The document discusses primary market and security issuances in the primary market. It begins by explaining that the primary market provides an opportunity for issuers like governments and corporations to raise funds through the issuance of new securities. It then describes some key features of the new issue market including that it is for raising long-term capital and securities are sold for the first time. It also outlines some common methods of securities issuance in the primary market like fixed price and book building.
The document discusses various aspects of new issue markets, including the meaning, functions, and methods of floating new issues. It describes the main functions of new issue markets as facilitating the transfer of resources from savers to users and mobilizing funds from savers to borrowers. The key methods of floating new issues discussed are public issues, rights issues, private placements, and preferential issues. It also covers various other topics related to new issue markets such as pricing of issues, offer documents, listing of securities, and participants in securities markets.
The document discusses the roles of merchant banks and underwriters in India. It begins by providing a brief history of merchant banking, noting it started in Italy and later spread to other European countries and the US. It then outlines some of the key functions of merchant banks, such as providing commercial banking services, long-term loans, and underwriting stocks. Next, it discusses the underwriting process, including different types of underwriting agreements and regulations around underwriting in India. It concludes by emphasizing the importance of underwriters and merchant banks in facilitating capital raising and protecting investor interests.
The document provides information on stock exchanges in India, including the major exchanges like the Bombay Stock Exchange and National Stock Exchange. It discusses the key players in stock exchanges like brokers, jobbers, and investors. It also covers topics like speculation, causes of price fluctuations, the role of SEBI in regulating exchanges, and how companies are rated. The largest stock exchange is the Bombay Stock Exchange, located in Mumbai, which accounts for over two-thirds of trading in India.
This document discusses five methods for floating new issues of shares:
1. Through prospectus, where a company directly offers shares to the public or institutions at a fixed price through a legal document containing key details.
2. Bought out deals, where promoters place shares with an investment banker who then offers them to the public after a holding period.
3. Private placement, where issues are placed with financial institutions and then sold, avoiding underwriting. This allows for a time and cost effective structured process.
4. Rights issues, where existing shareholders have the right to purchase additional shares offered by the company in proportion to their current holdings.
5. Book building, which resembles conducting a survey to determine
The document provides an overview of financial markets and systems. It discusses the functions of financial markets, types of markets including stock markets, bond markets, and money markets. It also describes market participants, types of financial institutions like commercial banks and their roles, and financial instruments. Financial regulation and Bangladesh's financial system are also briefly covered.
Chapter 1 sales management strategy sales and distribution managementIndrasen Shahi
This document discusses sales management strategies and the role of sales managers. It covers the definition of sales management, the importance of relationship-based selling, steps for designing and managing a sales force, duties and responsibilities of sales managers, and tips for sales manager success. Key aspects include planning, directing, motivating and evaluating personal selling teams; developing positive customer relationships; and organizing sales activities to meet company objectives and standards.
This document provides an overview of the merchant banking sector in India. It discusses the evolution of merchant banking in India since 1969. It defines the key terms like merchant banking and investment banking. It describes the various functions of merchant bankers like corporate counseling, project counseling, issue management, portfolio management etc. It also discusses the regulatory framework for merchant bankers in India as laid out by SEBI, including the categories of merchant bankers and their capital adequacy requirements. In conclusion, it discusses some recent developments and challenges in the Indian merchant banking sector.
The secondary market, also known as the stock market, provides liquidity to existing financial securities through trading on a stock exchange. It is regulated through processes like stock exchange recognition, security listing, and broker registration. Key functions of the secondary market include providing an ideal meeting place for buyers and sellers, ensuring safety and liquidity for investors, facilitating speculative trading and resource allocation, and disseminating market data. It involves various players like brokers, investors, clearing corporations, depositories, and clearing banks to facilitate trading, clearing, and settlement.
The document discusses various aspects of new issue markets, including the meaning, functions, and methods of floating new issues. It describes the main functions of new issue markets as facilitating the transfer of resources from savers to users and mobilizing funds from savers to borrowers. The key methods of floating new issues discussed are public issues, rights issues, private placements, and preferential issues. It also covers various other topics related to new issue markets such as pricing of issues, offer documents, listing of securities, and participants in securities markets.
The document discusses the roles of merchant banks and underwriters in India. It begins by providing a brief history of merchant banking, noting it started in Italy and later spread to other European countries and the US. It then outlines some of the key functions of merchant banks, such as providing commercial banking services, long-term loans, and underwriting stocks. Next, it discusses the underwriting process, including different types of underwriting agreements and regulations around underwriting in India. It concludes by emphasizing the importance of underwriters and merchant banks in facilitating capital raising and protecting investor interests.
The document provides information on stock exchanges in India, including the major exchanges like the Bombay Stock Exchange and National Stock Exchange. It discusses the key players in stock exchanges like brokers, jobbers, and investors. It also covers topics like speculation, causes of price fluctuations, the role of SEBI in regulating exchanges, and how companies are rated. The largest stock exchange is the Bombay Stock Exchange, located in Mumbai, which accounts for over two-thirds of trading in India.
This document discusses five methods for floating new issues of shares:
1. Through prospectus, where a company directly offers shares to the public or institutions at a fixed price through a legal document containing key details.
2. Bought out deals, where promoters place shares with an investment banker who then offers them to the public after a holding period.
3. Private placement, where issues are placed with financial institutions and then sold, avoiding underwriting. This allows for a time and cost effective structured process.
4. Rights issues, where existing shareholders have the right to purchase additional shares offered by the company in proportion to their current holdings.
5. Book building, which resembles conducting a survey to determine
The document provides an overview of financial markets and systems. It discusses the functions of financial markets, types of markets including stock markets, bond markets, and money markets. It also describes market participants, types of financial institutions like commercial banks and their roles, and financial instruments. Financial regulation and Bangladesh's financial system are also briefly covered.
Chapter 1 sales management strategy sales and distribution managementIndrasen Shahi
This document discusses sales management strategies and the role of sales managers. It covers the definition of sales management, the importance of relationship-based selling, steps for designing and managing a sales force, duties and responsibilities of sales managers, and tips for sales manager success. Key aspects include planning, directing, motivating and evaluating personal selling teams; developing positive customer relationships; and organizing sales activities to meet company objectives and standards.
