Professional Documents
Culture Documents
90,000
Amount Raised Rs. Crores (EQUITY) Amount Raises Rs Crores(PS) Amount Raised Rs Crores(Bonds)
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0 1997-98 1995-96 1996-97 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 1993-94 1994-95 2009-10
Debt Instruments
WHAT DO YOU MEAN BY DEBT INSTUMENTS?
DEBT INSTURMENTS
CAN YOU LIST OUT THE VARIOUS TYPES OF DEBT INSTRUMENTS AVAILABLE IN THE INDIAN MARKET?
EQUITY Market Segment 1. EQUITY Government SHARE Securities CAPITAL PREFERENCE SHARE CAPTAL WARRANTS Public Sector Issuer Central Government
Debt Instruments Zero Coupon Bonds, Coupon Bearing Bonds, Treasury Bills, STRIPS
2.
State Governments Coupon Bearing Bonds. Government Agencies / Statutory Bodies/Public Sector Units Govt. Guaranteed Bond/PSU Bonds, Debentures, Commercial Paper , Debentures
3.
Corporates
Debentures, Bonds, Commercial Paper, Floating Rate Bonds, Zero Coupon Bonds, Inter-Corporate Deposits Certificates of Deposits, Debentures, Bonds
Banks
Financial Institutions
DEBT INSTRUMENTS
FEATURES OF DEBT INSTRUMENTS? FIXED OR FLOATING RATE OF INTEREST FIXED COMMITMENT TO SERVICE THE PRINCIPAL AND INTEREST LOW RISK AND LOW RETURN NORMALLY NO VOTING RIGHT NORMALLY NO PARTICIPATION IN THE MANAGEMENT OF THE COMPANY
THEY ARE FIXED INTEREST DEBT INSTRUMENTS WITH VARYING PERIOD OF MATURITY. CAN EITHER BE PLACED PRIVATELY OR OFFERED FOR SUBSCRIPTION. MAY OR MAY NOT BE LISTED ON THE STOCK EXCHANGE. IF LISTED ON THE STOCK EXCHANGES, THEY SHOULD BE RATED PRIOR TO THE LISTING BY ANY OF THE CREDIT RATING AGENCIES DESIGNATED BY SEBI.
DEBENTURES-Continued
WHEN OFFERED FOR SUBSCRIPTION A DEBENTURE REDEMPTION RESERVE HAS TO BE MAINTAINED. THE PERIOD OF MATURITY NORMALLY VARIES FROM 3 TO 10 YEARS AND MAY ALSO BE MORE FOR PROJECTS WITH A HIGH GESTATION PERIOD.
TYPES OF DEBENTURES
NON CONVERTIBLE DEBENTURES (NCD) PARTIALLY CONVERTIBLE DEBENTURES (PCD) FULLY CONVERTIBLE DEBENTURES (FCD) CALLABLE DEBENTURE PUTTABLE DEBENTURE
BONDS
THESE ARE FINANCIAL INSTRUMENTS WITH A FIXED COUPON RATE AND A DEFINITE PERIOD AFTER WHICH THESE ARE REDEEMED.
TYPES OF BONDS
Fixed rate Floating rate Discount bonds Junk Bonds Secured Premium Notes
TERM LOANS
MONEY CAN BE BORROWED FROM THE COMMERCIAL BANKS, DFI ETC FOR LONG PERIOD OF TIME TO MEET THE FINANCIAL REQUIREMENTS OF THE PROJECT.
PUBLIC DEPOSITS
IT IS AN EASIER METHOD OF MOBILISING FUNDS, ESPECIALLY DURING PERIODS OF CREDIT SQUEEZE. THE ADMINISTRATIVE COST OF DEPOSITS FOR THE COMPANY IS LOWER THAN THAT INVOLVED IN THE ISSUE OF SHARES AND DEBENTURES. THE PROCEDURE OF INVITING PUBLIC DEPOSITS IS ALSO SIMPLER AND INVOLVE LESSER FORMALITIES. THE RATE OF INTEREST PAYABLE BY THE COMPANY ON PUBLIC DEPOSITS IS LOWER THAN THE INTEREST ON LOANS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS. SUCH AN INTEREST IS A TAX DEDUCTIBLE EXPENSE.
