BRIEF INTRODUCTION

Development of an economy is based on sound financial system. Its a wellknown fact that finance is the lifeline for any business enterprise. The efficient
functioning and success of business operations depend upon the availability of adequate
fund at the right time and required amount of funds as and when required.
Financial Market is the place where the investors and fund seekers meet for
mutual benefits.
Financial Market is divided into Money market and Capital market. Money
market refers to open market operations in highly marketable short-term debt instruments
and the capital market deals in long-term debt issues and stocks.

CAPITAL MARKET:
Capital market is the market for financial assets having a period of maturity of
more than one year or of an indefinite period. Thus, capital market provides long-term
resources needed by medium and large scale industries. Capital market is constituted by
three parts. Equity market debt market, derivative markets.

Capital market is a market for securities which consists of two segments:

Primary market
Secondary market

PRIMARY MARKET
The primary market is also known as the new issues market. It deals with new
securities being issued for the first time. The essential function of a primary market is to
facilitate the transfer of investible funds from savers to entrepreneurs seeking to establish
new enterprises or to expand existing ones through the issue of securities for the first
time. The investors in this market are banks, financial institutions, insurance companies,
mutual funds and individuals. A company can raise capital through the primary market in
the form of equity shares, preference shares, debentures, loans and deposits. Funds raised
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may be for setting up new projects, expansion, diversification, modernization of existing

projects, mergers and takeovers etc.

SECONDARY MARKET
The secondary market is also known as the stock market or stock exchange. It is a
market for the purchase and sale of existing securities. It helps existing investors to
disinvest and fresh investors to enter the market. It also provides liquidity and
marketability to existing securities. It also contributes to economic growth by
channelizing funds towards the most productive investments through the process of
disinvestment and reinvestment. Securities are traded, cleared and settled within the
regulatory framework prescribed by SEBI. Advances in information technology have
made trading through stock exchanges accessible from anywhere in the country through
trading terminals. Along with the growth of the primary market in the country, the
secondary market has also grown significantly during the last ten years.

ROLE OF 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 corporate, to
raise resources to meet their requirements of investment and/or discharge some
obligation. 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."

NEED FOR ISSUING SHARES BY COMPANIES TO PUBLIC

Most companies are usually started privately by their promoter(s). However, the
promoters capital and the borrowings from banks and financial institutions may not be
sufficient for setting up or running the business over a long term. So companies invite the
public to contribute towards the equity and issue shares to individual investors. The way
to invite share capital from the public is through a Public Issue. Simply stated, a public
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issue is an offer to the public to subscribe to the share capital of a company. Once this is
done, the company allots shares to the applicants as per the prescribed rules and
regulations laid down by SEBI.

CLASSIFICATION OF ISSUES
Primarily, issues can be classified as a Public, Rights or Preferential issues (also
known as private placements). While public and rights issues involve a detailed
procedure, private placements or preferential issues are relatively simpler. The
classification of issues is illustrated below:

Figure 1: Classification of Issues

Initial Public Offering (IPO):

Initial Public Offering (IPO) is when an unlisted company makes either afresh
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 issuers securities.
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A Follow on Public Offering (Further Issue):

A follow on public offering (Further Issue) is when an already listed company
makes either a fresh issue of securities to the public or an offer for sale to the public,
through an offer document.

Rights Issue:
Rights Issue is when a listed company which proposes to issue fresh securities to
its existing shareholders as on a record date. The rights are normally offered in a
particular ratio to the number of securities held prior to the issue. This route is best suited
for companies who would like to raise capital without diluting stake of its existing
shareholders.

A Preferential issue:
A Preferential issue is an issue of shares or of convertible securities by listed
companies to a select group of persons under Section 81 of the Companies Act, 1956
which is neither a rights issue nor a public issue. This is a faster way for a company to
raise equity capital. The issuer company has to comply with the Companies Act and the
requirements contained in the Chapter pertaining to preferential allotment in SEBI
guidelines which inter-alia include pricing, disclosures in notice etc. This means an issue
can be privately placed where an allotment is made to less than 50 persons.

