Best IPOs Performance since 2019
IPOs that more than doubled the wealth of Investors since 2019 are listed below
IPO
Allotment Procedure in IPO
There are different segments of Investors who invest in IPOs. The three important segments are Retail Investors, Qualified Institutional Buyers, and Non Institutional buyers. As per SEBI guidelines, there are a different set of allocation rules for different types of Book Building Issues. An issuer can issue securities to Investors in two ways: 100% book building and 75% book building (of the net offer to the public). We will see, these 3 important cases of allotment procedures below. Case 1: Issuer company makes an issue of 100% of the net offer to the public through 100% book building process. Allocation: Not less than 35% of the net offer to the public to Retail individual investor. Not less than 15% of the net offer to the public to NonInstitutional Investors i.e. investors other than retail individual investors and qualified institutional buyers. Not more than 50% of the net offer to the public to Qualified Institutional Buyer (out of which 5% to be specifically allocated to mutual funds) However 50% of net offer to the public shall be mandatory allotted to the qualified institutional buyers. Case 2: Issues made under Rule 19(2)(b) of Securities Contract Regulation, Rules 1957, with 60% mandatory allocation to Qualified Institutional Buyers (out of which 5% to be specifically allocated to mutual funds) Allocation: The percentage allocation to retail individual investors and non-institutional investors shall be 30% and 10% respectively. Case 3: CAn 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. Allocation: In the book built portion, not less than 25% the net offer to the public to non qualified institutional buyers. Not more than 50% of the net offer to the public to Qualified Institutional Buyer (out of which 5% to be specifically allocated to mutual funds) The balance 25% of the net offer to the public offered at a price determined through building to retail individual investors who either not participated or have not received allocation, in the book built portion.
Marketing Strategy for IPO
Marketing of IPO is very important to ensure 100% subscription of an IPO in all the segments. Marketing Strategy of IPO should be prepared by Marketing and PR team of the issuer with the Consultant having experience of Business-to-investor marketing. A wide spectrum of marketing tool should be used to achieve significant over-subscription from institutional as well as retail investors segment. The Road show In the road show a company and its underwriters transverse through the country as well as abroad. They conduct several meetings with potential investors; security analysis, brokers and potential underwriting syndicate members. Some of these meetings are one-to-one, but most are group meetings. The road show is most effective marketing tool for Institutional investors. The road show is conducted in the weeks immediately preceding the effectiveness and pricing of IPO, many indications of interest are placed immediately after a road show stop. The company’s story which may have been first told at the organizational meetings, which has been converted into an onscreen summary to be conveyed in 30 minutes or less to an astute and inquisitive audience can make or break an IPO. A successful road show typically, has a meaningful impact on the IPO price and on initial aftermarket trading Marketing strategy for retail investors Top 15 cities in India contribute more than 90% to the amount raised in IPOs. Therefore it is important to take press conferences in key cities. Advertisements in Newspapers, Business channels, and public relations campaign. Management interviews in print and electronic media. Broker conferences, press conferences etc. Site visit for key brokers across India. Sustained awareness program before SEBI observations, through corporate advertisement campaign. A good website and youtube channel having corporate videos, testimonials of customers etc. are important marketing tools. Marketing strategies for HNIs 25% of the Marketing budget of IPO goes in targeting High Net Worth Individuals (HNIs) of India and abroad. Initial contacts with High Net Worth Individuals (HNI) by Private Client Services (PCS) sales person Key HNI meet with the management Marketing strategies for qualified institutional investors. Develop equity story through research report Communicate equity story during pre-marketing where sector analysts interface with fund managers to discuss financials and answer preliminary questions Collate pre-marketing feedback and decide floor price Follow-up by senior salespersons to address investor queries Prepare senior personnel for management roadshows based on the interaction of the sector analyst and salespersons with fund managers. Finalize the management road show schedule to maximize investor coverage across investor geographies. One-on-one meetings and group functions with company management – video/telephone conferences in secondary cities as needed Regular interface by salespersons with fund managers to follow-up for bids.
