An

Assignment

On

RECENT IPO IN INDIAN CAPITAL

MARKET
In the subject

INDIAN FINANCIAL SYSTEM

Submitted to
Prof. Kaumudini Upadhyay
Prof. Kalpesh Prajapati

Submitted by
Alpesh Modh
Roll No.:22

1
 Introduction
Types of market
In market there are mainly two types of market available those are as under.

A) Primary market.
B) Secondary market.

Primary Market of Issue Mechanism

The method by which new issues are made as:

a) Public issue through prospectus.

b) Tender/Book building.
c) Offer for sale.
d) Placement.
e) Right issue.

Initial public offering (IPO) — The first time a company sells stock to the public. An IPO is a
type of a primary offering, which occurs whenever a company sells new stock, and differs from
a secondary offering, which is the public sale of previously issued securities, usually held by
insiders. Some people say IPO stands for "Immediate Profit Opportunities." More cynic it’s
Probably Overpriced."

Offering price — The price that investors must pay for allocated shares in an IPO. Not the
same as the opening price, which is the first trade price of a new stock.

Opening price — The price at which a new stock starts trading. Also called the first trade
price. Underwriters hope that the opening price is above the offering price, giving investors in
the IPO a premium.

Oversubscribed — Defines a deal in which investors apply for more shares than are available.
Usually a sign that an IPO is a hot deal and will open at a substantial premium.

Secondary market
In INDIA has shown maturity by registering enormous growth in the recent years in terms of
the number of listed companies, market capitalization, market value of listed companies to
gross national product, number of shareholders, and so on.

2
1. Why Do Firms Go Public?

• Desire to raise capital for a growing firm.

• Create liquidity for founders and other shareholders.
• To allow for greater dispersion of ownership. Pre-IPO angel investors and undiversified
portfolio and, therefore, are not willing to pay as high a price as diversified public-
market investors.
• For a potential acquirer, public targets are easier to spot than Private targets.
Entrepreneurs can facilitate the acquisition of their company for a higher value after the
IPO.
• Fixed costs of going public.
• Early in its lifecycle a firm will be private. As it grows and faces profitable investment
opportunities, the costs of going public are worth incurring.
• Public trading can itself add value to the firm as it inspires confidence from investors,
customers, suppliers, and employees.
• IPO capital allows for first-mover advantages.
• Asymmetric information model: firms postpone equity issue if they know they are
currently undervalued. If there are common misevaluations, aggregate issue volume will
increase following bull markets.
• Markets provide valuable information to entrepreneurs. Higher prices signal higher
growth opportunities.
• Propose a semi-rational theory without asymmetric information to explain increased
IPO volume following bull markets: Entrepreneur’s sense of value derives more from
their operations perspective and underlying business fundamentals than from public
markets.

3
 IPO Under pricing:
1. Why are IPO’s under priced?

Issuer is more informed than investor:

• If an issue is too low then the issuing firm’s owners will not like bearing the additional
cost of going public
• If an issue is priced too high then the underwriter is stuck with shares plus a bad
reputation
• The underwriter is to balance between the tow extreme
– Under pricing allows the underwriter to sell shares of the firm easily
– It reduces the possibility of lawsuits
High-quality issuers deliberately under price their shares to signal their high quality.
With some patience, these issuers can recoup their upfront sacrifice post-IPO through future
issuing activity or analyst coverage.

High Quality Issuer

Share
Price

Low Quality Issuer

Offer Day
Months
Investors are more informed than issuer:
While most IPO’s are under priced, a few are overpriced. Hence, an investor submitting a
purchase order cannot be certain about the offering’s value once it starts trading.
Testable implication: Greater the uncertainty about the true value of the IPO, greater the under
pricing.
Shares to be issued = 100.
True price = Rs.10.

Offer Price Informed Uninformed

Rs.12 (overpriced)
Shares demanded 0 100
Shares supplied 0 100
Gain / Loss 0 (10-12)*100= -Rs.200
Rs.8 (under priced)
Shares demanded 100 100
Shares supplied 50 50
Gain / Loss (10-8)*50= (10-8)*50=
Rs.100 Rs.100

4
If they are Focusing on Allocation of Shares
If IPO’s are under priced on average, then the opportunity to purchase them at the offering price
would be quite attractive. Underwriters have the opportunity to allocate such under priced
shares to their “preferred customers.”

