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Ashwin Chaudhary (Roll No 5) Mohsinkhan Belim (Roll No 2)
The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus.
Methods of issuing securities in the primary market are:
Initial public offering; Rights issue (for existing companies); Preferential issue.
Role of the „Primary Market‟
The primary market provides the channel for sale of new securities. Primary market provides opportunity to issuers of securities; Government as well as corporates, to raise resources to meet their requirements of investment and/or discharge some obligation. They may issue the securities at face value, or at a discount/premium and these securities may take a variety of forms such as equity, debt etc. They may issue the securities in domestic market and/or international market.
SEBI and what is its role
The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India(SEBI) with statutory powers for (a) protecting the interests of investors in securities (b) promoting the development of the securities market and (c)regulating the securities market. Its regulatory jurisdiction extends over corporates in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market. SEBI has been obligated to perform the aforesaid functions by such measures as it thinks fit. In particular, it has powers for:
Registering and regulating the working of stock brokers , sub–brokers etc. Promoting and regulating self-regulatory organizations Prohibiting fraudulent and unfair trade practices Calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, intermediaries, self – regulatory organizations, mutual funds and other persons associated with the securities market.
Issue of Shares
Why do companies need to issue shares to the public? What are the different kinds of issues? What is meant by Issue price? What is meant by Market Capitalisation? The market value
What is an Initial Public Offer-IPO
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer’s securities. The sale of securities can be either through book building or through normal public issue.
Marketing need for primary issue.
IPO Success: It's the marketing
For Fully Subscription Awareness about new issue To attract public for investment To raise fund via more application To raise the market price via good imagination
Marketing of Primary Issue
IPO management seems to be fast catching on, with the “positioning” and “marketing” of an issue becoming as crucial to its success as the fundamentals of a company. In many ways, marketing an IPO is akin to marketing a movie or an FMCG product, such as a cola or a pizza. These days, IPOs need a touch of brand marketing and management involving well-placed positioning and correct pricing. That’s one part of the story. The other is communicating the facts to prospective investors.
And here come the PR agencies, which have now assumed the mantle of “communications experts”. Communications experts today have to master the art of advising clients on Sebi guidelines and compliances, PR activities, road shows and events, database management and so on. Seamless interaction with distribution channels is not limited to white goods or telecom companies. IPO industry also has its own channel partners - the broking community and their subbrokers and agents at almost door-to-door level. Opinion makers aren’t limited to politics or Bollywood and the automobile industry. Numerous brokerage agencies are approached to analyse an upcoming IPO. “Third party testimonials play a major role as analysts with sectoral knowledge step in,” says the head of a large brokerage house.
Money management has acquired many dimensions and an IPO is no different. Players involved in IPO management await with bated breath just as Bollywood stars, directors and producers on the day of the release. Action over. Cut.
Marketing the IPO
Once it is filed the registration statement is transformed into the preliminary prospectus or “Red Herring” The preliminary prospectus is used to market the issue The SEC has 20 days to declare the issue effective At that point the red herring becomes a prospectus The company and the underwriter promote the IPO through the “road show” Road shows provide important monitoring for the underwriter on investor demand During the road shows the underwriter receives orders from individual and institutional investors - book building
Retail investors typically submit a “market order” in which only the quantity desired is stated Institutions typically submit limit orders where the quantity demanded is subject to a maximum price Retail orders are received earlier than institutional orders since institutions prefer to wait to a later stage of the process before submitting their orders Institutions submit an order with a commitment to purchase more shares in the open market if their order is fulfilled
Analysts may not participate in the preparation of, contribute to, comment on, or review the roadshow presentation Bankers may not solicit input from Analysts on the roadshow presentation During marketing process, no event can be attended by Bankers and Analysts together Analysts may not introduce management to buyside accounts during roadshow Analysts may not provide input into the roadshow schedule or identify investors to target Analysts may not attend roadshow meetings Analyst estimates and other perspectives/opinions may not be discussed or distributed in any manner, at any time by Bankers or Management during the roadshow
Marketing and Roadshow
Analysts‟ communications with Investors
Analysts may NOT make outgoing phone calls or other communications to Investors to solicit interest in the offering Analysts may respond to incoming calls from Investors and discuss:
Business fundamentals of the company Information contained in the prospectus Analyst‟s previously published research reports and financial model
Analysts may not discuss or provide an opinion with respect to:
Structuring or pricing of the transaction Any information not contained in the prospectus
Bankers and ECM personnel may not direct and Analyst to initiate or take calls from investors Analysts may not communicate investor feedback to Bankers or ECM personnel Analysts may not participate in the pricing call News Paper Advertisement
During marketing process, no event can be attended by Bankers and Analysts together Hear company or underwriter gives total information about IPO in various news papers. Gives ads about issue in every news papers, so that investor can know about IPO.
During marketing process, no event can be attended by Bankers and Analysts together Hear company or underwriter gives TV commercial ads about IPO and company and its important facts of business. Gives ads about issue in TV commercial, so that investor can know about IPO.
Online IPO Marketing Net worth: marketing your IPO online gives you access to a whole new world of investors