Procedure for the bidding
As an Investor when we apply to an IPO, all we know is Brand Price of the IPO, It’s issue size, duration for subscriptions and views of analysts on the IPO based on it’s fundamental analysis. We don’t know how this bidding procedure takes place and on what basis the allotment is done. In this post we will see the method and procedures of bidding in an IPO. The method and procedures of bidding is subject to following: Bid is required to be kept open for at least 3 working days and no more than 7 working days, which may be extended to a maximum of 10 working days in case the price band is revised. Bidding is permitted only if an electronically linked transparent facility is used. The ‘syndicate members’ are required to be present at the bidding centers so that at least one electronically linked computer terminal all the bidding centers is available for the purpose of bidding. a) The number of bidding centers, in case 75% of the net offer to the public is offered through the book building process shall not be less than the number of mandatory collection centers as specified in regulations. In case 100% of the net offer to the public is made through the book building process, the bidding centers shall be at all the places, where the recognized stock exchanges are situated. b) The same norms as applicable for collection centers shall be applicable to the bidding centers also. Individual, as well as qualified buyers, shall place their bids only through the brokers who shall have the right to vet the bids. The applicant is required to enclose the proof of DP ID and Client ID along with the application while making a bid. The investors shall have the right to revise their bids provided that Qualified Institutional Buyers are not be allowed to withdraw their bids after the closure of the bidding. During the period the issue is open to the public for bidding, the applicants may approach the brokers of the stock exchanges through which the securities are offered under the online system to place an order for bidding to securities. Every broker shall accept orders from all clients/investors who place orders through him. Bidding Form a)There shall be a standard bidding form to ensure uniformity in bidding and accuracy. b)The bidding form before being issued to the bidder shall be serially numbered at the bidding centers and date and time stamped. c)The serial number may be system generated or stamped with an automatic numbering machine. d)The bidding form shall be issued in duplicate signed by the investor and countersigned by the syndicate member, with one form for the investor and the other for the syndicate member(s)/book runner(s). At the end of each day of the bidding period, the demand shall be shown graphically on the terminal for information of the syndicate members as well as the investors. The identities of the Qualified Institutional Buyers making the bidding shall not be made public. The stock exchanges shall display data pertaining to book built issues in a uniform format, interalia giving category-wise details of the bids received indicative format as given in the guidelines. The data pertaining to an issue shall be displayed on the site for a period of at least three days after closure of bids. After the closure of the issue, the bids received are aggregated under different categories i.e. firm allotment, qualified institutional buyers (QIBs), Non-institutional buyers (NIBs), retails etc. The over subscription ratios are then calculated for each of the categories as against the shares reserved for each of the categories in the offer document. Within each of these categories, the bids are then segregated into different buckets based on the number of shares applied for. The over-subscription, ratio is the applied to the number of shares applied for and the numbers of shared to be allotted for applicants in each of the bucket is determined. Then the number of successful allotees is determined. The process is followed in case of proportionate allotment. In the case of allotment for QIBs, it is subject to discretion of the post issue lead manager. Where the lead book runner has reasons not to accept a qualified institutional buyer’s bid, the same is required to be done at the time receipt of the bids and the reasons therefore is required to the bidder Ideally, the share should trade in secondary market on T+6 day after Bid Closure at T day.
Eligibility Norms for companies issuing securities
The company issuing securities through an offer document shall satisfy the following conditions: 1.1 Filing of offer document 1.1.1) No company shall make any issue of a public issue of securities, unless a draft prospectus has been filed with the Board, through an eligible Merchant Banker, atleast 21 days prior to the filing of Prospectus with the Registrar of Companies (ROCs). Provided that if within 21 days from the date of submission of draft Prospectus, the Board specifies changes, if any, in the draft Prospectus (without being under any obligation to do so), the issuer or the Lead Merchant banker shall carry out such changes in the draft prospectus before filing the prospectus with ROCs. 1.1.2) No listed company shall make any issue of security through a rights issue where the aggregate value of securities, including premium, if any, exceeds Rs.50 lacs, unless the letter of offer is filed with the Board, through an eligible Merchant Banker, at least 21 days prior to the filing of the Letter of Offer with Regional Stock Exchange (RSE). Provided that if, within 21 days from the date of filing of draft letter of offer, the Board specifies changes, if any, in the draft letter of offer, (without being under any obligation to do so), the issuer or the Lead Merchant banker shall carry out such changes before filing the draft letter of offer with RSE. 1.1.3) Companies barred not to issue security No company shall make an issue of securities if the company has been prohibited from accessing the capital market under any order or direction passed by the Board. 1.1.4) Application for listing No company shall make any public issue of securities unless it has made an application for listing of those securities in the stock exchange (s). 1.1.5) Issue of securities in dematerialized form No company shall make public or rights issue or an offer for sale of securities, unless: (a) the company enters into an agreement with a depository for dematerialization of securities already issued or proposed to be issued to the public or existing shareholders; (b) and the company gives an option to subscribers/ shareholders/ investors to receive the security certificates or hold securities in dematerialized form with a depository. Explanation: A depository shall mean a depository registered with the Board under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996. 