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Questions and Answers
What is the primary purpose of the primary market?
What is the primary purpose of the primary market?
To transfer investible funds from savers to entrepreneurs for setting up new projects or expanding existing ones.
Describe the 'Offer through Prospectus' method of issuance in the primary market.
Describe the 'Offer through Prospectus' method of issuance in the primary market.
It involves inviting public subscriptions by advertising the securities in newspapers and magazines, appealing directly to potential investors.
What distinguishes a Rights Issue from other methods of security issuance?
What distinguishes a Rights Issue from other methods of security issuance?
A Rights Issue offers new shares to existing shareholders in proportion to their current holdings.
Explain the concept of Private Placements in the context of the primary market.
Explain the concept of Private Placements in the context of the primary market.
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What is an e-IPO and how does it differ from traditional IPOs?
What is an e-IPO and how does it differ from traditional IPOs?
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Study Notes
Primary Market Overview
- Primary markets facilitate the transfer of funds from savers to entrepreneurs.
- Funds support new projects, expansions, diversification, improvements, and mergers/acquisitions.
Methods of New Issue Floatation
- Prospectus Offer: Direct public appeal through prospectus advertisement in media to raise capital.
- Offer for Sale: Issuing houses/brokers sell securities to investors at a higher price than purchased from the company.
- Private Placements: Securities allocated to institutional investors and select individuals.
- Rights Issue: Existing shareholders receive new shares proportionally to their existing holdings.
- e-IPOs (Electronic Initial Public Offerings): Online stock exchange issue; involves agreements with stock exchanges and appointed SEBI-registered brokers for application acceptance and order processing.
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Description
Explore the primary market's function in transferring funds from savers to entrepreneurs. This quiz covers different methods for issuing new securities, including prospectus offers, rights issues, and electronic IPOs. Test your knowledge about how these methods support business growth and investment.
