Cash Equities Agenda In this session, you will learn about:
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Presentation on theme: "Cash Equities Agenda In this session, you will learn about:"— Presentation transcript:

Slide1

Cash Equities

Slide2

Agenda

In this session, you will learn about:

Equity Shares- Features, Advantages

and

Disadvantages

Preference Shares - Types, Advantages

and Disadvantages of Preference shares

Depository Receipts - Types

Types of

ADR, Advantages

of ADR and

GDR, Difference

between ADR and GDR

Primary & Secondary Market Issuance/Trading

IPO Process – US & Indian Markets

Stock Exchanges & Financial Centre’s of the World

Slide3

Equity (Ordinary) Shares

Slide4

Equity is also known as Common Stock or

Ordinary

share

capital.

Equity

Those funds can be invested in permanent assets like land , building, plant and machinery, furniture etc. Raising capital by issue of shares is a most important method of raising long-term funds. Equity represents a part of the total share capital of a company.

Company can issue two types of shares: Preference and Equity.Equity is nothing but ownership in a business.What is Equity?

E.g.: If you hold 10 shares of  XYZ Company out of total 1000 shares floated by the company – you are 1% owner in XYZ’s business.

Slide5

Equity, Stock, Shares

EQUITY

STOCK

SHARES

Whether you say shares, equity, or stock, it all means the same

thing!

Stock is a share in the ownership of a company.

Stock

represents a claim on the company's assets and

earnings.

As you acquire more stock, your ownership stake in the company becomes

greater.

Slide6

Stocks offer no guarantee of any returns and can lose value, even in the long run.

Owning a stock or a share means you are a partial owner of the company, and you get voting rights in certain company issues.

1

Investments in stocks can generate returns through dividends.

Over the long run, stocks have historically averaged about 10% annual returns.

3

Primarily invested to earn Capital Appreciation and Dividends

5

2

4

Facts on Stocks and Shares

Slide7

Features of Equity Shares

OWNED CAPITAL

RETURN ON SHARES

Shareholders are the owners of the business.

TRANSFER OF SHARES

They can be freely bought and sold.

Returns are paid out of profits in the form of dividends and in form of Capital AppreciationBENEFIT OF RIGHTS ISSUEEqual RightsEvery shareholder is considered ‘equal’ in the eyes of the company in terms of voting or receiving dividends

Issue of additional stock of the company at a discount due to loyalty and goodwill.

Slide8

Advantages of Equity Shares

So, what do you gain by investing in equity shares?

Capital appreciation in case the company performs well.

Liability is limited to the number of the shares held.

Gives you an option to purchase additional shares of the company at a discounted price

Owner of the company.

Received in form of Cash & Stock Dividends

A company will declare bonus shares to every shareholder. Consider this to be a free form of

income

DIVIDENDCAPITAL GAINLIMITED LIABILITY

OWNERSHIP RIGHTSRIGHTS ISSUE

BONUS SHARES

Slide9

Disadvantages of Equity Share Investment

And what could you possibly lose by investing in equity shares?

DIVIDEND

Dividends are not mandatory to be provided by the company*.

FLUCTUATING PRICE

Fluctuations in market may lead to capital

depreciation.

LIMITED CONTROL

Control on the company is limited to the amount of stock holding.

Microsoft (MSFT) issued its first dividend 17years after going public!!

Slide10

Share Capital

If the allocation price of shares is greater than their par

value, the

shares are said to be at a premium.

Authorized Capital

Issued CapitalIt refers to the portion of a company's equity that has been obtained(or will be obtained) by trading stock to a shareholder forcash or an equivalent item of capital value.

It is also used to describe the number and types of shares that compose a company's share structure.price of shares

p

ar value

Slide11

Types of Share Capital

Share Capital

(Equity & Preference)

Authorized Share Capital

Issued Capital

Un-Issued Capital

Subscribed Capital

Un-Subscribed Capital

Called Up Capital

Paid CapitalUnpaid Capital

Slide12

Authorized Share Capital

The number of stock units that a publicly traded company can issue as stated in its Articles of Association (AOA)

Company X

Shares

Capital

Individuals

Slide13

Types of Share Capital – Authorized Capital

Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly.

