Floating Methods in the Primary Market

(i) Public issue: Under this method, the company produces a prospectus and invites the public to purchase shares.. It provides information like the purpose for which the fund was raised, the background and future prospects of the company, its past financial performance, etc. This information helps the public and  investors  know about the business and its potential risks and rewards. related. This method is a bit tedious as it fulfills all the legal procedures prescribed by SEBI. approved by the board of directors, designated financial institutions,  stock exchanges, etc. An abbreviated prospectus is attached to each share registration form. SEBI authorization is required for issuance. The underwriter can determine the share price. The reason for the same should be given in the offering document.

(ii) Offer for sale: Under this method, the company does not issue securities directly to the public, but through intermediaries such as brokers, issuers, etc. In two stages, the company first sells its securities to an intermediary at an agreed-upon price, and then the middleman resells the securities to the investing public at a higher price to make a profit. Similarly, foreign affiliates or promoters can sell their shares to the Indian public through an offer to sell which can be made through brokers or by prospectus. this method is relatively faster and simpler than going public as it does not perform any formalities and it avoids the subscription cost.

(iii) Private placement: Under this method, the company sells securities to large financial institutions or brokers instead of  to the general public. In return, they sell these securities to  selected customers at a higher price. This method saves the company  various required or optional expenses such as management fees, commissions, underwriting fees, etc. As a result, companies that cannot afford the huge costs associated with going public  often opt for a private placement. This method is also popular because it is cheaper than the method of issuing to the public to raise capital.

(iv) Right issue: This method is used by companies that have been already issued their shares. When an existing company issues new shares, it gives the preference to existing shareholders this process is called as Right issue. In this scenario, the shareholder has the right to accept or reject the offer for himself or he can accept to transfer all or part  of his rights to another person. An issuer of  rights is required to send a circular to all existing shareholders. The circular letter must provide information on how the supplementary funds will be used and their effect on the ability to earn capital. Usually, a company can allow shareholders to exercise their right to exercise at least a month or two before the stock is issued to the public. Rights may also be provided through underwriters. If the company does well, the rights will be well received  by the shareholders and the need to subscribe may not arise.

(v) Electronic Initial Public Offering (eIPO): Under this method, companies issue their securities in electronic form (i.e. the Internet). The company that issues securities in this way enters into a contract with the stock exchange. SEBI registered brokers must be appointed to accept the application. This broker regularly sends information about this to the company. The securities issuer also appoints a registrar who contributes to the success of the issue  by establishing a connection with the stock exchange.