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Methods of Floatation in The Primary Market

The document outlines various methods companies can use to raise funds in the primary market, including public issues, private placements, and rights issues. Each method has specific regulatory requirements and caters to different investor groups, such as the general public or institutional investors. Key methods discussed include Initial Public Offerings (IPOs), Qualified Institutional Placements (QIPs), and Offer for Sale through intermediaries.

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43 views4 pages

Methods of Floatation in The Primary Market

The document outlines various methods companies can use to raise funds in the primary market, including public issues, private placements, and rights issues. Each method has specific regulatory requirements and caters to different investor groups, such as the general public or institutional investors. Key methods discussed include Initial Public Offerings (IPOs), Qualified Institutional Placements (QIPs), and Offer for Sale through intermediaries.

Uploaded by

varshneyanaisha
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© © All Rights Reserved
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Methods of Floatation in the Primary Market

The primary market allows companies to raise funds through various methods:

1. Offer through Prospectus


• Companies invite public subscriptions through a prospectus, making a direct appeal to
investors.
• Requires adherence to the Companies Act and SEBI guidelines, and listing on at least
one stock exchange.
• Publicity is given through media and issues are often underwritten.

2. Public Issue
• A direct offer to the public, with wide publicity managed by merchant bankers.
• Includes two types:
o Initial Public Offering (IPO): A first-time offer by an unlisted company to the
public, either as a fresh issue or sale of existing securities. It helps a company
get listed and raise capital.
o Follow-on Public Offer (FPO): Issued by already listed companies to diversify
their equity base. Investors make decisions based on the company's track record.

Book Building is used in IPOs for price discovery, collecting bids at various prices to
determine the offer price.

3. Offer for Sale


• Securities are sold indirectly to the public through intermediaries (e.g., stockbrokers).
The company first sells the securities to these intermediaries at an agreed price.

4. Private Placement
• Direct sale of securities to selected individuals or institutional investors without issuing
a prospectus.
• Quicker and less costly than public issues, with a limit of 50 participants.

5. Qualified Institutional Placement (QIP)


• Listed companies issue equity shares or convertible securities exclusively to qualified
institutional buyers.

6. Rights Issue
• An offer to existing shareholders to buy additional shares at a discounted price in
proportion to their current shareholding.

These methods provide different ways for companies to raise funds, catering to various investor
groups and regulatory requirements.

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