INDIAN CAPITAL MARKET - Download as PowerPoint by 4kGN8IE


   Market of Long-Term Funds.
   Issue of primary securities in the primary
   Issue of secondary securities in the primary
   Secondary market transactions in outstanding
    securities which facilitate liquidity.
     Functions of Capital market
   Disseminate information efficiently
   Quick valuation of financial instruments
   Enabling wider participation
   Developing integration among long term &
    short term funds, private sector & government
    sector etc.
        Primary Capital Market
   Primary issues of the corporate sector lead to
    capital formation
   Domestic funding through equity & debt
   External funding of equity through Global
    Depository Receipts and American Depository
    Receipts & Debt instruments through External
    Commercial Borrowings & other ECB through
   Why do companies need to issue shares
    to the public?
   What are the different kinds of issues?
   Initial Public Offering
   Right Issue
   Private Placement
   What is meant by Issue price?
   What is meant by Market Capitalisation?
   What is initial public offer?
   Who decides the price of an issue?
   the issuer in consultation with the Merchant Banker
    shall decide the price.
   other, where the company and the Lead Manager
    (LM) stipulate a floor price or a price band and leave
    it to market forces to determine the final price.
          Book Building Process
   Appointment of book Runner (Merchant
    Submission of draft to SEBI
   Issuer & book runner decide the offer price
   Offer at different price level from syndicate
    members. Also deciding about the opening &
    closing dates for bids
   Deciding min. Cut-Off rate
   Final prospectus filed with ROC
   Placement portion opens for subscription only
   Public issue portion
                  Cut-Off Price
   The actual discovered issue price can be any price in
    the price band or any price above the floor price. This
    issue price is called “Cut-Off Price”.
   What is minimum number of days for which a bid
    should remain open during book building?
   How does one know if shares are allotted in an
    IPO/offer for sale? What is the timeframe for
    getting refund if shares not allotted?
   How long does it take to get the shares listed
    after issue?
   What is the role of a ‘Registrar’ to an issue?
   Does NSE provide any facility for IPO?
          What is a Prospectus?
   This disclosure includes information like the
    reason for raising the money, the way money
    is proposed to be spent, the return expected on
    the money etc. This information is in the form
    of ‘Prospectus’ which also includes
    information regarding the size of the issue, the
    current status of the company, its equity
    capital, its current and past performance, the
    promoters, the project, cost of the project,
    means of financing, product and capacity etc.
   What is an ‘Abridged Prospectus’?
   Who prepares the ‘Prospectus’/‘Offer
   What does ‘Draft Offer document’ mean?
   What does one mean by ‘Lock-in’?
 Listing of Securities
  Admission of securities of an issuer to trading
  privileges on a stock exchange through a
  formal agreement also called Listing Agreement
 Delisting of securities

 What is SEBI’s Role in an Issue?

 Does it mean that SEBI recommends an
 Does SEBI tag make one’s money safe?
        Foreign Capital Issuance
   Can companies in India raise foreign
    currency resources?
   a) Issue of foreign currency convertible bonds
    known as ‘Euro’ issues
   b) Issue of ordinary shares through depository
    receipts namely ‘Global Depository Receipts
    (GDRs)/American Depository Receipts
    (ADRs)’ to foreign investor
      American Depository Receipts
   ADR is a U.S. negotiable Instrument in the form of a
    certificate denominated in US Dollars representing
    ownership in non-U.S. companies.
   Shares are issued by the issuing company with the
    depository bank.
   Depository Bank in turn tenders DRs to the investors.
   It is a non-voting equity holding.
   EX: New York Stock Exchange (NYSE) , National
    Association of Securities Dealers Automated
    Association (NASDAQ), American Stock Exchange
Global Depository Receipts (GDRs)
   a global finance vehicle that allows an issuer to
    raise capital simultaneously in two or markets
    through a global offering.
   The underlying shares correspond to the GDRs
    in a fixed ratio say 1 GDR=10 shares.
   GDRs may be used in public or private
    markets inside or outside US.
   GDR issues listed on the Luxembourg Stock
    Exchange & the London Stock Exchange.
      Foreign Currency Convertible
            Bonds ( FCCBs)
   FCCBs are bonds subscribed by non-residents
    in foreign currency.
   Carry fixed interest rate & option of
   Interest is paid in dollars & redemption is also
    in dollars.
   Interest is low but exchange risk is more.
    External Commercial Borrowings
   Indian corporates are allowed to raise foreign
    loans for financing infrastructure projects.
   Ex: Reliance petroleum raised $125 million in
    the form of ECB’s in August 1996 carrying
    low coupon rate of 7.84%
             Private Placement
   Involves issue of securities, equity or debt, to a
    limited no. of subscribers, such as banks, FIs,
    MFs, and high net worth individuals.
   Privately placed issue is one seeking
    subscription from max. 50 members.
             Secondary Market
   Secondary market is an equity trading venue in
    which already existing/pre-issued securities are
    traded among investors.
   Secondary market could be either auction or
    dealer market.
   Consists of recognized stock exchanges
    operating under rules, by-laws and regulations
    duly approved by the government.
 Role of a Stock Exchange in buying and selling
  Trading platform provided by NSE is an electronic
  one and there is no need for buyers and sellers to
  meet at a physical location to trade.
 Demutualisation of stock exchanges

  Legal structure of an exchange whereby the
  ownership, the management and the trading rights at
  the exchange are segregated from one another.

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