64554415 Investors Attitude Towards Primary Market Brijender
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Transcript of 64554415 Investors Attitude Towards Primary Market Brijender
A
Project Study Report
On
“INVESTORS ATTITUDE TOWARDSPRIMARY MARKET”
Undertaken at
Submitted to the
International School of Informatics & Management(Affiliated to Rajasthan Technical University)
the partial fulfillment of the degree of
MASTER OF BUSINESS ADMINISTRATION(2010-2012)
Submitted To: Submitted By:Ms. Tripti Bisawa Ronak Agrawal
MBA 4th Semester
ACKNOWLEDGEMENT
This project comes out to be a great source of learning and
experience. Lot of efforts has been put by various people to make this
project a success. This has greatly enhanced my knowledge about the vast
field of Investments in small cap and large cap companies.
I gratefully acknowledge my indebtedness to Ms. Tripti Bisawa,
Faculty MBA) for allowing me to undergo a project.
Then I express my sincere gratitude and thanks to Mr. Sushil Jain
(Project guide) for his inspiration and helpful attitude.
Ronak Agrawal
DECLARATION
I do hereby declare that the project report is submitted as partial
fulfillment of the requirement of MBA of International School of
Informatics & Management, Jaipur.
The Project has been done under the guidance of Mr. Sushil Jain, Vinod
Pandey in C-Scheme branch, Jaipur and Ms. Tripti Biswa Faculty guide,
International School of Informatics & Management, Jaipur
No part of this report has not been published or submitted elsewhere for
the fulfillment of any degree or diploma for any institute or university.
Ronak Agrawal
CONTENTS
S. No. Particulars Page No.
1 Executive summary 6
2 Project Details 7
3 Research Objectives 8
4 Research Methodology 9
5 Company Profile 12
6 Literature Review 19
7 Online Trading 23
8 The emergence of online trading in India 28
9 Growth of online trading 47
10 Data Analysis 54
11 Conclusion 66
12 Recommendations 67
13 Industry Relevance 68
14 Learning 69
15 Bibliography 70
16 Questionnaire 71
COMPANY PROFILE
ORGANIZATION HISTORY
Company Profile
Milestones
AR Core Strengths
Management Team
About Anand Rathi
Anand Rathi (AR) is a leading full service securities firm providing the entire gamut of
financial services. The firm, founded in 1994 by Mr. Anand Rathi, today has a pan
India presence as well as an international presence through offices in Dubai and
Bangkok. AR provides a breadth of financial and advisory services including wealth
management, investment banking, corporate advisory, brokerage & distribution of
equities, commodities, mutual funds and insurance, structured products - all of which
are supported by powerful research teams.
The firm's philosophy is entirely client centric, with a clear focus on providing long
term value addition to clients, while maintaining the highest standards of excellence,
ethics and professionalism. The entire firm activities are divided across distinct client
groups: Individuals, Private Clients, Corporate and Institutions and was recently ranked
by Asia Money 2006 poll amongst South Asia's top 5 wealth managers for the ultra-
rich.
In year 2007 Citigroup Venture Capital International joined the group as a financial
partner.
Equity & Derivatives Brokerage
Anand Rathi provides end-to-end equity solutions to institutional and individual
investors. Consistent delivery of high quality advice on individual stocks, sector trends
and investment strategy has established us a competent and reliable research unit across
the country.
Clients can trade through us online on BSE and NSE for both equities and derivatives.
They are supported by dedicated sales & trading teams in our trading desks across the
country. Research and investment ideas can be accessed by clients either through their
designated dealers, email, web or SMS.
Milestones
1994:
Started activities in consulting and Institutional equity sales with staff of 15
1995:
Set up a research desk and empanelled with major institutional investors
1997:
Introduced investment banking businesses
Retail brokerage services launched
1999:
Lead managed first IPO and executed first M & A deal
2001:
Initiated Wealth Management Services
2002:
Retail business expansion recommences with ownership model
2003:
Wealth Management assets cross Rs1500 crores
Insurance broking launched
Launch of Wealth Management services in Dubai
Retail Branch network exceeds 50
2004:
Commodities brokerage and real estate services introduced
Wealth Management assets cross Rs3000crores
Institutional equities business re-launched and senior research team put in place
Retail Branch network expands across 100 locations within India
2005:
Real Estate Private Equity Fund Launched
Retail Branch network expands across 200 locations within India
2006:
AR Middle East, WOS acquires membership of Dubai Gold & Commodity Exchange
(DGCX)
Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia Money
2006 poll
Ranked 6th in FY2006 for All India Broker Performance in equity distribution in the
High Net worth Individuals (HNI) Category
Ranked 9th in the Retail Category having more than 5% market share
Completes its presence in all States across the country with offices at 300+ locations
within India
2007:Citigroup Venture Capital International picks up 19.9% equity stake
Retail customer base crosses 100 thousand
Establishes presence in over 350 locations
AR Core Strengths
Breadth of Services
In line with its client-centric philosophy, the firm offers to its clients the entire
spectrum of financial services ranging from brokerage services in equities and
commodities, distribution of mutual funds, IPO’s and insurance products, real estate,
investment banking, merger and acquisitions, corporate finance and corporate advisory.
Clients deal with a relationship manager who leverages and brings together the product
specialists from across the firm to create an optimum solution to the client needs.
Management Team
AR brings together a highly professional core management team that comprises of
individuals with extensive business as well as industry experience.
In-Depth Research
Our research expertise is at the core of the value proposition that we offer to our clients.
