V - GUARD - Success Stock

Company History - V-Guard Industries 

The foundation of our business was laid with the formation of a Partnership Concern viz. Priemere Electronics by our Promoter in the year 1977 which was engaged in the business of manufacturing and marketing voltage stabilizers under the brand name V-Guard. In the year 1992, Premier Electronics, the partnership concern was dissolved and Mr. Kochouseph Chittilappilly continued the business as a properietory concern. 

Also, in the year, 1985, Mr. Kochouseph Chittilappilly started another proprietorship concern by the name of M/s Prompt India for marketing of the products under the brand name of V-Guard. Subsequently, M/s Prompt India changed its name to M/s V-Guard Industries. 

On February 12, 1996, our Company was incorporated under the name of V-Guard Industries Limited under the Companies Act, 1956, with the Registration No. 09-10010 of 1996 having its registered office at 44/1037, Little Flower Church Road, Kaloor, Cochin- 682017, Kerala, India. 

With effect from 1st April, 1996, our company took over the business of the properitory concern i.e. M/s V-Guard Industries, on going concern basis for a lump sum consideration of Rs.234 lakhs and carried on the business of the firm namely manufacturing and marketing of electronic and electro mechanical appliances. 

With effect from Novermber 15, 2001 our Company was converted into a private limited company and again got converted into a public limited company on August 1, 2007 and received a fresh certificate of incorporation in the name of V-Guard Industries Limited. Our Corporate Identity Number is U31200KL1996PLC010010. 

Our company now has diversified into a multi-product company which now manufactures and markets Electronic Voltage Stabilizers, Monobloc, Jet, Submersible, Compressor Pumps and Electric Motors, Insulated Electrical Cables (House Wiring, Industrial), Electric Storage & Instant Water Heaters, Solar Water Heaters, UPS, Electric Fans and is also in generation of Power in a small way. 

MAJOR EVENTS IN OUR HISTORY ARE GIVEN BELOW : 

Year Key Events 

Prior to our Our Promoter Mr. Kochouseph Chittilappilly was carrying out Company’s the business of manufacturing and selling of Electronic Voltage Incorporation Stabilizers and Pumps under the brand name V-Guard 

1996 

V-Guard Industries was incorporated as a Public Limited company which took over the 19 year old Proprietorship business of our promoter Mr. Kochouseph Chittilappilly.Launced Electric Water Heaters. 

1998  

Launched Ups (Online & Offline) Received Industry Excellence Award for Medium Scale Industries by the Institution of Engineering (India), Cochin 

1999  

Launched Digital Stabilizers Cable Manufacturing unit was inaugurated at Coimbatore 

2000  

ISO Certification received for Manufacturing of PVC Insulated Cables. ISO Certification received for Designing and Manufacturing of Solar Water Heaters. 

2001 

Launched Compressor Pumps Our Company was converted into a private limited company. 

2002 

Launched Solar Water Heaters 

2006 

Issued bonus shares to our members in the ratio of Six Equity Shares for every one Equity Share held 

2006 

Launched V-Guard Fans 

2007 

ISO Certification was awarded to R&D Division. Stabilizers Turnover Crossed 1 million mark in numbers. Our Company was converted into a public limited company. Received Excellence in Productivity Award for Medium Scale Industries by Kerala Productivity Council 

2008 

- V Guard Industries has announced a dividend of 25 per cent. 

- V-Guard Industries IPO was subscribed 2.62 times on the last day of the issue. 

2009 

- Mr. N Sreekumar, as the Joint Managing Director of the Company. The Company has also appointed Mr. A K Nair as an Independent director of the Company. 

2010 

- Dr. George Sleeba, as the Joint Managing Director of the Company. 

-Registered Office of the Company has been shifted From 44/1037, Little Flower Church Road, Kaloor, Kochi - 682017 To 33/2905 F, Vennala High School Road, Vennala, Kochi - 682028. 

2012 

- Mr. Ramachandran Venkataraman has joined the Company as Director - Marketing & Strategy. 

Capital Structure (V-Guard Industries) Period Instrument Authorized Capital Issued Capital - P A I D U P - From To (Rs. cr) (Rs. cr) Shares (nos) Face Value Capital 2012 2013 Equity Share 35 29.85 29847520 10 29.85 2011 2012 Equity Share 35 29.85 29847520 10 29.85 2010 2011 Equity Share 30 29.85 29847520 10 29.85 2009 2010 Equity Share 30 29.85 29847520 10 29.85 2008 2009 Equity Share 30 29.85 29847520 10 29.85 2007 2008 Equity Share 30 29.85 29847520 10 29.85 2006 2007 Equity Share 25 21.4 21395760 10 21.4 2005 2006 Equity Share 3 3 3000000 10 3

WHIRLPOOL OF INDIA - Success Stock

Company History - Whirlpool of India. 

1960

- The Company was incorporated on July 19, and obtained the certificate of commencement of business on August 9th. The company is engaged in the manufacture of refrigerators deep freezers, compressors, electric grade laminations cash registers, and scooters.

