1.​ What is the role of the ‘Primary Market’?

​
The primary market is where new securities (like stocks and bonds) are sold for the first
time. It helps companies and governments raise money for projects, investments, or to pay
off debts.
When a company or government needs funds, they issue securities, which investors can
buy. These securities can be sold at their actual price (face value), at a discount (cheaper
than face value), or at a premium (higher than face value).
The primary market deals with different types of securities, such as equity (ownership in a
company) and debt (loans or bonds). These securities can be sold within the country
(domestic market) or in other countries (international market).
In short, the primary market is where businesses and governments get the money they
need by selling brand-new financial assets to investors.

2.​ What is meant by Face Value of a share/debenture?​

The face value of a share or debenture is its original or stated value, set by the company
when it is issued.
●​ For shares (stocks), the face value is usually a small amount (like ₹5 or ₹10).
However, the market price of the share can be much higher (like ₹100 or ₹1000)
based on demand and company performance.
●​ For debentures or bonds (debt securities), the face value is the amount that the
investor will get back when the bond matures (usually ₹100 for government and
corporate bonds).

The actual price of these securities in the market can change due to factors like demand,
supply, and interest rate changes.

3.​ Why do companies need to issue shares to the public?​

Companies usually start with money from their founders (promoters) and loans from banks.
However, as the business grows, they often need more money to expand, develop new
products, or manage operations.
To raise this extra money, companies sell shares to the public through a process called a
Public Issue. This allows individuals to invest in the company and become part-owners.
Once people buy shares, the company allocates (distributes) shares to them based on
the rules set by SEBI (the organization that regulates the stock market).

4.​ What are the different kinds of issues?

Companies can raise money in different ways by issuing securities. The main types of
issues are:

Initial Public Offering (IPO) – When a company sells its shares to the public for the first
time. This allows the company to be listed on the stock market, and people can buy and
sell its shares.

Follow-On Public Offering (FPO) – When a company that is already listed on the stock
exchange issues more shares to the public to raise additional funds.
 Rights Issue – When a company offers new shares only to its existing shareholders in a
specific ratio (e.g., 1 new share for every 5 shares they already own). This helps raise
money without reducing the ownership percentage of current investors.

Preferential Issue (Private Placement) – When a company sells shares to a specific

group of investors instead of the general public. This is a quicker way to raise funds, but it
must follow certain legal rules set by SEBI and the Companies Act.

Each method has its own purpose, depending on how much money the company needs
and who they want to offer shares to.

5.​ What is the difference between public issue and private placement?​
The difference between Public Issue and Private Placement is:
●​ Public Issue → When a company sells its shares to everyone, including the
general public and all types of investors. Anyone can buy these shares.
●​ Private Placement → When a company sells its shares to a select group of
people (usually big investors, institutions, or wealthy individuals). These shares are
not available to the general public.

According to the Companies Act, if a company offers shares to 50 or more people, it is

considered a Public Issue. If it is offered to less than 50 people, it is a Private
Placement.

6.​ What is an Initial Public Offer (IPO)?​

An Initial Public Offering (IPO) is when a company sells its shares to the public for the
first time in the primary market. This helps the company raise money and allows its
shares to be listed on the stock exchange, where people can buy and sell them.
New shares (created to raise money for the company).
Existing shares (sold by current owners to the public).
Book Building – The price is decided based on investor demand within a price
range.
Fixed Price Issue – The company sets a fixed price for the shares.
7.​ What does ‘price discovery through Book Building Process’ mean?​
Price discovery through the Book Building Process is a method used in IPOs to find
the right price for a company's shares based on demand from investors.
The company sets a price range (a lower limit called the floor price and an upper
limit).
Investors place bids within this range, offering to buy shares at different prices.
After the bidding period ends, the final share price is decided based on the
demand.
This process helps ensure a fair market-driven price for the shares.
8.​ What is the main difference between an offer of shares through book building and an
offer of shares through normal public issues?​
The main difference between Book Building and a Normal Public Issue is how the
price of shares is decided.

Book Building Process:

 ●​ The price is not fixed in advance. Instead, investors place bids within a price range
(floor price & upper limit).
●​ The final price is decided after the bidding ends, based on demand.
●​ The company can see the demand daily while the bidding is open.

Normal Public Issue (Fixed Price Issue):

●​ The price of the shares is fixed before the IPO and known to investors.
●​ Investors buy shares at this fixed price.
●​ The demand is known only after the IPO closes.

Book Building gives a better idea of demand and helps in finding a fair price, while a
Normal Public Issue keeps things simple with a set price.

9.​ What is the Cut-Off Price?​

The Cut-Off Price is the final price at which shares are allotted in a Book Building IPO.