Another reason to keep shares, is to retain a controlling interest in the company.

Authorized share capital is also referred to, at times, as registered capital.

It presents the upper boundary for the actually issued share capital.

FormulaShares Authorized = Shares Issued + Shares Unissued

Slide14

Calculation of Authorized Share Capital

Formula

Authorized

Share Capital =

Number

of

Permitted Shares X Par ValueExample

We will issue 1,000 shares of Rs 10 each.

Authorized Share Capital: Rs. 10,000

Par Value refers to the stock value as stated in the Company Charter.

This is also known

as

Face Value

.

PAR VALUE

Slide15

Types of Share Capital – Issued Capital

It is the total of the share capital issued (allocated) to shareholders.

The total of the share capital issued (allocated) to shareholders which may be less or equal to the authorized capital.

It is that amount which the board of directors and/or shareholders have agreed to allocate. Issued shares are the sum of outstanding shares and treasury shares.

Shares outstanding are those issued shares which are held by the investors in the company.

Example

We will issue 1,000 shares of Rs 10 each.

We will issue only 300 shares of Rs 10 each.

Issued Share Capital: Rs. 3,000

Authorised Share Capital: Rs. 10,000

Authorized Share Capital

Issued Capital

NOTE

Slide16

Market Capitalization

Example

If a company has 15million shares outstanding, and its current market price is Rs 20, then its market capitalization is Rs. 300 million

The total value of the company or market in terms of the outstanding shares

Is calculated by multiplying the shares by the current market

price.Also known as Market Cap (MC)

Market CapitalizationLarge CapMC > $10 bn

Mid Cap

MC $2-10 bnSmallCapMC < $2 bn

Slide17

Preference Shares

Slide18

What are Preference Shares?

Preference

shares

are those shares which carry preferential rights with regards to the payment of dividend and on repayment of capital in case of winding up of the company.

DIVIDEND:

The

rate of dividend on these shares is fixed and the dividend on these shares must be paid before any dividend is paid to ordinary shares.

Directors, however, may decide not to pay any dividend to any class of shareholders even if there are sufficient profits. But, if any how, they decide to pay the dividend, preference shareholders will get the priority to pay the ordinary shareholders.

Slide19

Types of Preference Shares 

Cumulative and Non Cumulative Shares

Redeemable and Irredeemable Shares

Convertible and Non-Convertible Shares

Participating and Non-Participating Shares

TYPES OF PREFERENCE SHARES

Slide20

Non–Cumulative preference shares do not get accumulated dividends.

All missed dividends are not paid

They will only get the dividends for the year 2014

Types of Preference Shares(Contd.)

Dividends

which are not paid in the years the company makes a lossSuch ‘missed’ dividends are accumulated and paid together in the year the company makes a profit. For e. g.: Dividends are not paid out for 2012 & 2013. When they dividends are finally paid in 2014, the Cumulative shareholders will receive the dividends for 2012, 2013 & 2014.

Cumulative Non-Cumulative

Slide21

Types

of Preference Shares(Contd.)

Irredeemable preference shares are not redeemed by the issuing company

They are only paid back at the time of liquidation

Shares which are redeemed by the issuing company at a future date

The price is also pre-agreed in rare casesUsually redeemed after 20yearsRedeemable

Non-Redeemable

Slide22

Non-convertible preference shares cannot be converted to common shares.

They remain as Preference shares during their whole life

Converted into a number of shares of the company's common stock after a predetermined time span or on a specific date.

The two factors used are the conversion ratio and conversion price

Convertible

Non-Convertible

Types of Preference Shares(Contd.)

Slide23

Receives a fixed dividend

Does not participate in any surplus dividends

Shareholder can participate in the surplus profits of the organization even after dividend for equity shares are paid.

Sometimes are also paid the extra dividend which is paid to the Equity shareholders

For e. g.; If the holders have a dividend of Rs 10/-, and the Equity shareholders are paid a dividend of Rs 14/-, then the Participating Preference shares are paid Rs 10 + Rs 4 as dividends.

ParticipatingNon-Participating

Types of Preference Shares(Contd.)

Slide24

Advantages of Preference Shares

They can vote in matters concerning their own interest.

is limited to the number of the shares held.

