New issue market

1. SECURITY MARKETS
Primary Market

2. Learning Objectives
 Primary Market and Its functions
 Types of issues in NIM
 Pricing of Securities

3. Introduction
 Business needs capital
 Major sources of finance
 Availing term loans from FI’s and Banks
 Issue of new securities to the public
 The securities are issued by the company directly to the
investors.
 The company receives the money and issues new securities
to the investors.
 The primary markets are used by companies for the purpose
of setting up new ventures/ business or for expanding or
modernizing the existing business
 Primary market performs the crucial function of facilitating
capital formation in the economy

4. Primary Market
 Market for fresh capital
 Funds are mobilized through primary market
 Also known as NIM

5. How does it works?
 Preparation and Filing of Offer Document
 prepare an offer document giving sufficient
information and disclosures, which enables
(potential) investors to make an informed decision.
 The issuer company engages a SEBI registered
merchant banker.
 The draft offer document thus prepared is filed with
SEBI
 The final offer document with SEBI, Registrar of
Companies (ROC) and stock exchange.

6. Cont…
 Opening of the Issue
 The issuer company issues advertisements in English,
Hindi and regional language news papers.
 The interested investors can apply for subscribing
the share or debentures.
 Allotment and Listing

7. How to invest in public issue?
 The prerequisites
 PAN
 Bank Account
 Demat
 Getting the offer document
 Getting application form
 (http://rbidocs.rbi.org.in/rdocs/ECS/PDFs/I87908.pdf)
 ASBA
 Submitting the application form
 Allotment of Shares

8. Terms used in primary market
 IPO
 Issue price
 Issue size

9. Intermediaries in NIM
 Merchant banker
 Registrar to the Issue
 Bankers to the Issue

10. Primary Issues
 Public issue
 Rights issue
 Private placement

11. Initial Public Offering (IPO)
 A fresh issue of securities to the public by
unlisted company.
 A first time offer of sale of securities by an
unlisted company.
 Eligibility norms

12. Eligibility Norms
 Eligibility norm I
 Net tangible assets of Rs.3 crore for three full
year
 Distributable profit of at least three out of five
years
 The size of the issue should not exceed 5 times
the pre-issue net worth

13. Cont…
 Eligibility Norm II
 Issue shall be through a book building route with
at least 50 per cent of the allotment to the QIB’s
 The minimum post-issue face value capital shall
be Rs.10 Cr
 Eligibility Norm III
 The project is appraised and participated to the
extend of 15% by Scheduled Commercial
banks/FI’s
 The minimum post-issue face value capital shall
be Rs.10 Cr

14. Recent IPO’s in India
List of Upcoming IPO's, Current IPO's and Recently Closed IPO's in India
Issuer Company Issue Open Issue Close
Offer Price Issue Issue Size
(Rs.) Type (Crore Rs.)
Snowman Logistics Ltd IPO
26-Aug-14 28-Aug-14 44/- to 47/- IPO-BB 184.80 -
197.40
Vishal Fabrics Ltd IPO
31-Jul-14 5-Aug-14 45/- IPO-FP 15.63
Carewell Industries Ltd IPO
25-Jul-14 30-Jul-14 15/- IPO-FP 4.96
Bhanderi Infracon Ltd IPO
22-Jul-14 25-Jul-14 120/- IPO-FP 6.48
Bansal Roofing Products Ltd
IPO
26-Jun-14 30-Jun-14 30/- IPO-FP 2.04
Oasis Tradelink Ltd IPO
23-Jun-14 30-Jun-14 30/- IPO-FP 6
Tarini International Ltd IPO
9-Jun-14 13-Jun-14 41/- IPO-FP 16.31

15. Dhanuka Commercial Ltd IPO
22-May-14 28-May-14 10/- IPO-FP 4.44
SPS Finquest Ltd IPO
21-May-14 23-May-14 75/- IPO-FP 25.08
GCM Capital Advisors Ltd IPO
5-May-14 7-May-14 20/- IPO-FP 9
Wonderla Holidays Ltd IPO
21-Apr-14 23-Apr-14 115/- to 125/- IPO-BB 181.25
R & B Denims Ltd IPO
28-Mar-14 4-Apr-14 10/- IPO-FP 3.71
Women's Next Loungeries Ltd IPO
28-Mar-14 7-Apr-14 65/- IPO-FP 6.5
Oceanaa Biotek Industries Ltd IPO
18-Mar-14 20-Mar-14 10/- IPO-FP 2.1
Shri Krishna Prasadam Ltd IPO
11-Mar-14 14-Mar-14 10/- IPO-FP 2.16
Loha Ispaat Ltd IPO
11-Mar-14 25-Mar-14 74/- to 77/- IPO-BB
Anisha Impex Ltd IPO
3-Mar-14 5-Mar-14 10/- IPO-FP 6.5

