w is SENSEX calculated? SENSEX is calculated using a "Market Capitalization-Weighted" methodology. As per this methodology, the level of index at any point of time reflects the total market value of 30 component stocks relative to a base period. (The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company). An index of a set of a combined variables (such as price and number of shares) is commonly referred as a 'Composite Index' by statisticians. A single indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over time. It is much easier to graph a chart based on indexed values than one based on actual values. The base period of SENSEX is 1978-79. The actual total market value of the stocks in the Index during the base period has been set equal to an indexed value of 100. This is often indicated by the notation 1978-79=100. The formula used to calculate the Index is fairly straightforward. However, the calculation of the adjustments to the Index (commonly called Index maintenance) is more complex. The calculation of SENSEX involves dividing the total market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index maintenance adjustments. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate SENSEX every 15 seconds and disseminated in real time.How is the closing Index calculated? The closing SENSEX is computed taking the weighted average of all the trades on SENSEX constituents in the last 15 minutes of trading session. If a SENSEX constituent has not traded in the last 15 minutes, the last traded price is taken for computation of the Index closure. If a SENSEX constituent has not traded at all in a day, then its last day's closing price is taken for computation of Index closure. The use of Index Closure Algorithm prevents any intentional manipulation of the closing index value.How is the routine maintenance of SENSEX carried out? One of the important aspects of maintaining continuity with the past is to update the base year average. The base year value adjustment ensures that additional issue of capital and other corporate announcements like bonus etc. do not destroy the value of the index. The beauty of maintenance lies in the fact that adjustments for corporate actions in the Index should not per se affect the index values. The Index Cell of the Exchange does the day-to-day maintenance of the index within the broad index policy framework set by the Index Committee. The Index Cell takes special care to ensure that SENSEX and all the other BSE indices maintain their benchmark properties by striking a delicate balance between high turnover in Index scrips and its representative character. The Index Committee of the Exchange has experts from different field of finance related to the capital markets. They include Academicians, Fund-managers from leading Mutual Funds, Finance - Journalists, Market Participants, Independent Governing Board members, and Exchange administration.How are adjustments for Bonus, Rights and newly issued Capital carried out in SENSEX? The arithmetic calculation involved in calculating SENSEX is simple, but problem arises when one of the component stocks pays a bonus or issues rights shares. If no adjustments were made, a discontinuity would arise between the current value of the index and its previous value. The Index Cell of the Exchange periodically adjusts the base value to take care of such corporate announcements. Adjustments for Rights Issues: When a company, included in the compilation of the index, issues right shares, the market capitalisation of that company is increased by the number of additional shares issued based on the theoretical (ex-right) price. An offsetting or proportionate adjustment is then made to the Base Market Capitalisation (see ' Base Market Capitalisation Adjustment' below). Adjustments for Bonus Issue: When a company, included in the compilation of the index, issues bonus shares, the market capitalisation of that company does not undergo any change. Therefore, there is no change in the Base Market Capitalisation, only the 'number of shares' in the formula is updated. Other Issues: Base Market Capitalisation Adjustment is required when new shares are issued by way of conversion of debentures, mergers, spin-offs etc. or when equity is reduced by way of buy-back of shares, corporate restructuring etc. Base Market Capitalisation Adjustment: The formula for adjusting the Base Market Capitalisation is as follows: New Base Market Capitalisation = Old Base Market Capitalisation X (New Market Capitalisation/Old Market Capitalisation)To illustrate, suppose a company issues right shares which increases the market capitalisation of the shares of that company by say, Rs.100 crores. The existing Base Market Capitalisation (Old Base Market Capitalisation), say, is Rs.2450 crores and the aggregate market capitalisation of all the shares included in the index before the right issue is made is, say Rs.4781 crores. The "New Base Market Capitalisation " will then be: Rs.2501.24 crores = 2450 X (4781+100)/4781 This figure of 2501.24 will be used as the Base Market Capitalisation for calculating the index number from then onwards till the next base change becomes necessary.With what frequency is SENSEX calculation done? During market hours, prices of the index scrips, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time.
What is EMA: EMA is used instead of simple MA where the time frame is large. The idea here is to give more weightage to recent data than to old data.
