CHAPTER: 1

INTRODUCTION OF INDUSRTY

Indian stock market marks to be one of the oldest stock market in Asia. It dates back to the close
of 18th century when the east India Company used to transact loan securities. In the 1830s,
trading on corporate stock and shares in bank and cotton presses took place in Bombay. Thought
the trading was broad but the brokers were hardly half dozen during 1840 and 1850.

The Indian broking industry has come a long way in the last two decade. The industry has shed
most of its negative trappings of the past and is now being considered a preferred sector for
building long term careers by professionals from all disciplines. Unprecedented growth of
market volumes and growing participation by investors spread beyond the traditional
geographical pockets, coupled with professionalization of work cultures and demand for value-
added services like investment advisory and portfolio management, has created a huge demand
for talent at all levels.

This growth story is expected to be sustained for at least a decade or even more because of the
steady increase in the investor penetration and wider acceptance of stock investments as a
reliable option for long term wealth creation. Robust all round economic growth and favorable
demographics are other important factors which are transforming India from a nation of savers to
investors. Improved quality of the Indian regulatory framework and high compliance standards,
have led to greater transparency in all transactions and minimized the systemic risks.

Historically, the Indian financial services industry has been dominated by the banking sector.
However, globalization & liberalization of Indian Equity Markets has led to rapid modernization
and the professionalization of the financial sector. This has led to the emergence of the broking
industry, as an important part of the financial services sector, competing for talent with banks,
insurance companies, NBFCs etc.

The Indian Broking industry has indeed come of age & is attracting huge investments from large
domestic corporate houses as well as from international players. The Indian Broking industry is
now in a most exciting phase and is likely to grow at a much faster rate compared with many
other sectors. High quality Research & Advice, State-of-the-art Technology & Business
Analytics, Progressive HR Practices and CRM/Quality Management systems, have emerged as
the new drivers of competitive advantage in this business. The scope of services provided by
domestic brokerages has also moved up the value chain from mere Execution & Settlement to
cover the full range of financial products to meet the diverse needs of customers,

In conclusion, it would be appropriate to say that the Indian Broking industry is now one of the
hottest destinations for job seekers at the entry level as well as for experienced professionals a
trend which is here to stay!!!
Stock markets have set trading hours when they are open for business. For Example, the Indian
stock exchange is working between 9:15am and 3:30. London stock exchange is working
between 8:00am and 4:30pm.

Because stock market have globalized it is possible to trade around the clock by using different
market, e.g. in Europe, London, North America and Asia. Some large international companies are
traded on more than one exchange they can then raise capital from a wider investor base,
meaning their shares can be continually traded.

The Indian stock market has been assigned an important place in financing the Indian corporate
sector. The principal functions of the stock market are:

Enabling Mobilizing resources for investing directly from the investors.

Providing liquidity for the investor and monitoring.
Disciplining company management.

The two major stock exchanges in India are:-

National Stock Exchange(NSE)

National stock exchange incorporated in the year 1992 provides trading in the equity as
well as debt market. A maximum volume take place on NSE and hence enjoy leadership
position in the country today. NSE is a well-diversified 50 stock index according for 22
sectors of the economy. It is used for a variety of purposes such as benchmarking fund
portfolios, index based derivatives and index funds.

NSE came to be owned and managed by India index service and products ltd. (IISL),
which is a joint venture between NSE and CRISIL, IISL, is Indias first specialised
company focused upon the index as a core product. IISL have a consulting and licensing
agreement with standard & poors(S&P), who are world leaders in index services. CNX
stands for CRISIL NSE indices. CNX ensures common branding of indices, to reflect the
identities of both the promoters, i.e. NSE and CRISIL. Thus, C stands for CRISIL, N
stands for NSE and X stands for Exchange or index. The S&P prefix belongs to the US
based standard & poors financial information services.

Bombay Stock Exchange(BSE)

 Bombay stock exchange on the other hand was set up in the year 1875 as THE NATIVE
SHARE & STOCK BROKERS ASSOCIATION and is the oldest stock exchange in
Asia. It obtained permanent recognition in 1956 from the government of India under
securities contracts(Regulation) act, 1956.The Exchanges pivotal and pre-eminent role in
development of the Indian capital market is widely recognised and index, SENSEX, is
tracked worldwide. It has evolved in to its present status as the premier stock exchange.

SENSEX
The stock Exchange, Mumbai (BSE) in 1956 came out with a stock index that
subsequently became the barometer of the Indian stock market.
SENSEX is not only scientifically designed but also based on globally accepted
construction and review methodology. First complied in 1986, SENSEX is a basket of 30
constituent stocks representing a sample of large, liquid and representative companies,
the base year of SENSEX is1978-79 and the base value is 100. The index is widely
reported in both domestic and international markets through print as well as electronic
media.
Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the
pulse of the Indian stock market. As the oldest Index in the country,
it provides the time series data over a fairly long period of time. Small wonder, the
SENSEX has over the years become one of the most prominent brands in the country.
The SENSEX captured all these events in the most judicial manner. One can identify the
booms and busts of the Indian stock market through SENSEX.
The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of
BSE national Index (base: 1983-84=100). It comprised of 100 stocks listed at 5 major
stock exchanges.

PRIMARY MARKET
New Issues Market is that part of capital market where dealing exchanges takes the boundaries
de-marketing the financial services are fast eroding. Thanks to the innovations in the financial
services, the movement towards made by existing companies are known as further issues.

The primary market is that part of the capital markets that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain funding through the
sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers.
The process of selling new issues to investors is called underwriting. In the case of a new stock
issue, this sale is an initial public offering (IPO) Dealers earn commission that is built into the
price of the security offering. Though it can be found in the prospectus.

Mutual funds are seemingly the easiest and the least stressful way to invest in the stock market.
Quiet a large amount of money has been invested in mutual funds during the past few years Any
investor would like to invest in a reputed Mutual Fund organization. UTI is one such
organization that provides a better overview of the Mutual Fund industry. Understanding the
attitude of investors on their investment would help the company to increase their profits. In UTI
they believe that the investors attitude would result in profits.

The primary market, also called the new issue market, is the market for issuing new securities.
Many companies, especially small and medium scale, enter the primary market to raise money
from the public to expand their businesses. They sell their securities to the public through an
initial public offering. The securities can be directly bought from the shareholders, which is not
the case for the secondary market. The primary market is a market for new capitals that will be
traded over a longer period.

In the primary market, securities are issued on an exchange basis. The underwriters, that is, the
investment banks, play an important role in this market: they set the initial price range for a
particular share and then supervise the selling of that share.
Investors can obtain news of upcoming shares only on the primary market. The issuing firm
collects money, which is then used to finance its operations or expand business, by selling its
shares. Before selling a security on the primary market, the firm must fulfill all the requirements
regarding the exchange.

After trading in the primary market the security will then enter the secondary market, where
numerous trades happen every day. The primary market accelerates the process of capital
formation in a country's economy.

The primary market categorically excludes several other new long-term finance sources, such as
loans from financial institutions. Many companies have entered the primary market to earn profit
by converting its capital, which is basically a private capital, into a public one, releasing
securities to the public. This phenomena is known as "public issue" or "going public."

There are three methods thought which securities can be issued on the primary market; rights
issue, Initial Public Offer (IPO).and preferential issue. A companys new offering is placed on the
primary market through an initial public offer.

1. Market in which buyers and sellers negotiate and transact business directly, without any
intermediary such as resellers.
2. Financial market in which newly issuers securities are offered to the public.

