Chapter-1

INTRODUCTION

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 INTRODUCTION ABOUT IPO
An initial public stock 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
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.

Reasons for Listing

When a company lists its shares on a public exchange, it will almost

invariably look to issue additional new shares in order at the same time. The
money paid by investors for the newly-issued shares goes directly to the
company (in contrast to a later trade of shares on the exchange, where the
money passes between investors).

An IPO, therefore, allows a company to tap a wide pool of stock market

investors to provide it with large volumes of capital for future growth. The
company is never required to repay the capital, but instead the new

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shareholders have a right to future profits distributed by the company and
the right to a capital distribution in case of dissolution.

The existing shareholders will see their shareholdings diluted as a proportion

of the company's shares. However, they hope that the capital investment will
make their shareholdings more valuable in absolute terms.

In addition, once a company is listed, it will be able to issue further shares

via a rights issue, thereby again providing itself with capital for expansion
without incurring any debt. This regular ability to raise large amounts of
capital from the general market, rather than having to seek and negotiate
with individual investors, is a key incentive for many companies seeking to
list.

Benefits of being a public company-

• Bolster and diversify equity base

• Enable cheaper access to capital
• Exposure and prestige
• Attract and retain the best management and employees
• Facilitate acquisitions
• Create multiple financing opportunities: equity, convertible debt,
cheaper bank loans, etc.

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Procedure

IPOs generally involve one or more investment banks as "underwriters." The

company offering its shares, called the "issuer," enters a contract with a lead
underwriter to sell its shares to the public. The underwriter then approaches
investors with offers to sell these shares.

The sale (that is, the allocation and pricing) of shares in an IPO may take
several forms. Common methods include:

• Best efforts contract

• Firm commitment contract
• All-or-none contract
• Bought deal
• Dutch action
• Self distribution of stock
A large IPO is usually underwritten by a "syndicate" of investment banks led
by one or more major investment banks (lead underwriter). Upon selling the
shares, the underwriters keep a commission based on a percentage of the
value of the shares sold (called the gross spread). Usually, the lead
underwriters, i.e. the underwriters selling the largest proportions of the IPO,
take the highest commissions—up to 8% in some cases.

Multinational IPOs may have as many as three syndicates to deal with

differing legal requirements in both the issuer's domestic market and other
regions. For example, an issuer based in the E.U. may be represented by the
main selling syndicate in its domestic market, Europe, in addition to separate
syndicates or selling groups for US/Canada and for Asia. Usually, the lead

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underwriter in the main selling group is also the lead bank in the other
selling groups.

Because of the wide array of legal requirements, IPOs typically involve one
or more law firms with major practices in securities law, such as the Magic
Circle firms of London and the white shoe firms of New York City.

Usually, the offering will include the issuance of new shares, intended to
raise new capital, as well the secondary sale of existing shares. However,
certain regulatory restrictions and restrictions imposed by the lead
underwriter are often placed on the sale of existing shares.

Public offerings are primarily sold to institutional investors, but some shares
are also allocated to the underwriters' retail investors. A broker selling shares
of a public offering to his clients is paid through a sales credit instead of a
commission. The client pays no commission to purchase the shares of a
public offering; the purchase price simply includes the built-in sales credit.

The issuer usually allows the underwriters an option to increase the size of
the offering by up to 15% under certain circumstance known as the
greenshoe or over allotment option.

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 IPO – ADVANTAGES AND DISADVANTAGES
The decision to take a company public in the form of an initial
public offering (IPO) should not be considered lightly. There are several
advantages and disadvantages to being a public company, which should
thoroughly be considered. This memorandum will discuss the advantages
and disadvantages of conducting an IPO and will briefly discuss the steps to
be taken to register an offering for sale to the public. The purpose of this
memorandum is to provide a thumbnail sketch of the process. The reader
should understand that the process is very time consuming and complicated
and companies should undertake this process only after serious
consideration of the advantages and disadvantages and discussions with
qualified advisors.

Advantages of going public

 Increased Capital

A public offering will allow a company to raise capital to use for

various corporate purposes such as working capital, acquisitions,
research and development, marketing, and expanding plant and
equipment.

 Liquidity

Once shares of a company are traded on a public exchange, those

shares have a market value and can be resold. This allows a company
to attract and retain employees by offering stock incentive packages to

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 those employees. Moreover, it also provides investors in the company
the option to trade their shares thus enhancing investor confidence.

 Increased Prestige

Public companies often are better known and more visible than private
companies, this enables them to obtain a larger market for their goods
or services. Public companies are able to have access to larger pools
of capital as well as different types of capital.

 Valuation

Public trading of a company's shares sets a value for the company that
is set by the public market and not through more subjective standards
set by a private valuator. This is helpful for a company that is looking
for a merger or acquisition. It also allows the shareholders to know the
value of the shares.

 Increased wealth

The founders of the company often have the sense of increased wealth
as a result of the IPO. Prior to the IPO these shares were illiquid and
had a more subjective price. These shares now have an ascertainable
price and after any lockup period these shares may be sold to the
public, subject to limitations of federal and state securities laws.

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Disadvantages of going Public
 Time and Expense

Conducting an IPO is time consuming and expensive. A successful

IPO can take up to a year or more to complete and a company can
expect to spend several hundreds of thousands of dollars on attorneys,
accountants, and printers. In addition, the underwriter's fees can range
from 3% to 10% of the value of the offering. Due to the time and
expense of preparation of the IPO, many companies simply cannot
afford the time or spare the expense of preparing the IPO.

 Disclosure

The SEC disclosure rules are very extensive. Once a company is a

reporting company it must provide information regarding
compensation of senior management, transactions with parties related
to the company, conflicts of interest, competitive positions, how the
company intends to develop future products, material contracts, and
lawsuits. In addition, once the offering statement is effective, a
company will be required to make financial disclosures required by
the Securities and Exchange Act of 1934. The 1934 Act requires
public companies to file quarterly statements containing unaudited
financial statements and audited financial statements annually. These
statements must also contain updated information regarding
nonfinancial matters similar to information provided in the initial
registration statement. This usually entails retaining lawyers and
auditors to prepare these quarterly and annual statements. In addition,

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 a company must report certain material events as they arise. This
information is available to investors, employees, and competitors.

 Decisions based upon Stock Price

Management's decisions may be effected by the market price of the

shares and the feeling that they must get market recognition for the
company's stock.

 Regulatory Review

The Company will be open to review by the SEC to ensure that the
company is making the appropriate filings with all relevant
disclosures.

 Falling Stock Price

If the shares of the company's stock fall, the company may lose
market confidence, decreased valuation of the company may effect
lines of credits, secondary offering pricing, the company's ability to
maintain employees, and the personal wealth of insiders and investors.

 Vulnerability

If a large portion of the company's shares are sold to the public, the
company may become a target for a takeover, causing insiders to lose
control. A takeover bid may be the result of shareholders being upset
with management or corporate raiders looking for an opportunity.
Defending a hostile bid can be both expensive and time consuming.

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Parameters to judge an IPO

Good investing principles demand that you study the minutes of

details prior to investing in an IPO. Here are some parameters you should
evaluate:-

 Promoters

Is the company a family run business or is it professionally

owned? Even with a family run business what are the credibility and
professional qualifications of those managing the company? Do the top level
managers have enough experience (of at least 5 years) in the specific type of
business?

 Industry Outlook

The products or services of the company should have a good

demand and scope for profit.

 Business Plans

Check the progress made in terms of land acquisition,

clearances from various departments, purchase of machinery, letter of credits
etc. A higher initial investment from the promoters will lead to a higher faith
in the organization.

 Financials

Why does the company require the money? Is the company

floating more equity than required? What is the debt component? Keep a
track on the profits, growth and margins of the previous years. A steady
growth rate is the quality of a fundamentally sound company. Check the
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assumptions the promoters are making and whether these assumptions or
expectations sound feasible.

 Risk Factors

The offer documents will list our specific risk factors such as
the company’s liabilities, court cases or other litigations. Examine how these
factors will affect the operations of the company.

 Key Names

Every IPO will have lead managers and merchant bankers. You
can figure out the track record of the merchant banker through the SEBI
website.

 Pricing

Compare the company’s PER with that of similar companies.

With this you can find out the P/E Growth ratio and examine whether its
earning projections seem viable.

 Listing

You should have access to the brokers of the stock exchanges

where the company will be listing itself.

INTRODUCTION ABOUT NSE

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The National Stock Exchange (NSE) is India's leading stock exchange
covering various cities and towns across the country. NSE was set up by
leading institutions to provide a modern, fully automated screen-based
trading system with national reach. The Exchange has brought about
unparalleled transparency, speed & efficiency, safety and market integrity. It
has set up facilities that serve as a model for the securities industry in terms
of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in
terms of microstructure, market practices and trading volumes. The market
today uses state-of-art information technology to provide an efficient and
transparent trading, clearing and settlement mechanism, and has witnessed
several innovations in products & services viz. demutualisation of stock
exchange governance, screen based trading, compression of settlement
cycles, dematerialisation and electronic transfer of securities, securities
lending and borrowing, professionalisation of trading members, fine-tuned
risk management systems, emergence of clearing corporations to assume
counterparty risks, market of debt and derivative instruments and intensive
use of information technology.