Research teams across the firm continuously track various markets and products. The
aim is however common - to go far deeper than others, to deliver incisive insights and
ideas and be accountable for results.
Management Team
The senior Management comprises a diverse talent pool that brings together rich
experience from across industry as well as financial services.
Mr. Anand Rathi - Group Chairman
Chartered Accountant
Past President, BSE
Held several Senior Management positions with one of India's largest industrial groups
Mr. Pradeep Gupta - Vice Chairman
Plus 17 years of experience in Financial Services
Mr. Amit Rathi - Managing Director
Chartered Accountant & MBA
Plus 11 years of experience in Financial Services
ACQUISITION:
ANZ Grind lays : $ 1.34 bn from
August 2000.
Hong Kong Consumer Bank : $ 1.32 bn
Thailand Nakornthan Bank : $ 320 million
Indonesians Bank Per-Mata : $ 366 million from
Oct. 2004.
Korea First Bank : $ 3.3 bn from Apr.
2005.
Standard Chartered PLC is listed on both the London Stock Exchange and the Stock
Exchange of Hong Kong and is in the top 25 FTSE-100 companies, by market
capitalization. Top 100 companies list, no other bank present except Bank of America’s
position 69th and position of standard chartered bank is 74th.
Offices of ANANDRATHI are in 197 cities across 28 states & it has also branches in
Dubai & Bangkok with more than 44000 employees. It has daily turnover in excess of
Rs.4bn. It has 1, 00,000+ clients nationwide. It is also leading distributor of IPO’s.
In India where ANANDRATHI is present in 21 STATES:
Andhra Pradesh
Assam
Bihar
Chhattisgarh
Delhi
Goa
Gujrat
Haryana
Jammu & Kashmir
Jharkhand
Karnataka
Kerala
Madhya Pradesh
Maharashtra
Orissa
Punjab
Rajasthan
Tamil Nadu
Uttar Pradesh
Uttaranchal
West Bengal
LIST OF PRODUCTS :
Demat Accounts
Mutual Funds
Derivatives
Commodities
Bonds
Trading Account
Insurance
MISSION
To be India's first Multinational providing complete financial services solution across
the globe
VISION
Providing integrated financial care driven by the relationship of trust and confidence.
INTRODUCTION
The past twenty five years have witnessed a process of accelerating change in
the world’s financial markets. Driven by an interacting process of liberalization and
innovation, regulations have been removed, New product have emerged and old
boundaries between financial intermediaries have been blurred.
At the same time, growth of capital markets has posed new challenges to
economic and financial stability.
The role of Indian capital market which is to provide long term resources
required by industries for investment has observed buoyancy in share market with the
liberalization of industries and fiscal policies of the government. Finance, the lie
blood of industry is mobilized especially through New Issue Market or Primary
Market.
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 though which securities can be issued on the primary
market: rights issue, Initial Public Offer (IPO), and preferential issue. A company's
new offering is placed on the primary market through an initial public offer.
Meaning of 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 a 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.
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.
The new issue market does not include certain other sources of new long term
external finance, such as loans from financial institutions. Borrowers in the new
issue market may be raising capital for converting private capital into public
capital; this is known as "going public."
The financial assets sold can only be redeemed by the original holder.
Primary market
1. Market in which buyers and sellers negotiate and transact business directly,
without any intermediary such as resellers.
2. Financial market in which newly issued securities are offered to the public.
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 goods from a manufacturer and resells them to customers
unchanged
Primary Market
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 though which securities can be issued on the primary
market: rights issue, Initial Public Offer (IPO), and preferential issue. A company's
new offering is placed on the primary market through an initial public offer.
Recent Developments in Primary Commodity Markets
Since mid-1997 - that is, just before the beginning of the crisis in Thailand s
financial and foreign exchange markets - prices of primary commodities as a group
have fallen by more than 10 percent.(1) These price declines are sufficiently great in
magnitude to have far reaching implications for producers and consumers around the
world.
Effects of the Asian Crisis
To a large degree these price declines are associated with the Asian crisis.
During the early and mid-1990s, consumption of primary commodities in most Asian
developing countries increased at rates much higher than in the rest of the world.
Asian developing countries accounted for about two-thirds of the increase in world
consumption of petroleum products over the period 1992-96, and their share in world
consumption increased from 12 percent to 15 percent. Korea and the ASEAN-4
countries (Indonesia, Malaysia, the Philippines, and Thailand), in turn, accounted for
about one-half of the increase in consumption of petroleum products in Asian
developing countries, and the share of these five countries in world consumption rose
from 5 percent to 6 1/2 percent. A similar pattern of growth in consumption is
observed for base metals, rubber, coarse grains, oil meals, and fats and oils. For most
of these non-fuel commodities, the share of Asian countries in world consumption in
1996 was much greater than their share in the world consumption of petroleum
products. China's contribution to the growth in the markets for these commodities,
however, has tended to be much greater than that of Korea plus the ASEAN-4.
In the countries most directly affected, the Asian crisis has brought in its wake
much reduced construction activity, much higher import costs in terms of national
currencies, less available credit to finance imports, and, at a minimum, sharp
reductions in demand. These conditions have led to reductions in the rate of growth of
demand, not only in the ASEAN-4 countries and Korea but also, through the spillover
and contagion effects of the crisis, in many other countries in Asia and elsewhere.
Thus certain commodity markets that as recently as mid-1997 were expected to show
a high rate of growth of demand are now facing a period of considerable uncertainty
with regard to demand prospects. Furthermore, for some non-fuel commodities such
as timber, rice, natural rubber, and vegetable oils, the large depreciations of currencies
of the southeast Asian countries may also have had supply effects insofar as they
create incentives to increase exports from current inventories and to increase current
and prospective production.
