The chapter comprises of Primary Market - Its Role and Functions; Issue of Capital - Methods of Issuing Securities in Primary Market, Intermediaries in New Issue Market - Merchant Bankers, Underwriters, Brokers, Registrars and Managers Bankers; Pricing of Issue - Book Building, Green Shoe Option, Procedure for New Issues and SEBI Guidelines for Issue in Primary Market.
The primary market is where securities are created. It's in this market that firms sell (float) new stocks and bonds to the public for the first time. An initial public offering, or IPO, is an example of a primary market.
These trades provide an opportunity for investors to buy securities from the bank that did the initial underwriting for a particular stock.
An IPO occurs when a private company issues stock to the public for the first time.
Companies and government entities sell new issues of common and preferred stock, corporate bonds and government bonds, notes, and bills on the primary market to fund business improvements or expand operations. Although an investment bank may set the securities' initial price and receive a fee for facilitating sales, most of the funding goes to the issuer. Investors typically pay less for securities on the primary market than on the secondary market.
A rights offering (issue) permits companies to raise additional equity through the primary market after already having securities enter the secondary market. Current investors are offered prorated rights based on the shares they currently own, and others can invest anew in newly minted shares.
Companies can raise capital at relatively low cost, and the securities so issued in the primary market provide high liquidity as the same can be sold in the secondary market almost immediately.
The primary market is an important source for mobilisation of savings in an economy. Funds are mobilised from commoners for investing in other channels. It leads to monetary resources being put into investment options.
Chances of price manipulation in the primary market are considerably less when compared to the secondary market. Such manipulation usually occurs by deflating or inflating a security price, thereby deliberately interfering with fair and free operations of the market.
The primary market acts as a potential avenue for diversification to cut down on risk. It enables an investor to allocate his/her investment across different categories involving multiple financial instruments and industries.
It is not subject to any market fluctuations. The prices of stocks are determined before an initial public offering, and investors know the actual amount they will have to invest.
The chapter comprises of Primary Market - Its Role and Functions; Issue of Capital - Methods of Issuing Securities in Primary Market, Intermediaries in New Issue Market - Merchant Bankers, Underwriters, Brokers, Registrars and Managers Bankers; Pricing of Issue - Book Building, Green Shoe Option, Procedure for New Issues and SEBI Guidelines for Issue in Primary Market.
The primary market is where securities are created. It's in this market that firms sell (float) new stocks and bonds to the public for the first time. An initial public offering, or IPO, is an example of a primary market.
These trades provide an opportunity for investors to buy securities from the bank that did the initial underwriting for a particular stock.
An IPO occurs when a private company issues stock to the public for the first time.
Companies and government entities sell new issues of common and preferred stock, corporate bonds and government bonds, notes, and bills on the primary market to fund business improvements or expand operations. Although an investment bank may set the securities' initial price and receive a fee for facilitating sales, most of the funding goes to the issuer. Investors typically pay less for securities on the primary market than on the secondary market.
A rights offering (issue) permits companies to raise additional equity through the primary market after already having securities enter the secondary market. Current investors are offered prorated rights based on the shares they currently own, and others can invest anew in newly minted shares.
Companies can raise capital at relatively low cost, and the securities so issued in the primary market provide high liquidity as the same can be sold in the secondary market almost immediately.
The primary market is an important source for mobilisation of savings in an economy. Funds are mobilised from commoners for investing in other channels. It leads to monetary resources being put into investment options.
Chances of price manipulation in the primary market are considerably less when compared to the secondary market. Such manipulation usually occurs by deflating or inflating a security price, thereby deliberately interfering with fair and free operations of the market.
The primary market acts as a potential avenue for diversification to cut down on risk. It enables an investor to allocate his/her investment across different categories involving multiple financial instruments and industries.
It is not subject to any market fluctuations. The prices of stocks are determined before an initial public offering, and investors know the actual amount they will have to invest.
venture capital, process of venture capital, stages of venture capital, stages and process of venture capital, early stage finance, later stage financing,
All related information about capital market instruments such as debt instruments, equity instruments, insurance instruments, hybrid instruments, swaps etc.
Capital Market is divided into two division; Primary Market and Secondary Market. Primary Market and its components are briefly described in this presentation.
Introduction, Structure, Roles, Significance, Difference between Primary and Secondary Markets and Instruments are some of the major topics I am going to cover in this presentation.
venture capital, process of venture capital, stages of venture capital, stages and process of venture capital, early stage finance, later stage financing,
All related information about capital market instruments such as debt instruments, equity instruments, insurance instruments, hybrid instruments, swaps etc.