About Organization

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The National Stock Exchange of India Limited has genesis in the report of
the High Powered Study Group on Establishment of New Stock Exchanges.
It recommended promotion of a National Stock Exchange by financial
institutions (FIs) 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 Government 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 Contracts

(Regulation) Act, 1956 in April 1993, NSE commenced operations in the
Wholesale Debt Market (WDM) segment in June 1994. The Capital Market
(Equities) segment commenced operations in November 1994 and
operations in Derivatives segment commenced in June 2000.

The following years witnessed rapid development of Indian capital market

with introduction of internet trading, Exchange traded funds (ETF), stock
derivatives and the first volatility index - IndiaVIX in April 2008, by NSE.
August 2008 saw introduction of Currency derivatives in India with the
launch of Currency Futures in USD INR by NSE. Interest Rate Futures was
introduced for the first time in India by NSE on 31st August 2009, exactly
after one year of the launch of Currency Futures.

With this, now both the retail and institutional investors can participate in
equities, equity derivatives, currency and interest rate derivatives, giving
them wide range of products to take care of their evolving ends.

Mission of NSE

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NSE's mission is setting the agenda for change in the securities markets in
India. The NSE was set-up with the main objectives of:

• establishing a nation-wide trading facility for equities, debt

instruments and hybrids,
• 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 systems,
• enabling shorter settlement cycles and book entry settlements systems,
and
• Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology has
become industry benchmarks and is being emulated by other market
participants. NSE is more than a mere market facilitator. It's that force which
is guiding the industry towards new horizons and greater opportunities.

Promoters

NSE has been promoted by leading financial institutions, banks, insurance

companies and other financial intermediaries:

• Industrial Development Bank of India Limited

• Industrial Finance Corporation of India Limited
• Life Insurance Corporation of India
• State Bank of India
• ICICI Bank Limited
• IL & FS Trust Company Limited
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 • Stock Holding Corporation of India Limited
• SBI Capital Markets Limited
• Bank of Baroda
• Canara Bank
• General Insurance Corporation of India
• National Insurance Company Limited
• The New India Assurance Company Limited
• The Oriental Insurance Company Limited
• United India Insurance Company Limited
• Punjab National Bank
• Oriental Bank of Commerce
• Indian Bank
• Union Bank of India
• Infrastructure Development Finance Company Ltd.

Corporate Structure

NSE is one of the first de-mutualised stock exchanges in the country, where
the ownership and management of the Exchange is completely divorced
from the right to trade on it. Though the impetus for its establishment came
from policy makers in the country, it has been set up as a public limited
company, owned by the leading institutional investors in the country.

From day one, NSE has adopted the form of a demutualised exchange - the
ownership, management and trading is in the hands of three different sets of
people. NSE is owned by a set of leading financial institutions, banks,
insurance companies and other financial intermediaries and is managed by
professionals, who do not directly or indirectly trade on the Exchange. This
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has completely eliminated any conflict of interest and helped NSE in
aggressively pursuing policies and practices within a public interest
framework.

The NSE model however, does not preclude, but in fact accommodates
involvement, support and contribution of trading members in a variety of
ways. Its Board comprises of senior executives from promoter institutions,
eminent professionals in the fields of law, economics, accountancy, finance,
taxation, and etc, public representatives, nominees of SEBI and one full time
executive of the Exchange.

While the Board deals with broad policy issues, decisions relating to market
operations are delegated by the Board to various committees constituted by
it. Such committees include representatives from trading members,
professionals, the public and the management. The day-to-day management
of the Exchange is delegated to the Managing Director who is supported by
a team of professional staff.

INTRODUCTION ABOUT PRIMARY MARKET

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Primary market provides opportunity to issuers of securities, Government as
well as corporates, to raise resources to me et their requirements of
investment and/or discharge some obligation. The issuers create and issue
fresh securities in exchange of funds through public issues and/or as private
placement. They may issue the securities at face value, or at a
discount/premium and these securities may take a variety of forms such as
equity, debt or some hybrid instrument. They may issue the securities in
domestic market and/or international market through ADR/GDR/ECB route.

Market Design

The market design for primary market is provided in the provision of the
Companies Act, 1956, which deals with issues, listing and allotment of
securities. In addition, DIP guidelines of SEBI prescribe a series of
disclosures norms to be complied by issuer, promoter, management, project,
risk factors and eligibility norms for accessing the market. In this section,
the market design as provided in securities laws has been discussed.

DIP Guidelines, 2000

The issues of capital to public by Indian companies are governed by the

Disclosure and Investor Protection (DIP) Guidelines of SEBI, 2000. The
guidelines provide norms relating to eligibility for companies issuing
securities, pricing of issues, listing requirements, disclosure norms, lock-in
period for promoters’ contribution, contents of offer documents, pre-and
post issue obligations, etc. The guidelines apply to all public issues, offers
for sale and rights issues by listed and unlisted companies.

Eligibility Norms

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Any company issuing securities through the offer document has to satisfy
the following conditions:

• A Company making a public issue of securities has to file a draft

prospectus with SEBI, through an eligible merchant banker, at least 30
days prior to the filing of prospectus with the Registrar of Companies
(RoCs). The filing of offer document is mandatory for a listed
company issuing security through a rights issue where the aggregate
value of securities, including premium, if any, exceeds Rs.50 lakh. A
company cannot make a public issue unless it has made an application
for listing of those securities with stock exchange(s). The company
must also have entered into an agreement with the depository for
dematerialisation of its securities and also the company should have
given an option to subscribers/shareholders/investors to receive the
security certificates or securities in dematerialised form with the
depository. A company cannot make an issue if the company has been
prohibited from accessing the capital market under any order or
discretion passed by SEBI.
 An unlisted company can make an Initial Public Offering (IPO) of
equity shares or any other security which may be converted into or
exchanged with equity shares at a later date, only if it meets all the
following conditions:

(a) The company has net tangible assets of at least Rs.3 crore in each of the
preceding 3 full years (12 months each), of which not more than 50 % is
held in monetary assets, provided that if more than 50 % of the net tangible

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assets are held in monetary assets, the company has made firm commitments
to deploy such excess monetary assets in its business/project.

(b) The company has a track record of distributable profits in terms of

section 205 of the Companies Act, 1956, for at least three out of
immediately preceding five years. Provided further, that extraordinary items
shall not be considered for calculating distributable profits in terms of
section 205 Companies Act, 1956.

(c) The company has a net worth of atleast Rs.1 crore in each of the
preceding 3 full years (of 12 months each).

(d) In case the company has changed its name within the last one year, at
least 50% of the revenue for the preceding 1 full year is earned by the
company from the activity suggested by the new name.

(e) The aggregate of the proposed issue and all previous issues made in the
same financial year in terms of the size (i.e offer through offer
document+firm allotment promoters’ contribution Through the offer
document),does not exceed five times its pre-issue net worth as per the
audited balance sheet of the last financial year.

An unlisted company not complying with any of the conditions specified

above may make an initial public offering (IPO) of equity shares or any
other security which may be converted into or exchanged with equity shares
at a later date, only if it meets the two conditions given below.

(a) The issue is made through the book-building process, with atleast 50 %
of the net offer to public being allotted to the Qualified Institutional Buyers
(QIBs) failing which the full subscription monies shall be refunded OR the

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project has at least 15 % participation by Financial Institutions/Scheduled
Commercial Banks of which at least 10% comes from the appraiser(s). In
addition to this, at least 10% of the issue size shall be allotted to QIBs,
failing which the full subscription money shall be refunded.

(b) The minimum post-issue face value capital of the company shall be
Rs.10 crores OR there shall be a compulsory market making for at least 2
years from the date of listing of the shares, subject to the conditions that

• Market makers undertake to offer buy and sell quotes for a minimum
depth of 300 shares

• Market makers undertake to ensure that the bid-ask spread (difference

between quotations for sale and purchase) for their quotes shall not at
any time exceed 10 %

• The inventory of the market makers on each of such stock exchanges

as on the date of allotment of securities shall be at least 5% of the
proposed issue of the company.

 A listed company shall be eligible to make a public issue of

equity shares or any other security which ma y be converted into or
exchanged with equity shares at a later date; provided that the aggregate
of the proposed issue and all previous issues made in the same financial
year in terms of size (i.e offer through offer document+firm
allotment+promoters contribution through the offer document) issue
size does not exceed 5 times its pre issue net worth as per the audited
balance sheet of the last financial year. Further, if there is a change in
the name of the issuer company within the last 1 year (reckoned from

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 the date of filing of the offer document), the revenue accounted for by
the activity suggested by the new name is not less than 50 % of its total
revenue in the preceding 1 full year period.
• Infrastructure companies are exempt from the requirement of
eligibility norms if their project has been appraised by a public
financial institution or infrastructure development finance corporation
or infrastructure leasing and financing services and not less than 5%
of the project cost is financed by any of the institutions, jointly or
severally, by way of loan and/or subscription to equity or a
combination of both. Banks and rights issues of listed companies are
also exempt from the eligibility norms.
• For public and rights issues of debt instruments irrespective of their
maturities or conversion period, it is mandatory to obtain credit rating
from a registered credit rating agency and to disclose the same in the
offer document. If the credit rating is obtained from more than one
credit rating agency, all the credit ratings, including the unaccepted
ones, need to be disclosed. Thus the quality of the issue is
demonstrated by track record/appraisal by approved financial
institutions/credit rating/subscription by QIBs.

