This document discusses various aspects of raising capital through a public issue in the primary market. It describes the objectives of issuing capital, parties involved like managers, registrars, underwriters, bankers, advertising agents, and government agencies. It also covers aspects considered in selecting underwriters, placement of issues through prospectus, rights issues, private placements, book building, and factors for investors to consider.

2. Introduction
• To promote a new company
• To expand an existing company
• To diversify the production
• To meet the regular working
capital requirements
• To capitalize the reserves
Companies raise funds to
finance their projects
through various methods.
The promoters can bring
their own money or
borrow from financial
institutions or mobilise
capital by issuing
securities. The funds may
be raised through issue of
fresh shares at par,
premium and discount.
The main objectives of a
capital issue are given
below:

3. Parties involved in the new issue
• Drafting the prospectus
• Preparing the budget of expenses related to the issue
• Suggesting the appropriate timings of the public issue
• Assisting in marketing the public issue successfully
• Advising the company in the appointment of
registrars to the issue, underwriters, brokers, etc.
• Directing the various agencies involved in the public
issue.
Managers
to the
issue:

4. Registrar to the issue
After the appointment of the lead
managers to the issue, in consultation
with them the registrar to the issue is
appointed. Quotations containing the
details of various functions they
would be performing and charges for
them are called for selection.

5. underwriters
• Experience in primary market
• Past performance
• Outstanding underwriting
commitment
• The network of underwriter
• His overall reputation
Aspects
considered
before
selecting
underwriter
are

6. Bankers to the issue
Bankers to the issue have the
responsibility of collecting the
application money along with
the application form. If the size
of issue is too big 3 or 4 bankers
may be appointed.

7. Advertising agents
They advertise for the issue.
A comparative analysis is
done for to find suitable
advertisement agent from
the agents available.

8. The financial institutions
They generally act as
underwriters and
provide long term
loans to the company

9. Govt. and statutory agencies
SEBI
Registrar of companies
RBI
Stock exchanges
Industrial licensing authorities
Pollution control authorities

10. Collection centre’s
Generally there should be
at least 30 collection
centers' inclusive of places
where stock exchanges are
located.

11. Region Exchange City
Northern region Ludhiana stock exchange Ludhiana
Delhi stock exchange Delhi
Jaipur stock exchange Jaipur
U.P. stock exchange Kanpur
Southern region Hyderabad stock exchange Hyderabad
Banglore stock exchange Bangalore
Mangalore stock exchange Mangalore
Madras stock exchange Chennai
Coimbatore stock exchange Coimbatore
Cochin stock exchange cochin

12. Region Exchange City
Eastern region Calcutta stock exchange Calcutta
Gauhati stock exchange Gauhati
Magadh stock exchange Patna
Bhubaneshwar stock exchange Bhubaneshwar
Western region Bombay stock exchange Mumbai
National stock exchange Mumbai
OTCEI stock exchange Mumbai
M.P. stock exchange Indore
Pune stock exchange Pune
Vadodra stock exchange Vadodra
Ahemdabad stock exchange Ahemdabad
Saurashtra kutch stock exchange Rajkot

13. Placement of issue
Offer through prospectus
Bought out deal (offer for sale)
Private placement
Right issue
Book building

14. Offer through prospectus
According to companies act 1985, application forms of shares of
a company should be accompanied by a memorandum. In
simple terms a prospectus document gives details regarding the
company and invites offers for subscription or purchase of any
share or debentures from the public. The draft prospectus has
to be sent to the regional stock exchange where the shares of
company are to be listed and also to all other stock exchanges
where the shares are proposed to be listed. The stock exchange
scrutinies the draft prospectus. After scrutiny if there is any
clarification needed, the stock exchange writes to the company
and also suggest modification if any.

