Intro

It was a usual Monday morning, when Shubham received a call from his Senior Manager Vandan…

Good Morning Tomorrow!? I barely

Good morning Shubham! I Sir! I will start know anything about
just got off the call with working on IPOs.. Need to call my
our client and he is this right now! friends ASAP
considering IPO for his
company and needs us to
guide him through this.
Start working on this right
away our meeting is
scheduled for tomorrow.
 Shubham immediately calls some of his friends for their advice and guidance….

Hi guys! I just received

an urgent assignment Hello Shubham! Tell us
and will need your help. what is it?

I have to explain the in’s

and out’s of IPOs to our
client tomorrow and I Don’t worry friend! Just ask
don’t know anything us all of your queries. But
about it. before we begin with IPOs,
let’s understand financial
markets.
Umm..Okay Financial market is a platform where buyers and sellers
are involved in sale and purchase of financial products
like shares, mutual funds, bonds and so on.
Markets can be classified by: -
• Nature of Asset
Stock, Bond, Commodity and Derivative Market
• Nature of Claim
Equity and Debt Markets
• Maturity of Claim
Money and Capital Markets
• Delivery Timing
Cash and Future Markets
• Organizational Structure
Over the counter and Exchange Traded Market
 IPO stands for
So many markets!! But,
Initial Public It is a process where a private
WHAT IS AN IPO?. company sells it shares for the
Offering
first time to the public which
essentially means you are
turning your private company
into a public one. When a
company becomes a public firm,
it goes from being owned by just
a few people to potentially tens
of thousands of shareholders.
 Ohh… And
WHY IS IPO REQUIRED
by a company?. There can be multiple reason for a
company to initiate an IPO.
• Reduction in Debt
• Expansion of Existing Business
• Product or Service Launch
 Understood… So exactly Any company needs to follow some
WHAT IS THE PROCESS basic steps before going public: -
OF AN IPO? 1. Select an Investment bank
2. Due diligence and filings
3. Pricing
So there must be 4. Stabilization
some 5. Transition
GUIDELINES to be
followed in this
Yes, there are some guidelines from SEBI
process, right? that need to be followed in the process.
Let me show you..
 General SEBI Guidelines for IPO

A company that wants to make a public offer must also adhere to the following general SEBI guidelines for IPO inneeds
Any company India: to follow some
• The directors, promoters or other KMPs must not be associated with any other company in a similar role.
basic steps before going public: -
• The directors, promoters or any other key management personnel who have the control of the company must not be debarred from
accessing the primary market. 1. Select an Investment bank
• The application to list the company’s shares must be filed with a recognised stock exchange in 2. Due diligence and filings
India.
3. Pricing
• The company must enter into legal contracts with a depository to dematerialise its specific securities.
• The partly paid-up equity shares must be fully paid-up. 4. Stabilization
• A listed company must maintain a minimum public shareholding of 25%. In case of failure to do so, the company gets one year to meet
5. Transition
the requirement.
• A company must make financial arrangements from trust and verifiable sources for its financial requirements, excluding the amount put
up to issue new company shares. Yes, there are some guidelines from SEBI
• The process of an initial public offer of more than INR 50 lakhs must start with the companythat
filingneed
a draftto be in
offer followed
the form in
of the
Draftprocess.
Red
Herring Prospectus with the SEBI. Let me show you..
• Once the draft is reviewed and received by the company along with the issue of final observation letter, the final offer document or the
red herring prospectus must be filed with the Registrar of Companies (ROC).
• The company may choose the book building process under Entry Norm II. In this case, the company must complete the IPO process
within one year from the date of receiving the final observation letter from SEBI.
• 50% of the Board of Directors of the company must be independent investors.
• The same 50% of the Board of Directors of the company must have no obligations to the promoters or the company.
• No directors or promoters of the company must be guilty of an economic offence.
• The company or any of its promoters or directors must not be a wilful defaulter.
• The issuer company must disclose the number of shares or the number of shares to SEBI between the date of filing its draft red herring
prospectus and issue of specified securities.
• If a company wants to go for a public issue of more than INR 100 crores, it must submit a draft offer document with the regional office
of SEBI before doing so.
Very well… There must be both
I’ll explain this one. So like everything else
BENEFITS & LIMITATIONS there are pros and cons of an IPO. Here are
OF IPO, right? the BENEFITS: -
1. Access to a new way of financing
2. Independent and Objective
valuation
3. Best corporate governance practices
4. Employee Incentives
5. Expanding Customer Base
6. Prestige
7. Facilitates Mergers and Acquisitions
Hmmm… …and now the other side of the coin. Here
are the LIMITATIONS: -
1. Cost Increases
2. Shareholders decisions
3. Loss of Confidentiality
4. Owner unable to sell its share
5. Loss of decision making power
 I’ll answer
But, WHAT ARE THE TYPES ..there are four major types of investors:-
this one…
OF INVESTORS IN AN IPO? 1. QUALIFIED INSTITUTIONAL INVESTORS
(QIIs)
2. ANCHOR INVESTORS
3. RETAIL INVESTORS
4. HIGH NET-WORTH INDIVIDUALS
(HNIs) / NON INSTITUTIONAL
INVESTORS (NII)
 That must • A rights issue is an invitation to existing shareholders to purchase
be the additional new shares in the company. This type of issue gives
Interesting… I recently read of existing shareholders securities called rights. With the rights, the
recent RIL
some RIGHT ISSUES, what shareholder can purchase new shares at a discount to the market
Right
is that about? price on a stated future date.
Issues…
• Companies most commonly issue a rights offering to raise
additional capital. Troubled companies typically use rights issues to
pay down debt, especially when they are unable to borrow more
money. However, not all companies that pursue rights offerings are
in financial trouble.