Pricing of Issues

The companies eligible to make public issue can freely price their equity
shares or any security convertible into equity at a later date in cases of
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public/rights issues by listed companies and public issue by unlisted
companies. In addition, eligible infrastructure companies can freely price
their equity shares subject to compliance of disclosure norms as specified by
SEBI from time to time. The public and private sector banks can also freely
price their shares subject to approval by RBI. A company may issue shares
to applicants in the firm allotment category at higher price than the price at
which securities are offered to public. A listed company making a composite
issue of capital may issue securities at differential prices in its public and
rights issue. Further, an eligible company is free to make public/rights issue
in any denomination determined by it in accordance with the Companies
Act, 1956 and SEBI norms.

Issue of Sweat Equity

The SEBI (Issue of Sweat Equity) Regulations, 2002 have been framed and
the main provisions laid down therein for issue of sweat equity are

(a) Under the new guidelines, the Sweat Equity shares can be issued by a
company to its employees and directors as well as promoters,

(b) The pricing of the sweat equity shares should be as per the formula
prescribed for that of preferential allotment,

(c) The sweat equity shares should be locked in for a period of 3 years from
the date of Allotment. In case of a subsequent public issue being made, lock
in shall be as per the SEBI (DIP) Guidelines, 2000.

Book Building

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

securities proposed to be issued by a body corporate is elicited and built up
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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 a process of offering securities in which bids at various

prices from investors through syndicate members are collected. Based on
bids, demand for the security is assessed and its price discovered. In case of
normal public issue, the price is known in advance to investor and the
demand is known at the close of the issue. In case of public issue through
book building, demand can be known at the end of everyday but price is
known at the close of issue.

i) In case of an issuer company makes an issue of 100% of the net offer to

public through 100% book building processi) Not less than 35 % of the net
offer to the public shall be available for allocation to retail individual
investors.

ii) Not less than 15 % of the net offer to the public shall be available for
allocation to non institutional investors i.e. investors other than retail
individual investors and Qualified Institutional Buyers.

iii) Not more than 50% of the net offer to the public shall be available for
allocation to Qualified Institutional Buyers. Provided that, 50 % of net to
public should be mandatorily allotted to the Qualified Institutional Buyers,
in case the issuer company is making a public issue. Further, in respect of
issues made under Rule 19(2) (b) of Securities Contract (Regulation) Rules
1957, there should be 60% mandatory allocation to Qualified Institutional
Buyers and the percentage allocation to retail individual investors and non
institutional investors should be 30 % and 10% respectively.
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In case an issuer company makes an issue of 75% of the net offer to public
through book building process and 25% at the price determined through
book building.

i) In the book built portion, not less than 25% of the net offer to the public
should be available for allocation to non qualified institutional buyers and
not more than 50% of the net offer to the public should be available for
allocation to Qualified Institutional Buyers.

ii) The balance 25% of the net offer to the public offered at a price
determined through book building should be available only to retail
individual investors who have either not participated or have not received
any allocation, in the book built portion.

Provided that 50% of net offer to public should be mandatory allotted to

Qualified Institutional Buyers in case the issuer company is making a public
issue. Out of the portion available for allocation to qualified institutional
buyers in case when the company makes an issue through 100% or 75%
book building, five percent should be allocated proportionately to mutual
funds. Allotment to retail individual or non-institutional investors is made
proportionately. In case of under subscription in any category, the
unsubscribed portions are allocated to the bidders as per the proposed
manner of allocation among respective categories of investors, in the event
of under subscription. The book built portion, 100% or 75%, as the case may
be, of the net offer to public, are compulsorily underwritten by the syndicate
members or book runners.

Other requirements for book building include: bids remain open for at least 3
days, only electronic bidding is permitted; bids are submitted through
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syndicate members; bids can be revised; bidding demand is displayed at the
end of every day; allotments are made not later than 15 days from the
closure of the issue failing which interest at the rate of 15% shall be paid to
investors. The 100% book building has made the primary issuance process
comparatively faster and cost effective.

The DIP guidelines for book building provides that the company should be
allowed to disclose the floor price, just prior to the bid opening date, instead
of in the Red herring prospectus, which may be done by any means like a
public advertisement in newspaper etc. Flexibility should be provided to the
issuer company by permitting them to indicate a 20% price band. Issuer may
be given the flexibility to revise the price band during the bidding period and
the issuers should be allowed to have a closed book building i.e. the book
will not be made public.

On-line Initial Public Offers (IPO)

A company proposing to issue capital to public through on-line system of

the stock exchange has to comply with Section 55 to 68A of the Companies
Act, 1956 and SEBI (DIP) Guidelines, 2000. The company is required to
enter into an agreement with the stock exchange(s) which have the requisite
system for on-line offer of securities. The agreement should cover rights,
duties, responsibilities and obligations of the company and the stock
exchanges interest, with provision for a dispute resolution mechanism
between the company and the stock exchange. The issuer company appoints
a Registrar to the Issue having electronic connectivity with the stock
exchanges. The issuer company can apply for listing of its securities at any
exchange through which it offers its securities to public through on-line

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system, apart from the requirement of listing on the regional stock exchange.
The stock exchange appoints brokers for the purpose of accepting
applications and placing orders with the company. The lead manager would
co-ordinate all the activities amongst various intermediaries connected in the
system.

In addition to the above, the DIP guidelines also provide details of the
contents of the offer document and advertisement, other requirements for
issues of securities, like those under Rule 19(2) (b) of SC(R) Rules, 1957.
The guidelines also lay down detailed norms for issue of debt instruments,
issue of capital by designated financial institutions and preferential/bonus
issues.

Book Building through On-line IPO System

Book building is basically a process used in IPO for efficient price

discovery, wherein during the period for which the IPO is open, bids are
collected from investors at various prices, which are above or equal to the
floor price. The offer price is determined after the bid closing date. In it’s
strived to continuously improve Indian securities market; NSE offers its
infrastructure for conducting online IPOs through book building. It helps to
discover price as well as demand for a security to be issued through a
process of bidding by investors. The advantages of this new system are: a)
the investor parts with money only after allotment, b) it eliminates refunds
except in case of direct applications and c) it reduces the time taken for issue
process. Though the guidelines for book building were issued in 1995, it is
being used for IPOs from 1999.

Merchant Banking
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The merchant banking activity in India is governed by SEBI (Merchant
Bankers) Regulations, 1992. All merchant bankers have to be registered with
SEBI. The person applying for certificate of registration as merchant banker
has to be a body corporate other than a non-banking financial company, has
necessary infrastructure, and has at least two persons in his employment
with experience to conduct the business of the merchant banker. The
applicant has to fulfill the capital adequacy requirements, with prescribed
minimum net worth. The regulations specify the code of conduct to be
followed by merchant bankers, responsibilities of lead managers, payments
of fees and disclosures to SEBI. They are required to appoint a Compliance
Officer, who monitors compliance requirements of the securities laws and is
responsible for redressal of investor grievance.

Credit Rating

Credit rating is governed by the SEBI (Credit Rating Agencies) Regulations,

1999. The Regulations cover rating of securities only and not rating of fixed
deposits, foreign exchange, country ratings, real estates etc. CRAs can be
promoted by public financial institutions, scheduled commercial banks,
foreign banks operating in India with the approval of RBI, foreign credit
rating agencies recognised in the country of their incorporation, having at
least five years experience in rating, or any company or a body corporate
having continuous net worth of minimum Rs.100 crore for the previous five
years. CRAs would be required to have a minimum net worth of Rs. 5 crore.
No Chairman, Director or Employee of the promoters shall be Chairman,
Director or Employee of CRA or its rating committee. A CRA can not rate
(i) A security issued by its promoter,

27
(ii) Securities issued by any borrower, subsidiary, an associate promoter of
CRA, if there are common Chairman, Directors and Employees between the
CRA or its rating committee and these entities

(iii) A security issued by its associate or subsidiary if the CRA or its rating
committee has a Chairman, Director or Employee who is also a Chairman,
Director or Employee of any such entity.

For all public and rights issues of debt securities, an obligation has been cast
on the issuer to disclose in the offer documents all the ratings it has got
during the previous 3 years for any of its listed securities. CRAs would have
to carry out periodic reviews of the ratings given during the lifetime of the
rated instrument.

Demat Issues

As per SEBI mandate, all new IPOs are compulsorily traded in

dematerialized form. The admission to a depository for dematerialisation of
securities is a prerequisite for making a public or rights issue or an offer for
sale. The investors would however, have the option of either subscribing to
securities in physical form or dematerialised form. The Companies Act,
1956 requires that every public listed company making IPO of any security
for Rs.10 crore or more shall issue the same only in dematerialised form.

Private Placement

The private placement involves issue of securities, debt or equity, to a

limited number of subscribers, such as banks, FIs, MFs and high net worth
individuals. It is arranged through a merchant/investment banker, who acts
as an agent of the issuer and brings together the issuer and the investor(s).

28
On the presumption that these are allotted to a few sophisticated and
experienced investors and the public at large does not have much stake in it,
the securities offered in a private placement are exempt from the public
disclosure regulations and registration requirements of the regulatory body.

What distinguishes private placement from public issues is while the latter
invite application from as many subscribers, the subscriptions in the private
placement are normally restricted to a limited number. In terms of the

Companies Act, 1956, offer of securities to more than 50 persons is deemed

to be public issue.

Virtual Debt Portal

The private placement of debt as well as transactions in debt securities are

generally affected through opaque negotiations. The result is inefficient
price discovery, fragmented market, low liquidity, poor disclosures and
ineffective audit trails. B2B portal, namely debtonnetindia provides a secure,
anonymous, neutral and flexible transactional platform for issue and trading
of fixed income instruments.

