Primary Market Overview and Methods of Flotation

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Questions and Answers

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.

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?

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.

<p>Private Placements involve allotting securities to selected institutional investors and individuals rather than the general public.</p> Signup and view all the answers

What is an e-IPO and how does it differ from traditional IPOs?

<p>An e-IPO is the online issuance of securities through a stock exchange, requiring agreements with the exchange for the capital raise.</p> Signup and view all the answers

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Flashcards

Primary Market

The market where new securities are issued for the first time. It acts as a bridge between savers and entrepreneurs, channeling funds towards new projects, expansion, or mergers and acquisitions.

Offer through Prospectus

A method of selling securities to the public through a detailed document outlining the company's financial information and investment opportunity.

Offer for Sale

Securities are sold to intermediaries (brokers) at a negotiated price, and then resold to investors at a higher price.

Private Placements

Securities are sold directly to a select group of institutional investors and individuals, typically with limited public disclosure.

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Rights Issue

A new issuance of shares offered to existing shareholders in proportion to their current holdings.

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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.