PUBLIC DEPOSITS-Contd
IT HELPS THE COMPANY TO BORROW FUNDS FROM A LARGER SEGMENT OF PUBLIC AND THUS REDUCES THE DEPENDENCE OF THE COMPANY UPON FINANCIAL INSTITUTIONS. IT ALSO ENABLES THE COMPANY TO CREATE CONTACT WITH A LARGE NUMBER OF INVESTORS. IT ENSURES THE AVAILABILITY OF FUNDS FOR A LONGER DURATION AND PROVIDES FLEXIBILITY TO THE FINANCIAL STRUCTURE OF THE COMPANY. THERE IS NO RISK OF OVER-CAPITALISATION AND THE DEPOSITS CAN BE REPAID WHEN THEY ARE NOT REQUIRED. THERE IS NO DILUTION OF SHAREHOLDERS' CONTROL AS THE DEPOSITORS HAVE NO VOTING RIGHTS AND CANNOT INTERFERE WITH THE INTERNAL MANAGEMENT OF THE COMPANY.
EQUIPMENT FINANCING
EQUIPMENT FINANCING IS GENERALLY EXTENDED FOR STANDARD EQUIPMENT WHERE THE EQUIPMENT IS COMMONLY UTILIZED AND ITS VALUE IS KNOWN. EQUIPMENT FINANCING IS MAINLY PREVALENT FOR QUANTUM BETWEEN RS. 5 LAKH TO RS. 10 CRORES AND FOR A TIMEFRAME OF 3-5 YEARS. BETWEEN 70 80% OF THE COST OF THE EQUIPMENT IS GENERALLY PROVIDED IN CASE OF EQUIPMENT FINANCING.
EQUIPMENT FINANCING
INCLUDES FINANCING OF CONSTRUCTION EQUIPMENT, DG SETS, MEDICAL DIAGNOSTIC EQUIPMENT, INJECTION MOULDING MACHINE, PRINTING PRESS, AIR CONDITIONING EQUIPMENT, MACHINE TOOLS, OFFICE EQUIPMENT & COMPUTERS.
MT LOANS
FOR PERIOD RANGING FROM 2-5 YEARS
COMMERCIAL PAPERS
SHORT TERM UNSECURED PROMISSORY NOTES ISSUED BY FIRMS WITH A HIGH CREDIT RATING. THE MATURITY OF THESE VARY FROM 15 DAYS TO A YEAR. THEY ARE SOLD AT A DISCOUNT TO THE FACE VALUE AND REDEEMED AT THE FACE VALUE. CPS CAN BE ISSUED BY COMPANIES, WHICH HAVE A MINIMUM NETWORTH OF RS.4 CRORES AND NEEDS A MANDATORY CREDIT RATING OF MINIMUM A2 (ICRA), P2 (CRISIL), D2 (DUFF & PHELPS) AND PR2 (CREDIT ANALYSIS & RESEARCH). THE RATING SHOULD NOT BE MORE THAN 2 MONTHS OLD. MINIMUM AMOUNT OF ISSUE RS.25 LAKHS AND MORE IN MULTIPLES OF RS.5 LAKH.
EQUITY INSTRUMENTS
1,600
1,400
1,143 1,200 1,000 800 600 400 151 200 111 93 58 0 884
1,692
1,800
139
124
124
57
60
35
26
47
76
MEANING OF CAPITAL
IN RELATION TO A COMPANY LIMITED BY SHARES, THE WORD CAPITAL MEANS THE SHARE CAPITAL THE CAPITAL DIVIDED INTO SPECIFIED NUMBER OF SHARES OF A FIXED AMOUNT EACH. IT CAN ALSO BE DEFINED AS THE MONEY RAISED BY ISSUE OF SHARES BY A COMPANY LIMITED BY SHARES. IT DOES NOT INCLUDE DEBT
TYPES OF CAPITAL
NOMINAL, AUTHORISED OR REGISTERED CAPITAL ISSUED CAPITAL SUBSCRIBED CAPITAL CALLED UP CAPITAL UNCALLED CAPITAL PAID UP CAPITAL UNPAID CAPITAL RESERVE CAPITAL
KINDS OF SHARES
SEC. 86 PERMITS A COMPANY TO ISSUE TWO KINDS OF SHARES EQUITY SHARES PREFERENCE SHARE CAPITAL
EQUITY SHARES
AN EQUITY INSTRUMENT REFERS TO A DOCUMENT WHICH SERVES AS A LEGALLY APPLICABLE EVIDENCE OF THE OWNERSHIP RIGHT IN A FIRM, LIKE A SHARE CERTIFICATE. SEC.85(2) ANY SHARE WHICH IS NOT PREFERENCE SHARE IS TERMED AS EQUITY SHARE
PREFERENCE SHARE
WHAT ARE THE CHARATERISTICS OF PREFERENCE SHARES WHICH MAKES THEM DIFFERENT FROM EQUITY SHARES? SEC 85(1) : RIGHT WITH RESPECT TO DIVIDEND RIGHT WITH RESPECT TO PAYMENT OF CAPITAL
EQUITY SHARES
CAN A COMPANY ISSUE EQUITY SHARES WITH DIFFERENTIAL RIGHTS AS TO VOTING, DIVIDEND OR OTHERWISE? YES. COMPANIES (ISSUE OF SHARE CAPITAL WITH DIFFERENTIAL VOTING RIGHTS)RULES 2001. SEC 88 DELETED
