Financial Market - Capital Market

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 Banking

Security Market
Primary Market (Public Issue)
  • Company sell IPO by Merchant banker - Company release share to the share holders.
  • Ex: xyz company sell 1000 share at 10,000 rs as IPO.
  • New Issue
  • Public Issue
Initial Public Offering
  • Person A is Starting a Company need 100 Crore. I have 20 Crore, 40 Crore loan & balance 40 Crore converted in 40 share (1 Cr Each) and Sell - (IPO – Initial Public Offering – 1st time selling Share).
  • 40 Share, Public buy and give 40 Crore. Total 100 crore invested.
  • Equity debt ratio is 60 (20 Cr + 40 Share): 40 (Bank Loan).
  • Person A is 60% ownership (20 Cr + Loan). Balance 40% is Share Holders (Stocks/ Shares).
Some Process
  • Over Subscription - I need 40 Cr so sell 40 shares by Merchant Banker. Merchant Banker (paytm money, binano) announced price & Selling date. At the date I need 40 person to buy share but 60 person came to buy share, so share value increased from 1 Cr to 1.1 Cr because of demand. It cause inflation. I need 40 Cr but I got 44 Cr.
  • Under Subscription – Same example, Need 40 person for 1 Cr each but only 30 person come to buy share. Because of less demand share sell at 95 lakhs for 30 person. 10 share not sell. I need 40 Cr but get 28.5 Cr.
  • Under Writing – Merchant banker Subscribe the unsold share.
  • (The balance not selling 10 share is bought by merchant banker and give money I need. In Future the company grow the share gets demand at the time merchant banker release the share in market and get profit.)
Declared price Issue
  • Reputed company can fix the price for their share, like TCS launch 1 share = 10,000.
Book Building Method
  • New Company launch only shares and base price. Like xyz company launch 10,000 Shares at 1000 rs as base price. Based on market demand Share value increase and decrease.
Follow on Public Offering
  • Company doing well and get more profit. Wish to expand company. Need 50 Cr.
  • 20 Cr Person A Give Balance 30 Cr is make 30 Share (1 Cr Each) and sell – (FPO - Follow-on Public Offering – 2nd Time selling Share. Two types Private issue (Give share to friends/Relatives Directly) & Public issue (Sell Share in Share Market {NSE & BSE})
  • Because of High demand, share value increased to 1.5 Crore. (Over Valued Company – Share Sell more than its value).
  • Merchant Banker – Buy IPO & Sell in Secondary Market.
Other issue - Private Placement
  • If I need to sell 30 Share (1 Cr each). I go to merchant banker and say sell share at private placement.
  • If selling share as IPO merchant banker announced at public and sell the share. If it is private placement, the merchant banker call group of people and announce the group that ABC company sell these share at this price only to the group (The group are Liken Friends, Relative’s, Foreign Investors)
Rights Issue
(like as Private placement. Share sell to existing share holders)
  • If Authorised capital is 50 Cr. I sell 30 Cr first time as IPO. Later I need to expand company so Sell 20 Cr Share, at the time I call the existing share holders and sell the share to them.
Bonus Issue
  • Instead of giving dividend, Giving as share to the share holder
  • Ex: 100 Cr profit, Person has 10% Share  so they get 10 Cr as dividend. In bonus issue company give 10 Cr worth share to the share holder instead of giving money.
Sweat Equity Issue
  • Making the workers into Share Holders (Worker as Owner)
  • Ex: the Company Manager, CEO, Worker at the time of retirement, the company give some share the worker. Made the worker as share holder.
Second Market (Stock Market)
  • It is the place where sell already buy share.
  • Ex: use above example, Person A buy 10 share of xyz company at 1,00,000 (10,000 each) after 2 years the company perform well, so share value increased from 10,000 to 15,000.
  • Person A need 1.5 lakhs immediately so sell 10 share at share market (15,000 each) to person B and get 1.5 lakhs.
Stock Exchange or Market
  • Listed Company – Company Register in Stock Market (Can buy stock in BSE & NSE).
