This document discusses capital structure and financial markets, specifically the primary market. It defines the primary market as the market for new issuers, where companies can directly issue shares, bonds, or other securities to raise capital. The document outlines the key participants and processes in the primary market in Nepal, including requirements for disclosure, underwriting, and issue procedures that must follow the Company Act and SEBON guidelines. Overall, the primary market provides an important channel for companies and governments to raise funds for investment and growth.

1. Financial Institution
and Markets

2. GROUP MEMBERS
 Chhitiz Shrestha
 Digaj Amatya
 Dikshya Acharya
 Leeza Shrestha

3. INTRODUCTION TO CAPITAL STRUCTURE
 Represents long term investment
 Includes funds raised through:
 Ordinary and Preference shares
 Bonds
 Debentures
 Term loans from financial institutions
 Earned revenue
 Capital surpluses
 And so on..

4. INTRODUCTION TO CAPITAL STRUCTURE
 Represents the proportionate relationship between
debt and equity
 Types:
o Primary market
o Secondary market

5. PRIMARY MARKET
 Also known as “New Issue Market”
 Success of the capital market depends on primary market
 Is the market for new issuers
 Can be directly bought from the shareholders
 Small and medium scale business, enter the primary
market to raise money from the public
 Accelerates the process of capital formation in a country's
economy

6. PRIMARY MARKET
 Three methods to issue primary market
o Rights Issue,
o Initial Public Offer (IPO),
o Preferential Issue.

7. PRIMARY MARKET

8. FEATURES OF PRIMARY MARKET
 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.
 The company receives the money and issues new security
certificates to the investors.
 Primary issues are used by companies for the purpose of
setting up new business or for expanding or modernizing the
existing business.

9. FEATURES OF PRIMARY MARKET
 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."

10. THE NEED FOR PRIMARY MARKET
 To raise funds for certain purpose.
 To create market for new issues of securities.
 To establish the magnitude of the market.
 To mobilize Resource the economy.
 For overall development of companies.

11. FUNCTIONS OF PRIMARY MARKET
 Household Savings
 Global Investments
 Sale of Government Securities
 Primary Market Participants
 Marker Risk

12. IMPORTANCE
 It studies needs, wants and expectations of the
customers.
 It finds out reactions of customers to products of the
company.
 It evaluates company's sales promotion measures for
suitable adjustment and improvements.
 It studies current marketing problems and opportunities
for suitable follow up.

13.  It suggest introduction of new products, modification of
existing products.
 It studies marketing competition, channel of distribution
and pricing for suitable changes if necessary.
 It find methods for making the product popular and
raising its goodwill and marketing reputation.

14. HISTORICAL PERSPECTIVES OF NEPALESE
SECURITIES MARKET
 The history of capital market in Nepal dates back to
1936.
 First issue of government bonds made in the year
1964.
 carried 6 percent rate of interest and had the
maturity period of five years.
 In 1974, industrial policy was announced.

15. HISTORICAL PERSPECTIVES OF NEPALESE
SECURITIES MARKET
 In 1976 Securities exchange center was
established .
 The interim government (1990/91) initiated financial
reform program and two indirect investment
vehicles-Citizen's Investment Fund and NIDC
Capital Markets Ltd.
 Nepal (SEBO/N) and Nepal Stock Exchange Ltd.
(NEPSE) at the policy level in 1993.
 Since then they are operating as the main
constituents of securities market in Nepal.

16. DISCLOSURE IN PRIMARY MARKET
 The directors need to submit a copy of prospectus to the
concerned authorities
 After that the prospectus is approved for initial public offering.
 Possible financial risks involved in running the business,
financial arrangements made, detail list of the names and
particulars of all those involved in companies and other
important matters to be clearly stated in prospectus.

17. DISCLOSURE IN PRIMARY MARKET
 The issuance of shares worth Rs 7.77 billion in fiscal year
2010-11.
 Nepal Rastra Bank (NRB) has stopped giving license to new
financial institutions lessening the pressure of new share
issues.
 Every public company must publish its prospectus before
issuing securities.

18. DISCLOSURE IN PRIMARY MARKET
 Last fiscal year shows17 companies got approval to float their
primary shares
 31 listed companies were allowed to issue right shares.
 Yet the depreciating value of securities has reduced the
market capitalization of the secondary market.
 The capital market regulator shave witnessed the registration
of bonus shares worth Rs 4.41 billion of 62 companies and
promoters shares worth Rs 1.8 billion of 18 companies in the
last fiscal year.

20. PROCESS OF ISSUING PRIMARY IN NEPAL
 Originating the Securities
 Underwriting the Securities
 Formation of Syndicate
 Risk Diversification
 Distribution of Securities
 Stabilization of the Market

21. ISSUE PROCEDURE IN NEPAL
 In Nepal, the company should follow the company
act.
 This is a legal document containing the various
financial, corporate and business information,
which will help investors make rational investment
decisions
 the various guidelines developed by SEBON have
to be followed and issue managers have to obtain
Due Diligence Certificate in dealing in the primary
market issues.

22. ISSUE PROCEDURE IN NEPAL
 Companies take the help of the investment bankers
to provide guarantee of funds
 Investment bankers may act either as agents or as
principals in any given transactions
 The investor banker in this principal transaction is
often called an underwriter

23. ROLES OF AN ISSUE MANAGER
 Easy floatation
 Financial consultant
 Underwriting
 Market makers
 Due diligence
 Coordination
 Liaison with SEBI

24. ROLES OF UNDERWRITER
 Primarily responsible for subscription of the unsold
portion o f the securities .
 And also to make payment for the related
security.

25. FUNCTIONING OF UNDERWRITER

26. SUBSCRIPTION RATIOS
 For shares
 the original cost of the stock shown on the certificate
 For bonds
 the amount paid to the holder at maturity.
 For a debt security,
 face value is the amount repaid to the investor when the bond
matures (usually, Government securities and corporate bonds have a
face value of Rs. 100).
 The price at which the security is traded depends on the
fluctuations in the interest rates in the economy
 Securities are generally issued in denominations of 5, 10 or 100
known as the Face Value or Par Value of the security.

27. CONCLUSION
 Securities market plays a pivotal role in mobilizing
savings and channeling them in productive purposes and
many more.
 It provides the channel for sale of new securities.
 It helps government and corporate to raise resources to
meet their requirements of investment and/or discharge
some obligation.
 Nepalese capital market now is passing through a
bearish situation.
 Finally, it is a vital part of the economy