Disadvantages to company
Dilution in control No flexibility in capital structure High cost Speculation Disadvantages to investors Uncertain and Irregular Income Capital loss During Depression Period Loss on Liquidation
TYPES OF ISSUES
Public issue (i) Initial Public offer (IPO) (ii) Further public offer (FPO) Rights issue Bonus issue Private placement (i) Preferential issue (ii) Qualified institutional placement
60,000
50,000
40,000
30,000
20,000
10,000
1600
1200
1000
800
600
400
200
1600
Number of FPOs
Number of IPOs
1400
1200
1000
800
600
400
200
50,000
45,000 40,000
35,000 30,000
25,000
20,000 15,000
10,000 5,000
Issue Requirements
ARE THERE ANY ENTRY REQUIREMENTS FOR AN ISSUER TO MAKE AN ISSUE / OFFER TO PUBLIC? YES
AN UNLISTED ISSUER MAKING A PUBLIC ISSUE I.E. (MAKING AN IPO) IS REQUIRED TO SATISFY THE FOLLOWING PROVISIONS:
Entry Norm I (commonly known as Profitability Route)
NET TANGIBLE ASSETS OF AT LEAST RS. 3 CRORES IN EACH OF THE PRECEDING THREE FULL YEARS. DISTRIBUTABLE PROFITS IN ATLEAST THREE OF THE IMMEDIATELY PRECEDING FIVE YEARS. NET WORTH OF AT LEAST RS. 1 CRORE IN EACH OF THE PRECEDING THREE FULL YEARS. IF THE COMPANY HAS CHANGED ITS NAME WITHIN THE LAST ONE YEAR, ATLEAST 50% REVENUE FOR THE PRECEDING 1 YEAR SHOULD BE FROM THE ACTIVITY SUGGESTED BY THE NEW
NAME.
THE ISSUE SIZE DOES NOT EXCEED 5 TIMES THE PRE ISSUE NET WORTH AS PER THE AUDITED BALANCE SHEET OF THE LAST FINANCIAL YEAR TO PROVIDE SUFFICIENT FLEXIBILITY AND ALSO TO ENSURE THAT GENUINE COMPANIES DO NOT SUFFER ON ACCOUNT OF RIGIDITY OF THE PARAMETERS, SEBI HAS PROVIDED TWO OTHER ALTERNATIVE ROUTES TO THE COMPANIES NOT SATISFYING ANY OF THE ABOVE CONDITIONS, FOR ACCESSING THE PRIMARY MARKET, AS UNDER:
ISSUE SHALL BE THROUGH BOOK BUILDING ROUTE, WITH AT LEAST 50% TO BE MANDATORY ALLOTTED TO THE QUALIFIED INSTITUTIONAL BUYERS (QIBS). THE MINIMUM POSTISSUE FACE VALUE CAPITAL SHALL BE RS. 10 CRORES OR THERE SHALL BE A COMPULSORY MARKETMAKING FOR AT LEAST 2 YEARS
A LISTED ISSUER MAKING A PUBLIC ISSUE (FPO) IS REQUIRED TO SATISFY THE FOLLOWING REQUIREMENTS :
IF THE COMPANY HAS CHANGED ITS NAME WITHIN THE LAST ONE YEAR, ATLEAST 50% REVENUE FOR THE PRECEDING 1 YEAR SHOULD BE FROM THE ACTIVITY SUGGESTED BY THE NEW NAME. THE ISSUE SIZE DOES NOT EXCEED 5 TIMES THE PRE ISSUE NET WORTH AS PER THE AUDITED BALANCE SHEET OF THE LAST FINANCIAL YEAR ANY LISTED COMPANY NOT FULFILLING THESE CONDITIONS SHALL BE ELIGIBLE TO MAKE A PUBLIC ISSUE BY COMPLYING WITH QIB ROUTE OR APPRAISAL ROUTE AS SPECIFIED FOR IPOs
Allotment of shares
Net Offer to the General Public has to be at least 25% of the Total Issue Size for listing on a Stock exchange. It is mandatory for a company to get its shares listed at the regional stock exchange where the registered office of the issuer is located. In an Issue of more than Rs. 25 crores the issuer is allowed to place the whole issue by book-building Minimum of 50% of the Net offer to the Public has to be reserved for Investors applying for less than 1000 shares.
