As nowadays IPO’s have become a good investment avenue for investors So, I have done the project Titled “Emergence of IPO as an investment avenue” at Angel Broking Ltd. a very well known stock broking firm.
The project was carried out in the Pune office of Angel Broking Ltd. which is located at Kalyani Nagar. The duration of the project was two months.Any sector that produces goods or services is called as real sector. For producing goods or services finance is required. Hence for real sector, financial system is required. Financial System is a backbone of any economy. The financial sector plays an important role in the economy of any nation. A well-regulated and well-developed financial sector is vital to achieving the most basic need of efficient allocation of scarce resources. In any market economy, the banking and financial system plays a key role in mobilizing a society's savings and in channeling these savings into productive uses and investments. In providing an efficient and rigorous process for intermediating the flow of a society's savings into productive uses, the banking and financial system is one of the core determinants of the pace of a country's economic development and increase in the standards of living of its citizens.
Furthermore, the banking and financial system must facilitate transactions in an economy by ensuring that they can be effected safely and swiftly on an ongoing basis. The significance of the financial system for an economy arises from at least three major sources. First, it performs various transformation functions relating to intermediation of funds in the economy. Secondly, it provides the mirror image of the underlying real economy and the basic macro-economic balances. Thirdly, it is one industry whose basis of operation is underpinned in public trust.
Objective of the Project
The objectives of carrying out study are as follows:-
1. To be well versed with concept of IPO.
2. Aspects of IPO from Company’s & Investor’s point of view.
3. Factors affecting IPO listing Price.
4. Comparison between IPO’s of two companies from the same sector for feasible investment decision.
Concept of IPO
1 IPO is an acronym for (Initial Public Offering).
2 The Initial Public Offering or IPO market as it is known, received a new lease of life in FY99.
3 An IPO is when a company makes either a fresh issue of securities or an offer for sale of its existing securities to the public for the first time. It refers to first sale of stock by a company to a public.
4 IPO MEANS “GOING PUBLIC”
5 For a company to offer IPOs, they need to hire a corporate lawyer as well as an investment banker to underwrite the offer. The actual sale of the shares is generally offered by stock exchange or by regulators. When the company starts to offer IPOs, they are usually required to reveal financial information about the company so that investors know whether the companies a good investment or not.
6 This paves the way for listing in stock exchange in the first case, & trading of the issuer’s securities in the second.
7 With high profile issues like Hughes Software and TV-18 opening at more than 3 and 10 times their issue price respectively, investors are flocking to the IPO market like never before. Companies, which had earlier shied away from the capital market, are now returning with a vengeance to satiate the appetite of investors.
The strength of of India’s economy, stock market, corporate profits, energy sector and private equity has fuelled IPOs in 2006 and 2007. India’s market raised US$7.23 billion through 78 IPOs in 2006. The private equity rush into India is creating the potential for many IPO exists. Top global private equity funds such as Carlyle, Blackstone, Texas Pacific and Warburg Pincus, as well as local funds, have been key drivers of the strength of Indian IPO markets. India ranks seventh overall in the world, in the terms of IPOs in the first half of 2007 & the Indian second half performance is expected to be even higher.
Global IPO Market
Globalization of capital market has enhanced regional economic growth, cross border trading, liquidity, and stringency of local regulatory framework, all of which heightens the ability of local exchanges to support large IPOs. Stock markets continue to remain a key route for corporate's to raise funds for expansion, with the worldwide IPOs space posting a record net proceeds of $ 246 billion in 2006.the biggest number of IPOs came from the US with 187 offerings, followed by Japan with 185 and China with 175 IPOs. In 2007, a rich variety of high quality companies continue to surge through world IPOs pipeline with last years momentum, albeit with smaller deal sizes. Reliance Petroleum, which raised $1.8 billion, featured in the global Top 20 IPOs, which together raised $84 billion, representing 35 per cent of the total capital raised by all IPOs.
SEBI Requirements for IPO:
SEBI has laid down certain norms for companies making an offering to the public. The company should have….
1. Net tangible assets of not less than Rs 3 crores
2. A net worth of Rs 1 crores or more
3. Enough money to distribute as profits for three full years.
Primary issuances are governed by SEBI DIP- (DISCLOSURES & INVESTOR PROTECTION) - guidelines. The Lead Managers are required to follow due diligence & ensure that all requirements of DIP are fulfilled while submitting the draft offer document to SEBI.· Any non-compliance on their part can attract penal action