This document provides an overview of the merchant banking sector in India. It discusses the evolution of merchant banking in India since 1969. It defines the key terms like merchant banking and investment banking. It describes the various functions of merchant bankers like corporate counseling, project counseling, issue management, portfolio management etc. It also discusses the regulatory framework for merchant bankers in India as laid out by SEBI, including the categories of merchant bankers and their capital adequacy requirements. In conclusion, it discusses some recent developments and challenges in the Indian merchant banking sector.
The secondary market, also known as the stock market, provides liquidity to existing financial securities through trading on a stock exchange. It is regulated through processes like stock exchange recognition, security listing, and broker registration. Key functions of the secondary market include providing an ideal meeting place for buyers and sellers, ensuring safety and liquidity for investors, facilitating speculative trading and resource allocation, and disseminating market data. It involves various players like brokers, investors, clearing corporations, depositories, and clearing banks to facilitate trading, clearing, and settlement.
Kotak Mahindra Bank provides custodial services including safekeeping of securities, processing of corporate actions like dividends and bonuses, foreign exchange services, proxy voting, compliance monitoring, transaction settlement, and customized reporting. As one of India's leading private banks, it has over 30 years of experience in financial services and capital markets. Its custody services are aimed at both domestic and foreign institutional investors investing in Indian debt and equity markets.
This document discusses the nature and scope of financial services. It begins by defining financial services and intermediation. It then describes the traditional and modern activities of financial services, including fund-based activities like underwriting and non-fund based activities like advisory services. Modern activities include project advisory, M&A assistance, and risk management services. Revenue sources include fund-based income from interest and investments, and fee-based income from services. Financial innovation was necessitated by factors like low profitability, competition, economic liberalization, and improved customer expectations.
The document discusses the role of capital markets. It defines capital markets as financial markets where investment instruments like bonds and equities are bought and sold. Capital markets connect investors with surplus funds to companies needing funds. They include primary markets for new stock issues and secondary markets for existing stocks. Capital markets provide investors risk reduction through diversification and liquidity. They provide companies a source of finance and measure of performance. Capital markets help economies through mobilizing savings, allocating resources, and providing market indicators.
The document discusses the stages in channel planning which includes segmentation, positioning, and focus. It defines segmentation as clustering customers based on their expectations, positioning as defining the channel elements to service each segment, and focus as deciding which segments to address. The document also discusses defining customer needs based on expected service levels, defining channel objectives to support customer service, and considering the cost and alternatives of channel systems.
Channel Information Systems
Purpose
Information - Advantages
Classification of Information
Information Process
Developing a Channel MIS
Use of Information
Sources of Data
Competition Tracking
Elements of a Channel Information System
Channel Performance Evaluation
IT System for Channels
Intensive Distribution
Bond immunization is an investment strategy used to minimize the impact of interest rate changes on bond portfolios. It works by adjusting the portfolio duration to match the investor's time horizon. When a portfolio is immunized, its duration equals the investor's time horizon. Maintaining an immunized portfolio requires rebalancing the average duration whenever interest rates change, to keep it equal to the investor's time horizon. This offsets losses from falling bond prices against gains from reinvesting coupon payments at higher rates.
This document discusses loan syndication, which is when a group of lenders provide funds to a single borrower for a large project. Loan syndication often occurs when a single lender cannot provide the full funding needed or when the risks are too high. A lead financial institution coordinates the syndication by organizing the transaction and administering repayments, fees, reporting, and loan monitoring. The document then outlines the six main steps in the loan syndication process, including initial discussions with promoters, assessing the project, locating funding sources, preliminary discussions with lenders, preparing the loan application, and assisting with the project appraisal.
This document presents information on factoring and forfaiting. It defines factoring as the conversion of credit sales into cash by selling accounts receivable to a financial institution. It describes the parties involved as the supplier, buyer, and financial intermediary (factor). It then explains the steps in factoring, types of factoring, costs, and compares factoring to loans and bills discounting. Forfaiting is described as purchasing export receivables without recourse to the exporter. The document outlines the forfaiting process, costs, and compares forfaiting to factoring. It provides a comparative analysis of bills discounting, factoring and forfaiting.
The document discusses the roles and responsibilities of merchant bankers in India according to SEBI regulations. Key points:
- Merchant bankers are regulated by SEBI and involved in public issues, rights issues, open offers, and buybacks.
- They must meet requirements for capital, staffing, experience, and qualifications.
- As lead managers, they perform key functions like pricing issues, marketing, and preparing offer documents.
- Post-issue, they monitor allotments and refunds, file reports, and ensure investor grievances are addressed.
Investors Protection-Grievances and their Redressal for B.Com, M.ComDr. Toran Lal Verma
Investors in India face high risks of fraud and unethical practices. To address grievances, measures have been established to protect investors, including grievance cells in stock exchanges, the SEBI, and Company Law Board. Common grievances are against companies for issues like delayed payments or transfers, and against brokers for delayed deliveries or payments. Investors can seek resolution through these organizations, courts, or by reporting issues to the press. The SEBI and stock exchanges work to resolve complaints, including suspending trading or transferring stocks of non-compliant companies. This aims to restore investor confidence in India's financial markets.
The primary market deals with new security issues and helps transfer resources from savers to users. It involves various intermediaries like merchant bankers, underwriters, and registrars. The main functions of the primary market are origination, underwriting, and distribution of new securities. Origination involves evaluating project viability. Underwriting guarantees minimum subscription. Distribution involves selling securities to investors through brokers and agents. The primary market facilitates capital formation by bringing together investors and those seeking capital.
Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount in exchange for immediate cash. There are various types of factoring, including recourse factoring, where the client refunds amounts for defaults, and non-recourse factoring, where the factor's obligation is absolute. Factoring provides businesses with immediate cash flow and transfers the credit risk to the factoring institution. However, it is a relatively expensive source of financing.
The concept of Cost of capital for MNC is addressed in this ppt
Subscribe to Vision Academy for Video assistance https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
The document discusses the role of merchant banking in appraising projects, designing capital structures, and managing securities issues. It defines a merchant banker as an entity that engages in issue management by arranging the sale, purchase, or subscription of securities. The key functions of merchant bankers related to issue management include designing capital structures, determining appropriate capital market instruments, pricing issues, preparing prospectuses, and selecting other parties like bankers and advertising consultants to assist with securities offerings.
