at least 21
days before the company files it with the RoC/
Stock Exchange. During this period, you can
check it out on the SEBI Web site.

• Red Herring Prospectus is just like the

above, except that it will have all the information
as a draft offer document; it will, however, not
have the details of the price or the number of
shares being offered or the amount of issue. That
is because the Red Herring Prospectus is used in
book building issues only, where the details of
the final price are known only after bidding is
concluded.

SEBI Guidelines, 2000 (Disclosure and

Investor Protection (DIP) Guidelines)

The responsibilities of promoting and protecting are

counterbalanced by SEBI through the process of
equitable regulation by means of:

58
 • Defining and standardizing the attendant
process stage after stage relating to public
issues.
• Getting the intermediary who carries out
these processes to adhere to strict discipline /
and code of conduct.
• Making it obligatory on the issuer to publish
all information that is relevant and useful for the
investor to arrive at a judicious decision.
With this objective in view, SEBI in the year 1992
issued exhaustive guidelines to standardize
disclosure obligations and make it incumbent upon
corporate floating public issues to publish all relevant
information in the offer documents/prospectus
affecting investors’ interest. Based on experience
gained, these guidelines were issued. The
guidelines of 2000 were partly amended on August
14, 2003 and further on April 9, 2004. Presently, the
amended version of the securities and Exchange
Board of India (Disclosure and Investor Protection)
Guidelines, 2000 is operative and in force.

Players
• Co-managers and advisors
• Underwriters
• Lead managers
• Bankers
• Brokers and principal brokers
• Registrars
• Stock exchanges.

Structure of Offering

59
• Size of offering
• Primary and secondary components
• Number of shares authorized
• Status of mezzanine financing
• Existing shareholder list
• Lock-up agreements with company, principal
shareholders, officers,
directors
• Distribution objectives/syndication
• Directed share program
• Selection of listing exchange
• Selection of stock symbol
• Use of proceeds

Legal Considerations

• Outstanding claims
• Loan agreement restrictions or other consents
needed to offer shares
• Blue Sky Issues
• Board meetings
• Disclosure of confidential agreements
• Request of confidentiality or treatment of
confidential information
• Possible lawsuits
• Possible acquisitions, divestitures, restructuring,
management changes

60
Literature Review

Indian IPO Market: Prospects and Challenges

The Indian IPO market got its momentum in early

90s, but the mayhem and turmoil in the
secondary market during the mid 90s kept
investors away from the primary market.
Subsequently for a second time, the IT boom in
the country boosted primary market and gave it
a good chance for revival, but again, it did not
sustain due to the burst of the technology
bubble.

IPOs: Issues and Challenges

There have been constant shifts in the IPO trends in

the Indian capital market, since its kick-start in
2003. This was basically due to the market
sentiments as well as the fear factor among the
investors. This fear factor was essentially a
result of a series of scams, where hundreds of
millions of rupees were siphoned off by greedy
stock market bulls and cunning corporate
promoters. The series of scams were led by
Harshad Mehta’s scam in 1992; then came the
preferential allotment scam of 1993, where
MNCs allotted themselves below par shares.

IPO Pricing: Myth or Reality

The Indian Primary markets have come a long way

after deregulation of the economy and have gone
through reforms pertaining to structural and policy
changes. The dismantling of the controller of capital
issues and introduction of free price mechanism
were commendable. The new pricing mechanism –

61
the book building method allowed corporate to raise
money at appropriate prices. This emerged as the
most practical and efficient way for the price
discovery mechanism.

IPO Rating: A Primer

The episode of multiple demat accounts with a few

High-Networth Investors (HNI), who resorted to
corner shares, has made SEBI seriously look into
the governance issues of IPO Ratings. The
fraudulent parties sold the shares on the day of
listing and earned premium on the speculation
prices. SEBI, later on in order to address this issue
decided to make IPOs more transparent by getting
them rated to enable realistic pricing of shares and
help investors by providing more detailed information
on the issue.

