pricing & designing of
instruments & preparation
for public issues

content
• definition of public issue
• role of merchant banker for public issue
• marketing of public issue
• market design of public issue
• responsibilities of lead Manger(s) in marketing of public issue
• SEBI guidelines on issue advertisement
• recent market strategies for public issues
• public response to public issue
• SEBI guidelines for public issue

Introduction
• The primary market is a market for new issues.it is also
called the new issues market.It is a market for fresh capital .
funds are mobilized in the primary Market through
prospectus,right issues and private placement.

Public issue
• Issue of stock on a public market rather than being
privately funded by the companies own promoter(s), which
may not be enoughcapital for the business to start up,
produce, or continue running. By issuing stock publically,
this allows the public to own a part of the company, though
not be a controlling factor.

Intermediaries to an issue
• Merchant banker
• Registrar to the issue
• Bankers to the issue

Methods for determining the offer price
• Fixed price
• Book building

Determination of price
• Consultation
• Specified securities
• Cut off price
• Individual investor
• Rejection

ASBA process
• electronically
• Authorization
• BSE of NSE
• Transferring

Role of merchant banker in a public issue
• The details submitted by merchant banker about the public
issue should contain the following.
a.Furnishing Information
b.Books to be Maintained
c. Agreement with issuing company
d.Action by RBI
e.Code of Conduct

MARKETING OF PUBLIC ISSUES
• Issue management by merchant bankers mainly focuses on
three basic functions viz, origination, underwriting and
distribution of securities.
• Advancement of technology in communication and data
processing has posed a new challenge for the merchant
bankers in the area of marketing of public issues. Today,
merchant bankers need top care about being in the centre of
‘information flow’ rather than in the centre of ‘capital flow’.

Allotment in book build issue
• Not less than 35 %
• Not less than 15 %
• Not more than 50 %

Market Design of Public Issues
• The market design of public issues is provided in the
provisions of the Companies Act, 1956. It deals with
the issue, listing and allotment of securities.
• In amended from time to time prescribe a series of
disclosures about the issuing company, management,
promoters, project, risk factors and eligibility norms for
accessing the market.

Responsibilities of Lead Manager(s) in
Marketing of Public issue
• The responsibilities of lead merchant banker(s) for
marketing of public issues may be summarized as under:
1.Deciding the time of floating the issue
2.Appointment of Printers for issue stationery
3.Dispatch and Distribution of Issue Material
4.Appointment of Advertising Agency
5.Publicity Campaign

Contd.
• Along with print media, audio-visual media, hoardings,
banners, posters, publicity campaign may also be carried
through the followings:
a.Road Shows
b.Research Coverage
c.Press Conferences and Investors’ Conferences
d.Network of Merchant Bankers

Statutory Advertisements
• The following advertisements have to be statutorily released
1.Issue announcement advertisement at least 10 days before
opening of the issue. This advertisement contains an abridged
version of the prospectus.
2.Issue opening advertisement on the day of opening of the issue.
3.Issue closing advertisement on the day of closing of the issue.
4.The basis of allotment advertisement after finalization of
allotment.

Recent Marketing Strategies for Public
Issues
• Some of the recent marketing strategies adopted in new
issue market in India are as follows:
1.Marketing IPOs through Secondary Market ( e-IPO)
2.Green Shoe Option (Over Allotment of Securities)
3.Safety Net (Buy Back of Shares)
4.Target Marketing/ Branding the financial Instrument

Contd.
• During the period under review, bond issues of two
financial Institutions namely ICICI Ltd and IDBI Ltd
dominated the debt issues in India.To target the different
classes of investors, the bonds were classified as:
a.Tax Saving Bonds
b.Regular Income Bonds
c.Money Multiplier Bonds
d.Child Growth Bonds

Contd.
• The bonds issued by the IDBI Ltd were branded as ‘IDBI
FLEXIBLE BONDS’. Different types of bonds targeted
different types of investors like:
a.IDBI Regular Income Bonds
b.IDBI Growing Interest Bonds
c.IDBI Multiplier Bonds
d.IDBI Infrastructure (Tax Saving) Bonds

The eligibility norms for an unlisted
company for making a public issue
• An unlisted company has to satisfy the following criteria to be eligible to make
a public issue
1. Pre-issue networth of the co. should not be less than Rs.1 crore in last 3 out
of last 5 years with minimum networth to be met during immediately
preceding 2 years and
2. track record of distributable profits for at least three out of immediately
preceding five years and
3. the issue size (i.e. offer through offer document + firm allotment + promoters’
contribution through the offer document)
shall not exceed five times its pre-issue networth.

The eligibility norms for a listed company
for making a public issue
• A listed company is eligible to make a public issue if the
issue size (i.e. offer through offer document + firm
allotment + promoters’ contribution through the offer
document) is less than five times its pre-issue networth

Is it mandatory to have a Demat Account for
applying in public issue?
• An investor has the option to apply for and receive the shares in
physical form. However, it is advisable to get the allotment in Demat
form as the shares in IPO shall be compulsorily tradable in Demat
segment in Stock Exchanges. Dealing of physical shares (allocated in
IPO) will not be accepted.
• In case of an IPO of any security of issue size of Rs. 10 crore or more,
security shall be issued only in dematerialised form. In book built
issues, for QIBs and large investors (applying for more than 1000
shares) allotment shall be only in Demat form and hence they should
have a Demat account.

Within how many days should the
company get its securities listed after the
issue?
• The post issue lead manager ensures that all steps for
completion of the necessary formalities for listing and
commencement of trading at all stock exchanges
where the securities are to be listed are taken within 7
working days of finalisation of basis of allotment.