Financial intermediaries include stock exchanges, the Over-the-Counter Exchange of India, the Securities and Exchange Board of India, derivatives, and money market mutual funds. Stock exchanges provide a platform for trading securities while the Securities and Exchange Board of India regulates the securities market in India. Derivatives derive their value from underlying assets and are used for hedging risk or obtaining leverage. Money market mutual funds invest in short-term money market instruments to preserve principal.
The document discusses secondary markets and stock exchanges. It defines the secondary market as the market where existing securities of companies are traded. Investors buy and sell stocks and bonds among themselves in secondary markets, without providing new funds to the issuer. Stock exchanges like the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) provide organized markets for trading these secondary market securities and play an important role in capital formation and liquidity. The BSE and NSE are the largest stock exchanges in India in terms of market capitalization and trade volume.
The document discusses factoring and forfaiting. It provides details on:
1) Factoring involves the sale of book debts or invoices by a firm to a financial institution for an immediate payment, with the factor taking on responsibility for collection.
2) Forfaiting deals specifically with receivables related to deferred payment exports, where the exporter's rights are purchased without recourse.
3) Both mechanisms provide liquidity to exporters and absorb risks like political or conversion risks associated with cross-border receivables.
Letter of Credit - Complete Presentation - (Bcom-Mcom-BBA-MBA-BS)Millat Afridi
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. A letter of credit is extremely common within international trade and goods delivery, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as underwriting the credit risk of the buyer paying the seller for goods.
This document discusses various capital market instruments. It defines capital markets as dealing with medium to long term funds and describes primary roles as raising funds for governments, banks and corporations through stocks and bonds. It then discusses types of capital market instruments including equity (common/preferred stocks), debt (bonds, mortgages), hybrids (convertible bonds) and insurance instruments. The document provides details on features and types of these various capital market instruments.
The primary market deals with the issuing of new securities by companies, governments, or public institutions to raise funds. This is typically done through an investment bank or syndicate of securities dealers through processes like initial public offerings (IPOs) of stock, follow-on public offerings (FPOs), private placements, rights issues, and bonus issues. The primary market creates long-term instruments through which corporate entities can borrow capital. It allows companies to attract new capital, transfer assets into financial assets, and invest money for short or long term goals.
The document discusses the new issue market, which is where new securities or stocks are issued to acquire capital for new or existing companies. It describes the functions of origination, underwriting, and distribution. Various parties involved include managers, registrars, underwriters, bankers, and advertising agents. Methods for floating shares include prospectus, bought deals, private placements, rights issues, and book building. Measures to protect investors include project appraisal, underwriting, disclosure requirements, exchange clearance, and redressal of grievances. Recent trends include aggressive pricing, low liquidity and returns, and economic slowdown.
The document discusses the Indian capital market and the role of the Securities and Exchange Board of India (SEBI). It defines capital markets as markets for trading long-term financial securities like stocks and bonds. The capital market has a primary market where new securities are issued and a secondary market where existing securities are traded. SEBI regulates and oversees the capital markets, controlling stock exchanges, licensing brokers and dealers, auditing performance, and educating investors to increase transparency and prevent fraud.
Kotak Mahindra Bank provides custodial services including safekeeping of securities, processing of corporate actions like dividends and bonuses, foreign exchange services, proxy voting, compliance monitoring, transaction settlement, and customized reporting. As one of India's leading private banks, it has over 30 years of experience in financial services and capital markets. Its custody services are aimed at both domestic and foreign institutional investors investing in Indian debt and equity markets.
This document discusses the nature and scope of financial services. It begins by defining financial services and intermediation. It then describes the traditional and modern activities of financial services, including fund-based activities like underwriting and non-fund based activities like advisory services. Modern activities include project advisory, M&A assistance, and risk management services. Revenue sources include fund-based income from interest and investments, and fee-based income from services. Financial innovation was necessitated by factors like low profitability, competition, economic liberalization, and improved customer expectations.
The document discusses the role of capital markets. It defines capital markets as financial markets where investment instruments like bonds and equities are bought and sold. Capital markets connect investors with surplus funds to companies needing funds. They include primary markets for new stock issues and secondary markets for existing stocks. Capital markets provide investors risk reduction through diversification and liquidity. They provide companies a source of finance and measure of performance. Capital markets help economies through mobilizing savings, allocating resources, and providing market indicators.
The document discusses the stages in channel planning which includes segmentation, positioning, and focus. It defines segmentation as clustering customers based on their expectations, positioning as defining the channel elements to service each segment, and focus as deciding which segments to address. The document also discusses defining customer needs based on expected service levels, defining channel objectives to support customer service, and considering the cost and alternatives of channel systems.
Channel Information Systems
Purpose
Information - Advantages
Classification of Information
Information Process
Developing a Channel MIS
Use of Information
Sources of Data
Competition Tracking
Elements of a Channel Information System
Channel Performance Evaluation
IT System for Channels
Intensive Distribution
Bond immunization is an investment strategy used to minimize the impact of interest rate changes on bond portfolios. It works by adjusting the portfolio duration to match the investor's time horizon. When a portfolio is immunized, its duration equals the investor's time horizon. Maintaining an immunized portfolio requires rebalancing the average duration whenever interest rates change, to keep it equal to the investor's time horizon. This offsets losses from falling bond prices against gains from reinvesting coupon payments at higher rates.
This document discusses loan syndication, which is when a group of lenders provide funds to a single borrower for a large project. Loan syndication often occurs when a single lender cannot provide the full funding needed or when the risks are too high. A lead financial institution coordinates the syndication by organizing the transaction and administering repayments, fees, reporting, and loan monitoring. The document then outlines the six main steps in the loan syndication process, including initial discussions with promoters, assessing the project, locating funding sources, preliminary discussions with lenders, preparing the loan application, and assisting with the project appraisal.