The debtonnetindia is a B2B web-enabled market place for primary issuance

of debt securities and provides investors and brokers similar levels of
efficiency and transparency on the primary market segment as exchange
system provides for secondary market in debt.

ADRs/GDRs

Indian companies are permitted to raise foreign currency resources through

two main sources:

29
(a) Issue of Foreign Currency Convertible Bonds (FCCBs) more commonly
known as ‘Euro Issues’ and

(b) Issue of ordinary equity shares through depository receipts, namely,

Global Depository Receipts (GDRs)/American Depository Receipts (ADRs)
to foreign investor’s i.e. institutional investors or individuals (including
NRIs) residing abroad. A depository receipt (DR) is any negotiable
instrument in the form of a certificate denominated in US dollars. The
certificates are issued by an overseas depository bank against certain
underlying stock/shares. The shares are deposited by the issuing company
with the depository bank. The depository bank in turn tenders DRs to the
investors. ADR represents a particular bunch of shares on which the receipt
holder has the right to receive dividend, other payments and benefits which
company announces from time to time for the share holders. However, it is
non-voting equity holding. DRs facilitate cross border trading and
settlement, minimize transactions costs and broaden the potential base,
especially among institutional investors.

An American Depository Receipt (ADR) is a negotiable U.S. certificate

representing ownership of shares in a non-U.S. corporation. ADRs are
quoted and traded in U.S. dollars in the U.S. securities market. Also, the
dividends are paid to investor in U.S. dollars. ADRs were specifically
designed to facilitate the purchase, holding and sale of non-U.S. securities
by U.S. investor, and to provide a corporate finance vehicle for non-U.S.
companies.

Any non-U.S. company seeking to raise capital in the U.S. or increase their
base of U.S. investor can issue ADRs. Advantages of ADRs are:

30
 • ADRs allow you to diversify your portfolio with foreign securities
easily.
• ADRs trade, clear and settle in accordance with U.S. market
regulations and permit prompt dividend payments and corporate
action notification.
• If an ADR is exchange-listed, investor also benefits from readily
available price and trading information.
Global Depository Receipts (GDRs) may be defined as a global finance
vehicle that allows an issuer to raise capital simultaneously in two or more
markets through a global offering. GDRs may be used in either the public or
private markets inside or outside the US. GDR, a negotiable certificate
usually represents a company’s publicly traded equity or debt.

INTRODUCTION ABOUT SECONDARY MARKET

Secondary market is the place for sale and purchase of existing securities. It
enables an investor to adjust his holdings of securities in response to changes
in his assessment about risk and return. It also enables him to sell securities
for cash to meet his liquidity needs. It essentially comprises of the stock
exchanges which provide platform for trading of securities and a host of
intermediaries who assist in trading of securities and clearing and settlement
of trades. The securities are traded, cleared and settled as per prescribed
regulatory framework under the supervision of the Exchanges and SEBI.
31
MARKET DESIGN

Stock Exchanges

The stock exchanges are the exclusive centres for trading of securities.
Listing of companies on a Stock Exchange is mandatory to provide an
opportunity to investors to invest in the securities of local companies. The
trading volumes on exchanges have been witnessing phenomenal growth for
last few years.

Since the advent of screen based trading system in 1994-95, it has been
growing by leaps and bounds and reported a total turnover of Rs.51, 30,816
crore during 2007-08. The growth of turnover has, however, not been
uniform across exchanges as may be seen from Table 3.1. The increase in
turnover took place mostly at big exchanges (NSE and BSE) and it was
partly at the cost of small exchanges that failed to keep pace with the
changes. The business moved away from small exchanges to big exchanges,
which adopted technologically superior trading and settlement systems. The
huge liquidity and order depth of big exchanges further diverted liquidity of
other stock exchanges. The 19 small exchanges put together reported less
than 0.02% of total turnover during 2007-08, while 2 big exchanges
accounted for over 99.98 % of turnover. For most of the exchanges, the
raison d’être for their existence, i.e. turnover, has disappeared. NSE and
BSE are the major exchanges having nationwide operations. NSE operated
through 2,956 VSATs in 245 cities at the end of March 2008.

Trading Mechanism

The trading on stock exchanges in India used to take place through open
outcry without use of information technology for immediate matching or
32
recording of trades. This was time consuming and inefficient. This imposed
limits on trading volumes and efficiency. In order to provide efficiency,
liquidity and transparency, NSE introduced a nation-wide on-line fully
automated screen based trading system (SBTS) where a member can punch
into the computer quantities of securities and the prices at which he likes to
transact and the transaction is executed as soon as it finds a matching sale or
buy order from a counter party. SBTS electronically matches orders on a
strict price/time priority and hence cuts down on time, cost and risk of error,
as well as on fraud resulting in improved operational efficiency. It allows
faster incorporation of price sensitive information into prevailing prices, thus
increasing the informational efficiency of markets. It enables market
participants, irrespective of their geographical locations, to trade with one
another simultaneously, improving the depth and liquidity of the market. It
provides full anonymity by accepting orders, big or small, from members
without revealing their identity, thus providing equal access to everybody. It
also provides a perfect audit trail, which helps to resolve disputes by logging
in the trade execution process in entirety. This diverted liquidity from other
exchanges and in the very first year of its operation, NSE became the
leading stock exchange in the country, impacting the fortunes of other
exchanges and forcing them to adopt SBTS also. Today India can boast that
almost 100% trading takes place through electronic order matching.
Technology was used to carry the trading platform from the trading hall of
stock exchanges to the premises of brokers. NSE carried the trading platform
further to the PCs at the residence of investors through the Internet and to
handheld devices through Wireless Application Protocol (WAP) for
convenience of mobile investors. This made a huge difference in terms of
equal access to investors in a geographically vast country like India.
33
The trading network is depicted in Figure 1.1. NSE has main computer
which is connected through Very Small Aperture Terminal (VSAT)
installed at its office. The main computer runs on a fault tolerant STRATUS
mainframe computer at the Exchange. Brokers have terminals (identified as
the PCs in the Figure 1.1) installed at their premises which are connected
through VSATs/leased lines/modems. An investor informs a broker to place
an order on his behalf. The broker enters the order through his PC, which
runs under Windows NT and sends signal to the Satellite via VSAT/leased
line/modem. The signal is directed to mainframe computer at NSE via
VSAT at NSE's office. A message relating to the order activity is broadcast
to the respective member. The order confirmation message is immediately
displayed on the PC of the broker. This order matches with the existing
passive order(s) otherwise it waits for the active orders to enter the system.
On order matching, a message is broadcast to the respective member.

Figure 1.1: Trading Network

34
NSE Mainframe Broker's premises the trading system operates on a strict
price time priority. All orders received on the system are sorted with the best
priced order getting the first priority for matching i.e., the best buy orders
match with the best sell order. Similar priced orders are sorted on time
priority basis, i.e. the one that came in early gets priority over the later one.
Orders are matched automatically by the computer keeping the system
transparent, objective and fair. Where an order does not find a match, it
remains in the system and is displayed to the whole market, till a fresh order
comes in or the earlier order is cancelled or modified. The trading system
provides tremendous flexibility to the users in terms of kinds of orders that
can be placed on the system. Several time-related (day, immediate or
cancel), price-related (buy/sell limit and stop loss orders) or volume related
(Disclosed Quantity) conditions can be easily built into an order. The trading
system also provides complete market information on-line. The market
35
screen at any point of time provides complete information on total order
depth in a security, the five best buys and sells available in the market, the
quantity traded during the day in that security, the high and the low, the last
traded price, etc. Investors can also know the fate of the orders almost as
soon as they are placed with the trading members. Thus the NEAT system
provides an Open Electronic Consolidated Limit Order Book (OECLOB).
Limit orders are orders to buy or sell shares at a stated quantity and stated
price. If the price quantity conditions do not match, the limit order will not
be executed. The term ‘limit order book’ refers to the fact that only limit
orders are stored in the book and all market orders are crossed against the
limit orders sitting in the book. Since the order book is visible to all market
participants, it is termed as an ‘Open Book’.

NEAT SYSTEM

The NEAT system supports an order driven market, wherein orders match
on the basis of price and time priority. All quantity fields are in units and
prices are quoted in Indian Rupees. The regular lot size and tick size for
various securities traded is notified by the Exchange from time to time.

Market Types

The Capital Market system (the NEAT system) has four types of active
markets:

Normal Market

36
All orders which are of regular lot size or multiples thereof are traded in the
Normal Market. For shares that are traded in the compulsory dematerialized
mode the market lot of these shares is one. Normal market consists of
various book types wherein orders are segregated as Regular lot orders,
Special Term orders, and Negotiated Trade Orders and Stop Loss orders
depending on their order attributes.

Odd Lot Market

An order is called an odd lot order if the order size is less than regular lot
size. These orders do not have any special terms attributes attached to them.
In an odd-lot market, both the price and quantity of both the orders (buy and
sell) should exactly match for the trade to take place. Currently the odd lot
market facility is used for the Limited Physical Market as per the SEBI
directives. Pursuant to the directive of SEBI to provide an exit route for
small investors holding physical shares in securities mandated for
compulsory dematerialised settlement, the Exchange has provided a facility
for such trading in physical shares not exceeding 500 shares. This market
segment is referred to as 'Limited Physical Market' (small window). The
Limited Physical Market was introduced on June 7, 1999. The trading
members are required to ensure that shares are duly registered in the name of
the investor(s) before entering orders on their behalf on a trade date.