How does one become a “preferred customer?”

Provide underwriter with economic benefits.
Provide underwriter with political benefits.

5
Growth and the Need for Capital

• IPO: Private firm raises public capital and allocates it to projects the managers deem most
worthy.

• Sellout: Capital allocated by managers of acquiring company. Sellout firm has to compete
with other divisions of the acquiring company for new capital.

Companies with greater growth potential more likely to go public through an IPO.
Proxies for growth:

– Increase in assets, capital expenditures, revenues over the past year.

– Capital expenditure / Assets,
– R&D / Assets,
– Market value of assets / Book value of assets.
(Market = Book + Growth Opportunities.
Market / Book = 1+ Growth Opportunities.)

Companies that have

– lots of growth opportunities,

– have some debt, and
– cash constrained

Are more likely to do an IPO to gain access to equity capital.

6
 Indian Position at Past Year
At present India are seven among the world’s biggest IPO markets in the first eight months of
this year. In 2006, India was at 14th position. In this year 73 companies raised $5.4 billion
capital by IPO in 2006. And some investors were rewarded handsomely, particularly with
companies in high-growth sectors. Energy transportation concern Gujarat State Petronet, which
operates the second-largest pipeline in India, raised $84 million in its IPO last February and
shares jumped 75% during its first day of trading. It currently trades at 51.25 rupees more than
double its trading levels last June.

After a big initial public offering season last year, 95 companies are expected to raise up to $10
billion in new listings in '07 In my opinion, the main factor behind this tremendous
performance by India were DLfs $2.26-billion IPO, the biggest ever by an Indian company,
Genpact $568 million IPO, Idea Cellular $555 million IPO and Power Finance Corporation
$226 million IPO. So the year 2007 capital was raised.

In year 2005 there are only 50 IPO’s are listed and in 2004 there are only 20 IPO’s are listed it
shows that Indian IPO’s market is raised very fast.

At compare to all 2004 to 2007 Indian IPO’s market is raised very fast but present year there
are only 34 IPO’s come and IPO’s capital also decaling.

In 2008 there are more then 75 company’s IPO are waiting for time to bake up the market
situation. In this issue there are approximately 43000 crore Rs are invested.

Sector wise investment in IPO

No of Issue
Industry
2007 2008
Infrastructure & Real Estate 16 7
Banking & Finance 9 3
Power & Cement 5 4
It Sector 10 3
Media & Entertainment 4 0
Textile & Related Sector 6 1
Pharma & Chemical 2 2
Engineering 2 2
Others 41 12

7
 Trend Analysis

Tend Analysis
100
80
Total IPO

60
95
40 73
20 50
34
20
0
2004 2005 2006 2007 2008
Year

In above graph shows that in year 2004 share market is

Year No of Issue
introduction stage after 2004 to 2006 it has at growth stage
2004 20 then after in 2007 it is at maturity stage and then at present
2005 50 year 2008 it is at decline stage it shows that it is highly
decline so at present time many invested company wait for
2006 73 investment time.
2007 95
2008 34