This document presents information on factoring and forfaiting. It defines factoring as the conversion of credit sales into cash by selling accounts receivable to a financial institution. It describes the parties involved as the supplier, buyer, and financial intermediary (factor). It then explains the steps in factoring, types of factoring, costs, and compares factoring to loans and bills discounting. Forfaiting is described as purchasing export receivables without recourse to the exporter. The document outlines the forfaiting process, costs, and compares forfaiting to factoring. It provides a comparative analysis of bills discounting, factoring and forfaiting.
The document discusses the roles and responsibilities of merchant bankers in India according to SEBI regulations. Key points:
- Merchant bankers are regulated by SEBI and involved in public issues, rights issues, open offers, and buybacks.
- They must meet requirements for capital, staffing, experience, and qualifications.
- As lead managers, they perform key functions like pricing issues, marketing, and preparing offer documents.
- Post-issue, they monitor allotments and refunds, file reports, and ensure investor grievances are addressed.
Investors Protection-Grievances and their Redressal for B.Com, M.ComDr. Toran Lal Verma
Investors in India face high risks of fraud and unethical practices. To address grievances, measures have been established to protect investors, including grievance cells in stock exchanges, the SEBI, and Company Law Board. Common grievances are against companies for issues like delayed payments or transfers, and against brokers for delayed deliveries or payments. Investors can seek resolution through these organizations, courts, or by reporting issues to the press. The SEBI and stock exchanges work to resolve complaints, including suspending trading or transferring stocks of non-compliant companies. This aims to restore investor confidence in India's financial markets.
The primary market deals with new security issues and helps transfer resources from savers to users. It involves various intermediaries like merchant bankers, underwriters, and registrars. The main functions of the primary market are origination, underwriting, and distribution of new securities. Origination involves evaluating project viability. Underwriting guarantees minimum subscription. Distribution involves selling securities to investors through brokers and agents. The primary market facilitates capital formation by bringing together investors and those seeking capital.
Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount in exchange for immediate cash. There are various types of factoring, including recourse factoring, where the client refunds amounts for defaults, and non-recourse factoring, where the factor's obligation is absolute. Factoring provides businesses with immediate cash flow and transfers the credit risk to the factoring institution. However, it is a relatively expensive source of financing.
The concept of Cost of capital for MNC is addressed in this ppt
Subscribe to Vision Academy for Video assistance https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
The document discusses the role of merchant banking in appraising projects, designing capital structures, and managing securities issues. It defines a merchant banker as an entity that engages in issue management by arranging the sale, purchase, or subscription of securities. The key functions of merchant bankers related to issue management include designing capital structures, determining appropriate capital market instruments, pricing issues, preparing prospectuses, and selecting other parties like bankers and advertising consultants to assist with securities offerings.
Financial intermediaries include stock exchanges, the Over-the-Counter Exchange of India, the Securities and Exchange Board of India, derivatives, and money market mutual funds. Stock exchanges provide a platform for trading securities while the Securities and Exchange Board of India regulates the securities market in India. Derivatives derive their value from underlying assets and are used for hedging risk or obtaining leverage. Money market mutual funds invest in short-term money market instruments to preserve principal.
The document discusses secondary markets and stock exchanges. It defines the secondary market as the market where existing securities of companies are traded. Investors buy and sell stocks and bonds among themselves in secondary markets, without providing new funds to the issuer. Stock exchanges like the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) provide organized markets for trading these secondary market securities and play an important role in capital formation and liquidity. The BSE and NSE are the largest stock exchanges in India in terms of market capitalization and trade volume.
The document discusses factoring and forfaiting. It provides details on:
1) Factoring involves the sale of book debts or invoices by a firm to a financial institution for an immediate payment, with the factor taking on responsibility for collection.
2) Forfaiting deals specifically with receivables related to deferred payment exports, where the exporter's rights are purchased without recourse.
3) Both mechanisms provide liquidity to exporters and absorb risks like political or conversion risks associated with cross-border receivables.
Letter of Credit - Complete Presentation - (Bcom-Mcom-BBA-MBA-BS)Millat Afridi
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. A letter of credit is extremely common within international trade and goods delivery, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as underwriting the credit risk of the buyer paying the seller for goods.
This document discusses various capital market instruments. It defines capital markets as dealing with medium to long term funds and describes primary roles as raising funds for governments, banks and corporations through stocks and bonds. It then discusses types of capital market instruments including equity (common/preferred stocks), debt (bonds, mortgages), hybrids (convertible bonds) and insurance instruments. The document provides details on features and types of these various capital market instruments.
The primary market deals with the issuing of new securities by companies, governments, or public institutions to raise funds. This is typically done through an investment bank or syndicate of securities dealers through processes like initial public offerings (IPOs) of stock, follow-on public offerings (FPOs), private placements, rights issues, and bonus issues. The primary market creates long-term instruments through which corporate entities can borrow capital. It allows companies to attract new capital, transfer assets into financial assets, and invest money for short or long term goals.
The document discusses the new issue market, which is where new securities or stocks are issued to acquire capital for new or existing companies. It describes the functions of origination, underwriting, and distribution. Various parties involved include managers, registrars, underwriters, bankers, and advertising agents. Methods for floating shares include prospectus, bought deals, private placements, rights issues, and book building. Measures to protect investors include project appraisal, underwriting, disclosure requirements, exchange clearance, and redressal of grievances. Recent trends include aggressive pricing, low liquidity and returns, and economic slowdown.
The document discusses the Indian capital market and the role of the Securities and Exchange Board of India (SEBI). It defines capital markets as markets for trading long-term financial securities like stocks and bonds. The capital market has a primary market where new securities are issued and a secondary market where existing securities are traded. SEBI regulates and oversees the capital markets, controlling stock exchanges, licensing brokers and dealers, auditing performance, and educating investors to increase transparency and prevent fraud.
This document discusses equity shares and how they are issued in the primary market. It begins by defining the primary and secondary markets. In the primary market, companies issue new securities to raise capital. The document then discusses features of equity shares like maturity, income rights, and limited liability. It explains various methods of primary issuance like prospectus offers, private placements, right issues, and book building. It also outlines the roles of intermediaries in the issuance process like lead managers, registrars, bankers and underwriters.