Effects of Weather
This year weather conditions generally favorable to crop production have also
been an important factor that has tended to weaken the prices of several agricultural
commodities. This seems true notwithstanding the unusual weather patterns in many
parts of the world that have been attributed to El Nino and have received much press
coverage. At least so far, the adverse consequences of El Nino for commodity
production that are sufficiently great to have discernible effects on world prices for
individual commodities have been limited to the fish catches off the west coast of
South America and to palm oil production in southeast Asia. Elsewhere - for example,
in the case of cereal production in southern Africa - El Nino may have reduced
production locally, but the consequence for world prices is not of great importance. In
addition, warmer than usual weather this winter in the Northern Hemisphere has
reduced the demand for heating oil and hence contributed to the downward trend in
the price of petroleum and other energy commodities.
Developments in Specific Markets
The interplay of the Asian crisis and other factors affecting commodity
markets in recent months comes more into focus in a review of developments in
specific primary commodity markets. Price decreases in excess of 10 percent (with
prices measured in terms of SDRs) over the period June 1997 through January 1998
that were in some way associated with the effects of weaker demand from Asian
countries were recorded for nearly one-third of the commodities included in the IMF's
commodity price index. The price declines for five commodities - copper, nickel,
natural rubber, wool, and hides - appear to be associated mainly with the Asian crisis.
The Asian crisis also played an important role, but probably not the predominant role,
in the price declines of four other commodities - crude petroleum, timber, zinc, and
lead. For certain other commodities, such as aluminum, iron ore, meat, maize, and
soybean meal, ...
Problems of Indian Primary Market
There are several problems of the Indian primary market. But these problems
can be overcome too by mere application of simple rules( end of the article). These
remedies have been suggested by experts. Economists attribute these problems to
various factors some of which are highlighted below.
The function of the primary market with respect to the market for IPO or
initial public offering is to see that various companies are provided with opportunities
for the acquisition of growth capital. The primary market has withstood the tests of
time.
Inappropriate allotment of shares:
There are many existing problems of the Indian primary market. Some of the
instances include the inappropriate assignment of shares to the public as was the case
of the ONGC public issues. Due to this there was a lot of confusion among the
investors.
Withdrawal of IPOs:
Another problem lies in the fact that these days, IPOs are increasingly being
withdrawn. An expert has rightly said that there is no point expressing disappointment
in the withdrawal of the IPOs because it may be taken not as an indication of failure
of the company and hence the primary market but it may be considered as a
disagreement of price between the seller and the buyer. The primary markets are
undulating the world over. The incidents occurring in the primary markets are
reflections of what is actually happening in the secondary markets. It was fathomed
that the IPOs, which were lately taken back had very "aggressive" price bands. The
price bands could have been aligned as per existing conditions of the market. The lead
managers responsible for the IPOs may also be blamed for the catastrophe. Few are of
the opinion that lack of judgment may have led to the withdrawal. "Investors fatigue"
is being accounted for in the withdrawals.
"Cornering" of shares:
Recently, there was an instance when investors "cornered" shares, which were
to be alloted to the public. The investor was actually a big investor who camouflaged
as a small investor cornered many shares.
The most important factor shaping in today's global economy is the process of
globalization. Indian companies are moving in search of low-cast markets, technology
is driving growth in production and competition is becoming more intense. A second
factor is the fastest growth in private capital flows, mainly short-term flows by banks
and financial institutions, portfolio flows by mutual funds and pension funds and
foreign direct investment into India. A third factor is the increasing share of India and
other emerging market economies in world trade.
The outburst in communication technology has led to greater integration of
Indian financial markets across the world. The impact of these changes could be felt
from the extremely buoyant activity in Indian stock markets. A number of foreign
financial service providers have entered into the Indian financial market like Morgan
Stanley, Templeton, and Goldman Sachs. Currently FII investment is at $ 6.5 Billion
compared to $ 2 Billion in 2001. The stock market is booming with Sensex hovering
around 16000-17000. SEBI has put in place appropriate guidelines and controls to
regulate the markets in tune with the changing environment and attendant risks. All
this is happening because of large amounts of investment in the country.
People often invest in various asset classes to:
* To beat Inflation
* To fund future needs
* To meet contingencies
* To maintain same standard of living after retirement
All these factors matters a lot to the investors and the mutual fund route is one way
through which people can meet these needs.
Free economies are generally characterized to have financial markets to serve
as channels through which the savings of the society are made available to business
enterprises. Such financial markets may be classified as (1) Capital market, and (2)
Money market where the former refers to the market mechanism which envisages
institutional arrangements for marketing of long term and equity claims such as equity
shares, preference shares, debentures, bonds, etc., while the latter refers to the market
mechanism which concerns with floating of liquid funds and their short term uses in
trade and industry through the banking system.
The capital market which concerns with demand and supply of long term
funds is again dichotomized as primary or new issue market and secondary or stock
market where the former deals with new securities offered to the investing pubic,
while the latter deals with the existing securities. The joint stock companies raise
funds from new issue markets but such new issue are also listed with stock markets
which provide them a regular market, ensure regular valuation of and stability in
prices of such securities, assure safety in dealings of the securities, channelise funds
in the desired direction and ensure wider ownership of the securities.