Auction Market

In the Auction Market, auctions are initiated by the Exchange on behalf of

trading members for settlement related reasons.

Retail Debt Market

37
In Retdebt market, government securities are traded. At present only the
Central Government Securities are allowed to trade.

Corporate Hierarchy

The trading member has the facility of defining a hierarchy amongst its users
of the NEAT system. This hierarchy comprises:

The users of the trading system can logon as either of the user types. The
significance of each type is explained below:

(a) Corporate Manager: The corporate manager is a term assigned to a user

placed at the highest level in a trading firm. Such a user receives the End of
Day reports for all branches of the trading member. The facility to set
Branch Order Value Limits and User Order Value Limits is available to the
corporate manager. Corporate Manager can view outstanding order and trade
of all users of the trading member. He can cancel/modify outstanding order
of all user of the trading member.

(b) Branch Manager: The branch manager is a term assigned to a user who
is placed under the corporate manager. The branch manager receives End of
Day reports for all the dealers under that branch. The branch manager can

38
set user order value limit for each of his branch. Branch Manager can view
outstanding order and trade of all users of his branch. He can cancel/modify
outstanding order of all user of his branch.

(c) Dealer: Dealers are users at the lower most level of the hierarchy. A
dealer can view and perform order and trade related activities only for one
and does not have access to information on other dealers under either the
same branch or other branches.

Market Phases

The system is normally made available for trading on all days except
Saturdays, Sundays and NSE specified holidays. A trading day typically
consists of a number of discrete stages as explained below:

Opening

The trading member can carry out the following activities after login to the

NEAT system and before the market opens for trading:

(i) Set up Market Watch (the securities which the user would like to view on
the screen.

(ii) Viewing Inquiry screens. At the point of time when the market is
opening for trading, the trading member cannot login to the system. A
message ‘Market status is changing. Cannot logon for sometime’ is
displayed. If the member is already logged in, he cannot perform trading
activities till market is opened.

Open Phase

39
The open period indicates the commencement of trading activity. To signify
the start of trading, a message is sent to all the trader workstations. The
market open time for different markets is notified by the Exchange to all the
trading members. Order entry is allowed when all the securities have been
opened. During this phase, orders are matched on a continuous basis.
Trading in all the instruments is allowed unless they are specifically
prohibited by the exchange. The activities that are allowed at this stage are
Inquiry, Order Entry, Order Modification, Order Cancellation (including
quick order cancellation) Order Matching and trade cancellation.

Market Close

When the market closes, trading in all instruments for that market comes to
an end. A message to this effect is sent to all trading members. No further
orders are accepted, but the user is permitted to perform activities like
inquiries and trade cancellation.

SURCON

Surveillance and Control (SURCON) is that period after market close during
which, the users have inquiry access only. After the end of SURCON period,
the system processes the data for making the system available for the next
trading day. When the system starts processing data, the interactive
connection with the NEAT system is lost and the message to that effect is
displayed at the trader workstation.

TRADING AT BSE: BOLT

The Exchange has obtained permission from Securities and Exchange Board
of India (SEBI) for expansion of its BSE-On-Line-Trading (BOLT) network
40
to locations outside Mumbai. In terms of the permission granted by SEBI,
the members of the Exchange are free to install their trading terminals to
cities where there are no Stock Exchanges. However, at centres where the
other Exchanges are located, the Exchange is required to sign a
Memorandum of Understanding with these Exchanges permitting it to install
the BOLT terminals in their jurisdictional areas.

The expansion of BOLT network was inaugurated by the then Finance

Minister, Government of India, Shri P. Chidambaram on August 30, 1997.
The Exchange has signed Memorandum of Understanding with eleven Stock
Exchanges, viz., Calcutta, Pune, Ahmedabad, Saurashtra-Kutch (Rajkot),
Madhya Pradesh, Vadodara, Bhubaneshwar and Magadh (i.e., Patna), Jaipur,
Coimbatore & Chennai (Madras) to provide BOLT connections to the
members of these Exchanges after obtaining necessary clearance from SEBI.
The BOLT network has been expanded to centres outside Mumbai and
covers 232 centres having 726 VSATs (Very Small Aperture Terminals) and
1020 TWSs (Trader Work Stations) as on October 31, 1999. Of these, 648
VSATs and 872 TWSs respectively are installed outside Mumbai.

With the expansion of BOLT outside Mumbai, the total average daily
turnover at the Exchange has increased from Rs. 1064 crores in August 1997
to Rs. 1404 crores in April 1998 and further to Rs. 2885 crores in October
1999.

The average daily turnover at the Exchange has increased from Rs.851
crores in 1997-98 to Rs. 1284 crores in 1998-99 and further to Rs. 2885
crores in 1999-2000 (April - October 1999).

41
Some of the important aspects of the working of the Stock Exchange,
Mumbai are discussed below:

Trading:-

The Exchange has switched over from the open outcry trading system to a
fully automated computerised mode of trading known as BOLT (BSE On
Line Trading) System. This system, which is both order and quote driven,
was commissioned on March 14, 1995. It facilitates more efficient
processing, automatic order matching and faster execution of trades. Above
all, the system is more transparent. The members now enter orders/quotes on
their Trader Work Stations (TWSs) in their offices instead of assembling in
the trading ring.

The scrips traded on the Exchange have been classified into 'A', 'B1', 'B2', 'C'
'F' and 'Z' group. The number of scrips listed on the Exchange under 'A', 'B1'
and 'B2' groups which represent the equity segments as on October 1999
was 152, 1109 and 4510 respectively. The 'F' group represents the debt
market (fixed income securities) segment wherein 670 securities were listed
as at the end of October 1999. The 'Z' group was introduced in the month of
July 1999 and covers the list of companies that fail to comply with listing
requirements and also fail to resolve investor complaints. The 'Z' group
comprises of 539 scrips as of October 1999. The 'C' group covers the odd lot
securities in 'A', 'B1' & 'B2' groups and Rights renunciations.

The Stock Exchange, Mumbai, is the only Stock Exchange in the country to
provide a facility of on-line trading in odd lot securities and Rights
renunciations. This facility of trading in odd lots of securities and Rights

42
renunciations not only offers an exit route to investors to dispose of their
odd lot of securities but also provides them an opportunity to consolidate
their securities into market lots. Trading in this segment covers all the scrips
listed in the equity segment.

The trading cycle for all these groups of securities is weekly.

The trading cycle for 'A, B1, B2' 'C' and 'Z' group securities representing the
equity segment is from Monday to Friday and that for 'F' group securities
representing the debt market is from Thursday to Wednesday. The
transactions in group scrips are allowed to be carried forward from one
settlement to another settlement subject to a maximum of 75 days from the
date of original transaction. The Stock Exchange, Mumbai is the first
Exchange in the country to provide the facility of carry-forward of
outstanding positions in group scrips. The trading session for carry forward
of transactions from one settlement to another is conducted on Saturdays,
i.e., at the end of every trading cycle in the equity segment.

Trading on the BOLT system is conducted from Monday to Friday between

10:00 a.m. and 3:30 p.m. while the carry-forward session for 'A' group
securities is conducted on Saturdays between 10:00 a.m. and 12:30 p.m.

The members are allowed to enter into transactions on behalf of their

Institutional clients, viz., Scheduled Commercial Banks, Indian Financial
Institutions (IFIs) & Foreign Institutional Investors (FIIs) and Mutual Funds
registered with SEBI. The settlement of the trades (money and securities)
done on behalf of the Institutions may be either through the member himself
or through a SEBI registered Custodian appointed by an Institution. In case

43
the delivery/payment is to be given or taken by a Custodian on behalf of an
Institution, the former has to confirm the trade done by a member. For this
purpose, the Custodians have been admitted as members of the Clearing
House. In case an institutional transaction is not confirmed by the Custodian,
the liability for pay-in of funds or securities devolves on the concerned
member.

Settlement:-

Pay-in and Pay-out for "A, B1, B2", 'C' & "Z" group of securities
The trades done by the members during the weekly trading period from
Monday to Friday are settled by payment of money and delivery of
securities in the following week. All deliveries of securities are required to
be routed through the Clearing House, except for certain off-market
transactions which, although are required to be reported to the Exchange,
may be settled directly between the members concerned.

The Information Systems Department of the Exchange nets off all

deliverable trades (purchases and sales in each scrip) done by a member
during a settlement and generates delivery/receive orders and money
statements which are downloaded by the members in their back offices.

The delivery orders provide information like scrip, quantity and the name of
the receiving member to whom the securities are to be delivered through the
Clearing House. The Money Statement provides details of payments/receipts
for the settlement.

Earlier the members were required to submit along with the balance sheet
(Form 31-A) which includes the details of Money Statement, margins
44
payable/receivable, and other credits/debits arising out of auction for
shortages, objections, bad delivery, etc., a cheque /draft depending on
whether the settlement liability is a payable or receivable position on
Thursday, i.e., pay-in day. However, with effect from December 22, 1997
(i.e., Sett.No.39/97-98), the bank accounts of members maintained with
Bank of India, Stock Exchange Branch, the only clearing bank at that time,
were directly debited through computerised posting on the pay-in day for
their settlement dues. The list of clearing banks has since been expanded to
include HDFC Bank Ltd., Global Trust Bank Ltd. and Standard Chartered
Bank. Thus, the members are no longer required to submit physical Form
31-A and cheque/draft as was the earlier practice.