Received in form of Cash & Stock Dividends

FIXED INCOME

PREFERENTIAL RIGHT

VOTING RIGHTS

They have preferential rights over common shares in the event of dividend payment and liquidation.

Slide25

Disadvantages of

Preference Shares

Dividend being fixed they cannot take advantage of surplus profits except in the case of participating preference shareholders

.

Since dividend is fixed they may receive fewer dividends if the company issues higher dividend to common stockholders

.

FIXED INCOME

NO VOTING RIGHTS

NO CLAIM OVER SURPLUS

They can only vote in matters concerning their own interest and not otherwise.

Their ownership does not guarantee ownership over any assets of the company.

NO GUARANTEE OVER ASSETS

Slide26

Difference between Equity and Preference Shares

Equity Shares

Preference Shares

Dividend on equity shares are paid after dividend preference shares are paid.

Preference shares are paid dividend before equity

shares.Rate of dividend is decided by the Board of Directors.Rate of dividend is fixed at the time of the issue.Equity shares cannot be converted to preference shares.Convertible preference shares can be converted into equity

shares.Equity shareholders have voting rights.Preference shareholders do not have voting rights except for matters concerning their interest.At the time of winding up, equity shareholders are paid after preference shareholders.At the time of winding up, preference shareholders are paid before equity shareholders.

Slide27

Priority for Profit Distribution

Given that a company has decided to make available an amount for distribution,

this

is the order in which the funds are allocated:

Cumulative Preferred Stock

Non - Cumulative Preferred StockCommon Stock

Other Preference Stock

Slide28

Depositary Receipts

(DRs)

Slide29

What is a Depository Receipt?

COMPANY A

GLOBAL DEPOSITORY

LOCAL DEPOSITORY’S CUSTODIAN

Depository Receipt

Company Shares

A

Depository

R

eceipt (DR) is a negotiable certificate that represents a company's publicly traded debt or equity.DRs

are created when a company's shares are delivered to a local depository's custodian, which instructs its global depository to issue the DRs.

10 shares

1 DR

=

Ratio can be customized

Slide30

What is a Depository Receipt?

COMPANY A

Depository Receipt

DR’s facilitate trading of foreign securities.

Over the counter

On Exchanges

Capital Gain

Trading

DR’s facilitate trading of foreign securities. They are either traded on an exchange or over the counter market and is used to raise capital (only exchange traded).

Slide31

Broker

Parties Involved in a Depository Receipt

ISSUER

Depository

Custodian

Investment Banker

Lawyers

Accountants

DR’s are created when a company's shares are delivered to a local depositary's custodian, which instructs its global depositary to issue the DR’s.

Slide32

Depository Receipt - An Illustration

FOREIGN

LOCAL

Indian Company X

A company

in

India has fulfilled the requirements for DR listing and

now

wants to list its publicly traded shares on the NYSE.Broker/Merchant Banking

NYSE

CustodianDepository Bank

Contacts broker to make purchase

Purchases ordinary shares and hands them to the depository bank’s custodian

On the same day, Transfers shares to Custodian Bank

Custodian notifies Depository bank, who then issues DR’s

Issues the DR on exchange

The DRs represent the local US shares and can be traded freely on NYSE

Example

Slide33

Features of Depository Receipt

DRs are 

traded on a local stock exchange

DRs are 

physical

certificatesDRs provide access to international stock exchanges

without going through the tedious process of listing.DRs give access to international currenciesUsually, DR’s are issued for every 10 shares, but the ratio can be customized.

Slide34

Types of Depository Receipts

TYPES OF DEPOSITORY RECEIPTS

American Depository Receipt (ADRs)

Global Depository Receipt (GDRs)

Indian Depository Receipt (IDRs)

Slide35

American Depositary Receipts (ADRs)

Slide36

American Depository Receipts (ADRs)

ADRs

have been introduced to the financial markets as early as

April 29, 1927

, when the investment bank

J. P. Morgan launched the first-ever ADR.HISTORY LESSONAMERICAN DEPOSITORY RECEIPTS MAKE UP OVER 50% OF THE DEPOSITORY RECEIPTS ISSUED GLOBALLY

50%

Of DRs Issued Globally

DID YOU KNOW?