Gann Lines Gann lines are trend lines drawn from major tops and bottoms at specific angles. The most important angle is 45 degree and usually named as Gann line "one to one" (1X1) that means one change of price with one unit of time. Steeper Gann lines can be drawn at 63.75 degree and 75 degree. Lower degree Gann lines can also be drawn during a downtrend.According to Gann, the 45 degree Gann line represents a long term trend line. When prices are above the 45 degree Gann line, the market is considered as bullish. On the other hand when the prices are below the 45 degree Gann line, the market is considered bearishGann Fan Gann fan is created by drawing lines at different angles from an important base at price chart. Gann fan emphasized the following nine basic angles:1 X 8 = 82.5 degree 1 X 4 = 75.0 degree 1 X 3 = 71.25 degree 1 X 2 = 63.75 degree 1 X 1 = 45.0 degree 2 X 1 = 26.25 degree 3 X 1 = 18.75 degree 4 X 1 = 15.0 degree 8 X 1 = 7.5 degree Among the angles, the angle 1 X 1 is the most important angle. When prices are above the 45 degree Gann line, the market is considered as bullish. On the other hand when the prices are below the 45 degree Gann line, the market is considered bearish. Gann thought that the 45 degree Gann line is a strong support line in an uptrend market. When this line is breaking it can be considered as an important turn signal. The lines of Gann fan are served as support or resistance levels depending on the price trend. For example in an uptrend market, if prices cross over a line, prices are believed to be fall to the next lower line.
Sunday, March 09, 2008
Tuesday, January 08, 2008
DCM shricon BRKOUT
DCM SHRIRAM CONSOLIDATE BREAK OUT
TRGET 125. STOP 93.
There was some news about DSCL in the early December that itis developing its Hydel Power Business and has set up a subsidiary namely DCM Shriram Infrastructure Ltd for pursuing this business. This Company has recently bagged a 108 MW Hydro Power Project at Chhatru in Himachal Pradesh under competitive bidding, and is progressing this project further
also watch lokesh machines
and ucal fuels
TRGET 125. STOP 93.
There was some news about DSCL in the early December that itis developing its Hydel Power Business and has set up a subsidiary namely DCM Shriram Infrastructure Ltd for pursuing this business. This Company has recently bagged a 108 MW Hydro Power Project at Chhatru in Himachal Pradesh under competitive bidding, and is progressing this project further
also watch lokesh machines
and ucal fuels
Wednesday, December 26, 2007
any one interested in hexaware technology?
HEXAWARE IS AT VERY LOW NOW.GOOD VOLUME BUILD UP FOR THE LAST ONE MONTH. I THINK IT CAN GO UP NOW. OTHER TECNICAL INDICATORS ARE ALSO SEEMS TO BE POSITIVE.
CURRENT PRICE - 81:00
FIRST TARGET - 95:00 AND 127.00
STOP LOSS - 77.00
note:-I AM NEW IN TA AND STILL LEARNING TA. DONT TAKE IT SERIOUSLY IF YOU ARE NOT CONVINCED. THE IT SEC: MOVING UP NOW, SO I THNK THS WILL ALSO GO UP.
CURRENT PRICE - 81:00
FIRST TARGET - 95:00 AND 127.00
STOP LOSS - 77.00
note:-I AM NEW IN TA AND STILL LEARNING TA. DONT TAKE IT SERIOUSLY IF YOU ARE NOT CONVINCED. THE IT SEC: MOVING UP NOW, SO I THNK THS WILL ALSO GO UP.
Wednesday, April 05, 2006
study
What is an Initial Public Offering?
Initial Public Offering, IPO, is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer’s securities.
What is a Follow on Public Offering?
A Follow on Public Offering, FPO, is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.
What is a Rights Issue?
Rights Issue, RI, is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements
What is a Preferential Issue?
A Preferential Issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company has to comply with the Companies Act and the requirements contained in Chapter pertaining to preferential allotment in Sebi (DIP) guidelines which inter-alia include pricing, disclosures in notice etc.
What is Sebi’s role in an issue?
Any company making a public issue or a listed company making a rights issue of value of more than Rs 50 lakh is required to file a draft offer document with Sebi for its observations. The company can proceed further on the issue only after getting observations from Sebi. The validity period of Sebi’s observation letter is three months only i.e. the company has to open its issue within three months period.
What is the difference between an Offer Document, Red Herring Prospectus, a Prospectus and an Abridged Prospectus? What does it mean when someone says “Draft Offer Document”?
