Primary markets allow companies to raise fresh capital from investors. There are three main methods of raising funds in primary markets: public issues like IPOs and FPOs, rights issues which allow existing shareholders preemptive rights to purchase new shares, and private placements where companies directly sell new shares to select investors. Public companies, banks, financial institutions, and governments use primary markets to mobilize capital through securities like shares issued via prospectuses, right offers, or private placements to investors. Intermediaries help facilitate the sale and purchase of new securities in primary markets.

1. Primary Markets

2. Primary Markets
• Topics
– Concept
– Methods of Raising Funds
• Public Issue
• Rights Issue
• Private Placements

3. Primary Markets
Concept

4. Primary Market- Concept
• Definition – A Primary Market is a market for new issues.
Hence also called the new issues market and a market for
fresh capital.
• Fund Mobilization – It is achieved in the following manner:
– Prospectus or Public Issues
– Rights Issues
– Private Placements
• By –
– Government Companies, non government public limited
companies(private sector), public sector undertakings, banks
and financial institutions.

5. Primary Market- Concept
• 3 Categories of Participants
– Issuers of securities
– Investors in securities
– Intermediaries – Renders services to both issuers and investors.
• Enables the sale and purchase of securities
– Intermediaries to an issue
• Merchant Bankers or Book Running Lead Managers – Handles the pre
issue and post issue activities.
• Registrar to the issue – finalise the list of eligible allottees, crediting of
shares to demat accounts and dispatch of refunds
• Bankers to the Issue – activities relating to collecion of management
accounts, dispatching refund amounts.

6. Methods of Raising Funds

7. Primary Market – Methods of
Raising Funds
• Primary Issues are classified into
– Public Issue
• IPO – A first time offer of sale of securities by an
unlisted company
• FPO – An offer of sale of securities by a listed
company
– Rights Issue
• An offer of Sale of Securities to existing
shareholders.

8. Primary Market – Methods of
Raising Funds
– Private Placement
• Private Placement (Unlisted Companies) – Direct sale
of securities to some selected people or to financial
institutions
• Preferential Isssue – Allotment of shares to some select
group of persons in terms of provision of Chapter XIV
of SEBI(DIP Guideline)
• Qualified Institutions Placement(For listed Companies).
– Bonus Issue – Another way to raise capital.
• This does not bring in any fresh capital.
• Bonus is the capitalisation of free reserves.
• Enables the company to restructure its capital.

9. Primary Market – Methods of
Raising Funds
• Increases the Company’s equity capital
• Primary issuance by companies are
governed by the SEBI in terms of
SEBI(Issue of Capital and Disclosure
Requirements) Regulations, 2009.

10. Primary Markets – Public Issue
• Public Issue
– 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 public.
– Follow on Public Offering(FPO) – It is an offering of
either a fresh issue of securities or an offer for sale to
the public by an already listed company through an
offer document.
– Prospectus is an offer document in case of a public
issue.

11. Primary Markets – Rights Issue
• Rights Issue –
– It is the issue of new shares in which the
existing shareholders are given pre-emptive
rights to subscribe to the new issue on a pro
rata basis.
– The Rights are given in the form of Offer to
existing shareholders to subscribe to a
proportionate number of fresh shares at a pre-
determined price.
– To expand, diversify, restructure

12. Primary Markets – 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 number of investor
can go only up to 49. These investors are
select Financial Institution, corporates,
banks and high net worth individuals.

13. Rohit Kochhar