8
 Past Issues Through NSE
Sr. Name of the issue Date of Issue No. of No. of Issue Size (lakh Price Issue
No. members Bidding shares) Range Price
centers (Rs.)
1 RESURGERE 11/08/2008 41 50 44.5 Rs 263 270
MINES & to to Rs
MINERALS INDIA 13/08/2008 272
LIMITED
2 AUSTRAL COKE & 07/08/2008 83 65 72.6 Rs 164 *
PROJECTS to TO Rs
LIMITED 13/08/2008 196
3 NU TEK INDIA 29/07/2008 128 56 45 Rs 170 192
LIMITED to to Rs
01/08/2008 192
4 VISHAL 21/07/2008 100 49 27.9 Rs 140 150.00
INFORMATION to to
TECHNOLOGIES 24/07/2008 Rs150
LIMITED
5 BIRLA COTSYN 30/06/2008 85 60 (.) No of RS.12 14
INDIA LIMITED to Equity TO
09/07/2008 Shares RS.14
aggregating
to Rs.
10,753
Lakhs
excluding
Promoter
Contribution
of Rs 3665
Lacs
6 KSK ENERGY 23/06/2008 131 60 346.11 RS.240 240.00
VENTURES to TO
LIMITED 25/06/2008 RS.255
7 LOTUS EYE CARE 12/06/2008 61 48 100 Rs 36 38.00
HOSPITAL to to Rs
LIMITED 20/06/2008 38
8 FIRST WINNER 09/06/2008 121 48 55 Rs 115 125.00
INDUSTRIES to to Rs
LIMITED 17/06/2008 125
9 ARCHIDPLY 11/06/2008 105 56 66.1572 Rs 70 74.00
INDUSTRIES to to Rs
LIMITED 17/06/2008 80
10 SEJAL 09/06/2008 80 58 91.94155 Rs 105 115.00
ARCHITECTURAL to to Rs
GLASS LIMITED 12/06/2008 115
11 NIRAJ CEMENT 26/05/2008 72 59 32.5 Rs 175 190
STRUCTURALS to to Rs
LIMITED 30/05/2008 190

9
12 ANU’S 12/05/2008 119 52 38.2 Rs 200 210
LABORATORIES to to Rs
LIMITED 15/05/2008 210
13 GOKUL REFOILS 08/05/2008 165 52 71.58392 Rs 175 195.00
AND SOLVENT to to Rs
LIMITED 13/05/2008 195
14 AISHWARYA 15/04/2008 139 64 40 Rs 32 35
TELECOM to to Rs
LIMITED 17/04/2008 35
15 KIRI DYES AND 25/03/2008 141 53 37.5 Rs 125 150.00
CHEMICALS to to Rs
LIMITED 02/04/2008 150
16 TITAGARH 24/03/2008 141 50 23.83768 Rs 540 540.00
WAGONS LIMITED to to Rs
27/03/2008 610
17 Sita Shree Food 11/03/2008 95 48 (.) Equity Rs 27 30
Products Limited to Shares to Rs
14/03/2008 aggregating 30
Rs. 315M
18 GAMMON 10/03/2008 95 48 165.5 Rs 167 167.00
INFRASTRUCTURE to to Rs
PROJECTS 13/03/2008 200
LIMITED
19 RURAL 19/02/2008 144 57 1561.2 Rs 90 105.00
ELECTRIFICATIO to to Rs
N CORPORATION 22/02/2008 105
LIMITED
20 V-GUARD 18/02/2008 120 60 80 Rs 80 82.00
INDUSTRIES to to Rs
LIMITED 21/02/2008 85
21 GSS AMERICA 11/02/2008 146 60 34.97495 Rs.400 400.00
INFOTECH to to
LIMITED 15/02/2008 Rs.440
22 SVEC 04/02/2008 118 50 40 Rs 80 *
CONSTRUCTIONS to to Rs
LIMITED 13/02/2008 90
23 EMAAR MGF LAND 01/02/2008 192 42 1025.70623 Rs 530 *
LIMITED to to Rs
11/02/2008 630
24 WOCKHARDT 31/01/2008 130 69 250.87097 Rs225 *
HOSPITALS to to
LIMITED 07/02/2008 Rs260
25 Tulsi Extrusions 01/02/2008 110 63 57 Rs.80 85.00
Limited to to
05/02/2008 Rs.85
26 IRB 31/01/2008 118 58 510.57666 Rs.185 185.00
Infrastructure to to
Developers 05/02/2008 Rs.220
Limited