- It was formed in collaboration with Kelvinator International Corporation, U.S.A. for the manufacture of refrigerators, compressors and allied products.

- 50,000 shares issued without payment is cash to foreign collaborators and 3,00,000 shares issued to the public (otherwise than through a prospectus), promoters, directors etc.

1971

- 1,40,000 Bonus shares issued in prop. 2:5.

1973

- 3,90,000 Bonus shares issued in prop. 1:1.

1974

- The Company established a factory for the manufacture of electrical grade stampings in collaboration with Thermal Refrigeration Ltd., U.K.

- 4,90,000 Rights shares issued at par in prop. 1:2.

1975

- A modern tool room was established for the manufacture of tools, dies, jigs and fixtures.

1976

- Another factory was established for the manufacture of electro mechanical cash registers in collaboration with Gross Cash Registers Ltd., U.K. (now Chubb Cash Ltd.).

1980

- In August/September, 2,80,000 shares offered for public subscription (prem. Rs 2.50 per shares).

1982

- Aravalli Svachalit Vahan Ltd., a sick unit at Alwar (a centrally notified backward area in Rajasthan) was merged with the Company with effect from 26th May, 1982.

- Industrial licence/letter of intent were received for the manufacture of 12,000 nos. per annum of mopeds. A separate factory was to be built for the manufacture of mopeds having an engine capacity upto 100 cc in collaboration with Agrati-Carelli Spa, Milano, Italy.

- High court of Rajasthan at Jaipur approved the Scheme of Amalgamation of Aravalli Svachalit Vahan Ltd. with the Company on 14th May, and High Court of Delhi approved the same on 26th May.

- As per the Scheme of Amalgamation, 25,000 No. of equity shares of Rs 10 each of the company were allotted to the shareholders of Aravali Svachalit Vahan Ltd., in the proportion 1 equity share of the Company to every 40 shares of Aravalli Svachalit Vahan Ltd.

- Expo Machinery Ltd., and Kelbex International Ltd. are wholly owned subsidiaries of the Company. Sanskrit Investment Pvt., Ltd., and Episilon Investment Pvt Ltd. ceased to be subsidiaries of the Company.

1983

- Another letter of intent was received for increasing the production capacity of refrigerators from 2,00,000 to 5,00,000 nos. per annum.
A letter of intent was also received for the manufacture of washing machines.

- The Government of India extended for a period of 5 years, the Company's collaboration agreement with White Consolidated Industries Inc., U.S.A. for manufacture of compressors.

- 17,75,000 Bonus equity shares issued in prop. 1:1.

1984

- The Company issued 3,00,000-15% non-convertible debenture of Rs 100 each to Unit Trust of India on private placement basis.

1985

- The Company entered into a collaboration agreement with White Consolidated Industries Inc., U.S.A., for the manufacture of washing machines. The Government of India extended for a period of 5 years, the company's collaboration agreement with White Consolidated Industries Inc., U.S.A. for manufacture of compressors.

- The Company issued 4,00,000-15% secured non-convertible debentures of Rs 100 each to UTI, LIC, GIC and its subsidiaries and ICICI on private placement basis.

1986

- The Company introduced a 300 litre 2-door refrigerator for the lower and middle class consumers. A single speed (VIP-1) and 3-speed, kick start (VIP-3) mopeds were introduced along with two new models of cash registers.

- The Company's R&D introduced two new models viz., Avanti auto gear and Avanti-3 gear mopeds.

1987

- The Company proposed to implement 15 washing machines and microwave oven projects.

1989

- The Company introduced the new Zannusi model refrigeration and undertook modernisation of the manufacturing operations in the refrigeration division. New models of mopeds were introduced during the year.

- The Company undertook to set up a project for the manufacture of super enamelled copper wire.

- During August-September, the Company offered 5,63,380-12.5% secured redeemable partly convertible debentures of Rs 180 each for cash at par on rights basis in the proportion 9 deb.: 50 No. of equity shares held, to the shareholders except White Consolidated Industries (Inc.) USA (WCI) (All were taken up).

- The Company also issued 28,170 debentures to the employees/workmen of the Company under the Employees Stock Option Scheme (only 6,525 debentures taken up). The unsubscribed portion of 21,645 debentures was allowed to lapse Rs 80 of the face value of each debenture was to be automatically and compulsorily converted into one equity shares of Rs 10 each at a premium of Rs 70 per share on the expiry of 6 months from the date of allotment of debentures.

- The non-convertible portion of Rs 100 of the face value of each debentures was to be redeemed at par on the expiry of 7 years from the date of allotment of debentures.

- The Company also issued 79,400 No. of equity shares of Rs 10 each at a premium of Rs 70 per share to WCI so as to maintain their equity holding at 11.83%. Only 76,495 shares had to be allotted to W.C.I. as employees quota of covertible debentures was not fully taken up.

- 5,69,905 No. of equity shares allotted (prem. Rs 70) on conversion of 12.5% debentures as on 21.4.1990 to maintain their shareholding at 11.83%. In May, 41,96,400 bonus shares issued in prop. 1:1.

