- Mr. Anant Medhekar
Meaning of shares & share capital
Types of share & their advantages & disadvantages
Issue of shares
Meaning of debenture and its types
Real Life IPO & FPO Example
Companies (Private and Public) need capital either to increase their
productivity or to increase their market reach or to diversify or to
purchase latest modern equipments.
Companies go in for IPO and if they have already gone for IPO then
they go for FPO.
The only thing they do in either IPO or FPO is to sell the shares or
debentures to investors.(the term investor here represents retail
investors, financial institutions, government, high net worth individuals,
Whether they issue shares or debentures totally depends upon the
A share is one unit into which the total share capital is
Share capital of the company can be explained as a fund or
sum with which a company is formed to carry on the business
and which is raised by the issue of shares.
Shares are the marketable instruments issued by the
companies in order to raise the required capital.
These are very popular investments which are traded every
day in the stock market and the value of the share at the end
of the day decides the value of the firm.
The shares which are issued by companies are of two types:
Equity Shares are issued and are traded everyday in the stock
Equity share holders only get dividend after preference
shareholders & debenture holders.
The returns on the equity shares are not at all fixed. It depends on
the amount of profits made by the company.
The board of directors decides on how much of the dividends will be
given to equity share holders. Share holders can accept to it or reject
the offer during the annual general meeting.
Equity shareholders have the right to vote on any resolution placed
before the company.
ADVANTAGES of Equity Shares:
These can be easily liquidated.
Right to vote.
Right to choose the board of directors.
Equity share holders have the right to oppose any of the
decisions taken by the board of directors.
DISADVANTAGES of Equity Shares:
In worst cases less privilege given to equity share holders.
These shares have a higher claim on the assets and earnings
of the company than the equity shares.
The preference shares are market instrument issued by the
companies to raise the capital.
Preference shares have the characteristics of both equity
shares and debentures.
Fixed rate of dividends are paid to the preference share
holder as in case of debentures, irrespective of the profits
earned company is liable to pay interest to preference share
ADVANTAGES of Preference Shares:
Dividend at a fixed rate or a fixed amount on preferred
shares before any dividend on equity shares.
Return of preference share capital before the return of
equity share capital at the time of winding up of the company.
It’s a hybrid instrument having some of the characteristics
of debentures and equity shares.
DISADVANTAGES of Preference Shares:
They do not provide the investor with any of the voting
If the company gets huge profits then they won’t get any
1) Convertible Preference Shares: The preference shares which can
be converted into equity shares at the option of the holders after
a fixed period according to the terms and conditions of their issue.
2) Non-Convertible Preference shares: The preference shares which
are not convertible into equity shares.
3) Redeemable Preference Shares: The preference shares, which
can be redeemed or repaid after the expiry of a fixed period or
after giving the prescribed notice as desired by the company.
Terms of redemption are announced at the time of issue of such
4) Non-Redeemable Preference shares: The preference shares,
which cannot be redeemed during the life time of the company.
The amount of such shares is paid at the liquidation of the
5) Cumulative Preference Shares: The unpaid dividends on
preference shares are treated as arrears and are carried forward
to subsequent years.
6) Non-Cumulative Preference Shares: The preference shares that
have right to get fixed rate of dividend out of profits of current
7) Participating Preference Shares: The preference shares that have
right to participate in any surplus profit of the company after
paying the equity shareholders, in addition to the fixed rate of
8) Non-Participating Preference Shares: the Preference shares
which have no right to participate on the surplus profit or in any
surplus on liquidation of the company.
Detail of a Company & Shares in Prospectus.
90 % application is necessary
If access application received then company issue
shares by pro rata basis
full amount can be called up by company at the
time of application or it can be paid up in
installments also (calls)
share of the company may be issued in any of the
following three ways:
1. At par;
2. At premium; and
3. At discount.
Issue of shares for consideration other than cash
(For example: issue of shares to vendors, to promoters etc.)
Forfeiture of shares
Buy – Back of Shares
Redemption of preference shares/ Debenture
Instrument of debt executed by the company.
A certificate of loan.
Company pays pre specified percentage of interest.
Part of the company's capital structure.
Debentures are generally secured against the
Convertible debentures can be either fully or partly
converted into Shares.
Convertible debentures may carry a lower rate of
Security Point of View
i. Secured Debentures
ii. Unsecured Debentures
Tenure Point of View
i. Redeemable Debentures
ii. Perpetual Debentures
Mode of Redemption Point of View
i. Convertible Debentures
ii. Non-Convertible Debentures
Coupon Rate Point of View
ADVANTAGES of Debentures:
1. Control of company is not surrendered to debenture holders because
they do not have any voting rights.
2. Interest on debenture is an allowable expenditure under income tax
act, hence incidence of tax on the company is decreased.
3. Debenture can be redeemed when company has surplus funds.
DISADVANTAGES of Debentures:
1. Cost of raising capital through debentures is high of high stamps duty.
2. Common people cannot buy debenture as they are of high
3. They are not meant for companies earning greater than the rate of
interest which they are paying on the debentures.
Jaypee Infratech Ltd.
Sector 128, , District Gautam Budh Nagar , Noida , Uttar Pradesh - 201304
Phone: 4609000 Fax: 4609783
Public Issue of 224799496 Equity Shares of Rs 10 each for Cash at a Premium
of Rs 92 per share.
Issue Open Date Issue Closing Date Application Money Allotment Money
29/04/2010 04/05/2010 102 -
Object of the issue
The Issue comprises a Fresh Issue and an Offer for Sale. The Proceeds of Fresh Issue
The activities for which funds are being raised by our Company through this Issue, after
deducting the proceeds from the Offer for Sale: (i) to partially finance the Yamuna
Expressway Project; and
(ii) general corporate purposes. (collectively referred to herein as the "Objects"). In
addition, our Company expects to receive the benefits of listing of the Equity Shares on
the Stock Exchanges.
NTPC Limited (Company) enter market with FPO
FPO opens on February 03' 10
India’s largest power generation company NTPC Limited (Company) will
enter the capital markets on February 3, 2010 with its further public offer
(FPO) of 412,273,220 equity shares of Rs 10 at prices to be determined
through an alternative book building process under part D of Schedule XI of
the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009.
The FPO will close on February 5, 2010.
No doubt equity shares have both advantages and
disadvantages but the fact is that equity shares are the most
sought financial instruments for both investment or for