primary market - bundelkhand university
TRANSCRIPT
INTRODUCTION OF PRIMARY MARKET
Also known as “New Issue Market”
Success of the capital market depends on primary market
Is the market for new issuers
Can be directly bought from the shareholders
Small and medium scale business, enter the primary
market to raise money from the public
Accelerates the process of capital formation country's
economy
RIGHT ISSUE
Right Issue
• When Listed
Companies issues
fresh securities.
• To Existing Share
holder.
• Suites for companies
who would like to
raise capital.
INITIAL PUBLIC OFFER (IPO)
Initial Public Offer (IPO)
Either Fresh
Issue of
securities.
•An offer for
sale of its
existing
securities.
•Both for the
first time to
the public.
PREFERNTIAL ISSUE
Preferential
Issue
Issue of shares or convertible securities by
listed companies Which is neither right issue nor a
public issue Faster way for a company to raise equity
capital
FEATURES OF PRIMARY MARKET
This is the market for new long term equity capital.
The primary market is the market where the securities are sold for the first tim
e.
In a primary issue, the securities are issued by the company directly to investors.
The company receives the money and issues new security
certificates to the investors.
Primary issues are used by companies for the purpose of setting up new business
or for expanding or modernizing the existing business.
The new issue market does not include certain other sources of new long
term external finance
Borrowers in the new issue market may be raising capital for converting private
capital into public capital; this is known as "going public."
FUNCTION OF PRIMARY MARKET
Household Savings
Global Investments
Sale of Government Securities
Primary Market Participants
Market Risk
THE NEED FOR PRIMARY MARKET
To raise funds for certain purpose.
To create market for new issues of securities.
To establish the magnitude of the market.
To mobilize Resource the economy.
For overall development of companies.
DIFFERENCE BETWEEN PUBLIC ISSUE & PRIVATE
PLACEMENT
IN PUBLIC ISSUE
•When issue made for general
public and any investor at large.
•As per companies act, 1956 an
issue becomes public when result
it allotment to 50 persons or more
IN PRIVATE PLACEMENT
•Issue is made to a select set of
people.
•An allotment is made to less than 50
persons
IMPORTANCE OF PRIMARY MARKET
It studies needs, wants and expectations of the customers.
It finds out reactions of customers to products of the
company.
It evaluates company's sales promotion measures for suitable
adjustment and improvements.
It studies current marketing problems and opportunities for suitable
follow up.
It suggest introduction of new products, modification of
existing products.
It studies marketing competition, channel of distribution and pricing for
suitable changes if necessary.
It find methods for making the product popular and
raising its goodwill and marketing reputation.
DIS-CLOSURE OF PRIMARY MARKET
The directors need to submit a copy of prospectus to the
concerned authorities
After that the prospectus is approved for initial public offering.
Possible financial risks involved in running the business, financial
arrangements made, detail list of the names and particulars of all
those involved in companies and other important matters to be
clearly stated in prospectus.
Last fiscal year shows17 companies got approval to float their primary
shares
31 listed companies were allowed to issue right shares.
DIS-CLOSURE OF PRIMARY MARKET
Yet the depreciating value of securities has
reduced the market capitalization of the
secondary market.
The capital market regulator shave witnessed the regist
ration of bonus shares worth Rs 4.41 billion of 62 com
panies and promoters shares worth Rs 1.8 billion of 18
companies in the last fiscal year.
The issuance of shares worth Rs 7.77 billion in fiscal
year 2010-11.
Every public company must publish its prospectus
before issuing securities.
PROCESS OF PRIMARY MARKET
Originating the Securities
Underwriting the Securities
Formation of Syndicate
Risk Diversification
Distribution of Securities
Stabilization of the Market
ROLE OF AN ISSUE MANAGER
Easy floatation
Financial consultant
Underwriting
Market makers
Due diligence
Coordination
Liaison with SEBI
ROLE OF UNDERWRITER
Primarily responsible for subscription of
the unsold portion of the securities .
And also to make payment for the related
security.
SUBSCRIPTION RATIO
For shares
The original cost of the stock shown on the certificate.
For Bonds
The amount paid to the holder at maturity.
For a Debt Security,
Face value is the amount repaid to the investor when the bond matures (usually
, Government securities and corporate bonds have a face value of Rs. 100).
The price at which the security is traded depends on the fluctuations in
the interest rates in the economy.
Securities are generally issued in denominations of 5, 10 or 100 known as the Face
Value or Par Value of the security.
CONCLUSION
PRIMARY MARKET
Securities market plays a pivotal role in mobilizing savings
and channelling them in productive purposes and many more.
It provides the channel for sale of new securities.
It helps government and corporate to raise resources to mee
t their requirements of investment and/or discharge some
obligation.
Indian capital market now is passing through a be
Arish situation.
Finally, it is a vital part of the economy.