1990

- The operations were adversely affected due to lock-out for 45 days at Faridabad and Ballabgarh plants.

- Two sizes of microwave ovens were introduced.

1991

- The Company again had to declare a lock-out from 3rd October, which lasted for about 75 days at both Faridabad and Ballabgarh plants when an amicable settlement was arrived at with labour.

- With the introduction of a state-of-the-art 310 Ltr. single door refrigerator in the sterling range and with its proposed introduction of a 310 Ltr. 2-door refrigerator, the Company hoped to do better in the near future.

- The Company succeeded in indigenisation of micro wave ovens to a great extent. Production of international quality hermetic grade dual coated winding wire commenced during the year.

1992

- During October-November, the Company offered 22,19,876-15% Secured partly convertible debenture of Rs 170 each on Rights basis in the proportion 1 deb.: 5 equity shares held. All rights debenture were taken up. Another 1,10,994-15% debentures were also offered to the employees on an equitable basis (only 3,900 debentures were taken up).

- Part-A of Rs 100 of the face value of each debenture was to be automatically and compulsorily converted into 2 equity shares of Rs 10 each at a premium of Rs 40 per share at the end of 6 months from the date of allotment of debentures.

- Part-B of Rs 70 of the face value of each debenture was to be redeemed in three instalments of Rs 25, Rs 25 and Rs 20 each at the end of 6th, 7th and 8th years respectively from the date of allotment of debentures.

- 41,96,400 bonus shares issued in prop. 1:2. 44,67,552 No. of equity shares allotted (prem. of Rs 40) on convertion of 15% debentures. 5,96,975 No. of equity shares allotted to White Consolidated Industries Inc. foreign collaborators.

1993

- The Company entered into a tie up with Whirlpool Corporation, USA, whereby Whirlpool contracted to purchase from white consolidated Industries Inc., USA, erstwhile collaborators, their entire holding of 20,86,796 No. of equity shares of the company.

- Expo Machinery Ltd., a wholly owned subsidiary were merged with the company. Pursuant to scheme of amalgamation, 75,00,000 No. of equity shares of the Company were allotted to the shareholders of erstwhile Whirlpool Washing Machines Ltd. (WWML) in the ratio of one equity share of the Company for every four equity shares of erstwhile WWML.

1994

- The R&D developed a New Sterling Supreme 165 L refrigerator with improved aesthetic and a new freezer frame door was introduced.

- 1,41,00,000 shares allotted (Prem. Rs 187.16 per share) to Whirlpool Mauritius Ltd., to acquire 51% of share capital.

1995

- The Whirlpool brand was launched in November, along with a new 310 ltr. refrigerator.

1996

- Three variants of 165 L and a new 220 L Direct Cool Refrigerators were launched. The Pondicherry Washer Unit indroduced a re-styled version of a fully Automatic Washing machine and a 3.5Kg. Twin-tub machine under the Whirlpool brand.

- The Company undertook a major project for the manufacture of CFC Free No. Frost Refrigerators at Ranjangaon near Pune.

- The name of the company was changed from Kelvinator of India Ltd. to the Whirlpool of India Ltd.

- The Company proposed to dispose off the compressor unit, plastic division and Automotive plant to generate cash for the working capital needs of the Company.

1997

- WoI is a wholly owned subsidiary of the US major, Whirlpool Corporation.

- Whirlpool entered into a joint venture with TVS (washing machines of the TVS group) in 1990.

- The company has also introduced a 310 litre capacity refrigerator under the wing of Whirlpool brand, and another model based on the non-CFC refrigerant.

- WoI has one of the largest distribution networks in India. Presently it has about 40 branches and 5,500 dealers located all over the country.

- WoI has signed an MoU with Intrinsic Automation System Pvt. Ltd. (IASPL) for the hiving off its electronic cash register (ECR) division.

- Whirlpool introduced its second voluntary retirement scheme in two years which 1,500 employees availed themselves of between March and December 1996.

- Whirlpool launched a joint venture consumer finance company with Apple Industries, the latter taking a 60 per cent stake.

- The company is currently setting up a greenfield no-frost refrigerator manufacturing facility in Ranjangaon, near Pune.

- Whirlpool of India Ltd (WIL), a white goods manufacturer and marketer, has announced the launch of three of its new washing machine models for the domestic market.

- Pondicherry based Whirlpool of India Ltd (WIL) is a 56.3% subsidiary of the US$ 8 billion Whirlpool Corporation USA.

1998

- Whirlpool Financial India Private Ltd (WFI), a subsidiary of Whirlpool Corporation, US, is to merge with Whirlpool of India Ltd.

- The company has launched a `Kaizen' initiative to ensure regular and continuous improvement in all areas of its activity.

- Whirlpool India Limited, has launched a range of state of the art non-CFC frost free refrigerators said to be for the first in India.

