Then he has to indicate name of the depository and

then he has to indicate name of the depository and also of the depository
participant with whom an account is maintained. It is appropriate on the part of
the investors to hold securities in demat form as physical securities carry the
risk of being fake, forged or stolen. For this, there is a need to open a demat
account with depository participant like a bank. This will facilitate to carry our
transactions like sale and purchase of shares.
7.6.6 IPO Grading
The SEBI has issued guidelines for grading of the IPO by the rating
agencies. The IPO grading has been introduced with a view to provide additional
information about IPOs to the investors so as to facilitate proper assessment about
IPOs before applying for subscription. The IPO grading is nothing but the grade
given by the recognized credit rating agency to the initial public offer (IPO) of
equity shares or any other security which may be converted into equity at a later
date. Such grading is generally assigned on a five point scale which is as under:
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
Earlier IPO Grading was made mandatory. But now it is optional. Any
issuer who decides to offer shares through an IPO may like to obtain a grade for
the same from at least one recognized credit rating agency. The IPO grading can be
done either before filing the draft offer documents with the SEBI or thereafter.
However, the grades given to the IPO by credit rating agencies may be disclosed in
the prospectus or red herring prospectus as the case may be.
7.7 Difference between Book Building Issue
and Normal Public Issue
The company can offer shares either through book building process or
through normal public issue. Therefore both the methods are different from
each other. The following points can be considered to find out difference
between these two methods:
(i) In case of normal public issue, the price at which the shares are offered or
allotted is known in advance to the investor. In case of book building process, price
at which shares are offered or allotted is not known in advance to the investor.
Only an indicative price range (i.e. price band) is known to the investor.
(ii) In case of normal public issue, demand for the shares offered is known
only after the closure of the issue. However, in case of book building method,
the demand can be known everyday as the book is built or maintained by a lead
Indian Equity Market - I :
Primary Market
Financial
Institutions

Indian Equity Market - I :
Primary Market
NOTES
106
Financial Markets and Financial
Institutions in India - I
manager (merchant banker) of a public issue on daily basis.
(iii) In case of normal public issue, payment for subscription is made at the
time of submission of application form. The refund if any, for non-allotment of
shares is made after allotment of shares. In case of book building method,
institutional investors are required to pay 10 per cent of subscription amount at
the time of submission of bid. However, retail investors are required to make
full payment at the time of submission of application.