Description
This is a presentation about the the role of merchant banking when a company is coming with an IPO.
Merchant banking
Merchant banking
? Issue management:
? The merchant bankers help corporates to raise
money from the markets through the issue of shares, debentures, bonds etc. They are designed as managers to the issue. Their main business is to attract public money to capital issues.
Merchant banking
? They usually render the following services:
? Drafting of prospectus and getting it approved from
the stock exchanges. ? Obtaining consent/acknowledgement from SEBI. ? Appointing bankers, underwriters, brokers, advertisers, printers’ etc. ? Obtaining the consent of all the agencies involved in the public issue.
Merchant banking
?
? ?
Holding road shows, to sell the issue. These shows are held for the analysts, brokers and institutional investors. The purpose of these shows is to answer queries from these people about the company and the project for which the funds are being raised Deciding the pattern of advertising. Deciding the branches where application money should be collected
Merchant banking
? ? ? ?
Preparing an action plan and budget for the total expenses for the issue. Preparation of application to SEBI and assistance in obtaining the consent from SEBI. Drafting of the prospectus. Selection of underwriters, brokers etc.
IPO Guidelines
? An unlisted company has to satisfy the following
criteria to be eligible to make a public issue ? Pre-issue networth of the co. should not be less than Rs.1 crore in last 3 out of last 5 years with minimum networth to be met during immediately preceding 2 years and ? track record of distributable profits for at least three (3) out of immediately preceding five (5) years and
IPO Guidelines
?
The issue size (i.e. offer through offer document + firm allotment + promoters’ contribution through the offer document) shall not exceed five (5) times its pre-issue networth.
? A listed company is eligible to make a public issue if the
IPO Guidelines
issue size (i.e. offer through offer document + firm allotment + promoters’ contribution through the offer document) is less than five (5) times its pre-issue networth. ? If the issue size is more than or equal to 5 times of preissue networth, then the listed company has to take the book building route and allot sixty percent (60%) of the issue size to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded.
?
IPO Guidelines
? The companies can freely price their equity
shares. However they have to give justification of the price in the offer document / letter of offer ? In case of an Initial Public Offer (IPO) i.e. public issue by unlisted company, the promoters have to necessarily offer at least 20% of the post issue capital.
IPO Guidelines
? In case of public issues by listed companies,
the promoters shall participate either to the extent of 20% of the proposed issue or ensure post-issue share holding to the extent of 20% of the post-issue capital. ? In case of any issue of capital to the public the minimum contribution of promoters shall be locked in for a period of 3 years, both for an IPO and Public Issue by listed companies
IPO Guidelines
? In case of an IPO, if the promoter’s
contribution in the proposed issue exceeds the required minimum contribution, such excess contribution shall also be locked in for a period of one year. ? In case of a public issue by a listed company, participation by promoters in the proposed public issue in excess of the required minimum percentage shall also be locked-in for a period of one year as per the lock-in provisions as specified in Guidelines on Preferential issue.
IPO Guidelines
? Beside the above, in case of IPO the entire pre-
issue share capital i.e. paid up share capital prior to IPO and shares issued on a firm allotment basis along with issue shall be locked-in for a period of one year from the date of allotment in public issue.
IPO Guidelines
? In case of over-subscription in a fixed price issue the
allotment is done in marketable lots, on a proportionate basis (for details refer to clause 7.6.1 of DIP Guidelines). ? In case of a book building issue, allotment to Qualified Institutional Buyers and Non-Institutional buyers are done on a discretionary basis. Allotment to retail investors is done on a proportionate basis as per provisions of Clause No. 7.6.1 of Guidelines.
IPO Guidelines
? Despatch of refund orders / allotment advice is to be
within 2 working days of finalisation of the basis of allotment ? Companies are required to finalise the basis of allotment within 30 days from the closure of the issue in case of a fixed price issue and within 15 days from the closure of the issue in case of a book building issue or else they are liable to pay interest @ 15% p.a.
IPO Guidelines
? The post issue lead manager ensures that all
steps for completion of the necessary formalities for listing and commencement of trading at all stock exchanges where the securities are to be listed are taken within 7 working days of finalisation of basis of allotment.
IPO Guidelines
? An investor has the option to apply for and
receive the shares in physical form. However, it is advisable to get the allotment in Demat form, as the shares in IPO shall be compulsorily tradable in Demat segment in Stock Exchanges. Dealing of physical shares (allocated in IPO) will not be accepted. In case of an IPO of any security of issue size of Rs. 10 crore or more, security shall be issued only in dematerialised form. In book built issues, for QIBs and large investors (applying for more than 1000 shares) allotment shall be only in Demat form and hence they should have a Demat account.
IPO Guidelines
? SEBI Guidelines define Book Building as a
process undertaken by which a demand for the securities proposed to be issued by a corporate body is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document
IPO Guidelines
? Price at which securities will be allotted is not
known in case of offer of shares through book building while in case of offer of shares through normal public issue, price is known in advance to investor. In case of Book Building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue
IPO Guidelines
? Book should remain open for minimum of 5 days.
? As per SEBI, only electronically linked transparent
facility is allowed to be used in case of book building.
doc_388329624.ppt
This is a presentation about the the role of merchant banking when a company is coming with an IPO.
