IPO & Its Requirments
IPO & Its Requirments
IPO & Its Requirments
Going Public
WHETHER IPO DECISION IS PURELY MARKET DRIVEN?
company when its unlisted offers ownership opportunity to the outside investor. Termed it as PRIVATE WINDOW.
What is difference between Promoters, Strategic Investors and Financial Investors? What is the difference between Private Window & Market Window? Market worth of a company is dynamic and may not have relevance with fundamentals.
Going Public
Promoters prime concern is controlling interest in the company.
Strategic Investor has business interest in the company & is ready to pay an entry premium on long term consideration.
Financial Investor looks at the return on investment. Private Investor look for exit route different from Retail Investor.
Market Window unlike Private Window provides entry and exit routes to investors (known as secondary offers in USA).
Pvt. Window is not market driven though has some influence in consideration.
Market window which is market driven also performs validation of companys worth on a continuous basis through stock exchange route.
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Private Investor look for exit route different from Retail Investor. Strategic Sale to another private investor/s. Buy back by promoters.
Whether company is confident of strong top line & bottom line growth to sustain market expectations?
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I P O Financial Dimension
For some industry going public is no choice option. The capital intensive industry i.e. cement; steel; shipping; power and power transmission; heavy engineering etc. For balance capital structure going for IPO is essential. They may need multiple round of public issue for growth and consolidation. Here IPO and Offer for sale is more a financial decision rather strategic. Unlocking value through an IPO is financial decision. But how to generate more value is strategic decision. Company can look to raise funds through strategic sale of equity through private window that realises better value rather an IPO as private valuation offer significantly higher valuation than in the retail market. Third aspect of financial dimension is to properly evaluate how much capital should be ideally raised through IPO and how it should be optimally deployed.
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Threats: Listed co. face threat of hostile take over. Future acquisition of stake by promoters become costlier. Brings additional cost of Issue exp; regulatory compliances etc.
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Agenda
Fund Raising Options
Equity
IPO FPO
Hybrid
Various forms of Convertibles
In India
outside India
ECB
ADR/GDR
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FY-2004
Rs. 24,707 cr
FY-2005 IPO
Rs. 27,477 cr
Rs. 32,950 cr
FY-2007 QIP
Rs. 104,937 cr
FY-2008
FPO
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Why IPO??
For Funding Needs Funding Capital Requirements for Organic Growth Expansion through Greenfield or Brownfield or De-bottle Necking Projects Diversification Funding Inorganic Growth through Acquisitions Funding Global Requirements Funding Joint Venture and Collaborations needs Funding Infrastructure Requirements, Marketing Initiatives and Distribution Channels Financing Working Capital Requirements Funding General Corporate Purposes Investing in businesses through other companies Repaying debt to strengthen the Balance Sheet Meeting Issue Expenses
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Why IPO??
For Non-funding Needs Enhancing Corporate Stature Retention and incentive for Employees through stock options Providing Investors exit options Provide liquidity to the shareholders
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IPO Requirements
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Primary Criteria
An infrastructure company:
Whose project has been appraised by a public financial institution (PFI) Not less then 5% of the project cost is financed by any of the PFI Rights issue by a listed company
Minimum postissue face value capital must be Rs. 10 Crores OR Compulsory market making for at least 2 years from the date of listing of shares Choice of Route: Fixed Price or Book Building
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Large Companies The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as "the Company") shall be Rs. 3 crore; and The minimum issue size shall be Rs. 10 crore; and The minimum market capitalization of the Company shall be Rs. 25 crore (market capitalization shall be calculated by multiplying the postissue paid-up number of equity shares with the issue price).
Small Companies
The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as "the Company") shall be Rs. 3 crore; and The minimum issue size shall be Rs. 3 crore; and The minimum market capitalization of the Company shall be Rs. 5 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price). The minimum income/turnover of the Company shall be Rs. 3 crore in each of the preceding three 12 months period; and The minimum number of public shareholders after the issue shall be 1000 A due diligence study may be conducted by an independent team of CAs or Merchant Bankers appointed by BSE.
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Promoter includes:
The person or persons who are in over-all control of the company; The person or persons who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public; The persons or persons named in the prospectus as promoters(s). Promoter Group Defined under clause 6.8.3.2 of SEBI DIP Public Implies all investors other than Promoter and Promoter Group In case of PSUs, the Promoter is Government of India (represented by President of India). SEBI has granted exemption on issue structure from Rule 19(2)(b) on case to case basis
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Infrastructure Company means, a company wholly engaged in the business of developing, maintaining and operating infrastructure facility.
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Promoters Contribution
Lock-in period
Balance pre-issue capital, other than held by Indian and Foreign Venture Funds (registered with SEBI) and shares held for at least one year and being offered for sale in the issue Must be locked-in for a period of 1 year from the date of allotment Shares issued last will be locked-in first In case of public issue of securities by a company which has been listed on a stock exchange for at least 3 years and has a track record of dividend payment for at least 3 immediately preceding years.
Exemption
In case of companies where no identifiable promoter or promoter group exists. In case of rights issues.
