Primary Market - Bundelkhand University

UNDER THE GUIDANCE OF –

SUBMITTED BY-

PRIMARY MARKET

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

METHODS OF PRIMARY MARKET

Right Issue Initial Public

Offer (IPO)

Preferential

Issue

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.

THANKYOU