- Crisil has assigned a P1 rating to the Rs.20 crore commercial paper (CP) programme of Whirlpool of India Ltd (WOIL). The rating favours the impending merger of Whirlpool Financial India Pvt Ltd (WFIL) into WOIL and continued support from the parent company.

- Whirlpool of India, the 51 per cent subsidiary of Whirlpool Corporation of the US.

- A P1 rating has been assigned to Rs 70-crore commercial paper issue of Whirlpool India Limited (WIL).

1999

- KIL entered into just a strategic alliance with Whirlpool with the object of manufacturing and marketing state-of-the-art home appliance and simultaneously discounting all unrelated and non-core product lines.

- In September 1998, Whirlpool Financial India Private Ltd (WFIPL), another group company of WC and a wholly-owned subsidiary of Whirlpool Financial Mauritius Ltd (WFML) was merged with WIL.

- Kelvinator of India used to manufacture refrigerators under the brand name of Kelvinator under a licensing agreement with Swedish white goods giant AB Electrolux which owned the brand internationally.

- The company is one of the largest manufacturers of chloroflouro carbons in the country, and it has consistently generated free cash and incremental returns on capital year on year.

2000

- Whirlpool of India Ltd had being granted foreign collaboration approval for the manufacturing of refrigerators.

- The Company will launch a new air-conditioner series for the Indian Market.

- Crisil has assigned a `P1+' rating to the Rs 100 crore commercial paper programme of the Company.

- The Company has launched `Whitemagic' Hotwash - the only top loading washing machine with a heater.

- Raj Jain will take over as the new managing director of the company.

- Whirlpool of India chairman and managing director Garrick D'silva has been promoted as regional vice-president, Whirlpool Asia.

- The Company offered a Voluntary Retirement Scheme to the employees of its Refrigerator Division.

- The Company has launched its fully automatic top-loading washing machine, Whitemagic Hotwash, in the Kerala market.

2001

- The Company offered a Voluntary Retirement Scheme to its employees and spent Rs. 12.66 Crores.

- The Company has introduced a range of direct cool and frost-free refrigerators in the Kerala market.

2002

-Whirlpool and Godrej filed a law suite with MRTPC against LG Electronics India Ltd of misrepresenting its capacity and volumes.

-Launches new eight refrigerators in both frost-free and direct cool models.

2003

-Receives ISO 9001:2000 certification for its Design and Manufacturing of Direct Cool Refrigeration.

2004

-Whirlpool India forges alliance with Faber Heatcraft Industries Ltd

-Whirlpool on May 17 launched new refrigerators in the 'ice magic' frost-free range'

-Whirlpool has announced the launch of single-door frost-control refrigerators in the Kerala market

-Whirlpool announces new scheme for Onam season

-Launches new range of refrigerators and washing machines to improve its market share on October 25, 2004.

-Delist from the Delhi Stock Exchange Association Ltd with effect from October 13, 2004

-Faber India enters into distribution tie-up with Whirlpool

2005

-Ajay Devgan and wife Kajol have been signed on by Whirlpool appliances for their new commercial targeted at family audiences the couple's first major ad campaign together

-Whirlpool launches `Genius' a direct cool refrigerator of 180 litres and premium range of window air-conditioners on April 25, 2005

-Whirlpool India bags 'AAA' rating

-Whirlpool unveils new Iceberg refrigerators

2006

-Whirlpool of India Ltd has appointed Mr Mahesh Krishna as Director of the Company w.e.f. October 27, 2006, liable to retire by rotation, who shall hold the office until the next meeting of the Company and shall be eligible for re-election.

2007

-Whirlpool joining hands with retailers for easier credit facilities

2010

-Whirlpool of India launches its Jet Chef and Family Chef Collection of Microwaves

-Whirlpool launches 4 New Brand shops in Chandigarh

-Whirlpool redefines washing machines in India, launches the all new 'Whirlpool ACE washstation'

-Whirlpool corporation kicks off 100th year anniversary celebration

-Launches new brandshops in Amritsar and Jalandhar

-Best Consumer Durables Company...Dun & Bradstreet Corporate Awards

2010

-Readers Digest Trusted Brand Gold Award (2009-2010) for Refrigerators and Washing Machines

2011

-Whirlpool Pondicherry Washer Facility Gold Award in Economic Times Frost & Sullivan Manufacturing Excellence Award - 2011

-India is an important global mkt: Whirlpool

2012

-Whirlpool launches a new range of domestic products

-Whirlpool ACE Washing Machine received the Silver Medal in the prestigious international Edison Awards for being the best new product in the Lifestyle and Social Impact category.

