INDIAN EQUITY MARKET Every company needs funds.

Transcript:INDIAN EQUITY MARKET Every company needs funds.:
INDIAN EQUITY MARKET Every company needs funds. Funds may be required for short term or long term. Short term requirements of funds can be met through banks, lenders, institutions etc. When a company wishes to raise long term capital, it goes to the primary market Primary market is an important constituent of a capital market. In the primary market the security is purchased directly from the issuer. The primary market is a market for new issues. It is also called new issue market. It is a market for fresh capital. It deals with the new securities which were not previously available to the investing public. Corporate enterprises and Government raises long term funds from the primary market by issuing financial securities. Both the new companies and the existing companies can issue new securities on the primary market. It also covers raising of fresh capital by government or its agencies. The primary market comprises of all institutions dealing in fresh securities. These securities may be in the form of equity shares, preference shares, debentures, right issues, deposits etc. PRIMARY MARKET/NEW ISSUE MARKET (NIM): The first important feature of the primary market is that it is related with the new issues. Whenever a company issues new shares or debentures, it is known as Initial Public Offer The main players of primary markets are the private and public companies that offer equity or debt based securities such as stocks and bonds in order to raise money for their spur operations such as business expansion, modernization and so on Primary market transactions are carried out before secondary market operations. There are various methods of raising funds from primary markets: public issue, right issue, tender offer, private placement and offer for sale. FEATURES OF PRIMARY MARKET: Origination: Origination refers to the work of investigation, analysis and processing of new project proposals. Origination begins before an issue is actually floated in the market, The function of origination is done by merchant bankers who may be commercial banks, all India financial institutions or private firms. Underwriting: When a company issues shares to the public it is not sure that the whole shares will be subscribed by the public. Therefore, in order to ensure the full subscription of shares (or at least 90%) the company may underwrite its shares or debentures. The act of ensuring the sale of shares or debentures of a company even before offering to