New Issue market deals with new securities
that are offered to the investing public for
the first time.
IPO- Market where firms go to the public for
the first time through initial public offering.
SEO- Market where firms which are already
trading raise additional capital through
seasoned equity offering.
Deals with new
No tangible form
Provides the issuing
co. with funds.
Ready market for
Have physical setup
and are located in
Provides liquidity to
the co. as well as to
The cos. which make new issue apply for
listing of shares on a recognized stock
The new issues first placed in the NIM can be
disposed off subsequently in the stock
Both the markets are susceptible to the
changes in the macro-environment
NIM and stock market are economically an
integral part of industrial securities market.
A careful study of market, technical and
financial viability of a project.
1. Type of issue
2. Magnitude of issue
3. Time of floating an issue
4. Pricing of an issue
5. Methods of issue
It is an agreement whereby the underwriter
promises to subscribe to a specified no. of
shares or debentures or a specified amount
of stock in the event of public not
subscribing to the issue.
Institutional underwriters- LIC, UTI, IDBI,
ICICI,GIC and commercial banks.
Non-institutional underwriters- Brokers.
Assured of raising adequate capital
Relieved from the risk of finding buyers
Assured of getting minimum subscription
within the stipulated time.
Sale of securities to ultimate investors.
Performed by brokers and agents.
Offer for sale
The issuing co. directly offers to the general
public/institutions a fixed no. of shares at a
stated price through a document called
Large section of the investing public through
Avoid concentration of wealth in few hands.
Suitable only for large issues.
Name of the company.
Address of the registered office of the company
Existing and proposed activities
Location of the industry
Names of directors
Authorised and proposed issue capital to the
Dates of opening and closing the subscription list
Names of brokers/ underwriters/ bankers/
managers and registrars to the issue
A statement by the co. that it will apply to stock
exchange for quotations of its shares.
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
(Cos. Amendment act, 1988)
Consists in outright sale of securities through
the intermediary of issue houses or share
First stage- Direct sale to the issue house and
Second stage- Intermediaries resell the
above securities to the ultimate investors
The difference in the purchase and selling
price is called turn or spread.
Offer by a foreign co. of a part of it to Indian
Promoters diluting their stake to comply with
requirements of stock exchange at the time
listing of shares.
The securities issue (users of funds) seeks to
find an institutional buyers such as pension
fund or group of buyers (suppliers of funds) to
purchase the whole issue.
Issue houses buy the securities outright with
the intention of placing them with their clients
Reliance Industries raised Rs.945 crores with
three FIs of whom UTI was important.
Konkan Railway Corp. placed tax free bonds
worth Rs. 70 crores with banks and Fis.
In a depressed market condition
Suitable for small cos. and first generation
Avoids delays and expenses involved in public
Available to unlisted cos.
Majority holding of securities with few
Offered to the existing shareholders in a
particular proportion to their existing share
A right means an option to buy certain
securities at a certain privileged price within
a certain specified period
The rights are transferable and saleable in
Secured premium notes with detachable warrants(SPN)
Equity shares with detachable warrants.
Preference shares with warrants.
Non- convertible Debentures with detachable Equity
Fully convertible cumulative preference shares
Zero interest fully convertible Debentures (FCDs)
Fully convertible Debentures with interest
Zero interest bonds.
Deep discount bonds.
Bonds with warrants
Indian Depository Receipts (IDR)
Global Depository Receipts (GDR)
The warrants ensure the holder the right to
apply and get equity shares after a notified
period provided the SPN is fully paid up.
Issued at a nominal value and does not carry
Redeemed by repayment in several
installments at a premium.
Secured by mortgage of immovable
Document representing underlying shares of
a foreign co. denominated in Indian
Standard chartered bank is the first co. to
An Indian co. raise funds in the foreign
Tata steel raised $500mn through GDR listed
on London stock exchange.
Each GDR represented one share.
Priced at $7.644 and now trading at $14.5.
Anybody can easily invest in a foreign co.
without any trading laws and practices of
One is free to invest without any limits.
