Broad marketing and government security markets in india
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The Industrial securities market refers to the market for shares and bonds of the existing companies, as well as those of new companies.
This market is further divided into New Issue Market (NIM) and Old Issue Market. The New Issue Market is also called Primary Market. Likewise, the Old Issue Market is also called Secondary Market or Stock Exchange.
However, it is important to emphasize that the New Issue Market and Stock Exchange are inter-linked and work in conjunction with each other. Although they differ from each other in the sense that the New Issue Market deals with ‘new securities’ issued for the first time to the public and Stock Exchange deals with those securities which have already been issued once to the public.
(i) Primary Market:
The primary market is concerned with the floatation of new issues of shares or bonds. The firms floating new issues to raise funds may be new companies or existing companies planning expansions. The Merchant Banking Division of a commercial bank is asked by the company to advise on the viability Of floatation of an issue before an issue is actually floated in the market.
The stock issuing company also approaches the institutional underwriters like LIC, UTI, ICICI and IDBI, to ensure the marketability of an issue. The underwriters like LIC and UTI purchase securities from the New Issue Market to hold these in their own asset portfolio.
In Indian capital market, there are two main ways of floating new issues:
(a) Public issues, and
(b) Rights issues.
(a) Public Issues:
The most popular method for floating securities in the New Issue Market is through a legal document called the “Prospectus”. It is an open invitation to the public to subscribe to the issue at par or at premium.
(b) Right Issues:
This method of the sale of stock is normally used by existing companies whose shares are already listed in the Stock Exchange. Right issue represents an invitation to the existing shareholders to subscribe to a part or the whole of the new issue in a fixed proportion to their shareholding.
Resource mobilisation through primary market by Indian corporate companies is shown in Table 40.2 for the years 2007-08 to 2010-11. The primary capital market progressed significantly in 2009-10 and 2010 -11 after the setback in 2008-09. The amounts of funds raised and the number of new issues which entered the primary market increased in 2009-10 and 2010-11.
The total amount of capital raised through equity issues in 2009-10 was Rs. 46,736 crore as against Rs. 2082 crore in 2008-09. Due to global financial crisis in 2008, the primary capital market received a setback in 2008-09. The number of new issues declined sharply in 2008-09.
Total amount of capital raised through equity issues during 2010-11 was Rs. 48,654 crore. The total number of initial public offerings (IPOs) in 2010-11 was only 55 as against 85 in 2007-08 and 39 in 2009-10. The amount mobilized by IPOs in 2010-11 was Rs. 35,569 as against Rs. 24,696 crore in the whole year 2009-10.
The mean IPO size increased from Rs. 033 crore in 2009-10 to Rs. 671 crore in 2010-11. There was debt issue (i.e. issue of corporate bonds and debentures) to the tune of Rs. 2,500 crore in 2009-10 and Rs. 9,451 crore in 2010-11. There was no debt issue in 2007-2008. As will be seen from Table 40.2 the amount of capital mobilized through private placement in 2010-11 was Rs. 2,18,785 crore as compared to Rs. 2,12,635 crore in 2009-10.
In the financial year 2011-12 resource mobilisation through the primary market was still greater. Rs. 35,611 crore was raised through sale of bonds by the corporate sector (i.e., through debt mode) and Rs. 12,857 crore was raised through issue of equity and Rs. 2,61,282 crore were raised through primary primate placement. In this way the total of Rs. 3,09, 750 crore were raised during financial year 2011-12. During the financial year (up to December 2012-13) resource mobilisation through primary market witnessed an upward movement and a total of Rs. 2, 81,667 crores were raised in the first three quarters of 2012-13 (See Table 40.2).
This market is further divided into New Issue Market (NIM) and Old Issue Market. The New Issue Market is also called Primary Market. Likewise, the Old Issue Market is also called Secondary Market or Stock Exchange.
However, it is important to emphasize that the New Issue Market and Stock Exchange are inter-linked and work in conjunction with each other. Although they differ from each other in the sense that the New Issue Market deals with ‘new securities’ issued for the first time to the public and Stock Exchange deals with those securities which have already been issued once to the public.
(i) Primary Market:
The primary market is concerned with the floatation of new issues of shares or bonds. The firms floating new issues to raise funds may be new companies or existing companies planning expansions. The Merchant Banking Division of a commercial bank is asked by the company to advise on the viability Of floatation of an issue before an issue is actually floated in the market.
The stock issuing company also approaches the institutional underwriters like LIC, UTI, ICICI and IDBI, to ensure the marketability of an issue. The underwriters like LIC and UTI purchase securities from the New Issue Market to hold these in their own asset portfolio.
In Indian capital market, there are two main ways of floating new issues:
(a) Public issues, and
(b) Rights issues.
(a) Public Issues:
The most popular method for floating securities in the New Issue Market is through a legal document called the “Prospectus”. It is an open invitation to the public to subscribe to the issue at par or at premium.
(b) Right Issues:
This method of the sale of stock is normally used by existing companies whose shares are already listed in the Stock Exchange. Right issue represents an invitation to the existing shareholders to subscribe to a part or the whole of the new issue in a fixed proportion to their shareholding.
Resource mobilisation through primary market by Indian corporate companies is shown in Table 40.2 for the years 2007-08 to 2010-11. The primary capital market progressed significantly in 2009-10 and 2010 -11 after the setback in 2008-09. The amounts of funds raised and the number of new issues which entered the primary market increased in 2009-10 and 2010-11.
The total amount of capital raised through equity issues in 2009-10 was Rs. 46,736 crore as against Rs. 2082 crore in 2008-09. Due to global financial crisis in 2008, the primary capital market received a setback in 2008-09. The number of new issues declined sharply in 2008-09.
Total amount of capital raised through equity issues during 2010-11 was Rs. 48,654 crore. The total number of initial public offerings (IPOs) in 2010-11 was only 55 as against 85 in 2007-08 and 39 in 2009-10. The amount mobilized by IPOs in 2010-11 was Rs. 35,569 as against Rs. 24,696 crore in the whole year 2009-10.
The mean IPO size increased from Rs. 033 crore in 2009-10 to Rs. 671 crore in 2010-11. There was debt issue (i.e. issue of corporate bonds and debentures) to the tune of Rs. 2,500 crore in 2009-10 and Rs. 9,451 crore in 2010-11. There was no debt issue in 2007-2008. As will be seen from Table 40.2 the amount of capital mobilized through private placement in 2010-11 was Rs. 2,18,785 crore as compared to Rs. 2,12,635 crore in 2009-10.
In the financial year 2011-12 resource mobilisation through the primary market was still greater. Rs. 35,611 crore was raised through sale of bonds by the corporate sector (i.e., through debt mode) and Rs. 12,857 crore was raised through issue of equity and Rs. 2,61,282 crore were raised through primary primate placement. In this way the total of Rs. 3,09, 750 crore were raised during financial year 2011-12. During the financial year (up to December 2012-13) resource mobilisation through primary market witnessed an upward movement and a total of Rs. 2, 81,667 crores were raised in the first three quarters of 2012-13 (See Table 40.2).
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