PRIMARY MARKET

Primary Market
provides the channel for sale of new securities to raise resources to meet their requirements issue the securities in domestic market and/or international market.

Terminology
Nominal or stated amount assigned by issuer When security sold above its face value

Face value Premium

Discount

When security sold at less than face value

Classification of issue of shares

Fresh Issue Initial Public Offering Offer for Sale Public

Fresh Issue Issues

Rights Private Placement Further Public Offering Offer for Sale

Initial Public Offering (IPO)

Made by Unlisted Companies

Either Fresh issues of securities

An offer for sale Both for the first of its existing time to the public securities

Advantage of IPO

No Cost of capital

Huge amount can be raised

Brand Value

Correct Valuation

Disadvantage of IPO
Disclosure of information

Decisions take time

Cost of IPO

Parties to IPO

Registrar

Underwriter

Lead Manager

Merchant Banker

Who decides the price of an issue?

Fixed Price
When issuer & Lead Merchant Banker fix a price

Price discovery through Book Building

When the company and Lead Manager stipulate the price and leave it to market forces

Further Public Offering

When an already listed company makes

Either fresh issue of securities to the public

Or an offer for sale to the public Through offer document

Rights Issue

When listed company issue fresh securities To existing shareholder Suites for companies who would like to raise capital

Private Placement / Preferential Issue

Issue of shares or convertible securities by listed companies
Which is neither right issue nor a public issue Faster way for company to raise equity capital

1.

2.

3.

Issue Price
Price at which company shares are offered

Initially in primary market

Market Capitalization

1.

Market value of a quoted company

2.

MC = Market Price * No. of Shares

Difference between Public Issue & Private Placement

Public Issue Private Placement
When issue made for Issue is made to a select general public and any set of people. investor at large. As per companies act, An allotment is made to 1956, an issue becomes less than 50 persons. public when result it allotment to 50 persons or more.

Book Building

Cut Off Price

Any price which above the floor price Decided by Issuer & Lead Manager After considering the book & investors appetite for the stock

Floor Price

It is the minimum price at which bids can be made

Price Band
The prospectus may contain
Either the floor price for the securities Price Band within which the investor can bid

Cap should not be more than 120% of the floor price

Price decided by The Company consultant with The Merchant Banker

Documents in IPO

Prospectus

Draft Offer Document

Abridged Prospectus

Draft Offer Document

Offer document in draft stage

Filled with SEBI

At least 2 days prior to the filling of the offer document with ROC

Abridged Prospectus
Shorter version of the prospectus

Contains all the salient features of a prospectus

Applications form of public issues.

Lock in
Freeze on the sale of shares for a certain period of time Ensure that company should continue to hold some minimum percentage After public issue

Listing of Securities
Admission of securities of an issuer to trading

Dealing on a stock exchange through a formal agreement

Provide liquidity and marketability to securities Provide mechanism for effective control & supervision of trading

Listing Agreement
Specifies the terms & conditions of listing

1.

2.

Disclosures shall be made by a company on continuous basis to the exchange

Delisting of Securities
Permanent removal of securities of a listed company

From the stock exchange

Securities of that company no longer be traded that stock exchange

How to apply in IPOs ?

Online

Offline