“Offer Document” means prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue, which is filed Registrar of Companies, RoC, and Stock Exchanges. An Offer Document covers all the relevant information to help an investor to make his/her investment decision. “Draft Offer document” means the offer document in draft stage. The draft offer documents are filed with Sebi, atleast 21 days prior to the filing of the Offer Document with ROC/ SEs. Sebi may specifies changes, if any, in the Draft Offer Document and the issuer or the lead merchant banker shall carry out such changes in the Draft Offer Document before filing the Offer Document with ROC/ SEs. The Draft Offer document is available on the Sebi website for public comments for a period of 21 days from the filing of the Draft Offer Document with Sebi.
What is a Red Herring Prospectus?
Red Herring Prospectus, RHP, is a prospectus, which does not have details of either price or number of shares being offered, or the amount of issue. This means that in case price is not disclosed, the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares are determined later. An RHP for and FPO can be filed with the RoC without the price band and the issuer, in such a case will notify the floor price or a price band by way of an advertisement one day prior to the opening of the issue. In the case of book-built issues, it is a process of price discovery and the price cannot be determined until the bidding process is completed. Hence, such details are not shown in the Red Herring Prospectus filed with RoC in terms of the provisions of the Companies Act. Only on completion of the bidding process, the details of the final price are included in the offer document. The offer document filed thereafter with RoC is called a Prospectus.
What is an Abridged Prospectus?
Abridged Prospectus means the memorandum as prescribed in Form 2A under sub-section (3) of section 56 of the Companies Act, 1956. It contains all the salient features of a prospectus. It accompanies the application form of public issues.
What does one mean by Lock-in?
Lock-in indicates a freeze on the shares. Sebi (DIP) guidelines have stipulated lock-in requirements on shares of promoters mainly to ensure that the promoters or main persons who are controlling the company, shall continue to hold some minimum percentage in the company after the public issue.
How the word Promoter has been defined?
The Promoter has been defined as a person or persons who are in overall control of the company, who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public and those named in the prospectus as Promoters(s). It may be noted that a director/officer of the issuer company or person, if they are acting as such merely in their professional capacity are not be included in the definition of a Promoter. 'Promoter Group' includes the Promoter, an immediate relative of the Promoter (i.e. any spouse of that person, or any parent, brother, sister or child of theperson or of the spouse). In case promoter is a company, a subsidiary or holding company of that company; any company in which the Promoter holds 10% or more of the equity capital or which holds 10% or more of the equity capital of the Promoter; any company in which a group of individuals or companies or combinations thereof who holds 20% or more of the equity capital in that company also holds 20% or more of the equity capital of the issuer company. In case the Promoter is an individual, any company in which 10% or more of the share capital is held by the promoter or an immediate relative of the promoter' or a firm or HUF in which the 'Promoter' or any one or more of his immediate relative is a member; any company in which a company specified in (i) above, holds 10% or more, of the share capital; any HUF or firm in which the aggregate share of the promoter and his immediate relatives is equal to or more than 10% of the total, and all persons whose shareholding is aggregated for the purpose of disclosing in the prospectus "shareholding of the promoter group".
Who decides the price of an issue?
Indian primary market ushered in an era of free pricing in 1992. Following this, the guidelines have provided that the issuer in consultation with Merchant Banker shall decide the price. There is no price formula stipulated by Sebi. Sebi does not play any role in price fixation. The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. There are two types of issues one where company and LM fix a price (called fixed price) and other, where the company and LM stipulate a floor price or a price band and leave it to market forces to determine the final price (price discovery through book building process).
What is firm allotment?
A company making an issue to public can reserve some shares on “allotment on firm basis” for some categories as specified in DIP guidelines. Allotment on firm basis indicates that allotment to the investor is on firm basis. DIP guidelines provide for maximum percent of shares, which can be reserved on firm basis. The shares to be allotted on “firm allotment category” can be issued at a price different from the price at which the net offer to the public is made provided that the price at which the security is being offered to the applicants in firm allotment category is higher than the price at which securities are offered to public.
Is there any preference while doing the allotment?
The allotment to the Qualified Institutional Buyers, QIBs, is on a discretionary basis. The discretion is left to the merchant bankers who first disclose the parameters of judgment in the Red Herring Prospectus. There are no objective conditions stipulated as per the DIP guidelines. The merchant bankers are free to set their criteria and mention the same in the Red Herring Prospectus.
How is the Retail Investor defined as?
‘Retail Individual Investor’ means an investor who applies or bids for securities of or for a value of not more than Rs 1,00,000.
Can a Retail Investor also bid in a book-built issue?