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27 SHRIRAM EPC 29/01/2008 128 48 50 Rs.290 300.00
LIMITED to to
01/02/2008 Rs.330
28 Bang Overseas 28/01/2008 110 56 35 Rs.200 207.00
Limited to to
31/01/2008 Rs.207
29 ONMOBILE 24/01/2008 90 48 109.00545 Rs.425 440.00
GLOBAL LIMITED to to
29/01/2008 Rs.450
30 KNR Construction 24/01/2008 64 42 78.7457 Rs.170 170
Limited to to
29/01/2008 Rs.180
31 CORDS CABLE 21/01/2008 72 57 30.85 Rs.125 135.00
INDUSTRIES to to
LIMITED 24/01/2008 Rs.135
32 J. Kumar 18/01/2008 96 49 65 Rs.110 110
Infraprojects to to
Limited 23/01/2008 Rs.120
33 RELIANCE POWER 15/01/2008 208 128 2280 Rs.405 450.00
LIMITED to to
18/01/2008 Rs.450
34 FUTURE CAPITAL 11/01/2008 156 59 64.228 Rs.700 765.00
HOLDINGS to to
LIMITED 16/01/2008 Rs.765

11
 IPO subscribed in 2008
Vishal Information Technology Ltd. IPO Subscription Details (Final):
QIB: 0.45 times
Non-Institutional Investors: 1.36 times
Retail: 2.19 times
Overall: 1.19 times

Birla cotsyn (India) limited

QIB: 0.01 times
Non-Institutional Investors: 5.75 times
Retail: 0.92 times
Employees: 0.04 times
Overall: 1.11 times

Gokul Refoils and Solvents IPO was subscribed 4.67 times (Retail: 5.59 times)

Reliance IPO
Reliance Power IPO was over subscribed heavily, but less than 15 times in retail section.
Reliance Power IPO allotment in is confirmed one lot to each retail investor for those who have
applied for 15 lots. Due to the partial payment option available, most of the retail investors have
applied for all 15 lots allowed by investing only Rs. 25875. This saved a lot of money to be
pumped into market due to this mega IPO or you might have had seen larger fall in the market
on 21st and 22nd Jan. After allotment stock market was decline and its market decline so Anil
Ambani has decided to give bonus share of reliance power they issued bonus on three of one
share they allotted.

12
 Top Performing IPO's
Company Issue Current Gain/Los LTT
Price Price s (%)
(Rs.)
Religare Enterprises Ltd 185.00 383.5 107.30 Sep 12 2008
10:44AM
Vishal Information Technologies 150.00 292.1 94.73 Sep 12 2008
Ltd 10:44AM
Allied Computers International 12.00 22.15 84.58 Sep 12 2008
(Asia) Ltd 10:44AM
Power Grid Corporation of India Ltd 52.00 95.5 83.65 Sep 12 2008
10:44AM
Koutons Retail India Ltd 415.00 750.1 80.75 Sep 12 2008
10:44AM
Gokul Refoils and Solvent Ltd 195.00 316.5 62.31 Sep 12 2008
10:44AM
Anu's Laboratories Ltd 210.00 305.55 45.50 Sep 12 2008
10:44AM
Kaveri Seed Company Ltd 170.00 239 40.59 Sep 11 2008
3:43PM
Titagarh Wagons Ltd 540.00 715.1 32.43 Sep 12 2008
10:44AM
Austral Coke & Projects Ltd 196.00 240.95 22.93 Sep 12 2008
10:44AM
Bang Overseas Ltd 207.00 243.9 17.83 Sep 12 2008
10:44AM
Kiri Dyes & Chemicals Ltd 150.00 171 14.00 Sep 12 2008
10:44AM
OnMobile Global Ltd 440.00 486 10.45 Sep 12 2008
10:44AM
Lotus Eye Care Hospital Ltd 38.00 38 0 Sep 12 2008
10:44AM

13
 LOSERS IPO’S
Company Issue Price Current Gain/Loss
(Rs.) Price
K.S.K ENERGY LTD 240 148 -92
FIRST WINNER 125 104 -21
ARCHID PLAY 74 37 -37
NIRAJ CEMENT 190 57 -133
GEMAN INFRASTRUCTURE 167 96 -71
G.S.S 400 235 -165
K.N.R 170 80 -90
RELIANCE POWER 450 155 -295
FUTURE CAPITAL 765 365 -400

Conclusion
In 2008 there are 34 company come with IPO and in this IPO 12 IPO are at income based
and other all are 22 IPO are in under issue price. After Reliance IPO market is very highly
decline.

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