-ICWAI....National Award for Excellence in Cost Management - Silver

-Trophy for Export Excellence in EPO Service for outstanding export performance
 

Company Background - Whirlpool of India.
Industry Name	Domestic Appliances - Others
House Name	MNC Associate
Collaborative Country Name	N.A.
Joint Sector Name	N.A.
Year Of Incorporation	1960
Year Of Commercial Production	N.A.
Regd. Office
Address	Plot No. A-4, MIDC,, Ranjangaon,
District	Pune District
State	Maharashtra
Pin Code	412220
Tel. No.	02138-660100
Fax No.	02138-232376
Email : ravi_kumar_sabharwal@whirlpool.com	Internet : http://www.whirlpoolindia.com
Auditors S R Batliboi & Co.	Company Status  N.A.
Registrars
Name Link Intime India Pvt. Ltd.
Address 44, Community Center, 2nd Floor, Naraina Industrial Area, Phase I, Near PVR, Naraina, New Delhi - 110028, Delhi
Tel. No. : 011-41410592, 41410593, 41410594	Fax No. : 011-41410591
Email : delhi@linkintime.co.in	Internet : http://www.linkintime.co.in

NEW DELHI: Microsec Capital has given a 'BUY' call on Whirlpool of India Ltd with a 12-month target price of Rs 208, which represents an upside of nearly 20 per cent from Thursday's closing price of Rs 174.20.

Whirlpool of India is a subsidiary of the world's largest consumer durables company Whirlpool Corporation, USA. The parent company is headquartered at Michigan, USA, having presence over 170 countries and manufacturing operations in 13 countries with 11 major brand names such as Whirlpool, KitchenAid, Roper, Estate, Bauknecht, Laden and Ignis.

Diversified business model, focus on innovation and productivity improvement coupled with control on operational efficiencies, and factors like rural demand, increase in disposable income and rapid urbanization driving demand for home appliances bode well for Whirlpool India.

Microsec Capital lists out five reasons why the stock is a long-term buy:
Diversification of products in a single segment:

The company has diversified into a variety of products under a single segment named 'home appliances' like refrigerators, washing machines, air conditioners, microwave ovens and other built in appliances.

It derives 59-60 per cent of revenue from refrigerators, 20-22 per cent from washing machines, 10-11 per cent from air conditioners, 3 per cent from microwave ovens, 5 per cent from consumer services and 2 per cent from others.

Recently, the company launched new, innovative and intuitive products in 70% of its portfolio which would be valued for performance, design and differentiated features.

Focus on innovation and productivity improvement:

Whirlpool India, which has a share of 20 per cent in the Indian home appliances market pegged at around Rs 35,000 crore or 15 million appliances, expects to improve market share by continuous launching of new products and re-engineering product design and components.

The company's raw material cost, which accounts for 55-60 per cent of the total cost, is focusing on improving cost efficiencies in the wake of demand. Also, the company which imports 27-30 per cent of raw materials is now increasing domestic sourcing to save itself from rupee depreciation.

Microsec believes that these measures like delivering higher rate of productivity along with cost control is expected to help the company realize better margins.

Rural demand, increase in disposable income and rapid urbanization:

Rural demand, increase in disposable income and rapid urbanization have always been the major factors for driving demand of home appliances. With penetration of refrigerators and washing machines low in rural areas, the company is ready to tap the opportunity.

In the rural market, the company is focusing on basic products and in urban market it is focusing on launching new products in the premium and super premium range.

Debt-free company; increasing free cash flows:

Microsec believes that Whirlpool India can leverage on its debt-free status to improve net profit margins in the coming years also. The company generates healthy cash flows. Its cash balance has gone up from INR86cr in FY12 to Rs 155cr in FY13. Hence, healthy cash flows leave much scope for the company to consider dividend payments going ahead.

Venture Capitalists

Venture capital is basically a group of business people who specialize in investing in small businesses to provide them funding for their business operations. Private investors who provide venture capital to promising business ventures.

The venture capitalists are persons who invests in a business venture, providing capital for start-up or expansion. Venture capitalists are looking for a higher rate of return than would be given by more traditional investments.In return, when the business is sold they make a profit on their investment.

Venture capital firms are pools of capital, usually organized as a limited partnership. The money comes from private investors or institutions like banks and pension funds.

Venture capitalists typically put this money in small, fast-growing companies who cannot raise funds on the stock market.

They can invest in companies at any stage of the business cycle.

In return for this medium or long-term financing - usually for five or seven years - the investors receive a share of the company's equity.

They typically invest where at least 25 percent annual returns within one to five years are feasible, and often demand 50 percent or more ownership to exercise control over the invested firm to offset their high risk. Often they also provide management and industry expertise and business connections with other firms and venture capitalists. Their objective usually is to bring the business to its initial public offering (IPO) stage so that they can sell their shareholdings to the public at high profit, and get out.

Generally, venture capitalists are looking for returns of 25 percent and up.

A venture capitalist is a professional investor. He or she manages a fund and is looking for suitable investments for that fund.

In other words, the venture capitalist may have no business experience applicable to the industry your company is involved in, and is focused on the potential rate of return your company can provide.

For example, the business I used to work for was owned by the founder. He wanted money to grow the business so that he could sell it to someone else or another business. The owner contacted several venture capitalist firms. They met and discussed the companies business plan and one company decided to invest $5 million dollars in the business and they took 49% of the company stock. The owner retained the other 51%.

