Presentation on

PRIMARY MARKET ISSUERS AND INVESTORS

Submitted to : Vinod Verghese Prepared by : Pankaj Katharotiya [En. No.- 2019]

C.K.Pithawalla Institute of Management

Primary Market :
The primary market is the market place for fresh issuance of equity and long-term debt securities. An essential feature of the primary market is that it has to be driven by new issues of securities by different issuers. Each issue made adds to the floating stock of such securities in the secondary market.

Primary Market Issuers :

Companies incorporated under the Companies Act prescribed that only a public company having a share capital can issue shares to the public for subscription. A public company shall not have any of the restrictions in its articles of association that shall prevent it from making a public offer of equity or debt. Under the Act, companies can be privately owned or owned by the Governments, either Central or Stat Government companies. A subsidiary of a government company shall also be deemed to be a government company. For example IOC,BPCL,HPCL,HMT,Maruti Udhyog Ltd,SAIL,IPCL etc.

(cont) The other type of entities are corporation incorporated either under a Central Act, or a State Act or a Provincial or Local Law. The central corporations listed in stok market are LIC,GIC,NTPC,Airport Authority of India and others. Stat corporation are incorporated under respective Acts passed by state legislatures such as the transport corporation, urban development and etc. Local and private bodies include municipal bodies and others that have a revenue collecting authority in a particular area.

Primary Market Investors :

Primary market investors can be basically differentiated into tree categories i). Institutional Investors. ii). Non- Institutional Large Investors [High Networth Investors (HNIs)]. iii). Small or Retail Investors. The Institutional Investors and HNIs comprise the nonretail category. The essential feature that distinguishes retail investors from the non-retail category is their status and the size and purpose of investments. Retail investors are mostly investment oriented while non-retail investors are mostly in the business of investment.

Institutional Investors and HNIs :

There are several categories of large investors in Indian capital market, some of whom are institutional investors and the rest are non-institutional HNIs. Large non-institutional investors are those who invest large corpus of funds in the securities market either because they are investment companies or bodies corporate such as trusts, societies or HUFs. Usually institutional investors are financial institution that have an important role in the financial market such as bank, institutions and mutual funds.

Some large investors categories are as follows:

Public Financial Institution:

- Any non-banking institution engaged primarily in the activity of
financing other entities are known as financial institution. - non-banking institution that have been notified u/s 4A of the Companies Act are given the status of public financial institution. - Notified financial institution are LIC,IDFC,ARCIL,GIC,NHB,IRFC, EXIM Bank and NABARD.

Scheduled Commercial Bank :

- Commercial bank can make investments in corporate securities.
- As per prevalent law, the exposure limits of a bank to capital market is capped at 40% of its networth as on March 31 of the previous financial year. - Within these overall ceiling, the banks direct investment exposures in shares, convertible bonds, units of MFs and all exposures to VCFs should not exceed 20% of its networth.

 Mutual Fund :

- Domestic MF in India that are registered with SEBI under the

SEBI Regulation Act 1996 are a category of eligible QIBs. - It may be noted that all mutual funds constituted in India have to be compulsorily registered with SEBI.

Foreign Institutional Investors :

- FIIs are a separate category of non-resident investors who are

provided the facility of investing in Indian capital market. - FIIs such as pension funds, mutual funds, assets mgt companies, nominee companies are the types of institutions that are eligible to invest in Indian capital market. - These investments are regulated by the SEBI Regulations, 1995. - All FIIs intending to invest in India has need to register with SEBI under the said guidelines.

 Multilateral And Bilateral Development Financial Institutions

- These are a special category of financial institutions that have

been set up under international conventions with a mandate for global or regional financing and economic development. - The International Finance Corporation invests in private sector companies in different countries. - Similarly, there are government sponsored financial institutions in several countries that have the same function.

Domestic Venture Capital Funds :

- VCFs operating in India are known as Domestic venture

capital funds. - These can be of two types: A) Those that are registered with SEBI and B) Those that are not registered - SEBI regulates the activity of such VCFs.

 State Industrial Development Corporations :

- SIDCs are special corporations set up by the respective state

government of various state in India with the objective of promoting industrial development of there state. - These corporations are usually owned entirely by the state government or public financial institutions.

Insurance Companies :
- These are the private insurance companies that operate under

the Insurance Act 1938 and the guidelines issued by IRDA which is the regulator in India. - The amount of investment that can be made by these companies in the capital market is regulated under the provisions of said Act and IRDA guidelines.

 Provident Funds and Pension Funds :

- PFs in India are governed by the Provident Fund Act 1952.

- The investment made by these funds are decided by the governing board under the investments guidelines. - Provident funds and Pension funds have traditionally been conservative and their investment in capital market has been very limited.

Retail Investors :

An individual investors other than financial or non-financial institution are categories in retail investors. SEBI floated the concept of retail individual investors, in relation to the primary market. A retail investor is one who applies for securities of a value not exceeding Rs 1,00,000 in a public offer.