Capital Market is divided into two division; Primary Market and Secondary Market. Primary Market and its components are briefly described in this presentation.
Introduction, Structure, Roles, Significance, Difference between Primary and Secondary Markets and Instruments are some of the major topics I am going to cover in this presentation.
The slides contains material regarding new issue market or primary market for b.com 5th sem students....
I hope this will help u guys in understanding the content easily
Critical IPO disclosures in a prospectus and comparison of JustDial and TBZ IPOtwinkle Chhadwa
This PPT describes everything about IPO's and their regulations. It highlights the key part of an ipo prospectus i.e Disclosures. We have critically analysed 15 disclosures along with SEBI requirements. For this purpose we have taken two companies JustDial and TBZ IPO's and have compared them.Also supported by various casestudies such as DLF, Facebook, Alibaba etc.
This document provide the information about primary Market:
Like
What is primary market?
Methods of Floating new issue.
Functions of NIM(New Issue Market).
Disadvantages of Primary Market.
Advantages of Primary Market.
Parties involved in the new issue.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
2. INTRODUCTION
The primary market is a market for new issues.
It is also called the new issues market or market for
fresh capital.
Four ways to raise capital through primary market:-
1)Prospectus
2)Rights issues
3)Private placement
4)Bonus issue
3. According to section 67 of the companies
(Amendment) Act, 2000 Prospectus means ‘where the
offer or invitation to subscribe for shares or debenture
is made to 50 or more persons, then such an offer or
invitation shall be deemed to be a public offering and
shall have to comply with all the provisions of the act
as well as the SEBI guidelines applicable to such
public offerings.
PROSPECTUS
4. Why Bonus Issue?
Bonus is the capitalization of free reserves. Higher
the free reserves, higher are the chances of a bonus
issue. Companies convert their retained earnings
into capital.
1) To boost liquidity of companies stock
2) To bring down the stock price
3) To restructure companies capital
5. Participants in the Primary Market
1. Merchant Bankers or BRLM
2. Registrar to the issue
3. Bankers to the issue
4. Agents/Brokers
5. Auditors of the company
6. Syndicate members
6. Methods for Determining the Offer Price
1. Fixed Price
2. Book Building
Book building is a mechanism through which an offer
price for IPOs based on the investors’ demand is
determined.
In other words, it is a process by which demand for the
proposed issue is elicited and built-up and the price at
which the securities will be issued is determined on the
basis of the bids received.
7. Difference between Fixed Price and Book-
Building Process
Features Fixed Price Process Book-building Process
Pricing Price at which the securities
are offered/allotted is
known in advance to the
investor.
Price at which the securities are
offered/allotted is not known in
advance to the investor. Only an
indicative price range is known.
Demand Demand for the securities
offered is known only after
the closure of the issue.
Demand for the securities offered
can be known everyday as the book
is built.
Payment Payment is made at the time
of subscription wherein
refund is given after
allocation.
Payment only after allocation.
10. Benefits of Book Building Method
Enables issuers to reap benefits arising from price and
demand discovery.
The cost and time for making public issues is
lowered.
The procedures are also simplified.
The possibility of price falling below par after listing
is remote.
11. Limitations of Book Building Method
The book building process adopted in India is quite different
from the USA.
In India, unlike the developed markets, the process is still
dependent on good faith.
There is a lack of transparency at critical steps and the absence
of strong regulation.
Since the price fixed for the public portion as well as for the
placement portion is the same, issues may not succeed in
inviting the desired public response.
12. Limitations of Book Building Method
Advertisement about book built issues to retail investors are
not necessary. This increases the chances of negotiated deals.
It has not proved to be a good price discovery mechanism
because many issues have been listed below their issue price.
Issuers may have to sell cheap due to the collective bargaining
power of institutions.
The role of retail investors in determining the pricing
decreases. Moreover, retail investors may not have the
information to judge the issue.
13. REVERSE BOOK BUILDING
Reverse book building is a process wherein the
shareholders are asked to bid for the price at which
they are willing to offer their shares.
This process helps in discovering the exit price and is
used by companies who want to delist their shares or
buy-back shares from the shareholders.
Delisting of securities means permanent removal of
securities of a listed company from a stock exchange.
