Primary market ajahar husain NDIM


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Primary market ajahar husain NDIM

  2. 2. Primary Market Provides the channel for sale of new securities to raise resources to meet their requirements issue the securities in domestic market and/or international market.
  3. 3. Terminology • Nominal or stated amount assigned by issuerFace value • When security sold above its face valuePremium • When security sold at less than face valueDiscount
  4. 4. Classification of issue of shares Issues Public Initial Public Offering Fresh Issue Offer for Sale Further Public Offering Fresh Issue Offer for Sale Rights Private Placement
  5. 5. Initial Public Offering (IPO) Made by Unlisted Companies Either Fresh issues of securities An offer for sale of its existing securities Both for the first time to the public
  6. 6. Advantage of IPO No Cost of capital Huge amount can be raised Brand Value Correct Valuation
  7. 7. Disadvantage of IPO Disclosure of information Decision’s take time Cost of IPO
  8. 8. Parties to IPO Registrar Underwriter Lead Manager Merchant Banker
  9. 9. Who decides the price of an issue? • When issuer & Lead Merchant Banker fix a priceFixed Price • When the company and Lead Manager stipulate the price and leave it to market forces Price discovery through Book Building
  10. 10. Further Public Offering When an already listed company makes Either fresh issue of securities to the public Or an offer for sale to the public Through offer document
  11. 11. Rights Issue When listed company issue fresh securities To existing shareholder Suites for companies who would like to raise capital
  12. 12. Private Placement / Preferential Issue 1. • Issue of shares or convertible securities by listed companies 2. • Which is neither right issue nor a public issue 3. • Faster way for company to raise equity capital
  13. 13. Issue Price Price at which company shares are offered Initially in primary market
  14. 14. Market Capitalization • Market value of a quoted company1. • MC = Market Price * No. of Shares2.
  15. 15. CAPS IN MARKET Large cap Mid cap Small cap
  16. 16. Difference between Public Issue & Private Placement Public Issue When issue made for general public and any investor at large. As per companies act, 1956, an issue becomes public when result it allotment to 50 persons or more. Private Placement
  17. 17. Book Building
  18. 18. Cut –Off Price Any price which above the floor price Decided by Issuer & Lead Manager After considering the book & investors appetite for the stock
  19. 19. Floor Price It is the minimum price at which bids can be made
  20. 20. Price Band Price decided by The Company consultant with The Merchant Banker Cap should not be more than 120% of the floor price The prospectus may contain Either the floor price for the securities Price Band within which the investor can bid
  21. 21. Documents in IPO Prospectus Draft Offer Document Abridged Prospectus
  22. 22. Draft Offer Document Offer document in draft stage Filled with SEBI At least 2 days prior to the filling of the offer document with ROC
  23. 23. Abridged Prospectus Shorter version of the prospectus Contains all the salient features of a prospectus Applications form of public issues.
  24. 24. Lock in Freeze on the sale of shares for a certain period of time Ensure that company should continue to hold some minimum percentage After public issue
  25. 25. Listing of Securities Admission of securities of an issuer to trading Dealing on a stock exchange through a formal agreement Provide liquidity and marketability to securities Provide mechanism for effective control & supervision of trading
  26. 26. Listing Agreement • Specifies the terms & conditions of listing1. • Disclosures shall be made by a company on continuous basis to the exchange 2.
  27. 27. Delisting of Securities Permanent removal of securities of a listed company From the stock exchange Securities of that company no longer be traded that stock exchange
  28. 28. How to apply in IPO’s ? Online Offline