62
Problem Formulation

Here, applying for IPO or not applying for IPO

is not a question, but the question is whether
investors who apply for IPO are aware and know the
facts of IPO. The problem arises here. Respondents
(Investors) who apply for IPO are not having the
thorough knowledge of IPO. They do not know what
IPO is. The basic concept in their mind is “For public,
IPO is a tool to get easy money after listing and for a
company it is a source to collect funds from the
public”. So they just visit their broker, fill up the
application form of IPO and invest their money
without knowing the facts. They do not take
reasonable care and keen interest in knowing and
understanding the impact of facts and figures on
future growth. Hence, they suffer a loss of valuable
savings.

Respondents of my questions do not read the

primary document “The Red Herring Prospectus” in
which each and every fact of the company is
disclosed. The reasons indicated by respondents for
not paying attention to Prospectus are as follows:
 Font size is too small and printing of this
prospectus is very Illegible / unreadable to
read with naked eyes. So they feel bore to
read.
 The English language is a problem as all are
not familiar with English.
 Some do not feel the necessity of reading The
Red Herring Prospectus. They believe that it
is of no use.

63
Scope of the study

I have tried to cover the major and relevant points

specifically of Income group and Education Group
from respondents for taking decision regarding
Awareness and Understanding of IPO. However,
exhaustive study is limited to Questions asked in the
Questionnaire and number of respondents.

64
 Research Methodology

Research Objectives

• To check the awareness for IPO.

• To check the understanding of investors.

• To know the interest of investors in IPO.

• To know the investors’ preference for

investment.

Research Design

1. Type: Descriptive research design.

2. Type of Data: Primary Data.

3. Universe of the study: All

respondents are from Bharuch.

4. Data Collection Method: Survey.

5. Data Collection Tool / Instrument:

Structured Questionnaire.

6. Target Population: Investors.

7. Sample size: 40

8. Sample selection: Non-Probability

Convenience Sampling.

65
Interpretation & Analysis of Data

In my survey, 40 persons responded to my

Questionnaire. Details as per various groups are as
follows:

A. Age-group

B. Gender

C. Educational Qualification

D. Occupation

E. Annual Income

A) Age-group:

Age Group Respondents

18-25 yrs 3
25-35 yrs 10
35-50 yrs 21
Above 50 yrs 6
Total 40

B) Gender:

Gender Respondents
Male 36
Female 4
Total 40

66
 C) Educational Qualification:

Education
Qualification
Under SSC 1
SSC 5
HSC 1
Under Graduate 6
Graduate 19
Post Graduate 8
Total 40

D) Occupation:

Occupation
Salaried 20
Business man 13
Professional 5
Retired 1
Others 1
Total 40

E) Annual Income:

Annual
Income
< 1 lakh 6
1-3 lakhs 15
3-5 lakhs 12
5-8 lakhs 6
> 8 lakhs 1
Total 40

Q.1 What type of investment do you prefer?

Investment Preference
FD + NSC + Insurance 2
Insurance 7
NSC 1
NSC + Insurance 17
NSC + Insurance + MF 2

67
Multiple 11
Total 40

Interpretation:
In investment preference, my survey indicates
that 39 investors out of 40 have given first
preference to Insurance, 33 out of 40 have given
second preference to NSC. Multiple investment
includes more than 3 alternatives which means
Insurance + NSC + any two or more from the
remaining alternatives.

All the respondents of any income group excluding

1, have given priority to secure their family with the
help of Life Insurance.

Q.2 Do you apply for IPO?

Yes 30
No 10
Total 40

68
Interpretation:
I found that 10 respondents out of 40 (25%) do not
apply for IPO. Most of them are less educated. But
they have given preference to Life Insurance and/or
NSC.

Q.3 If you are not investing in IPO, give reason.

Reasons
Lack of finance 4
not interested 4
Loss suffered in past 2
Not Applicable 30
Total 40

Interpretation:
I observed from survey that…
• 4 respondents having lack of finance do not
apply for IPO
• 4 respondents are not at all interested in IPO
• 2 respondents had applied in IPO in before
few years and suffered a loss; hence they have
changed their mind and do not apply for IPO.
Remaining 30 respondents out of 40, apply for
IPO.

