THIS PPT DEFINES SOME RECENT CHANGES HAPPEN IN THE PRIMARY MARKET IN RECENT DECADES

1. PRIMARY MARKET DEVELOPMENTS

2. • NAME: - RUSHIT S.BHATTI
• ER NO: - 19SOMBA21001
• SUBJECT: - MANAGEMENT OF
FINANCIAL SERVICES
• SEMESTER: - MASTER OF BUSINESS
ADMINISTRATION SEM-3
• UNDER GUAIDANCE: - VIDHI KAKKAD

3. PRIMARY MARKET
 The primary market is the part of the capital market that deals with issuing
of new securities.
 Companies, governments or public sector institutions can obtain funds
through the sale of a new stock or bond issues through primary market
 This is typically done through an investment bank or finance syndicate of
securities dealer.
 Also known as “New Issue Market”.
 Success of the capital market depends on primary market.
 Market for new issuers.
 Accelerates the process of capital formation in a country‘s economy.

4. ISSUE
PUBLIC
IPO
(UNLISTED
COMPANY)
FRESH
ISSUE
OFFER
FOR
SALE
FPO
(LISTED
COMPANY)
FRESH
ISSUE
OFFER FOR
SALE
RIGHT PRIVATE
PLACEMENT
PRIVATE
PLACEMENT
(UNLISTED
CO.)
PREFERENTIAL
ISSUE
(LISTED CO. )
QUALIFIED
INSTITUTION
AL
PLACEMENT
(LISTED CO.)

5. FEATURES
• This is the market for new long term equity capital.
• The primary market is the market where the securities are sold for the first time.
• In a primary issue, the securities are issued by the company directly to investors.
• Primary issues are used for the purpose of set up/expanding or modernizing the existing
business.
• The new issue market does not include certain other sources of new long term external
finance
• Borrowers in the new issue market may be raising capital for converting private capital
into public capital; this is known as "going public."

6. Role of Primary Market
 To raise funds for certain purpose.
 To create market for new issues of securities.
 Establish the magnitude of the market.
 To mobilize Resource the economy.
 For overall development of companies.

7. RECENT DEVELOPMENTS
IN
INDIAN PRIMARY MARKET

8.  It was observed that the level of disclosures varied amongst listed
entities, which many a time resulted in such disclosures adhering to
the letter but not to the spirit of the disclosure requirements thus
leading to asymmetric information with different types of investors.
 To address these concerns, provide guidance and improve the
compliance culture, continuous disclosure requirements were
amended.
Strengthening the Continuous Disclosure Requirements for Listed
Entities

9. Introduction of an Institutional Trading Platform
 SEBI has introduced a rationalized framework for the listing of companies,
including startups, on the ‘Institutional Trading Platform’; vide amendments
carried out to the SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009.
 Various consequential amendments to other SEBI regulations pertaining to
takeovers, listing, delisting and AIFs have also been undertaken in this
regard.
 A number of relaxations in regulatory requirements were introduced enabling
companies, including start-ups, to raise funds from the public for their
projects.

10.  SEBI initially introduced stringent entry requirements for corporate, in terms of
net worth and profitability track record and also stipulated a minimum dilution
of 25% of the post-issue capital of a company.
 Such conditions restricted many companies from accessing the primary markets,
though demand for the paper existed.
 SEBI has now liberalized the regulatory regime for companies not meeting
these requirements and allowed them to tap the markets, provided the IPO is
through a book-built issue and at least 60% of the allotment is to Qualified
Institutional Buyers (QIBs)
Increasing role of institutional investors

11.  i.e. institutional investors like mutual funds, Foreign Institutional Investors
(FIIs), financial institutions, banks, venture capital funds, state industrial
development corporations and multilateral development institutions.
 These investors have participated actively in many IPOs and their role is
likely to increase in the future.

12. Introduction of book-building
 The introduction of book-building process by SEBI was a landmark event
and subsequently many companies have successfully used this route to
access the market.
 Introduction of book-building has had two major benefits:
(a) market participants now have an efficient mechanism used
internationally to raise funds; and
(b) investors are more integrated into the process and now play an
interactive role in the pricing and the success of the IPO.

13.  Though the current mechanism allows only up to 90% of the IPO to be
executed through the book-built route with the balance 10% through a fixed
price issue, introduction of 100% book-building is expected very soon.
 The book-building method involves the use of the stock exchange trading
system for the bidding process; and the collection centers have shifted from
banks to brokers with a wide distribution network.

14.  In addition, stocks issued through an IPO have to be in dematerialized
form, requiring depositories to be part of the IPO process, thus resulting in
further institutionalization of other intermediaries.
 Many of the large IPOs today are through the book-building process and
involve significant underwriting requirements from the merchant bankers.
 This activity has, thus, been restricted to less than a dozen large, well-
capitalized merchant bankers capable of undertaking / arranging significant
commitments.
Dematerialization

15.  Certain measures have been introduced for reducing the post-issue
timeline for listing from existing T+12 days to T+6 days, increasing the
reach of retail investors and reducing the costs involved in a public issue
of equity shares and convertibles.
Streamlining of the Public Issue Process
 To avoid any misleading signals to retail investors about the extent of
subscription in the issue, no withdrawals or lowering of size of bids shall
be permitted for non-retail investors at any stage. However, retail
investors will be permitted to withdraw or downsize their bids until the
finalization of allotment.
Revision of Bidding by Investors(2012)

16.  In order to enable wider participation of shareholders in corporate
proposals, top 500 listed companies were mandated to enable e-voting
facility to their shareholders, in respect of those businesses which are
transacted through postal ballot by the listed companies.
Enabling Shareholders to Electronically Cast their Votes
 In order to ensure certain minimum levels of subscription from qualified
institutional buyers (QIBs) even in a relatively bearish market, SEBI
introduced the concept of ‘Anchor Investors’ in public offering.
 Such investors are expected to offer stability to the issue by subscribing to
the issue before the bid is open to other categories of the investors.
Introduction of Concept of ‘Anchor Investors’ in Public Offerings

17. In order to have a greater enforceability of the regulatory framework relating
to issue of capital by companies and to streamline the disclosures while also
taking into account changes in market design, the erstwhile SEBI Disclosure
and Investor Protection Guidelines (DIP Guidelines) governing public
offerings were replaced by the SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009 (ICDR Regulations).
There were certain changes made in the ICDR Regulations vis-à-vis the
provisions contained in DIP Guidelines, on account of
1. Removal of redundant provisions of DIP Guidelines
2. Modifications on account of change in market design
3. Bringing more clarity to the existing provisions of DIP Guidelines.
Strengthening the Regulatory Framework Governing Public Offerings
(2010)

18.  Eligibility of Shares for Promoters’ Contribution and Offer for Sale
 Extension of Validity Period of SEBI Observations
 Announcement of Price Band before Initial Public Offer Opens
 Provisions Pertaining to Corporate Governance
 Disclosure of Pledged Shares by Promoters/Promoter Group in Listed
Companies
 Introduction of Uniform Margin Payment for all Categories of
Investors in Public Issues
 Public Announcement by companies proposing to access the capital
market
 Reforms in Issue Process

20. • Primary market plays constructive role in the Indian economy.
• Primary market delivers more specific results then secondary
market which is much importance
• There are many developments are seen to the Indian primary
market after the 1990-91 era and still it was occurred as per
the requirement in recent world and if Indian capital market
wants to grow with its 100% potential its necessary that
developments comes on it’s worthy time.