Over the next 2 years, the venture capitalist were not happy with how the owner was running the business. So they invested another $2 million to buy a majority stake in the company. I think they had 60%. The installed their own CFO and their own VP of sales, weeded out some dead wood employees, and in 2 years the company was sold for $19 million. So the original owner was paid $7.6 mil for his 40% stake and the venture capitalist made $11.4 million. After their original investment, that netted out to a $4.4 million profit. In most situations the venture capitalist make more than the actual example I gave.

So basically the venture capitalist invests in a business in order to make money. Just like someone may buy BW3 stock at $5 and sell it for $35. They make a profit of $30 per share.

Management role

The venture backer may also seek a non-executive board position and attend monthly Board meetings.

They provide far more than a cheque, stepping in with experience, contacts and advice when required.

About 50% of venture capital financing are for expansion, specifically to help existing businesses to grow and compete, the British Venture Capital Association said.

For some companies, that cocktail of cash and advice was just what they needed.

Some well known UK companies were built with venture capital, for example Lastminute.com, National Express Group, Trafficmaster and Whittards of Chelsea.

In the US, companies such as Apple, Federal Express, Compaq, Sun Microsystems, Intel and Microsoft are famous examples of companies that received venture capital early in their development.

In other cases, pride has come before a fall.

In the 1980s, management buyout funds competed to gain control of Magnet, a supplier of kitchens and bathrooms. The winning bidder had no more success managing the company than the old management.

UK statistics

Almost three million people in the UK are employed by companies backed by venture capital, according to the British Venture Capital Association.

Many of these companies - and the jobs they provide - might not be in existence without the injection of cash and guidance venture capitalists provide, the BVCA said.

Venture capital is usually concentrated in the newer fast growing sectors of the economy, such as the internet, and over half of all funds invested in the UK were in hi-tech firms.

These fast growth sectors often have few other alternatives to make their business plans a reality.

The UK venture capital industry has invested almost £50bn in up to 23,000 companies since 1983.

And it is still growing, with the total funds invested by UK venture capitalists in 2001 rising to £12bn, up 36% from the previous year.

Defensive Stocks

Securities that are considered to be more stable in price in a market where prices are falling. A stock that tends to remain stable under difficult economic conditions. During market turmoil defensive stocks can provide a steady income. But what makes a stock defensive?

For example, some shares are well-positioned to withstand recession, because the goods and services they sell are essential items rather than luxuries.

Defensive stocks include food groups, tobacco companies, oil, utilities and banks are traditionally regarded as good defensive stocks, and when the market turns bearish there will be talk about a 'flight' to these kinds of stocks.

These stocks hold up in hard times because demand does not decrease as dramatically as it may in other sectors. Defensive stocks tend to lag behind the rest of the market during economic expansion because demand does not increase as dramatically in an upswing.

Defensive stocks are those to which traders flee during periods of weakness in volatile, high flying stocks. It is a stock that provides consistent earnings no matter what the state of the overall stock market is. An example of a volatile group in recent years would be high-technology.

In the most recent dictionary entry, we can find the term "cyclical stock".

A cyclical stock is a stock that does better when the economy is expanding, and worse when the economy is contracting.

An example of a cyclical company would be a car manufacturer.

Now, "defensive stocks" hold up much better when the economy is slowing or in a full-blown recession.

Why?

"Defensive stocks" are companies that don't experience a noticeable downtick in revenues when the economy goes south.

Food companies. Tobacco companies. Health care companies.

Smokers are still going to buy cigarettes in a recession. People are still going to buy dinner at McDonald's in a depression.

These are "defensive" companies, meaning - if you want to protect your portfolio in a recession, you will turn to "defensive stocks" such as McDonald's or Philip Morris.

Cyclical companies, on the other hand, will perform (by definition) poorly during times of economic distress.

The same attributes are always cited when investors attempt to define a defensive stock:

• That they are non-cyclical. That is, they produce solid earnings irrespective of the performance of the larger economy.
• That they offer higher-than-average dividend yields.
• That they are linked to either basic human needs or addictions, so defensive stocks are often connected with food and drink, power, water, health, smoking and alcohol. The 'defensive' sectors are therefore typically utilities, telecoms, pharmaceutical, beverage, food retail and tobacco.

Of course, nothing is that simple and the history of investing is littered with examples of defensive stocks which failed to conform to their "safe haven" profiles. Similarly, thorough research may unearth company characteristics in less predictable sectors which should see them safely through downturns in the wider economy.

I.P.O - Book Building Process

Two of the most popular means to raise money are Initial Public Offer (IPO) and Follow on Public Offer (FPO). During the IPO or FPO, the company offers its shares to the public either at fixed price or offers a price range, so that the investors can decide on the right price.

Public issue of common shares is essentially carried out in two ways.The method of offering shares by providing a price range is called as book building method.
 
Fixed price method, and
Book-building method.

Fixed price issues are issues in which the issuer is allowed to price the shares as he wishes. The basis for the price is explained in an offer document through qualitative and quantitative statements. This offer document is filed with the stock exchanges and the registrar of companies.