Allotment of Shares
THERE SHOULD BE ATLEAST 5 INVESTORS FOR EVERY 1 LAKH OF EQUITY OFFERED (NOT APPLICABLE TO INFRASTRUCTURE COMPANIES). QUOTING OF PERMANENT ACCOUNT NUMBER OR GIR NO. IN APPLICATION FOR ALLOTMENT OF SECURITIES IS COMPULSORY WHERE MONETARY VALUE OF INVESTMENT IS RS.50,000/- OR ABOVE. INDIAN DEVELOPMENT FINANCIAL INSTITUTIONS AND MUTUAL FUND CAN BE ALLOTTED SECURITIES UPTO 75% OF THE ISSUE AMOUNT. ALLOTMENT TO CATEGORIES OF FIIS AND NRIS IS UPTO A MAXIMUM OF 24%, WHICH CAN BE FURTHER EXTENDED TO 30% BY AN APPLICATION TO THE RBI - SUPPORTED BY A RESOLUTION PASSED IN THE GENERAL MEETING.
TIME FRAME
A RIGHTS ISSUE HAS TO PROCURE 90% SUBSCRIPTION IN 60 DAYS OF THE OPENING OF THE ISSUE. ALLOTMENT HAS TO BE MADE WITHIN 30 DAYS OF THE CLOSURE OF THE PUBLIC ISSUE AND 42 DAYS IN CASE OF A RIGHTS ISSUE. ALL THE LISTING FORMALITIES FOR A PUBLIC ISSUE HAS TO BE COMPLETED WITHIN 70 DAYS FROM THE DATE OF CLOSURE OF THE SUBSCRIPTION LIST.
PRICING OF AN ISSUE
WHO FIXES THE PRICE OF SECURITIES IN AN ISSUE? INDIAN PRIMARY MARKET USHERED IN AN ERA OF FREE PRICING IN 1992. THE OFFER DOCUMENT CONTAINS FULL DISCLOSURES OF THE PARAMETERS WHICH ARE TAKEN IN TO ACCOUNT BY MERCHANT BANKER AND THE ISSUER FOR DECIDING THE PRICE. THE PARAMETERS INCLUDE EPS, PE MULTIPLE, RETURN ON NET WORTH AND COMPARISON OF THESE PARAMETERS WITH PEER GROUP COMPANIES.
FOR HOW MANY DAYS AN ISSUE IS REQUIRED TO BE KEPT OPEN? Fixed price public issues: 310 working days For Book built public issues: 37 working days extendable by 3 days in case of a revision in the price band For Rights issues : 1530 days.
A 20 % price band is offered by the issuer within which investors are allowed to bid and the final price is determined by the issuer only after closure of the bidding.
Demand for the securities offered , and at various prices, is available on a real time basis on the BSE website during the bidding period..
10 % advance 50 % of shares payment is offered are required to be reserved for QIBS, made by the QIBs 35 % for small along with the investors and the application, while balance for all other categories of other investors. investors have to pay 100 % advance along with the application.
NEW TERMS
GREENSHOE OPTION SAFETY NET OPEN BOOK/CLOSED BOOK HARD UNDERWRITING SOFT UNDERWRITING DIFFERENTIAL PRICING
GAP OF 365 DAYS BETWEEN TWO BUY BACK PROPOSALS BUY BACK IS LESS THAN 25% OF PAID UP CAPITAL AND FREE RESERVES DEBT AFTER BUY BACK IS NOT MORE THAN TWICE THE CAPITAL AND FREE RESERVES
1400
Number of Issues(PS)
1200
1000
800
600
400
200
0 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 200994 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
MARKET CAPITALISATION BSE RS. 61,65,619 CRORE NSE RS. 60,09,173 CRORE
THANKS