PRIMARY MARKET

FMM PROJECT

SHRIYANSH DALMIA
12A
 INDEX
SL. TOPIC PG NO.
NO

1 What is primary market ?

5
What is primary market?

A primary market is a source of new securities. Often on an exchange, it's where companies, governments,
and other groups go to obtain financing through debt-based or equity-based securities. Primary markets are
facilitated by underwriting groups consisting of investment banks that set a beginning price range for a given
security and oversee its sale to investors.

Once the initial sale is complete, further trading is conducted on the secondary market, where the bulk of
exchange trading occurs each day.
Functions of primary market

New issue offer The primary market organises offer of a new issue which had not been traded on any other exchange earlier. Due to
this reason, it is also called a New Issue Market. Organising new issue offers involves a detailed assessment of project viability, among
other factors. The financial arrangements for the purpose include considerations of promoters’ equity, liquidity ratio, debt-equity ratio
and requirement of foreign exchange.

* Underwriting services
Underwriting is an essential aspect while offering a new issue. An underwriter’s role in a primary marketplace includes purchasing
unsold shares if it cannot manage to sell the required number of shares to the public. A financial institution may act as an underwriter,
earning a commission on underwriting.Investors rely on underwriters for determining whether undertaking the risk would be worth its
returns. It may so thus happen that an underwriter ends up buying all the IPO issue, and subsequently selling it to investors.
Functions of primary market

+ Distribution of new issue

Anew issue is also distributed in a primary marketing
sphere. Such distribution is initiated with a new prospectus
issue. It invites the public at large to buy a new issue and
provides detailedtimings »rmation on the company, issue,
and involved underwriters.
Types of public offerings

An initial public offering, or IPO, is an example of a security issued on a primary market. An IPO occurs when
a private company sells shares of stock to the public for the first time, a process known as "going public."
The process, including the original price of the new shares, is set by a designated investment bank, hired by
the company to do the initial underwriting for a particular stock.

A rights offering (issue) permits companies to raise additional equity through the primary market after already
having securities enter the secondary market. Current investors are offered prorated rights based on the
shares they currently own, and others can invest anew in newly minted shares.