14. REVERSE BOOK BUILDING
The reverse book building route is a difficult and
costly process.
Price discovery is a problem in case of small
companies as their shares are thinly traded, making it
difficult to delist through the reverse book building
route. Unless the shares are delisted, the small
companies have to pay all listing charges.
15. GREEN-SHOE OPTION
Green-shoe option is also referred to as an over allotment
option. It is a mechanism to provide post-listing price
stability to an initial public offering.
The green shoe company was the first to issue this type of
option, hence the name green-shoe option.
The first ever exercise of a green-shoe option in the
course of a public issue was carried out by the ICICI
bank. The LIC became the first institution to lend shares
in the primary market.
16. BENEFITS OF GREEN-SHOE OPTION
Investor protection measure- especially for protection of
small investors during the post-listing period.
Benefits the underwriters in both bullish and bearish
conditions.
In a bull market, underwriters will opt for additional
allotment of 15 per cent due to index riding high.
In a bearish market, the underwriting option may not be
exercised or the underwriters may buy up to 15 per cent
at prices lower than the issue price from the market.
17. ON-LINE IPOs
The on-line issue of shares is carried out via the electronic
network of the stock exchanges.
The company proposing to make a public issue through the
on-line system of stock exchange has to comply with sections
55-68A of the companies act, 1956 and Disclosure and
Investor Protection (DIP) guidelines.
The issuer company is required to enter into an agreement
with stock exchanges which have the requisite system for an
o-line offer and has to appoint brokers and registrars to the
issue having electronic connectivity with stock exchanges.
18. BENEFITS OF ON-LINE IPOs
Reduces the time taken for the issue process.
Securities get listed within 15 days from the closure of the
issue, thereby enabling faster access to funds.
If allotment made after 15 days then interest at the rate of 15
per cent should be paid to investors.
Corporates can reduce their stationery, printing and other
expenses.
The investor also benefits as the system eliminates refunds
except in case of direct application.
19. PRIMARY ISSUES-PUBLIC ISSUE
1. Initial Public Offering (IPO):
It is an offering of either a fresh
issue of securities or an offer for sale of existing securities, or
both by an unlisted company for the first time to the public.
IPO enables listing and trading of the issuer’s securities.
The availability of information regarding the past
performance of the company and its track record is generally
inadequate and may lack credibility. The SEBI has laid down
entry norms to protect the interest of investors and to enable
investors to take informed decisions.
20. PRIMARY ISSUES-PUBLIC ISSUE
Eligibility Norms for Entities Raising Funds through an IPO
and an FPO:
Entry Norm I:
Net tangible assets of atleast Rs 3 crores for 3 full years, of which not
more than 50 per cent is held in monetary assets.
Distributable profits in atleast 3 out of the preceding 5 years.
Net worth of atleast Rs 1 crore in 3 years.
If there is a change in company’s name, atleast 50 per cent revenue
for preceding 1 year should be earned from the new activity.
The issue size should not exceed 5 times the pre-issue net worth.
21. PRIMARY ISSUES-PUBLIC ISSUE
Entry Norm II:
Issue shall be through a book building route, with atleast 50
per cent of the issue to be mandatorily allotted to the QIBs,
failing which the money shall be refunded.
The minimum post-issue face value capital shall be Rs 10
crore or there shall be compulsory market making for atleast
2 years.
OR
22. PRIMARY ISSUES-PUBLIC ISSUE
Entry Norm III:
The ‘project’ is appraised and participated to the extent of 15
per cent by FIs/Scheduled commercial banks of which atleast
10 per cent comes from the appraiser(s).
The minimum post-issue face value capital shall be Rs 10
crore or there shall be a compulsory market making for
atleast 2 years.
23. PRIMARY ISSUES-PUBLIC ISSUE
The SEBI has exempted the following entities from entry
norms:
1. Private sector banks.
2. Public sector banks.
3. Rights issue by a listed company.
24. PRIMARY ISSUES-PUBLIC ISSUE
2. Follow-on Public Offering (FPO):
It is an offer of sale of
securities by a listed company. FPO is also known as
subsequent or seasoned public offering. Listed companies
issue FPOs to finance their growth plans. Listed companies
with a good track record find it easier to raise funds through
FPOs.
Due to cumbersome procedural requirements and high cost
and time, the FPOs are no longer an attractive route to raise
funds. Listed companies are preferring the QIP route .