The stock exchanges are, thus, primarily concerned with providing
marketability to the existing securities but these also activate the new issue markets
which serve as primary source of funds to the industrial enterprises for their new
projects or for expansion, diversification or modernization of existing ones. Both the
primary and the secondary markets are integral parts of the capital market and are
susceptible to common influences. Public responses are generally encouraging in the
new issue market when there is boom in the stock market and vice versa. Similarly,
the secondary market is very sensitive to the impact of development in the country
and the same is transmitted to the new issue market.
New issues include ‘initial issues’ as well as ‘further issue’ where the former
refers to the securities issued buy the companies for the first time either on
incorporation or on conversion from private to public company while the latter refers
to the new issues floated by existing companies which needed funds for expansion/
diversification/ modernization. The initial and further issues may be combined under
new money issue which refer to the issues for mobilization of new money for the
corporate enterprises and there can be no new money issue which include
bonus/capitalization issues and exchange issues where the former results from the
capitalization to retained earnings enabling existing shareholders get new shares
without paying and the latter results from conversion of private company into public,
amalgamation, merger and equity dilution by FERA companies.
INITIAL PUBLIC OFFERINGS (IPO)
A corporate may raise capital in the primary market by way of an initial public
offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of
securities to the public in the primary market. It is the largest source of funds with
long or indefinite maturity for the company.
IPO Stocks: When the company wants to release their shares into the market for the
first time, they will invite the public to participate in an exercise called the IPO (Initial
Public Offering). This is when you see people filling in application forms and buying
bank drafts to purchase the company's shares (some countries do it electronically).
Some call it "applying for new shares".
Prices when applying for new shares are always much cheaper than what it
should be listed in the market later. However, if it is a very attractive company, there
will be more people who will participate in the IPO exercise and the draw-lots method
will be used to determine who will be allocated the shares.
Then, after the first stage, the company's shares will be listed in the stock
market. That is when if you have managed to purchase the shares during the IPO
offering, you will be able to sell them into the market to buyers who want a part of
these shares. Buying stocks through applying for IPO shares in general is always a
safer method of investing in the stock market as most companies price them
attractively.
FUNCTIONARIES OF INITIAL PUBLIC OFFER
The functionaries in IPO are those concerned with the formation of joint stock
companies and the issue of their securities to the public. Public issue is essentially an
exercise involving active participation of a number of agencies. At earlier stages it
was sole effort on the part of the company and its personnel.
However with the growth of the number of public issues and the complexities
in the efforts involved, it has now become necessary to enlist active participation and
support of a number of agencies in making any public issue a success. 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
the 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. These are: (1)
SEBI which provides guidelines for public issue, (2) registrar of the companies with
whom the prospectus has to the filed and registered before the public issue under
section 60 of the companies act, 1956, (3) reserve bank of India from whom necessary
permission has to be obtained for non resident investment, of any in the company, (4)
the stock exchanges where the company’s share are to be listed (5 industrial licensing
authorities for necessary industrial license to be obtained for the project or other
statutory bodies like DGTD etc. with whom the capacity of the project has to be
registered, and (6) pollution control authorities and other local authorities from whom
the clearance may have to be obtained and such clearance is referred to in the
prospectus.
A NEW CONCEPT OF IPO MARKET—BOOK BUILDING
SEBI guidelines defines Book Building as "a process undertaken by which a
demand for the securities proposed to be issued by a body corporate is elicited and
built-up and the price for such securities is assessed for the determination of the
quantum of such securities to be issued by means of a notice, circular, advertisement,
document or information memoranda or offer document".
Book Building is basically a process used in Initial Public Offer (IPO) for
efficient price discovery. It is a mechanism where, during the period for which the
IPO is open, bids are collected from investors at various prices, which are above or
equal to the floor price. The offer price is determined after the bid closing date.
As per SEBI guidelines, an issuer company can issue securities to the public
though prospectus in the following manner:
1. 100% of the net offer to the public through book building process
2. 75% of the net offer to the public through book building process and 25% at
the price determined through book building. The Fixed Price portion is
conducted like a normal public issue after the Book Built portion, during
which the issue price is determined.
The concept of Book Building is relatively new in India. However it is a common
practice in most developed countries.
Difference between Book Building and Public Issue
In Book Building securities are offered at prices above or equal to the floor prices,
whereas securities are offered at a fixed price in case of a public issue. In case of
Book Building, the demand can be known everyday as the book is built. But in case of
the public issue the demand is known at the close of the issue.
The book building process:
The company approaches lead manager for IPO
The company and lead manager suggest a price band at which shares are to be offered
Application are invited
Based on demand for the shares a certain price is established by promoters and the lead manger
The allotment is made on the basis of the market clearance price
Post issue the price stabilization is undertaken by the lead manager.
WHAT SEBI DID TO ENCOURAGE RETAIL INVESTOR
SEBI has announced a series of measures to encourage retail participation in
the primary market. This is perhaps the first instance where the market regulator has
got the timing of reform measures spot on.
Coming close on the heels of the hugely successful Maruti IPO, these
measures should arouse retail interest in some of the big public offers expected in the
near future — BPCL, Idea Cellular, TCS and Nalco. The principle of these changes
seems to be that greater participation of retail investors in the primary market is
possible only when they have a reasonable chance of making gains, certainly not the
case earlier. To enable such participation, Sebi has adopted a two-fold approach. First,
the market watchdog has made sure that retail investors actually get an allotment in
book-built IPOs. Hence, the 10% increase in the allocation for retail investors. But
more significant is the change in the definition of what constitutes retail — from those
applying for up to 1,000 shares to applications for shares worth Rs 50,000 or less.