Book building refers to the process of generating, capturing, and recording investor demand for shares during an Initial Public Offering (IPO), or other securities during their issuance process, in order to support efficient price discovery.[1]

Book building

Book building is a common practice in developed countries and has recently been making inroads into emerging markets as well. Bids may be submitted on-line, but the book is maintained off-market by the bookrunner and bids are confidential to the bookrunner.

Book-building is actually a process of price discovery method used in public offers. The issuer sets a base price and a band within which the investor is allowed to bid for shares. Take the recent, Yes Bank IPO, the floor price was Rs 38 and the band was from Rs 38 to Rs 45.

In this method, the company doesn't fix up a particular price for the shares, but instead gives a price range, e.g. Rs 80-100.

When bidding for the shares, investors have to decide at which price they would like to bid for the shares, for e.g. Rs 80, Rs 90 or Rs 100. They can bid for the shares at any price within this range.

Based on the demand and supply of the shares, the final price is fixed. The lowest price (Rs 80) is known as the floor price and the highest price (Rs 100) is known as cap price.

The price at which the shares are allotted is known as cut off price. The entire process begins with the selection of the lead manager, an investment banker whose job is to bring the issue to the public.

Both the lead manager and the issuing company fix the price range and the issue size. Next syndicate members are hired to obtain bids from the investors. Normally the issue is kept open for 5 days.

Once the offer period is over, the lead manager and issuing company fix the price at which the shares are sold to the investors. If the issue price is less than the cap price, the investors who bid at the cap price will get a refund and those who bid at the floor price will end up paying the additional money.

For e.g if the cut off in the above example is fixed at Rs 90, those who bid at Rs 80, will have to pay Rs 10 per share and those who bid at Rs 100, will end up getting the refund of Rs 10 per share. Once each investor pays the actual issue price, the shares are allotted.

Usually, the issuer appoints a major investment bank to act as a major securities underwriter or bookrunner. The “book” is the off-market collation of investor demand by the bookrunner and is confidential to the bookrunner, issuer, and underwriter. Where shares are acquired, or transferred via a bookbuild, the transfer occurs off-market, and the transfer is not guaranteed by an exchange’s clearing house. Where an underwriter has been appointed, the underwriter bears the risk of non-payment by an acquirer or non-delivery by the seller.

Book building vs fixed price

The main difference between the book building method and the fixed price method is that in the former, the issue price is not decided initially.

The investors have to bid for the shares within the price range given and based on the demand and supply of the shares, the issue price is fixed. On the other hand, in the fixed price method, the price is decided right at the start.

Investors cannot choose the price, but must buy the shares at the price decided by the company. In the book building method, the demand is known every day during the offer period, but in fixed method, the demand is known only once the issue closes.

Book building vs. Reverse book building

While book building is used to raise capital for the company's business operations, reverse book building is used for buyback of shares from the market. Reverse book building is also a price discovery method, in which the bids are taken from the current investors and the final price is decided on the last day of the offer. Normally the price fixed in reverse book building exceeds the market price.

Book building is the price discovery method in which the investors bid for the shares of the company during IPO/FPO. They are given a price range in which the investors have to bid for the shares.

Depending on the demand and supply of the shares, the issue price is fixed. Those who bid at the price higher than the issue price end up getting refund and those who bid at the price below the issue price end up paying the remaining amount.

Cut-off price

Once the issue period is over and the book has been built, the BRLM along with the issuer arrives at a cut-off price. The cut-off price is the price discovered by the market. It is the price at which the shares are issued to the investors.

Investors bidding at a price below the cut-off price are ignored. So those investors who apply at a price higher than the cut-off price have a higher chance of getting the stock. So the question that arises is: How is the cut-off price fixed?

The cut-off price is arrived at by the method of Dutch auction. In a Dutch auction the price of an item is lowered, until it gets its first bid and then the item is sold at that price.

Let's say a company wants to issue one million shares. The floor price for one share of face value, Rs 10, is Rs 48 and the band is between Rs 48 and Rs 55.

At Rs 55, on the basis of the bids received, the investors are ready to buy 200,000 shares. So the cut-off price cannot be set at Rs 55 as only 200,000 shares will be sold. So as a next step, the price is lowered to Rs 54. At Rs 54, investors are ready to buy 400,000 shares. So if the cut-off price is set at Rs 54, 600,000 shares will be sold. This still leaves 400,000 shares to be sold.

The price is now lowered to Rs 53. At Rs53, investors are ready to buy 400,000 shares. Now if the cut-off price is set at Rs 53, all one million shares will be sold.

Investors who had applied for shares at Rs 55 and Rs 54 will also be issued shares at Rs 53. The extra money paid by these investors while applying will be returned to them.

When companies are on the look out to raise money for their business operations, they use various means for the same.

The investor had to bid for a quantity of shares he wished to subscribe to within this band. The upper price of the band can be a maximum of 1.2 times the floor price.

Every public offer through the book-building process has a book running lead manager (BRLM), a merchant banker, who manages the issue.

Further, an order book, in which the investors can state the quantity of the stock they are willing to buy, at a price within the band, is built. Thus the term 'book-building.'