Yes. He can bid in a book-built issue for a value not more than Rs 1,00,000. Any bid made in excess of this will be considered in the HNI category.
How many days is the issue open?
As per Clause 8.8.1, subscription list for public issues shall be kept open for at least 3 working days and not more than 10 working days. In case of book-built issues, the minimum and maximum period for which bidding will be open is 3–7 working days extendable by 3 days in case of a revision in the price band. The public issue made by an infrastructure company, satisfying the requirements in Clause 2.4.1 (iii) of Chapter II may be kept open for a maximum period of 21 working days. As per clause 8.8.2., rights issues shall be kept open for at least 30 days and not more than 60 days.
Can I know the number of shares that would be allotted to me?
In case of fixed price issues, the investor is intimated about the CAN/Refund order within 30 days of the closure of the issue. In case of book built issues, the basis of allotment is finalized by the book running lead Managers within 2 weeks from the date of closure of the issue. The registrar then ensures that the demat credit or refund as applicable is completed within 15 days of the closure of the issue. The listing on the stock exchanges is done within 7 days from the finalization of the issue.
Is it compulsory for me to have a Demat Account?
As per the requirement, all the public issues of size in excess of Rs 10 crore, are to made compulsorily in the demat mode. Thus, if an investor chooses to apply for an issue that is being made in a compulsory demat mode, he has to have a Demat Account and has the responsibility to put the correct DP ID and Client ID details in the bid/application forms.
How do I know if I am allotted the shares? And by what timeframe will I get a refund if I am not allotted?
The investor is entitled to receive a Confirmatory Allotment Note, CAN, in case he has been allotted shares within 15 days from the date of closure of a book-built issue. The registrar has to ensure that the demat credit or refund as applicable is completed within 15 days of the closure of the book-built issue.
How long will it take after the issue for the shares to get listed?
The listing on the stock exchanges is done within 7 days from the finalization of the issue. Ideally, it would be around 3 weeks after the closure of the book-built issue. In case of fixed price issue, it would be around 37 days after closure of the issue.
Who are the intermediaries in an issue?
Merchant bankers to the issue or Book Running Lead Managers, BRLM, syndicate members, Registrars to the issue, Bankers to the issue, Auditors of the company, Underwriters to the issue, Solicitors, etc. are the intermediaries to an issue. The issuer discloses the addresses, telephone/fax numbers and email addresses of these intermediaries. In addition to this, the issuer also discloses the details of the compliance officer appointed by the company for the purpose of the issue.
What is a Green shoe option?
Green shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days in accordance with the provisions of Chapter VIIIA of DIP guidelines, which is granted to a company to be exercised through a Stabilizing Agent. This is an arrangement wherein the issue would be over allotted to the extent of a maximum of 15% of the issue size. From an investor’s perspective, an issue with green shoe option provides more probability of getting shares and also that post listing price may show relatively more stability as compared to market.
What is an e-IPO?
A company proposing to issue capital to public through the on-line system of the stock exchange for offer of securities can do so if it complies with the requirements under Chapter 11A of DIP guidelines. The appointment of various intermediaries by the issuer includes a prerequisite that such members/registrars have the required facilities to accommodate such an online issue process.
What is open book/closed book?
Presently, in issues made through book building, Issuers and merchant bankers are required to ensure online display of the demand and bids during the bidding period. This is the open book system of book building. Here, the investor can be guided by the movements of the bids during the period in which the bid is kept open. Under closed book building, the book is not made public and the bidders will have to take a call on the price at which they intend to make a bid without having any information on the bids submitted by other bidders.
What is Hard underwriting?
Hard underwriting is when an underwriter agrees to buy his commitment at its earliest stage. The underwriter guarantees a fixed amount to the issuer from the issue. Thus, in case the shares are not subscribed by investors, the issue is devolved on underwriters and they have to bring in the amount by subscribing to the shares. The underwriter bears a risk which is much higher in soft underwriting.
What is Soft underwriting?
Soft underwriting is when an underwriter agrees to buy the shares at later stages as soon as the pricing process is complete. He then, immediately places those shares with institutional players. The risk faced by the underwriter as such is reduced to a small window of time. Also, the soft underwriter has the option to invoke a force Majeure (acts of God) clause in case there are certain factors beyond the control that can affect the underwriter’s ability to place the shares with the buyers.
What is a Cut Off Price?
In Book building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called “Cut Off Price”. This is decided by the issuer and LM after considering the book and investors’ appetite for the stock. Sebi (DIP) guidelines permit only retail individual investors to have an option of applying at Cut Off Price.