This would ensure that ‘retail’ is truly retail. Take the i-flex IPO, priced at Rs 530 a
share. An application for 1,000 shares entailing investment of Rs 5.3 lakh would have
qualified for the retail category. Second, to ensure some quality, the regulator has
introduced the concept of net tangible asset, making certain that issuing company has
some pre-IPO history. Additionally, to discourage fancy ideas being sold to public
and subsequently abandoned (plantation schemes), issuers have been asked to tie-up
funds for a project before the issue. Of course, willful defaulters have been barred.
Lastly, to fix accountability, the CEOs or the CFOs of the issuing company would
have to certify disclosures in the offer document.
These measures should translate into higher allotment for retail investors and
keep a check on the quality of issuers as well. The decision to disallow withdrawal of
bids by institutional investors and the shift to price band instead of a floor price will
prevent manipulation in pricing and subscription, both inimical to retail interest while
the availability of a ‘green shoe’ option should deliver price stability post listing in the
case of over subscription. Beyond this, there is precious little a regulator can do. The
rest is upto the market and investors.
HOW TO BE WATCH FUL OF IPO BOOM
The Indian capital market is on the verge of an unprecedented IPO boom.
Reports emanating from the office of the Securities and Exchange board of India
clearly indicate that the year 2004 is all set to emerge as a record breaking year for
initial public offer as over 600 companies big, medium as well as small are planning
to raise a whopping sum of Rs. 60,000 crore! Interestingly, it had taken 15 years for
over 5,600 companies to raise this amount! The 2004 performance will, thus, be a
historical feat in the realm of the Indian capital market.
Of course, the IPO market was literally comatose for the last six years after the
previous five-year (1992-96) boom period when about 5,000 companies had raise
around Rs 45,000 crore! At least one third of this amount has vanished into thin air as
several cheaters, unscrupulous businessmen belonging to select industrial groups and
fly by night operators had palmed off worthless scrap papers in the name of share
certificates to millions of hapless investors. The watchdog could not see in which
direction the promoters fled after downing the shutters of their companies and stock
exchange authorities took easiest route to forget about the fraud by de-listing the
shares of these companies. And the poor investors are still burdened with these
worthless papers, originally valued at millions of rupees.
This body blow was enough to disenchant the investing public from the new
issue market which wore a deserted look for the last six years. But now that business
activity has picked up, economy is on the path of rapid growth and wheels of
industries have started running at a fast pace, the new issue market is showing some
activity once again. On the one side, the government is in dire need of funds to meet
its budgetary plans and, for this, disinvestments of PSU offers the easiest route. And
on the other hand, with business activity picking up, there is need for larger
production of industrial and consumer goods, which, in turn, needs funds for
expansion and setting up new plants. At he same time, as interest rates on various
instruments of saving have come down drastically and equities have emerged as more
remunerative avenue for investment, the public is willing to go for equities. The
buoyancy in the stock market has further aided this trend.
Taking advantage of this favorable climate, over 600 companies have planned
to come out with issues to raise over Rs 60,000 crore. It is almost certain that cheaters
and looters among businessmen will once again be at their game mopping up funds
through bad or bogus issues. Lured by hefty fees and heftier out of pocket expanses,
merchant bankers will also try to hard sell these shares. The capital market watchdog,
SEBI has already washed its hands of any say in it by declaring that “SEBI does not
take any responsibility either for the financial soundness of any scheme or the project
for which the issues are proposed to be made or for the correctness of the statements
made or opinion expressed in the offer document”.
The SEBI ‘clarification’ raises a pertinent question: have we moved forward
or backward from the controller of capital issues days in investor protection? By and
large, merchant bankers are more interested in their fees rather than in the quality of
the issues. Can you rely on analysts? Just recall the paeans they had sung on issues
which shook the very foundation of a giant institution like UTI
The best thing for investors to do to ensure that thy are not cheated in this IPO
boom, is to follow the following evaluation process
THE EVALUATION PROCESS
Backed by aggressive merchant bankers, the pink papers, and gung ho TV
channels. Rs. 40,000 crore is hard to resist. But don’t forget that your personal rs 4000
are as valuable to you as it will be with a couple of zeroes more. Before you jump on
to the bandwagon. Do your homework. Its not easy to analyze the performance even
of al listed company that has been around for a while and has a record of market
performance; for a company making an initial public offer, this analysis is rather more
difficult. But some point to be considered are as follows
THE BUSINESS
Make sure you understand the company’s business. The attempt should be to
understand the long-term sustainable advantage of the business and the company’s
position in it. The prospectus has a section dedicated for such information and this is a
must read. A voluminous offer document can seem daunting but if you focus on the
key aspects, it gets less tedious. Study the document to understand product portfolio,
competitive strengths, new business initiatives and strategy, regulations and so on.
THE COMPANY
Next, choose companies with leadership positions. Three successful recent
issues have been Maruti, TV today and Patni computers. Maruti is an industry leader
and the largest passenger car manufacturer in India with a diverse product portfolio,
which includes 10 basic models with over 50 variants. In 2003, Maruti’s share stood
at 54.6 percent; the balance was divided among nine other manufacturers. Similarly,
TV Today is India’s leading news broadcaster and Patni computer is India’s largest IT
services company.
THE PROMOTER
An old business adage says, ”it’s better to have an ‘a’ team with a ‘c’ team
with an ‘a’ product, and even better to have an ‘a’ team with a ‘a’ product.” After all
it’s people who run the business. Hence, it’s important to focus on the credentials of
the promoter and key management figures. Invest in companies with a proven
management track record, since it’s the management philosophy and ability that
determines attitude towards minority shareholders and the likely success of a venture.