The securities, as per delivery orders issued by the Exchange, are to be

delivered in the Clearing House on the day designated for pay-in ,i.e., on
Wednesday and Thursday as per prescribed time slots upto 1:00 p.m. No late
delivery of shares is permitted. Members have to deliver the securities in
special closed pouches issued by the Exchange along with the relevant
details (distinctive numbers, scrip code, quantity, and receiving member) on
a floppy. The data submitted by the members on floppies is matched against
the master file data on the Clearing House computer systems. If there are no
discrepancies, then a scroll number is generated and a scroll slip is issued.
The members then submit the securities at the receiving counter. The
Clearing House personnel arrange and tally the securities received against
the receiving member wise report generated on the Pay-in day. Once this
reconciliation is complete, the bank accounts of members having pay-in
positions are debited on Thursday. This procedure is called Pay-in. The
Receiving Members collect securities on Friday and the accounts of the
45
members having pay-out are credited on Saturday. This is referred to as Pay-
out.

Auction is conducted for those securities which members fail to deliver/short

deliver during the Pay-in. In case the securities are not received in an
auction, the positions are closed out as per the close-out rate fixed by the
Exchange in accordance with the prescribed rules. The close out rate is
calculated as the highest rate of the scrip recorded in the settlement in which
the trade was executed or in the subsequent settlement upto the day prior to
the day of auction or 20% above the closing price on the day prior to the day
of auction, whichever is higher.

46
 Chapter-2

LITERATURE REVIEW

LITERATURE REVIEW

Jyoti Gupta, Taufique Samdani, Is investor sentiment driven by IPO

pricing mechanism?

They regress the average of first-day returns of past six IPOs on first-day
return of new IPO (underpricing). They argue that when investors are in the
“representativeness” state, there is underpricing in IPOs and when in

47
“conservatism” state, the IPO price is close to the issue price. Two possible
explanations of underpricing in this argument are that 1) the underwriter has
completely left sentiment out of IPO pricing, and 2) the underwriter has
barely included it in the representative state. The second explanation may
result in equally low underpricing in both states thus, making the two states
indistinguishable between. However, they find that an upward trend in past
six IPOs is positively correlated with underpricing in High Premium IPOs
and weakly correlate in Low Premium IPOs.

Guntur Anjana Raju, Rudresh R Kunde, Indian IPO

This article provides a detailed analysis of IPOs (initial public offerings) in

the various sectors across the Indian primary market from the period January
2005 till March 31, 2007, during which 140 public issues were floated. Forty
two issues were floated in 2005, 65 in 2006, and 33 in 2007 (till March 31,
2007). It was observed that during this period, the IPOs gave a return of 33%
on average after being listed on the Indian stock exchanges. Due to good
returns, IPOs are increasingly becoming an attractive investment avenue for
wealth creation. In such a scenario, it is important for the investor to know
the sector-wise performance of IPOs, as investors would prefer to take
informed decisions and plan their investments in different sectors according
to the risk-return characteristics of various sectors. Moreover, in order to
gauge the performance of the primary market, development of an IPO index
in the Indian context is necessary. The present study throws light on the
development of an IPO index and on structuring a model IPO index for the
Indian primary market.

Kumar, S.S.S., Short term & long term performance of IPO in India

48
One of the important reforms Indian markets witnessed in the recent past is
the introduction of issuing shares through the book building process which
aims at efficient price discovery. The paper attempts to see how the IPOs
issued through book building process fare both in short-run as well as in
long run. Results indicate that the IPOs are under-priced as is evidenced by
the positive listing day returns and are out performing the market in the
subsequent months almost up to twenty four months. However, after two
years of listing they generate negative returns. This finding is consistent
with the IPO performance literature from the other countries but is in
contrast with the first long run study on IPOs in the long run in India.

Chopra, Rohini Inder Bhanot, Ravi Kiran

The present study intends to examine the price performance of the Indian
IPOs listed on NSE, using a sample of IPOs that tapped the NSE market
during 1999-2008 by taking in consideration of their prices. The short run
as well as long run analysis of their price performance have been done by
taking the gap of time intervals of 1 weak, 1month, 3months, 6months and
1year, 2years, 3years respectively. In addition to that an analysis has been
conducted to know the influence of the factors viz. subscription level, Issue
size, Listing Lead time and Age, on the price performance of the IPOs. The
study shows that underpricing is present in the Indian Capital market. Also,
underpricing is more prevalent in the short run than in the long run. The
study further shows that IPOs come to their intrinsic value over a period of
time. The regulatory framework of IPOs with special reference to SEBI
guidelines has also been done.
49
50
 Chapter-3

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

Objectives

• To study the operations of Primary Market and Secondary Market.

• To study the market trends of IPO’s issued in the last one year.
• To study the growth of IPO market for five year period.
• To study the performance of IPO against benchmark Index of NSE.

Research Design

51
 Experimental research: Systematic observation of phenomena
for the purpose of learning new facts or testing the application of theories to
known facts.

Sampling procedure & design

Convenient sampling method is used for the study.

Data Collection Method

Secondary data: The secondary method of data collection was used for the
study. Various websites of stock exchange used to know about the primary
market, secondary market& various IPO’s & its past & present market
prices.

Analysis & Interpretation of Data

Statistical tools & techniques were used such as Line graph & t-test.

Hypothesis: There is no significance difference between the retuns of Nifty

& IPOs. & value of calculated value of t is compare with table value at 0.5.

Scope of Study

52
This project also helps the investors to predict the future trend of IPOs so
that they can earn higher returns on their investments.

It also give knowledge about the market trend of current IPOs whether the
prices are going upward or downward. It provided the short run position of
IPO because my study is primarily based on current IPOs.

It also provides the long term position of the IPO to investors who want to
invest in it for a long time.

This project provides the information about the performance of IPO as

comparison with the benchmark index of NSE.

Significance of Study

The significance of this project is to have in-depth knowledge or

understanding about the IPOs & working of primary and secondary market.

It also gives information to the investors about the market trend of current
IPOs whether the prices are going upward or downward which helps them to
make investment in IPO. It also provides the information about the return
on past investments which helps the investors to take decision regarding new

53
investments. This project also studies the growth trends of the Indian stock
market.

This project is beneficial for both researcher and investors as it provide in-
depth knowledge about the IPO market.

Limitations of the Study

1. There are lots of IPOs in the market, so IPOs of limited time period is

taken for the study.

2. Lack of time- Due to limited time it is not possible to make depth study of

all IPOs.

3. More Market fluctuation affects the whole study because future is

unpredictable.
54
5. Less sample size: As I know study the whole is difficult so few of them

are selected for the study which can’t provide the IPO growth of whole

market.

55
 Chapter-4
ANALYSIS & INTERPRETATION

ANALYSIS & INTERPRETATION

Market trends of IPO’s issued in the last one year

Market trend of Den networks limited

56
 Close Price
250
200
150
100
Close Price
50
0
11/24/2009

12/22/2009

12/29/2009
12/1/2009

12/8/2009

12/15/2009

Graph -4.1

return

6
4
2
0 return
-2
9

09

09
09

9
00

00
00

20

20
20
/2

/2
/2

-4
5/

9/
/
4

2
/1

/8
/2

/1

/2
/2
12

12
11

12

12

12

-6

Graph-4.2

Interpretation:-

The graph shows that closing price of DEN IPO increasing day by day it
started from Rs. 163.4 & reached at Rs 196.55. But its returns are volatile by
nature. Its returns started from Rs 4.3 & its minimum return was Rs. -4.9 &
its maximum return was Rs. 4.9.

Market trend of Indiabulls power limited

57
 close price

50
40
30 close price
20
10
0

/4 9

/2 09
/6 9

/2 09

/2 09

/1 09

09
/1 09

/1 09
12 200
11 200

11 /20
11 /20

12 /20

12 /20
20
11 / 20

12 / 20
7/
0/

5/
3

1
8
/3
10

Graph-4.3

return

10
5
0
return
-5
09

09

09

09

09
09

09

09

09
20

20

20

20

20

20

20
/2

/2

-10
3/

0/

7/

8/

5/
0/

1/
/6

/4
/1

/2

/1

/2
/3

/2

/1
11

12
10

11

11

11

12

12

12

-15

Graph-4.4

Interpretation:-

The graph shows that price of this IPO decreases. Initially its closing price is
Rs. 39.5 then started decline after that it goes stable & reached at Rs. 34.8.
But returns on it were negative initially, and then it took progress. This IPO
earned minimum return Rs. -13.4 & its maximum return was Rs. 6.4.

Market trend of THINKSOFT GLOBAL SERVICES LIMITED

58
 Close Price

350
300
250
200 Close Price
150
100
50
0
/2 9

/2 09

/3 09

/7 9

/2 09

/2 09

09
/9 9
/1 09

/1 09
12 00
11 200

11 00

11 /20

11 /20

12 /20

12 /20
20
11 / 20

12 20
2
/2
6/

0/

8/
/
6

1
/2
10

Graph-4.5

return

25
20
15
10
5
return
0
-5
9
12 009

09
11 009

11 009

9
9
11 200

11 200

12 200

12 200
11 200

12 200

-10
20
/2

/2

2
6/

3/

0/

4/

1/

8/
/

/
6

/2

/9

/7

-15
/2

/3

/2
/2

/1

/1

/2
10

-20

Graph-4.6

Interpretation:-

Prices of THINKSOFT IPO are in increasing trend. It started from Rs. 164.4
& became double at the end of December. And its returns are positive
initially but after that it goes down. Initially this IPO earned return of Rs.
19.4 then show major fluctuation & reached it’s down at Rs. -14.09 .