25. PRIMARY ISSUES-RIGHTS ISSUE
3. Rights Issue:
Rights issue is an offer of new securities by a listed
company to its existing shareholders on a pro-rata basis. Companies
issue rights by sending a letter of offer to the shareholders whose
names are recorded in the books on a particular date.
A shareholder has four options in case of rights:
a) To exercise the rights.
b) Renounce rights and sell them in the open market.
c) Renounce part of the rights and exercise the reminder.
d) To do nothing.
26. PRIMARY ISSUES-RIGHTS ISSUE
Promoters offer rights issues at attractive price due to
following reasons:
a) They want to get their issues fully subscribed to.
b) To reward their shareholders.
c) It is possible that the market price does not reflect a stock’s true
worth or that it is overpriced, prompting promoters to keep the
offer price low.
d) To hike their stake in their companies, thus, avoiding the
preferential allotment route which is subject to lot of restrictions.
27. PRIMARY ISSUES-PRIVATE PLACEMENT
4. Private Placement:
Private placement refers to the direct sale of
newly issued securities by the issuer to a small number of investors
through merchant bankers. The investors are selected clients such
as financial institutions, corporates, banks.
There are some advantages to the issuer like the time taken by, as
well as the cost of issue is much less as compared to the public and
rights issue. These issues can be tailor-made to suite the
requirements of both the parties. Moreover private placement does
not require detailed compliance of formalities, rating and disclosure
norms as required in public or rights issues.
28. PRIMARY ISSUES-PREFERENTIAL ISSUE
Due to cumbersome statutory provisions of a public/rights issue,
many companies opt for preferential allotment of shares for raising
funds.
Such allotments are made to various strategic groups including
promoters, foreign partners, technical collaborators and private
equity funds. Companies need to seek approval from shareholders
for preferential allotment of shares.
It is done by listed companies, whose entire shareholding is held in
dematerialised form, to a select group of persons under section 81
of the companies act, 1956 which is neither a rights issue or a
public issue.
29. PRIMARY ISSUES-PREFERENTIAL ISSUE
Reasons for raising capital through preferential allotment:
a) To enhance the promoters’ holding.
b) As part of debt restructuring/conversion of loans.
c) For the purpose of strategic investments by
institutional/foreign investors.
d) To issue shares by way of Employees Stock Option Plans
(ESOPs).
e) For fresh issue to shareholders other than promoters.
f) For take over of company by management group.
30. PRIMARY ISSUES-QIP
6. Qualified Institutions Placement (QIP):
QIP is a private
placement of equity shares or convertible securities by a
listed company to QIBs.
It has emerged as a new fund raising investment for listed
companies in India.
Through a QIP issue, funds can be raised from foreign as well
as domestic institutional investors without getting listed on a
foreign exchange, which is a lengthy and cumbersome affair.
31. PRIMARY ISSUES-QIP
The issue process is not only simple but can be completed
speedily since the company issues equity shares and does not
create a derivative investment as is the case with GDR/ADR.
Unlike GDRs, a QIP issue can be offered to a wide set of
investors including Indian mutual funds, banks and insurance
companies, as well as, FIIs.
As there is no new stock exchange listing, the issue is free
from the hassles of continuing disclosures and administrative
costs.
32. Resource Mobilisation from International
Capital Market
Global Depository Receipts (GDRs):
GDRs are listed o the
European stock exchanges or on the Asian stock exchanges
such as the Dubai and Singapore stock exchanges.
American Depository Receipts (ADRs)
External Commercial Borrowings (ECBs)
Foreign Currency Convertible Bonds (FCCBs)
33. INDIAN DEPOSITORY RECEIPTS (IDRs)
Enable foreign companies to raise capital in India.
Enable Indian investors to diversify risk.
Enable globalisation of Indian stock exchanges.
34. Steps to Improve Primary Market Infrastructure
The IPO process should be automated wherein the investor
will have to provide his name and depository umber or the
unique identification number while subscribing to an IPO.
The book running lead manager should be made more
accountable and should be empowered to pick up his team.
To increase retail participation in public issues and to
maintain the retail character of the primary market, there
must be direct retailing of primary issues and allotment
incentives for early bid investors.
There must be 10 per cent margin imposed on all QIB bids.
35. Steps to Improve Primary Market Infrastructure
Issue expenses should be reduced by way of issuing
electronic prospectus rather than application forms.
Internet and digital signatures should also be considered to
prevent the use of paper and save precious natural resources.
Certified brokers should be used for even non-online
applications.