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Equity Capital Markets – Public Issue (PART 4)

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Equity Capital Markets – Public Issue & Allotment Process (Part 2)

4. Types of Issues:

  • Public Issue: Open offer to the public via IPO or FPO.
  • Private Placement: Limited offer to select investors.
    • Preferential Allotment: Shares to promoters or strategic investors.
    • Qualified Institutional Placement (QIP): Shares to QIBs only.
    • Institutional Placement Program (IPP): Used to meet minimum public shareholding.
  • Rights Issue: Existing shareholders get the right to buy additional shares.
  • Bonus Issue: Free shares to existing shareholders based on their holdings.
  • Sweat Equity: Shares to employees/directors for contributions.

5. Debt vs Performance Capital

Debt Capital: Borrowed funds repayable with interest.
Performance Capital (Equity): Ownership-based capital with profit-sharing but no fixed returns.

6. IPO Application Process

  • Red Herring Prospectus: Draft prospectus with key info but no final price.
  • Road Show: Presentations to potential investors to attract interest.
  • Green Shoe Option: Overallotment option to stabilize prices post-listing.

7. Shareholding Structures

  • Diluted Shareholding: Includes potential shares from convertible instruments.
  • Non-Diluted Shareholding: Only currently existing equity shares.

8. Pricing of Issues

  • Fixed Price Issue: Price pre-determined and disclosed.
  • Book Building: Price discovered through investor bids within a range.

9. Stock Exchange vs OTC

  • Stock Exchange: Centralized, regulated marketplace (e.g., NSE, BSE).
  • OTC (Over-the-Counter): Decentralized market for unlisted securities.

10. Trading and Settlement

Trading today is done electronically through stock exchanges. Earlier it was physical, now fully digitized.

  • Settlement: Transfer of securities and funds after trade execution.
  • Types: T+1, T+2 (settlement completed 1 or 2 days after trade).

Continue to: Part 3 – Valuation Techniques & Preference Shares

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