Detailed presentation on capital market

1. Capital Market
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•Basics of Financial Management
•Ashish Pingale

2. CAPITAL
MARKETS
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3. Definition
■ A market where buyers and sellers engage in trade of financial securities like
bonds, stocks etc.
■ Securities - a bundle of rights sold to the public by companies, authorities or
institutions
■ Types of securities : stocks, bonds, debentures etc.

4. History
■ Opening of the Suez Canal.
■ BSE came into existence in 1875, an unincorporated body of stockbrokers.
■ Very few companies and the number of securities traded in the stock exchanges
was small.
■ Significant improvement since Independence.

5. Types of Capital Market
■ Primary Markets - The market where those wishing to raise funds
from the stock market sell their securities to the public.
■ The secondary market - Where those who bought the securities in
the Initial Public Offer (IPO) can sell them any time they wish.

6. CAPITAL MARKET
PARTICIPANTS
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7. Capital Market Participants
■ Individual Investors
■ Institutional Investors
– Pension Funds
– Mutual Funds
■ Governments
■ Companies and Organizations
■ Banks and Financial Institutions
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8. CAPITAL MARKET
INSTRUMENTS
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9. Capital Market Participants
■ Bonds
– Government Bonds
– Corporate Bonds
– Zero Coupon Bonds
– Convertible vs Non-convertible Bonds
■ Debentures
■ Equity / Shares
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10. What is an IPO ?
■ An initial public offering (IPO) is the first time that the stock of a private company
is offered to the public.
■ IPOs are often issued by smaller, younger companies seeking capital to expand,
but they can also be done by large privately owned companies looking to
become publicly traded.

12. IPO Pricing
Fixed Price
Method
Book
Building
Method
Combination
Method
The price at
which
securities are
offered is fixed
in advance.
The investors
have to bid in
shares within a
price band
specified by the
issuer and the
final price is
decided after the
bidding results.
Components
of both fixed
price and
book building
methods are
considered.

13. IPO PROCESS
STEP 6 : LISTING ON THE IPO
STEP 5 : SEBI INPRINCIPLE
PERMISSION
STEP 4 : INSPECTION BY SEBI
STEP 3 : SUBMISSION OF RED HERRING
PROSPECTUS TO SEBI
STEP 2 : PREPARATION OF RED HERRING
PROSPECTUS
STEP 1 : APPOINTMENT OF
MERCHANT/INVESTMENT BANKER

14. STEP1 :
APPOINTMENT OF MERCHANT/INVESTOR BANKER
■ A merchant bank is a company that deals mostly in international finance,
business loans for companies and underwriting.

15. STEP 2 :
Merchant banker will write RED HERRING
PROSPECTUS
A red herring prospectus contains information on :
■ Corporate, Subordinate offices
■ Creditors and debtors
■ Basic company info.
■ Cases against company
■ Five years of financial data

16. Step3:
Submission of the Red Herring prospectus to SEBI/RBI
■ The document, filed with the SEBI/RBI, is intended to provide pertinent
information to prospective shareholders about the company's business
description, management, strategic initiatives, financial statements and
ownership structure.

17. Step 4 :
Inspection by SEBI
■ Once the prospectus has been filed with SEBI, SEBI will inspect the company
and the prospectus and inform the company of discrepancy, if any.

18. Step 5 :
SEBI Inprinciple permission
■ SEBI will give in principle permission to the company to issue the shares.
■ Types of capital :
 Authorized Capital : Amount of capital SEBI has allowed to raise from equity
market.
 Paid up Capital : Amount of capital company has actually raised from the
market.

19. Subscribed
Capital
Over
subscription
Under
subscription

20. Over Subscription
■ GREEN SHOE OPTION :
In the context of an initial public offering (IPO), it is a provision contained in an
underwriting agreement that gives the underwriter the right to sell investors
more shares than originally planned by the issuer if the demand for a security
issue proves higher than expected.

21. Under Subscription
■ Merchant Banker by default takes responsibility of buying remaining % of
shares, that have not been demanded in the market.
■ If subscription is less than 50%, the company can call off the issue.

22. ■ Merchant Banker will go to the following to decide on the pricing :
 Qualified Institutional Buyers
 Foreign Institutional Investors
 Domestic Mutual Funds
 High Net worth Individuals
 Retail Institutional Investors

23. Step 6 :
Listing on the IPO
■ After all the formalities have been complied to and SEBI gives the approval, the
company gets listed on the IPO and the stock begins to trade in the market.

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Equity Market

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Bulls & Bears

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Bull Market
• Economy is in great position.
• Growth in GDP.
• Rise in stock prices.

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Bear Market
• Economy is at bad position.
• Recession is looming.
• Stock prices are falling.

28. ROLE OF CAPITAL
MARKET
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29. Role of Capital Markets
■ Promoting and sustaining the growth of an economy.
■ An effective source of investment in the economy.
■ Catalyst in transforming the economy into a more innovative and competitive
marketplace.

30. FUNCTIONS OF SEBI
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SEBI
• Established in the year 1988 by the GOI.
• Given statutory powers on 12 April 1992
through the SEBI Act, 1992.
• Regulator for the securities market in India.
• SEBI has its headquarters at the business
district of Bandra Kurla Complex in Mumbai.
• Regional Offices in New Delhi, Kolkata,
Chennai, Ahmedabad

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National Securities Depository Limited
• Indian central securities depository based
in Mumbai.
• Established on 8 November 1996.
• First electronic securities depository in India.
• Handles most of the securities held and
settled indematerialised form in the
Indian capital market.

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Central Securities depository
• A specialist financial organization holding securities.
• Such as shares either in certificated or uncertificated
(dematerialized) form.
• Ownership can be easily transferred through a book entry
rather than the transfer of physical certificates.
• Domestic central securities depository
• International central securities depository

34. STOCK EXCHANGES
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35. Stock Exchanges
• A stock exchange is an exchange where stock brokers and traders can buy and/or
sell stocks, bonds, and other securities.
• Provides facilities for issue and redemption of securities.
• “Continuous auction" markets.
• Raising capital for businesses.
• Going public.
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Various Stock Exchanges in India
National level Regional level
• Two national level stock exchanges.
• BSE and NSE
• The BSE is the world's 11th largest
stock exchange . More than 5500
companies listed on it.
• NSE is 12th largest stock exchange.
• NSE’s index Nifty is used in India and
all over the world as barometer for
Indian capital market.
• 23 regional level stock exchanges.
• Few of them are Ahmedabad, Bangalore,
Bhubaneshwar, Calcutta, Cochin,
Hyderabad, Jaipur.
• Latest added are Coimbatore and Meerut
Stock Exchange.

37. THANK YOU !!!!!!!
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