The document discusses the new issue market, also known as the primary market, where new securities are issued to the public for the first time, primarily through initial public offerings (IPOs) and seasoned equity offerings (SEOs). It outlines the roles of various participants such as merchant bankers, underwriters, and brokers, as well as methods for floating new issues, including public issues, offers for sale, placement, and rights issues. Additionally, it highlights the role of regulatory bodies like SEBI in protecting investor interests and ensuring market development.

1. NEW ISSUE MARKET
STOCK MARKET
OPERATIONS
UNIT I
By
Dr.M.Devaki
Assistant Professor

2. MEANING
New Issue Market – Primary Market
Issue new securities to the public for the first time.
Equity – Initial Public Offering (IPO)
Debt instruments – Issuing bonds or debentures.
All financial institutions which contribute, underwrite
and directly subscribe to the securities are part of
new issue market.
There are various intermediaries like registrars,
custodians and merchant bankers that are involved
in this activity of issuing new securities.

4. FUNCTIONS OF NEW ISSUE MARKET
 Market where firms go to the public for the first
time through initial public offering (IPO).
 Market where firms which are already trading
raise additional capital through seasoned
equity offering (SEO).

6. ORIGINATION
The work of investigation, analysis and processing of new project proposals.
This function is done by merchant bankers who may be commercial banks, all
India financial institutions or private firms.
THE FUNCTION OF ORIGINATION IS DONE BY :
1. MERCHANT BANKERS
2. COMMERICAL BANKS
3. ALL INDIA FINANCIAL INSTITUTES
UNDERWRITING
It is an agreement between the underwriter and the issuer where by the
underwriter promises to subscribe to a specific number of securities in the event
of public not subscribing to it.
METHODS OF UNDERWRITING
Underwriters In India Classified Two Categories :
1. Institutional Underwriters: LIC,UTI,IDBI,ICICI, Commercial Banks
2. Non Institutional Underwriters : Brokers

7. DISTRIBUTION
It is the function of sale of securities to ultimate investors.
This service is performed by brokers and agents who maintain a
regular and direct contact with the ultimate investors.
It invites the public at large to buy a new issue and
provides detailed information on the company, issue and involved
underwriters.

8. METHODS OF FLOATING NEW ISSUE
The various methods which are used in
the flotation of securities in the new issue
market are :
1. Public issues
2. Offer for sale
3. Placement
4. Rights issues

9. PUBLIC ISSUES
Under this method, this issuing company directly offers to the general
public/ institutions a fixed number of shares at a stated price through
a document called prospectus.
The prospectus must state the following:
 Name of the company
 Address of the registered office
 Existing and proposed activities
 Location of the industry
 Names of Directors
 Minimum subscription
 Names of brokers/ underwriters/ bankers/ managers and registrars
to the issue.

10. OFFER FOR SALE
 This method of offer of sale consists in outright sale of
securities through the intermediary of Issue Houses or
share-brokers.
 In other words, the shares are not offered to the
public directly.
 This method consists of two stages:
1. The first stage is a direct sale by the issuing company
to the issue house and brokers at an agreed price.
2. In the second stage, the intermediaries resell the
above securities to the ultimate investors.

11. PLACEMENT
 Under this method, the issue houses or brokers buy the
securities outright with the intention of placing them with
their clients afterwards.
 Here the brokers act as almost wholesalers selling them in
retail to the public.
 The brokers would make profit in the process of reselling to
the public.
 The issue houses or brokers maintain their own list of clients
and through customer contact sell the securities.
 There is no need for a formal prospectus as well as
underwriting agreement.

12. RIGHTS ISSUE
 It is a method of raising funds in the market by an existing company.
 A right means an option to buy certain securities at a certain
privileged price within a certain specified period.
 Shares, so offered to the existing shareholders are called rights
shares.
 Section 81 of the Companies Act deals with rights issue.
 The cost of issue is minimum.
 There is no underwriting, brokerage, advertising and printing of
prospectus expenses.
 It prevents the directors from issuing new shares in their own name
or to their relatives at a lower price and get controlling right.

13. PLAYERS IN THE PRIMARY MARKET
Merchant Bankers
Registrars to the issue
Underwriters and Brokers
Collecting and Co-ordinating Bankers

14. ROLE OF SEBI RELATING TO NEW ISSUE MARKET
PROTECTION

15. Protecting
the
interest of
investors
To ensure
Developme
nt activities
in Stock
Exchange
Regulate the
business of
stock
exchange
and
activities of
stock
exchange
To
Regulate
Insider
Trading
Process of
Issuance Of
Securities