New Issue Market

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UNIT 8 CAPITAL MARKET I : NEW ISSUES MARKET Structur 8.0 8.1 8.2 8.3 . . Objectives Introduction ,Primary Market and Secondary Market 'Idethods of Floatation of New Issues 8.3.1 Public Issue 8.3.2 Rights Issue 8.3.3 Private Placement 8.4 Entry Norms for New Issues 8.5 Fixation of Premium 8.5.1 Book Building Process 8.6 Reforms in Primary Capital Market 8.7 Recent Trends in New Issues Market in India 8.8 Let U s Sum Up 8.9 Key Words 8.10 Some Useful Books 8.1 1 Answers/Hints to Check Your Progress 8.0 OBJECTIVES After going through this unit you will be able to : explain the concept of capital market and its segments, ' describe the various means to raise the capital in the primary market, describe the reforms in primary capital…show more content…
The procedure followed in cases of public issue is as follows: Invitation to subscribe the share is made through a document called 'prospectus'. The applications on the prescribed form, along with application money, are invited by the company. Thc subscription list is open for a period of 3 to 7 days. No allotment can be made unless, the amount stated in the prospectus as t h e minimum subscription h a s been subscribed, and the company has received sum payable on application. Minimum subscription refers to the number of shares, which should be subscribed. A s per the SEBI guidelines, minimum subscription has been fixed a t 90% of entire public issue. Generally, the amount is mobilized in two instalmentsapplication money and allotment money. If the full amount is not asked for a t the time of allotment itself, the balance is called u p in one or two calls thereafter knourn a s call money. The letter of allotment sent by the company is exchangeable far share certificates. If the allottee fails to pay the calls, his shares are liable to be forfeited. In that case, allottee is not eligible for any refund. The public issue may also be underwritten by an underwriter. Underwriting is nut mandatory now. BE underwriter gives a n undertaking, to the issuing company to take the unsubscribed shares. This is called devalvement of shares on. the underwriter:;;, for which they are paid a commission. In India unde, writing agencies can be classified into following categories:
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