Documente Academic
Documente Profesional
Documente Cultură
Prospectus is a document that contains the various aspects of the issuing company which is circulated to the general public.
#
Advantages: To investors- it facilitate satisfactory compliance with the legal requirements. And promotes confidence of investors through transparency and non-discriminatory basis of allotment. To issuers- it is popular among the large issuers. It provides for wide diffusion on ownership.
Drawbacks: High issue costs. Time consuming.
#
Under the second stage the securities are sold to the ultimate investors at a market related price. The biggest advantage in this method is the issuing company is free from the hassles of selling it directly to the public. And the disadvantage of this method is that it is expensive for the investor as they get the securities at a higher prices from the issue houses.
#
This method can be resorted when the market it dull and when the public response is doubtful. This method suits the requirements of small companies. Major disadvantages are the securities are concentrated in few hands. This may create artificial scarcity by jacking up the prices.
#
The public issue made by the corporate entity for the first time is called Initial Public Offer. Securities are issued to the applicants on the basis of the order placed by them, through their brokers. When a company whose stock is not publicly traded wants to offer that stock to the general public, it takes the form of Initial Public Offer. The job of selling the stock is entrusted to the underwriters. He agrees to pay the issuer a certain price for a minimum no of shares and resells those shares to the buyers. They charge a fee for their service. #
Stocks are issued to the underwriters after issuing the prospectus. The underwriters releases these stock to the public. The issuer and the underwriter syndicate jointly determine the price of the new issue. The approximate price listed in the preliminary prospectus may or may not be close to final issue price. Good relationship between the broker and the investor is a prerequisite for the stock being acquired.
#
Steps involved in marketing of securities: Order: brokers receive and place orders on behalf of the clients with the issuer. Share allocation: the issuer finalizes the share allocation and informs the broker for the same. The client: the broker advices the client of the share allocation. Clients then submit the application form of shares and make payment to the issuer through the broker. Primary issue account: the issuer opens a separate account for the primary issue market. The clearing house debits primary issue a/c and credits issuer a/c.
#
Certificates: certificates are then delivered to the investors. Or depository a/c may be credited. Merits: No need for investors to part with the money even before the shares are allotted in his favour.
When shares of the company are issued to its existing shareholders it is called as right issue. The shares are issued in proportion to the no of shares already held by them. RBI GUIDELINES: Issued only by listed companies. Right issue once made, shall not be withdrawn. Underwriting is optional and appointment of Registrar is compulsory. Appointment of category 1 Merchant bankers holding a certificate of registration issued by SEBI is compulsory.
#
Obligation for a company to increase in subscribed capital is necessary after 2 yrs of its formation or 1 yr of its first issue of shares, whichever is earlier. Merits: Most economical method of raising fresh capital. no brokerage and underwriters cost. Procedure are easier as limited no of applicants handled are less. Issue of right issue does not dilute the ownership of existing shareholders. It offers freedom to subscribe or not to subscribe the issue. The only demerit is that it is restrictive ie its available only to the existing companies and not to the new ones.
#
SEBI GUIDELINES
Reservation. Reserves. Dividend mode. Fully paid. No default. Implementation. The articles. Resolution.
#
STEPS INVOLVED
Appointment of Book Runner. Drafting Prospectus. Circulating Draft Prospectus. Maintaining Offer Records. Intimation about aggregate Offer. Bid Analysis.
STEPS INVOLVED
Mandatory Underwriting. Filing with ROC. Bank Accounts. Collection of Completed Application. Allotment of Securities. Payment Schedule and Listing. Under Subscription.
#
ADVANTAGES
Reduction in duration between allotment and listing. Reliable allotment procedure. Quick listing in stock exchange. No price manipulation as the price is determined on the basis of bids received.
Benefit: This scheme also offers an incentive to the employees to stay in the company It is useful in the case of companies whose business activity is dominantly based on the talent of the employees i.e., Software Industry. It retains their most productive employees in an industry.
SEBI Guidelines Issue at Discount Approval Maximum Limit Minimum Period Eligibility Directors Report
Bought-out Deals
A method of marketing of securities of a body corporate whereby the promoters of an unlisted company make an outright sale of a chunk of equity shares to a single sponsor or the lead sponsor.
Features Parties: They are promoters of the company, sponsors and co-sponsors who are generally merchant bankers and investors. Outright Sale: Outright sale of a chunk of equity shares to a single sponsor or the lead sponsor. Syndicate: Sponsor forms a syndicate with other merchant bankers for meeting the resource requirement and for distributing the risk. Sale Price: It is finalized through negotiations between the issuing company and the purchases, the sale being influenced by such factors as project evaluation, promoters image and # reputation.
Fund-based: Bought-out deals are in the nature of fund-based activity where the funds of the merchant bankers get locked in for at least the prescribed minimum period. Listing: The investor-sponsors make a profit, when at a future date, the shares get listed and higher price prevail. Listing generally takes place at a time when the company is performing well in terms of higher profit and larger cash generations from projects. OTCEI: Sale of these shares at Over-the-Counter Exchange of India (OTCEI) or at a recognized stock exchanges, the time of listing these securities and off-loading them simultaneously are being generally decided advance.
#
Features
Trading Scrips Creating Securities
Private Placement
Listed securities Results in the creation of additional securities for the buying institutions 5 years
Brought-out Deal
Unlisted securities Securities are simply transferred from promoters to sponsors who in turn off-load them to the public 18 months
Lock-in Period
Limitations: Loss of Control Loss of Sales Wrong Appraisal Manipulation No Accountability Windfall Profits Loss to Investors
#
THANK YOU.
#