69
Q.4. If yes, what are the reasons of your
preference in IPO?

Reasons
Appreciation 12
Good return 18
Not Applicable 10
Total 40

Interpretation:
From my survey it is found that 30 (75%)
respondents out of 40 are interested in IPO. Out of
30, 18 respondents have shown their interest in IPO
because of GOOD RETURN and 12 respondents
said the reason of APPRECIATION.

70
Q.5 From which year you are applying in IPO?

Year
1985-1990 2
1990-1995 1
1995-2000 12
2000-2005 5
2005 onwards 10
Not Applicable 10
Total 40

Interpretation:
Out of 40, 30 respondents are favouring IPO and it is
observed that…
• 2 respondents started applying for IPO from
1985-1990.
• 1 respondents started applying for IPO from
1990-1995.
• 1 respondents started applying for IPO from
1990-1995.
• 12 respondents started applying for IPO from
1995-2000.

71
 • 5 respondents started applying for IPO from
2000-2005.
• 10 respondents started applying for IPO from
2005 onwards.

Q.6 Are you aware of IPO funding?

Yes 15
no 15
Not Applicable 10
Total 40

Interpretation:
It is found that out of 30 respondents favouring IPO,
15 are aware of IPO funding. These 15 respondents
have not taken the benefit of IPO funding inspite of
awareness. Remaining 50 are not aware of IPO
funding.

72
Q.7. Which type of IPO do you prefer?

Preferential Sector
Infra + Power + Pharma 1
No preference 20
Power 5
Infra 2
Pharma 1
Banking 1
Not Applicable 10
Total 40

Interpretation:
It is observed that 30 respondents who apply for IPO
have indicated different preferences which are as
follows:
• 1 respondent prefers Infra sector, Power &
Energy sector and Pharma sector.

73
 • 20 respondents do not have specific sector for
preference.
• 5 respondents prefer Power sector.
• 2 respondents prefer Infra sector.
• 5 respondents prefer Power sector.
• 1 respondent prefer Pharma sector.
• 1 respondent prefer Banking sector.
Q.8 How long do you keep your amount invested
after allotment of shares from

IPO?

More than 12 months 12

Depend on market 18
Not Applicable 10
Total 40

Interpretation:
Out of 30 respondents apply for IPO, 12 keep their
amount invested for more than 12 months after
allotment of shares. Remaining 18 respondents keep
their eyes on market and they take decision
according to market trend.

74
Q.9 From whom you get the investment advice
for IPO?

Broker 22
Friend + Broker 4
Newspaper & magazine + busi. chanel 2
Friend 2
Not applicable 10
Total 40

Interpretation:
I observed that out of 30 favouring IPO…
• 22 respondents take broker’s advice only.

75
 • 4 respondents take the advice from Friend &
Broker.
• 2 respondents take the opinion of Newspaper,
Magazines & business channels.
• 2 respondents follow their friends advice.

Q.10 From where you get IPO form?

Stock Broker 30
Syndicate member 0
Not Applicable 10
Total 40

Interpretation:
It is observed that all 30 respondents take the IPO
form and necessary details from stock broker only.
They do not have any idea of syndicate member.

Q.11. Do you apply online for IPO?

Yes 7
No 23
Not Applicable 10
Total 40

76
Interpretation:
7 out of 30 respondents favouring IPO, take benefit
of online facility for IPO application.

Q.12 Do you read IPO Red Herring Prospectus

before investing?

Yes 10
No 20
Not Applicable 10
Total 40

Interpretation:
It is found that 10 out of 30 respondents applying for
IPO read and study The Red Herring Prospectus
before investing.