MEANING OF ISSUE PRICE

The price at which a company's shares are offered initially in the primary market
is called as the Issue price. When they begin to be traded, the market price may be above
or below the issue price.

Difference between Public Issue and Private Placement or Preferential

Allotment:
When an issue is not made to only a select set of people but is open to the general
public and any other investor at large, it is a public issue. But if the issue is made to a
select set of people, it is called private placement. As per Companies Act, 1956, an issue

becomes public if it results in allotment to 50 persons or more. This means an issue can
be privately placed where an allotment is made to less than 50 persons.

NEED AND IMPORTANCE OF THE STUDY

The primary market plays an important role in the securities market by forming a
link between the savings and investments. It is through this market that the
borrowers viz., the Government and the corporates issue securities in which the
investors deploy their savings.

The primary market performs the crucial function of facilitating capital formation
in the economy.

This is the market for new long term equity 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.

MAJOR REFORMS OF PRIMARY MARKET

Reduced the timeline between the launch of an IPO and listing of shares to 12
days from 21 days earlier. This ensures the money invested in an IPO is blocked

for a shorter time.

Introduction of Application Supported by Blocked Amount, or ASBA. Under this,
an investors account is debited only when the actual allotment of shares happen
in a public issue. Recently, ASBA has been made mandatory for all non-retail
investors. ASBA is safer, less time-consuming, and more transparent as compared

with the traditional method of investing in public floats.

100% margining for institutional investors in IPOs from 10% earlier. This ensures
only serious institutional investors will participate in the bidding. It enhances
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transparency as it prevents issuers from attracting investors by way of displaying

inflated over-subscription numbers from institutional investors.

Introduction of French auction for follow-on public offerings. Under this,
institutional investors are allotted shares according to the bidding price and the
lowest bid price becomes the cut-off for retail investors. This ensures higher

listing premium for retail investors.

Allowed more time for retail investors for investing in IPOs and FPOs. Extra two
days allow retail investors to gauge the demand from the bigger investors and the

prospects of the issuer.

Introduced anchor investors for primary market issuances. This would help firms
going public to get a capital commitment from a group of institutional investors
for a period longer than usual investors, which in turn could indicate the strength
of the company and promotes its brand in the market circle.

OBJECTIVES OF THE STUDY

To know the procedure through which we can apply a primary market issue.
To highlight the ASBA (Application Supported by Blocked Amount) and Non
ASBA form of applying for the issue.
To study Book Building issuing companies listed in NSE and BSE and analyze its
performance.

To study fixed price issuing companies listed in BSE and analyze its performance.
To compare the returns of Book Building and Fixed Price Issues.
To draw conclusions and offer suggestions for companies and investors in gaining
returns through Primary market.

SCOPE OF THE STUDY

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 The scope of the study is limited to only Indian Primary Market relating to Equity.
This study is based on the specified Book Building and Fixed Price issuing
companies of IPOs which are listed in BSE and NSE. So, the present study
includes the companies which are raised the capital through Public issues, the
Returns.

The study confined to the specific objectives mentioned. Based on the data
available of trading of companies will be considered to analyze the performance
of IPOs.

RESEARCH METHODOLOGY
For the study of Primary market mainly the secondary data is extracted from the
Bombay Stock Exchanges site www.bseindia.com and also various books have been
referred for the same. Mainly the data collection done by
1) The direct interacting with the project guide.
2) The most of the data is collected from various text books, journals, magazines,
Stock Exchanges like NSE and BSE, SEBI.

Formulae used for Book Building and Fixed Price:

The initial return on IPOs has been computed as the difference between closing
price on the first day of trading and offer price, divided by the offer price.
For Book Building Issues:

Closing Price Offer price

Offer price

For Fixed Price Issues:

X
100

Closing Price Offer price

P1 = Closing Price on the first day of trading.

