1. Presented by:Rajesh KumarMBA(Finance), ACS, AIII

2. PRIMARY MARKETPrimary Market is a market wherein corporatesissue new securities for raising funds generally forlong term capital requirement.For our purposes, think of the primary market asbeing synonymous with an Initial Public Offering(IPO). 3. INTRODUCTION The companies that issue their shares are calledIssuers and the process of issuing shares to publicis known as Public Issue. Entire process involves various intermediaries likeMerchant Banker, Bankers to the Issue,Underwriters, and Registrars to the Issue etc . 4. The Primary Market is, hence, The market that provides a channel for the issuance ofnew securities by issuers (Government companies orcorporates) to raise capital. The securities (financial instruments) may be issued atface value, or at a discount / premium in various formssuch as equity, debt etc. They may be issued in the domestic and / orinternational market. 5. FEATURES OF PRIMARY MARKET The securities are issued by the company directly tothe investors. The company receives the money and issues newsecurities to the investors. The primary markets are used by companies for thepurpose of setting up new Ventures/ business or forexpanding or modernizing the existing business Primary market performs the crucial function offacilitating capital formation in the economy 6. ADVANTAGES OF IPO Enlarging and diversifying equity base Enabling cheaper access to capital Creating multiple financing opportunities, equityconvertible debt, cheaper bank loans, etc Increasing exposure , prestige and public image Attracting and retaining better management andemployees through liquid equity participation 7. DISADVANTAGES OF IPO Requirement to disclose financial and businessinformation Meaningful time , effort, and attention required ofseniour mangement Loss of control and stronger agency problems due tonew shareholders Significant legal, accounting and marketing costs,many of which are ongoing 8. HOW DOES IT WORK? Preparation and Filing of Offer Document:(i) A company wanting to raise capital from the public is requiredto prepare an offer document giving sufficient information anddisclosures, which enables (potential) investors to make aninformed decision. Accordingly, the offer document is required tocontain details about the company, its promoters, the project,financial details, objects of raising the money, terms of the issue etc.(ii) The issuer company engages a SEBI registered merchant bankerto prepare the offer document. Besides, due diligence in preparingthe offer document, the merchant banker is also responsible forensuring legal compliance. The merchant banker facilitates theissue in reaching the prospective investors (marketing the issue). 9. (iii) The draft offer document thus prepared is filed with SEBI andis made available on SEBIs website(http://www.sebi.gov.in/SectIndex.jsp?sub_sec_id=70) along with itsstatus of processing (http://www.sebi.gov.in/PMDData.html)Company is also required to make a public announcement about thefiling English, Hindi and in regional language newspapers.(iv) The Indian regulatory framework is based on a disclosure regime.SEBI reviews the draft offer document and may issue observations onthe draft offer document .(v) SEBIs observations on the draft offer document are forwarded tothe merchant banker, who incorporates the necessary changes andfiles the final offer document with SEBI, Registrar of Companies(ROC) and stock exchange(s). This is made available on websites ofthe merchant banker, stock exchange(s) and SEBI. 10. Opening of the Issue:(vi) After completing legal formalities, the issuer company issues advertisementsin English, Hindi and regional language news papers and the issue is open topublic for subscription.(vii) If the prospective investor is interested in subscribing to the shares of theissuer company based on what is disclosed in the offer document, he can applyfor its shares (or debentures) before the issue closes, by duly filling up theapplication form and making the payment.(viii) The entire back office operation of the public issue, including processing ofapplication forms, despatch of refunds, allotment of securities, is handled by theRegistrar to the Issue (RTI) on behalf of the issuer company.(ix) It is to be noted that only one application per PAN is allowed in any issue. Ifinvestor makes more than one application, all the applications are liable to berejected. The RTI matches applicants name in the application form and verifiesit against the PAN, demat account details (DP ID and Demat A/c No) and alsoweeds out duplicate applications. 11. Allotment and Listing:(x) The issue then closes (investor cannot apply beyond the closing date) and theshares are allotted to the applicants proportionally or on lottery basis, if there isoversubscription. The merchant banker and RTI finalize the basis of allotment.This is approved by the stock exchange officials and the basis of allotment is madeavailable in the website of the RTI. The issuer company issues advertisements inEnglish, Hindi and regional language news papers about the issue price and basisof allotment.