PRIMARY

MARKETS

Topics Covered

INTRODUCTION
MEANING
FEATURES
FUNCTIONS

NEED OF PRIMARY MARKETS

IMPORTANCE OF PRIMARY MARKETS

DIFFERENT KINDS OF ISSUE

DISTINGUISH BETWEEN PRIMARY AND SECONDAY
MARKET
CONCLUSION

Introduction
Also known as New Issue Market
Success of the capital market depends on
primary market
Is the market for new issuers
Can be directly bought from the shareholders
Small and medium scale business, enter the
primary market to raise money from the public

Meaning
The primary market is
the part of the capital
market that deals with
issuing of new securities.
Companies, governments
or public sector
institutions can obtain
funds through the sale of
a new stock or bond
issues through primary
market.
This is typically done
through an investment

Why do companies need to issue

share in public ?
Most companies are usually started privately by
their promoters.
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.
The way to invite share capital from the public is
through a Public Issue. Simply stated, a public
issue is an offer to the public to subscribe to the
share capital of a company.

Features Of Primary Market

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.
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

Functions
Household Savings
Global Investments
Sale of Government
Securities
Primary Market
Participants
Market Risk

Different kinds of Issues

Initial Public Offering (IPO)
Rights Issues
Preferential Issues

IPO
Meaning
E.g. 1.Wipro
Suppose You Bought Wipro 100 share value Rs. 100 in 1980
1981 ,1:1 Bonus =200 shares
1985,1:1 Bonus =400 shares
1986 split to Rs 10 =4000 shares
1987,1 :1 Bonus =8000
1989, 1:1 Bonus =16000
1992 ,1:1 Bonus =32000
1995 ,1:1 Bonus =64000
1997 ,2:1 Bonus =1,92,000
1999 Split to Rs 2 =9,60,000
2004 2:1 Bonus =28,80,000
2005 1:1 Bonus =57,60,000
2010 3:2 Bonus =96,00,000
Todays Rate Rs 431
You Earn Rs 413 Crore !!

IPO
Reliance Power Ltd.
Issued on 2008
Issue Price 450
Many Demat A/c were opened in 2008
Current Market Price is 66.80.

company

Dilution of
stakes
Held with
owners

Intermediaries

Merchant Bankers
Underwriters
RTA
Depository (CDSL &NSDL)
Brokers to issue
Consultants

Need For Primary Market

To raise funds for certain purpose.
To create market for new issues of
securities.
To establish the magnitude of the market.
To mobilize Resource in the economy.
For overall development of companies

portance Of Primary Marke

It studies needs, wants and expectations of
the customers.
It finds out reactions of customers to
products of the company.
It evaluates company's sales promotion
measures for suitable adjustment and
improvements.
It studies current marketing problems and
opportunities for suitable follow up.

Conclusion
Securities market plays a pivotal role in
mobilizing savings and channeling them in
productive purposes and many more.
It provides the channel for sale of new
securities.
It helps government and corporate to raise
resources to meet their requirements of
investment and/or discharge some
obligation.