1.

IPO issue models: ISSUE TYPE OFFER PRICE Fixed Issues DEMAND PAYMENT RESERVATIONS

Price Price at which the Demand for the 100 % advance 50 % of the shares offered are securities are securities offered payment is required reserved for applications below offered and would is known only after to be made by the Rs. 1 lakh and the balance for be allotted is made the closure of the investors at the time higher amount applications. known in advance issue of application. to the investors

Book Building A 20 % price band Demand for the 10 % advance 50 % of shares offered are Issues is offered by the securities offered , payment is required reserved for QIBS, 35 % for issuer within and at various to be made by the small investors and the balance which investors are prices, is available QIBs along with the for all other investors. allowed to bid and on a real time basis application, while the final price is on the BSE other categories of determined by the website during the investors have to pay issuer only after bidding period.. 100 % advance along closure of the with the application. bidding.

2. Issuing IPO process: General procedure: 1. Appointment of underwriter 2. Appointment of registrar 3. Appointment of the brokers to the issue 4. Appointment of lawyers 5. Draft prospectus 6. Filling of prospectus with Registrar of Companies 7. Printing and dispatch of Application forms 8. Filling of initial listing application 9. Statutory announcement 10. Processing of Applications 11. Establishing the liability of the underwriter 12. Allotment of shares 13. Listing of the issue More About Book Building Book Building is essentially a process used by companies raising capital through Public Offerings-both Initial Public Offers (IPOs) or Follow-on Public Offers ( FPOs) to aid price and demand discovery. It is a mechanism where, during the period for which the

book for the offer is open, the bids are collected from investors at various prices, which are within the price band specified by the issuer. The process is directed towards both the institutional as well as the retail investors. The issue price is determined after the bid closure based on the demand generated in the process. The Process: The Issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'. The Issuer specifies the number of securities to be issued and the price band for the bids. The Issuer also appoints syndicate members with whom orders are to be placed by the investors. The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to open auction. The book normally remains open for a period of 5 days. Bids have to be entered within the specified price band. Bids can be revised by the bidders before the book closes. On the close of the book building period, the book runners evaluate the bids on the basis of the demand at various price levels. The book runners and the Issuer decide the final price at which the securities shall be issued. Generally, the number of shares are fixed, the issue size gets frozen based on the final price per share. Allocation of securities is made to the successful bidders. The rest get refund orders. BSE's Book Building System BSE offers a book building platform through the Book Building software that runs on the BSE Private network. This system is one of the largest electronic book building networks in the world, spanning over 350 Indian cities through over 7000 Trader Work Stations via leased lines, VSATs and Campus LANS. The software is operated by book-runners of the issue and by the syndicate members , for electronically placing the bids on line real-time for the entire bidding period. In order to provide transparency, the system provides visual graphs displaying price v/s quantity on the BSE website as well as all BSE terminals. (3) SEBIs regulations regarding issue of ipo: 3.1 The eligibility norms for an unlisted company for making a public issue. An unlisted company has to satisfy the following criteria to be eligible to make a public issue : Pre-issue networth of the co. should not be less than Rs.1 crore in last 3 out of last 5 years with minimum networth to be met during immediately preceding 2 years and track record of distributable profits for at least three out of immediately preceding five years The issue size (i.e. offer through offer document + firm allotment + promoters contribution through the offer document) shall not exceed five (5) times its pre-issue networth. In case an unlisted company does not satisfy any of the above criterion, it can come out with a public issue only through the Book-Building process. In the Book Building process the

company has to compulsorily allot at least sixty percent (60%) of the issue size to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded. 3.2 The eligibility norms for a listed company for making a public issue. A listed company is eligible to make a public issue if the issue size (i.e. offer through offer document + firm allotment + promoters contribution through the offer document) is less than five times its pre-issue networth. If the issue size is more than or equal to 5 times of pre-issue networth, then the listed company has to take the book building route and allot sixty percent (60%) of the issue size to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded. For details refer Chapter II of SEBI (DIP) Guidelines and relevant clarifications issued subsequently. 3.3 The requirements regarding promoters contribution and lock-in.

In case of an Initial Public Offer (IPO) i.e. public issue by unlisted company, the promoters has to necessarily offer at least 20% of the post issue capital. In case of public issues by listed companies, the promoters shall participate either to the extent of 20% of the proposed issue or ensure post-issue share holding to the extent of 20% of the post-issue capital. In case of any issue of capital to the public the minimum contribution of promoters shall be locked in for a period of 3 years, both for an IPO and Public Issue by listed companies. In case of an IPO, if the promoters contribution in the proposed issue exceeds the required minimum contribution, such excess contribution shall also be locked in for a period of one year. In case of a public issue by a listed company, participation by promoters in the proposed public issue in excess of the required minimum percentage shall also be locked-in for a period of one year as per the lock-in provisions as specified in Guidelines on Preferential issue. Beside the above, in case of IPO the entire pre-issue share capital i.e. paid up share capital prior to IPO and shares issued on a firm allotment basis along with issue shall be locked-in for a period of one year from the date of allotment in public issue.