NEW ISSUE

MARKET
Submitted to: Submitted by:
Mrs.Simmi Vashishtha Rupanci
Ishu
MBA(SM) F
 Contents

• New Issue Market

• Features Of New Issue Market
• Primary Vs. Secondary Market
• Functions Of New Issue Market
• Participants Of The New Issue Market
• Problems
• Solutions
• SEBI Guidelines
New Issue Market/Primary Market

• The primary market deals with the

issue of new securities.
Features Of New Issue Market
• New long term equity capital

• Directly issued to investors.

• Issues new security certificates

Cont…….
• Expanding or modernizing business

• Capital formation

• Redemption of financial assets

 Primary Vs. Secondary Market

• Liquidity aspect
• Exercise control
• Direct link
• Complimentary to each other
 Functions Of Primary Market

• Origination: It refers to the work of

investigation, analysis and processing
of new project proposals.

Preliminary investigation
Advisory nature
Cont…….
• Underwriting:
The underwriter promises to
subscribe to a specified number of
shares or debentures
Cont…….
• Distribution:
It is the function of sale of securities
to ultimate investors.
Participants Of New Issue Market
1. Managers to the issue
2. Registrar to the issue
3. Underwriters
4. Bankers to The Issue
5. Advertising agents
6. The financial institutions
7. Government and statutory agencies
 Managers To The Issue
Duties of the lead managers are:

• Drafting Prospectus

• Preparing budget

• Suggesting appropriate timings

Cont…….
• Assisting in marketing

• Advising in appointment

• Directing agencies
 Registrar To The Issue

• Registrar appointed in consultation

with lead manager

• Receive share application

 Underwriters
Categories Of Underwriters:

• Financial Institutions & Banks

• Brokers & approved investment

companies
 Do’s and Don'ts

• Experienced

• Past underwriting performance &

default

• Outstanding underwriting commitment

Cont…….
• Underwriters’ investors network

• Overall reputation
 Banker To The Issue

• Responsibility of collecting application

money along with the application form.
Advertising Agents

The financial institutions

Government and statutory agencies

SEBI
Registrar of Companies
RBI
Stock Exchanges
Industrial licensing authorities
Pollution control authorities
 Problems of primary market

• Withdrawal of IPOs

• "Cornering" of shares

• Grey markets
 Solutions to the problems

• Part payment of shares may be removed

• Uniform process among different investor

• Restricting company's entry into primary

market
Cont…….
• Effective book building process

• Efficient book builders

 SEBI Guidelines

• Filing of offer document

• Rights issue value doesn’t exceed
Rs. 50 lakhs
• Memorandum of understanding
submitted by lead managers
• Responsible for underwriting
arrangements
 Cont…….
• Lead merchant banker(s) undertake
minimum underwriting obligation of 5% of
total underwriting commitment or Rs.25
lakhs whichever is less.
• Outstanding underwriting commitments of a
merchant banker shall not exceed 20 times
its net worth
• The draft offer document made public for
a(21 days)
 Cont…….
• The Issuer Company Net Tangible Assets of
at least Rs. 3 crores in each of the preceding
three full years
• Distributable profits in atleast three of the
immediately preceding five years.
• Net worth of at least Rs. 1 crore in each of
the preceding three full years.
Cont…….
• If the company has changed its name
within the last one year, atleast 50%
revenue for the preceding 1 year should
be from the activity suggested by the
new name.
• The issue size does not exceed 5 times
the pre‐ issue net worth as per the
audited balance sheet of the last
financial year
THANK
YOU