Merchant banking
Merchant banking
? Issue management:
? The merchant bankers help corporates to raise
money from the markets through the issue of shares, debentures, bonds etc. They are designed as managers to the issue. Their main business is to attract public money to capital issues.
Merchant banking
? They usually render the following services:
? Drafting of prospectus and getting it approved from
the stock exchanges. ? Obtaining consent/acknowledgement from SEBI. ? Appointing bankers, underwriters, brokers, advertisers, printers’ etc. ? Obtaining the consent of all the agencies involved in the public issue.
Merchant banking
?
? ?
Holding road shows, to sell the issue. These shows are held for the analysts, brokers and institutional investors. The purpose of these shows is to answer queries from these people about the company and the project for which the funds are being raised Deciding the pattern of advertising. Deciding the branches where application money should be collected
Merchant banking
? ? ? ?
Preparing an action plan and budget for the total expenses for the issue. Preparation of application to SEBI and assistance in obtaining the consent from SEBI. Drafting of the prospectus. Selection of underwriters, brokers etc.
IPO Guidelines
? An unlisted company has to satisfy the following
criteria to be eligible to make a public issue ? Pre-issue networth of the co. should not be less than Rs.1 crore in last 3 out of last 5 years with minimum networth to be met during immediately preceding 2 years and ? track record of distributable profits for at least three (3) out of immediately preceding five (5) years and
IPO Guidelines
?
The issue size (i.e. offer through offer document + firm allotment + promoters’ contribution through the offer document) shall not exceed five (5) times its pre-issue networth.
? A listed company is eligible to make a public issue if the
IPO Guidelines
issue size (i.e. offer through offer document + firm allotment + promoters’ contribution through the offer document) is less than five (5) times its pre-issue networth. ? If the issue size is more than or equal to 5 times of preissue networth, then the listed company has to take the book building route and allot sixty percent (60%) of the issue size to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded.
?
IPO Guidelines
? The companies can freely price their equity
shares. However they have to give justification of the price in the offer document / letter of offer ? In case of an Initial Public Offer (IPO) i.e. public issue by unlisted company, the promoters have to necessarily offer at least 20% of the post issue capital.
IPO Guidelines
? In case of public issues by listed companies,
the promoters shall participate either to the extent of 20% of the proposed issue or ensure post-issue share holding to the extent of 20% of the post-issue capital. ? In case of any issue of capital to the public the minimum contribution of promoters shall be locked in for a period of 3 years, both for an IPO and Public Issue by listed companies
IPO Guidelines
? In case of an IPO, if the promoter’s
contribution in the proposed issue exceeds the required minimum contribution, such excess contribution shall also be locked in for a period of one year. ? In case of a public issue by a listed company, participation by promoters in the proposed public issue in excess of the required minimum percentage shall also be locked-in for a period of one year as per the lock-in provisions as specified in Guidelines on Preferential issue.
IPO Guidelines
? Beside the above, in case of IPO the entire pre-
issue share capital i.e. paid up share capital prior to IPO and shares issued on a firm allotment basis along with issue shall be locked-in for a period of one year from the date of allotment in public issue.
IPO Guidelines
? In case of over-subscription in a fixed price issue the
allotment is done in marketable lots, on a proportionate basis (for details refer to clause 7.6.1 of DIP Guidelines). ? In case of a book building issue, allotment to Qualified Institutional Buyers and Non-Institutional buyers are done on a discretionary basis. Allotment to retail investors is done on a proportionate basis as per provisions of Clause No. 7.6.1 of Guidelines.
IPO Guidelines
? Despatch of refund orders / allotment advice is to be
within 2 working days of finalisation of the basis of allotment ? Companies are required to finalise the basis of allotment within 30 days from the closure of the issue in case of a fixed price issue and within 15 days from the closure of the issue in case of a book building issue or else they are liable to pay interest @ 15% p.a.
IPO Guidelines
? The post issue lead manager ensures that all
steps for completion of the necessary formalities for listing and commencement of trading at all stock exchanges where the securities are to be listed are taken within 7 working days of finalisation of basis of allotment.
IPO Guidelines
? An investor has the option to apply for and
receive the shares in physical form. However, it is advisable to get the allotment in Demat form, as the shares in IPO shall be compulsorily tradable in Demat segment in Stock Exchanges. Dealing of physical shares (allocated in IPO) will not be accepted. In case of an IPO of any security of issue size of Rs. 10 crore or more, security shall be issued only in dematerialised form. In book built issues, for QIBs and large investors (applying for more than 1000 shares) allotment shall be only in Demat form and hence they should have a Demat account.
IPO Guidelines
? SEBI Guidelines define Book Building as a
process undertaken by which a demand for the securities proposed to be issued by a corporate body is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document
IPO Guidelines
? Price at which securities will be allotted is not
known in case of offer of shares through book building while in case of offer of shares through normal public issue, price is known in advance to investor. In case of Book Building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue
IPO Guidelines
? Book should remain open for minimum of 5 days.
? As per SEBI, only electronically linked transparent
facility is allowed to be used in case of book building.
doc_388329624.ppt