New Issue market deals with new securities that are offered to the investing public for the first time.

IPO- Market where firms go to the public for the first time through initial public offering.

SEO- Market where firms which are already trading raise additional capital through seasoned equity offering.

Deals with new securities.

No tangible form nor any administrative organisational set up.

Provides the issuing co. with funds.

Ready market for trading old securities.

Have physical setup and are located in particular geographical areas.

Provides liquidity to the co. as well as to the investors.

The cos. which make new issue apply for listing of shares on a recognized stock exchange.

The new issues first placed in the NIM can be disposed off subsequently in the stock exchange.

Both the markets are susceptible to the changes in the macro-environment conditions.

NIM and stock market are economically an integral part of industrial securities market.

Origination Underwriting Distribution

A careful study of market, technical and financial viability of a project.

Advisory services-1.Type of issue2.Magnitude of issue3.Time of floating an issue4.Pricing of an issue5.Methods of issue

It is an agreement whereby the underwriter promises to subscribe to a specified no. of shares or debentures or a specified amount of stock in the event of public not subscribing to the issue.

Institutional underwriters- LIC, UTI, IDBI, ICICI,GIC and commercial banks.

Non-institutional underwriters- Brokers.

Standing behind the issue Outright purchase Consortium method

Assured of raising adequate capital Relieved from the risk of finding buyers Assured of getting minimum

subscription within the stipulated time. Expert advice Public confidence

Sale of securities to ultimate investors. Performed by brokers and agents.

Public issues Offer for sale Private placement Rights issues

The issuing co. directly offers to the general public/institutions a fixed no. of shares at a stated price through a document called prospectus.

Large section of the investing public through advertisement.

No intermediaries. Avoid concentration of wealth in few

hands.

Expensive method. Suitable only for large issues.

Name of the company. Address of the registered office of the

company Existing and proposed activities Location of the industry Names of directors Authorised and proposed issue capital to the

capital Dates of opening and closing the subscription

list Minimum subscription Names of brokers/ underwriters/ bankers/

managers and registrars to the issue A statement by the co. that it will apply to

stock exchange for quotations of its shares.

Abridged Prospectus is a shorter version of the Prospectus and contains all the salient features of a Prospectus. It accompanies the application form of public issues (Cos. Amendment act, 1988)

Consists in outright sale of securities through the intermediary of issue houses or share brokers

First stage- Direct sale to the issue house and brokers

Second stage- Intermediaries resell the above securities to the ultimate investors

The difference in the purchase and selling price is called turn or spread.

Offer by a foreign co. of a part of it to Indian investors.

Promoters diluting their stake to comply with requirements of stock exchange at the time listing of shares.

The securities issue (users of funds) seeks to find an institutional buyers such as pension fund or group of buyers (suppliers of funds) to purchase the whole issue.

Issue houses buy the securities outright with the intention of placing them with their clients afterwards.

Reliance Industries raised Rs.945 crores with three FIs of whom UTI was important.

Konkan Railway Corp. placed tax free bonds worth Rs. 70 crores with banks and Fis.

In a depressed market condition Suitable for small cos. and first

generation entrepreneurs Avoids delays and expenses involved in

public issue. Available to unlisted cos.

Majority holding of securities with few institutions.

Offered to the existing shareholders in a particular proportion to their existing share ownership.

A right means an option to buy certain securities at a certain privileged price within a certain specified period

The rights are transferable and saleable in the market.

Secured premium notes with detachable warrants(SPN)

Equity shares with detachable warrants. Preference shares with warrants. Non- convertible Debentures with detachable Equity

warrants. Fully convertible cumulative preference shares Zero interest fully convertible Debentures (FCDs) Fully convertible Debentures with interest Zero interest bonds. Deep discount bonds. Option bonds Bonds with warrants Indian Depository Receipts (IDR) Global Depository Receipts (GDR)

The warrants ensure the holder the right to apply and get equity shares after a notified period provided the SPN is fully paid up.

Issued at a nominal value and does not carry any interest.

Redeemed by repayment in several installments at a premium.

Secured by mortgage of immovable properties.

Document representing underlying shares of a foreign co. denominated in Indian currency.

Standard chartered bank is the first co. to issue IDRs.

An Indian co. raise funds in the foreign capital markets.