(xi) Upon allotment, investor will receive demat credit within 12 days. Thedespatch of refund cheques, instructions for unblocking amount in bank account(for ASBA) and instructions for electronic credits of refund money, is given by theRTI within 12 days of the close of the issue.(xii) The shares of the company are then listed on the stock exchange within 12working days of the close of the issue. Listing of shares (or debentures) in stockexchange enables the investor to buy securities from or sell securities to otherinvestors (secondarymarket).(xiii) The complete contact details of all the intermediaries involved in an issuenamely merchant banker, RTI, banker to the issue etc. are available in the offerdocument. In case the investor needs any clarification they can contact them. 12. DIFFERENT TYPES OF ISSUEi. Public issue: When a company raises funds by selling (issuing) its shares (or debenture /bonds) to the public through issue of offer document (prospectus), it is called a publicissue.a) Initial Public Offer: When a (unlisted) company makes a public issue for the first timeand gets its shares listed on stock exchange, the public issue is called as initial public offer(IPO).b) Further public offer: When a listed company makes another public issue to raise capital,it is called further public / follow-on offer (FPO).ii. Offer for sale: Institutional investors like venture funds, private equity funds etc., investin unlisted company when it is very small or at an early stage. Subsequently, when thecompany becomes large, these investors sell their shares to the public, through issue ofoffer document and the companys shares are listed in stock exchange. This is called as offerfor sale. The proceeds of this issue go the existing investors and not to the company.iii. Issue of Indian Depository Receipts (IDR): A foreign company which is listed in stockexchange abroad can raise money from Indian investors by selling (issuing) shares. Theseshares are held in trust by a foreign custodian bank against which a domestic custodianbank issues an instrument called Indian depository receipts (IDR), denominated in `. 13. (iv) Others -a) Rights issue (RI): When a company raises funds from itsexisting shareholders by selling (issuing) them new shares /debentures, it is called as rights issue. The offer document fora rights issue is called as the Letter of Offer and the issue iskept open for 30-60 days.b) In a Bonus Issue, the company issues new shares to itsexisting shareholders. As the new shares are issued out of thecompanys reserves (accumulated profits), shareholders neednot pay any money to the company for receiving thenew shares. 14. Methods for Determining the OfferPriceIssue Type Offer Price Demand Payment ReservationsFixed PriceIssuePrice at which thesecurities are offered andwould be allotted is madeknown in advance to theinvestorsDemand for thesecurities offered isknown only after theclosure of the issue100 % advancepayment is requiredto be made by theinvestors at the timeof application.50 % of the sharesoffered are reservedfor applicationsbelow Rs. 1 lakh andthe balance forhigher amountapplications.Book BuildingIssueA 20 % price band isoffered by the issuerwithin which investors areallowed to bid and thefinal price is determinedby the issuer only afterclosure of the bidding.Demand for thesecurities offered ,and at variousprices, is availableon a real time basison the BSE websiteduring the biddingperiod..10 % advancepayment is requiredto be made by theQIBs along with theapplication, whileother categories ofinvestors have to pay100 % advancealong with theapplication.50 % of sharesoffered are reservedfor QIBS, 35 % forsmall investors andthe balance for allother investors. 15. In a Book Building issue the issuer company mentions the minimum and maximumprice (price band) at which it will sell (issue) its shares. Thus the offer document(in this case, called the Red Herring Prospectus) contains only the price bandinstead of the price at which its shares are offered to the public.Within this price band the investor can choose the price at which the investor arewilling to buy the shares and also the quantity. As this process is similar to biddingin an auction, the application form for book built issue is also known as the bidform.At times the issuer may revise the price band (revision of price band) which has tobe accompanied with news paper advertisement.Bids by various investors are entered into the stock exchange system through thebrokers (also called syndicate member) terminal. The list of the bid received frominvestors at various price bands is known as the book and can be seen in thewebsite(s) of the stock exchange for each investor category.Based on the total demand in the book, the cut off price is then decided by theissuer and merchant banker. 