The document discusses various aspects of the new issue market in India including initial public offerings (IPO) where firms issue stock to the public for the first time, and seasoned equity offerings (SEO) where already public firms issue additional stock. It covers the key functions of origination, underwriting, and distribution in new stock issues. It also discusses the roles of various intermediaries that facilitate new issues such as merchant bankers, brokers, and underwriters.
This document discusses the various intermediaries involved in the new issue market for securities. It describes the roles of merchant bankers/lead managers, underwriters, bankers to the issue, registrars to the issue, debenture trustees, and brokers. Merchant bankers manage public issues and ensure regulatory compliance. Underwriters guarantee that unsold shares will be purchased. Bankers to the issue accept application money. Registrars design application forms and manage allotment. Debenture trustees safeguard debenture holders' interests. Brokers procure subscriptions from investors. Each intermediary plays an important but distinct role in facilitating the issuance of new securities.
The new issue market, also called the primary market, facilitates the raising of funds by companies through the initial public offering of securities. It allows companies to issue securities directly to investors. The main functions of the new issue market are to mobilize savings from investors and transfer those funds to companies. Common methods used to issue securities include public issues, rights issues, private placements, and preferential allotments. After being issued, securities are typically listed on a stock exchange for trading in the secondary market.
The document provides an overview of the Indian capital market. It discusses key concepts like primary and secondary markets, types of financial instruments traded (equity shares, bonds, etc.), participants (issuers, investors, intermediaries), regulatory body SEBI and its roles, sources of long-term financing like equity, debt, retained earnings, and venture capital. The capital market helps raise long-term funds for businesses and channels savings of individuals into productive investments. SEBI regulates and develops the capital market to protect investors and ensure its orderly functioning.
White Paper on IPO This study includes the definition, types, procedures, regulatory aspects and various terms associated with issue of initial public offerings (IPOs) in Indian stock market.
This document summarizes the key aspects of raising capital through a primary market public offering in India. It discusses the various methods companies use to raise funds, such as issuing shares, debentures, or global depository receipts. It then describes the functions of the primary market and the parties involved, including lead managers, registrars, underwriters, bankers, and advertising agents. It provides details on the prospectus, book building process, and other placement methods such as rights issues, private placements, bought deals and fixed price offerings. Overall, the document offers an overview of the Indian primary market and the process for companies conducting a public securities offering.
The document discusses the Indian capital market. It has two segments - the primary market where new securities are first issued to investors, and the secondary market which is the stock exchange where existing securities are traded. The key functions of the capital market are to mobilize savings, facilitate capital formation and economic growth. It discusses various instruments like equity shares, bonds, and methods of issuance like IPO, right issue, bonus issue etc. Important participants include brokers, banks, mutual funds. The regulator is SEBI and it oversees raising of capital and trading according to guidelines.
What is Equity Market
How to understand trading in Equity market
How to invest in Equity Market
How to trade in Equity Market
How to earn in Equity Market
The document provides an overview of how companies raise capital through primary equity markets. It defines a primary market as the market where companies issue new securities to raise funds. The process involves companies filing an offer document with regulatory authorities, opening the issue to public subscription, allotting shares on a proportional or lottery basis, and finally listing the shares on a stock exchange. Primary markets play a crucial role in facilitating long-term capital formation for companies.
The document discusses financial markets, specifically focusing on the primary market where new securities like stocks and bonds are first offered to investors. It provides details on the types of financial instruments traded in the primary market, the process for companies to issue equity and debentures, and regulations from the Securities and Exchange Board of India governing primary market activities. The primary market facilitates the transfer of funds from investors to companies raising capital for new projects and expansion.
The document is a sample tutor marked assignment for a business organization course. It contains 5 sample questions and answers on topics related to business such as long-term capital and sources, primary and secondary markets, stock exchanges, warehousing, and factors affecting channel selection. The questions require students to write multi-paragraph answers explaining key concepts and differences between topics. The assignment provides contact information for students to obtain fully solved assignments and previous question papers.
This document provides an overview of how the primary stock market works. It discusses:
1) The primary market allows companies to raise capital by issuing new shares to investors. This helps companies fund new ventures, business expansions, or modernizations.
2) The process involves companies filing an offer document with regulators, opening the issue for public subscription, allotting shares, and ultimately listing the shares on a stock exchange.
3) Pricing can be done through a book building process, where investors bid for shares within a price band, or at a fixed price set by the company.
This book provides basic information about the stock market to the beginners. Your all doubts have been cleared after reading this book related to the stock market investment.
The primary market allows companies to issue new securities to raise capital directly from investors. It involves an initial public offering (IPO) process where a company issues shares on a stock exchange for the first time. The document discusses the key participants in the IPO process like merchant bankers and registrars. It also outlines the steps of preparing and filing an offer document with regulators, opening subscriptions, allocating shares, and ultimately listing the company's shares on a stock exchange. The primary market thus facilitates capital formation for companies through public issuances.
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.
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2. Primary Market (NIM)
Primary market provides opportunity to issuers of securities, Government as well as
corporate, to raise resources to meet their requirements of investment and/or
discharge some obligation.
The issuers create and issue fresh securities in exchange of funds through public
issues and/or as private placement.
3. Features of New Issue Market
1. This is the market for raising long term capital.
2. The primary market is the market where the securities are sold for the first time.
Therefore, it is also called the new issue market (NIM).
3. In a primary issue, the securities are issued by the company directly to investors or by
involving intermediaries.
4. The company receives the money and issues new security certificates to the investors.
5. The primary market performs the crucial function of facilitating capital formation in the
economy.
6. Primary issues are used by companies for the purpose of setting up new business or for
expanding, diversifying or modernizing the existing business.
4. Services of the Primary Market
1. Introduction (Investigating and Advisory Services)
2. Underwriting
3. Distribution
5. Services of the Primary Market
1. Introduction: Starts before an issue is floated in the market.
I. Technical, economic and financial viability to ensure soundness of
the project.
II. Advisory services. (improve the quality)
a) Type of issue
b) Magnitude of issue
c) Time of floating
d) Pricing of an issue
e) Methods of issue, etc.
6. Services of the Primary Market
2. Underwriting:
Underwriting is an agreement, whereby the underwriter promises to
subscribe to a specified number of shares or specified amount of share in
the event of public.