Tata steel raised $500mn through GDR listed on London stock exchange.

Each GDR represented one share. Priced at $7.644 and now trading at

$14.5.

Anybody can easily invest in a foreign co. without any trading laws and practices of that country.

One is free to invest without any limits. Free from forex fluctuations. Opportunity to diversify one’s

investment portfolio.

Differential pricing- is the issue of shares at different prices in public/rights issues and firm allotment category and net allotment to public.

Price band- 20% cap and 20% floor price.

Discounts/Commissions- cannot be made to any firm allotee in a public issue.

Merchant banker/ lead manager Underwriters Bankers to issue Brokers to an issue Registrar to issue and share transfer

agent Debenture trustees Portfolio managers

Any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager/consultant/ advisors or rendering corporate advisory service in relation to issue management.

Make a commitment to get the issue subscribed either by others or by themselves.

Engaged in activities such as acceptance of applications along with application money from the investors in respect of issues of capital and refund of application money.

Concerned with the procurement of subscription to the issue from the prospective investors.

Collects application from the investors, keeps a proper record of applications and money received from investors or paid to the seller of securities and assists companies in determining the basis of allotment of securities in consultation with stock exchanges, finalizes the allotment of securities and processing/ dispatching allotment letters, refund orders, certificates and other related documents in respect of issues of capital.

Maintain the records of holders of securities on behalf of companies, and deal with all matters connected with the transfer/ redemption of its securities.

Trustee for a trust deed needed for securing any issue of debentures by a company/body corporate or any private placement of debentures by a listed/ proposed to be listed company.

Persons who advise/ direct/ undertake, on behalf of the clients, whether discretionary portfolio manager or otherwise, the management/ administration of portfolio of securities/ funds of clients.

Corporate counselling Project counselling Loan syndication Issue management

Public issue through prospectus Marketing Pricing of issues Post issue management Underwriting of public issues Managers, consultants or advisers to the

issue Portfolio management Advisory service relating to mergers and

takeovers Offshore finance Non- Resident Investment

Size of the issue Maximum no. of lead managers

Less than Rs. 50 crores 2

Rs. 50 crores to Rs. 100 crores

3

Rs. 100 crores to Rs. 200 crores

4

Rs. 200 crores to Rs. 400 crores

5

Above Rs. 400 crores 5 or more as prescribed by SEBI.

Authorization by sebi Four categories-1.First category- All the functions of issue

management networth- 1 crore2.Second category- Co-manager, advisor,

consultant, underwriter or portfolio manager networth- 50 lakhs

3.Third category- underwriter, advisor or consultant networth- 20 lakhs

4.Fourth category- advisor or consultant networth- nil

Authorisation fee, annual fee and renewal fee is collected by sebi.

All issues must be managed atleast by one authorised bankers.

Category 1 merchant banker shall accept a min. underwriting obligation of 5% of the total underwriting commitment or Rs.25lakhs whichever is less.

Furnish half yearly financial results to sebi. Integrity, fairness, high standards of service,

due diligence, professional judgement, follow ethics.

Sebi will supervise the activities continuously. Suspend or cancel the authorisation in case of

violation of the guidelines. Inspections will be conducted by sebi.

0.5%max. as commission for whole of the issue.

Project appraisal fees. Lead manager- 0.5% upto Rs. 25 crores

and 0.2% in excess of Rs. 25 crores. Underwriting commission-1% to 2.5% Brokerage commission 1.5% Other expenses- advertising, printing,

Registrars expenses, stamp duty etc. can be reimbursed from its clients.

Draft prospectus Fulfillment of entry norms Appointment of underwriters Appointment of bankers Appointment of Registrars to issue Appointment of brokers to the issue Filing of documents Printing of prospectus and application forms Listing the issue Publication in newspapers Accept application forms Allotment of shares Underwriters liability Optional listing

Allotments have to be made within 30 days in case of public issue and 42 days in case of rights issue.

In case an issue exceeds more than Rs.100crores the whole issue is allowed through book building.

A min. of 50% of the issue is to be alloted for investors applying for less than 1000 shares.

All listing formalities have to be complied within 70 days.

There should be atleast 5 investors for every 1lakh of equity offered.

The PAN no. should be quoted if investment is Rs.50,000 and above.

The subscription list shall be kept open for 3 to 10working days.