16. After the allotment, a public advertisement is issued,giving details of the issue price as well as a table showingthe number of securities and the amount payable bysuccessful bidders.The merchant banker in a book built public issue isknown as Book Running Lead Managers (BRLM) andthe issues is kept open for 37 working days, and isextendable by 3 days in case of a revision in the priceband by the issuer 17. How to Read Offer DocumentThe offer documents lists out the facts, details and promise of the issuercompany.SampleCover PageYou will find the following information in the cover page: full contact details of the issuer company full contact details of the lead managers and registrar to the issue, Details of the issueo nature of the instrumento number of security offeredo price of the securityo amount of instrument offeredo and issue size proposed listing details Credit Rating / IPO Grading Risks in relation to the first issue, etc 18. Risk FactorsUnder this head the management of the issuer company gives its view on theInternal and external risks envisaged by the company and the proposals, if any,to address such risks. This information is disclosed in the initial pages of thedocument and also in the abridged prospectus. The investor should read therisk factors before taking investment decision.IntroductionThe following information / details are available in this section. A summary of the industry in which the issuer company operates The brief details of the business of the issuer company Summary of consolidated financial statements and other data on generalinformation about the issuer company The details of merchant bankers and their responsibilities The details of brokers (syndicate members) to the Issue In case of debt issueo credit ratingo details of debenture trustees details of monitoring agency for issue size exceeding Rs.500 cr 19. Book building process in brief IPO Grading in case of first Issue of equity capital Details of underwriting Agreements Details of capital structureobjects of the offerfunds requirementfunding planschedule of implementationfunds deployedsources of financing of funds already deployedsources of financing for the balance fund requirementinterim use of funds Basic terms of issue Basis for issue price Tax benefits 20. About usThe following information / details are available in this section. Details of the business of the company Business strategy Competitive strengths Insurance Industryregulation (if applicable) History Corporate structureo main objectso subsidiary detailso management and board of directorso compensationo corporate governance Related party transactions Exchange rates & currency of presentation Dividend policyFinancial StatementsUnder this head Summary Restated Financial Statements for the last fivefinancial statements and stub period are disclosed which includes Balance Sheet,Profit and Loss Account, Cash Flow Statement, Notes to accounts, financialratios, Related Party Disclosures etc 21. Legal and other informationThe following information / disclosures are available in thissection. Details of litigations involvingthe companythe promoters of the companyits subsidiariesand group companiesOther regulatory and statutory disclosuresThe following disclosures are available in this section. Authority for the Issue Prohibition by SEBI Eligibility of the company to enter the capital market Disclaimer statement by the issuer and the lead manager Disclaimer in respect of jurisdiction 22. Offering informationThe following information / details are available in thissection. Terms of the Issue Mode of payment of dividend Face value and issue price Rights of the equity shareholder,Market lot Nomination facility to investor Issue procedureo book building procedure in detailso process of making an application Signing of underwriting agreement Filing of prospectus with SEBI / Registrar of Companies(ROC) Announcement of statutory advertisement .etc 23. IPO GradingIPO grading is the professional assessment of a Credit Rating Agency (CRAs) onthe fundamentals of a company in relation to the other listed equity shares inIndia. It is mandatory for the issuer company coming with initial public offer(IPO) to obtain IPO grading from a Credit Rating Agency and disclose the sameon the cover page of offer document and Application form.Factors considered in gradingThe indicative list of areas that are generally looked into by the CRA whilearriving at an IPO grade includes: Business Prospects and Competitive Positiono Industry Prospectso Company Prospects Financial Position Management Quality Corporate Governance Practices Compliance and Litigation History New ProjectsRisks and Prospects 24. The grades IPO grade 1: Poor fundamentals IPO grade 2: Below average fundamentals IPO grade 3: Average fundamentals IPO grade 4: Above average fundamentals IPO grade 5: Strong fundamentals 25. Credit rating Credit rating is an opinion of a Credit Rating Agency (CRA) on the likelihood of timelypayment of interest and principal (credit risk) on the rated debt instrument. It is an unbiased, objective, and independent assessment of the issuer's capacity to meetits financial obligations and is conveyed with alphanumeric symbols. (Rating category)Description (with regard to the likelihood of meeting the debtobligations on time) AAA Highest Safety