Page 100 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 5: Primary Market

14. ……………………..carries out the activities, such as maintaining the records of holders of Notes
securities of the company for and on behalf of the company.
15. ………………………..and transfer agent are the two categories of intermediaries who
actively participate in the new issue activity of a company.

5.5 Summary

 Primary market of a country renders three major services: investigating and processing of
proposals for new issues, underwriting of new security issues and distribution of new
securities to ultimate investors. These functions are carried out by specialized agencies
like financial institutions, brokers and dealers in securities.
 There are various methods of selling securities, viz., public issue through prospectus,
offer for sale, private placement, right issue, over-the-counter-placement, stock option
and book building.
 A host of players participate in the activities of the primary market in India. They are
merchant brokers, underwriters, bankers to the issue, brokers to the issue, registrars and
share transfer agencies and debenture trustees. These players can carry on their business
after getting Certificate of registration from the SEBI. The SEBI has laid down
comprehensive rules defining duties and responsibilities of each of these players and
codes for conduct in their business. Violation of rules and failure to observe codes may
lead to suspension of their business.

 The SEBI plays a vital role in the effective functioning of the primary market in India by
formulating comprehensive rules regarding issue of new securities, defining duties and
responsibilities of various players of the market, and conducting the inspection of the
working of these players.

5.6 Keywords

Book-building means a process by which a demand for the securities proposed to be issued by
a body corporate is elicited and built-up and the price for such securities is assessed.
Brokers to an issue: Represent intermediaries who are concerned with procuring the subscription
to the issue from prospective investors across the country.

Green-shoe Option: Means an option of allocation of shares in excess of the shares included in
the public issue and operating a post-listing price stabilizing mechanism through a Stabilizing
Agent (SA).
Merchant banker: Is any person who is engaged in the business of issue management either by
making arrangements regarding selling, buying or subscribing to securities or acting as manager,
consultant, advisor or rendering corporate advisory service in relation to such 'issue management'.
Qualified Institutional Bidders: Under this method, bidders will be free to bid at any price
above the floor price and allotment would be at differential prices against the current practice of
bidding within a price band.

5.7 Review Questions

1. Outline major functions of the primary market in India.

2. Discuss, in brief, about the agencies associated with activities of primary market in India.

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