Here’s how it works:

●​ The company sets a price range (a lower limit called the floor price and an upper
limit).
●​ Investors place bids within this range.
●​ After all bids are collected, the company decides the final issue price based on
demand. This final price is called the Cut-Off Price.

Investors who choose the Cut-Off Price option agree to buy shares at whatever price is
finalized within the range.

10.​ What is a Price Band in a book built IPO?​

The Price Band in a Book Building IPO is the range within which investors can place their
bids for shares.
●​ The lower limit of the range is called the floor price.
●​ The upper limit is called the cap price.
●​ The cap price cannot be more than 120% of the floor price (meaning the
difference between the highest and lowest price is up to 20%).
●​ If the company changes the price band, they must announce it publicly and extend
the bidding period by 3 extra days (but not more than 10 days in total).

This system helps determine a fair market price based on investor demand.

11.​ How does one know if shares are allotted in an IPO/offer for sale? ​
After applying for an IPO or Offer for Sale, investors can check if they got shares through
the Basis of Allotment process.
●​ The company finalizes the allotment within 8 days after the IPO closes.
●​ Within 2 more working days, investors will:
○​ Receive shares in their demat account (if allotted).
○​ Get a refund if shares are not allotted.
●​ Within 11 days from the IPO closing date, investors will know whether they received
shares or got a refund.
12.​ What is the role of a ‘Registrar’ to an issue?​
The Registrar to an IPO handles the processing of investor applications and ensures
smooth allotment of shares.
1.​ Checks Applications – Removes invalid or incorrect applications.
2.​ Finalizes Allotment – Decides who gets shares and how many.
3.​ Credits Shares – Transfers shares to investors' demat accounts.
4.​ Processes Refunds – Sends refunds to those who didn’t get shares.
5.​ Coordinates with Lead Manager – Ensures the smooth flow of applications and
completion of the process.
6.​ Helps with Listing – Ensures shares are ready for trading on the stock exchange.

The Lead Manager (a financial expert) works closely with the Registrar to complete the
process efficiently.

13.​ Does NSE provide any facility for IPO?​

Yes, NSE (National Stock Exchange) provides a facility for companies to conduct online
IPOs using its electronic trading network.
●​ Nationwide Access – Investors from all over India can place bids.
●​ Online Bidding – Uses an automated screen-based system for placing bids.
●​ Transparency & Efficiency – Ensures a fair and secure process for collecting
bids.
●​ Lower Costs – Cheaper compared to traditional IPO methods.
●​ Faster Processing – Reduces the time required to complete the IPO.
●​ Investors can place bids between 10:00 AM to 5:00 PM.

This system makes it easier for investors to participate in Book Building IPOs from
anywhere in India.

14.​ What is a Prospectus?​

A Prospectus is a detailed document that a company publishes when it wants to raise
money through an IPO.Many new companies issue shares, but not all may be trustworthy.
A prospectus helps investors decide whether to invest by providing key information about
the company and its plans.
●​ Why the company is raising money and how it will be used.
●​ Company details – its history, performance, and financial status.
●​ Issue details – size of the IPO, number of shares, and pricing.
●​ Project details – plans for growth, new products, and expansion.
●​ Promoters and management – background of key people running the company.
●​ Legal & financial disclosures – SEBI regulations, risks, and investor protections.

This document helps investors understand the short-term and long-term potential of the
company before investing.

15.​ What does ‘Draft Offer document’ mean?​

A Draft Offer Document is the preliminary version of the Offer Document that a
company submits before launching an IPO or Rights Issue.It is a detailed document (like a
 Prospectus) that provides all important information about the company and the IPO,
helping investors make informed decisions.
●​ It is the first version of the Offer Document, submitted to SEBI (Securities and
Exchange Board of India) at least 30 days before final approval.
●​ SEBI reviews it and suggests necessary changes.
●​ It is also made available on SEBI’s website for 21 days, allowing the public to
give feedback.
●​ After incorporating SEBI’s and public comments, the final version is submitted to the
Registrar of Companies (ROC).

This process ensures transparency and investor protection before the IPO is officially
launched.

16.​ What does one mean by ‘Lock-in’?​

Lock-in means that certain shares cannot be sold for a fixed period after an IPO.
●​ SEBI sets lock-in rules to ensure that the promoters (company owners or key
people) don’t sell all their shares immediately after the IPO.
●​ This helps maintain investor confidence, as it shows that the promoters are
committed to the company's future.
●​ Promoters’ shares are locked for a specific time, meaning they cannot be sold or
transferred during that period.
●​ After the lock-in period ends, promoters are free to sell their shares.

This rule helps prevent quick exits by key shareholders and ensures stability in the
company after going public.