For instance, the promoters of Indraprastha gas and Maruti have proven management
credentials. On the other hand, there’s a Tips industry, where there were allegations
against one to the promoters in the Gulshan Kumar murder case such issues are best
avoided.
THE LOCK IN
During an IPO, the underwriter makes the company’s key shareholders sign a
lock-in agreement. The agreement is legally binding on the promoters and other key
shareholders, prohibiting them from selling their shares for a specified period of time.
The inevitable supply overhang when these previously restricted investors are
permitted to sell shares can put downward pressure on the stock price. For example, in
Patni computers, the lock in period for key promoters is three years, but for general
Atlantic, a foreign venture capital investor holding 28.3 percent of outstanding shares,
the lock in period is 180 days from listing.
THE FINANCES
A good management and a sound business model count, but what matters most
is performance. Check for consistency in revenue and profit growth and margins for at
least three years before the IPO. Also, check if the company has an overly high debt
equity ratio, or carries contingent liabilities, or has disputed tax claims, or faces
litigation in short, factors bearing on the company’s operations and results.
THE RISK
This is the most relevant part of the offer document. Although the offer
document is tailor made to sell the issue, the risk factors help you get a fair idea of the
impact of such risks on the company’s operations. For example, in the case of Bharti
Televenture the biggest risk came from regulations governing Indian telecom.
Increased competition in cellular services, unrestricted competition in fixed line
services and the decision to allow fixed line operators to provide limited mobility
using WLL were some of the risks at the time of the IPO.
THE OBJECTS
In bull markets, price increases defy fundamentals, and companies are prone
to capitalize on this sentiment to raise money. If you study the objects of the issue,
you will be able to weed out the chaff. For example, if the money is being raised to
repay loans or to provide and exit option to existing investors investigate. If the
business is doing well, the company should not need to raise fresh capital to repay its
debt.
However, a proceeds of the issue going towards research, marketing, or
capacity expansion paints a better picture. Companies like Bharti and Divi’s have
used the funds raised to create infrastructure, which will drive growth for these
companies in future. On the other hand, BAG films had earmarked 60 percent of he
issue proceeds towards production to feature films, which exposes it to significant
risks considering that film production is not a safe business, especially when the
company does not have prior experience in it.
THE FINE PRINT
Often, the most critical bits of information on a company’s financial health are
buried in the prospectus. Expect the red flags, in particular, to be lost in acres of fine
print. For example, BAG films converted its 14 percent fully convertible debentures
and accumulated interest into equity shares and issued them to UTI and IDBI at a 10
percent discount to the issue price at Rs. 9 per share.
Rarely, some good news also gets buried and goes unnoticed. The discounts
and royalty waivers by Suzuki to Maruti, for instance, will result in savings of over
Rs.80 crore, which will directly flow to the bottom line. This means Maruti’s Rs.146
crore net profit in 2003 will get a boost of 40 percent by just this little clause.
THE PRICE
The pricing of the issue determines the demand for the stock. Although issues
are usually attractively priced to attract investors, benchmarking it with valuations of
comparable listed companies is a good idea. This will give you a sense o f the relative
attractiveness of the issue and scope for appreciation. For valuation purposes,
compare the company’s profit margins, capital efficiency, price earning ratio and
other financial parameters with that of similar payers. For example, Patni scores high
on the valuation front but low on performances parameters like operating margins.
THE HYPE
Given that there is only one IPO for a company, they are often presented as
not to be missed opportunity and much hype is created by lead managers and brokers
to get as much attention as possible. Remember that it is their business to make clients
buy and sell stocks. Our advice: don’t buy stocks just because they are making a debut
in the market.
THE BROKER
The lead manager’s track record is as important as that of the company’s.
History suggests that the best merchant bankers usually undertake some due diligence
before associating themselves with an issue. Since business fortunes of merchant
bankers depend on their track record, there is more reason for them to handle only
quality issues. Look for known lead managers like Kotak investment, SBI capital
markets, DSP Merill lynch, Enam, JM Morgan. Be wary of smaller investment banks
that may be willing to make any company public.
RESEARCH METHODOLOGY
The research methodology for the project completed in two phases:
First Phase is the collection of Secondary Data:
This involves the collection of Secondary data using internet and internal sources
for comparison of Online trading account of other Broking houses in the market like
SBI Capital Securities, MOTILAL Oswal, Religare and Reliance Money etc. This also
involves talking to their executives regarding various features provided to the customer
along with their Brokerage structure.
Second Phase is Collection of Primary Data and Analysis:
After collecting the Secondary data the next phase will be collection of primary
data using Questionnaires. The questionnaire will be filled by around 100 people who
will be mainly from Jaipur. The sample will consist of people who are employed or
work as free lancers dealing in investment options to know their financial requirements.
Based on these requirements different investments will be informed to them for further
perusal. The data collected will be then entered into MS-excel for analysis of the data
collected.
RESEARCH DESIGN
Non probability
The non–probability respondents have been researched by selecting the persons
who do the stock trading. Those persons who do not trade in stocks have not been
interviewed.
Exploratory and descriptive research
The research is primarily both exploratory and descriptive in nature. The sources of
information are both primary and secondary. The secondary data has been taken by
referring to various magazines, newspapers, internal sources and internet to get the
figures required for the research purposes. The objective of the exploratory research is
to gain insights and ideas. The objective of the descriptive research study is typically
concerned with determining the frequency with which something occurs. A well
structured questionnaire was prepared for the primary research and personal interviews
were conducted to collect the responses of the target population.
