investor awareness program on ipo basics - mahavir...
TRANSCRIPT
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Howrah, March 27, 2008
Mahavir Lunawat
ICSI-EIRC Investor Awareness Program
on IPO Basics
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Presentation OutlineIPO - Basic Concepts
Key Players & Documents
IPO Process
Statutory Framework
Areas of Investor Grievance
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Basic Concepts
I P O – Investor Perspective
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Capital Issues – Types
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Public Offer of shares through book building mechanism is designed to ascertain demand for the shares at various price levels within a price-band to facilitate discovery of the Issue Price
Book Building
Price Band : The investors are informed of the price band for bidding The lower end of the price band is the floor price and the upper end of the price band is the cap price. The cap price should not be more than 20% of the floor price. The investors can bid at any price in multiples of Rs.1 within the price band
Basics
KEY
CONCEPTS
Red Herring Prospectus : Prospectus without issue price and size of the issue
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Margin Amount : The money collected along with the application is referred to as margin amount. QIBs have to pay 10% margin only
Minimum Lot Size : The minimum lot size of the shares that can be bid shall be determined in such a manner that the amount payable at the floor price and cap price shall be in the range of Rs. 5000 to 7000. Bids should be for the minimum lot size or multiples there of
Basics
KEY
CONCEPTS
Bidding Centers : Bidding centers are essentially broking outfits associated with the Book Running Lead Managers / Syndicate Members. They have on-line connectivity to either or both of BSE and NSE. Investors may participate in the bidding process by submitting application forms to any of the designated bidding centers.
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Revision of Bids :• Book building process provides for revision of the “options”
both in respect of the quantum of shares and / or the bid price to all categories of investors.
• The investors can revise their bids any number of times before the closure of the issue.
• However, for every revision they are required to go to the same bidding center where the original bid / earlier revision was registered.
• The revision bid form provided alongwith the application form. • If there is an upward revision (in terms of shares and / or price)
the investors are required to pay the differential amount along with the revised bid
• Lower revision – Excess money Only at the time of refund
Basics
KEY
CONCEPTS
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Cut-off Price : Retail individual bidders can bid at “cut off” price, in which case, they need not indicate the specific price and yet become eligible to be considered for allotment irrespective of the issue price finally decided through the price discovery process. They must pay the margin amount calculated at the ceiling price
Basics
KEY
CONCEPTS
Basis of Allotment : The allotment shall be made on proportionate basis to the investors. The number of shares allotted shall not be less than minimum lot prescribed and thereafter in multiples of one share. Where the shares available for allotment to any category is less than the minimum lot prescribed, on the basis of drawal of lots, the successful investors in that category shall be identified
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Process
I P O
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Process
Investor Bidding Center RTI Inward
Preparation of BasisGeneration and Creation of Allotment as per basis,
Printing of Refund Orders
BankApplication Form
Electronic Data Capture
Stam
ping
/ Fr
anki
ngan
d D
ispa
tch
Allo
tmen
t Let
ters
/ R
efun
d O
rder
s /
Cer
tific
ates
/ cr
edit
Verification ReconciliationData Analysis
Registration of bids
NSE / BSE
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Statutory FrameworkI P O
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IPO – Regulatory FrameworkRegulatory Framework
• SEBI (DIP) Guidelines, 2000SNAPSHOT
Depositories Act, 1996
Securities Contracts (Regulation) Act, 1956 and Rules, 1957
Companies Act, 1956Companies (Issue of Share Certificates) Rules, 1960
Stamp Act
Listing Agreement and Stock Exchanges’ Regulations
Foreign Exchange Management Act, 1999 and Regulations
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Key Players & Documents
I P O
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Key Players
The InvestorsThe IssuerBook Running Lead ManagersCredit rating AgencySyndicate MembersBidding CentersEscrow BankersRegistrarsPrintersAdvertisement Agencies
With the support ofThe Stock ExchangesThe DepositoriesThe Postal System
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Investors
• Categories of InvestorsQualified Institutional InvestorsNon Institutional InvestorsRetail Individual Investors
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Key Documents
• Offer Document– Draft Red Herring Prospectus– Red Herring Prospectus– Prospectus
• Agreements– MOU with BRLMs– MOU with RTI and STA– Escrow Agreement– Syndicate Agreement– Agreement with Post Monitoring Agency
• Comfort Letters from Auditors &Due Diligence Certificates from BRLMs
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Prospectus
• Read the Prospectus– Important Aspects
• Abridged Version in Application Form
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Areas of
Investor Grievance
I P O
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Post IPO Matters
Grievances
IPO – Rejections IPO – Rejections
Post IPO Matters
INVESTOR GRIEVANCE
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IPO – Grounds of Rejections
PAN Not provided HNI at cut-off Applications not bid but bankedApplications bid but not banked
Client ID / DP ID Not provided
Mistakes in Client ID / DP ID – EscrowMore than one applicationPayment method mismatch
Unsigned Application Form
Bids outside the price band
Bids for shares lower than the minimum application
BE CAREFUL
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Post IPO Matters
Refunds not gone through Shares in Pool Account Postal return undeliverableWrong credit / dual credit
Improper Reconciliation
BECAREFUL
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Summary of Various remedies
RemedyCivil Remedy Criminal Remedy
Against the company
Against the directors, promoters & experts
Rescission of contract Claim for
damageDamages Comp. u/s
62Damage non-comp Sec 56
Fraudulent mis-rep. Innocent
mis-rep.
SEBI ROC Court Investor Forum
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Must know the Facts in DetailKnow about the company & management reasonablyFill in Application Form properlySubmit the Application Form on timeCheck with the broker after submissionLiaise with the Registrar to the Issue
Dear InvestorsKeys to Success – Follow the Basics !
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THANK YOU !