What is NIMStocks available for the first time are

offered through New Issue Market.The issuer may be a new company or an

existing company.These issues may be of new type or the

security used in the past.

Functions of NIMOriginationUnderwritingDistribution

1. OriginationIt deals with the origin of the new issue.The proposal is analyzed in terms of the

nature of the security, the size of the issue, timing of the issue and floatation method of the issue.

2. UnderwritingUnderwriting contract makes the share

predictable and removes the element of the uncertainty in the subscription.

3. DistributionIt refers to the sale of securities to the

investors.This is carried out with the help of the

lead managers and brokers to the issue.

Parties involved in the new issueManagers to the issueRegistrar to the issueUnderwritersBankers to the issueAdvertising agentsFinancial institutionsGovernment and statutory agencies

1. Managers to the issue Lead managers are appointed by the company to

manage the public issue programmes. Their main duties are a) Drafting of prospectusb) Preparing the budget of expenses related to the issuec) Suggesting the appropriate timings of the public issued) Assisting in marketing the public issue successfullye) Advising the company in the appointment of registrars

to the issue, underwriter, bankers to the issue, advertising agents

f) Directing the various agencies involved in the public issue.

2. Registrar to the issue After the appointment of the lead managers to the

issue, in consultation with them, the registrar to the issue is appointed.

Quotations containing the details of the various functions they would be performing and charges for them are called for selection.

Among them the most suitable one is selected. It is always ensured that the registrar to the issue has

the necessary infrastructure like computer, internet and telephone.

3. UnderwritersUnderwriting is a contract by means of

which a person gives an assurance to the issuer to the effect that the former would subscribe to the securities offered in the event of non subscription by the person to whom they were offered.

The person who assures is called an underwriter.

Underwriters are divided into 2 a) Financial institutions and Banksb) Brokers and approved investment

companies. The underwriters do not buy or sell

securities. They stand as back-up supporters and

underwriting is done for a commission.

4. Bankers to the issueThey have the responsibility of collecting

the application money along with the application form.

The bankers to the issue generally charge commission besides the brokerage, if any.

Depending upon the size of the public issue more than one banker to the issue is appointed.

5. Advertising Agents Advertising plays a key role in

promoting the public issue. Hence, the past track record of the advertising agency is studied carefully.

Tentative programmes of each advertising agency along with the estimated cost are called for.

After comparing the effectiveness and cost of each programme with the other, a suitable advertising agency is selected in consultation with the lead managers to the issue.

6.The financial institutions Financial institutions generally

underwrite the issue and lend term loans to the companies.

Hence, normally they go through the draft of prospectus, study the proposed programme for public issue and approve them.

IDBI, IFCI&ICICI, LIC, GIC and UTI are the some of the financial institutions that underwrite and give financial assistance.

7. Government and statutory Agencies SEBIRegistrar of companiesRBIS/EIndustrial licensing authoritiesPollution control authorities.

Collection Centres Generally there should be at least 30

mandatory collection centers inclusive of the places where stock exchanges are located.

If the issue is not exceeding Rs.10 Cr (Excluding premium if any) the mandatory collection centers are the four metropolitan centres viz. Mumbai, Delhi, Calcutta and Chennai and at all such centres where stock exchanges are located in the region in which the registered office of the company is situated.

Placement of issueOffer through prospectusBought out deals (Offer for sale)Private PlacementRights IssueBook building

1. Offer through ProspectusProspectus is a document gives details

regarding the company and invites offers for subscription or purchase of any shares or debentures from the public.

2. Offer for saleIn bought out deal, an existing company

off-loads a part of the promoters capital to a wholesaler instead of making a public issue.

The sponsors hold on to these shares for a period and at an appropriate date they offer the same to the public.

The hold on period may be as low as 70 days or more than a year.

3. Private placementIn this method the issue is placed with

a small number of financial institutions, corporate bodies and high networth individuals.

The special feature of the private placement is that there is no need for underwriting arrangements since the placement itself amounts to underwriting.

Through private placement equity shares, preference shares, cumulative convertible preference shares, debentures and bonds are sold.

