NMIMS Global Access

School for Continuing Education (NGA-SCE)

Course: Financial Institutions and Markets
Internal Assignment Applicable for December 2022 Examination

1. As a financial advisor to the firm advise the various techniques which the company
can use in order to raise fresh capital from the primary market.

Introduction:-
In order for the company to launch FMCG outlets to cater to business capital is needed. It is
one of the important need for any company to run its businesses. The capital market is one
of the important sources of money for the organizations. It consists of two types of segments.
The primary and secondary. In case of primary market new securities are issued for the first
time and if someone wants to raise funds they would be issuing shares in the primary market
and which can result in fresh capital. We can reach out to brokers, banking firms and dealers
to manage the launch of shares in primary market. Whereas in case of secondary market the
shares launched in primary marked are traded. When it comes to growth of the company or
country as a whole both primary and secondary market play an important role.

The primary market helps in origination, underwriting and distribution. In case of origination
evaluation of new project proposal in terms of its economic, legal, technical and financial
aspects is carried out. It helps merchant bankers which can include bankers, financial
institutions. In case of underwriting a sale of fixed amount of shares at a particular price.
Generally a group of financial institutions underwrite a shares of particular price. And finally
in case of distribution the new issue is based on subscription of the issue and primary
participants like brokers, agents etc.

Ambit can make use of primary market to raise fresh capital to meet its retail outlet plan by
means of issuing shares. There are various types of shares or bonds the company can issue to
manage its capital. The details of the same is discussed below.

Raising funds for FMCG outlets:-

The company can raise fresh capital when it issues shares in the primary market. When it
launches IPOs (Initial public offering) in the primary market. In case of primary market the
shares are directly purchased by the public from the issuer. Now coming to the question of
what are the ways by which company can raise fresh capital from the primary market, it
includes various options like i. Public issue ii. Right issue iii. Private placement and iv.
Preferential allotment.
i. Public issue:- The concept of public issue is sale of securities to the general public.
An initial public offering is issued and is one of the common means of raising fresh
capital. The company can enter the capital market for raising funds from all types
of investors. The shares are offered to sale to new investors. The investor once
purchasing the shares will become part of the shareholder of the issuing company.
It is called public issue. It can be further classified as
a. Initial public offer:- As one can understand from the name it encompasses the
issue of equity shares or convertible securities by an unlisted company. it is
observed from the description that the company is into FMCG and wants to
raise funds and it is believed to be a unlisted company going for the first time
to market. For which this type of issue of shares can be taken care. The
company shares are traded in stock exchange. The investors can buy and sell
securities after the listing in secondary market.
b. Further public offer or follow on of FPO:- Even when we believe that the
company is listed already then when it issues shares to general public it can be
designated as Follow on offer. The company in question can also follow the
method to raise funds from the market.
ii. Rights issue:- This is another means by which the company can raise funds from
the primary market. When we believe that the company is already in stock market
and has shareholders it can issue shares to existing shareholders to raise
supplementary funds. When the company shares are already traded in secondary
market the company can use the means of rights issue to raise fresh capital. The
company offers the investors the option of buying at a discounted price within a
specific period. The rights issues helps the companies to enhance the control of
existing shareholders of the company.
iii. Private placement: In this case the company to raise capital for FMCG outlets can
offer the sale of shares to limited number of special investors like venture capital
funds, mutual funds, frequent investors etc. Though it is not issued to general
public it has potential to gain quick capital access than the general public. It is
 relatively inexpensive method of raising capital. The securities raised my be by
means of bonds, stocks or other securities. These offer a manageable option of
raising capital than the IPO, it also needs less time to raise capital.
iv. Preferential allotment:- The company can also try to issue equity shares to a
selected number of investors at a discounted price to raise the capital. This option
can help both listed and unlisted companies to raise the capital. It is not a public r
rights issue, in this category the company allotment of preference shares to
receive dividends before the ordinary share hold receive it.

The Ambit Ltd, can use primary market to raise funds, how it needs to be in cognizant of some
problem with primary market such as withdrawal of IPO when company want to not go ahead
with the proposed security offerings. Shrinking retain investor base like the problem faced by
the Indian primary market due to dependency on bank funding and promoter capital, It also
needs to understand the complexity in terms of manipulation of grey markets, different
processes for different categories of investors and finally volatility in the market.

