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

Face value • Nominal or stated amount

assigned by issuer

Premium • When security sold above

its face value

Discount • When security sold at less

than face value

Classification of issue of shares Issues Public

Initial Public Offering Fresh Issue

Offer for Sale

Further Public Offering Fresh Issue

Offer for Sale

Rights

Private Placement

Initial Public Offering (IPO)

Made by Unlisted Companies

Either Fresh issues of

securities

An offer for sale of its existing

securities

Both for the first time to the public

Advantage of IPO

No Cost of capital Huge amount can be

raised

Brand Value Correct Valuation

Disadvantage of IPO

Disclosure of information

Decision’s take time

Cost of IPO

Parties to IPO

Registrar Underwrit

er

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

1.• Issue of shares or convertible

securities by listed companies

2.• Which is neither right issue

nor a public issue

3.• Faster way for company to

raise equity capital

Issue Price

Price at which company shares are offered

Initially in primary market

Market Capitalization

• Market value of a quoted company 1.

• MC = Market Price * No. of Shares 2.

Difference between Public Issue & Private Placement

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.

Private Placement • Issue is made to a select

set of people.

• An allotment is made to less than 50 persons.

Book Building

A process used in IPOs

For efficient price discovery

Offer price is determined after bid closing date

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

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

1.• Specifies the terms &

conditions of listing

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 IPO’s ?

Online

Offline