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Allotment Procedure in IPO

24th January 2019 by stocksbaazigar

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

28th January 201924th January 2019 by stocksbaazigar

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

24th January 2019 by stocksbaazigar

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.