P0 = Offer Price
The returns for the different time period gaps considered calculated by taking
closing prices of the given stock after the specified time date from the listing day.
So, the formula used in equation as follows:
For Book Building Issues:

Pt P0
X 100
P0

For Fixed Price Issues:

Pt P0

Pt = Closing price at time t

P0 = Closing price on listing day

LIMITATIONS OF THE STUDY

The major limitations of the study of Primary market are as follows:-

1) The study under taken of the selected companies with only one tool and had
limited time period.
2) This study was conducted only for 45 days.

INDUSTRY PROFILE:
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Indian Stock Exchange

Broadly speaking the Capital Market is classified in to two categories. They are
the Primary market (New Issues Market) and the Secondary market (Old (Existing)
Issues Market). This classification is done on the basis of the nature of the instrument
brought in the market.

Meaning of Stock Market or Stock Exchange

Stock Market or Stock Exchange (also called Share Market) is one important
constituent of Capital Market. Stock Exchange is an organized market for the purchase
and sale of industrial and financial security. It is convenient place where trading in
securities is conducted in systematic manner i.e. as per certain rules and regulations.
It performs various functions and offers useful services to investors and
borrowing companies. It is an investment intermediary and facilitates economic and
industrial development of a country.
Stock exchange is an organized market for buying and selling corporate and other
securities. Here, securities are purchased and sold out as per certain well-defined rules
and regulations. It provides a convenient and secured mechanism or platform for
transactions in different securities. Such securities include shares and debentures issued
by public companies which are duly listed at the stock exchange and bonds and
debentures issued by government, public corporations and municipal and port trust
bodies.
Stock exchanges are indispensable for the smooth and orderly functioning of
corporate sector in a free market economy. A stock exchange need not be treated as a
place for speculation or a gambling den. It should act as a place for safe and profitable
investment, for this, effective control on the working of stock exchange is necessary. This
will avoid misuse of this platform for excessive speculation, scams and other undesirable
and anti-social activities.
There are 23 recognized stock exchanges in India out of which the prominent two
are Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). While Bombay
stock exchange (BSE) is the oldest in India. National Stock Exchange (NSE) is the first
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exchange in the world to use satellite communication technology for trading and the
latest Stock Exchange to add to the list is the MCX Stock Exchange Limited (MCX-SX)
which is the first listed Stock Exchange in India.

BOMBAY STOCK EXCHANGE (BSE)

Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange
Ltd.), is Asias first Stock Exchange and one of Indias leading exchange groups. Over
the past 137 years, BSE has facilitated the growth of the Indian corporate sector by
providing it an efficient capital-raising platform. Popularly known as BSE, the bourse
was established as The Native Share & Stock Brokers' Association" in 1875.
BSE is a corporatized and demutualised entity, with a broad shareholder-base
which includes two leading global exchanges, Deutsche Bourse and Singapore Exchange
as strategic partners.BSE provides an efficient and transparent market for trading in
equity, debt instruments, derivatives, mutual funds. It also has a platform for trading in
equities of small-and-medium enterprises (SME). Around 5000 companies are listed on
BSE making it world's No. 1 exchange in terms of listed members. The companies listed
on BSE Ltd command a total market capitalization of USD Trillion 1.06 as of May 15,
2012. BSE Ltd is world's fifth most active exchange in terms of number of transactions
handled through its electronic trading system. It is also one of the worlds leading
exchanges (5th largest in May 2012) for Index options trading
(Source: World Federation of Exchanges).
BSE also provides a host of other services to capital market participants including
risk management, clearing, settlement, market data services and education. It has a global
reach with customers around the world and a nation-wide presence. BSE systems and
processes are designed to safeguard market integrity, drive the growth of the Indian
capital market and stimulate innovation and competition across all market segments. BSE
is the first exchange in India and second in the world to obtain an ISO 9001:2000
certifications. It is also the first Exchange in the country and second in the world to
receive Information Security Management System Standard BS 7799-2-2002 certification
for its On-Line trading System (BOLT). It operates one of the most respected capital