If the issue is fully subscribed, then there is no liability for the underwriter.
If a part of share issues remains unsold, the underwriter will buy the shares.
Thus, underwriting is a guarantee for the marketability of shares.
7. Services of the Primary Market
2. Underwriting:
Advantages of underwriting:
i. The issuing company is relieved from the risk of finding buyer.
ii. The company is assured of getting the minimum subscription within
the stipulated time.
iii. Underwriters undertake the burden of highly specialized function of
distributing securities.
iv. Underwriters provide expert advice about timing of issue, pricing,
size and type of securities to be issued.
v. Public confidence is enhanced when Underwriting is done through
reputed Underwriters.
8. Services of the Primary Market
3. Distribution:
Sale of securities to ultimate investors. This service is performed by
brokers, agents, who maintain a regular and direct contact with
the ultimate investors.
10. Primary Market/New Issue Market
• Issuer
An issuer in the primary market is the entity seeking capital through the
issue of securities. Issuer in primary markets include, Governments,
Public companies, Private Companies, Banks, Non-Banking Finance
companies, Financial Institutions and Mutual Funds.
11. Primary Market/New Issue Market
• Types of Investors
Qualified institutional investors (QIB)
Retail investors:
Non-institutional investors
Employees of the issuing company
12.
13. Primary Market/New Issue Market
• Types of Investors
Qualified institutional investors (QIB): They usually apply in very high quantities. As per the
changes SEBI guidelines, QIBs now have to pay a margin, not the full amount, at the time of
bidding in the book building of an issue (preferential treatment for investment SEBI).
Mutual funds, Scheduled commercial banks, FIs, Insurance co. registered under IRDA. 50%
Retail investors: A retail investor is an individual investor in the Indian Securities market
whose subscription to securities is of a value less than Rs. 2 lakh. 35% of the issue has to
be reserved for them.
Non-institutional investors: Indian resident, HUF, companies, NRIs, Societies and Trusts, etc
who bid for more than Rs 2 lakhs. They need not to register with SEBI. Non-institutional
bidders have an allocation of 15% of shares of the total issue size.
Employees of the issuing company
14. Intermediaries involved in Primary Market
I. Merchant Bankers
II. Lead Managers
III. Registrar of an Issue
IV. Share transfer agent
V. Bankers to the issue
VI. Underwriters
VII. Advertisers
VIII. Printers
IX. Stock-brokers and sub-brokers
X. Depositories
XI. Legal Counsel
15. Role of Intermediaries involved in Primary
Market
I. Merchant Bankers: Assist the company right from preparing prospectus (about the
correctness of all information). A company can appoint more than one MB
provided allocation of responsibilities between MB is properly structured.
II. Lead Managers: Merchant Banker must be appointed as lead manager for
coordinating all issue related activities. The name of LM should appear on the
prospectus.
III. Registrar to an Issue process all applications received from the public and prepare
the basis of allotment. He finalizes the total list of applicants after rejecting invalid
ones. The dispatch of certificates/refund orders are also handled by him. Then
ensures shares are credited to the allottees A/c and refunds are sent to
unsuccessful ones.
16. Role of Intermediaries involved in Primary
Market
iv. Share Transfer Agent: who maintains the records of holders of
securities on behalf of the company.
v. Banker to an Issue are banks those accept applications from the public
on behalf of the company and forwarded to registrar and share transfer
agents.
vi. Underwriters
vii. Stock-brokers and sub-brokers who through their contacts/sources
invite the public for subscribing shares and get brokerage.
17. Role of Intermediaries involved in Primary
Market
viii. Advertisers: The company coming out with public issue must release
advertisements before the issue opens and after it closes as per SEBI
guidelines.
ix. Printers: Printers must comply with the guidelines regarding size of
pages, font size, contents, no. of copies and so on.
x. Depository: With whom they will be placing the shares allotted to the
applicants (NSDL and CDSL) are the intermediaries who hold securities in
DEMAT form on behalf of the shareholders.
xi. Legal Counsel: Related to every legal formalities and execution of
documents.
18. Role of SEBI in Primary Market
1. Prescribing thorough code of conduct for every player of Primary market
for protecting interests of the investors.
2. Prescribing guidelines with respect to various methods that can be
adopted by the company to sell its securities.
3. Laying down rules with respect to duties and responsibilities of various
players of the Primary market.
4. Conducting the inspection of the working of every intermediaries involved.
5. Suspending the certificate of registration granted to the intermediary in
case of any violation of the SEBI’s provisions.
6. Cancelling the certificate of registration in case of repeated defaults.
21. Concepts of Equity/owned capital
• Authorized capital
• Issued capital
• Subscribed capital
• Called-up capital
• Paid-up capital
• Calls-in-arrears/unpaid capital
22. Concepts of Equity/owned capital
• Authorized capital: As per companies act, a company can issue only as much
shares as it has been authorized to by its MOA (Memorandum of
Association).
• Issued capital: The actual number of shares at their face value that have
been issued to investors out of the authorized capital.
• Subscribed capital: The actual amount subscribed by the investors out of
the issued capital by making commitments to pay for the shares.
• Paid-up capital: Any amount of money that has already been paid by
investors in exchange for shares of stock is paid-up capital.
• Called-up capital: The capital which has been called up for payment on
shares issued to them.
• Calls-in-arrears: The amount that remains unpaid.
23. Solution:
1. Authorized capital = Rs. 10,00,000 (1,00,000 shares of Rs. 10 each)
2. Issued capital = Rs. 7,50,000 (75,000 shares of Rs. 10 each)
3. Subscribed capital = Rs. 7,00,000 (70,000 shares of Rs. 10 each)
4. Called-up capital = Rs. 3,50,000 (70,000 shares of Rs. 3 each – final call)
5. Called-up = Rs. 7,00,000 (70,000 * 10)
6. Paid-up capital = Rs. 6,75,000 (70,000 shares* Rs. 5) + (65,000 shares * Rs. 5)
7. Calls-in-arrears = Rs. 25,000 (5,000 shares* Rs. 5)
24. Solution:
1. Authorized capital = Rs. 10,00,000 (100,000 shares of Rs 10/- each)
2. Issued capital = Rs. 7,50,000 (75,000 shares x Rs. 10/- each)
3. Subscribed capital = Rs. 7,00,000 (70,000 shares x Rs. 10)
4. Called-up capital = Rs. 3,50,000 (70,000 shares x Rs. 5)
5. Paid-up capital = Rs. 6,75,000 (70,000 x Rs. 5 + 65,000 x 5)
6. Calls-in-arrears = Rs. 25,000 (5,000 x 5)
25. Sum 2:
The Capital XYZ Ltd.’s MOA discloses of 80,000 shares of Rs. 10 each. Out of
above, the company decides to issue 60,000 shares to investors. The
company requires the shareholders to pay Rs. 5 on application and allotment
and Rs. 5 on 1st call. Applicants have applied for 55,000 shares. All applicants
have paid the call amount, except 4,000 shares.