Features of primary markets are:

This is the market for new long term equity capital. The primary market is the market
where the securities are sold for the first time. Therefore it is also called the new issue
market (NIM).
In a primary issue, the securities are issued by the company directly to investors.
The company receives the money and issues new security certificates to the investors.
Primary issues are used by companies for the purpose of setting up new business or for
expanding or modernizing the existing business.
The primary market performs the crucial function of facilitating capital formation in the
economy.
 PARTIES INVOLVED IN PRIMARY MARKET

Market: - Actual or conceptual place in commercial world where forces of demand and
supply operate, and where buyers and sellers interact (directly or through intermediaries)
to trade goods, services, or contracts or instruments for money or barter. Markets include
mechanisms or means for

(1) Determining price of the traded item,

(2) Communicating the price information

(3) Facilitating deals and transactions, and

(4) Effecting distribution Market

For a particular item is made up of existing and potential customers who need it and have
the ability and willingness to pay for it. All markets. ultimately, consist of people also
called marketplace.
Buyer: -

1. Party which acquires, or agrees to acquire, ownership (in case of goods), or benefit or
usage (in case of services), in exchange for money or other consideration under a
contract of sale also called purchaser.

2. Professional purchaser specializing in a specific group of materials, goods, or

services, and experienced in market analysis, purchase negotiations, bulk buying, and
delivery coordination.

Seller: - Entity that makes, or offers or contracts to make, a sale to an actual or potential
buyer. Also called vendor particularly the one selling a real property.
 Negotiation: -

1. General: Bargaining (give and take) process between two or more parties (each with its
own aims, needs, and viewpoints) seeking to discover a common ground and reach an
agreement to settle a matter of mutual concern or resolve a conflict.

2. Banking: Accepting or trading a negotiable instrument.

3. Contracting: Use of any method to award a contract other than sealed bidding.

4. Trading: Process by which a negotiable instrument is transferred from one party

(transferor) to another (transferee) by endorsement or delivery. The transferee takes the
instrument in good faith, for value, and without notice of any defect in the title of the
transferor, and obtains an indefeasible title.

Business: - Economic system in which goods and services are exchanged for one another
or money, on the basis of their perceived worth. Every business requires some form of
investment and a sufficient number of customers to whom its output can be sold at profit
on a consistent basis.

Intermediary: - Firm or person (such as a broker or consultant) who acts as a mediator

on a link between parties to a business deal, investment decision, negotiation, etc. In
money markets, for example, banks act as intermediaries between depositors seeking
interest income and borrowers seeking debt capital. Intermediaries usually specialize in
specific areas, and serve as a conduit for market and other types of information. Also
called a middleman. See also intermediation.

Reseller: - One who buys good, from a manufacturer and resells them customers
unchanged.
 INTRODUCTION OF IPO

IPO or Initial Public Offer is a way for a company to raise money from investors for its future
projects and get listed to Stock Exchange. Or An Initial Public Offer (IPO) is the selling of
securities to the public in the primary stock market.
The term initial public offering (IPO) slipped into everyday speech during the tech bull market of
the late 1990s. Back then, it seemed you couldn't go a day without hearing about a dozen new
dotcom millionaires in Silicon Valley who were cashing in on their latest IPO

An initial public offering, or IPO, is the first sale of stock by a company to the public. A
company can raise money by issuing either debt or equity. If the company has never issued
equity to the public, it's known as an IPO.

Companies fall into two broad categories: private and public. A privately held company has
fewer shareholders and its owners don't have to disclose much information about the company.
Anybody can go out and incorporate a company: just put in some money, file the right legal
documents and follow the reporting rules of your jurisdiction. Most small businesses are
privately held.

It usually isn't possible to buy shares in a private company. You can approach the owners about
investing, but they're not obligated to sell you anything. Public companies, on the other hand,
have sold at least a portion of themselves to the public and trade on a stock exchange. This is
why doing an IPO is also referred to as "going public."

Public companies have thousands of shareholders and are subject to strict rules and regulations.
They must have a board of directors and they must report financial information every quarter. In
the United States, public companies report to the Securities and Exchange Commission (SEC). In
other countries, public companies are overseen by governing bodies

Similar to the SEC. From an investor's standpoint, the most exciting thing about a public
company is that the stock is traded in the open market, like any other commodity. If you have the
cash, you can invest. The CEO could hate your guts, but there's nothing he or she could do to
stop you from buying stock.

When a company wants to go public, the first thing it does is hire an investment bank. A
company could theoretically sell its shares on its own, but realistically, an investment bank is
required - it's just the way Wall Street works. Underwriting is the process of raising money by
either debt or equity (in this case we are referring to equity). You can think of underwriters as
middlemen between companies and the investing public. The biggest underwriters are Goldman
Sachs, Credit Suisse First Boston and Morgan Stanley.
Flipping is reselling a hot IPO stock in the first few days to earn a quick profit. This isn't easy to
do, and you'll be strongly discouraged by your brokerage. The reason behind this is that
companies want long-term investors who hold their stock, not traders.

Broadly speaking, companies are either private or public. Going public means a company is
switching from private ownership to public ownership.

Definition of IPO:
The securities which the companies issue for the first time to the public either after
incorporation or on conversion from private to public company is called INITIAL PUBLIC
OFFERING or IPO. Company raising money through IPO is also called as Company Going
Public.

Reasons for Going Public

To raise funds for financing capital expenditure needs like expansion diversification etc.

To finance increased working capital requirement

As an exit route for existing investors

For debt financing.

If the corporation chooses to sell ownership to the public, it engages in an IPO. Corporations
choose to "go public" instead of issuing debt securities for several reasons. The most common
reason is that capital raised through an IPO does not have to be repaid, whereas debt securities
such as bonds must be repaid with interest. Despite this apparent benefit, there are also many
drawbacks to an IPO. A large drawback to going public is that the current owners of the privately
held corporation lose a part of their ownership.

Corporations weigh the costs and benefits of an IPO carefully before performing an IPO.
If a corporation decides that it is going to perform an IPO, it will first hire an investment bank to
facilitate the sale of its shares to the public. This process is commonly called "underwriting"; the
bank's role as the underwriter varies according to the method of underwriting agreed upon, but
its primary function remains the same.

Basically, going public (or participating in an "initial public offering" or IPO) is the process in
which a business owned by one or several individuals is converted into a business owned by
many. It involves the offering of part ownership of the company to the public through the sale of
debt or more commonly, equity securities (stock).
The promoter, as a principal representative of the company which is making the public issue,
should be clear in his mind about the number of agencies involved and their respective roles in
the entire exercise so as to be able to coordinate effectively the efforts of these agencies. These
functionaries are:

Promoters: - Modern industrial enterprises require large amounts of capital which can
only be raised by resorting to the joint stock company is done by company promoters and
syndicates. It is the promoter who is responsible for conception or discovery of the idea
to exploit the possibility of some industrial proposition. He has to work up details,
formulate the financial plan, which he usually does with the help of an issue house and
finally he has to put his proposition into active operation. The work of the promoter
entails difficulties and risks and sometimes he has to stake his whole fortune and
reputation in order to make the venture a success. Prior to founding the company a lot of
expenditure has to be incurred by the promoter on employment of engineers, technical
and other experts. In case the company is successfully established and investors come
forth to take up its shares, the promoter is duly rewarded, otherwise he stands to lose not
only his money he had sunk in the venture but his reputation as well.
The promoter, if he is well endowed financially, will work alone, but in the case of
projects of large dimensions he usually form a syndicate. All members of the syndicate
work up the possibilities of the proposition and undertake the investigation and
examination of the scheme. It may be turned over to the technical staff employed and on
its favorable report the formulation of the financial plan will be taken up by he financial
experts who are supposed to be well conversant with the conditions in the capital market.
After completing the financial plan, the work of drawing up the prospectus, the
memorandum of association and articles of association for the formal incorporation as a
company is proceeded with. After all the formalities are completed, the new company is
ready to be launched and its issue is to be placed before the public
Managers to the issue: - These persons are actively associated in the selection of various
agencies involved with new issue planning the timing of the issue, strategies to be
adopted by way of publicity and marketing of the issue, etc. they advise the company on
selection of the registrars to the issue, underwriters, brokers and bankers to the issue,
advertising agents, printer etc. and also give a sense of direction to the various agencies
involved in the entire issue. Besides, the other activities mainly performed buy them are
drafting of prospectus, preparing project profiles for underwriters, preparing budget of
expenses, suggesting the appropriate timings for the public issue, assisting in marketing
the public issue successfully, etc. there are a number of agencies specializing in the role
of managers to the issue. These merchant banking divisions of some all India financial
institutions, subsidiaries of commercial banks and also some private agencies where
traditional stock brokers have graduated into providing specialized merchant banking
services.
 SEBI has made the registration of merchant bankers compulsory to ensure that only
professionals with requisite qualification and financial background enter into the job.
These MBs are classified into four categories where the first category MBs must have a
minimum net worth of Rs.100 lacs and can undertake all activities of issue management
(preparation of prospectus, determining financial structure, final allotment and refund of
subscription) portfolio management, underwriting, consultant or advisers in the issue. The
second categories of MBs must have a minimum net worth of Rs.50 lacs and can
undertake all activities except issue management. The third categories of MBs must have
a minimum net worth of Rs.20 lacs and can undertake works of underwriter, adviser and
consultant while there is no minimum net worth requirement for fourth category of MBs
but they can function as adviser or consultant only.

Registrars: - The registrars sometimes, also called the issue house are responsible
normally for receiving the share applications from the various collection centers through
controlling branches of bankers to the issue, analyzing them, recommending the basis of
allotment in consultation with the managers to the regional stock exchange for approval
arranging for dispatch of allotment letters and preparing the register of members, etc.
their job normally starts with the opening of the subscription list, and continues till the
share certificates are dispatched, and register of members along with other related
registers/details are handed over to the company. Sometimes, the registrars to issue
continue their association with the company in the role of share transfer agents, even after
the issue is completed.

Underwriters: - The underwriters are the people who actually ensure that the company is
able to raise the capital issued by it for a commission charged by them. They make a
commitment to get the issue subscribed either by others or themselves. Usually the
underwriters can be divided into two categories, namely, financial institutions and banks
on the one hand, and broker underwriters and approved investment companies/trust, on
the other.

Brokers: - These are the people who actually bring the prospective investors and the
company together. It may not be an exaggeration to state that the success or failure of a
public issue depends to large extent on the reaction of the brokers. Generally, they are the
members of recognized stock exchanges, with a view to providing better and professional
services to investing public and to promote development of capital market on healthy
lines, the government has since allowed multiple membership to members of stock
exchanges and accorded recognition to corporate entities and the financial institutions
including subsidiaries of the banks.

Bankers: - These are the commercial banks, which will receive the application money
along with the share application forms from the prospective investors. Depending upon
the size of the issue, at least 4 or 5 banks are designated as bankers to the issue. Different
 branches of these banks are named at various locations where such application money is
accepted. These collecting branches send the application forms and the money received
by them to specified branch, where the details of the application are consolidated. Such
specified branch of the banker to the issue is called controlling branch/ the controlling
branch is usually selected in the city where the managers to the issue/registrars to the
issue/registered office of the company is situated. However, it is not necessary that
controlling branch should be at a place where the managers to the issue/ registrars to the
issue/registered office of the company is situated.

Publicity and advertising agents: - Public issue is an effort to motivate and persuade
members of the public to invest in the shares of the company. It is, therefore, essential
that the general public is made aware of the company, its activities, its plans for future,
etc. it is of vital importance that publicity is given before the public issue by giving
newspaper and TV advertisements. Press releases, press conference, leaflets and
brochures, hoardings and posters and even audio visual shows are the usual media of
publicity used for public issue. There are some advertising agencies, which specialize in
financial advertising and publicity campaign for public issues.

Financial institutions: - Term lending financial institutions at the time of sanctioning

underwriting support loans to the company, usually stipulate that the draft of the
prospectus and also the proposed program for public issue is approved by them. The three
principal all India financial institutions are the IDBI, IFCI and ICICI. Even when all the
three institutions jointly finance a project under their participating finance scheme, one of
them is generally chosen as the lead financials institution which acts on behalf of the
other two. Hence, it is generally adequate if the company obtains the necessary approval
from the regional office of the lead institution only. In some cases where other institutions
like the LIC, GIC, UTI, etc. have also given financial assistance, it might be necessary to
seek separate approvals from them, if insisted for. But generally an advance copy of the
draft prospectus is sent to them with a request forward their comments, if any, direct to
lead institution.

Other Agencies: -In addition, the company will also have a interaction with other
agencies like auditors, legal advisors, taxation or technical experts whose names or
statements are mentioned or quoted in the prospectus.

Government/Statutory Agencies: -Besides the various agencies which are directly

connected with a public issue whose efforts will have to be coordinated by the company,
there are some statutory/government agencies that are connected with public issue.
Advantages of Going Public:

Stock Holders diversification: As a company grows and becomes more valuable, its founders
often have most of its wealth tied up in the company. By selling some of their stock in a public
offering, the founders can diversify their holdings and thereby reduce somewhat the risk of their
personal portfolios.

Easier to raise new capital: If a privately held company wants to raise capital a sale of a new
stock, it must either go to its existing shareholders or shop around for other investors. This can
often be a difficult and sometimes impossible process. By going public it becomes easier to find
new investors for the business.

Enhances liquidity: The sock of a closely held firm is not liquid. If one of the holders wants to
sell some of his shares, it is hard to find potential buyers-especially if the sum involved is large.
Even if a buyer is located there is no establishes price at which to complete the transaction.
These problems are easily overcome in a publicly owned company.
Establishes value for the firm: This can be very useful in attracting key employees with stock
options because the underlying stock have a market value and a market for them to be traded that
allows for liquidity for them.

Image: The reputation and visibility of the company increases. It helps to increase company and
personal prestige.

Other Advantages: Like additional incentive for employees in the form of the companies
stocks. This also helps to attract potential employees. It commands better valuation of the
company. Better situated for making acquisitions.

Disadvantages of Going Public:

Cost of Reporting: A publicly owned company must file quarterly reports with the Securities
and exchange Board of India. These reports can be costly especially for small firms. Disclosure:
Management may not like the idea or reporting operating data, because such data will then be
available to competitors.

Self dealings: The owners managers of closely held companies have many opportunities for
self-transactions, although legal they may not want to disclose to the public.
 Inactive market low price: If a firm is very small and its and its shares are not traded
frequently, then its stock will not really be liquid and the market price may not be truly
representative of the stocks value.

Control: Owning less than 50% of the shares could lead to a loss of control in the management.

Other disadvantages: The profit earned by the company should be shared with its investors in
the form of dividend. It is a costly affair around 15-20% of the amount realized is spent on
raising the same and also substantial amount of time and effort has to be investing for going
public.

