(a) The merchant banker works in consultation with the issuer (company) to decide the issue price. They are also required to give full disclosures of the parameters considered while deciding the price.

(b) No, SEBI does not play any role in price fixation. There is no price formula stipulated by SEBI. The company and merchant banker decide the price together.

(c) Two types of issues:

1. Fixed Price Issue – where company and Lead Merchant Banker fix the price.
2. Book Building Issue – where a floor price or price band is stipulated and market forces determine the final price.

(d) In a fixed price issue, the company and Lead Merchant Banker decide the final price. In book building, market forces determine the final price within the band stipulated by the company and Lead Manager.

Source: Financial Markets, Primary Market/Issue Pricing

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• The passage is the sole source — all four answers are directly lifted from it. Do not add outside knowledge.
• (b) is a direct yes/no + reason — keep it sharp.
• (c) uses the passage's own terms: "fixed price" and the book-building type (floor price/price band).
• Since this is a case-study extract question, examiners reward passage-based answers; paraphrase the text closely.

Global Depository Receipts (GDRs) are negotiable certificates that allow an issuer to raise capital simultaneously in two or more markets through a global offering, where each GDR typically represents a fixed number of underlying company shares (e.g., 1 GDR = 10 shares).

Source: Foreign Capital Issuance, chapter 3

For a 1-mark question, just define GDR in one clear sentence. Key terms examiners look for: negotiable certificate, raise capital in two or more markets, and optionally the fixed ratio of GDR to underlying shares. Avoid writing more than 2 lines.

(c) Prospectus

As per the source, 'Abridged Prospectus' is a shorter version of the Prospectus that accompanies the application form of public issues.

Source: Chapter 3, What is an 'Abridged Prospectus'?

The exact definition from the textbook states: "'Abridged Prospectus' is a shorter version of the Prospectus and contains all the salient features of a Prospectus. It accompanies the application form of public issues." The question describes the Abridged Prospectus, but since the option given is simply Prospectus (c), that is the correct choice. Always remember this one-liner for MCQs and fill-in-the-blank questions.

(b) Five days — ❌ Incorrect.

(a) Three days ✓ — The Book should remain open for a minimum of 3 days during the book building process.

The source passage explicitly states: "The Book should remain open for a minimum of 3 days." The correct answer is (a) Three days. Note: if the price band is revised, the bidding period is extended by 3 more days, subject to a maximum of 10 days total — do not confuse this with the minimum.

Foreign Currency Convertible Bonds (FCCBs): These are bonds issued by Indian companies in foreign currency and are convertible into ordinary shares of the issuing company. They are commonly known as 'Euro issues' and allow companies to raise foreign currency resources from international markets.

Global Depository Receipts (GDRs): A GDR is a global finance vehicle that allows an issuer to raise capital simultaneously in two or more markets through a global offering. It is a negotiable certificate that usually represents a company's traded equity/debt. The underlying shares correspond to GDRs in a fixed ratio (e.g., 1 GDR = 10 shares). GDRs may be used in public or private markets inside or outside the US.

American Depository Receipts (ADRs): An ADR is a physical certificate evidencing ownership of American Depository Shares (ADSs). ADSs are US dollar-denominated forms of equity ownership in a non-US company, traded on NYSE, AMEX or quoted on NASDAQ. They provide US investors a convenient way to invest in overseas securities, though they do not eliminate currency risk.

Source: Foreign Capital Issuance, Chapter 3

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• The examiner expects definitions of all three instruments — FCCBs, GDRs, and ADRs — since the question asks for all three.
• Note: The textbook does not give a separate elaborate definition of FCCBs beyond calling them 'Euro issues' used to raise foreign currency; keep that brief.
• For GDRs, the fixed ratio example (1 GDR = 10 shares) is a useful detail to include.
• For ADRs, mention the key exchanges (NYSE, AMEX, NASDAQ) and the USD denomination — these are frequently tested points.
• Do not confuse ADR (the certificate) with ADS (the actual share form); the question only asks for ADR, so a brief mention of ADS within it suffices.

Companies require to issue shares to the public because the promoters' own capital and borrowings from banks and financial institutions may not be sufficient for setting up or running the business over the long term. Therefore, companies invite the public to contribute towards their equity by issuing shares through a Public Issue, which is an offer to the public to subscribe to the share capital of the company.

Source: Chapter 3, Section 3.1 – Issue of Shares

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The examiner expects two clear points: (1) the limitation — promoters' capital + bank borrowings are insufficient, and (2) the solution — inviting public contribution through a public issue. Use the textbook phrase "contribute towards the equity" for full marks. No need to elaborate on types of issues for a 2-mark question.

(B) 21 Days

The Draft Offer Document is available on the SEBI website for public comments for a period of 21 days from the filing of the Draft Offer Document with SEBI.

Source: Chapter 3, "What does 'Draft Offer document' mean?"

The passage clearly states: "The Draft Offer Document is available on the SEBI website for public comments for a period of 21 days from the filing of the Draft Offer Document with SEBI." Students often confuse this with the 30-day period (which is the minimum time before filing the red herring prospectus with ROC) — note these are two different timelines. Always read carefully what each time period refers to.

