Indian Capital Market

The capital market provides the support to the system of capitalism of the country. The Securities and
Exchange Board of India (SEBI), along with the Reserve Bank of India are the two regulatory authorities for
Indian securities market, to protect investors and improve the microstructure of capital markets in India. With
the increased application of information technology, the trading platforms of stock exchanges are accessible
from anywhere in the country through their trading terminals.

Capital Markets in India

India has a fair share of the world economy and hence the capital markets or the share markets of India form
a considerable portion of the world economy. The capital market is vital to the financial system.

The capital Markets are of two main types. The Primary markets and the secondary markets. In a primary
market, companies, governments or public sector institutions can raise funds through bond issues. Alos,
Corporations can sell new stock through an initial public offering (IPO) and raise money through that. Thus in
the primary market, the party directly buys shares of a company. The process of selling new shares to
investors is called underwriting.

In the Secondary Markets, the stocks, shares, and bonds etc. are bought and sold by the customers. Examples
of the secondary capital markets include the stock exchanges like NSE, BSE etc. In these markets, using the
technology of the current time, the shares, and bonds etc. are sold and purchased by parties or people.

Broad Constituents in the Indian Capital Markets

1. Fund Raisers
Fund Raisers are companies that raise funds from domestic and foreign sources, both public and
private. The following sources help companies raise funds.

2. Fund Providers
Fund Providers are the entities that invest in the capital markets. These can be categorized as domestic
and foreign investors, institutional and retail investors. The list includes subscribers to primary market
issues, investors who buy in the secondary market, traders, speculators, FIIs/ sub-accounts, mutual
funds, venture capital funds, NRIs, ADR/GDR investors, etc.

3. Intermediaries
Intermediaries are service providers in the market, including stock brokers, sub-brokers, financiers,
merchant bankers, underwriters, depository participants, registrar and transfer agents, FIIs/ sub-
accounts, mutual Funds, venture capital funds, portfolio managers, custodians, etc.

4. Organizations
Organizations include various entities such as MCX-SX, BSE, NSE, other regional stock exchanges, and
the two depositories National Securities Depository Limited (NSDL) and Central Securities Depository
Limited (CSDL).

5. Market Regulators
Market Regulators include the Securities and Exchange Board of India (SEBI), the Reserve Bank of India
(RBI), and the Department of Company Affairs (DCA).

Role and Importance of Capital Market in India

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The capital market has a crucial significance to capital formation. For a speedy economic development, the
adequate capital formation is necessary. The significance of capital market in economic development is
explained below:

1. Mobilization of Savings and Acceleration Of Capital Formation:

In developing countries like India, the importance of capital market is self-evident. In this market,
various types of securities help to mobilize savings from various sectors of the population. The twin
features of reasonable return and liquidity in stock exchange are definite incentives to the people
to invest in securities. This accelerates the capital formation in the country.

2. Raising Long-Term Capital

The existence of a stock exchange enables companies to raise permanent capital. The investors
cannot commit their funds for a permanent period but companies require funds permanently. The
stock exchange resolves this dash of interests by offering an opportunity to investors to buy or sell
their securities, while permanent capital with the company remains unaffected.

3. Promotion Of Industrial Growth

The stock exchange is a central market through which resources are transferred to the industrial
sector of the economy. The existence of such an institution encourages people to invest in
productive channels. Thus it stimulates industrial growth and economic development of the
country by mobilizing funds for investment in the corporate securities.

4. Ready And Continuous Market

The stock exchange provides a central convenient place where buyers and sellers can easily
purchase and sell securities. Easy marketability makes an investment in securities more liquid as
compared to other assets.

5. Technical Assistance
An important shortage faced by entrepreneurs in developing countries is technical assistance. By
offering advisory services relating to the preparation of feasibility reports, identifying growth
potential and training entrepreneurs in project management, the financial intermediaries in capital
market play an important role.

6. Reliable Guide To Performance

The capital market serves as a reliable guide to the performance and financial position of
corporate, and thereby promotes efficiency.

7. Proper Channelization Of Funds

The prevailing market price of a security and relative yield are the guiding factors for the people to
channelize their funds in a particular company. This ensures effective utilization of funds in the
public interest.

8. Provision Of Variety Of Services:

The financial institutions functioning in the capital market provide a variety of services such as a
grant of long-term and medium-term loans to entrepreneurs, provision of underwriting facilities,
assistance in the promotion of companies, participation in equity capital, giving expert advice etc.

9. Development Of Backward Areas

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 Capital Markets provide funds for projects in backward areas. This facilitates economic
development of backward areas. Long-term funds are also provided for development projects in
backward and rural areas.

10. Foreign Capital

Capital markets make possible to generate foreign capital. Indian firms are able to generate capital
funds from overseas markets by way of bonds and other securities. The government has liberalized
Foreign Direct Investment (FDI) in the country. This not only brings in the foreign capital but also
foreign technology which is important for economic development of the country.