What is Differential Pricing?
Pricing of an issue where one category is offered shares at a price different from the other category is called Differential Pricing. In DIP guidelines Differential Pricing is allowed only if the securities to applicants in the firm allotment category is at a price higher than the price at which the net offer to the public is made. The net offer to the public means the offer made to the Indian public and does not include firm allotments or reservations or promoters’ contributions.
What is Basis of Allocation/Basis of Allotment?
After the closure of the issue, the bids received are aggregated under different categories i.e., firm allotment, Qualified Institutional Buyers, QIBs, Non-Institutional Buyers, NIBs, Retail, etc. The oversubscription ratios are then calculated for each of the categories as against the shares reserved for each of the categories in the offer document. Within each of these categories, the bids are then segregated into different buckets based on the number of shares applied for. The oversubscription ratio is then applied to the number of shares applied for and the number of shares to be allotted for applicants in each of the buckets is determined. Then, the number of successful allottees is determined. This process is followed in case of proportionate allotment. In case of allotment for QIBs, it is subject to the discretion of the post issue lead manager.
Who is a Qualified Institutional Buyer?
Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP guidelines, a ‘Qualified Institutional Buyer’ shall mean: a. Public financial institution as defined in section 4A of theCompanies Act, 1956; b. Scheduled commercial banks; c. Mutual funds; d. Foreign institutional investor registered with Sebi; e. Multilateral and bilateral development financial institutions; f. Venture capital funds registered with Sebi. g. Foreign Venture capital investors registered with Sebi. h. State Industrial Development Corporations. i. Insurance Companies registered with the Insurance Regulatoryand Development Authority, IRDA. j. Provident Funds with minimum corpus of Rs 25 crore k. Pension Funds with minimum corpus of Rs 25 crore These entities are not required to be registered with Sebi as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.
Initial Public Offering, IPO, is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer’s securities.
What is a Follow on Public Offering?
A Follow on Public Offering, FPO, is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.
What is a Rights Issue?
Rights Issue, RI, is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements
What is a Preferential Issue?
A Preferential Issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company has to comply with the Companies Act and the requirements contained in Chapter pertaining to preferential allotment in Sebi (DIP) guidelines which inter-alia include pricing, disclosures in notice etc.
What is Sebi’s role in an issue?
Any company making a public issue or a listed company making a rights issue of value of more than Rs 50 lakh is required to file a draft offer document with Sebi for its observations. The company can proceed further on the issue only after getting observations from Sebi. The validity period of Sebi’s observation letter is three months only i.e. the company has to open its issue within three months period.
What is the difference between an Offer Document, Red Herring Prospectus, a Prospectus and an Abridged Prospectus? What does it mean when someone says “Draft Offer Document”?
“Offer Document” means prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue, which is filed Registrar of Companies, RoC, and Stock Exchanges. An Offer Document covers all the relevant information to help an investor to make his/her investment decision. “Draft Offer document” means the offer document in draft stage. The draft offer documents are filed with Sebi, atleast 21 days prior to the filing of the Offer Document with ROC/ SEs. Sebi may specifies changes, if any, in the Draft Offer Document and the issuer or the lead merchant banker shall carry out such changes in the Draft Offer Document before filing the Offer Document with ROC/ SEs. The Draft Offer document is available on the Sebi website for public comments for a period of 21 days from the filing of the Draft Offer Document with Sebi.
What is a Red Herring Prospectus?
Red Herring Prospectus, RHP, is a prospectus, which does not have details of either price or number of shares being offered, or the amount of issue. This means that in case price is not disclosed, the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares are determined later. An RHP for and FPO can be filed with the RoC without the price band and the issuer, in such a case will notify the floor price or a price band by way of an advertisement one day prior to the opening of the issue. In the case of book-built issues, it is a process of price discovery and the price cannot be determined until the bidding process is completed. Hence, such details are not shown in the Red Herring Prospectus filed with RoC in terms of the provisions of the Companies Act. Only on completion of the bidding process, the details of the final price are included in the offer document. The offer document filed thereafter with RoC is called a Prospectus.
What is an Abridged Prospectus?
Abridged Prospectus means the memorandum as prescribed in Form 2A under sub-section (3) of section 56 of the Companies Act, 1956. It contains all the salient features of a prospectus. It accompanies the application form of public issues.
What does one mean by Lock-in?