Opportunities to Investors and Company:

From an investor point of view, IPO gives a chance to buy shares of a company, directly from the
company at the price of their choice (In book build IPO's). Many a times there is a big difference
between the price at which companies decides for its shares and the price on which investor are
willing to buy share and that gives a good listing gain for shares allocated to the investor in IPO.
From a company prospective, IPO help them to identify their real value which is decided by
millions of investor once their shares are listed in stock exchanges. IPO's also provide funds for
their future growth or for paying their previous borrowing.

Factors to be considered before applying for an IPO:

There are certain factors which need to be taken into consideration before applying for Initial
Public Offerings in India:

Historical record of the firm providing the Initial Public Offerings

Promoters, their reliability and past records

Products offered by the firm and their potential going forward

Whether the firm has entered into a collaboration with technological firm

Project value and various techniques of sponsoring the plan

Productivity estimates of the project

Risk aspects engaged in the execution of the plan

General Terms involved in IPO:

Primary market: It is the market in which investors have the first opportunity to buy a newly
issued security as in an IPO.

Prospectus: A formal legal document describing the details of the company is created for a
proposed IPO, also making the investors aware of the risks of an investment. It is also known as
the offer document.

Book building: It is the process by which an attempt is made to determine the price at which the
securities are to be offered based on the demand from investors.

Over Subscription: A situation in which the demand for shares offered in an IPO exceeds the
number of shares issued.

Green shoe option: It is referred to as an over-allotment option. It is a provision contained in an

underwriting agreement whereby the underwriter gets the right to sell investors more shares than
originally planned by the issuer in case the demand for a security issue proves higher than
expected.

Price band: Price band refers to the band within which the investors can bid. The spread
between the floor and the cap of the price band is not be more than 20% i.e. the cap should not
be more than 120% of the floor price. This is decided by the company and its merchant bankers.
There is no cap or regulatory approval needed for determining the price of an IPO.

Listing: Shares offered in IPOs are required to be listed on stock exchanges for the purpose of
trading. Listing means that the shares have been listed on the stock exchange and are available
for trading in the secondary market.

Flipping: Flippingis reselling a hot IPO stock in the first few days to earn quick profit. The
reason behind this is that companies want long-term investors who hold their stock, not traders.

The IPO Process in India

The IPO process in India consists of the following steps: -

Appointment of merchant banker and other intermediaries

Registration of offer document

Marketing of the issue

Post- issue activities

Appointment of Merchant Banker and Other Intermediaries

One of the crucial steps for successful implementation of the IPO is the appointment of a
merchant banker. A merchant banker should have a valid SEBI registration to be eligible for
appointment.

A merchant banker can be any of the following lead manager, co-manager, underwriter or
advisor to the issue.

Certain guidelines are laid down in Section 30 of the SEBI Act, 1992 on the maximum limits of
intermediaries associated with the issue:

Size of the Issue No. Of lead Managers

50 cr. 2

50 100 cr. 3

100 200 cr. 4

200 - 400 cr. 5

Above 400 cr. 5 or more as agreed by

the board

The number of co- managers should not exceed the number of lead managers.

There can only be one advisor/consultant to the issue.

There is no limit on the number of underwriters.

Other Intermediaries

Registrar to the Issue: Registration with SEBI is mandatory to take on responsibilities as a

registrar and share transfer agent. The registrar provides administrative support to the issue
process. The registrar of the issue assists in everything from helping the lead manager in the
selection of Bankers to the Issue and the Collection Centres to preparing the allotment and
application forms, collection of application and allotment money, reconciliation of bank accounts
with application money, listing of issues and grievance handling.

Bankers to the Issue: Any scheduled bank registered with SEBI can be appointed as the banker
to the issue. There are no restrictions on the number of bankers to the issue. The main functions
of bankers involve collection of application forms with money, maintaining a daily report ,
transferring the proceeds to the share application money account maintained by the controlling
branch, and forwarding the money collected with the application forms to the registrar.
Underwriters to the Issue: Underwriting involves a commitment from the underwriter to
subscribe to the shares of a particular company to the extent it is under subscribed by the public
or existing shareholders of the corporate. An underwriter should have a minimum net worth of 20
lakhs, and his total obligation at any time should not exceed 20 times the underwriters net
worth. A commission is paid to the writers on the issue pricefor undertaking the risk of under
subscription. The maximum rate of underwriting commission paid is as follows:

Nature of Issue On amount On amounts

Devolving On subscribed by public
Underwriters

Equity shares, 2.5% 2.5%

preference shares
and debentures

Issue amount 2.5% 1.5%

upto Rs.5 lakhs

Issue amount 2.0% 1.0%

exceeding %

Broker To the Issue: Any member of a recognized stock exchange can become a broker to the
issue .A broker offers marketing support, underwriting support, disseminates information to
investors about the issue and distributes issue stationery at retail investor level.

Registration Of The Offer Document

For registration,10 copies of the draft prospectus should be filed with SEBI. The draft prospectus
filed is treated as a public document. The lead manger also files the document with all listed
stock exchanges. Similarly, SEBI uploads the document on its website www.sebi.com. Any
amendments to be made in the prospectus should be done within

21days of filing the offer document. Thereafter the offer document is deemed to have been
cleared by SEBI.

Promoters Contribution: In the public issue of an unlisted company, the promoters shall
contribute not less than 20% of the post issue capital as given in Chapter- IV of the SEBI Act,
1992.The entire contribution should have been made before the opening of the issue.

Lock-in Requirement
The minimum promoters contribution will be locked in for a period of 3 years. The lock-in
period commences from the date of allotment or from the date of commencement of commercial
production, whichever is earlier.

Marketing of the Issue

Timing of the Issue

Retail distribution

Reservation of the Issue

Advertising Campaign

Timing of the Issue

An appropriate decision regarding the timing of the IPO should be made, keeping in mind the
general sentiments prevailing in the investor market. For example, if recession is prevailing in
the economy (the investors are pessimistic in their approach), then the firm will not be able to get
a good pricing for its IPO, as investors may not be willing to put their money in stocks.

Retail distribution:

Retail distribution is the process through which an attempt is made to increase the subscription.
Normally, a network of brokers undertakes retail distribution. The issuer company organizes road
shows in which conferences are held, which are attended by high net worth investors, brokers
and sub-brokers. The company makes presentations and solves queries raised by participants.
This is one of the best ways to raise subscription.

Reservation in the Issue

Sometimes reservations are tailored to a specific class of investors. This reduces the amount to
be issued to the general public. The following are the classes of investors for whom reservations
are made:

Mutual Funds

Banks and Financial Institutions; Non-resident Indians (NRI) and Overseas Corporate
Bodies (OCB) The total reservation for NRI/OCB should not exceed 10% of the post-
issue capital, and individually it should not exceed 5% of the post issue capital.

Foreign Institutional Investors (FII): The total reservation for FII cannot exceed 10% of
the post-issue capital, and individually it should not exceed 5% of the post issue capital.
 Employees: Reservation under this category should not exceed 10% of the post issue
capital.

Group Shareholders: Reservation in this category should not exceed 10% of the post
issue capital.

The net offer made to the public should not be less then the 25% of the total issue at any point of
time.

Post-Issue Activities

Principles of Allotment: After the closure of the subscription list, the merchant banker
should inform, within 3 days of the closure, whether 90% of the amount has been
subscribed or not. If it is not subscribed up to 90%, then the underwriters should bring the
shortfall amount within 60 days. In case of over subscription, the shares should be
allotted on a pro-rata basis, and the excess amount should be refunded with interest to the
shares holders within 30 days from the date of closure.