1. Authorized capital = Rs. 8,00,000
2. Issued capital = Rs. 6,00,000
3. Subscribed capital = Rs. 5,50,000
4. Called-up capital = Rs. 2,75,000
5. Paid-up capital = Rs. 5,30,000
6. Calls-in-arrears = Rs. 20,000
26. Sum 3:
The Capital XYZ Ltd.’s MOA discloses of 80,000 shares of Rs. 10 each. Out of
above, the company decides to issue 60,000 shares to investors. The
company requires the shareholders to pay Rs. 8 on application and allotment
and the balance as a call after 4 months. Applicants have applied for 55,000
shares. All applicants have paid the call amount, except 5,000 shares.
1. Authorized capital = Rs. 8,00,000
2. Issued capital = Rs. 6,00,000
3. Subscribed capital = Rs. 5,50,000
4. Called-up capital = Rs. 1,10,000
5. Paid-up capital = Rs. 5,40,000
6. Calls-in-arrears = Rs. 10,000
27. 27
SHARE CAPITAL: TERMINOLOGIES
Shares
Number of units of capital of a company
Share certificate evidences ownership of shares. Indicates (a) kind of shares (b)
number of shares and (c) distinctive serial number
Demat or dematerialized shares are shares in electronic forms
28. 28
TYPES OF SHARE CAPITAL
(a) Equity Capital/ Common Stock/ Share Capital
Owners of the firm
Residual interest in the profits after payments to creditors and preferred shareholders
are met
(c) Preferred Capital/ Preferred Stock/ Preference Share Capital
Preference over equity shareholders over two aspects
Payment of periodic dividend
Distribution of assets on liquidation of the company
Carries fixed rate of dividend which is payable when the company has earned adequate
profits. They get dividend before equity shareholders
29. 29
TYPES OF SHARE CAPITAL
(c) Preferred Capital/ Preferred Stock/ Preference Share Capital
Cumulative and Non Cumulative Preference Shares
Cumulative: Receive dividends for one or more years in which no dividend was paid.
Preference dividend not paid is ‘dividends in arrears’
Non cumulative: ‘Dividends in arrears’ not payable
Redeemable and Non-Redeemable Preference Shares
Redeemable: Repayable after the period of holding stated in the share certificate
Non- Redeemable: Can not be repaid except at the time of liquidation
Convertible and Non-Convertible Preference Shares
Convertible: Can be converted into equity shares at a predetermined ratio
Non- Convertible: Will always remain preference shares
30. Debentures or Bonds
30
Consists of a written promise to pay principal amount at a specified time and interest at
a specified rate
A debenture certificate is issued to each lender as evidence of the issuing company’s
obligations to the debenture-holder.
The debenture trust deed (also known as bond indenture) is a legal document that
states the rights and obligations of the debenture-holders and the issuer.
31. 31
Characteristics of Debentures or Bonds
Secured and Unsecured Debentures
Debentures which are backed by specific assets to ensure their repayment are called
Secured Debentures.
A mortgage is a legal arrangement for securing a borrowing with immovable assets
such as land, building or embedded plant and machinery.
In a pledge, the borrower gives physical possession of the asset to the lender, e.g.
pawning jewellery with a bank as security for a loan.
Unsecured debentures are backed only by the general creditworthiness of the
issuer, not by a legal interest in any specific asset.
32. 32
LIABILITIES: Non- Current Liabilities
Characteristics of Debentures or Bonds
Term and serial debentures
• When all the debentures of a single issue, mature or come due on a single date are called
term debentures.
• In contrast, Serial bonds are bonds which do not mature or come due on a single date.
Instead, serial debentures mature in instalments on a series of specified dates.
Convertible debentures
• The debenture-holder has the option of exchanging these debentures for shares of
the issuing company.
• A convertible debenture has a stipulated conversion rate of some number of shares
for each debenture.
Callable bonds
• These bonds contain a provision that gives the issuer the right to call the debenture
before its maturity date.
• The price the issuer must pay, known as the call price, is specified in the debenture trust
deed.
33. 33
LIABILITIES: Non- Current Liabilities
Characteristics of Debentures or Bonds
Zero-coupon bonds
• these debentures do not carry any periodic interest payment, or coupon.
• Zero-coupon bonds have two special features:
a) They have low issue price and a high maturity value, and
b) They are issued for long periods.
Deep Discount Bonds
• An extension of ZCB, the DDB is a very long tenor unsecured bond, issued at discount
and redeemed at its face value.
34. Other Aspects of Fixed Income Securities
• Investors’ Perspective of Debt Securities: Stable and assured return.
Suited for investors with less appetite for risk.
Pure debt vs Convertible debt. (evaluations can be based on NPV
approach).
a. NPVC > NPVP = Convertible Debt good option.
b. NPVP > NPVC = Pure Debt good option.
• Issuers’ Perspective of Debt Securities: less cost of capital (debt is
cheaper than equity due to limited risk profile).
Tax break enjoyed on the interest paid on debt securities.
40. Book Building
• Book-building is a process of price discovery used in public offers. The issuer
sets a base price band within which the investor is allowed to bid for shares.
• It is a mechanism where, during the period for which the book for the offer
is open, the bids are collected from the investors at various prices, within
the price band specified by the issuer.
• In this process, the price determination is based on orders placed and
investors can place orders at different prices.
41. Book Building
Floor Price: Floor price is the minimum price at which bids can be made.