Slide37

American Depository Receipts (ADRs)

ADRs

represent shares of

non-US

companies and trade on

American Stock Exchanges.

PRICES IN US DOLLARDIVIDENDS IN US DOLLAR

ADRs are traded just like US stocks on the

US Stock ExchangeThey carry voting rights as the DR’s are representative of the underlying company’s shares.

The prices of the ADR usually track the underlyer’s

prices in the domestic market.

Slide38

Workflow of an ADR

Russian Gas Oil Company

Local Custodian

Depository

ADR

Investors

Slide39

Workflow of an ADR

So lets say a Russian gas company wants to get

its share traded in America via an ADR.

It approaches a depository in US which can

facilitate the issuance.

The depository will get in touch with local custodian who will collect the shares from the company

Once the shares are acquired by the local custodian, the depository will issue ADRs to local investors in US which will be a receipt.Understand the investors in US will not be holding shares but a document which mentions their share holding.

Slide40

Workflow of an ADR

the

price of the Russian gas company is at

RUB

150

.Each DR consists of

10 shares.The current USD/RUB exchange rate is: 60The Value of each ADR will be: (10*150) /

60

= $ 25WHAT WILL BE THE VALUE OF THE ADR?

Slide41

Types of American Depository Receipts

SPONSORED

ADRs

UNSPONSORED

ADRs

There are two types of ADRs:

Approximately half

of all ADR programs in

existence today are

unsponsored.

DID YOU KNOW?

Slide42

Sponsored ADRs

An American depositary receipt (ADR) issued by a

depository/custodian on

behalf of the foreign company whose equity serves as the underlying asset.

Sponsored ADRs can be listed on major

NY exchanges

. A sponsored ADR creates a legal relationship between the ADR and the foreign company, which absorbs the cost of issuing the security..

Foreign companies use ADRs in order to tap into capital markets abroad. Investors who may typically focus on domestically listed companies are given the opportunity to obtain returns from higher growth emerging markets

Slide43

Unsponsored ADRs

Trade

on the OTC market

Without consent

of underlying company

Issued

in accordance with market demand

Issued by more than one Depository Bank

S

ervices only the ADRs it has issued

No voting rights

Slide44

Advantages of American Depositary Receipt

Diversification

It enables an American investor to invest in a Non-American company and diversify his portfolio without the hassle of geographical or currency restrictions.

Liquidity

As it is on stock exchanges.

Allows raising of Capital

It allows a company to raise capital in the USA, while making itself more well-known in their markets.

Slide45

Disadvantages of American Depositary Receipt

High Fee

Receipts are subject to high fees while buying and selling.

Lack of information

Only the positive image of the company is usually portrayed by the depository to the potential investors

Forex risk

The value of the ADR and the dividends issued by the underlyer company are exposed to changes in the FX rates

Slide46

Examples of ADRs by Indian Companies

Examples of ADRs

Slide47

Global Depositary Receipts (GDRs)

Slide48

Global Depository Receipts

Global D

epository

Receipts (GDR)

are receipts

which represents ownership of a foreign-based corporation stock shares which are traded in numerous capital markets around the world.Home countryGDRsForeign Markets

Slide49

Global Depositary Receipts

Slide50

How do Global Depository Receipts Work?

 

One ITC

share in Indian

market:

Rs 1000, i.e. 10 Euros The Bank buys 100 shares of ITC.

 HSBC issues in the ratio 10:1 in foreign market. 1 GDR represents 10 ITC shares, i.e. 100 Euros

The subsequent

price is determined by market

forces.

Example

Slide51

Advantages of

Global Depository

Receipt

Increase

not only volumes on local and foreign markets

Exchange of information, technology, regulatory procedures, and market transparency.

It enables an investor to invest in a Non-Domestic company and diversify his

portfolio

DIVERSIFICATIONINCREASING GLOBAL TRADE

Slide52

Disadvantages of Global Depositary Receipt

Forex risk while paying dividends

Dividends are paid in a foreign currency which is then subject to volatility in the

forex

market.