Free from forex fluctuations.
Opportunity to diversify one’s investment
Differential pricing- is the issue of shares at
different prices in public/rights issues and
firm allotment category and net allotment to
Price band- 20% cap and 20% floor price.
Discounts/Commissions- cannot be made to
any firm allotee in a public issue.
Merchant banker/ lead manager
Bankers to issue
Brokers to an issue
Registrar to issue and share transfer agent
Any person who is engaged in the business of
issue management either by making
arrangements regarding selling, buying or
subscribing to securities or acting as
manager/consultant/ advisors or rendering
corporate advisory service in relation to issue
Make a commitment to get the issue
subscribed either by others or by themselves.
Engaged in activities such as acceptance of
applications along with application money
from the investors in respect of issues of
capital and refund of application money.
Concerned with the procurement of
subscription to the issue from the
Collects application from the investors,
keeps a proper record of applications and
money received from investors or paid to the
seller of securities and assists companies in
determining the basis of allotment of
securities in consultation with stock
exchanges, finalizes the allotment of
securities and processing/ dispatching
allotment letters, refund orders, certificates
and other related documents in respect of
issues of capital.
Maintain the records of holders of securities
on behalf of companies, and deal with all
matters connected with the transfer/
redemption of its securities.
Trustee for a trust deed needed for securing
any issue of debentures by a company/body
corporate or any private placement of
debentures by a listed/ proposed to be listed
Persons who advise/ direct/ undertake, on
behalf of the clients, whether discretionary
portfolio manager or otherwise, the
management/ administration of portfolio of
securities/ funds of clients.
Public issue through prospectus
Pricing of issues
Post issue management
Underwriting of public issues
Managers, consultants or advisers to the issue
Advisory service relating to mergers and
Non- Resident Investment
Size of the issue Maximum no. of lead managers
Less than Rs. 50 crores 2
Rs. 50 crores to Rs. 100 crores 3
Rs. 100 crores to Rs. 200 crores 4
Rs. 200 crores to Rs. 400 crores 5
Above Rs. 400 crores 5 or more as prescribed by SEBI.
Authorization by sebi
1. First category- All the functions of issue
management networth- 1 crore
2. Second category- Co-manager, advisor,
consultant, underwriter or portfolio manager
networth- 50 lakhs
3. Third category- underwriter, advisor or
consultant networth- 20 lakhs
4. Fourth category- advisor or consultant
Authorisation fee, annual fee and renewal fee is
collected by sebi.
All issues must be managed atleast by one
Category 1 merchant banker shall accept a min.
underwriting obligation of 5% of the total
underwriting commitment or Rs.25lakhs
whichever is less.
Furnish half yearly financial results to sebi.
Integrity, fairness, high standards of service, due
diligence, professional judgement, follow ethics.
Sebi will supervise the activities continuously.
Suspend or cancel the authorisation in case of
violation of the guidelines.
Inspections will be conducted by sebi.
0.5%max. as commission for whole of the
Project appraisal fees.
Lead manager- 0.5% upto Rs. 25 crores and
0.2% in excess of Rs. 25 crores.
Underwriting commission-1% to 2.5%
Brokerage commission 1.5%
Other expenses- advertising, printing,
Registrars expenses, stamp duty etc. can be
reimbursed from its clients.
Fulfillment of entry norms
Appointment of underwriters
Appointment of bankers
Appointment of Registrars to issue
Appointment of brokers to the issue
Filing of documents
Printing of prospectus and application forms
Listing the issue
Publication in newspapers
Accept application forms
Allotment of shares
Allotments have to be made within 30 days in case of
public issue and 42 days in case of rights issue.
In case an issue exceeds more than Rs.100crores the
whole issue is allowed through book building.
A min. of 50% of the issue is to be alloted for
investors applying for less than 1000 shares.
All listing formalities have to be complied within 70
There should be atleast 5 investors for every 1lakh of
The PAN no. should be quoted if investment is
Rs.50,000 and above.
The subscription list shall be kept open for 3 to
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