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market educational institutes in the country (the BSE Institute Ltd.). BSE also provides
depository services through its Central Depository Services Ltd. (CDSL) arm.
BSEs popular equity index - the SENSEX - is India's most widely tracked stock
market benchmark index. It is traded internationally on the EUREX as well as leading
exchanges of the BRCS nations (Brazil, Russia, China and South Africa).

NATIONAL STOCK EXCHANGE (NSE)

The National Stock Exchange of India Limited has genesis in the report of the
High Powered Study Group on Establishment of New Stock Exchanges. It recommended
promotion of a National Stock Exchange by financial institutions (FIs) to provide access
to investors from all across the country on an equal footing. Based on the
recommendations, NSE was promoted by leading Financial Institutions at the behest of
the Government of India and was incorporated in November 1992 as a tax-paying
company unlike other stock exchanges in the country.
The National Stock Exchange (NSE) operates a nation-wide, electronic market,
offering trading in Capital Market, Derivatives Market and Currency Derivatives
segments including equities, equities based derivatives, Currency futures and options,
equity based ETFs, Gold ETF and Retail Government Securities. Today NSE network
stretches to more than 1,500 locations in the country and supports more than 2, 30,000
terminals.
With more than 10 asset classes in offering, NSE has taken many initiatives to
strengthen the securities industry and provides several new products like Mini Nifty,
Long Dated Options and Mutual Fund Service System. Responding to market needs, NSE
has introduced services like DMA, FIX capabilities, co-location facility and mobile
trading to cater to the evolving need of the market and various categories of market
participants.
NSE has made its global presence felt with cross-listing arrangements, including
license agreements covering benchmark indexes for U.S. and Indian equities with CME
Group and has also signed a Memorandum of Understanding (MOU) with Singapore
Exchange (SGX) to cooperate in the development of a market for India-linked products
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and services to be listed on SGX. The two exchanges also will look into a bilateral
securities trading link to enable investors in one country to seamlessly trade on the other
country's exchange.
NSE is committed to operate a market ecosystem which is transparent and at the
same time offers high levels of safety, integrity and corporate governance, providing ever
growing trading & investment opportunities for investors.

MCX Stock Exchange Limited (MCX-SX)

MCX Stock Exchange Limited (MCX-SX), Indias new stock exchange,
commenced operations in the Currency Derivatives (CD) segment on October 7, 2008
under the regulatory framework of Securities & Exchange Board of India (SEBI) and
Reserve Bank of India (RBI). The Exchange is recognized by SEBI under Section 4 of
Securities Contracts (Regulation) Act, 1956. In line with global best practices and
regulatory requirements, clearing and settlement is conducted through a separate clearing
corporation, MCX-SX Clearing Corporation Ltd. (MCX-SXCCL).
MCX-SX, which had started operations in Currency Futures segment, has been
witnessing a steady and significant growth in average daily turnover and open interest
ever since its inception. The average daily turnover (ADT) of currency futures stood at Rs
13,530.47 crore at the end of July 2012, a significant increase from an ADT of Rs 324.78
crore in the first month of operations. Completing the spectrum of currency risk
management products, MCX-SX recently introduced its first differentiated product in
Currency Options with a smaller tick size of 10 bps.
The currency derivatives segment at MCX-SX is supported by a strong
membership base and witnesses a nation-wide participation. At the end of July 2012,
MCX-SX had 751 members and saw participation from 714 towns and cities across
India.
MCX-SX received permissions to deal in Interest Rate Derivatives, Equity,
Futures & Options on Equity and Wholesale Debt Segment, vide SEBIs letter dated July
10, 2012.

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