Formalities Associated With Listing: The SEBI lists certain rules and regulations to be
followed by the issuing company. These rules and regulations are laid down to protect the
interests of investors. The issuing company should disclose to the public its profit and
loss account, balance sheet, information relating to bonus and rights issue and any other
relevant information.

WHAT IS BOOK BUILDING?

Book Building is the process of determining the price at which an Initial Public Offering will be
offered. Book building is a common practice in developed countries and has recently been
making Two of the most popular means to raise money are Initial Public Offer (IPO) and Follow
on Public Offer (FPO).

During the IPO or FPO, the company offers its shares to the public either at fixed price or offers
a price range, so that the investors can decide on the right price. The method of offering shares
by providing a price range is called as book building method.
Types of investors
There are three kinds of investors in a book-building issue.

The retail individual investor (RII),

The non-institutional investor (NII)

The Qualified Institutional Buyers (QIBs)

There are two types of Public Issues:

FIXED PRICE ISSUE: - When the issuer at the outset decides the issue price and mentions it in
the offer document, it is commonly known as fixed price issue.

BOOK BUILT ISSUE:-When the price of an issue is discovered on the basis of demand received
from the prospective investors at various price levels, it is called as book built issue.

BOOK BUILDING PROCESS IN INDIA

Book Building is fundamentally a procedure utilized in IPOs for effective price discovery. Its a
method where, during the time period for which the initial public offer is open, bids are gathered
from traders at different prices, which are higher or equal to the ground price. The IPO offer
price is decided following the bid ending date.

GUIDELINES BY SEBI
 On the recommendations of Malegam committee, The concept of Book Building assumed
significance in India as SEBI approved, with effect from November 1, 1995, the use of
the process in pricing new issues.
SEBI issued the guidelines under which the option of 100%book-building was available
to only those issuer companies which are to make an issue of capital of and above Rs.
100crore.
These guidelines were modified in 1998-99.The ceiling of issue size was reduced to Rs.
25crore.
SEBI modified book-building norms for public issues in 1999
and allowed the issuer to choose either the existing or the
modified mode of book building.

Modified Guidelines:-

Compulsory display of demand at the terminals was made optional.

The reservation of 15% of the issue size for individual investors could be clubbed with
fixed price offer.
The issuer was allowed to disclose either the issue size or the number of securities being
offered.
The allotment of the book built portion was required to be made in Demat mode only.
In April 2000, SEBI modified guidelines for the 100% book-
building process. i.e. a maximum of 60% of the issue was
allowed to Institutional investors and atleast 15% to non-
institutional investors who had applied for more than 1,000
share

CHAPTER: 2
LITERATURE REVIEW
Swarup K. S. (October 2003) had studied Measures for Improving Common Investor
Confidence in Indian Primary Market and indicated that there is a decrease in preference for
equity due to the losses made in investments by the investors in equity markets. These losses in
primary market are due to lower market price after listing. The study conducted on investor
confidence also indicated the importance of issue price and market price, which was given
overall first and third, ranks respectively. Study indicated that investors prefer personal analysis
to brokers advice. For carrying out personal analysis, information is required. Thus information
plays an important role in investment decisions and needs of the investors in this area also need
to be addressed.

Mishra S. K. (May 2010) in their study acknowledged Investors Confidence in Primary Market
which indicated that the new issue market in India is not fully developed as compared to other
advanced countries like U.S.A., U.K. and Germany. But there has been tremendous growth in the
sphere of new issue activity in India in the 1980s and 2009s. The knowledge of secured
investment practice is now no more a nightmare to the investors. Publicly available information
and rich literatures have provided the all the requisites right form selection to valuation of
securities and portfolios to match with their changing expectations. Gone are those days when
small investors had to depend on the brokerage firms and individuals to possess the stocks of
their choices. Now, with the introduction and successful implementation of new sophisticated
technology investors have online trading practices.

Gade S. & Rao S. K. (July 2011) in their study examined retail investors perception towards
initial public Offers (IPOs) in India which reveals that retail investors opinion is similar on
majority aspects relevant to IPOs at the same time study did find that there are some problems
with IPOs, major problem was the adequacy of 35 percent reservation for retail investors.
Majority of the investors want SEBI to fix a greater responsibility on the merchant bankers and
hold them responsible for the promoters dubious acts. Also they want SEBI to create legal
provisions to pull up the promoters for their misdeeds and proceed against them under criminal
laws and confiscate all their ill gotten wealth.

Manjunatha T. and Gopi K. T. (2013) in their study examined factors influencing retail
investors in Indian primary market and their findings suggest that wealth-maximization criteria
are important to retail investors while investing in the primary market, even though retail
investors employ diverse criteria when choosing investment avenues. The recommendations of
brokerage houses, analysts, issue price, IPOs grading, promoters reputation and other factors go
largely heed in the primary market. The investment decision process appears to incorporate a
broader range of items. Furthermore, each investor may view the broad criteria differently in
terms of relative importance.
Obamuyi T. M. (2013) in their study examined factors influencing investment Decisions in
capital market and how these factors are related to the investors socio-economic characteristics.
The study finds that the socio-economic characteristics of investors (age, gender, marital status
and educational qualifications) statistically and significantly influenced the investment decisions
of investors. The study recommends that the investment climate and the market environment be
made friendly and conducive to attract investors by creatively developing programmers and
policies that impact on investors decisions in order to maximize the value of the firms and
enhance the wealth of the The market players should re-organize the market and implement
accommodating policies which will eliminate fraud and resolve the leadership crisis in the
market.

Abraham R. (February 2014) has observed that Indias initial public offering (IPO) market is
going through its driest patch in years as no IPO is scheduled in the near future even eight
months after the last IPO by Just Dial hit the market in June. India has continued to
struggle primarily due to its own domestic concerns. The Indian market has really not been IPO-
friendly for the past three years due to a variety of factors. This includes overall poor sentiments,
secondary market volatility, promoters not getting the valuations they think they deserve,
apprehensions of regulators views on valuations and lack of appetite for equity of big-time
issuers from the infrastructure sector,

Madhumita Gosh, Vice President (PM & Research) Unicon Financial Intermediaries in her
article IPOs: More Misses Than Hits, published in the Dalal Street Investment Journal, pointed
out that, in the recent past a majority of IPOs havent performed well because valuation wise
they are priced more than the fundamentals. This has happened mainly due to the greed of
promoters, who want to price their issue invariably at a much higher price. In such cases
merchant bankers role also comes under scanner as they usually dont give proper advice to the
promoters in the wake of losing the business.

Jignesh B. Shahet et al.(2013)in their research, concluded that, the recent IPO Scam indicates
that even a highly automated system will not prevent malpractices. But steps should be taken by
SEBI to restrict such IPO Scam by applying know your customer (KYC) and unique
identification number to market players and investors.

Prithvi Haldea, CMD, Prime Database in his article IPOs: More Misses Than Hits, published
in the Dalal Street Investment Journal pointed out that, IPOs in India have become an instrument
of trading rather than investment and a majority of people are parking their money into such
IPOs just to make a fast buck at the time of listing. So, in my view, they are not the investors
who are investing money as per the valuations of the company by taking a long term horizon.

Sunil Damania in his article Primary Issues published in Dalal Street, mention that, the
primary market has been always been a great area of interest for retail investors. But over the last
few years the quality of IPOs and their issue prices have been a matter of concern. Due to this
investors are losing faith in the IPO system and this is a very dangerous sign for the country. For
any new investor to enter the market, the primary market is the first step. If that first experience
of investment is not a happy one, it is unlikely that investors would continue investing in the
market.