77
Q.13 How do you decide the price at the time of
applying for the share in IPO?

Broker 28
Newspaper & magazine + business channel 2
Not Applicable 10
Total 40

Interpretation:
28 out of 30 respondents decide the price for the
share in IPO with the help of broker only and
remaining 2 take the advantage of Newspaper,
Magazines and Business channels.

78
Q.14. Do you keep information of IPO after
submitting IPO application?

Yes 28
No 2
Not Applicable 10
Total 40

Interpretation:

28 out of 30 respondents keep IPO information for

future reference.

Q.15 Do you believe IPO gives better return?

Yes 25
No 7
Not Applicable 8
Total 40

Interpretation:

79
It is observed from the data that out of 32
respondents (including 2 respondents who suffered
loss in past) 25 believe that IPO gives better return
and it depends on the IPO selection.

Q.16 Would you recommend others to invest in

IPO?

Yes 18
No 12
Not responded 2
Not Applicable 8
Total 40

Interpretation:
Out of 30 respondents, 18 recommend other for IPO,
12 do not prefer to recommend others and 2 do not
respond to this question.

Q.17 Have you attended any awareness

programme for investment in IPO?

Yes 2
No 28
Not Applicable 10
Total 40

80
Interpretation:

Only 2 out of 30 respondents favouring IPO have

attended IPO awareness programme and both are
post Graduates. Most of the respondents do not
have idea of this type awareness programmes.

Q.18 What is the reason for selecting company

for IPO?

Goodwill + track record of good companies 1

Market analysis 13
Track record of group companies 16
Not applicable 10
Total 40

Interpretation:
It is observed from the data that…
• 1 respondent considers Goodwill & Track
Record of the group companies.
• 13 respondents consider Market Analysis of
IPO.

81
 • 16 respondents consider Track record of
Group companies while selecting IPO.

Q.19 Have you ever withdrawn from IPO? If yes,

Mention reason.

Yes 1
No 29
Not applicable 10
Total 40

Interpretation:
1 respondent out of 30, favouring for IPO had
withdrawn from IPO after applying.

82
Findings

I derived the following findings from the survey, I

conducted:
• It is found that applicants applying for IPO do
not have knowledge and information regarding
different sector like Power, Infra etc. They apply
for IPO without any preference. And hence they
depend on the Brokers or friends’ advice.
• Out of 30 respondents apply for IPO, 2
respondents have attended IPO awareness
programmes. Hence respondents do not have
any idea of IPO awareness programmes.
• Respondents having Annual Income less than
1 lakh are not at all interested in IPO. They
prefer safer investments which covers life like
Life Insurance.
• Respondents having Annual Income of 1-3
lakhs also prefer safer investments like
Insurance, National Saving Certificates and
Fixed Deposits.
• Out of 15 respondents having Annual Income
of 1-3 lakhs:
 11 apply for IPO, but they have given
priority to Insurance and NSC.
 Only 2 out of 11 respondents preferred
multiple investment which includes
Insurance + NSC + 2 or more investments
from other options.
 1 out of this 15 respondents had
suffered a loss previously and so
determined not to invest in IPO.
• 19 respondents includes Annual
Income:

83
3-5 lakhs - 13 respondents
5-8 lakhs - 5 respondents
More than 8 lakhs - 1 respondent
 Out of these 19 respondents, 10 invest
in IPO because of Appreciation in share
price and 9 invest for getting good return.
 Out of these 19 repondents –
- 14 do not have particular preference of
sector for selecting IPO.
- 2 respondents favour Power sector.
- 2 respondents favour Infra sector.
- 1 respondent favoura Banking sector.
It seems that awareness and
knowledge amongst respondents in
selecting sector for IPO is less.
• Respondents investing in Life Insurance and
NSC obtain the Tax benefits.
• There are 12 respondents having less
education say –
1 Under SSC
5 SSC
6 Under Graduate.
 Out of these 12, 9 respondents do not
apply for IPO. 9 repondents include:
1 Under SSC
3 SSC
5 Under Graduate
 But remaining 3 out of 12 repondents
believe that IPO gives Good Return.
• Out of 30 respondents applying for IPO, 26
are dependent on Broker for getting investment
advice for IPO.

