Post on 05-Apr-2018
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PREPARED BY:-Sumit Kumar 1135
Yash Deliwala 1141
Sourbha Deshpande 1128Awasf Khan 1116
Nadeem Khan 1119
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Need for long term Finance
For modernization, expansion,diversification
Huge quantities reqd., irreversibledecision
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Equity Shares are issued and are traded everyday in the stock
market.
Equity share holders only get dividend after preference
shareholders & debenture holders.
The returns on the equity shares are not at all fixed. It depends
on the amount of profits made by the company.
The board of directors decides on how much of the dividends
will be given to equity share holders. Share holders can accept
to it or reject the offer during the annual general meeting.
Equity shareholders have the right to vote on any resolution
placed before the company.
EQUITY SHARES
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ADVANTAGES
High Return Easily Transferable.
These can be easily liquidated.
Right to vote
Right to choose the board of directors.
Equity share holders have the right to oppose any of the decisions taken
by the board of directors.
DISADVANTAGES
High Risk In worst cases less privilege given to equity share holders.
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These are other type of shares. The
preference shares are market instrument
issued by the companies to raise the capital.Preference shares have the characteristics
of both equity shares and debentures.
Fixed rate of dividends are paid to the
preference share holder as in case of
debentures, irrespective of the profits earned
company is liable to pay interest to
preference share holders.
PREFRENCE SHARE
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Preference shares are divided into:
Cumulative & Non cumulative shares
Redeemable & Non-redeemable
Convertible & Non-convertible shares
Participating and non-participating
TYPES OF PREFERENCE SHARES
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ADVANTAGES
These yield fixed rate of returns Its a hybrid instrument having some of the characteristics of
debentures and equity shares.
DISADVANTAGES They do not provide the investor with any of the voting
rights.
If the company gets huge profits then they wont get any
extra bonus.
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ISSUE OF SHARES
Prospectus
Application
Repayment/dividend
Allotment
Detail of a Company & Shares in Prospectus.
90 % application is necessary
If excess application received then company issue
shares by pro rata basis
full amount can be called up by company at the
time of application or it can be paid up in
installments also (calls)
share of the company may be issued in any of the
following three ways:
1. At par;
2. At premium; and
3. At discount.
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Instrument of debt executed by the company
A certificate of loan
Company pays pre specified percentage of
interest Part of the company's capital structure
Debentures are generally secured against thecompanys assets
Convertible debentures can be either fully orpartly converted into Shares
Convertible debentures may carry a lowerrate of interest
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DEBENTURES
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Security Point of Viewi. Secured Debentures
ii. Unsecured Debentures
Tenure Point of Viewi. Redeemable Debentures
ii. Perpetual Debentures
Mode of Redemption Point of View
i. Convertible Debenturesii. Non-Convertible Debentures
TYPES OF DEBENTURES
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ADVANTAGES
1. Control of company is not surrendered to debenture holders becausethey do not have any voting rights.
2. Interest on debenture is an allowable expenditure under income tax
act, hence incidence of tax on the company is decreased.
3. Debenture can be redeemed when company has surplus funds.
DISADVANTAGES
1. Cost of raising capital through debentures is high of high stamps duty.
2. Common people cannot buy debenture as they are of high
denominations.3. They are not meant for companies earning greater than the rate of
interest which they are paying on the debentures.
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ECB
External Commercial Borrowings
(ECB) refer to commercial loansavailed from non-resident lenderswith minimum average maturity of 3
years.ECB can be accessed under two routes
Automatic Route outlined in
Paragraph I (A)Approval Route outlined inparagraph I (B).
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Automated route
Eligible borrowerscorporate and Units in SEZtrusts and non profitmaking org. not eligible
Amount and maturityECB up to USD 20 million or equivalent in a financial
year with minimum average maturity of three years.ECB above USD 20 million and upto USD 500 millionor equivalent with a minimum average maturityaverage maturity of five years.ECB upto USD 20 million can have call / put optionprovided the minimum average maturity of threeyears is complied with before exercising call / putoption.
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Approval route
Eligible BorrowerFinancial institution dealing in infrastructure andexport financeBanks & Financial institution (in textile and steel)Corporate (industrial or infrastructure)
NGO engaged in micro finance activitiesAmount & maturity
Corporate can avail of ECB of an additional amountof $250 million with average maturity of more than10 yearsCorporate in infrastructure can avail ECB up to $100million and Corporate in industrial sector can availECB up to USD 50 millionNGOs engaged in micro fnance activities can raise
ECB up to USD 5 million during a financial year
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Commodity BondsA commodity-backed bond is an investment term referring to a type
of bond whose value is directly related to the price of a specifiedcommodity.
Most bonds have a fixed value determined at the time of purchase. Acommodity-backed bond, however, can experience fluctuations invalue because its value is tied to the value of its underlying
commodity.
Commodity-backed bonds are frequently used to hedge againstinflation and other economic variables.
Also called gold bonds, commodity-backed bonds carry more riskthan traditional bonds because the value of the underlyingcommodity is not guaranteed.
There is the possibility, however, of achieving higher returns with a
commodity-backed bond versus a traditional bond.
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