Gaurav Kabra, Prashant Kumar, Mishra, Manoj Kumar Dash (2010) from the study
concluded that modern investor is a mature and adequately groomed person. In spite of
phenomenal growth in the security market and quality Initial Public Offerings (IPOs) in the
market, the individual investors prefer investments according to their risk preference. A majority
of investors are found to be using some source and reference groups for taking decisions. Though
they are in the trap of some kind of cognitive illusions such as overconfidence and narrow
farming, they consider multiple factors and seek diversified information before executing some
kind of investment transaction. Syed Tabassum Sultana (2010) concludes that the individual
investor still prefers to invest in financial

Chattopadhyay. P, (2010), in his article, Retail investors in IPO subscription, in the

liberalization regime of India, there has been a renewed emphasis on the equity cult and a
growing stress of what is termed market capitalization. The number of retail investors has
already become substantial and is still growing. This underlines the need for safety and security
of the money invested along with the promise of augmented yield. These have required the
government and the regulatory bodies to provide necessary systems and methods for
safeguarding the interests of the small, retail investors The Securities and Exchange Board of
India has recently mooted a proposal to the effect that in the cases of retail investors seeking to
subscribe to the share offers by the public limited companies, cash transactions should take place
only after the allotment has been made. The proposed intention of SEBI is to be lauded; there are
other parts which are not as commendable. The proposal does not appear fool-proof on one side,
and may be easily subject to abuse, on the other. Least of all, the proposal may not restore.

Viswambharan A.M, (2008), in his article entitled, Indian Primary Market Opportunities and
Challenges, has examined the recent trends in primary market, the current IPO system book
building process, opportunities for investors, problems faced by the investors and has suggested
that investors should rely on long term investment than speculation. Investor education shall be
strengthened. Commercial banks may take-up investment consultancy for their clients to improve
investor participation.

Rajendra Kanoongu, in his article IPOs: More Misses Than Hits, published in the Dalal
Street Investment Journal, stated that, investors should wait for the project implementation of
the company to take place and then take a real value of stock. If they are looking for listing then
they better not to apply in the IPO and rather buy from the secondary market. They also
mentioned major reasons for the underformance of new issues; one is the uncertain market trend,
wherein investors are not in a position to take a call whether the pricing is right or wrong.
Secondly, the investors themselves, who are waiting for the listing gain and want to exit on the
first day.
Gaurav Kabra, Prashant Kumar, Mishra, Manoj Kumar Dash (2010) from the study
concluded that modern investor is a mature and adequately groomed person. In spite of
phenomenal growth in the security market and quality Initial Public Offerings (IPOs) in the
market, the individual investors prefer investments according to their risk preference. A majority
of investors are found to be using some source and reference groups for taking decisions. Though
they are in the trap of some kind of cognitive illusions such as overconfidence and narrow
farming, they consider multiple factors and seek diversified information before.

Another study by Shiller (2000) reported that many investors do not have data analysis and
interpretation skills. This is because, data from the market supports the merits of index investing,
passive investors are more likely to base their investment choices on information received from
objective or scientific sources. People are limited in their capacity for processing information.

Christopher Ray Reutzel (2012)( Institutional Investor Portfolio Stability and Post-IPO
Firm Survival: A Contingency Approach) This study examines the influence of institutional
investor portfolio stability on the survival of 379 IPO firms that went public in 1997. I find a
negative relationship between the amount of stable institutional investment in and newly public
firms and post-IPO firm failure. Consistent with multiple agency theory I also find that outside
director board control weakens the influence of stable institutional investment on post-IPO firm
failure. These results provide support for multiple agency theory and highlight the importance of
differences among and between principals and agents in the post-IPO setting. This study attempts
to answer the question of, Does the amount of IPO firm equity held by institutional investors
with stable investment portfolios influence post-IPO firm survival? As such, this study
considers the role that post-IPO institutional investment time horizons play in influencing IPO
firm adaptation to the rigors of public trading. In doing so this study contributes to multiple
agency theory by demonstrating that some principals, in this case institutional investors with
long-term investment horizons are better equipped to monitor newly public firms than those with
shorter-term investment horizons in order to ensure IPO firm survival.

Rock and Kelvin (1986) demonstrated that retail uninformed investors might suffer from a
winners curse problem. They might get all the allocations that they have asked for in IPOs,
which are going to earn very low returns on the day of listing, but Estelar [59] may be rationed
out in IPOs, which will give very high returns on the day of listing, because of the high demand
that such issues will generate. Thus, retail uninformed investors might not be able to utilize the
underpricing inherent in IPOs to their advantage. Besides this, uninformed investors might not be
able to fully comprehend the risk factors which are outlined in the offer documents of the IPOs.
To this extent, the rating mechanisms introduced in the Indian IPO markets would prove to be
useful for the retail investors.
Reena Aggarwal et al. (1993) found the initial one-day returns to be 78.5 percent, 16.7 percent,
and 2.8 percent for Brazil, Chile, and Mexico. The long-run mean market-adjusted returns were
found to be -47.0 percent in Brazil after three years. The three-year mean excess return was -23.7
percent for Chile and the one-year mean excess return was -19.6 percent for Mexico. They
indicated long-run underperformance. For Brazil, there seems to be a negative relationship
between the initial returns and the long-run returns, suggesting the overpricing of IPOs on the
first trading day. These findings for the Latin American markets were similar to the U.S. and UK
pattern of long-run underperformance. Based on the international evidence, it appears that these
long-run patterns were not just sample or country-specific.

Dakshayani [28] JIBC Jan 2017, Vol. 22, No.S7 examined that the perceptions towards equity
and other alternative investment avenues in Anand Rathi in Bijapur city of Karnataka. This will
depended upon the investors perception. However, it believed investors differ around because of
different factors like age, income, experience of investing, investment goals and personal social
needs. Suggested that generally those investors, who invested in equity, are for in my opinion
follow the stock market often and investors different investment alternatives banned deposits,
gold and silver, real estate and insurance.

Viswambharan A.M, (2009), in his study on Indian Primary Market Opportunities and
Challenges, examined the recent trends in primary market, the current IPO system book
building process, opportunities for investors, problems faced by the investors and suggested that
investors should rely on long term investment than speculation.
 CHAPTER 3
RESEARCH METHODOLOGY

RESEARCH AIM
The aim of this research is to empirically investigate the perception of Ahmedabad investors
towards IPO.

RESEARCH OBJECTIVE

To find out the level of awareness about IPO in the investors.

To find out investors preference while investing money (whether investors feel that they
can make money in the stock market?).
To identify factor affecting the investor in investment in IPO.
To study the opinion if retail investor on initial public offer (IPOs) and important on them
to study the time of involvement in capital market has a significant impact on the
perception of investor regarding the market volatility being important factor for making
the decision of investment in IPO

SCOPE OF STUDY

We can have complete analysis of perception of investor who is investing in IPO and in depth
analysis of behavior change of retail investor as well as initial public offers and also understand
the earning satisfaction level of retail investor from their current investment and to understand
the service provided to retail investor and analysis of IPO.

DATA COLLECTION PLAN

Primary data
Primary data are those which is collected for the first time and our primary source
to collect the data is being through questionnaire.

