1. Topic: pricing of a public issue

2. Kinds of issue or methods of floating new issue
public issue
Right issue
Private placement
Employees stock option plan(esop)
Bonus issue

3. Contents of prospectus
Name &brief history of company
Address of the registered office
Location of industry
Objectives
Names &address of directors
Date of opening & closing of subscription list
Minimum subscription
Names of brokers, underwriters, bankers, managers etc.

4. Initial public offering (ipo)
Ipo simply as an offering or floatation is when a company issues common stock or shares to the public for the first time.
It can be a risky investment.
It is the selling of securities to the public in the primary stock market.

5. Methods of pricing Fixed price method Book building process
Reverse book building
Green shoe option(g s o)
Differential pricing

6. Fixed price method
A fixed price of offer is decided and it is mentioned in the offer document

7. Book building process It is the process of price discovery
It determined on the basis of demand from investors.
It is the process of fixing price for an issue of securities on a feedback from potential investors based upon their perception about the company
The issue price is not determined in advances, the book running lead manager(b r l m) arrives at a price at which the issue is to be made.

8. There is auction of shares and the issuer discloses a floor price in the red herring prospectus
Price band is the price range with floor price
Cap price within which the investors can bid spread of it shalln’t exceed20%
In the case of ipo disclosure it at least 2 working days before the opening

9. In fpo(follow up public offer)at least 1day before
Bid price below cutoff will reject
The final prospectus with all the details will be filled with the registrar of companies
The cutoff option is available for only retail individual investors .such investors need to tick the option ,which means the willingness to subscribe any price within the price band.

10. The process of book building
In the case of it the company will first of all appoint a lead manager to the issue.
Then the price band of the issue is decided
A price band is a range of lower level and the upper level within which the investors can bid.
The lower level of the price band is called floor price . The upper level is cap price
The lead manager is book runner

11. He will open a book in which the no: of shares applied for all as well as the price quoted by the select group of investors are recorded.
On the closure of the issue, based on the demand received at various price levels within the specified price band, the cutoff price is determined. normally all bids below cutoff price will be rejected.

12. Types of book building system
It is a type where the demand for the securities and the bids need to be displayed online on the website of the stock exchange
It is the book which is not made public and cannot know about the bids submitted .by other bidder
Open book
Closed book

13. factor
Fixed price
Book building
price
Exact price at which securities are available are known in advance
Only an indicative price range is known in advance. exact price is not known in advance
demand
Market demand for the securities is known only after the closure of issue
Demand for the securities can be known daily based on bids
payment
Payment for the securities is to be given at the time of application
Payment need to be given only at the time of allotment
refund
Refund will be made after allocation
No question of refund

14. Book building
Helps issuers to find out price and demand in advance
Underwriting is not required
Reduce cost and time
Simple procedure
Offer price would be dependable
Chance of security price falling will be less
Companies may be forced to issue at lower price due to the collective bargaining power of the institutional bidders
Retail investors have only limited role in determining the offer price
advantages
disadvantages

15. Reverse book building
It is used to delist the company’s share .it is used to find the price at which the shares are available for buyback from the shareholders.
It would be above or equal to floor price done under the provisions of SEBI guidelines2003,co-ordinated by BRLM.
It is a process by a company to determine the price at which its own shares shall be bought back from the shareholders

16. Offers are collected from the shareholders at various price levels for selling their shares to company.
The buyback price is determined after the offer closing date.

17. Green shoe option (GSO)
There could be much difference between the issue price and market price of a share, immediately after listing .It would either affect the existing shareholders or the new shareholders.
In order to avoid such situation companies adopt a new method called GSO.it is also called over allotment option.

18. It was green shoe company which adopted this method for the first time and thus got this name
The money raised through this over allotment will be kept in a separate bank a/c under the control of a merchant banker called stabilising agent

19. The merchant banker is responsible for stabilising the price for the specified period after the listing of the securities in the stock exchange
It help the investors due to 2 reason
It help to reduce instability in post listing price
The chances of getting allotment is more in the case of such issues due to over allotment to the extent of15%

20. Differential pricing
It is a system of offering shares at a different price for a particular category of investors . it would be allotted at a discount .the difference shall not be more than 10%of price

21. Categories of investors who can invest in an IPO
Qualified institutional bidders(QIB)
Non institutional investors
Retail investors

22. QIB
Under this head , financial institutional such as bankers , mutual fund , insurance companies , foreign institutional investors etc are permitted to bid
A maximum of 50%of issue kept reserved for investors falling under QIB category
Out of 50%shares ,5%are reserved for mutual funds
These are commercial banks , state industrial development corporation(SIDC),provident fund(PF),pension fund , venture capital fund , public financial institutions etc.

23. Non institutional investors
Under this , resident Indian individuals, HUF’s, companies , corparate bodies ,NRI’s ,societies and trusts whose application size in terms of value of more than 1lakh are alloted to bid.
At least 15%of total issue reserved for non instituitonal bidders.

24. RETAIL INVESTORS
Under this, only individuals , both resident and NRI’s along with HUF’s are alloted to bid
At least 35% of issue is reserved for such investors
If one want to apply under this the application size in terms of value shouldn’t exceed 1lakh

25. THANK YOU
PRESENTED BY,
JITHU T REJI