The document, presented by Dr. P. Manochithra, discusses the processes and stakeholders involved in public stock issues. It covers topics such as origination, underwriting, and distribution of securities, detailing the roles of lead managers, registrars, and underwriters. Additionally, it addresses regulatory frameworks and historical context related to stock exchanges in India.

1. Presented By
Dr.P.Manochithra
Assistant Professor
Department of Corporate Secretaryship
Sri Ramakrishna College of Arts & Science
Coimbatore.

2. Stocks available for the first time are offered through New
Issue Market.
The issuer may be a new company or an existing company.
These issues may be of new type or the security used in the
past.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
2

3. Origination
Underwriting
Distribution
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
3

4. It deals with the origin of the new issue.
The proposal is analyzed in terms of the nature of the
security, the size of the issue, timing of the issue and
floatation method of the issue.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
4

5. Underwriting contract makes the share predictable and
removes the element of the uncertainty in the subscription.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
5

6. It refers to the sale of securities to the investors.
This is carried out with the help of the lead managers and
brokers to the issue.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
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7. Managers to the issue
Registrar to the issue
Underwriters
Bankers to the issue
Advertising agents
Financial institutions
Government and statutory agencies
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
7

8.  Lead managers are appointed by the company to manage the public
issue programmes.
 Their main duties are
a) Drafting of prospectus
b) Preparing the budget of expenses related to the issue
c) Suggesting the appropriate timings of the public issue
d) Assisting in marketing the public issue successfully
e) Advising the company in the appointment of registrars to the issue,
underwriter, bankers to the issue, advertising agents
f) Directing the various agencies involved in the public issue.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
8

9.  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 the various functions they would be
performing and charges for them are called for selection.
 Among them the most suitable one is selected.
 It is always ensured that the registrar to the issue has the necessary
infrastructure like computer, internet and telephone.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
9

10. Underwriting is a contract by means of which a person
gives an assurance to the issuer to the effect that the
former would subscribe to the securities offered in the
event of non subscription by the person to whom they were
offered.
The person who assures is called an underwriter.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
10

11.  Underwriters are divided into 2
a) Financial institutions and Banks
b) Brokers and approved investment companies.
 The underwriters do not buy or sell securities.
 They stand as back-up supporters and underwriting is done
for a commission.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
11

12. They have the responsibility of collecting the application
money along with the application form.
The bankers to the issue generally charge commission
besides the brokerage, if any.
Depending upon the size of the public issue more than one
banker to the issue is appointed.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
12

13.  Advertising plays a key role in promoting
the public issue. Hence, the past track
record of the advertising agency is
studied carefully.
 Tentative programmes of each
advertising agency along with the
estimated cost are called for.
After comparing the effectiveness and
cost of each programme with the other, a
suitable advertising agency is selected in
consultation with the lead managers to the
issue.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
13

14.  Financial institutions generally
underwrite the issue and lend term loans
to the companies.
Hence, normally they go through the draft
of prospectus, study the proposed
programme for public issue and approve
them.
 IDBI, IFCI&ICICI, LIC, GIC and UTI are
the some of the financial institutions that
underwrite and give financial assistance.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
14

15.  SEBI
Registrar of companies
RBI
S/E
Industrial licensing authorities
Pollution control authorities.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
15

16.  Generally there should be at least 30
mandatory collection centers inclusive of the
places where stock exchanges are located.
 If the issue is not exceeding Rs.10 Cr
(Excluding premium if any) the mandatory
collection centers are the four metropolitan
centres viz. Mumbai, Delhi, Calcutta and
Chennai and at all such centres where stock
exchanges are located in the region in which
the registered office of the company is
situated.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
16

17. Offer through prospectus
Bought out deals (Offer for sale)
Private Placement
Rights Issue
Book building
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
17

18. Prospectus is a document gives details regarding the
company and invites offers for subscription or purchase of
any shares or debentures from the public.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
18

19. In bought out deal, an existing company off-loads a part of
the promoters capital to a wholesaler instead of making a
public issue.
The sponsors hold on to these shares for a period and at an
appropriate date they offer the same to the public.
The hold on period may be as low as 70 days or more than a
year.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
19

20. In this method the issue is placed with a
small number of financial institutions,
corporate bodies and high networth
individuals.
The special feature of the private placement
is that there is no need for underwriting
arrangements since the placement itself
amounts to underwriting.
Through private placement equity shares,
preference shares, cumulative convertible
preference shares, debentures and bonds are
sold.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
20