Secondary data
Secondary data will be collected through website and document journals and
other online sources are consider as reliable sources for information which is
helpful for enhance the result of study research design
RESEARCH DESIGN

Type of study :- Descriptive research

Method of data collection:- survey
Research Instrument :- questionnaire
Research environment:- field study

SAMPLING PLAN

Sampled population: Retail investor

Sample size :- 120
Sampling decision :- convince sampling (Non Random Sampling)
Sampling area :- Ahmedabad
 CHAPTER: 4

DATA
Cumulative
Frequency Percent Valid Percent
Percent

Valid Yes 100 100.0 100.0 100.0

ANALYSIS AND INTERPRETATION

1. Are you aware about IPO?

 INTERPRETATION:

On the basis of above chart we can say that 100% Respondents are aware about IPO.

2. Do you invest in IPO?

Cumulative
Frequency Percent Valid Percent
Percent

No 17 17.0 17.0 17.0

Valid Yes 83 83.0 83.0 100.0

Total 100 100.0 100.0

 INTERPRETATION: The above diagram shows that 83% Respondents are investing in
IPOs and 17% respondents are not investing in IPO.

3. If no, than Reasons for not investing in IPO?

Percentage
Due to risk factor 15%
Lack of awareness and
70%
knowledge
Take more time in getting
15%
returns
 Reason for not investing in ipo
Due to risk factor Lack of awarness and knowledge
Take more time in getting returns

15% 15%

70%

INTERPRETATION: On the basis of above chart we can say that majority of

respondent who are not investing in IPO because of lack of awareness
regarding IPO.

4. Which of the investment tools you invest in other than IPO?

Which_investment_tools_inthat_you

Frequency Percent Valid Percent Cumulative Percent

Bond's 4 4.0 4.0 4.0

Equity 32 32.0 32.0 36.0

Mutual fund 43 43.0 43.0 79.0

Valid
Derivative & commodity 15 15.0 15.0 94.0

Real-estate 6 6.0 6.0 100.0

Total 100 100.0 100.0

 INTERPRETATION: From above chart we can interpret that majority of
respondent are investing in Mutual fund ( 43%) and Equity (32%) among all
the other option other than IPO.

5. How much confidence do you have in Indias financial markets?

Frequency Percent Valid Percent Cumulative Percent

Valid Don't know 2 2.0 2.0 2.0

Fairly confident 59 59.0 59.0 61.0

Not at all confident 3 3.0 3.0 64.0

Not very confident 18 18.0 18.0 82.0

Very confident 18 18.0 18.0 100.0

Total 100 100.0 100.0

 INTERPRETATION: 59% Respondent are fairly confident about Indian
financial market and 18% are very confident those shows majority respondents
have confidence about current Indian financial market.

6. Approximately how much did you invest during the year in initial
offer period?

approx_how_much_you_invest

Frequency Percent Valid Percent Cumulative Percent

Valid 25,000 to 50,000 44 44.0 44.0 44.0

50,000 to 100,000 24 24.0 24.0 68.0

More than 100,000 7 7.0 7.0 75.0

Up to 15000 25 25.0 25.0 100.0

Total 100 100.0 100.0

INTERPRETATION: The above chart shows that the 44% people are investing between
25,000 to 50,000 in IPO during the year and 23% People are investing in between 50,000
to 100,000 in the initial offer period.

7. Which, if any, of the following have you done when considering whether to
invest in IPO?

Frequen Percent Valid Cumulative

cy Percen Percent
Valid Looked information on the company through its 2 2.0 2.0 2.0
website

Looked information of the company in news 12 12.0 12.0 14.0

spoken to financial adviser 44 44.0 44.0 58.0

Sector performance 27 27.0 27.0 85.0

Promoters Background 9 9.0 9.0 94.0

Looked for information of annual reports/other 6 6.0 6.0 100.0

 Total 100 100.0 100.0

INTERPRETATION: From the basis of above chart we can say that most of respondent
are taking consideration of their financial adviser (44%) before investing in IPO and 27%
are consider sector performance.

8. Your preference for IPOs can be best described as

High Ver Me Lo Ver
y diu w y
Hig m Low
h
IPO's offer better returns if not the best 29 47 20 1 3
IPOs are most sought after due to the fact as the 63 9 20 4 4
issuing companies are having proven performance
record
IPOs are better than debt and deposits 29 9 51 8 3
IPOs are most preferred since these offerings went 28 16 23 28 5
through a tough evaluation and regulatory process
by various
 70

60

IPO's offer better returns if not

50 the best
IPOs are most sought after
due to the fact as the issuing
40 companies are having proven
performance record
30 IPOs are better than debt and
deposits
IPOs are most preferred since
20 these offerings went through a
tough evaluation and
regulatory process by various
10

0
High Very High Medium Low veryLow

INTERPRETATION: Above chart shows that around 48% respondent have preferences
for the 2nd statement is very high. Around 52% respondent have preferences for 3rd
statement is medium. Around 28% respondent have preferences for 4th statement is high.

9. Your perceptions on IPO issues (About Investors Psychology)

Ver
y Med Lo Very
High
Hig ium w Low
h
IPOs are good for the investors who are new to
23 46 24 3 4
stock market investments
IPOs generate good initial returns (short-term) 59 12 22 4 3
Investors need not keep IPOs for long 24 15 55 3 3
IPOs are little masked as to risk as against quoted
33 11 24 29 3
scripts
IPOs are good for even the small investors to enter 31 16 34 8 11
 into the stock market later
IPOs offer good quality as it is being listed on stock
exchanges immediately after the closing date of 39 17 25 10 9
ipo

70

60

50

High
40
Very High
Medium
30
Low
Very Low
20

10

0
IPOs are good for the investors who are new to stock market investments

INTERPRETATION: Above chart shows that around 47% respondent have perception for
1st statement is very high. Around 66% respondent have perception for 2nd statement is
high. Around 56% respondent have perception for 3rd statement is medium. Around 30%
respondent have perception for 4th statement is low. Around 34% respondent have
perception for 5th statement is medium.
10. Which type of IPO company (sector) would do you like to invest in?

Frequency Percent Valid Percent Cumulative Percent

Valid IT 7 7.0 7.0 7.0

Energy 18 18.0 18.0 25.0

MNC 20 20.0 20.0 45.0

Automobile 27 27.0 27.0 72.0

PSU Bank 15 15.0 15.0 87.0

 Pharmaceutical 13 13.0 13.0 100.0

Total 100 100.0 100.0

INTERPRETATION: The above diagram clearly shows that majority respondent have
shown interest in investing Energy sector after energy sector IT sector is second highest
choice of investor

11. Thinking back to when you first heard about the upcoming share offer,
where did you first hear about the share offer you [invested/considered
investing] in?

Frequency Percent Valid Percent Cumulative Percent

Valid TV 1 1.0 1.0 1.0

Newspaper/magazines 3 3.0 3.0 4.0

Internet 20 20.0 20.0 24.0

 Heard about it from a financial adviser or 46 46.0 46.0 70.0
broker

somewhere else 9 9.0 9.0 79.0

Billboards/buses/bus shelters 16 16.0 16.0 95.0

Heard about it from a financial adviser or 4 4.0 4.0 99.0

broker

TV 1 1.0 1.0 100.0

Total 100 100.0 100.0

INTERPRETATION: The above chart clearly shows that financial advisor/stock broker
is the main source where people herd the information about upcoming IPOs. Many of the
respondent also getting information from the newspaper.
12. How long do you plan to keep the shares you purchased in IPO.