An issue through the book-building route remains open for a period of 3 to 7 days and can be extended by another three days if the issuer decides to revise the floor price and the band.

Unlike a public issue, the book building route will see minimum number of applications and large order size per application. The price at which new shares are issued is determined after the book is closed at the discretion of the bookrunner in consultation with the issuer. 

Generally, bidding is by invitation only to high-networth clients of the bookrunner and, if any, lead manager, or co-manager. Generally, securities laws require additional disclosure requirements to be met if the issue is to be offered to all investors. Consequently, participation in a book build may be limited to certain classes of investors. If retail clients are invited to bid, retail bidders are generally required to bid at the final price, which is unknown at the time of the bid, due to the impracticability of collecting multiple price point bids from each retail client. 

Although bidding is by invitation, the issuer and bookrunner retain discretion to give some bidders a greater allocation of their bids than other investors. Typically, large institutional bidders receive preference over smaller retail bidders, by receiving a greater allocation as a proportion of their initial bid. All bookbuilding is conducted ‘off-market’ and most stock exchanges have rules that require that on-market trading be halted during the bookbuilding process.

The key differences between acquiring shares via a bookbuild (conducted off-market) and trading (conducted on-market) are: 

1) bids into the book are confidential vs transparent bid and ask prices on a stock exchange; 

2) bidding is by invitation only (only high-networth clients of the book-runner and any co-managers may bid); 

3) the book-runner and the issuer determine the price of the shares to be issued and the allocations of shares between bidders in their absolute discretion; 

4) all shares are issued or transferred at the same price whereas on-market acquisitions provide for a multiple trading prices.

The book-runner collects bids from investors at various prices, between the floor price and the cap price. Bids can be revised by the bidder before the book closes. The process aims at tapping both wholesale and retail investors. The final issue price is not determined until the end of the process when the book has closed. After the close of the book building period, the book runner evaluates the collected bids on the basis of certain evaluation criteria and sets the final issue price.

If demand is high enough, the book can be oversubscribed. In these case the greenshoe option is triggered.
 
Real Life Application
Before Facebook's IPO, the book building process was used to determined how much the stock was worth before it was sold to the public. Morgan Stanley was the lead investor for Facebook's IPO. Initially, the stock was thought to be determined between $28 and $35 a share. The week before the stock was sold, the demand for the stock was sufficient to increase the price between $34 to $38 a share. Once the stock was offered Morgan Stanley tried to prevent the stock from falling below $38 a share in order to prevent the IPO from being considered a failure. Since Facebook stock initially had a high demand, but this demand fell and its price consequently fell it was considered that Facebook was overvalued when it was sold at its initial public offering. [4]

Types of investors

There are three kinds of investors in a book-building issue. The retail individual investor (RII), the non-institutional investor (NII) and the Qualified Institutional Buyers (QIBs).

RII is an investor who applies for stocks for a value of not more than Rs 100,000. Any bid exceeding this amount is considered in the NII category. NIIs are commonly referred to as high net-worth individuals. On the other hand QIBs are institutional investors who posses the expertise and the financial muscle to invest in the securities market.

Mutual funds, financial institutions, scheduled commercial banks, insurance companies, provident funds, state industrial development corporations, et cetera fall under the definition of being a QIB.

Each of these categories is allocated a certain percentage of the total issue. The total allotment to the RII category has to be at least 35% of the total issue. RIIs also have an option of applying at the cut-off price. This option is not available to other classes of investors. NIIs are to be given at least 15% of the total issue.

And the QIBs are to be issued not more than 50% of the total issue. Allotment to RIIs and NIIs is made through a proportionate allotment system. The allotment to the QIBs is at the discretion of the BRLM.

Lately there have been some complaints by the QIBs of BRLMs resorting to favouritism while allocating shares. The Securities and Exchange Board of India (Sebi) is in the process of reviewing this mechanism.

Let's suppose, A Ltd, makes an offer for 200,000 shares. The issue is oversubscribed -- i.e. there is demand for more shares than the issuer plans to issue. Further, a minimum allotment of 100 shares is to be made for every investor.

The cut-off price has been decided and now the allotments are to be made. In the RII category, 1,500 applicants have applied for 100 shares each, i.e. there is a demand for 150,000 shares.

A Ltd plans to issue 35% of the total issue to this category, i.e. 70,000 shares. In the NII category, 200 applicants have applied for 500 shares each, i.e. 100,000 shares. A Ltd plans to issue 15% of the total issue to this category, i.e. 30,000 shares.

The cut-off price has already been decided, so adjusting the quantity remains the only way of reaching the equilibrium. Applying the proportionate allotment system each investor in the RII category will get 46.67 shares [(70,000/ 150,000) x 100)]. But the minimum allotment has to be 100 shares.

So through a lottery, 700 investors are chosen and allotted 100 shares each, making a total of 70,000 shares. In the NII category every investor will get 150 shares [(30,000/100,000) x 500)]. And that is how equilibrium is reached.