(C) Cut-off Price

In a book building issue, the actual discovered issue price — which can be any price in the price band or above the floor price — is called the Cut-off Price.

Source: Chapter 3, Section 3.1 – "What is Cut-Off Price?"

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The passage directly defines Cut-off Price as the discovered issue price in a book building process. Students often confuse it with Floor Price (minimum bid price) or Price Band (the range). Remember: Floor Price = minimum; Price Band = range; Cut-off Price = final discovered price after book building.

The correct answer is (D) The system increases the time taken for completion of the issue process.

This is not an advantage — in fact, Book Building through NSE reduces the time taken for completion of the issue process.

The source passage explicitly lists the advantages of Book Building through NSE, which include nationwide bidding, fair/transparent method, and lower costs. It states the system reduces (not increases) the time taken. Options A, B, and C are directly listed as advantages in the passage, making D the odd one out.

(C) Book Building

Book Building is a mechanism where, during the period the IPO is open, bids are collected from investors at various prices which are above or equal to the floor price.

Source: Chapter 3, Issue of Shares — 'What does price discovery through Book Building Process mean?'

The question directly quotes the textbook definition of Book Building. Examiners expect you to identify the correct term from the definition given. Remember: Book Building ≠ Fixed Price (where price is set in advance). In Book Building, the final price (Cut-Off Price) is discovered after bid closing.

A Public Issue is an offer made to the general public to subscribe to the share capital of a company, open to any investor at large, resulting in allotment to 50 or more persons.

Source: Issue of Shares, Chapter 3

The examiner expects two key elements: (1) it is an offer open to the general public (not a select group), and (2) allotment is made to 50 or more persons. Including both earns full marks. Do not confuse with private placement (fewer than 50 persons).

An Abridged Prospectus is a shorter version of the Prospectus that contains all the salient features of a Prospectus and accompanies the application form of public issues.

Source: Chapter 3, Section 3.1 – Issue of Shares

The answer is directly lifted from the textbook definition. For 1 mark, examiners expect two key points in one line: (1) it is a shorter/condensed version of the Prospectus, and (2) it accompanies the application form. Do not confuse it with the Draft Offer Document or the full Prospectus.

Lock-in indicates a freeze on the sale of shares for a certain period of time, imposed by SEBI mainly to ensure that promoters continue to hold a minimum percentage in the company after a public issue.

Source: Chapter 3, Issue of Shares

The examiner expects two key elements in this answer: (1) the meaning — a freeze/restriction on selling shares for a fixed period, and (2) the purpose — to ensure promoters retain a minimum stake post-public issue. Both points together make a complete 1-mark answer. Do not write more than one or two lines.

Foreign Currency Convertible Bonds (FCCBs) are bonds issued by Indian companies in foreign currency to raise resources abroad, which can be converted into equity shares at a later date.

Source: Foreign Capital Issuance, Chapter 3

The examiner expects a one-line definition covering two key points: (1) it is a bond issued in foreign currency, and (2) it is convertible (into equity). The passage mentions FCCBs as one of two ways Indian companies raise foreign currency resources. Keep it concise for 1 mark.

Two key advantages of the Book Building process within NSE's IPO system are:

1. Nationwide reach with transparency: NSE's NEAT IPO system provides a nationwide bidding facility, offering a fair, efficient, and transparent method for collecting bids using the latest electronic trading systems.

1. Cost and time efficiency: The costs involved in the issue are far less than those in a normal IPO, and the system reduces the time taken for completion of the entire issue process.

Source: Chapter 3, Section – Does NSE provide any facility for IPO?

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The question specifically asks about NSE's Book Building system advantages, not Book Building in general. Examiners expect you to pick two distinct points from the listed benefits in the passage. The four listed advantages are: nationwide bidding, fair/transparent method, lower costs, and reduced time — pick any two clearly. Keep each point precise and labelled.

(A) Cut-off price

In a book building issue, the actual discovered issue price — which can be within the price band or above the floor price — is called the Cut-off price. It is decided by the issuer and lead manager after considering the book and investors' appetite for the stock.

Source: Chapter 3, Section 3.1 — "What is Cut-Off Price?"

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The passage explicitly defines Cut-off price as the discovered issue price in a book building process, which can be any price within the price band or above the floor price. Students often confuse it with floor price (minimum bid price) or ceiling/cap price (maximum of the band). Remember: floor price = minimum; ceiling = maximum; cut-off = final determined price after book building.

(C) Rights Issue

A Rights Issue is when a listed company offers fresh securities to its existing shareholders in a fixed ratio to shares currently held. Jaykant holds 100 shares and is offered new shares at 2:1, which matches this definition exactly.

Source: Chapter 3, Issue of Shares — Rights Issue

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The key clue is "existing shareholder" + "fixed ratio (2:1) based on shares currently held" — this is the defining feature of a Rights Issue. IPO is for unlisted companies; Offer for Sale and Private Placement do not involve existing shareholders receiving a proportional offer. Examiners expect you to identify the method and give a one-line justification.