15. Salient features of prospectus are:
• Name and address of the registered office of
company
• The name of stock exchanges where applications
have been made for permission to deal in and for
official quotation of shares
• Opening closing and earliest closing date of
issue
• Name and address of lead managers
• Name and addresses of trustees under debenture
trust deed
• Rating if obtained from CRISIL
General
information:-

16. • Issued subscribed and paid up capital
• Size of present issue giving separately
reservation for preferential allotment
to promoters and others.
• Paid up capital-
• After the present issue
• After the conversion of debenture
• (IV) Details regarding the promoters
contribution
2.
Capital
structure
of
company

17. • Authority for the issue, terms of
payment, procedure and time schedule
for allotment, issue of certificate and
rights of the instrument holder.
• How to apply- availability of forms,
prospectus and mode of payment.
• Special tax benefits to the company and
shareholders under the income tax act if
any
3.
Terms
of the
present
issue

18. Particulars of the issue
(I) objects of issue
(II) Project cost
(III) Means of financing
(including promoters
contribution)

19. • History of present business
• Subsidiary companies if any
• Promoters and their background
• Name and address of M.D.
• Location of project
• Plant and machinery, technological process etc.
• Collaboration, any performance guarantee by
collaborators
• Infrastructures facilities for raw material and
utilities
5. Company
management
and project

20. (IX) Schedule of implementation
of project and progress so far
(X) The product
• Nature of product. Industrial/
consumer
• Approach to marketing and
proposed set up
• Export possibilities and export
obligations
• (XI) Future prospects
• (XII) Stock market data for
shares

21. 6. Particulars about other listed companies under the same management if any
7. Details of outstanding litigations pertaining to matters likely to affects the
operations and finances of the company including dispute tax liability if any
8. Management perception of risk factors like sensitivity to foreign exchange rate
fluctuations
9. Justification of the issue premium.
10. Financial information
11. Statutory information

22. Bought out deal
Here the promoter places his shares with an
investment banker who offers it to the public at
later date. In other words in a bought out deal, an
existing company off-loads a part of the promoters
capital to a wholesaler instead of making a public
issue. In addition to main sponsor, there could be
individuals and other smaller companies
participating in the syndicate. The hold on period
may be as low as 70 days and as long as one year.

23. Private placement
In this method issue is placed with a
small no. of financial institutions,
corporate bodies and high net worth
individuals. The financial
intermediaries purchases the shares
and sell them at a suitable price to
investors later.

24. Right issue
According to sec 81 of companies act 1956, if a public company wants to
increase its subscribed capital by allotment of further shares after two
years from date of its formation or one year after date of first allotment.
It should offer shares at first to the existing share holders in proportion
to the shares held by them at the time of offer.
According to section 81, the company has to satisfy certain conditions to
issue right shares.
• In same proportion of their holding
• Time not less than 15 days
• After the issue the shares can be disposed in a way beneficial for company.

25. Book building
Book building is a mechanism through which the initial public
offerings take place in U.S. In this process the price determination is
based on order placed and investors have an opportunity to place
orders at different prices as practiced in international offerings.
In this process book runner is appointed and his name is mentioned
in the draft prospectus. The book runner has to circulate the copy of
the draft prospectus to be filed with SEBI among the institutional
buyers who are eligible for firm allotment. The draft prospectus
should indicate the price band within which the securities are being
offered for subscription.

26. The offers are sent to book runners. He maintains
a record of the names and number of securities
offered and the price offered by the institutional
buyer with in the placement portion .
Underwriters should also intimate the orders
received by the him within the placement portion
and the price for which the order is received to
the book runner. The price is finalized by book
runner and the issuer company.

27. Allotment of shares
At par
At premium
At discount

28. Factors to be considered before
investing
Promoters credibility
Efficiency of management
Project details
Product
Financial data
Risk factors
Auditors report
Statutory clearance
Investors service

29. Investors protection in the primary
market
• Provision of all the relevant
information
• Provision of accurate
information
• Transparent allotment
procedures without any bias
The
principal
ingredients
of
investors
protection
are:

30. • Project appraisal
• Underwriting
• Disclosures in prospectus
• Clearance by stock exchange
• Signing by board of directors
• SEBI’s role
• Redressal of investor grievances
To provide
the above
mentioned
factors
several steps
have been
taken. They
are:

31. Factors needed to make the
investor protection effective
Investors awareness
Strict norms for premium fixation
Safety nets
Punitive action
Promoters stake

32. Recent trends in the primary
market
Aggressive pricing
Good liquidity
Low returns
Low volume
Economic slow down