SAMPLING METHODOLOGY
Sampling Technique
Initially, a rough draft was prepared a pilot study was done to check the accuracy
of the Questionnaire and certain changes were done to prepare the final questionnaire to
make it more judgmental.
Sampling Unit
The respondents who were asked to fill out the questionnaire in the National
Capital Region are the sampling units. These respondents comprise of the persons
dealing in stock trading. The people have been interviewed in the open market, in front
of the companies, telephonic interviews and through other sources also.
Sample Size
The sample size was restricted to only 180 respondents.
Sampling Area
The area of the research was Jaipur.
LIMITATIONS OF THE STUDY
The various limitations of the study are:
People were not willing to fill the entire questionnaire due to the less time
available to them.
Some respondents might be hesitant to divulge personal and financial information
which can affect the validity of all responses.
There is lack of awareness among people about investing in stock market. So the
people who are aware of such things were found in specific areas for survey
purposes.
Most people are comfortable with traditional system in small towns and like to
trade from their respective brokers, hence not providing a true opinion of theirs.
Some of the respondents who did not do online trading were able to respond to
only few questions.
The survey was done in the Jaipur region and may not truly express the opinion
of whole country.
OBJECTIVES OF THE STUDY
The following are the other ancillary objectives:
To know about the perception of primary market.
To know about the risk of primary market.
To study about the regular return.
To study how to earn more liquidity.
To study the safety of investment.
To find out the important factor which do mostly affect to the customer
To develop a good strategy and process that improves the business of the
organization
To be able to compare and analyze the various Financial Products
Business development and revenue generation
ANALYSIS AND INTERPRETATION
Q.1 Which age group do you belong?
Age Group No. of Respondents
18-30 14
30-45 89
45-55 58
Above 55 19
Analysis:The above diagram shows that 14 respondents were from 18 to 30 age group, 89
respondents were from 30 to 45 age group, 58 respondents were 45 to 55 age group and 19 respondents were from above 55 age group.
2) Have you ever invested in stock market?
Invested in Stock Market No. of Respondents
Yes 150
No 30
Analysis:The above diagram shows that 150 respondents said that they are invested in the
stock market and 30 respondents said that they did not invest in the stock market.
Q3) If yes, in which type of market?
Type of Market No. of Respondents
Primary 100
Secondary 30
Both 20
Analysis:The above diagram depicts that 100 respondents said that they invest in primary
market, 30 respondents said that they invest in secondary market and 20 respondents said that they invest in both markets i.e. primary as well as secondary.
Q4) What is the source of information regarding primary market?
Source of Information No. of Respondents
News 16
Broker 89
TV 6
Internet 2
Any Other 7
Analysis:The above diagram shows that 89 respondents i.e. maximum from total 120
respondents said that they got the knowledge from their brokers, 16 respondents said that they got knowledge about primary market from News/newspaper, 6 respondents got information through TV, 2 from Internet and 7 respondents said any other sources for information.
Q5) In which of the following you would like to invest your money?
Like to Invest No. of Respondents
Private Co. 43
Govt. Co. 18
Semi Govt. 37
Any Other 22
Analysis:The above diagram depicts that 43 respondents said that they like to invest in
Private companies, 18 respondents said Govt. companies, 37 respondents said they like to invest in Semi-Govt. companies and 22 respondents said they like to invest in any other companies.
Q6) How much % of your income you invest yearly?
%age of Income Invest No.of Respondents
0-20% 49
20-35% 32
35-50% 29
Above 50% 10
Analysis:The above diagram shows that 49 respondents said that they invest upto 20% of
their income in primary market, 32 respondents said that they invest upto 20% to 35% of their income, 29% respondents said they like to invest in 35% to 50% of their income, and 10 respondents said that they invest above 50% of their income in primary market.
Q7) In which sector you like the invest the money?
Investment Sector No. of Respondents
Insurance 16
Infrastructure 48
Telecom 33
IT Sector 23
Any Other 10
Analysis:The above diagram shows that 16 respondents said that they invest in insurance
sector, 48 respondents said they invest in Infrastructure sector, 33 respondents said that they invest in Telecom sector, 23 respondents said that they invest in IT sector and 10 respondents said that they invest in any other sectors.
Q8) How much is your portfolio?
Portfolio No.of Respondents
Rs.10000 to 50000 41
Rs.50000 to 1 Lac 58
Above Rs.1 Lac 21
Analysis:The above diagram shows that 41 respondents said that their yearly portfolio has
been between Rs.10000 to 50000, 58 respondents said that their yearly portfolio has been between Rs.50000 to 1 Lac and 21 respondents said that their yearly portfolio has been above Rs. 1 Lac.
Q9) For how much period you would prefer to invest?
Investment Time No. of Respondents
Short Term 96
Long Term 24
Analysis:The above diagram shows that 96 respondents said that they invest for short time
and 24 respondents said that they invest for long term.
Q10) Investing in primary market is risky or not?
Risky Investment No. of Respondents
Yes 26
No 94
Analysis:The above diagram shows that 78% respondents i.e. 94 said that primary market
investment is risky and 22% respondents i.e. 26 said that primary market investment is not risky.
Q11) If yes, then how much risky in this?
Risk No. of Respondents
Highly 6
Moderately 2
Lower 18
Analysis:The above diagram shows that 6 respondents said that primary market is highly risky,
2 respondents said moderately risky and 18 respondents said primary market is risky but not highly or moderately.
