Primary markets are also known as new issue market.

Here all the securities are issued for the first time

When a company wishes to raise capital it goes to the primary market.

Methods to raise capital from primary market:

Initial public offer Rights issue Preferential issue

Initial public offer is the first time sale of securities by a company. It can be made through any of the following methods:

Public issue through prospectus Offer for sale Private placement

Public issue through prospectus under this , a company which wants to

raise capital ,issues a prospectus to attract and invite people to subscribes securities (shares or debentures)

Prospectus is that advertisement ,notice or information by which the general public is invited for the purchase of shares and debentures ,on certain terms and conditions

It contains the past performance ,background of the company and experience of the promoters.

Prospectus enables the public to decide whether to invest or not in a company

some of its disadvantages are that this method is costly, it involves larger no of administrative problems.

It involves large no of intermediaries like merchant bankers, brokers underwriters etc. .

Offer for sale Under this method , new securities are

sold by the company to the intermediary who sells them to the public

The intermediaries are generally financial institutions and stock brokers

They buy the securities from the companies at an agreed price and then sell these securities to the public at a higher price

Of its advantage is that the issuing company is saved from involving itself from the tedious process of public issue

Private placement Under this method securities are sold by

the company privately to one or more intermediaries at an agreed price who sells them at a higher price to clients and associates

Here, securities are not offered to the public even by the intermediaries

There is no need of issuing a prospectus by the company as the whole issue is sold to the selected intermediaries

Thus to conclude offer for sale and private placement of securities are cost effective methods of raising finance as compared to a public issue through prospectus

The company saves a lot of expenditure involved in issue of prospectus ,underwriting , advertisement

These methods are suitable for small as well as big companies raising small amount

Thank you

Made by: Aditya mahajanAashray khuranaRadhika jaggiMandeep singh