AA High Safety A Adequate Safety BBB Moderate Safety BB Inadequate Safety B High Risk C Substantial Risk D Default 26. Nature of Merchant Banking 27. Merchant Bankerscore business portfolio 28. Registration for Merchant Bankers 29. Requirements for granting acertificate 30. Capital Adequacy Requirements 31. Procedure for Registration 32. Renewal of certificates 33. Obligations and Regulations 34. Obligations and Regulations(contd) 35. Obligations andRegulations(contd) 36. Obligations and Regulations(contd)Appointment of Lead Merchant Banker 37. Obligations andRegulations(contd) 38. Obligations and Regulations(contd) 39. Procedure for InspectionSEBIS Right to Inspect 40. Procedure for Inspection(contd) 41. Procedure for Inspection(contd) 42. Procedure for Inspection(contd) 43. Procedure for Action in case of DefaultSuspension of Registration 44. Procedure for Action in case ofDefault 45. Procedure for Action in case ofDefault(contd) 46. Procedure for Action in case ofDefault(contd) 47. Procedure for Action in case ofDefault(contd) 48. TRIBHOVANDAS BHIMJIZAVERIIPO 49. About the Company The 148 year old company, Tribhovandas Bhimji Zaveri,Mumbais local jeweller, plans to raise around Rs. 200 crorethrough 16.7 million shares. The company is in the retail jewellery business with 14showrooms across 5 states mainly in western and centralIndia. Around 72% revenue comes from gold jewellery and 25%from diamonds 50. About IPOOffer Date 24 26 AprilPrice Band Rs. 120 126 per ShareMinimum Application 45 SharesReserved for QIB 50%Reserved for Non Institutional Bidders 15%Reserved for retail 35%Total Amount to be raised Rs. 200 CroreTotal No. Of Share on sale 16.7 millionGot BID for 1.62 crore sharesSubscribed by 1.15 times 51. Plans To finance establishment of new showrooms To expand this to around 57 showrooms, adding 43 new onesin India by 2015 To use about Rs. 20 Crore to open 9 new large formatshowrooms by the end of fiscal 2013. To finance working capital requirements The remaining amount would be used for general corporatepurpose 52. Financial InformationIn Rs. Crore FY 10 FY 11 9 Months FY 12Net Sales 885 1194 1117% Change 32.3 34.9 NAOperation Profit 47 87 102% Change 11 37.2 NANet Profit 17 40.4 50.5% Change 63.5 137.6 NA 53. Competitors / Peers Tanishq Rajesh Exports Gitanjali Gems Shri Ganesh Jewellery Suraj Diamond 54. Day 1 trading122120118116114112110108106104Open High Low CloseBSENSEListing Day Trading InformationBSE NSEIssue Price: Rs. 120.00 Rs. 120.00Open: Rs. 115.00 Rs. 115.05Low: Rs. 110.00 Rs. 110.50High: Rs. 119.80 Rs. 120.00Last Trade: Rs. 111.20 Rs. 111.00Volume: 1,157,892 1,253,983 55. Strength of TBZ Strong and trusted Brand Name Focus to develop new design and products by understandingcustomer requirement with constant interaction The company has substantial experience in expandingoperations and managing the launch of new showrooms. The company has its own manufacturing facilities in Kandivaliwith a carpet area of 5,755 sq. ft. 56. Weakness of TBZ Inventory risk and gold price fluctuation is also high Working capital situation of the company is not good Financial performance of the company is also not encouraging Peers are doing good in compare to TBZ 57. Opportunities for TBZ Branded retail chains are expanding their presence by creatinggrowth opportunities in jewellery market The Indian gold jewellery sector accounted for 61% total domesticgold demand in 2011 It is expected that domestic industry to grow at a CAGR of 10% 12% up to 2015 because of: Higher disposable income Rising young population with the urge to spend Higher no. of women investing her saving in gold/diamondjewellery Conscious marketing efforts by companies Steady rise in gold prices across the global market. 58. Threats of TBZ There is intense competition in the jewellery retailing market Branded players are also willing to expand Devaluation of gold may affect the business The company has not registered its jewellery designs so it could beduplicated by competitors The new tax policy where the customer has to give his/ her PANnumber on purchase made above `5 lakh is likely to hinder thebusiness. 59. Future Strategy of TBZ The company is planning to add 43 showrooms by end of fiscalyear 2014 It is building additional facility at Kandivali with a carpet areaof Approx. 17739 sq. ft. Increasing marketing activities to increase footfalls and sales atshowrooms. Focusing to increase its diamond studded jewellery sales whichwill improve its overall profit margin. 60. Conclusion IPO of TBZ got moderate response because: The Shares are offered quite expensive in compare to its peers As it intend to utilize 70% of its raised funds for working capitalneeds , this may affect the performance of the company. The opening of new stores will mount pressure on profitability dueto time taken for break-even of new stores, higher marketingexpenses and working capital requirement Even though the gross margin in the gold segment is around 10.86%, while that in the case of diamond jewellery is around 36 %,company intent to invest in gold business. 61. THANK YOU