16. Resource Mobilization Through
Primary market 2012-2014
Resource Mobilization through Public and Rights Issue
Particulars
2012-2013 2013-2014
No.of Issues Amount in Crore No.of Issues Amount in Crore
(i)Public Issues (Eqiuty) 53 23,510 75 51,075
33 6528 40 8,692
IPO 33 6528 38 1,236
FPO 0 0 2 7457
(ii) Public Issues (Bond) 20 16,982 35 42,383
Rights Issue 16 8,945 15 4,576
Total Equity Issue 49 15,473 55 13,269
Total Equity andBond
Issue 69 32,455 90 55,652
Source : www.sebi.gov.in/cms/sebi_data/attachdocs/1408513411215.pdf

17. Top 10
Mega Issues in 2013-14*
Name of Entity
Type of
Issue
Type of
Istrument
Date of
Opening of
the Issue
Offer size
(in crores)
Just Dial Ltd IPO Equity 20-May-13 919
Kesoram Industries Ltd Rights Equity 3-Jun-13 416
Reliance Mediaworks Ltd Rights Equity 6-Aug-13 600
Godrej Properties Ltd Rights Equity 28-Aug-13 700
Power Grid Corporation of
India Ltd FPO Equity 3-Dec-13 959
Engineers India Ltd FPO Equity 6-Feb-14 498
The Tata Power Company
Limited Rights Equity 31-4-14 1,993
Shriram Transport Finance
Company Public Bond 16-Jul-13 736
Rural Electrification
Corporation Public Bond 30-Aug-13 3,441
India Infoline Finance Limited Public Bond 17-Sep-13 1,050

18. Follow on Public Issue
 Offer for sale of securities by a listed company.
 Engineers India LTD
 Price Band Rs.145-Rs.150
 2.8 times subscribed
 Issue size is Rs.500 Cr.
 Power Grid Corp (Rs.85-Rs.90) raised
Rs.7000 crore
 6.7 times Oversubscribed

19. Rights Issue
 The issue of new shares in which existing
share holders are given preemptive rights to
subscribe to new issue on a pro-rata basis.
 The company issue rights share by sending a
letter of offer to the share holders
 The issue shall be kept open for 30 days and
not more than 60
 Promoters offer rights at attractive price

20. Rights Issue
 Declaration Date
 This is the date on which the board of directors
announces to shareholders
 Record Date
 The date set by the company to determine, from the
records, who are the holders of shares/bonds of the
company
 Ex Date
 Date of payment

21. Recent Rights Issue
Company Name Premium Ratio Book Closures Date EX Right Date
CHANNEL NINE 0 1:2 14-Aug-14 13-Aug-14
ECO FRIENDLY 0 3:2 17-Apr-14 16-Apr-14
DENIS CHEM LAB 3 2:1 29-Mar-14 27-Mar-14
TATA POWER CO. 59 7:50 20-Mar-14
19-Mar-14
GOLDEN GOENKA 4 9:5 19-Mar-14 18-Mar-14
EASUN REYROLLE 57 12:25 17-Mar-14 13-Mar-14
IL&FS TRANSPORT 90 27:100 14-Mar-14 13-Mar-14
WHEELS INDIA 390 51:21 14-Feb-14
13-Feb-14
COROMANDEL ENG 10 91:10 15-Jan-14
13-Jan-14
COROMANDEL ENGG. 10 91:10 15-Jan-14 13-Jan-14

22. Cont..
Company Name
Premium
(Rs) Ratio Record Date
Ex Rights
Date
Neuland Laboratories Ltd 194 4:25 14-Aug-14 13-Aug-14
Lakshmi Vilas Bank Ltd 40 5:6 28-Jul-14 25-Jul-14
Indian Hotels Co Ltd 0 9:40 21-Jul-14 18-Jul-14
Ramco Systems Ltd 145 1:2 23-Apr-14 22-Apr-14
Eco Friendly Food Processing Park Ltd 0 3:2 17-Apr-14 16-Apr-14
Denis Chem Lab Ltd 3 2:1 29-Mar-14 27-Mar-14
Tata Power Company Ltd 59 7:50 20-Mar-14 19-Mar-14
Golden Goenka Fincorp Ltd 4 9:5 19-Mar-14 18-Mar-14
Easun Reyrolle Ltd 57 12:25 17-Mar-14 13-Mar-14
IL&FS Transportation Networks Ltd 90 27:100 14-Mar-14 13-Mar-14
Wheels India Ltd 390 51:20 14-Feb-14 13-Feb-14
Mukand Ltd 11 1:1 11-Feb-14 10-Feb-14
Coromandel Engineering Company Ltd 10 91:10 15-Jan-14 13-Jan-14

23. How does it works?
 Example of ABC Company
 ABC Company has 1,00,000 share at a share
price of Rs.70
 Mr.A Holds 1,000 share of ABC
 ABC needs Rs.3,00,00 capital (Rs.60 new price)

24. Mechanics of Rights Offering
 The company announces the rights offering to
share holder listed on the book as of record
date.

25. Mechanics of Rights Offering
Meeting day
‘Rights on” period
August 1
Record Day
August 15
Rights Expires
“Rights Off”
Period August
30th