  • Un Listed Company – Company Not Register in Stock Market (Can buy share directly in Company or Merchant Banker.
  • Bullish – Stock exchange is in rise performance.
  • Bearish – Stock exchange is in fall
  • BSE & NSE both are in Bombay.
Bombay Stock Exchange
  • Sensex is Index for BSE, to determine the Mood & Performance.
  • Index calculator by different parameter & Weightage.
  • Sensex is Performance of Top 30 company and give weightage based Buy & Sell.
National Stock Exchange
  • Nifty is index for NSE
  • It is modern stock exchange created after LPG Reforms, new trend
  • Nifty is performance of top 50 company.
International Stock Exchange (INX)
  • It is in Gandhi Nagar, Gujarat at GIFT City (Gujarat International Financial Technology City).
  • GIFT city has more International Financial institutions branch.
Authorised Capital
  • If I start a company I need to register at Ministry of Corporate Affairs (MoCA) in Company Act. MoCA ask it is private Company or public company
  • Private company – 100 Cr need, 50 Cr Own money & 50 Cr as loan. No share is sell.
  • Public company – If I need 100 Cr to start a company, 40 Cr own money & 30 Cr as loan, for balance 30 Cr company sell share to public and get money. If I register in public company MoCA analysis the company and tell the maximum amount of share to release by the company is called authorised Capital.
  • Ex: If MoCA analysis the company and tell 50 Cr as authority capital. I sell share upto 50 Cr.
Issued Capital
  • Authorised capital is 50 Cr but I sell share only for 30 Cr (30 share, 1 Cr at each). The 30 Cr is issued capital.
Subscribed Capital
  • If 30 Cr Share (30 share) introduced by Merchant banker. But only 20 share sell for 20 Cr. The 20 Cr is Subscribed Capital.
Stock, Equity & Debenture
  • 100 Cr worth company (50 Cr own money + 10 Cr loan + 10 Cr by release bond + 30 Cr by stocks.
  • The Company total asset is 80 Cr (50 + 30 Cr) and total liability is 20 Cr (10 + 10 Cr)
  • Equity of company is 80 Cr
  • Stocks of Company is 30 Cr (Share is part of Equity)
  • Debenture is Unsecurity bond. Bond with no Collateral, bond are buy based only on credit rating of the company alone. Like G-Sec, Commercial paper. Because of No Collateral interest rate is high to attract buyers.
  • Other Terminology
  • Clearing House
  • To investigate in stock market need both bank account & Demonte account.
  • Ever Stock Exchange has its own clearing house.
  • Person A has 10 share (10,000 each) of TCS in demate account and person B has 1,00,000 in bank account & need 10 TCS share, the clearing house act as a intermediate. It transfer money from person B bank account to Person A bank account at the same time Transfer Share from person A to Person B demante account.
  • National Clearing house Corporation Limited for NSE.
  • Indian Clearing house Corporation Limited for BSE.
Insider Trading
  • SEBI baned
  • Take Example as aadar. Indian Government sign deal with TSC for creating aadar back end network and it announce publically on April 1. But the insider (Board of director, CEO, MD) known it early so one of the board of director tell this to their family & Friends to buy TCS because after the announcement on April 1 the value definitely rise. So His family & friends get profit than general public. (Ex: If share value is 1 lakh after announcement it became 1.5 lakh. It bring profit to their family and friends)
  • So SEBI say the term Unpublished Price Sensitive Information (UPSI), who has legal authority (like CEO, MD, Board of Director..) to hold it, the unlegal person know the information is illegal. (The person is arrested who unlegal person have information & legal person who leaked the information)
  • SEBI Regulations that the who are all the legal persons of company &  also company should provide Legal person list, whose family does not buy the share of the company.
Mutual Funds
  • Person collect money from the people and invested in Good Company. Company get profit the person distribute the profit to people.
Hedge Fund
  • Bigger size of mutual funds, high capital with high risk. For Rich People.
NBFC
Insurance Company
Pension Company

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