84
• All 30 respondents applying for IPO get the
form from Stock Broker. They do not know the
Syndicate Member.
• Out of 30 respondents, 7 apply for IPO online
sometimes.
• Out of 30 respondents, 10 respondents read
Red Herring Prospectus before investing in
IPO.
The reasons of not reading the prospectus
mentioned by respondents are as follows:
 Illegible / Unreadable in terms of font
size and printing of prospectus.
 Barrier of language as each and every
person do not english.
 Not felt necessary to go through
prospectus.
• Out of 30 respondents applying for IPO, 28
depend on Broker for deciding the price of the
share in IPO.
• Out of 30 respondents applying for IPO, 28
keep information of IPO after submitting IPO
application.
• Out of 30 respondents applying for IPO,
reason of selecting of company for investing in
its IPO mentioned are as follows:
 16 repondents indicating reason of
Track Record of Group Companies
 13 repondents indicating reason of
Market Analysis.
 1 repondent indicating reason of
Goodwill & Brand name of the Company
and Track Record of Group Companies.

85
 • Out of 10 not applying for IPO, 4 persons do
not prefer IPO due to non-availability of funds, 4
are not interested and 2 had suffered loss in
past.

Limitations

• Findings cannot be generalised as it is a non-

probability sampling.
• The area or territory for survey is limited.
• Time is a constraint as the period of training is
about 6 weeks.

Recommendations

Following are the recommendations relating to my

project:
•I recommend to organize awareness
programmes with a view to increasing the
understanding and awareness for IPO.
• This type of awareness programmes are to be
organized by broking houses and companies
inviting public for IPO. They can take
cooperation and support of management
associations functioning locally and at district
level.
• Legible (readable) printing font must be made
compulsory so that investors can glance at Red
Herring Prospectus easily and know the facts.
• Company bringing IPO should inform brokers
to make available Red Herring Prospectus with
legible fonts in English and local or regional
language on bulletin boards in their office.

86
• Investors should read and understand the
facts disclosed in Red Herring Prospectus
before taking decision of investment. Investors
should consider the degree of Risk and Return.
• Investor should attend the seminars for
increasing their awareness and knowledge
regarding IPO.
• Efforts to be made for increasing online
applications which will be time saving and less
expensive as it saves printing and stationery
cost.

87
Conclusion

Before I conclude my Project report, I would like to

note:
“If you leap into a well, providence is not bound
to fetch you out”.

Investment has become a part and parcel of one’s

life. It is noticed that many investors invest their
savings without knowing of a better IPO available
elsewhere or pros and cons of a particular type of
IPO. Investors will have to spend some time to take
proper decision for applying in IPO.

Government has no control over the share market

prices. Of course, SEBI focuses its attention on
company issuing Initial Public Offer (IPO) and
secondary market. It is the duty of the investors to
understand the facts declared in Red Herring
Prospectus of the company inviting public for
investment. So, learn first to understand the facts.
If you select IPO on hearsay or brokers’ advice and
lose money, nobody will come to rescue. It is noticed
during last 22 years, many companies which brought
IPO have been disappeared. Hence many investors
have suffered a heavy loss.

I would like to conclude my project report as follows:

It was a nice experience from the point of
view of my knowledge and practical aspect as well.
The IPO is the good source for new entrepreneurs
for their business expansion, diversification and

88
growth. Entrepreneurs must disclose the truth before
issuing shares to public.
As per my analysis, most of the respondents
give priority to Life Insurance and National Saving
Certificates (NSC). Respondents are still having very
traditional approach to make investments in safe
investment avenues. Thus they prefer safety
parameter with Life Insurance and National Saving
Certificates (NSC) and it is the most important factor.