21. If a public company wants to increase its
subscribed capital by allotment of further
shares after two years from the date of its
formation or one year from the date of its
first allotment, whichever is earlier,
should offer share at first to the existing
shareholders in proportion to the shares
held by them at the time of offer.
Shares of this type is called as rights
shares.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
21

22. Book building is a mechanism through which the initial
public offerings (IPOs) takes place in the U.S.
Similar methods are used in the primary market for the
issue of GDRs.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
22

23. Pricing of the public issue has to e carried out according to
the guidelines issued by SEBI.
The companies are permitted to price their issues at par or
at premium
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
23

24. According to SEBI, the allocation of shares is done under
proportionate allotment method.
The applications will be categorized according to the
number of shares applied for.
Then allocation is done by proportionate basis.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
24

25. In the secondary market, the investors can sell and buy
securities.
The health of the economy is reflected by the growth of the
stock market.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
25

26. Origin of stock exchanges in India can be traced back to
the later half of 19th Century.
The brokers organized an informal Association in Mumbai
named “The Native Stock and Share Brokers Association”
in 1875.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
26

27. The growth of stock exchanges suffered a set back after the
end of World War.
Securities Contract and Regulation Act, 1956 gave powers to
the Central Government to regulate the Stock Exchanges.
The stock exchanges in Mumbai, Calcutta, Chennai,
Ahmedabad, Delhi, Hyderabad and Indore were recognized by
the SCR Act.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
27

28. The Bangalore stock exchanges was recognised only in 193. At
present we have 23 stock exchanges.
Till recent past, floor trading took place
Screen-based trading facility was introduced
Bombay Stock exchange introduced the screen based trading
system in 1995, which is known as BOLT (Bombay On-Line
Trading System)
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
28

29. Maintains active trading
Fixation of prices
Ensures safe and fair dealing
Aids in financing the industry
Dissemination of information
Performance inducer
Self-regulatory organization
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
29

30. 1.Ministry of finance
The stock Exchange Division of the Ministry of Finance has
powers related to the application of the provision of the
SCR Act and licensing of dealers in the other area.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
30

31. 2. Securities and Exchange Board of India:
It has got power to regulate the business of stock exchanges.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
31

32. 3.The Governing Board
The Governing Board of the stock Exchange consists of elected
member directors, government nominees and public
representatives.
Rules, bye-laws and regulations of the stock exchange provide
substantial powers to the Executive Director for maintaining
efficient and smooth day to day functioning of the stock
exchange.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
32

33. The SCR Act of 1956 has provided uniform regulation for
the admission of members in the stock exchanges.
The qualifications for becoming a member of a recognised
stock exchange are given below.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
33

34. 1. The minimum age prescribed for the
members is 21 years.
2. He/She should be an Indian citizen.
3. He should be neither a bankrupt nor
compounded with the creditors.
4. He should not be convicted for fraud or
dishonesty.
5. He should not be engaged in any other
business connected with a company.
6. He should not be a defaulter of any other
stock exchange.
7. The minimum required educational
qualification is a pass in 12th standard
examination.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
34

35. A broker/member registered with the recognized stock
exchange has to apply to the SEBI for registration.
Usually the agreement between the broker and the sub
broker is carried out on a non-judicial stamp paper of
Rs.10.
 The agreement generally specifies the authority and
responsibility of the broker and sub-broker.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
35

36. The broker has to abide by the code of conduct laid down by
the SEBI.
The code of conduct prevents the malpractice, manipulation
and gives other statutory requirements.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
36

37. Listing refers to the admission of the security of a public
limited company on a recognized stock exchange for
trading.
Listing of securities is undertaken with the primary
objective of providing marketability, liquidity and
transferability to securities.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
37

38. 1. Liquidity
2. Best Price
3. Regular Information
4. Periodic reports
5. Transferability
6. Income Tax benefit
7. Wide publicity
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
38

39. 1. Listed companies are subjected to various
regulatory measures of the stock
exchanges and SEBI.
2. Essential information has to be submitted
by the listed companies to the stock
exchanges.
3. Annual General Meeting, Annual reports
have to be sent to a large number of
shareholders. This creates large amount of
unnecessary expenditure.
4. Public offer itself is an expensive exercise.
Dr.P.Manochithra, Assistant Professor of BCom-CS, Sri Ramakrishna College
of Arts & Science,Coimbatore
39