Learn about share market

 Let us learn about Share Market

I will start with -What is a Capital Market?

Capital Market is that form of market where long term and short term funds are collected and by these funds requirements of business organization, individual business and government organizations are fulfilled.

 

Capital Market structure in India

1.      Organized                                               2.           Unorganized

Fund Market                                                          Fund Market

 

Unorganized fund Market- Ex- Chit funds, Private Bankers, Private financial institutions.

Organized fund Market- Ex- Stock Market, R.B.I., Banks, L.I.C. Etc.

In capital market funds are collected in 3 ways:-

1.      Public Issue

2.      Rights Issue

3.      Private Placement





 

1.      Public Issue:- a public issue (often called a public offering) is when a company offers its shares or debentures to the general public to raise capital. It’s the transition point where a company moves from being privately funded to being owned by everyday investors and institutions.

The Two Main Types of Public Issues

When a company decides to go public or raise more money from the market, it typically follows one of two routes:

(A)    Initial Public Offering (IPO)

This is a company’s very first sale of equity to the public. Before an IPO, the company is private—owned by founders, venture capitalists, or private investors.

The Goal: To get listed on a stock exchange (like the NSE or BSE), allowing anyone to buy and sell their shares.

Why do it? It provides massive capital for expansion, gives early investors an exit strategy, and boosts the company's public profile.

 

(B) Further Public Offer (FPO) / Follow-on Public Offer

An FPO happens when a company that is already public and listed decides to issue fresh shares to the public to raise additional funds.

The Goal: To reduce debt, fund a new massive project, or finance an acquisition.

The Difference: It is generally considered less risky than an IPO because the public already has a track record of the company's performance and stock price.

 

2.      Rights Issue:- A rights issue is an invitation to existing shareholders to buy additional, new shares of the company—usually at a discounted price compared to the current market value.

Unlike a public issue (IPO or FPO), which invites the general public to buy shares, a rights issue is strictly reserved for people who already own stock in the company.

 

3.      Private Placement:- A private placement is the exact opposite of a public issue. Instead of offering shares or bonds to the general public on the open market, a company sells them directly to a select group of chosen investors.

 

Because these shares are not offered to the public, the company doesn't need to list them on a stock exchange immediately or file a massive, heavily regulated prospectus. It is a highly targeted way to raise capital.

 

Who Are the Investors?

Since the general public (retail investors) is excluded, private placements are pitched to Institutional Investors and Accredited/High-Net-Worth Individuals. These are entities deemed sophisticated enough to understand the risks without strict regulatory hand-holding.

 They typically include:

1.      Venture Capital (VC) and Private Equity (PE) funds

2.      Mutual funds and insurance companies

3.      Hedge funds

4.      Banks and financial institutions

5.      Wealthy individual investors (Angel investors)

In this type companies have various benefits such as:-

(1)   In this type issue cost of issue is very low.

(2)   If company require low amount funds then this type is very beneficial.

(3)   In this type of issue there are very less formalities.

 

 This will be series of small articles

 

                                                                                         

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