Cannot be split

A GDR represents a number of shares in one receipt and so cannot be traded in parts.Beneficial for HNIDue to the high investment in buying a GDR, it is a good tool for only HNI investors

Slide53

Examples of GDRs

Companies that issue GDRs

Slide54

Examples of GDRs Traded on Stock Exchanges

Company

Stock Exchange

Trading

Slide55

Difference Between ADR and GDR

ADR

(

American Depository Receipt)

GDR(Global Depositary Receipt)ADR is only negotiable in USGDR is negotiable globallyDeals with single currency i.e. USDDeals with multiple

currencyADRs are traded over the New York Stock Exchange (NYSE), NASDAQGDRs are traded over the London Stock Exchange, Luxemburg Stock Exchange and Frankfurt Stock Exchange.

Slide56

Difference Between ADR and GDR

GDR

ADR

ADR is only negotiable in US.

Deals with single currency i.e. USD.

Traded

over the New York Stock Exchange (NYSE), NASDAQ.

Cost is higher and legal liability is more.

GDR is negotiable globally.

Deals with multiple currencies.

Traded on the London Stock Exchange, Luxemburg Stock Exchange and Frankfurt Stock Exchange.Cost is comparatively less than ADR and liability is less.

Slide57

Indian Depositary Receipts (IDRs)

Slide58

Indian Depository Receipts

It is a financial instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (registered with SEBI) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities Markets.

 

DENOMINATION:

Indian Rupees

 CREATED BY:Domestic (Indian) Depository

 CREATED AGAINST:Underlying equity shares of issuing company GOAL:

To enable foreign companies to raise funds from the Indian S

ecurities Markets.

DID YOU KNOW?

Standard Chartered Bank’s IDR on 25

th

May, 2010 was the first ever IDR issue in the history of Indian Capital Markets.

Slide59

 

HOW IDRs WORK?

Indian Depository Receipts(IDRs)

 

Foreign Company X

 

Indian Depository (

eg NSDL)

 Indian Investors

SHARES

DEPOSITORY

RECEIPTS

Company

Stock Exchange

Trading

EXAMPLE

Slide60

Primary Market

Slide61

Structure of Capital Market

CAPITAL MARKET

PRIMARY MARKET

SECONDARY MARKET

IPO

EQUITY

DEBT

Slide62

Capital Market

Secondary Market

Primary Market

The primary market is that part of the capital markets that deals with the issuance of new securities, which in turn helps in raising funds.

Also called the new issue market (NIM). IPO is a feature of primary market.

Market in which previously issued financial instruments such as stock, bonds are bought and sold.

Secondary market is further divided into Equity market and Debt market.

Slide63

Functions of Primary Market

Origination

Underwriting

Distribution

Knowledge about

adequacy and structure of financial arrangements

I

nstitution

undertakes the risk associated with a venture, an investment, or a loan in lieu of a premium

The

sale of the stock to the public

Slide64

Features of Primary Market

Includes instruments such as Equities and Bonds

Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business.

The

new issue market does not include other sources of new long term external finance, such as loans from financial institutions.

It performs the crucial function of facilitating capital formation in the economy.

The company raises funds from the public and in turn, issues new securities to the InvestorsThis capital for converting private capital into public capital is typically known as ‘going public’.

Slide65

Various Ways of Raising Capital

Public

Rights

Private Placements

Issues

Initial Public Offerings

Further Public Offerings

Fresh Issue

Fresh Issue

Offer for Sale

Offer for Sale

Private Placement for Unlisted Companies

Preferential Issues

Qualified Institutional Placement

L

isted Companies

Unlisted

Companies

Listed Companies

Slide66

IPO Process

Slide67

What is an IPO?

An initial public offering (IPO) or stock market launch is when shares of an unlisted company are sold to the general public, for the first time.

PRIVATE COMPANY

PUBLIC COMPANY

IPO

When a company lists its securities on a stock exchange, the money paid by the investing public for the newly issued shares goes directly to the company.

General Public

Shares

Money Paid

Slide68

COMPANY A

(Unlisted)

Easy and large amounts of funds for

various business

needs

Expansion

Capitalization

Diversification

RAISING CAPITAL OR FUNDS

GOAL

FUNCTIONS

IPO!!!

