Corporate finance

presentation
Presented by :
Abhilash
Gurudas kr
Mohammed Khurshid
Sherin richeal
Vyoma renu
Group 3
 Primary market
The primary market is that part of the capital market
that deals with the issue of new securities. Companies,
governments or public sector institutions can obtain
funding through the sale of a new stock or bond issue.

A primary market is a place where companies,

government and other corporate bodies sell new
shares and other financial products which are also
called as financial products.
In primary market trading is not allowed. Like any
newly listed company sells IPO (initial public
offer) then it happens in primary market or
whenever any already exiting company goes public
then at that time it issues an IPO in primary
market.
 Features of primary market

Here, the securities are sold by the company directly

to the investors. However, it is not so in the Secondary
Market.

New security certificates are issued to the investors

once the company receives money from them.

The funds from selling the securities are used by

companies for starting new business or expanding the
existing ones.
The primary market is the market where the securities
are sold for the first time. Therefore it is also called
the new issue market (NIM).

The primary market performs the crucial function of

facilitating capital formation in the economy.
Raising capital in primary market

There are various methods of raising capital in

primary market.
 Offer through Prospectus: Offer through prospectus
is the most popular method of raising funds by public
companies in the primary market. This involves
inviting subscription from the public through issue of
prospectus. A prospectus makes a direct appeal to
investors to raise capital, through an advertisement in
newspapers and magazines.
Offer for Sale: Under this method securities are not
issued directly to the public but are offered for sale
through intermediaries like issuing houses or stock
brokers. In this case, a company sells securities at an
agreed price to brokers who, in turn, resell them to the
investing public.

Private Placement: Private placement is the

allotment of securities by a company to institutional
investors and some selected individuals. It helps to
raise capital more quickly than a public issue.
Rights Issue: This is a privilege given to existing
shareholders to subscribe to a new issue of shares
according to the terms and conditions of the company.
The shareholders are offered the ‘right’ to buy new
shares in proportion to the number of shares they
already possess.

IPOs: A company proposing to issue capital to the

public through the on-line system of the stock
exchange has to enter into an agreement with the
stock exchange. This is called an Initial Public Offer
(IPO).
 IPO Process
The issuance of an IPO is a process with distinctive
stages. the life cycle of an IPO can be understood to
be spread over these steps or stages. The various
stages in the life cycle of an Initial Public Offering are
as follows –

Initialization – In this stage, the company appoints

various entities that are crucial in the management of
the IPO. these entities include the issue managers or
book runners (mostly investment banks) and registrars
to the issue.
Pre Issue Activities – In this stage, the draft offer
prospectus is prepared and submitted to SEBI. The
lead manager may conduct road shows- which are
basically marketing activities- to generate awareness
about the issue.

Submit Prospectus to Stock Exchange – The offer

prospectus is now submitted to relevant stock
exchange for approval. When the date of issue and the
price band (and not the exact price) is decided and
incorporated into the offer prospectus, it becomes the
‘Red Herring Prospectus’.
 Distribution of Red Herring Prospectus and IPO
Forms – The prospectus and the forms are distributed
to retail investors through the syndicate members.

Public Issue – In this stage, the issue is thrown open

to the public and the bids are collected. The public
issue closes at a predetermined date. This stage can be
considered to be the “public face” of the IPO. Price
Fixing – Once all the bids are collected, the lead
managers decide the final issue price, and inform the
stock exchange and SEBI.
Processing of IPO Applications by Registrar – This
is the ‘clerical’ stage, wherein the forms are collected,
checks are processed, share allotment is completed,
shares are transferred to the Demat accounts and any
excess money is refunded.

Listing in the Stock Exchange – Once the date of

listing is decided, the shares of the issuer company are
listed on the stock exchange.
Role of SEBI in IPO
Security exchange board of India plays a major role in
issuing a IPO.
The rules, regulations and procedures relating to public
issues in India are governed by the Securities and
Exchange Board of India (SEBI).
Any company going public in India should get approval
from SEBI before opening its IPO. Issuer company's
lead managers submit the public issue prospectus to
SEBI, provide clarification, make changes to the
prospectus suggested by SEBI and get it approve.
Sebi checks that proper disclosure guidelines are in
place and ensure that only those companies which
have a good track record, sound financial records,
articulate vision of future and clear objective of
maximizing the wealth of shareholder are allowed to
launch IPOs in market

SEBI validate the IPO prospectus and make sure all

the declaration made in this document are correct and
also make sure that document has enough information
to help investors to take decision before applying
shares in an IPO.
The SEBI is the regulatory authority established
under Section 3 of SEBI Act 1992 to protect the
interests of the investors in securities and to
promote the development of, and to regulate, the
securities market and for matters connected
therewith and incidental thereto.
 Any company making a public issue or a listed
company making a rights issue of value of more
than Rs.50 lakhs is required to file a draft offer
document with SEBI for its observations.
The company can proceed further on the issue only
after getting observations from SEBI. The validity
period of SEBI’s observation letter is three months
only ie. the company has to open its issue within
three months period.
Thank you