Project On IPO

Project on IPO
Presentation Outline
• What is an IPO?
• Why an IPO?
• Important Factors to be kept in
Mind.
• Parties involved in an IPO.
• Benefits of investing in share
market
• Primary and Secondary market.
• Why do firms go public?
• What is a Scam?
• Risk factors involved.
• Pricing Strategies Used for IPO's.
• What is expected of the media?
• Conclusion
What is an IPO?
• IPO is an acronym for Initial Public
Offer.
• This is the first sale of shares by a

company to the public.
• A company can raise money by

issuing either debt (bonds) 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.
What is an IPO?
• A privately held company has fewer
shareholders and its owners don't have
to disclose much information about the
company.
• Shares of private companies are usually

traded on the Over The Counter Market
(OTC).
• 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."
What is an IPO?
• Public companies may 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 periodically.
• Currently the SEC regulates all public companies listed on

the stock exchange (Ghana Stock Exchange).
What is an IPO?
• 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 money, you can invest.
• The CEO could hate your guts, but there's nothing he or she
could do to stop you from buying shares of the company.
Why an IPO?
• Improved Financial Condition
• Greater Marketability
• Improved Value
• Provides Capital to Sustain Growth
• A Path to Mergers and Acquisitions
• Listing on a Stock Exchange
• Enhanced Corporate Image and

Increased Employee Participation
Important Factors to be kept in Mind
• Who are the Promoters ? What is their

credibility and track record ?
• What is the company manufacturing or
providing services?
• What has been the past performance
of the Company offering the IPO ?
• What is the Project cost ?
• What are the means of financing and
profitability projections ?
• What are the Risk factors involved ?
• Who has appraised the Project ? In
India Projects apprised by IDBI and
ICICI have more credibility than small
Merchant Bankers.
Benefits of Investments in Shares
• Greater Returns
• Owning Quality Companies
• Ease of Diversification
• Availability of Information
• Liquidity
• Tax Benefits
Parties Involved in the IPO
• Issuer
• Lead Manager
• Lawyer / Solicitor
• Auditors
• Reporting Accountants
• Sebi
What is Primary & Secondary
market?
• Primary market is the market where shares are offered to

investors by the issuer company to raise their capital.
• Secondary market is the market where stocks are traded after

they are initially offered to the investor in primary market
(IPO's etc.) and get listed to stock exchange. Secondary
market comprises of equity markets and the debt markets.
• Secondary market is a platform to trade listed equities, while

Primary market is the way for companies to enter in to
secondary market.
Why Firms Go Public?
• to raise funds for expansion of
operations;
• to secure an easier access to future
capital on more favorable terms;
• to provide liquidity and/or exit
strategy for shareholders;
• to enhance the company’s
reputation and credibility;
• to increase the market’s awareness
of the company and its products;
• to provide acquisition currency to
facilitate acquisitions of other
businesses;
• to attract and retain employees;
• to obtain a market valuation of the
company.
What is an IPO Scam?
• It involved manipulation of the

primary market by financiers
and market players by using
fictitious demat accounts.
• While investigating the Yes
Bank scam, SEBI found that
certain entities had illegally
obtained IPO shares reserved
for retail applicants through
thousands of demat accounts.
• They then transferred the
shares to financiers, who sold
on the first day of listing,
making windfall gains from the
price difference between the
IPO price and the listing price.
What are the Drawbacks?
• Loss of Control
• Loss of Privacy
• Limiting Management’s
Freedom to Act
• Periodic Reporting
• Initial and Ongoing Expenses
• Shareholder Expectations
• Restrictions on Selling Existing
Shareholders’ Shares
• Fiduciary Responsibilities
Risk Factors Involved
• Corporate Risk
• Economic Risk
• Market Value Risk
• Valuation Risk
• Speculative Risk
• Micro-economic Risk
• Macro-economic Risk
Pricing Strategies Used for IPO‘s
• More of an art than a

science
• Comparison with
competitors in same
industry: P/E ratio
• Current trends in the
investment community--a
bull or a bear market
• Balance between public
offering price (POP) and the
number of shares issued
What is expected of the Media?
• Report accurately
• Media should not sensationalize issues
• Market is sensitive to the information be it
negative or positive
• Media is expected to always revert to the
Commission first before going public on
any issues identified
• Have the development of the capital
market at the back of their mind
• Financial journalism is different from
political/social journalism
TYPES OF CHARTS :
LINE CHARTS BAR CHARTS CANDLESTICK POINT & FIGURE

CHARTS CHARTS
IPO ACTIVITY – Trends and Examples
Issuer Type and Sector-Wise Analysis
Upward Trend 05-06

to 07-08:
 Listed Issuer – 170%
 IPO Issuer – 289%
 Private Sector – 233%
 Public Sector – 174%
Downward Trend 07-

08 to 08-09:
 Listed Issuer – 71 %
 IPO Issuer – 95%
 Private Sector – 78%
 Public Sector – 100%
Reasons?
Industry Wise – Capital Raised through IPO
List of IPO’s IPO Example - NHPC
Recent Listed IPO:
 Oil India Ltd
 Globus Spirit Ltd
 Jindal Cortex Ltd
 NHPC Ltd
 Adani Power Ltd
Upcoming IPO:
 Thinksoft Global
Services Ltd
 Euro Multivision
Ltd
 Pipavav
Shipyard Ltd
Largest IPO’s:
 Reliance Power
 ONGC
Conclusion
 Investor confidence is key to the survival of any capital market.

 Erroneous news that dents investor confidence, destroys the market.
?
Any Further
Questions?

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Project on IPO

• This is the first sale of shares by a

• A company can raise money by

• If the company has never issued

• Companies fall into two broad

• Shares of private companies are usually

• Public companies, on the other hand,

• This is why doing an IPO is also referred

• Public companies may have thousands of shareholders and

• They must have a board of directors and they must report

• Currently the SEC regulates all public companies listed on

• From an investor's standpoint, the most exciting thing about a

• If you have the money, you can invest.

• Provides Capital to Sustain Growth

• A Path to Mergers and Acquisitions

• Listing on a Stock Exchange

• Enhanced Corporate Image and

• Who are the Promoters ? What is their

• Primary market is the market where shares are offered to

• Secondary market is the market where stocks are traded after

• Secondary market is a platform to trade listed equities, while

• It involved manipulation of the

• More of an art than a

LINE CHARTS BAR CHARTS CANDLESTICK POINT & FIGURE

Upward Trend 05-06

Downward Trend 07-

 Investor confidence is key to the survival of any capital market.

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