by Rajen KumarDildaar or Daag-daag? Redefining Delhi's Tagline?
Rather than forward a mail, which disturbed me no ends, to the Chief Minister Sheila Dikshit, I have thought it prudent that I share it with my readers. For, I am not sure if the mail...
Special ReportsMay 2013
According to, “The State of Food and Agriculture Report 2012”, “world agriculture needs to feed a projected population of more than 9 billion people by 2050, some 2 billion...
The Primary Market, Initial Public Offering, Reasons for listing, Procedure - SME Knowledge Kit
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.
Features of primary markets are:
• This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM).
• In a primary issue, the securities are issued by the company directly to investors.
• The company receives the money and issues new security certificates to the investors.
• Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business.
• The primary market performs the crucial function of facilitating capital formation in the economy.
• The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as "going public."
The financial assests sold can only be redeemed by the original holder.
Initial Public Offering
Initial public offering (IPO), also referred to simply as a "public offering" or "flotation," is when a company issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.
In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market.
An IPO can be a risky investment. For the inidual investor, it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value.
Reasons for listing
When a company lists its shares on a public exchange, it will almost invariably look to issue additional new shares in order to raise extra capital at the same time. The money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of stock market investors to provide it with large volumes of capital for future growth. The company is never required to repay the capital, but instead the new shareholders have a right to future profits distributed by the company and the right to a capital distribution in case of dissolution.
The existing shareholders will see their shareholdings diluted as a proportion of the company's shares. However, they hope that the capital investment will make their shareholdings more valuable in absolute terms.
In addition, once a company is listed, it will be able to issue further shares via a rights issue, thereby again providing itself with capital for expansion without incurring any debt. This regular ability to raise large amounts of capital from the general market, rather than having to seek and negotiate with inidual investors, is a key incentive for many companies seeking to list.
- Winner of appreciation award for promoting SMEs in India.
- 1st ever Indian magazine to penetrate tier II, III cities & the rural belt.
- Industry Partnerships include CII, FICCI, ASSOCHAM, PHDCC, AIMA, ITPO, SME Network, Federation of Indian Micro Small Enterprises (FISME)
- Official Magazine Partners for several national & international MSME events.
The Last Word
Times were when we celebrated with fervour and flavour hallowed days like 'Teacher's Day', 'Labour Day', 'Flag Day' etc. but as modern times invaded our lives, we borrowed 'days' for us. Today,...
We are looking for writers and experts to contribute original stories and articles. Send an email to firstname.lastname@example.org with your story idea and lets get talking.
Some of our valued contributors are...