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Methods of Floating New Issues

The document discusses various methods for floating new issues in the primary capital market, including public issues, initial public offers, follow-on public offers, offers for sale, private placements, issues of Indian depository receipts, rights issues, and bonus issues. Public issues and rights issues involve selling new shares or debentures to the public or existing shareholders. Private placements sell securities to select institutional investors. Offers for sale allow early investors to sell shares when a company goes public.

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3K views8 pages

Methods of Floating New Issues

The document discusses various methods for floating new issues in the primary capital market, including public issues, initial public offers, follow-on public offers, offers for sale, private placements, issues of Indian depository receipts, rights issues, and bonus issues. Public issues and rights issues involve selling new shares or debentures to the public or existing shareholders. Private placements sell securities to select institutional investors. Offers for sale allow early investors to sell shares when a company goes public.

Uploaded by

priya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Methods of floating new issues

Capital market
• The term capital Market refers to facilities and
institutions arrangements through which long-
term funds; both debt and equity are raised
and invested. The Capital Market consists of
development banks, commercial Banks
and stock exchanges. The Capital market can
be divided into two parts (a)Primary Market
(b) Secondary Market
Methods of Floating New Issues in
the Primary Market
• Public issue: When a company raises funds by
selling (issuing) its shares (or debenture / bonds)
to the public through issue of offer document
(prospectus), it is called a public issue.Initial
Public Offer (IPO): When a (unlisted) company
makes a public issue for the first time and gets its
shares listed on stock exchange, the public issue
is called as initial public offer (IPO).Follow-on
public offer (FPO): When a listed company makes
another public issue to raise capital, it is called
follow-on offer (FPO).
Cont..
• Offer for sale: Institutional investors like
venture funds, private equity funds etc., invest
in unlisted company when it is very small or at
an early stage. Subsequently, when the
company becomes large, these investors sell
their shares to the public, through issue of
offer document and the company’s shares are
listed in stock exchange. This is called as offer
for sale. The proceeds of this issue go the
existing investors and not to the company.
Cont..
• Private Placement: The sale of securities to a
relatively small number of select investors for
raising capital. Investors involved in private
placements are usually large banks, mutual
funds, insurance companies and pension
funds. Private placement is the opposite of a
public issue, in which securities are made
available for sale on the open market.
Cont..
• Issue of Indian Depository Receipts (IDR): A
foreign company which is listed in stock exchange
abroad can raise money from Indian investors by
selling (issuing) shares. These shares are held in
trust by a foreign custodian bank against which a
domestic custodian bank issues an instrument
called Indian depository receipts (IDR).IDR can be
traded in stock exchange like any other shares
and the holder is entitled to rights of ownership
including receiving dividend.
Cont..
• Rights issue (RI): When a company raises
funds from its existing shareholders by selling
(issuing) them new shares / debentures, it is
called as rights issue. The offer document for
a rights issue is called as the Letter of
Offer and the issue is kept open for 30-60
days. Existing shareholders are entitled to
apply for new shares in proportion to the
number of shares already held.
Cont..
• Bonus Issue, the company issues new shares
to its existing shareholders. As the new shares
are issued out of the company’s reserves
(accumulated profits), shareholders need not
pay any money to the company for receiving
the new shares

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