Market trend of PIPAVAV SHIPYARD LIMITED

59
 Close Price

60
58
56
54
52 Close Price
50
48
46
10/9/2009

10/23/2009

11/6/2009

11/20/2009

12/4/2009

12/18/2009
Graph-4.7

return

0
-10
/2 09

/1 09
/2 0 9

/3 09

/6 9

/2 09

/4 9

/2 09
09
/1 09

/1 09
/1 09
11 200

12 200
10 /20

10 /20

11 /20

11 /20

12 /20

12 /20
20
10 / 20

11 / 20

12 / 20
0/

7/

5/

-20
6

8
/9

3
10

-30 return
-40
-50
-60

Graph-4.8

Interpretation:-

On this IPO, returns were constantly negative between Rs. -40 & -50 and
closing prices have also shown fluctuation, Initial price was Rs. 56.7 &
reached its down at Rs. 51.67 & high at Rs. 58.95.

Market trend of OIL INDIA LIMITED

60
 close price

1,600.00
1,400.00
1,200.00
1,000.00
800.00 close price
600.00
400.00
200.00
0.00

11/11/2009

12/23/2009
9/30/2009

10/14/2009

10/28/2009

11/25/2009

12/9/2009

Graph-4.9

return

6
4
2
0 return
10/14/2009

12/23/2009
9/30/2009

10/28/2009

11/11/2009

11/25/2009

12/9/2009

-2
-4
-6

Graph-4.10

Interpretation:-

Its returns have volatility, initially return on this IPO was Rs. 2.2 then it
showed fluctuations & reached its minimum at Rs. -4.16. But closing prices
have stability & have increasing trend. In the beginning closing price was
Rs. 1141.20 & on 31st December it reach at Rs. 1241.90.

Market trend of GLOBUS SPIRITS LIMITED

61
 Close Price

120
100
80
60 Close Price
40
20
0
09

09

09

09
9
9

9
00

00
00

00
20

20
20

20
/2

/2

/2

/2
8/
1/

6/

0/
/7

/4

/2
23

/2

/1

/1

/3
10

11

12
9/

10

11

12

12
Graph-4.11

return

20
15
10

5 return
0
11/18/2009
9/23/2009

10/7/2009

10/21/2009

11/4/2009

12/2/2009

12/16/2009

12/30/2009

-5
-10

Graph-4.12

Interpretation:-

In it closing price was almost stable but returns have volatility. It closing
price began from Rs. 91 & on 31st December it reached at Rs. 98.

Initially it earned a return of Rs. 1.48 & their maximum return was Rs. 16.88
& then goes down & at the end of December it reached at Rs. -1.66.

Market trend of JINDAL COTEX LIMITED

62
 Close Price

120
100
80
60 Close Price
40
20
0 10/20/2009

12/29/2009
9/22/2009

10/6/2009

11/3/2009

11/17/2009

12/1/2009

12/15/2009
Graph-4.13

return

20

15

10

5 return

0
09
09

09

09
9

-5
00

00
00

00

20

20

20

20
/2

/2

/2

/2
0/

7/

5/

9/
/3

/1
22

/6

/1

-10
/2

/1

/2
12
10

11
9/

11
10

12

12

Graph-4.14

Interpretation:-

The closing prices of this IPO started from Rs 87.3 & at the last of
December it reached at Rs. 96.05. Its returns have volatility. Its returns
started from Rs 0.68 & reached at its high at Rs 18.66.

Market trend of NHPC LIMITED

63
 Close Price

40
35
30
25
20 Close Price
15
10
5
0
9/ 009

/8 9

09
9
9/ 009

9
10 200

11 200

11 200

12 00
10 200

12 200
20
2
2

/2

3/

7/

0/

4/

2/
1/

/
15

29
9/

/1

/2

/2

/2
/1

Graph-4.15

return

6
4
2 return
0
-2
15 9

09

09

09

09

09
29 9

9
0

00

00

00
20

20

20

20

20

20
/2

/2

/2
3/

7/

0/

4/

2/
1/

-4
/8
9/

/1

/2

/1

/2

/2
12
9/

9/

10

10

11

12
11

Graph-4.16

Interpretation:-

Its closing prices started from Rs. 36.75 & its minimum price was Rs. 30.05.
& at the end of December it reached at Rs. 34.05.

Its returns have major fluctuations, initially it earned negative return of Rs.
1.08 & returns reached its maximum at Rs. 6.48.

Market trend of ADANI POWER LIMITED

64
 Close Price

110
105
100
95 Close Price
90
85
80
9/17/2009

10/29/2009

12/10/2009
8/20/2009

9/3/2009

10/1/2009

10/15/2009

11/12/2009

11/26/2009

12/24/2009
Graph-4.17

return

4
2
0
return
-2
17 9

09

09

09

09
9

09

09
0
00

00

00
20

20

20

20

20

20

20
/2

/2

/2

5/

9/

2/

6/

0/

4/
3/

-4
20

/1
9/

/2

/2

/2
/1

/1

/1
10
8/

9/

10

11

12

12
10

11

-6

Graph-4.18

Interpretation:-

Closing prices of this IPO were in decreasing trend initially its closing price
was Rs. 100.2 then it continuously go down & reached its minimum at Rs.
99.

But the returns over it were volatile. It started from Rs. 3.04 & reached at
minimum near Rs. -4.39.

Market trend of RAJ OIL MILLS LIMITED

65
 Close Price

140
120
100
80
Close Price
60
40
20
0
09

09

09
9

9
00

00

20

20

20
/2

/2

2/

2/
2/
12

12

/1

/1

/1
8/

9/

10

11

12

Graph-4.19

return

30
20
10
return
0
8/12/2009

8/26/2009

9/9/2009

9/23/2009

10/7/2009

10/21/2009

11/4/2009

12/2/2009

12/16/2009
11/18/2009

12/30/2009

-10
-20

Graph-4.20

Interpretation:-

Closing prices of this IPO was on declining trend. It started from Rs. 119.25
& at the end reached near Rs. 73.

& its returns were initially negative but after sometime it took progress.
Initially it earned a return near about Rs. 1.8 then it reached at its maximum
at near Rs. 18.

Market trend of EXCEL INFOWAYS LIMITED

66
 Close Price

150
100
50
Close Price
0
8/3/2009

10/3/2009

11/3/2009
9/3/2009

12/3/2009
Graph-4.21

return

30
20
10
return
0
-10
09

9
00

00

00

00
20

/2

/2

/2

-20
3/

3/

/3

/3

/3
8/

9/

10

11

12

Graph-4.22

Interpretation:-

Closing prices were in decreasing trend. It started from Rs. 95 & reached at
Rs. 59.3. & its returns were volatile by nature it started from Rs. 11.11 goes
down to Rs. -14.59 & at the end reached Rs. 4.2.

Market trend of MAHINDRA HOLIDAYS & RESORTS INDIA LIMITED

67
 close price

500
400
300 close price
200
100
0 7/16/2009

8/16/2009

9/16/2009

10/16/200

11/16/200

12/16/200
Graph-4.23

return

15
10
5 return
0
9/16/2009

10/16/2009

11/16/2009

12/16/2009
7/16/2009

8/16/2009

-5

Graph-4.24

Interpretation:-

Closing prices are in increasing trend. It began from Rs. 317.45 and reached
at Rs. 463.5. But its return began from Rs 10 & showed various fluctuations
& at the end of December it gave a return of Rs. 1.53.

Market trend of EDSERV SOFTSYSTEMS LIMITED

68
 close price

300
250
200
150 close price
100
50
0
7/1/2009

8/1/2009

9/1/2009

10/1/2009

11/1/2009

12/1/2009

Graph-4.25

return

15

10

5
return
0
7/1/2009

9/1/2009
8/1/2009

10/1/2009

11/1/2009

12/1/2009

-5

-10

Graph-4.26

Interpretation:-

Closing prices were in increasing trend. It began from Rs. 36.2 & reached at
Rs. 247. Initially it has return of Rs. 5.11 & goes high at Rs. 10.09 & its
minimum return was Rs. -4.9.

Growth of IPO market in last five years.

69
 sr. year IPO issued (Table-4.1)
no.
1 2005 50
2 2006 73
3 2007 95
4 2008 36
5 2009 21

IPOissued
100
90
80
70
60
50
IPO issued
40
30
20
10
0
1 2 3 4 5

Graph-4.27

Interpretation:-

• Despite a surge in the secondary market, the IPO market witnessed

just 21* issues in 2009 compared to 36* and 95* public issues got
listed in 2008 and 2007 respectively.
• Most of the IPO activities witnessed in 2nd half of 2009. 19* out of the
21* IPOs came in the 2nd half.
• Continuing the trend witnessed in 2008, number of IPOs declined by
55% in 2009 over 2008 and 83% on 2007 levels.

70
IPO Issued in 2010
• Secondary markets outperformed primary markets in 2009, but we
expect 2010 will be exciting performance for both primary and
secondary markets. Because In the first quarter of this year, 24 IPOs
have issued in the market.

• With more than 60 firms already in process for approval form SEBI to
raise approximate INR 400B, we expect the number of draft offer
documents filed with SEBI will match the levels of 2007.

• 2010 will see the IPOs of BSNL and RITES and FPO of SAIL.
• With the handy increase in liquidity in market and stabilization in
secondary markets, the companies will raise money with ease in early
in 2010.

