COMPARATIVE STUDY ON
INITIAL PUBLIC OFFER (IPO)
SUBMITTED TO: SUBMITTED BY:
Mr. Avijit Bakshi Kanchan Kushwah (BCMH1CF14008)
Lakshya Khandelwal (BCMH1CF14010)
Piyush Gupta (BCMH1CF14018)
Varsha Parahwar (BCMH1CF14035)
Kritika Jain (BCMI1CF14007)
[Link] Hons (V Semester)
What is IPO?
Process of selling securities to public in primary market
Made with 2 types –
• Fixed Price Issues
• Book building Issues
Majorly done to raise Capital
Process is directed towards both institutional & the retail investors
Why IPO is done?
• New capital
Almost all companies go public primarily because
they need money to expand the business.
• Future capital
Once public, firms have greater and easier access to
capital in the future.
• Mergers and acquisitions
Its easier for other companies to notice and
evaluate a public firm for potential synergies.
IPOs are often used to finance acquisitions.
SEBI Guidelines for IPO
1. It must have a pre-issue net worth of not less than Rs. 10,000,000 (Rupees One
crore) in 3 out of the preceding 5 years, with a minimum net worth to be met
during the 2 immediately preceding years.
2. It must have a track record of distributing dividends for at least 3 out of the
immediately preceding 5 years, and
3. The issue size, i.e., the offer through the offer document, the firm allotment
and the promoter’s contribution through the offer document, should not
exceed five times the pre-issue net worth as per the last available audited
account, either at the time of filing the draft offer document with the
Securities and Exchange Board of India (“SEBI”) or at the time of opening
of the issue.
• If the above conditions are not satisfied, then the IPO can be made only
through a book-building process, provided that sixty percent (60%) of the issue
size must be allotted to Qualified Institutional Buyers (“QIBs”).
The Process of IPO
• Company nominates lead merchant banker(s)
• Disclose of securities to be issued & price band for bidding
• Appointment of syndicate members
• Bidding process
• Process normally remains for 5 days
• Bids have to be entered within the specified price band
• On the closure of the process, the book runners evaluates the
price levels
• At last the book runners & the issuer decides the final price
• Allocation of securities is made to the successful bidders
• Rest get refund orders.
TRIBHOVANDAS
BHIMJI ZAVERI
IPO
About the Company
• The 148 year old company, Tribhovandas Bhimji Zaveri,
Mumbai’s local jeweller, plans to raise around Rs. 200 crore
through 16.7 million shares.
• The company is in the retail jewellery business with 14
showrooms across 5 states mainly in western and central
India.
• Around 72% revenue comes from gold jewellery and 25%
from diamonds.
About IPO
Offer Date 24 – 26 April
Price Band Rs. 120 – 126 per Share
Minimum Application 45 Shares
Reserved for QIB 50%
Reserved for Non Institutional Bidders 15%
Reserved for retail 35%
Total Amount to be raised Rs. 200 Crore
Total No. Of Share on sale 16.7 million
Got BID for 1.62 crore shares
Subscribed by 1.15 times
Plans
• To finance establishment of new showrooms.
• To expand this to around 57 showrooms, adding 43 new ones in
India by 2015.
• To use about Rs. 20 Crore to open 9 new large format
showrooms by the end of fiscal 2013.
• To finance working capital requirements.
• The remaining amount would be used for general corporate
purpose.
Financial Information
In Rs. Crore FY 10 FY 11 9 Months FY 12
Net Sales 885 1194 1117
% Change 32.3 34.9 NA
Operation Profit 47 87 102
% Change 11 37.2 NA
Net Profit 17 40.4 50.5
% Change 63.5 137.6 NA
Competitors / Peers
• Tanishq
• Rajesh Exports
• Gitanjali Gems
• Shri Ganesh Jewellery
• Suraj Diamond
Share holding pattern post IPO
%
3.17% 10.81%
11.85%
Promoter holding
FII
DII
Others
74.17%
Day 1 trading
122 Listing Day Trading Information
120
BSE NSE
118
116 Issue Price: Rs. 120.00 Rs. 120.00
114
Open: Rs. 115.00 Rs. 115.05
BSE
112
NSE
Low: Rs. 110.00 Rs. 110.50
110
108 High: Rs. 119.80 Rs. 120.00
106
Last Trade: Rs. 111.20 Rs. 111.00
104
Open High Low Close
Volume: 1,157,892 1,253,983
No. of times issue is subscribed
Subscribed by
1.16 1.29
Qualified Institutional Buyers
Non Institutional Investors
Retail Investors
0.68 Anchor Investors
1.91
Strength of TBZ
• Strong and trusted Brand Name.
• Focus to develop new design and products by understanding
customer requirement with constant interaction.
• The company has substantial experience in expanding operations
and managing the launch of new showrooms.
• The company has its own manufacturing facilities in Kandivali
with a carpet area of 5,755 sq. ft.
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.
Opportunities for TBZ
• Branded retail chains are expanding their presence by creating
growth opportunities in jewellery market.
• The Indian gold jewellery sector accounted for 61% total domestic
gold 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/diamond
jewellery
– Conscious marketing efforts by companies
• Steady rise in gold prices across the global market.
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
be duplicated by competitors.
• The new tax policy where the customer has to give his/ her PAN
number on purchase made above `5 lakh is likely to hinder the
business.
Future Strategy of TBZ
• The company is planning to add 43 showrooms by end of fiscal
year 2014.
• It is building additional facility at Kandivali with a carpet area of
Approx. 17739 sq. ft.
• Increasing marketing activities to increase footfalls and sales at
showrooms.
• Focusing to increase its diamond studded jewellery sales which
will improve its overall profit margin.
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
capital needs , this may affect the performance of the company.
– The opening of new stores will mount pressure on profitability
due to time taken for break-even of new stores, higher
marketing expenses 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.
THANK YOU!
