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Capital market

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Capital market

  1. 1. Intro to CapitalMarket By-Binny Bhogal Rawat HLCPE Ahmedabad rawatsisa@gmail.com
  2. 2. • The market where investment funds like bonds, equities and mortgages are traded.• It is the market for securities, where companies and govt. can raise long term funds.• Instruments like equity, credit market,insurance,foreign exchange, hybrid and derivative instruments.Capital Market
  3. 3. • Primary market• Secondary marketDivision of capital market
  4. 4. • NIM or primary market or long term debt market• Includes-• IPO/Public Issue• Right Issue• Private Placement• Offer for saleNew issue market
  5. 5. • The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market. Also referred to as a "public offering."IPO
  6. 6. • It is an agreement whereby the underwriter promises to subscribe to a specified number of shares or debentures or a specified amount of stock in the event of public not subscribing to the issueUnderwriting
  7. 7. • Standing behind the issue• Outright purchase• Consortium methodMethods of underwriting
  8. 8. • Institutional underwriters• Non-Institutional underwriters Underwriters in India may be classified into two categories-:
  9. 9. • LIC• UTI• IDBI• ICICI• Commercial Banks and General Insurance companiesInstitutionalunderwriters
  10. 10. • Through the intermediary• Issue house or broker• They purchase at negotiated price and resell at a higher price• The difference between the two prices is called turn or spread• Not common in IndiaOffer for sale
  11. 11. • Green shoe options typically allow underwriters to sell up to 15% more shares than the original number set by the issuer, if demand conditions warrant such action.• In certain cases it can be more than 15 % also with prior permission of SEBI• Used in case of International IPOGreen Shoe option
  12. 12. • An offer document means prospectus in case of public issue or offer for sale and letter for offer in case of right issue, which is required to be filed with the Registrar of Companies(ROC) and stock exchange.Kinds of offer documents
  13. 13. • A company before making any public issue of securities, shall file a draft prospectus with SEBI,through an eligible merchant banker,atleast 21 days prior to the filing of prospectus with ROC.Draft Prospectus
  14. 14. • Before making any right issue for an amount exceeding 50lakh shall file this with SEBI at least 21 days prior of filingDraft letter of offer
  15. 15. • A prospectus is a disclosure document that describes a financial security for potential buyers. A prospectus commonly provides investors with material information about mutual funds, stocks, bonds and other investments, such as a description of the companys business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties and any other material information. In the context of an individual securities offering, such as an initial public offering, a prospectus is distributed by underwriters or brokerages to potential investors.Prospectus
  16. 16. • Abridged Prospectus is a shorter version of the Prospectus and contains all the salient features of a Prospectus. It accompanies the application form of public issues. Abridged Prospectus" means the memorandum as prescribed in Form 2A under subsection (3) of section 56 of the Companies Act, 1956. It contains all the salient features of a prospectus. It accompanies the application form of public issues.Abridged Prospectus
  17. 17. • When securities is issued in stages• Then a prospectus issued at initial stage• And Information memorandum for subsequent stagesShelf Prospectus
  18. 18. • There is no price or issue size stated in the red herring, and it is sometimes updated several times before being called the final prospectus. It is known as a red herring because it contains a passage in red that states the company is not attempting to sell its shares before the registration is approved by the SEBI.Red herring Prospectus