Performance of IPO against Benchmark Index of NSE.

71
Performance of DEN against Nifty

X1 X2
25 25
N1 N2
(Table-4.2)

Calculated value of t= 0.226

0
12/29/2009
11/24/2009

12/1/2009

12/8/2009

12/15/2009

12/22/2009

-2

-4
return of den
-6 return of nifty

Graph-4.28

Interpretation:-

The calculated value is less than the table value at .5 which is 2.575. So null
hypothesis is accepted. It means that there is no significance difference
between the IPO return & nifty return.

Performance of IBPOW against Nifty

X1 X2
72
41 41
N1 N2
(Table-4.3)

Calculated value of t= 0.274

10

0
11/6/2009

11/13/2009

11/20/2009

12/18/2009
10/30/2009

11/27/2009

12/4/2009

12/11/2009

12/25/2009
-5

-10
IBPOW
-15 nitfy

Graph-4.29

Interpretation:-

The calculated value of t is less than the tabulated value. So hypothesis we

have taken is accepted.

Performance of THINKSOFT against Nifty

X1 X2
73
45 45
N1 N2
(Table-4.4)

Calculated value of t= 0.047

25

20

15

10

5 thinksoft
0 nifty
12/14/2009
10/26/2009
11/2/2009

11/16/2009
11/23/2009
11/30/2009

12/21/2009
12/28/2009
11/9/2009

12/7/2009

-5

-10

-15

-20

Graph-4.30

Interpretation:-

The calculated is less than tabulated value. So hypothesis is accepted.

Performance of PIPAVAYARD against Nifty

X1 X2
74
45 45
N1 N2
(Table-4.5)

Calculated value of t= 4.1245

10

0
10/9/2009
10/16/2009
10/23/2009
10/30/2009
11/6/2009
11/13/2009
11/20/2009
11/27/2009
12/4/2009
12/11/2009
12/18/2009
12/25/2009
-10

-20
PipAvavyd
-30 nifty

-40

-50

-60

Graph-4.31

Interpretation:-

The calculated value is more than tabulated value at .5 which is 2.575. so

null hypothesis is rejected.

Performance of OIL against Nifty

75
X1 X2
61 61
N1 N2
(Table-4.6)

Calculated value of t= 0.677

5
4
3
2
1
0
9/30/2009

10/14/2009

10/28/2009

11/11/2009

12/2/2009

12/9/2009
10/7/2009

10/21/2009

11/4/2009

11/18/2009

11/25/2009

12/16/2009

12/23/2009

12/30/2009
-1
-2
-3
-4
oil
-5
nifty

Graph-4.32

Interpretation:-

The calculated values is less than is the tabulated value it means that there is
no significance difference between OIL IPO or nifty’ s return.

Performance of GLOBUSSPR against Nifty

76
X1 X2
66 66
N1 N2
(Table-4.7)

Calculated value of t= 0.833

GLOBUSSPR
20
nifty

15

10

0
9/30/2009

10/28/2009

11/11/2009

11/25/2009

12/2/2009

12/16/2009
9/23/2009

10/7/2009

10/14/2009

10/21/2009

11/4/2009

11/18/2009

12/9/2009

12/23/2009

12/30/2009
-5

-10

Graph-4.33

Interpretation:-

The calculated value is less than tabulated value. So we can say that there is
no significant difference between both of returns.

Performance of JINDCOT against Nifty

X1 X2
77
66 66
N1 N2
(Table-4.8)

Calculated value of t= 0.757

20

15

10

jindcot
5
nifty

0
9/22/2009

10/6/2009

11/3/2009

12/1/2009

12/29/2009
10/20/2009

11/17/2009

12/15/2009

-5

-10

Graph-4.34

Interpretation:-

Calculated value is less than tabulated value so the hypothesis I have taken
is significant

Performance of NHPC against Nifty

X1 X2

78
80 80
N1 N2
(Table-4.9)

Calculated value of t= 0.323

NHPC
2
nifty

0
9/1/2009

10/13/2009

10/27/2009

11/24/2009
9/15/2009

9/29/2009

11/10/2009

12/8/2009

12/22/2009
-2

-4

Graph-4.35

Interpretation:-

Calculated value is less than tabulated value so the null hypothesis is

accepted.

Performance of ADANIPOWER against Nifty

X1 X2

79
88 88
N1 N2
(Table-4.10)

Calculated value of t= 0.324

0 ADANIPOWE
9/17/2009

10/15/2009
8/20/2009

9/3/2009

10/1/2009

10/29/2009

11/12/2009

11/26/2009

12/10/2009

12/24/2009
-1 R
nifty
-2

-3

-4

-5

Graph-4.36

Interpretation:-

Calculated value is less than the tabulated value so hypothesis I have taken
is significant.

Performance of RAJOIL against Nifty

X1 X2
94 94
N1 N2
(Table-4.11)
80
Calculated value of t= 0.139

25

20

15

10

5 RAJOIL
0 nifty
8/26/2009

9/23/2009

10/21/2009

11/18/2009

12/16/2009
8/12/2009

9/9/2009

10/7/2009

11/4/2009

12/2/2009

12/30/2009
-5

-10

-15

-20

Graph-4.37

Interpretation:-

The calculated value is less than the table value at .5 which is 2.575. So null
hypothesis is accepted. It means that there is no significance difference
between the IPO return & nifty return.

Performance of EXCELINFO against Nifty

X1 X2
101 101
N1 N2
(Table-4.12)

Calculated value of t= 0.299

81
 25

20

15

10

5 EXCELINFO
0 nifty
8/17/2009

9/14/2009

9/28/2009

11/9/2009

12/7/2009
8/3/2009

8/31/2009

10/12/2009

10/26/2009

11/23/2009

12/21/2009
-5

-10

-15

-20

Graph-4.38

Interpretation:-

The calculated value of t is .299620654 which is less than the table value at .
5 which is 2.575. So the hypothesis I have taken is significant.

Performance of MHRIL against Nifty

X1 X2
113 113
N1 N2
(Table-4.13)

Calculated value of t= 0.508

82
 12

10

4 MHRIL
2 nifty

0
7/16/2009

7/30/2009

8/27/2009

9/10/2009

11/5/2009

12/3/2009

12/17/2009
8/13/2009

9/24/2009

10/8/2009

10/22/2009

11/19/2009

12/31/2009
-2

-4

-6

Graph-4.39

Interpretation:-

Calculated value of t is less than the table value at .5. So the hypothesis is
accepted.

Performance of EDSERV against Nifty

X1 X2
124 124
N1 N2
(Table-4.14)

Calculated value of t= 0.000105471

83
 12
10
8
6
4
EDSERV
2
nifty
0
7/1/2009
7/15/2009
7/29/2009

8/26/2009
9/9/2009

10/7/2009
10/21/2009
8/12/2009

9/23/2009

11/4/2009
11/18/2009
12/2/2009
12/16/2009
12/30/2009
-2
-4
-6
-8

Graph-4.40

Interpretation:-

Calculated value of t is less than table value. So hypothesis is accepted.

84
 Chapter-5
FINDINGS & CONCLUSION

FINDINGS & CONCLUSION

• The closing prices of IPOs of DEN NETWORK LIMITED,

THINKSOFT GLOBAL SERVICES LIMITED, OIL INDIA
LIMITED, GLOBUS SPIRITS LIMITED, JINDAL COTEX
LIMITED, EDSERV SOFTSYSTEMS LIMITED, MAHINDRA
HOLIDAYS & RESORTS INDIA LIMITED shows increasing trends.

• PIPAVAV SHIPYARD LIMITED shows various fluctuations.

85
• The closing prices of INDIABULLS POWER LIMITED, NHPC
LIMITED, ADANI POWER LIMITED, RAJ OIL MILLS LIMITED,
EXCEL INFOWAYS LIMITED shows declining trends.

• The returns of all the IPOs have volatility.

• In the last five year IPO market is not doing well. Up to 2007 it is
growing but after 2007 it starts declining. But in this year there are
chances of growth in market because in the first quarter of this year,
24 have issued in the market.

• When a comparison is made between benchmark index Nifty & all

IPOs, in all cases except PIPAVAYARD calculated value of t is less
than the table value at .5 which is 2.575. So null hypothesis is
accepted. It means that there is no significance difference between the
IPO return & nifty return.

Chapter-6
86
 BIBLIOGRAPHY

BIBLIOGRAPHY

Websites Reffered:
 www.nseindia.com
 www.ssrn.com
 www.iijournals.com. , Indian IPO, Guntur Anjana Raju, Rudresh R
Kunde
 www.dspace.iimk.ac.in , Short term & long term performance of IPO
in India
 www.sciencedirect.com, is investor sentiment driven by IPO pricing
mechanism? Jyoti Gupta, Taufique Samdani.
87
  www.arc-fs.com, IPO market- Global & India-A comprehensive
assessment (2009).
 wikipedia.org/wiki/Primary_market
 wikipedia.org/wiki/Secondary_market
 wikipedia.org/wiki/Initial_public_offering
 http://www.lkpsec.com/website/stockwork.html
 http://www.investopedia.com/ask/answers/06/ipoadvantagedisadvanta
ge.asp
Books Reffered:
 Pandian, Punithavathy, Security Analysis and Portfolio Management,
Vikas Publishing House Pvt. Ltd.
 Bhalla, V.K., Investment Management, Security Analysis and
Portfolio Management, S. Chand

88