Lock-in indicates a freeze on the shares. Sebi (DIP) guidelines have stipulated lock-in requirements on shares of promoters mainly to ensure that the promoters or main persons who are controlling the company, shall continue to hold some minimum percentage in the company after the public issue.
How the word Promoter has been defined?
The Promoter has been defined as a person or persons who are in overall control of the company, who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public and those named in the prospectus as Promoters(s). It may be noted that a director/officer of the issuer company or person, if they are acting as such merely in their professional capacity are not be included in the definition of a Promoter. 'Promoter Group' includes the Promoter, an immediate relative of the Promoter (i.e. any spouse of that person, or any parent, brother, sister or child of theperson or of the spouse). In case promoter is a company, a subsidiary or holding company of that company; any company in which the Promoter holds 10% or more of the equity capital or which holds 10% or more of the equity capital of the Promoter; any company in which a group of individuals or companies or combinations thereof who holds 20% or more of the equity capital in that company also holds 20% or more of the equity capital of the issuer company. In case the Promoter is an individual, any company in which 10% or more of the share capital is held by the promoter or an immediate relative of the promoter' or a firm or HUF in which the 'Promoter' or any one or more of his immediate relative is a member; any company in which a company specified in (i) above, holds 10% or more, of the share capital; any HUF or firm in which the aggregate share of the promoter and his immediate relatives is equal to or more than 10% of the total, and all persons whose shareholding is aggregated for the purpose of disclosing in the prospectus "shareholding of the promoter group".
Who decides the price of an issue?
Indian primary market ushered in an era of free pricing in 1992. Following this, the guidelines have provided that the issuer in consultation with Merchant Banker shall decide the price. There is no price formula stipulated by Sebi. Sebi does not play any role in price fixation. The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. There are two types of issues one where company and LM fix a price (called fixed price) and other, where the company and LM stipulate a floor price or a price band and leave it to market forces to determine the final price (price discovery through book building process).
What is firm allotment?
A company making an issue to public can reserve some shares on “allotment on firm basis” for some categories as specified in DIP guidelines. Allotment on firm basis indicates that allotment to the investor is on firm basis. DIP guidelines provide for maximum percent of shares, which can be reserved on firm basis. The shares to be allotted on “firm allotment category” can be issued at a price different from the price at which the net offer to the public is made provided that the price at which the security is being offered to the applicants in firm allotment category is higher than the price at which securities are offered to public.
Is there any preference while doing the allotment?
The allotment to the Qualified Institutional Buyers, QIBs, is on a discretionary basis. The discretion is left to the merchant bankers who first disclose the parameters of judgment in the Red Herring Prospectus. There are no objective conditions stipulated as per the DIP guidelines. The merchant bankers are free to set their criteria and mention the same in the Red Herring Prospectus.
How is the Retail Investor defined as?
‘Retail Individual Investor’ means an investor who applies or bids for securities of or for a value of not more than Rs 1,00,000.
Can a Retail Investor also bid in a book-built issue?
Yes. He can bid in a book-built issue for a value not more than Rs 1,00,000. Any bid made in excess of this will be considered in the HNI category.
How many days is the issue open?
As per Clause 8.8.1, subscription list for public issues shall be kept open for at least 3 working days and not more than 10 working days. In case of book-built issues, the minimum and maximum period for which bidding will be open is 3–7 working days extendable by 3 days in case of a revision in the price band. The public issue made by an infrastructure company, satisfying the requirements in Clause 2.4.1 (iii) of Chapter II may be kept open for a maximum period of 21 working days. As per clause 8.8.2., rights issues shall be kept open for at least 30 days and not more than 60 days.
Can I know the number of shares that would be allotted to me?
In case of fixed price issues, the investor is intimated about the CAN/Refund order within 30 days of the closure of the issue. In case of book built issues, the basis of allotment is finalized by the book running lead Managers within 2 weeks from the date of closure of the issue. The registrar then ensures that the demat credit or refund as applicable is completed within 15 days of the closure of the issue. The listing on the stock exchanges is done within 7 days from the finalization of the issue.
Is it compulsory for me to have a Demat Account?
As per the requirement, all the public issues of size in excess of Rs 10 crore, are to made compulsorily in the demat mode. Thus, if an investor chooses to apply for an issue that is being made in a compulsory demat mode, he has to have a Demat Account and has the responsibility to put the correct DP ID and Client ID details in the bid/application forms.
How do I know if I am allotted the shares? And by what timeframe will I get a refund if I am not allotted?