Keep_share_purchased_ipo

Frequency Percent Valid Percent Cumulative

Percent

Valid Don't know 8 8.0 8.0 8.0

On First day of listing 42 42.0 42.0 50.0

One to two year 14 14.0 14.0 64.0

Two to five year 3 3.0 3.0 67.0

Up to one year 33 33.0 33.0 100.0

 Total 100 100.0 100.0

INTERPRETATION: 43% Respondent are planning to sell their shares on first day of
listing and 32% respondent are keep their shares up to one year for good returns.

13. What is the reasonable return do you expect from IPO?

expeted_return

Frequency Percent Valid Percent Cumulative Percent

Valid 13- 15 % 36 36.0 36.0 36.0

16 - 20% 10 10.0 10.0 46.0

4--8% 21 21.0 21.0 67.0

9 - 12% 26 26.0 26.0 93.0

Above 20 % 7 7.0 7.0 100.0

 Total 100 100.0 100.0

INTERPRETATION: The above diagram shows that 37% respondent are expecting
13-15% from the initial public offerings and 25% respondent are expecting 9-12% of
returns.

14. What do you feel about the procedure of IPOs with reference to ASBA
Feature?

Frequency Percent Valid Percent Cumulative

Percent

Valid Complicated 12 12.0 12.0 12.0

Difficult 21 21.0 21.0 33.0

Easy 56 56.0 56.0 89.0

Lengthy 11 11.0 11.0 100.0

Total 100 100.0 100.0

 INTERPRETATION: The above diagram clearly shows that majority of 56%
respondent find IPO procedure with reference ASBA is very easy.

15. Your satisfaction level on the services being rendered by the financial
intermediaries like investment bankers, underwriters, brokers etc. in regard
to IPO offerings
Highly Satisfe Moder Not Highly
Satisf d ately satisfe Dissat
ed Satisf d isfed
ed
Investment information services 47 31 17 3 2
being offered on IPO issues
Compliance services rendered in 8 61 24 5 2
accordance with the local norms
Compliance redressal services being 35 7 53 3 3
offered
Investment advices given to meet the 8 28 23 39 2
specifc investment objectives of
investors

70
60
50 Investment information
services being offered on IPO
40
issues
30 Compliance services
20 rendered in accordance with
10 the local norms
Compliance redressal
0
services being offered
Investment advices given to
meet the specifc investment
objectives of investors

INTERPRETATION:

Personal Information

1. Gender
Gender

Frequency Percent Valid Percent Cumulative

Percent

Valid Female 18 18.0 18.0 18.0

 Male 82 82.0 82.0 100.0

Total 100 100.0 100.0

Interpretation: From above chart shows that there are 18% are female and 82% are male
responded.

2. Age Group

Frequency Percent Valid Percent Cumulative

Percent

Valid 18-25 39 39.0 39.0 39.0

25-35 50 50.0 50.0 89.0

36-60 11 11.0 11.0 100.0

 Total 100 100.0 100.0

INTERPRETATION: From the above chart shows that there are 50% responded are who
belongs to the age group of 25-35. 39% who belongs to the age group of 18-25. 11% who
belongs to the age group 36-60.

3. Education

Education

Frequency Percent Valid Percent Cumulative

Percent

Valid Bachelors Degree 48 48.0 48.0 48.0

 Diploma/certificate 6 6.0 6.0 54.0

Master Degree/ACCA/CPA 39 39.0 39.0 93.0

PhD./D.sc/D.litt 1 1.0 1.0 94.0

Secondary school or less 6 6.0 6.0 100.0

Total 100 100.0 100.0

INTERPRETATION: From the above chart 49% respondent holds Bachelors degree
39% respondent holds Master degree.

4. Annual Income (approximately rounded to nearest thousands )

Frequency Percent Valid Percent Cumulative Percent

Valid 0 - 3 Lac 37 37.0 37.0 37.0

10 - 30 Lac 15 15.0 15.0 52.0

 3 - 10 Lac 42 42.0 42.0 94.0

More than 30 Lac 6 6.0 6.0 100.0

Total 100 100.0 100.0

INTERPRETATION:

The above chart shows that out of total responded, around 43% responded have the annual
income below 3-10 lakh.36% responded have annual income below 3 lakh. 15% responded have
annual income 10-30 lakh.

FINDINGS

Majority of respondent are aware about IPO as the one of tool of the investment to
generate good returns.
 From the survey its found out that the main reason for not investing in IPO is lack of
awareness and many of respondent believes its involve risk to invest.

The study shows that most of people who invest in IPO are also investing in Equity and
mutual funds returns.

Maximum respondents said that they are fairly confident about current Indian financial
market situation for investing.

Majority of respondent are invest between 25000-50000 during the year in IPO

Most of the respondent are spoken to their financial advisor before investing in IPO

Energy and It are the most preferable sector for the respondents to invest.

The study shows that financial advisor is the main source where respondents heard about
the upcoming share offer

From the survey its found out that majority of the respondent are sells their shares on the
first day of listing to get short-term returns.

Most of the respondent are expecting 13-15% returns from the initial public offerings

From the survey its found out that majority of respondent find IPO procedure with
reference of ASBA easy.

SUGGESTINOS

On the basis of the Market survey conducted has put very interesting findings in the Market. The
very first suggestion to the investor is that the best thing for the investors to do to ensure that
they are not cheated in this IPO boom, is to study the prospectus themselves, read various
comments and take their own decision. Investors have to beware as all those who are keen to
grab a piece of the cake of the impending IPO boom, are doing so at their cost. Keep in mind
three Ps before investing in any IPO & Three Ps are
Promoter

Performance

Price
The next best suggestion to the investor is that they should be steer clear of IPOs from
lesser known industry and focus on offerings by well known industry leader with quality
management and strong financials.
The investor should not follow the IPO boom blindly as they can get cheated as they
during nineties IPO fiasco.

Investor should keep their shares for longer period so that they can earn good profits from
the IPO

The investor should not trust blindly on their financial advisor for the taking decision of
investment

For the new investor IPO is best for starting investment in equity market.

Female should start investing in IPO because IPO is good for new investors to
understand equity market.

LIMITATIONS OF STUDY

1 The study was to be completed in a short time; the time factor put a considerable limit on
the scope and the extensiveness of the study.
 2 The unsupportive attitude of the respondents while responding to the questions, requiring
the qualitative information may have affected the final findings and outcomes.

3 Because of the diversity of nature of respondents as well as due to conduction of the

study on very small scale, the findings of the survey could not be generalized.

It was tried very harder to include the best of information from published and unpublished
sources available on internet, books and magazines but some of the data required for the detailed
study was not available free.

CONCLUSION

This project is based on the study of Investors attitude towards initial public offerings. In the
today scenario its very important to study the customers psychological behavior regarding the
various services provided by them.
In the end, I conclude that investor should not invest their hard earned money blindly in the
IPOs but they should invest their money by taking different safeguards like understand the
company business, who its promoter are, how is its management, its risk factor and pricing of the
issue etc.
Although there is SEBI to protect the investor but he company which follow the legal binding of
the SEBI is not fool proof that the company is a good one.
It has been concluded that on the one hand the customers are somewhat satisfied but on the other
hand, still some improvements are required. So, the broking companies segment is flooded with
the new schemes from new & existing players and moreover, lot many schemes are waiting to hit
the ramp in the coming years.

The main reason behind people not wanting to have investing of a particular company is
the lack of proper information. Moreover, people dont want to come out of cocoon of
their seemingly uncomplicated life. They seem satisfied with their old ways and are wary
of modern, new age products.

The most important factor that attracts the people towards investment in primary market
is the communication factor. This is the most important reason and for this, people feel
persuaded to buy it.

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