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Pricing
SEBI allows free pricing of equity shares in an IPO Approval of RBI might be required for public issues by banks Differential pricing is permissible in a public issue to retail individual investors and retail individual shareholders Retail investors can be offered shares at a discount to the price offered to other investor categories (Max discount can be 10%) Price Band: The cap price can be 20% more than the floor price. Price band can be revised by 20% from the floor price. No payment of commission by the promoter or issuer company to the public If the issue price is above Rs.500 then the issuer can fix the FV of shares below Rs.10 but a minimum of Rs.1.
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Reservations
Reservations / Firm Allotment shall not be made to categories other than: Permanent employees of the issuer company and in the case of a new company the permanent employees of the promoting companies'; Shareholders of the promoting companies in the case of a new company and shareholders of group companies in the case of an existing company either on a competitive basis or on a firm allotment basis. Persons who, on the date of filing of the draft offer document with the Board, have business association, as depositors, bondholders and subscribers to services, with the issuer making an initial public offering,
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Optimum number of executive and non executive directors with at least 50% being non-executive. If the chairman, has executive powers then 50% of Board comprises of Independent directors. While if chairman has non-executive powers then 1/3 of the Board comprises of Independent directors.
Audit Committee
Mandatory constitution of Audit Committee with minimum three directors and headed by an Independent director. All members shall be financially literate (should be able to understand financial statements) and at least one member should have accounting and financial management expertise. Shareholder/Investor Grievances Committee to be formed under the chairmanship of a non executive director to look into the redressing of shareholder and investor complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends At least one director on the Board of the holding company shall be a director on the Board of a material non listed Indian subsidiary Company - Material non-listed subsidiary means a subsidiary whose turnover or net worth exceeds 20% of the consolidated turnover or net worth in the preceding accounting year Audit committee of the listed holding company shall also review the financial statements, in particular, the investments by the unlisted subsidiary Company A separate section on Corporate Governance to be included in the Annual Reports with disclosures on compliance of mandatory and non-mandatory requirements Submission of quarterly compliance report to the stock exchanges
Investor Committee
Subsidiary Company
CEO/CFO Certification
Capital Structure
Securities Premium Account (pre-issue and post-issue) Holding of the promoter and promoter group Disclosure about ESOPs if any Total requirements of funds Means of Financing
Undertaking by the issuer company confirming firm arrangements of finance through verifiable means towards 75% of the stated means of finance (excluding proposed IPO) Details about the appraisal of the project. Interim use of funds etc. Description about the Industry in which the Company operates
Business
Detailed description about the business of the Company Risks related to the Company
Risk Factors
Company Management
Details about the Board of Directors and various committees Details about key management persons
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Financial Disclosures
MD&A
Detailed discussion on performance for the past 3 years Capital Expenditure Cash Flow and Liquidity All pending litigations in which the Company/Promoters / Promoter Group / Directors / Group companies are involved. Both, litigations filed by or against the Company/Promoters / Promoter Group / Directors / Group companies Outstanding litigations, defaults, etc., pertaining to matters likely to affect operations and finances of the company. The pending proceedings initiated for economic offences against the directors, the promoters, companies and firms promoted by the promoters indicating their present status.
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Particulars
Remarks Government of India, represented by the President of India disclosed as promoter with no additional details No promoter group companies disclosed. However, the disclosures w.r.t Subsidiaries need to be made Clause 49 of the listing agreement
REC Yes
Promoter
No
No
No
No
Corporate governance
Yes
Yes
Yes
Yes
Issue structure
Yes
No*
No*
Yes
* Obtained relaxation from SEBI and issue structure is 50% to QIB, 15% to HNI and 35% Retail # Based on DRHP filed with SEBI
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Has 2689 branches + subsidiaries in India (BOB Caps, BOB Cards, BOB AMC) + foreign subsidiaries
Bank of Baroda
Limited Review for June 2005 numbers allowed. Limited Review done for only select (around 20 branches) by auditors and rest were relied on by auditors. Limited review of foreign subsidiary for June 2005 allowed.
Need to comply with Corporate governance norms Promoters contribution and lock-in
Promoter is president of India NTPC Relaxation in disclosure of promoter and promoter group in offer document.
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Intermediaries Involved
Intermediaries Involved
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Overall Co-ordination Conduct due diligence and finalize disclosure in Offer Document Assist the legal counsel in drafting of Offer Document Interface / ensure compliance protocol with SEBI / NSE / BSE Legal Due Diligence
Lead Managers
Bankers
Self Certified Syndicate Bank (SCSB)
Acting as collecting agents for ASBA (Application Supported by Block Amount) process
Co-ordination with the Issuer and Bankers regarding collections, reconciliation, refunds etc
Securing allocation approval from Stock Exchanges Post issue co-ordination collation and reconciliation of information
Reviewing and auditing financials and preparing financial statements for inclusion in the Offer Document Verify/audit various financial and other data used in the Offer document and provide Comfort Letter
Bulk printing of the Red Herring Prospectus Bid Forms, final Prospectus, CAN, Refund orders etc.
Ensure timely dispatch and distribution of stationery to all centers Preparing and getting published all statutory notices Creating all advertisement materials 33
Listing
Issuer
Due diligence Allotment
Issue Closure
Pre-Marketing
Roadshows
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Listing
Issuer
RoC filing of final Prospectus
Due diligence
Pre-Marketing
Roadshows
Book building
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Thank You
Thank You
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