Goal of an IPO

$$$

Slide69

Why an IPO?

For an Equity IPO, it provides capital for various corporate purposes without incurring any debt. This ability to quickly raise potentially large amounts of capital from the marketplace is a key reason many companies seek to go public.

IPOs are used by companies to raise capital for expansion or

modernization

and to provide an exit route for private investmentsA company selling common shares is never required to repay the capital to its public investors, except in certain circumstances (bonds, preference shares or delisting)

Slide70

Appointment of IPO Participants

Registration of the Document

Determine the Price of the Issue

Allocation of the Shares

4

2

3

1

5

Steps For IPO Process – Indian Markets

Qualifications for Listing IPO’s

Slide71

Qualifications for Listing IPO’s

Paid up equity capital of the applicant shall not be less than 10

crores

and the capitalization of the applicant's equity shall not be less than 25 crore

Adhere to the conditions set forth by the Securities Contracts (Regulations) Act 1956, Companies Act 1956, Securities and Exchange Board of India Act 1992

No disciplinary actions have been taken on the Company

Have at least 3 years of track record of either

Company seeking listing

Promoters /Promoting Company

Incase of an FPO, then the applicant should have distributable profits for 2 out of the last 3 financial years

Slide72

Appointment of IPO

Participants (1/2)

Investment/Merchant Banks – GS, Barclays, HSBC, CITI etc

They play the role of a Lead Manager/Underwriter or Advisor to the issue

Per SEBI, there is a limit for the no. of lead managers for the issues(2 ->5) depending on the size of the issueAlso drives in the road-shows conducted by the Issuing CompanyRoad shows are considered to be one of the biggest ways to increase the subscriptions

Syndicate Members – ICICI Securities, Kotak Securities etcThey face the general public and drive the IPOCollect the bids of the shares from the public

Slide73

Appointment of IPO Participants

(2/2)

Registrars –

Karvy

Infotech, Enam Securities, Link Intime IndiaProvides administrative support to the Issue processAssists in everything from helping the lead manager in setting-up the Collection Center's, preparing the allotment and application forms, collection of application and allotment money, reconciliation of bank accounts with application money, listing of issues and grievance handling

Bankers – Axis, State Bank of IndiaProcess the bids received from the public and holds the money till the allotment of shares is doneHold the funds in an escrow account (temporary pass-through account till the IPO process is complete)

Slide74

Who is a Lead Manager?

Lead managers are independent financial institutions appointed by the company going public to manage the IPO. They are the main body responsible for most of the IPO processing.

In the pre-issue process, the Lead Manager (LM) takes up the due diligence of company's operations/ management/ business plans/ legal etc.

They are also known as Book Runners , Underwriters, Merchant Bankers, Investment Bankers.

Issuer Company can appoint more then one lead manager to manage big IPO's i.e. Reliance Power IPO came in Jan 2008 had 10 Book Running Lead Managers.

Slide75

Functions of Lead Manager in an IPO

Help company in selling the IPO Shares, finalize the issue price, issue opening & closing dates, listing date etc.

Write

the Red Herring Prospectus (RHP) and get it approve by SEBI.

Drafting

and designing of Offer documents, Prospectus, statutory advertisements and memorandum containing salient features of the Prospectus.

Finalization of trading and dealing of instruments and dispatch of certificates and demat of delivery of shares, with the various agencies connected

Functions of Lead Manager in an IPO

The post issue activities including management of escrow accounts, coordinate non-institutional allocation, intimation of allocation and dispatch of refunds to bidders etc are performed by the LM. 

Slide76

Registration of the

Document (1/2)

Draft

Prospectus

First document filed with the SEBI (21 days prior to the filing of the IPO)

SEBI may specify changes as deemed necessary

Slide77

Registration of the

Document (2/2)

Red Herring Prospectus

Contains the number of shares and the upper/lower price

bands

Approved by SEBI and filed with the Registrar of Companies

First or preliminary prospectus

Slide78

Determine the Price of the

Issue (1/2)

Fixed Price

IPO

Issuer company is allowed to freely price the issue

Issuer

discloses in detail about the qualitative and quantitative factors justifying the issue price

There is only one price and issue will be offered at that price

PRICING

DISCLOSURE

OFFER PRICE

Slide79

Determine the Price of the Issue

(2/2)

Book Building

IPO

Also known as Price Discovery

Once the bids are collated, the shares are allocated to the investors based on the Dutch Auction method

ALLOCATE

Using the Upper & Lower Price Bands mentioned in the Red Herring Prospectus, applicants bid for the quantity and price for the shares.