The investor is entitled to receive a Confirmatory Allotment Note, CAN, in case he has been allotted shares within 15 days from the date of closure of a book-built issue. The registrar has to ensure that the demat credit or refund as applicable is completed within 15 days of the closure of the book-built issue.
How long will it take after the issue for the shares to get listed?
The listing on the stock exchanges is done within 7 days from the finalization of the issue. Ideally, it would be around 3 weeks after the closure of the book-built issue. In case of fixed price issue, it would be around 37 days after closure of the issue.
Who are the intermediaries in an issue?
Merchant bankers to the issue or Book Running Lead Managers, BRLM, syndicate members, Registrars to the issue, Bankers to the issue, Auditors of the company, Underwriters to the issue, Solicitors, etc. are the intermediaries to an issue. The issuer discloses the addresses, telephone/fax numbers and email addresses of these intermediaries. In addition to this, the issuer also discloses the details of the compliance officer appointed by the company for the purpose of the issue.
What is a Green shoe option?
Green shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days in accordance with the provisions of Chapter VIIIA of DIP guidelines, which is granted to a company to be exercised through a Stabilizing Agent. This is an arrangement wherein the issue would be over allotted to the extent of a maximum of 15% of the issue size. From an investor’s perspective, an issue with green shoe option provides more probability of getting shares and also that post listing price may show relatively more stability as compared to market.
What is an e-IPO?
A company proposing to issue capital to public through the on-line system of the stock exchange for offer of securities can do so if it complies with the requirements under Chapter 11A of DIP guidelines. The appointment of various intermediaries by the issuer includes a prerequisite that such members/registrars have the required facilities to accommodate such an online issue process.
What is open book/closed book?
Presently, in issues made through book building, Issuers and merchant bankers are required to ensure online display of the demand and bids during the bidding period. This is the open book system of book building. Here, the investor can be guided by the movements of the bids during the period in which the bid is kept open. Under closed book building, the book is not made public and the bidders will have to take a call on the price at which they intend to make a bid without having any information on the bids submitted by other bidders.
What is Hard underwriting?
Hard underwriting is when an underwriter agrees to buy his commitment at its earliest stage. The underwriter guarantees a fixed amount to the issuer from the issue. Thus, in case the shares are not subscribed by investors, the issue is devolved on underwriters and they have to bring in the amount by subscribing to the shares. The underwriter bears a risk which is much higher in soft underwriting.
What is Soft underwriting?
Soft underwriting is when an underwriter agrees to buy the shares at later stages as soon as the pricing process is complete. He then, immediately places those shares with institutional players. The risk faced by the underwriter as such is reduced to a small window of time. Also, the soft underwriter has the option to invoke a force Majeure (acts of God) clause in case there are certain factors beyond the control that can affect the underwriter’s ability to place the shares with the buyers.
What is a Cut Off Price?
In Book building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called “Cut Off Price”. This is decided by the issuer and LM after considering the book and investors’ appetite for the stock. Sebi (DIP) guidelines permit only retail individual investors to have an option of applying at Cut Off Price.
What is Differential Pricing?
Pricing of an issue where one category is offered shares at a price different from the other category is called Differential Pricing. In DIP guidelines Differential Pricing is allowed only if the securities to applicants in the firm allotment category is at a price higher than the price at which the net offer to the public is made. The net offer to the public means the offer made to the Indian public and does not include firm allotments or reservations or promoters’ contributions.
What is Basis of Allocation/Basis of Allotment?
After the closure of the issue, the bids received are aggregated under different categories i.e., firm allotment, Qualified Institutional Buyers, QIBs, Non-Institutional Buyers, NIBs, Retail, etc. The oversubscription ratios are then calculated for each of the categories as against the shares reserved for each of the categories in the offer document. Within each of these categories, the bids are then segregated into different buckets based on the number of shares applied for. The oversubscription ratio is then applied to the number of shares applied for and the number of shares to be allotted for applicants in each of the buckets is determined. Then, the number of successful allottees is determined. This process is followed in case of proportionate allotment. In case of allotment for QIBs, it is subject to the discretion of the post issue lead manager.
Who is a Qualified Institutional Buyer?
Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP guidelines, a ‘Qualified Institutional Buyer’ shall mean: a. Public financial institution as defined in section 4A of theCompanies Act, 1956; b. Scheduled commercial banks; c. Mutual funds; d. Foreign institutional investor registered with Sebi; e. Multilateral and bilateral development financial institutions; f. Venture capital funds registered with Sebi. g. Foreign Venture capital investors registered with Sebi. h. State Industrial Development Corporations. i. Insurance Companies registered with the Insurance Regulatoryand Development Authority, IRDA. j. Provident Funds with minimum corpus of Rs 25 crore k. Pension Funds with minimum corpus of Rs 25 crore These entities are not required to be registered with Sebi as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.
Monday, August 29, 2005
INTRESTING NEWS
TIMES NEWS NETWORK[ MONDAY, AUGUST 29, 2005 02:14:04 AM]
NEW DELHI: ‘TEL jhaari se ayega, khaari (Gulf) se nahin,’ says Hari Ram, a young farm enthusiast from Haryana, for whom jatropha farming is a mission. After all, this new-age crop could well transform his life and convert him into India’s neo-oil sheikh. Sounds ambitious? So what if India imports more than 70% of its crude oil requirement from West Asia, there’s always time for a new beginning. Bio-fuel has already become the rage in Brazil, Ghana, Sweden, Germany and even the US, and could end up playing a larger role in India’s quest for energy security. After all, acquiring equity oil in foreign lands to meet energy demands is not an easy game and India will need to increasingly look for homegrown solutions to fuel its economy. So, while oilmen spend time and money wringing Mother Earth for that extra drop of oil, Indian farmers could turn vast farmlands into new oilfields for India. Says RK Pachauri, director general, TERI, “Progressive farmers are beginning to discover the market for this crop. This could be India’s biggest source of bio-fuel with a little push from the oil companies and customers in the auto-segment.” Farming of jatropha — commonly known as ‘Rattanjot’ — growing wild in arid Rajasthan, is catching on. Farmers from Andhra Pradesh to Haryana, Madhya Pradesh to Karnataka are cashing in on the crop with fuel-potential. Jatropha is fast-growing, has high seed yield and is usually not eaten by animals. Around 10 lakh hectares across India have been identified for jatropha plantation. Jatropha biodiesel has an extra edge in its particularly favourable ignition performance, besides being sulphur-free and therefore a clean, low-emission fuel.
No wonder then, that customers such as Daimler Chrysler, IOC, Indian Railways, Tata Motors and state roadways companies in Andhra Pradesh, Tamil Nadu, Haryana and Gujarat are ready to bet on biofuel. Daimler Chrysler has already tied up with the Centre for Scientific and Industrial Research to set up a research project. Increasing crop yield, however, remains a big challenge. “The sustainability of the fuel would depend on the economic viability of the crop,” says Mr Pachauri. So far, the yield in India is below average. Every hectare of crop yields about 900 litres of fuel. Another grey area is sustained availability, so Indian oilcos are looking for foreign options to keep the biofuel tap flowing. Says NG Kannan, director marketing of IOC, “One of the major problems with large scale use of biodiesel is cost and availability. To be viable, biodiesel has to be available at Rs 17-27/litre.” IOC is planning to collaborate with Lubrizol to source biodiesel. Lubrizol will supply 2,000 kiloliters of biodiesel this year, 5,000 KL next year and 7,000 KL the year after, according to Mr Kannan. Although the prices will be high in the initial years, it will progressively come down as scales of operation kick in. Right now, it hardly makes sense to opt for this fuel. “In the first year, biodiesel should sell for Rs 43/litre. This should come down to Rs 37/litre and Rs 34/litre in subsequent years,” says Mr Kannan. So unless oilcos subsidise the retail price, there may be no buyers. Even so, farmers growing jatropha have already started using the green fuel in their home applications. Small quantities of jathropa oil are already being used to light lamps in village homes, while others are even using them to run gensets and tractors.
Jatropha oil can be used as is, unlike ethanol, a sugar cane extract that needs to be doped with petrol. “It could be doped as much as 20% with the regular diesel for trucks,” Mr Pachauri says. Leading automakers such as Mahindra, Tata Motors and Maruti are collaborating with Indian oilcos on viable alternate fuel from jathropa. Says Anand Mahindra of Mahindra & Mahindra, “The increasing requirement for greener fuels and India’s over dependence on imported fossil fuel has driven us to look for alternatives.” The planning commission estimates that the use of biodiesel blends would lead to an annual saving of Rs 20,000 crore on crude oil import. India has the potential to produce 13m tonnes alternate fuel every year. That would need 11m hectares of land and create 11m jobs. Not surprisingly then, there is plenty of excitement in the air.
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