primary market

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Primary market is concerned with issue of new shares. Primary market provides opportunity to issuers of securities; Government as well as corporate, to Raise Capital to meet their requirements. PRIMARY MARKET


The capital (long term) that is required by the company is divided into small units of fixed equal amount. These units are called ‘Shares’. Company required Capital No of Shares Face value SHARES PREMIUM DISCOUNT



PUBLIC OFFERING OF SHARES ( No Of Persons > 50 ) :

a) INITIAL PUBIC OFFERING It involves direct sale of securities from an Unlisted Company to the public for fixed price. The company gives a notice or advertisement inviting the public to subscribe for the shares. The circular or Notice or Advertisement is a legal document called ‘ prospectus ’. No intermediaries are involved. This method Is expensive. b) FUTURE ISSUE It is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. OFFER FOR SALE Under this method, shares are allocated to an intermediary such as ‘ Issue house ’. This ‘Issue house’, in turn, sells the shares to the public at a higher price. PUBLIC OFFERING OF SHARES ( No Of Persons > 50 )

PRIVATE PLACEMENT ( No Of Persons < 50 ):

a) PREFERENTIAL ISSUE It is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company has to comply with the Companies Act and the requirements contained in the Chapter pertaining to preferential allotment in SEBI guidelines which inter-alia include pricing, disclosures in notice etc. PRIVATE PLACEMENT ( No Of Persons < 50 ) c) RIGHT ISSUE It is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders.


ISSUE PRICE DISCOVERY BOOK BUILDING NORMAL PUBLIC ISSUE BOOK BUILDING Book Building is basically a process used in IPOs for efficient price discovery. During the process the IPO is open , bids are collected from investors at various prices, which are above or equal to the Floor price . Floor price is the minimum price at which bids can be made. The spread between the floor price and the cap of the price band shall not be more than 20%. The actual discovered issue price can be any price in the price band or any price above the floor price . This issue price is called “ Cut-Off Price ”.


This disclosure includes information like the reason for raising the money, the way money is proposed to be spent, the return expected on the money etc. This information is in the form of ‘ Prospectus’. ‘Prospectus’ is submitted to SEBI for its approval. Content of Prospectus The size of the issue The current status of the company, its equity capital Its current and past performance The promoters, the project, cost of the project, means of financing, product and capacity etc. PROSPECTUS

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Contd… Abridged Prospectus ‘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. Draft Offer Document ‘Offer document’ means Prospectus in case of a public issue or offer for sale ‘Draft Offer document’ means the offer document in draft stage.

Functions of Securities and Exchange Board of India (SEBI):

Regulates Capital Market. Checks Trading of securities. Checks the malpractices in securities market. It enhances investor's knowledge on market by providing education. It regulates the stockbrokers and sub-brokers. Functions of Securities and Exchange Board of India (SEBI)


Issue of Prospectus Application Application for listing of securities Allotment of shares Allotment / Regret letter PROCEDURE REGARDING NEW ISSUES

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