eqty

1. Primary Market
Primary markets are the market for first time issuance of shares and being listed
on the stock exchanges.
Public issue
When an issue/offer of securities is made to new investors to become a part of the
shareholders family of the issuer it known as public issue.
Kind of issue
(a) Public Issue
(i)Initial Public Offer(IPO)
When an unlisted company makes a fresh issue or offer its existing securities
it paves way for listing and trading.
(ii) Further public offer (FPO)
FPO is when listed company makes either a fresh issue of securities to the
public or an offer. for sale to the public.
(b) Rights issue (RI)
A issue made by the issuer to the existing shareholders(on a record date) is
right issue.
(c) Bonus issue: an issue to existing shareholders without any
consideration from them,. The issue is made from free reserve or share
premium account in a ratio to the number of securities held.
(d) Private placement: a issue made to a select group of
persons not exceeding 49. It is neither a right issue nor a public issue. Private
placement is of 2 types.
(i)
Preferential allotment: shares are issued to a select group of persons in
terms of provisions of Chapter XIII of SEBI (DIP) guidelines.
(ii)
Qualified institutions placement (QIP): when shares are issued to
Qualified Institutions Buyers only in terms of provisions made in Chapter
XIIIA of SEBI.

2. Issue requirement
Entry norm have been laid by SEBI for an unlisted company
Entry Norm I ( “Profitability Route”)
The Issuer Company shall meet the following requirements:
(a) Net Tangible Assets of at least Rs. 3 crores in each of the preceding three full
years.
(b) Distributable profits in atleast three of the immediately preceding five years.
(c) Net worth of at least Rs. 1 crore in each of the preceding three full years.
(d) If the company has changed its name, atleast 50% of it
revenue should be from the activity under new
name.
(e) The issue size does not exceed 5 times the pre‐ issue net worth as per the audited
balance sheet of the last financial year
SEBI has provided two other alternative routes to companies not satisfying any of
the above condition
Entry Norm II ( “QIB Route”)
(a) Issue shall be through book building route, with at least 50%
allotted to (QIBs).
(b) The minimum post‐issue face value capital shall be Rs. 10 crores
Entry Norm III (“Appraisal Route”)
(a) The “project” is appraised and participated to the extent of 15% by
Financial
Institutions / Scheduled Commercial Banks of which at least 10% comes from
the
appraisers.
(b) The minimum post‐issue face value capital shall be Rs. 10 crores or there
shall be
a compulsory market‐making for at least 2 years.

3. (ii) A listed issuer making a public issue (FPO) is required to satisfy the
following
requirements :
(a) If the company has changed its name atleast 50% of it
revenue for the preceding year should be from the activites in the new
name.
(b) The issue size does not exceed 5 times the pre‐ issue net worth .
(i)
Certain category of entities which are exempted from the above
norms are
(a) Private Sector Banks
(b) Public sector banks
(c) An infrastructure company whose project has been appraised by a Public
Financial Institution or IDFC or IL&FS and not less than 5%
of the project cost is financed by these institutions.
Provisions to be mentioned in guidelines for making a public issue
(a)
Minimum Promoter’s contribution and lock‐in
promoters should contribute not less than 20% of the post issue capital
which will be
locked in for a period of 3 years.
(b)
IPO Grading
Credit Rating Agency registered with SEBI should grade IPOs . this
should be disclosed in the public issue offer.
(c)
Pricing of an Issue
The issuer in consultation with merchant banker decides the price . the
offer document disclosed the price parameters. There are 2 types of price
(i)
Fixed Price Issue
The issuer decide the price at the outset
(ii)
Book built issue
The price is discovered on the basis ofdemand received from
prospective investors at various level.
(d)

4. (e)
Book building
Book building is a process of price discovery. The issuer discloses a price
band
Within which demands are received. Book Running Lead Manager
(BRLM) and issuer arrives at a price at which the security offered.
(f)
Price band
The price band is disclosed in the red herring rospectus. The spread
between the floor price and the cap