4. Rights issueIf a public company wants to increase its

subscribed capital by allotment of further shares after two years from the date of its formation or one year from the date of its first allotment, whichever is earlier, should offer share at first to the existing shareholders in proportion to the shares held by them at the time of offer.

Shares of this type is called as rights shares.

5. Book BuildingBook building is a mechanism through

which the initial public offerings (IPOs) takes place in the U.S.

Similar methods are used in the primary market for the issue of GDRs.

Pricing of new issuesPricing of the public issue has to e

carried out according to the guidelines issued by SEBI.

The companies are permitted to price their issues at par or at premium

Allotment of sharesAccording to SEBI, the allocation of

shares is done under proportionate allotment method.

The applications will be categorized according to the number of shares applied for.

Then allocation is done by proportionate basis.

Secondary MarketIn the secondary market, the investors

can sell and buy securities.The health of the economy is reflected by

the growth of the stock market.

History of Stock Exchanges in IndiaOrigin of stock exchanges in India can be

traced back to the later half of 19th Century.

The brokers organized an informal Association in Mumbai named “The Native Stock and Share Brokers Association” in 1875.

The growth of stock exchanges suffered a set back after the end of World War.

Securities Contract and Regulation Act, 1956 gave powers to the Central Government to regulate the Stock Exchanges.

The stock exchanges in Mumbai, Calcutta, Chennai, Ahmedabad, Delhi, Hyderabad and Indore were recognized by the SCR Act.

The Bangalore stock exchanges was recognised only in 193. At present we have 23 stock exchanges.

Till recent past, floor trading took placeScreen-based trading facility was

introducedBombay Stock exchange introduced the

screen based trading system in 1995, which is known as BOLT (Bombay On-Line Trading System)

Functions of Stock ExchangeMaintains active tradingFixation of pricesEnsures safe and fair dealingAids in financing the industryDissemination of informationPerformance inducerSelf-regulatory organization

Regulatory framework1.Ministry of financeThe stock Exchange Division of the

Ministry of Finance has powers related to the application of the provision of the SCR Act and licensing of dealers in the other area.

2. Securities and Exchange Board of India:It has got power to regulate the business

of stock exchanges.

3. The Governing BoardThe Governing Board of the stock

Exchange consists of elected member directors, government nominees and public representatives.

Rules, bye-laws and regulations of the stock exchange provide substantial powers to the Executive Director for maintaining efficient and smooth day to day functioning of the stock exchange.

Members of the stock ExchangeThe SCR Act of 1956 has provided

uniform regulation for the admission of members in the stock exchanges.

The qualifications for becoming a member of a recognised stock exchange are given below.

1. The minimum age prescribed for the members is 21 years.

2. He/She should be an Indian citizen.3. He should be neither a bankrupt

nor compounded with the creditors.

4. He should not be convicted for fraud or dishonesty.

5. He should not be engaged in any other business connected with a company.

6. He should not be a defaulter of any other stock exchange.

7. The minimum required educational qualification is a pass in 12th standard examination.

The brokerA broker/member registered with the

recognized stock exchange has to apply to the SEBI for registration.

Usually the agreement between the broker and the sub broker is carried out on a non-judicial stamp paper of Rs.10.

The agreement generally specifies the authority and responsibility of the broker and sub-broker.

The broker has to abide by the code of conduct laid down by the SEBI.

The code of conduct prevents the malpractice, manipulation and gives other statutory requirements.

Listing of SecuritiesListing refers to the admission of the

security of a public limited company on a recognized stock exchange for trading.

Listing of securities is undertaken with the primary objective of providing marketability, liquidity and transferability to securities.

Merits of Listing1. Liquidity2. Best Price3. Regular Information4. Periodic reports5. Transferability6. Income Tax benefit7. Wide publicity

De-merits of Listing1. Listed companies are subjected to

various regulatory measures of the stock exchanges and SEBI.

2. Essential information has to be submitted by the listed companies to the stock exchanges.

3. Annual General Meeting, Annual reports have to be sent to a large number of shareholders. This creates large amount of unnecessary expenditure.

4. Public offer itself is an expensive exercise.