Conclusion:- It is to be noted that the purpose of primary market is to encourage investors to

invest their money in the new issue floated by companies. It provides thrust to new and
upcoming segments of the economy.
 2. Pooja is a new joiner at a financial advisory firm. Her first task given by the manager
is to prepare a report on any four each money market instruments that she would advise
her client to invest in for a short time period. Prepare a report for Pooja to complete her
first task

Introduction:- Invest in a for a short time period is one of the widely used temporary
investments instruments. They are the instruments whose can be easily converted to cash
within a less time period. There are many examples of these short term money instruments
are converted to cash within a period of less than 12 months. These are owned by company
and recorded in a separate account and listed in the current assets section. These are also
called as short term instruments or temporary instruments that can be easily converted to
cash. These are holding hold by company but intends to sell off within a year. Common
examples of such cases include CDs, money market accounts, high yield saving account,
government bonds and treasury bills. These are generally have less interest but have the
ability to generate quick money by means of withdrawal options. When the company short
term instruments are fluctuating it reflects in company income statement for the quarter. The
following four types of money market instruments are intended to be discussed in this section
i. Treasury bills ii. Bill of exchange iii. Promissory notes and iv. Commercial papers.

1. Treasury bills:-
These are one of the most well recognized money market instruments. The length of
duration for these type of instruments have varying short term maturities. The GOI
issues the bills in range of 14 days to 364 days. The instruments are issued at
discounted rate and paid full at the time of maturity. RBI issues the bills for the
government. These are also called promissory notes at a discounted price. There is a
difference between issue price and redemption price. The bills are issued at T-91, T –
182 or T-364, where T designates the treasury bill and the number states the number
of days. These can be transferrable by means of a method called purpose
endorsements. It can be regular or adhoc bills, in case of regular bills are sold to
general public and in case of adhoc these are issued by state governments. Though
adhoc bills are abolished in the year 1997.
2. Bills of exchange: -
It is unconditional order in which drawer order the payment of stipulated money to
another person known as drawee. There are various parties involved in the bills of
exchange like drawer who draws the bill of exchange, drawee to whom the exchange
is drawn and payee the person named in instrument to whom or whose order money
is directed to be paid. There are various types of bills mentioned in the exchange like
Inland bill, foreign bill, trade bill and accommodation bill.
i. Inland bill is type of bill drawn in India on person residing in India it may paid
both within India or outside India.
ii. Foreign bill: which is not an inland bill and where it is drawn in one country and
payable in another country
iii. Trade bill: it is accepted for genuine trade transaction
iv. Accommodation bill: This is a type of bill which is drawn and accepted which is
backed up by transactions in trade. No consideration is available for the bill to
make some other party.
3. Promissory notes:-
In this type of instrument one party promises to pay another party the sum of money
at a stipulated future date. The parties are known as issuer of the market, bearer of
the instrument. There are many examples of promissory notes but the noteworthy is
the bank notes or currency note through which goods and services are purchased.
It is a written instruments signed by marketer, which is a unconditional instrument, it
is paid at demand or at certain date, amount is certain and definite and finally the note
may be made by more than one person.
4. Commercial papers
These are unsecured financial instruments of money markets. These are issued by
corporate houses in the form of promissory notes and duration of such papers is very
less. High credit rating company offer such papers. The RBI regulates the papers . it is
issued with certain terms and conditions such as net work of the company should be
at least 4 cr, it has a minimum rating of P2 or AZ from credit rating and the rating
should be within 2 months of issue
 Besides these types there are other types also available like certificate of deposits,
repurchase agreements, banker acceptance etc.

Table. Summary of Instruments

Basis Short terms T – Bill Bill of Promissory Commercial

Overall Exchange notes papers
comments
Meaning Informal Short term Short Stated sum Unsecured short
debt term specified term
instruments stipulated date
money
Nature High Zero No Some Unsecured
coupon and interest interest
no interest mentioned
in the
notes
Liquidity High
Instruments Commercial T – 91, T- Document Personal, Drafts, cheques,
paper, CoD, 182 & T- bill, Clean commercial
T – Bills 364 bill, and real
foreign estate etc
bill
Risk Low Drawee Very low Too high for
may not small
pay organization
Maturity period 1 year or 91, 182, & 90 days Max 3 Less than 270
less 364 days years days
Purpose Short terms Less than 1 Short Shor term Should not
year term less than 3 exceed 270 days
years
 Return on Lower than Non Order in
investments capital interest writing
market

Conclusion:-

As summarized above and described in paragraphs, there are different instruments

exchanged the money market which can be used for short term money.
3.a. You are therefore required to help Manya understand various life insurance policies
along with the participants involved in such a market.

Introduction:- Selecting the right insurance policy is one of the important factor for a stress
free and safety life. It helps one achieve comfortable, hassle free life and it guarantees the
dependents will be looked after even after their presence. There are different types of
insurance types available in the market. Some of the important types include Term life or
term plans, whole life insurance, Unit linked insurance plan, Endowment plan money back
plan, retirement plan, group insurance plan etc. There are various participants involved in the
insurance like insurer and insured. Insurer is the person whose life being covered against the
risk under the policy and insurer is the insurance company who is providing the insurance
cover. The proposer is the person who is takes the cover and can be a policy holder. The
beneficiary is the name of the person who would be receiving the insurance and can be
spouse, parents, children, siblings etc.