BID

Shares are allocated from the highest price bidders to the lowest price bidders, but the price paid is only of the lowest successful bid

PRICE

#1

#2

#3

Slide80

Allocation of the Shares

Refunded

with interest within 10-30 days from the date of subscription closure

Shares

are allotted to the investors based on their successful bids

Unsuccessful Bids

Successful Bids

Shares

are allotted to the investors based on their successful bids

Over Subscribed Issue

Shares

are allotted to the investors based on their successful bids

Undersubscribed

Issue

How are

shres

allotted on closure of a Subscription?

Slide81

Did You Know?

Slide82

IPO’s in India – Reliance Power

$27.5 bn

Amount fetched by the IPO

450

Upper price for the bid

26 crNumber of equity shares

LEAD MANAGERS

End result:

Fully subscribed at first but momentum fizzled and the stock dipped below issue price

Slide83

Secondary Market

Slide84

What is a Stock Exchange?

A stock exchange is an institution, organization or association that serves as a market for trading financial instruments such as equity shares, bonds and/ or derivatives.

Slide85

What is a Stock Exchange?

A stock exchange is an institution, organization or association that serves as a market for trading financial instruments such as equity shares, bonds and/ or derivatives.

Exchanges make money in several different

areas.

Listings, sales, and selling market statistics are some of the various ways that they produce revenue.

Most modern stock exchanges, have both a trading floor and an electronic trading system.

Slide86

Rationale of Secondary Market

The secondary market is the financial market for trading of securities that have already been issued in a public offering.

Once a newly issued stock is listed on a stock exchange, investors and speculators can easily trade on the exchange, as market makers provide bids and offers in the new stock.

Securities are sold by and transferred from one investor or speculator to another. 

It is the only way to create this liquidity for investors and speculators to meet at a fixed place regularly.

Slide87

Major Stock Exchanges in the World

New York Stock Exchange – NYSE:

Headquartered in New York City is the largest stock exchange in the world by both market capitalization and trade value.

NYSE is the premier listing venue for the world’s leading large- and medium-sized companies. Operated by NYSE Euronext, the holding company created by the combination of NYSE Group, Inc. and Euronext.

NYSE offers a broad and growing array of financial products and services in cash equities, futures, options, exchange-traded products (ETPs), bonds, market data, and commercial technology solutions.

Featuring more than 8000 listed issues it includes 90% of the Dow Jones Industrial Average and 82% of the S&P 500 stock market indexes volume. 

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Major Stock Exchanges in the World(Contd.)

NASDAQ

:

National

Association of Securities Dealers Automated

Quotations

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Major Stock Exchanges in the World(Contd.)

NASDAQ:

Headquartered

in New York City

It is

the second largest stock exchange in the world by market capitalization and trade value

The exchange is owned by NASDAQ OMX Group which also owns and operates 24 markets, 3 clearinghouses and 5 central securities depositories supporting equities, options, fixed income, derivatives, commodities, futures and structured products It is a home to approximately 3,400 listed companies and its main index is the NASDAQ Composite, which has been published since its inception.

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Major Stock Exchanges in the World(Contd.)

London Stock Exchange

OLDEST STOCK EXCHANGE

IN THE WORLD

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Major Stock Exchanges in the World(Contd.)

London Stock Exchange – LSE

:

Headquartered in London, LSE is the fourth-largest

stock exchange in the

world.The

London Stock Exchange runs several markets for listing, giving an opportunity for different sized companies to list.For the biggest companies exists the Premium Listed Main Market, while in terms of smaller SME’s the Stock Exchange operates the Alternative Investment Market and for international companies that fall outside the EU, it operates the Depository Receipt scheme as a way of listing and raising capital.

It is the most international of all the world’s stock exchanges, with around 3,000 companies from over 70 countries admitted to trading on its markets

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