89
 Bibliography

Books:
o Cooper Donald R., Schindler Pamela
R. (2003) Business Research Methods, Eight
Edition, Delhi, Tata McGraw Hill.
o Shahjan Vandana (2006) IPO Markets
– Perspective and Experiences, First Edition,
Hyderabad, ICFAI University Press.
Websites:
o www.investopedia.com
o www.chittorgarh.com
o www.moneycontrol.com
o www.ipoavenue.com
o www.ipohome.com
o www.essortment.com
o www.moneycentral.hoovers.com
o www.bullishindian.com
o www.rupya.com
o www.investorguide.com
o www.hdil.in

References

o Shahjan Vandana (2006), Indian IPO Market:

Prospects and Challenges, IPO Markets –
Perspectives and Experiences, First Edition,
Page no. 93.
o Shahjan Vandana (2006), IPOs: Issues and
Challenges, IPO Markets – Perspectives and
Experiences, First Edition, Page no. 113

90
o Shahjan Vandana (2006), IPO Pricing: Myth
or Reality, IPO Markets – Perspectives and
Experiences, First Edition, Page no. 120.
o Shahjan Vandana (2006), IPO Rating: A
Primer, IPO Markets – Perspectives and
Experiences, First Edition, Page no. 134.

91
 Questionnaire
Awareness &
Understanding of Investor
for
Initial Public Offering (IPO)
(Please tick mark wherever is applicable)

Name :
__________________________________________
______________
Age :
18 – 25 35 – 50 yrs
yrs Above 50 yrs
25 – 35
yrs
Gender : Male
Female

Address:
__________________________________________
___________

Contact no.:
_____________________________________

E-mail ID :
______________________________________

Educational Qualification:
Under SSC Under Graduate
SSC Graduate
HSC Post Graduate

Occupation: Professional
Salaried
Businessman Retired

92
 Other (Please ________________
specify) __

Annual Income:
Less than 1 Lakh 5 lakhs – 8 lakhs
1 lakh – 3 lakhs More than 8 lakhs
3 lakhs – 5 lakhs

1. What type of investment do you prefer?

Fixed Deposit with Bank
Fixed Deposit with company
National Saving Certificates (NSC)
Government Bonds
Mutual Fund
Share Market
Insurance
Other (Please specify)
____________________
2. Do you apply for IPO?
Yes
No

3. If you are not investing in IPO, give reason.

Risk Factor Not Interested
Irregular return Lack of knowledge
Volatility in Loss suffered in past
market
Lack of Finance
Other (please specify) ___________

4. If yes, what are the reasons of your preference

in IPO?
Less risk
Good return
Appreciation of shares

5. From which year you are applying in IPO?

93
 1985 – 1990 2000 – 2005
1990 – 1995 2005 onwards
1995 – 2000

6. Are you aware of IPO funding?

Yes
No

7. Which type of IPO do you prefer?

FMCG Infrastructure
Realty Power & Energy
Pharma & Retail
Healthcare No particular
Banking preference

8. How long do you keep your amount invested

after allotment of shares from
IPO?
Less than 1 month
More than 1 but less than 3 months
More than 3 but less than 6 months
More than 6 but less than 12 months
More than 12 months
Depend upon market

9. From whom you get the investment advice for

IPO?
Friends Business channel
Broker opinion
Newspaper & Others
Magazine opinion

10. From where you get IPO form?

Stock broker
Syndicate member

11. Do you apply online for IPO?

94
 Yes
No

12. Do you read IPO Red Herring Prospectus

before investing?
Yes
No

13. How do you decide the price at the time of

applying for the share in IPO?
Friends
Broker
Newspaper &
Magazine opinion
Business channel
opinion
Others

95
14. Do you keep information of IPO after submitting IPO application?
Yes
No

15. Do you believe IPO gives better return?

Yes
No

16. Would you recommend others to invest in IPO?

Yes
No

17. Have you attended any awareness programme for investment in IPO?
Yes
No

18. What is the reason for selecting company for IPO?

Goodwill & Brand Name of the company
Trust
Track record of group companies
Market analysis
Other (please specify) ____________________

19. Have you ever withdrawn from IPO? If yes, Mention reason.
___________________________________________________________
__