1. Term life insurance or term plan: it is one of the most widely opted life insurance. It is
a type of simplest and purest form of insurance. It offers death benefit to the
beneficiary if the insured person dies during the policy tenure. It is managed by means
of nominal premium. It does not offer any maturity benefit, there can be certain
insurance plans which offered maturity benefits like TROP if the policy holder outlives
policy term. In this type of insurance cover we have seen the participants like
beneficiary the person who is going to get the insurance benefit and insurer is the
name of the agency who is covering the insurance and insured person is the name of
the person on whom the insurance cover is opted.
2. Whole life insurance plan: in this type of insurance plan the life of the person is
covered till the death of the policy holder. It can be both participating or non
participating policy. The premium for such policy is high and dividends are paid at
higher intervals to the policy holders. In this case we have came across a term policy
holder is the name of the person who is holding the policy or on whose name the
policy is implemented.
3. Unit linked insurance plan: In this type of policy it offers dual benefit by means of
investment and insurance. A portion of insurance is used for insurance coverage while
the rest of the payment is used for boutique investment instruments which are like
 market backed equity funds, debt funds or other securities. These are highly flexible
instruments and investors can easily switch or redirect their premiums.
4. Endowment policy: in this type of policy which works both as an instrument and
insurance saving. These provide maturity benefit to the life insured in the form of lump
sum money.

Conclusion:- Based on the discussion it is found the following participants are involved.
i. Insurance policy – Is the instrument based on which life cover of a person is
managed. It can be various types depending on the type of the insurance policy
being opted.
ii. Insured person: As designated it covers the person on whose name the insurance
is taken or person whose life is in consideration for the life cover being covered
against the risk under the policy.
iii. Insurer:- It the company who is covering the insurance or providing insurance
cover for the insured person.
iv. The proposer: - He is the person who takes the cover and holds the policy. He can
be designated as policy holder.
v. Beneficiary: - It covers the person to whom the benefit would be passed on in the
event of unfortunate incidents. It can cover siblings, spouse, children etc.

The various type of insurance type include terms plan, Unit linked policy etc. defined in the
section above.
3b. In the light of the above case, explain to Ramya the concept of Venture Capital and the
stage of funding involved in Venture Capital Financing.

Introduction:-
When money is provided by an individual or by a company to new entrepreneurs who have
business idea the concept is called venture capital financing. In this type of association the
venture capitalist provides financial, technical or managerial assistance to new
entrepreneurs. It is recognized as one of the important type of funding sources for budding
new business entrepreneurs as they may not have access to funds or money or even lack
technical capabilities or managerial decision making abilities. It is a common trand in the
market that venture capitalists venture in companies in which others may not invest and the
ideas are unique and novel. The risk in such type of venture is also huge and companies
designate these type of investment as risk capital as well.

Features of venture capitals:-

- It is associated with novel and unique ideas where the risk appetite is also high
- There would not immediate benefits realized for the ventures and it might result in
long run and also as highlighted section above may not see the light of the day and fail
with high risk levels
- The venture capitalists are back bone of the company operation and all decisions and
management functioning would be carried out at the discretion of venture capitalists
- The funding when a venture capitalist aims should be based on the knowledge of
competition
- They are forward looking with a future trends management and issues related to the
same.

Stages of the venture capital: -

A start up need for money is unique and many different organizations would like to have
money at different stages of the venture. Same cannot be generalized in the market, however
there are different stages of venture capital financing like early stage financing, start up stage
financing and late stage financing.
 i. Early stage funding:-During assessment of project the venture capitalist carries out
detailed study of the project including technical, operational and functional
aspects of the project. In this stage the opinion of consultants is taken into
consideration for understating the venture benefits and risks and decision is made
whether or not invest in project under consideration.
ii. Start-up stage financing:- when a project is already launched in the market and is
facing unique challenges in terms of stabilization or high degree of risks when it is
launched it might not be successful. It can be in conjunction with slow growth,
sales or requires certain measures to be taken into consideration to avoid failure.
When a venture capitalist provides funding to stabilize the project by means of
marketing campaigns or running products etc. it is called start up stage funding.
iii. Late stage financing:- when a project has crossed the start up stage and trying to
expand its foot print by means of increasing its opeations and presence
throughout the country or globe. In order to manage such expansion goals the
need for additional funds might be arising, which is designated as late stage
financing.

Conclusion:-
Based on the discussion which is explained to Ramya the venture capital stages can be early
stage, start-up state or late stage financing. It consists of many other segments like need for
venture capital involvement, their management powers and how they influence their day to
day to management.