Page 20 - DCOM504_SECURITY_ANALYSIS_AND_PORTFOLIO_MANAGEMENT

Unit 1: Introduction to Capital Market

(c) The syndicate member brokers operate the software through book-runners of the Notes
issue and through this book, the syndicate member brokers on behalf of themselves
or their clients' place orders.
(d) Bids are placed electronically through syndicate members and the information is
collected on line real-time until the bid date ends.

(e) In order to maintain transparency, the software provides visual graphs displaying
price v/s quantity on the terminals.
Differences between shares offered through book-building and offer of shares through
normal public issue:
Features Fixed Price Process Book-building Process

Pricing The price at which the securities are The price at which securities will be
offered/allotted is known in advance to the offered/allotted is not known in advance
investor. to the investor. Only an indicative price
range is known.
Demand Demand for the securities offered is known Demand for the securities offered can be
only after the closure of the issue. known everyday as the book is built.
Payment Payment if made at the time of subscription Payment only after allocation.
whereas refund is given after allocation.

Safety Net
Safety net is a scheme under which a person or a company (generally a finance company)
undertakes to buy shares issued and allotted in a new issue from the allottees at a stipulated
price. This is an agreement in relation to an issue of equity shares. The main feature of the
safety net is to provide the equity investors safety of their investments from fall of the
share price below the issue price. This facility will be generally provided in a bear market
environment. Closely-held companies that are going to issue snares to the public for the
first time may also provide safety net facility to the investors in their shares where the
investors have no benchmark price to go by and therefore the safety net would provide
them a sort of confidence regarding safety of their investment into equity shares. The
safety net scheme generally puts provision for buying back the shares at a price lower
than the issue price, and the difference will be the premium to the buyer for the risk taken
in purchase of shares back from the investors.
Stockinvest
In case of oversubscription of issue, there have been inordinate delays in refund of excess
application money and large amounts of investors' funds remain locked up in companies
for long periods, affecting the liquidity of the investing public. To overcome the said
problem a new instrument called 'stockinvest' is introduced. The stockinvest is a
non-negotiable bank instrument issued by the bank in different denominations. The investor
who has a savings or current account with the bank will obtain the stockinvest in required
denominations and will have to enclose it with the share/debenture application. The face
of the instrument provides for space for the investor to indicate the name of the issues, the
number and amount of shares/debentures applied for and the signature of the investor.
The stockinvests issued by the bank will be signed by it and the date of issue will also be
indicated on the instruments. Simultaneously with the issue of stockinvest, the bank will
mark a lien for the amounts of stockinvest issued in the deposit account of the investor.
On full or partial allotment of shares to the investor, the Registrar, to issue, will fill the
columns of stockinvest indicating the entitlement for allotment of shares/debentures, in
terms of number, amount and application number and send it for clearing.

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