• As a shareholder, you have three options with a rights issue –

subscribe to the rights issue in full, ignore your rights & sell your
rights to someone else.

Let me explain the case of recent RIL Right Issues…

Hmm… please do.. • Reliance Industries' shares offered 1 for
every 15 shares held, in the just-concluded
rights issue, concluding the issue in just 42
days, has been listed and permitted to trade
on the Exchange in from June 15, 2020.
How is its timeline
and payment • RIL's Rs 53,124 crore rights issue was India's
schedule set? largest-ever rights issue. It ended with 1.6
times subscription - a commitment
exceeding Rs 84,000 crore.
 this..
Here… look at

Timeline Payment Schedule

 Shareholding Percentage
2.28

8.44 7.95
…and these
are the
2.6
shareholdings
0.2
5.25 49.15

24.14
1.Promoters Group 2.Foreign Institutions 3.NBFC and Mutual Funds
4.Central Government 5.Others 6.General Public
7.Financial Institutions 8.GDR
 You’ll also need
• It refers to the non-public offering of shares in a public
a brief idea
Now what is this? company.
about PRIVATE
PLACEMENTS • The investors in private placement of shares are usually
banks, mutual funds, insurance companies and big
businessman or investors. Private placement is the opposite
of a public issue where the securities are made available for
everyone. As a private placement is offered to a selected
few it doesn’t have to be registered with the Securities and
Exchange Board of India (SEBI).

• There are various types of private placements. For example,

PIPE and SEDA are forms of private placements. They are
often a cheaper source of capital than a public offering.
 I am sure RIL must have
Yes… That’s right.. Wait I’ll share a news report
implemented these too..
about it…
RIL allots NCDs worth Rs 3,600 crore on private
placement basis
RIL on May 20, announced that it had allotted
36,000 unsecured redeemable non-convertible
debentures (NCDs) of face value Rs.10 Lakh
each aggregating Rs.3,600 crore.
 Also there’s
Wow! Another another concept Private equity is an alternative
one!? Tell me… PRIVATE investment class and consists of capital
EQUITY that is not listed on a public exchange.

It is composed of funds and investors

that directly invest in private companies,
or that engage in buyouts of public
companies, resulting in the de listing of
public equity.
So, who are the major
private equity firms Top Private equity firms which invested in RIL
investing in RIL? recently:
1. Mark Zuckerberg’s Facebook
2. US-based private equity firm TPG & L.
Catterton
3. Private equity firms KKR and Vista equity
partners
4. Mubadala investment company and Silver Lake
5. Abu Dhabi Investment Authority (ADIA)
 Percentage Stake of Investors in Reliance Jio
50,000 12

45,000
9.99
10
40,000

35,000
8
30,000
…look here is the
25,000 6

Cost INR (in Crores)

list of recent

Stake Percentage
investors of RIL 20,000
and their stakes 4
15,000
2.32 2.32 2.32
10,000 1.85 2
1.34 1.16 1.15
5,000 0.93
0.39 0.39 0.15
0 0
k KR er
s IF ala tic IA ke G n el m
oo K n P d n AD a TP r to I nt m
b rt se
d a tla rL tte lco
ce Pa a ub lA v e a a
Fa ty aB M ra Sil L.
C Qu
q ui a bi n e
ta E
i Ar Ge
s ud
Vi a
S

Money (in Crores) % of Stakes

Source: Jaagran, as on 15 th July, 2020
That clears out most of my
queries and I will be able
to explain IPO to my client
in an effective way. Anytime mate!
THANK YOU guys for all
the help!
Thank You Slide..