1.2) Initial Public Offerings by Unlisted Companies 2.2.1) An unlisted company 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 all the following conditions: (a) The company has net tangible assets of at least Rs. 3 crores in each of the preceding 3 full years (of 12 months each), of which not more than 50% is held in monetary assets. Provided that if more than 50% of the net tangible 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 (3) out of immediately preceding five (5) years Provided further that extraordinary items shall not be considered for calculating distributable profits in terms of Section 205 of Companies Act, 1956; (c) The company has a net worth of at least 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, atleast 50% of the revenue for the preceding 1 full year is earned by the company from the activity suggested by the new name; and (e) 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), does not exceed five (5) times its pre-issue networth as per the audited balance sheet of the last financial year. 1.2.2 An unlisted company not complying with any of the conditions specified in Clause 1.2.1 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 both the conditions (a) and (b) given below: (a) (i) The issue is made through the book-building process, with at least 50% of the issue size being allotted to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded. OR (a) (ii) The 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 monies shall be refunded. AND (b) (i) The minimum post-issue face value capital of the company shall be Rs. 10 crores. OR (b) (ii) There shall be a compulsory market-making for at least 2 years from the date of listing of the shares, subject to the following: (a) Market makers undertake to offer buy and sell quotes for a minimum depth of 300 shares; (b) 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%: (c) 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. 1.2.2.A) An unlisted public company shall not make an allotment pursuant to a public issue or offer for sale of equity shares or any security convertible into equity shares unless, in addition to satisfying the conditions mentioned in Clause 1.2.1 or 1.2.2 as the case may be, … Read more
Flow chart of IPO Process
The process of offering shares in a private corporation to the public for the first time is called Initial Public Offering (IPO). Flow Chart of IPO Process Approval of Board: An approval of the Board of Directors of the company is required fo raising capital from the public. Appointment of Lead Managers: The Lead Manager is a Merchant banker who orchestrates the issue in consultation with the company. Appointment of other Intermediaries: Several intermediaries facilitate the IPO process. A company secretary, an underwriter, bankers, brokers, registrars etc. are selected. Filing of the Prospectus with SEBI: All the companies seeking to make a public issue have to file their offer document with SEBI. The Offer document or Prospectus communicates the information about the company and the proposed security issue to the investing public. Filing of the Prospectus with Registrar of Companies: Once the SEBI and Stock Exchanges gives approval to the prospectus, offer document, must be filed with the Registrar of Companies, along with required documents by the Companies Act, 1956 Filing of Initial Listing Application: Within 10 days of filing the prospectus, the initial listing application must be made to the concerned stock exchanges, along with the initial listing fees. Promotion of the Issue: To promote the issue the company holds conferences for brokers, press, and investors. Advertisements are also released in newspapers and periodicals to generate interest among potential investors. Statutory Announcement: The Statutory announcement of the issue must be made after seeking the approval of the lead stock exchanges. This must be published at least 10 days before the opening of the subscription list. Collection of Applications: During the period of subscription, the bankers to the issue collect application money on behalf of the company. While the managers of the issue, with the help of registrar, monitor the situation. Information is gathered about the number of application received in various categories, the number of shares applied for, and the amount received. Processing of Applications: The applications forms received by the bankers are transmitted to the registrars of the issue for processing. This mainly involves scrutinizing the applications, coding the applications, preparing a list of applications with all the relevant details. etc. Establishing the Liability of Underwriters: If the issue is undersubscribed, the liability of the underwriter has to be established. Allotment of Shares: According to SEBI guidelines, one-half of the net public offers have to be reserved for applications up to 1000 shares and the balance one-half for larger applications. For each of these segments, the proportionate system of allotment is followed. Listing of the issue: The detailed listing application should be submitted to the concerned stock exchanges along with the listing agreement and the listing fee. The allotment formalities should be completed within 30 days after the subscription list is closed or such extended period as permitted by the lead stock exchanges. STAGES OF THE IPO 1) Pre-issue Due Diligence Draft Offer document to be filed with SEBI Final Offer document to be filed with SEBI Application for listing with Stock Exchange Promoter’s Contribution to be brought in prior to the issue Appointment of Compliance Officer In-Principal approval from Stock Exchange to be obtained and filed with SEBI Issue Advertisement Book-building and Bidding processes to be followed 2) Issue Subscription list to be kept open for at least 3 days Issue open with in the time prescribed 3) Post-Issue Monitoring reports to be submitted to SEBI Final Post issue monitoring reports Post Issue Advertisements Dispatch of shares certificates etc. and allotment of the documents.
Primary Market
Capital Market can be broadly divided in Primary Market and Secondary Market. What is a Primary Market? The Primary Market is the part of Capital Market that deals with the issuance of new securities and then sold to investor directly by the issuer. It is also known as a New Issue Market. In this Market, Investors buy securities that were never traded before. New Issue Markets are facilitated by underwriting groups, consisting of investment banks that set a beginning price range for a given security and oversee its sale to investors. Once the initial sale is complete, further trading is conducted on the secondary market. Investors typically pay less for securities on the primary market than secondary market. What is the role of the ‘Primary Market’? It issues new securities on an exchange for companies, Government and other groups to obtain financing through debt-based or equity-based securities. It provides the channel for sale of new securities. It create long term instruments through which corporate entities raise funds from the capital market. It provides the issuers the opportunity to raise resources to meet their requirements of investment and/or discharge of some obligation. 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 etc. They may issue the securities in domestic market and/or international market. Ways of raising funds through Primary markets Corporate entities raise funds from New Issue Market in three ways. Public Issue: A stock exchange lists the securities and corporate raises funds through Initial Public Offering (IPO). Rights Issue: Existing shareholders are offered more shares at a discounted price and or a pro-rata basis. Private Allotment: A corporate issues shares at a price which may or may not be related to the current market price of the same security. Major Players of Primary Market There are several major players in the New Issue market. These include the merchant bankers, mutual funds, financial institutions, foreign institutional investors (FIIs) and individual investors.