Financial Market And Services

Project Work On Primary Issue

Submitted By : Tushar Bhardwaj
Submitted To : Rashmi Mam
 What Is Primary Issue ?
• Primary issue is also known as primary market.
• Primary market is a part of capital market where issue of new
securities take place.
• The main function in this market is to facilitate transfer resources
from saver to the user.
• Primary market helps to accelerate the process of capital
formation in a country’s economy.
 Functions of Primary Market
• Origination –
• It refers to the work of investigation , analysis and processing
of new project proposals.
• This function is done by merchant bankers who may be
commercial banks , financial institutions or private firms
• It starts before an issue is been floated in market.
 Kinds of Issue
• There are three kinds of issue i.e –
- Public Issue
- Right Issue
- Private Placement
 Public Issue
• Under this method , the issuing company directly offers to the
general public a fixed number of shares at a stated price through
a document called prospectus.
• It has two methods i.e IPO and FPO.
• IPO : Initial public offering is an offering of either fresh capital or
an offer for sale of existing securities or both by an unlisted
company for the first time to the public
• FPO : Offering of either fresh issue of securities or an offer for
sale to the public by a listed company .
 Right Issue
• It is the issue of new shares in which the existing shareholders are
given primary rights to subscribe to the new issue on pro-rata basis .
The right is given in form of an offer to existing shareholders to
subscribe to a proportionate number of fresh and extra shares at
predetermined price . The shareholder has four option in case of
right :
a) To exercise the right .
b) Renounce the right and sell them in open market.
c) Renounce part of its right and exercise its remainder.
d) Choose to do nothing.
Private Placement
• It refers to direct sale of newly issued securities lay the
issues to a small no. of investors through merchant
banker. These inventors are selected client such as
financial institutions , corporate banks and high network
individuals.