1
- Mr. Anant Medhekar
Team Members
Ajaypal Singh
Gargi Kapadia
Chandan Bangera
Neelam Pal
Introduction
Meaning of shares & share capital
Types of share & their advantages & disadvantages
Issue of shares
Mean...
3
Companies (Private and Public) need capital either to increase their
productivity or to increase their market reach or ...
4
A share is one unit into which the total share capital is
divided.
Share capital of the company can be explained as a ...
5
The shares which are issued by companies are of two types:
 Equity Shares
 Preference Shares
6
Equity Shares are issued and are traded everyday in the stock
market.
Equity share holders only get dividend after pre...
7
ADVANTAGES of Equity Shares:
 High Return.
 Easily Transferable.
 These can be easily liquidated.
 Right to vote.
 ...
8
These shares have a higher claim on the assets and earnings
of the company than the equity shares.
The preference shar...
9
ADVANTAGES of Preference Shares:
 Dividend at a fixed rate or a fixed amount on preferred
shares before any dividend on...
10
11
1) Convertible Preference Shares: The preference shares which can
be converted into equity shares at the option of the ...
12
5) Cumulative Preference Shares: The unpaid dividends on
preference shares are treated as arrears and are carried forwa...
13
Prospectus
Application
Repayment/
dividend
Allotment
 Detail of a Company & Shares in Prospectus.
 90 % application i...
14
 Issue of shares for consideration other than cash
(For example: issue of shares to vendors, to promoters etc.)
 Forf...
Instrument of debt executed by the company.
A certificate of loan.
Company pays pre specified percentage of interest.
...
16
 Security Point of View
i. Secured Debentures
ii. Unsecured Debentures
 Tenure Point of View
i. Redeemable Debentures...
17
ADVANTAGES of Debentures:
1. Control of company is not surrendered to debenture holders because
they do not have any vo...
18
Jaypee Infratech Ltd.
Sector 128, , District Gautam Budh Nagar , Noida , Uttar Pradesh - 201304
Phone: 4609000 Fax: 460...
19
NTPC Limited (Company) enter market with FPO
FPO opens on February 03' 10
India’s largest power generation company NTPC...
20
No doubt equity shares have both advantages and
disadvantages but the fact is that equity shares are the most
sought fi...
Upcoming SlideShare
Loading in …5
×

Shares and Debentures - Financial Management

2,665 views

Published on

Welingkar Institute of Management Development and Research
By Gargi Kaoadia

Published in: Leadership & Management
0 Comments
3 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
2,665
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
157
Comments
0
Likes
3
Embeds 0
No embeds

No notes for slide

Shares and Debentures - Financial Management

  1. 1. 1 - Mr. Anant Medhekar Team Members Ajaypal Singh Gargi Kapadia Chandan Bangera Neelam Pal
  2. 2. Introduction 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 Conclusion 2
  3. 3. 3 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, banks etc). Whether they issue shares or debentures totally depends upon the concerned company.
  4. 4. 4 A share is one unit into which the total share capital is divided. 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.
  5. 5. 5 The shares which are issued by companies are of two types:  Equity Shares  Preference Shares
  6. 6. 6 Equity Shares are issued and are traded everyday in the stock market. 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.
  7. 7. 7 ADVANTAGES of Equity Shares:  High Return.  Easily Transferable.  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:  High Risk.  In worst cases less privilege given to equity share holders.
  8. 8. 8 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 holders.
  9. 9. 9 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 rights.  If the company gets huge profits then they won’t get any extra bonus.
  10. 10. 10
  11. 11. 11 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 shares. 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 company.
  12. 12. 12 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 year only. 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 their dividend. 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.
  13. 13. 13 Prospectus Application Repayment/ dividend Allotment  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.
  14. 14. 14  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  Right Shares  Redemption of preference shares/ Debenture
  15. 15. 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 company’s assets. Convertible debentures can be either fully or partly converted into Shares. Convertible debentures may carry a lower rate of interest. 15
  16. 16. 16  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
  17. 17. 17 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 denominations. 3. They are not meant for companies earning greater than the rate of interest which they are paying on the debentures.
  18. 18. 18 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 - Listed at BSE, NSE 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.
  19. 19. 19 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.
  20. 20. 20 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 speculation. THANK YOU..

×