Primary market


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Primary market

  2. 2. Primary Marketprovides the channel for sale ofnew securitiesto raise resources to meet theirrequirementsissue the securities in domesticmarket and/or international market.
  3. 3. Terminology • Nominal or stated amountFace value assigned by issuer • When security sold above itsPremium face value • When security sold at lessDiscount than face value
  4. 4. Classification of issue of shares Fresh Issue Initial Public Offering Offer for Sale Public Fresh IssueIssues Further Public Rights Offering Offer for Sale Private Placement
  5. 5. Initial Public Offering (IPO) Made by Unlisted CompaniesEither Fresh An offer for sale Both for the first issues of of its existing time to the public securities securities
  6. 6. Advantage of IPONo Cost of Huge amount capital can be raised CorrectBrand Value Valuation
  7. 7. Disadvantage of IPO Disclosure of information Decision’s take time Cost of IPO
  8. 8. Parties to IPO Registrar Underwriter Lead Merchant Manager Banker
  9. 9. Who decides the price of an issue? • When issuer & Lead Merchant Banker fix a Fixed Price pricePrice discovery • When the company and Lead Manager stipulate through Book the price and leave it to Building market forces
  10. 10. Further Public OfferingWhen 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 IssueWhen listed company issue fresh securities To existing shareholderSuites for companies who would like to raise capital
  12. 12. Private Placement / Preferential Issue • Issue of shares or convertible securities by 1. listed companies • Which is neither right issue nor a public issue 2. • Faster way for company to raise equity 3. capital
  13. 13. Issue Price Price at which company shares are offered Initially in primary market
  14. 14. Market Capitalization1. • Market value of a quoted company2. • MC = Market Price * No. of Shares
  15. 15. Difference between Public Issue & Private Placement Public Issue Private Placement• When issue made for • Issue is made to a select general public and any set of people. investor at large.• As per companies act, • An allotment is made to 1956, an issue becomes less than 50 persons. public when result it allotment to 50 persons or more.
  16. 16. Book Building
  17. 17. Cut –Off PriceAny price which above the floor price Decided by Issuer & Lead Manager After considering the book &investors appetite for the stock
  18. 18. Floor PriceIt is the minimum price at which bids can be made
  19. 19. Price Band The prospectus may containEither the floor price for the Price Band within which the securities investor can bidCap should not be more than 120% of the floor price Price decided by The Company consultant with The Merchant Banker
  20. 20. Documents in IPO Draft Offer AbridgedProspectus Document Prospectus
  21. 21. Draft Offer Document Offer document in draft stage Filled with SEBIAt least 2 days prior to the filling of the offer document with ROC
  22. 22. Abridged Prospectus Shorter version of the prospectus Contains all the salient features of a prospectus Applications form of public issues.
  23. 23. Lock inFreeze on the sale of shares for a certain period of timeEnsure that company should continue to hold some minimum percentage After public issue
  24. 24. 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
  25. 25. Listing Agreement • Specifies the terms & conditions1. of listing • Disclosures shall be made by a2. company on continuous basis to the exchange
  26. 26. Delisting of SecuritiesPermanent removal of securities of a listed company From the stock exchange Securities of that company nolonger be traded that stock exchange
  27. 27. How to apply in IPO’s ? Online Offline