17.​ What is meant by ‘Listing of Securities’?​

Listing of Securities means that a company's shares are officially approved for trading
on a stock exchange (like NSE or BSE).
●​ It allows investors to buy and sell shares easily.
●​ It provides liquidity, meaning investors can convert their shares into cash
whenever they want.
●​ It ensures transparency and regulation, as stock exchanges monitor trading to
prevent fraud.

Once listed, a company's shares can be traded publicly, making it easier for investors to
invest and exit as needed.

18.​ What is a ‘Listing Agreement’?​

A Listing Agreement is a contract between a company and a stock exchange when the
company’s shares are listed for trading.
●​ It sets the rules and responsibilities that the company must follow after listing.
●​ It ensures that the company provides regular updates about its financial status,
performance, and other important events.
●​ It helps in maintaining transparency and investor trust.

In simple terms, it is an agreement to follow stock exchange rules so that investors

always get accurate and timely information.
19.​ What does ‘Delisting of securities’ mean?​
Delisting of securities means that a company’s shares are removed from the stock
exchange, so they can no longer be bought or sold there.
●​ Investors cannot trade the company’s shares on that stock exchange anymore.
●​ The company may go private or shift to another exchange.
●​ Investors who still hold shares may have to sell them privately or wait for a
buyback offer.

Delisting can happen voluntarily (company chooses to delist) or involuntarily (due to

violations of stock exchange rules).

20.​ What is SEBI’s Role in an Issue?​

SEBI’s Role in an Issue is to review and approve the offer document before a company
can sell shares to the public.
●​ If a company plans to raise more than ₹50 lakh through an IPO or rights issue, it
must submit a draft offer document to SEBI.
●​ SEBI reviews the document and gives its observations (feedback or changes
needed) to ensure transparency and investor protection.
●​ The company can only proceed with the issue after SEBI’s approval.
●​ SEBI’s approval is valid for three months, meaning the company must launch the
issue within this time.

This ensures that companies provide clear and accurate information to investors before
raising money.

21.​ Can companies in India raise foreign currency resources?​

Yes, Indian companies can raise money from foreign investors in two main ways:​
1. Foreign Currency Convertible Bonds (FCCBs) – Also called ‘Euro’ issues
●​ These are special types of bonds that companies issue in foreign currency.
●​ Investors can choose to convert them into company shares later.
●​ This helps companies raise money from international markets.​
2. Global Depository Receipts (GDRs) / American Depository Receipts (ADRs)
●​ These allow Indian companies to sell their shares to foreign investors in global
stock markets.
●​ GDRs are traded in Europe and other global markets.
●​ ADRs are traded in the U.S. stock markets.

Indian companies can raise funds from foreign investors by either issuing convertible
bonds (FCCBs) or selling shares in global stock markets through GDRs/ADRs.

22.​ What is an American Depository Receipt?​

An American Depository Receipt (ADR) is a way for foreign companies to let U.S.
investors buy their shares easily in the U.S. stock market.
●​ Instead of buying shares directly from a foreign stock exchange, U.S. investors buy
ADRs, which represent shares of the foreign company.
●​ These ADRs are traded on U.S. stock exchanges like normal U.S. stocks.
●​ Each ADR represents one or more shares of the foreign company, held by a U.S.
bank.
 In simple terms, ADRs allow American investors to invest in foreign companies
without dealing with international stock markets.

23.​ What is ADS?​

An American Depositary Share (ADS) is a way for U.S. investors to own shares of a
foreign company in U.S. dollars and trade them on U.S. stock exchanges.
●​ A foreign company’s shares are held by a custodian bank in its home country.
●​ The bank issues ADSs, which represent those foreign shares, in U.S. dollars.
●​ ADSs can be bought and sold just like U.S. stocks on exchanges like the NYSE or
NASDAQ.
●​ Investors get dividends in U.S. dollars, but since the company is based in another
country, currency fluctuations can still affect the investment.

In simple terms, ADSs allow U.S. investors to invest in foreign companies without
dealing with foreign stock markets or currencies.

24.​ What is meant by Global Depository Receipts?​

A Global Depository Receipt (GDR) is a way for companies to raise money from
investors in multiple countries at the same time.
●​ A company issues shares, but instead of selling them directly in different countries,
it deposits them with an international bank.
●​ The bank then issues GDRs, which represent those shares and can be bought
and sold by investors in different countries.
●​ Each GDR is linked to a certain number of shares (for example, 1 GDR = 10
company shares).
●​ Companies get access to international investors without listing directly on
multiple stock exchanges.
●​ Investors from different countries can invest in foreign companies without
dealing with foreign stock markets.

In simple terms, GDRs make it easier for companies to raise money globally and for
investors to invest in international companies.