Q12) How much return has been earned from primary market?
%age of Return No. of Respondents
10-50% 63
50-100% 31
100-150% 18
150-200% 8
Analysis:The above diagram shows that 63 respondents said that they earn 10-50%
return from their primary market investments, 31 respondents earn 50-100% return, 18 respondents earn 100 to 150% return and 8 respondents said that they earn between 150 to 200% return from primary market.
Q.13 What criteria you used to invest in any IPO?
Criteria for Invest No. of Respondents
Past Experience 29
Company Results 59
Any Other 32
Analysis:The above diagram shows that 29 respondents said that they use their past
experience for new investment into primary market, 59 respondents said they watch current results of companies in which they want to invest and 32 respondents said they watch other things whenever they go for investment in primary market.
Q.14 From where you get to know about these criteria?
Knowledge about Criteria No. of Respondents
Share Broker 87
Newspaper 25
Magazine 8
Analysis:
The above diagram shows that 87 respondents said that know about their criteria
from their Share brokers, 25 respondents said they got knowledge from Newspapers and 8
respondents said they got knowledge from Magazines.
FINDINGS
Most of respondents said that they are invested in the stock market and few of
them said that they did not invest in the stock market.
Maximum respondents said that they got the knowledge from their brokers, &
some of them said that they got knowledge about primary market from
News/newspaper & very few respondents got information through TV from
Internet and any other sources for information.
Retail investor divert their fund from the banking system to the primary
market. As the interest rate of saving account deposit decreased very much.
Most of respondents said that they invest less portion of their income in
primary market. Very few investors like to invest major portion of their income in
primary market.
Respondents view is that primary market investment is risky. So there is a fear
in the mind of respondents about to invest in primary market.
The study shows that maximum respondents among the sample respondents
are getting information related to the different services from the agents. It implies
that most powerful source of information about services is an agent.
There is a need to bring awareness among the general public about primary
market.
SUGGESTIONS
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 P’s before investing in any
IPO & Three P’s are
Promoter
Performance
Price
The next best suggestion to the investor is that they should be steer
clear of IPO’s 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.
The companies should make regular contact with his customer through
his marketing executives. This would not only help in strengthening the business
relation but would also help in taking proper feedback of their products.
The majority of customers are price conscious so they should improve
or decrease their price/commission rate.
The companies should concentrate more on the sale promotion
activities through different media.
The market is not well aware of the product line of the companies, so
companies should give full information of there product line to the investors.
In corporate and institutions, people are looking for better service. So
by providing this it can gain the big reach its break even as soon as possible and
can earn profit from there.
Customers get dissatisfied very soon. So they must be supported by a
good customer care unit. They need care and by providing that a long customer-
organization relationship can be built.
CONCLUSION
This project is based on the study of “Investors attitude towards primary
market”. In the today scenario it’s very important to study the customer’s
psychological behaviour regarding the various services provided by them.
In the end, I conclude that investor should not invest their hard earned money
blindly in the IPO’s 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 don’t 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.
BIBLIOGRAPHY
1) M.Y Khan., “Financial Services”, Himalaya publishing house Pvt. Ltd. New
Delhi, 2001, p-10-20.
2) Kothari, C.R, “Research methodology methods & techniques”, 2nd edition,
New age international ltd. Publishers, 2005, P. No. 27-42.
3) Wilkinson & Bhandarkar, “Business Research Methodology”, 6th edition, Tata
McGraw Hill Publications, Delhi, 2005, PP 237-243.
4) Dr. Bansal K Lalit, “Merchant Banking & Financial Services” Vikas
Publications, 2002, (Page 152- 155) (Page 175-185)
JOURNALS and MAGAZINES:-
1) Applied Finance, page no 261-268, volume 5 / Dec.2007.
2) Financial review, edition January 2007, pages no 34-40.
3) Management Accountant, May 2006 P. No.- 359-412.
Websites
1. www.thehindubusinessline.com
2. www.anandrathi.com
3. www.prowessdatabase.com
4. www.indiatimes.com
QUESTIONNAIRE
Q1) General Information1. Name ____________________________ 2. Age
______________
3. Occupation
a) Businessman b) Serviceman
c) Professional d) Any other
4. Annual Income
a) Rs.50000 to 1 Lac b) Rs.1 Lac to 3 Lacs
c) Above Rs.3 Lacs
Q2) Which age group do you belong?
18 - 30 30 - 45 45 - 55 above 55
Q3) Have you ever invested in stock market?
Yes No
Q4) If yes, in which type of market?
Primary Market Secondary Market
Q5) What is the source of information regarding primary market?
News Broker TV Internet Any
other
Q6) In which of the following you would like to invest your money?
Private Co. Govt. Co. Semi Govt. Any other
Q7) How much % of your income you invest yearly?
0-20% 20-35%
35-50% 50% & above
Q8) In which sector you like the invest the money?
Insurance Infrastructure Telecom
IT Sector Any Other
Q9) How much is your portfolio?
Rs.10000 – 50000 Rs.50000 – 1 Lac Above 1 Lac
Q10) For how much period you would prefer to invest?
Short term Long term (5 & above)
Q11) Investing in primary market is risky or not?
Yes No
Q12) If yes, then how much risky in this?
Highly Moderately Lower
Q13) How much return has been earned from primary market?
10% – 50% 50%-100% 100%-150% 150% - 200%
Q.14 What criteria you used to invest in any IPO?
Past Experience Company Result Any Other
Q.15 From where you get to know about these criteria?
Share Broker Newspaper Magazine