Price Band: The offer document may have a floor price for the securities or a
price band within which the investors can bid. The spread between the
floor and the cap of the price band cannot be more than 20%.
Cut-off price: Once the issue period is over and the book has been built, the IB
along with the issuer arrived at a cut-off price. It is the final price at which
the shares are issued to the investors.
Investors bidding at a price below the cut-off price are ignored. So those
investors who apply at a higher than the cut-off price have a higher chance
of getting the stock.
42. Book-Building Process
Company plans an IPO via the book-building route
Appoints Investment Banker
Issues a draft prospectus
Book-runner appoints syndicates members and registered
intermediaries
At close of bidding, book runner and company decide upon
the allocation and allotments
Draft prospectus filled
simultaneously with
concerned authority
Price discovery begins
through the bidding process
43. Book Building Process
1. Appoint one or more MB(s) as book runner(s) and their name shall be
disclosed in the draft red herring prospectus. The LMB shall act as the lead
book runner and shall be primarily responsible for the BB. If more than one
book runner, they shall either be co-book runner or syndicate members.
2. The book runner(s)/syndicate members shall appoint stock-brokers who are
members of the recognized stock exchange and registered with the SEBI, for
the purpose of accepting bids, applications and placing orders with the issuer
and ensure that the stock-brokers are financially capable.
3. The lead MB shall file with the SEBI a draft red herring prospectus containing
all the disclosures including total issue size (if applicable), except the price and
the number of specified securities to be offered.
44. Book Building Process
4. Price band (Floor price and cap price)
a. If the issuer opts not to make disclosure of the price band in RHP, then following
shall be disclosed:
• A statement that FP or PB, shall be disclosed at least 2 days before the opening of
bid;
• A statement that the investors may be guided in the meantime by the secondary
market;
• The names and editions of the newspapers where the announcement of the FP or
PB would be made.
45. Book Building Process
5. A public issue shall be kept open for at least 3 working days but not more than 7 days
(3-7 days). In case of revision in PB, may be extended to a maximum of 10 working
days.
6. The issuer shall, after registering the red herring prospectus with the registrar of
companies, make a pre-issue advertisement in one English national daily newspaper,
Hindi national daily newspaper and one regional language newspaper.
7. Bid Analysis: carried out by the book-runner immediately after the closure of the bid
offer date.
8. The book runner and the issuer decide the final price at which the securities shall be
issued.
9. Allotment of securities
46. Bidding Process
1. Shall be through an electronically linked transparent bidding facility provided by recognized
stock exchanges.
2. The lead book runner shall ensure the availability of adequate infrastructure with syndicate
members for data entry of the bids in a timely manner.
3. The syndicate members shall be present at the bidding centers.
4. Every stock-broker shall accept orders from all clients who place orders through certified
syndicate bank.
5. Applicants who are QIBs shall place their bids only through the stock-brokers.
6. The bidding terminals shall contain an online graphical display of demand and bid prices
updated at periodic intervals, not exceeding 30 minutes.
7. The investors may revise their bids.
8. The QIBs shall not withdraw their bids after closure of bidding.
9. The stock exchanges shall continue to display on their website, the data pertaining to book-
built in a uniform format.
47. Difference between Fixed Price and Book Building
Features Fixed Price Book-building
1. Pricing Price at which the securities are
offered/allotted is Known in advance to the
investor.
Price is Not known in advance to the
investor. Only Price Range is known.
2. Demand Demand for the securities offered is known
only after the closure of the issue.
Can be known everyday as the book
built.
3. Payment Payment is made at the time of
subscription wherein refund is given after
allocation.
Payment only after allocation.
48. Types of Primary Market Issuances
I. Public Issue/ Offer through prospectus
II. Offer for Sale
III. Preferential Issues/Private Placement
IV. Right Issues
V. Bonus Issue
49. 1. Public Issue/Offer through Prospectus
Application forms for shares of a company should be accompanied by
a prospectus.
“Prospectus” means any document issued by the company and
includes any notice, circular, advertisement or other document
inviting deposits from the public.
Prospectus is a document by way of which the investor gets all the
information pertaining to the company in which they are going to
invest.
It gives detail information about the company, promoter, directors,
group companies and capital structure, etc.
50. Writing the prospectus
• The most important document the company and the investment bankers must
produce to make an IPO happen is the prospectus. The prospectus is the
massive document that lists all the opportunities, risks, and financial details about
the company that’s selling stock to the public. It’s available to investors,
regulators, and other interested parties.
• At the top of a prospectus, the investment bankers lay out the main details an
investor should be concerned with. Here, in the summary section, investors learn
about the company’s intentions from the deal.
• Investment bankers also try to demonstrate why the company is looking to sell
stock. It’s typical for the investor to get a taste of the size of the company’s target
market. The summary is also a common place for the company’s management
team to lay out their broad objectives for the company.
51.
52. Public Issue
Public Issues can be further classified as:
• Initial Public Offering (IPO): IPO is an offering of a fresh issue of
securities to the public.
• Follow on Public Offering (FPO): Shares issued by a company already
listed on stock exchange.
53. Regulations regarding Issue of Prospectus
1. A company cannot come out with public issue unless draft prospectus is
filed with SEBI.
2. A company cannot file prospectus directly with SEBI. It must be file
through an Investment Banker.
3. SEBI after examining the same, may suggest changes within 21 days (if
any).
4. If the issue size is up to Rs. 20 crore then IB required to file prospectus
with the regional office of SEBI falling under the jurisdiction in which
registered office of the company is situated.
5. If the issue size is <20 crore, IB required to file prospectus at SEBI, Mumbai
office.
6. Prospectus is also required to filed with the concerned stock exchange
along with the application for listing its securities.
54. The role of IB in IPOs
1. The company produces information about its stock sale – (Prospectus).
2. The company takes its story to the streets – (Roadshows).
3. The IBs gather up the investors in the book-building process.
4. Underwriters’ price the deal.
5. Underwriters’ support the IPO.
55. The goals of the sell-side analyst
• Protecting new stocks from being lost and forgotten
• Performing surveillance for investors
• Highlighting anomalies
56. What investors look to sell-side analyst for
• Research reports
• Instant updates
• Industry analysis