Primary market

PRIMARY MARKET

• It deals with the issue of new or fresh capital also referred to as the New Issue Market (NIM).
• Securities are issued by the company directly to investors.

Methods of Floatation

1. Offer through Prospectus:

• Most popular method of raising funds is by public companies.
• Company issues a prospectus to inform and attract the investing public.
• Prospectus contains the financial performance of the company to let the public know about the risk factor in the likely investment.

2. Offer for Sale:

• First step: - The company sells securities at an agreed price to brokers.
• Second step: - Resell to the investing public at a higher price.
• Benefit: - Avoid the difficult procedure and minimize the floating cost.

3. Private Placement:

• A private placement is the allotment of securities by a company to institutional investors and some selected individuals.
• Benefit:-Cost-effective method for small companies to avoid expenses like underwriter commission and printing of prospectus etc.

4. Rights Issue:

• To maintain the control of the existing shareholder are offered the ‘right ‘to buy new shares in proportion to the number of shares they already possess.
• Shareholders may accept this offer or reject it.

5. e-IPOs:

• A company proposing to issue capital to the public through the online system of the stock exchange has to enter into an agreement with the stock exchange.
• SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company.
• The issuer Company should also appoint a registrar to the issue having electronic connectivity with the exchange.