11. Easy Liquidity

With the help of secondary market, investors can sell off their holdings and convert them into
liquid cash. Commercial banks also allow investors to withdraw their deposits, as and when they
are in need of funds.

STRUCTURE OF CAPITAL MARKET

There are multiple ways I could look at the capital markets, but I feel this is the most easiest way.

 Primary Market
So, the primary market is the place where the real action begins. For example, zomato getting funded by
info edge during the start-up phase is an example of the primary market. However, at the same time, the
IPO listing of zomato initially is also immediate.

Similarly, you buy government bonds also from the primary market. ICICI is one of the direct brokers to
purchase government bonds.

 Secondary Market
This is where zomato, once bought by you in the IPO, will keep changing hands. Suppose you purchased
Zomator stock in IPO and then sold it to me. The critical distinction is no new security is created in the
process.
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Also, this is facilitated by exchanges like the National stock exchange or the Bombay stock exchange. If you
are not investing directly, you gain exposure through asset management companies like mutual funds.

 Intermediaries
So, someone has to specialize in helping a customer purchase stocks or bonds from the exchanges. In the
process, also adds the value of research done by the brokers. On the other hand, custodians offer the
service of holding your securities in digital form like CDSL.

 Regulators
This complex movement of securities, purchasing and listing can lead to disputes. So, it would be best if
you had a watchman to guard the interest of all the parties. Which is done by the regulator? The Securities
Exchange Board of India mainly regulates capital markets in stocks, derivatives, mutual funds etc.

On the other hand, RBI deals with bonds and currencies.

Functions of Capital Market

1. Formation of Capital: There are two types of individuals in the capital markets: investors who don't
need money right away and debtors who do. The capital markets enable leftover funds to be invested
and put to use rather than just hanging around. Therefore, it gives firms the chance to borrow money
and invest in new machinery or other capital equipment rather than having ₹1 crore sitting in the
locker. In exchange, the investor obtains a dividend and the company has access to more effective
machinery. This capital market role looks at the economy at a macro level.
2. Absence of Entry and Exit Barriers: Today's investors generally trade on the capital markets using
their mobile devices, making them more accessible than ever. The spread of technology has virtually
made financial markets accessible to everyone. Investors are practically prepared to invest as soon as
they open an account with a broker. Additionally, there are now worldwide marketplaces. Due to the
increased demand for assets, people can leave the market just as quickly as they entered.
3. Economic Growth: The capital market promotes a marketplace for borrowers and lenders, which
results in a more effective flow of cash. Businesses in need of corporate loans can apply on the capital
market, and an underwriter will then issue the loan. As an alternative, it can raise money by offering a
portion of its business on the stock market. Due to the fact that idle capital is put to use elsewhere in
the economy, this promotes economic growth. Simply put, it increases demand. Businesses that
require credit can make investments if they are granted it. The company that offers the capital
equipment that it invested in receives that money in return. The economy can then continue to grow
as a result of that money's circulation. This aspect is considered to be one of the most important roles
of capital market.
4. Capital Liquidity: People with money can invest it owing to the financial markets. They receive
ownership of a bond or stock in exchange. However, they cannot use a bond certificate to purchase a
car, food, or other assets, thus it could be essential to liquidate them. It is fairly simple for investors to
sell their assets to a third party on the capital markets in exchange for liquid funds (cash). There is
nearly always a buyer if one wishes to sell an item at the current market price, enabling you to convert
the asset into actual cash.
5. Price Regulation: Making sure the price of an asset is accurate is one of the capital markets' primary
objectives. A share's price may spike after receiving favorable news or plunge after reading an
unsatisfactory annual report. The prices fluctuate to the point where the equity worth is represented
in its price at that moment due to the thousands of traders. Bond prices can change and adapt more
quickly as a result of supply and demand at the same time. For instance, during a recession, investors
typically choose bonds since they are perceived as a safer investment.

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6. Provides Opportunity to Investors: If an investor wants a high level of risk or a low level of risk, there
are enough financial instruments available in the capital markets to fit their needs. At the same time,
capital markets give investors a chance to increase their capital yield. Savings accounts pay very little
interest, especially when compared to the rates on most equities. Therefore, the capital market offers
investors the chance to earn a higher rate of return, though there is also some risk involved.
This function of capital market stands in the favor of the investors participating in it.

What are the instruments traded in the Capital Market?

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1. Equities:
Equity securities refer to the part of ownership that is held by shareholders in a company.
In simple words, it refers to an investment in the company’s equity stock for becoming a shareholder of the
organization.
The main difference between equity holders and debt holders is that the former does not get regular
payment, but they can profit from capital gains by selling the stocks.
Also, the equity holders get ownership rights and they become one of the owners of the company.

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 When the company faces bankruptcy, then the equity holders can only share the residual interest that
remains after debt holders have been paid.
Companies also regularly give dividends to their shareholders as a part of earned profits coming from their
core business operations.
2. Debt Securities:
Debt Securities can be classified into bonds and debentures:
1. Bonds:
Bonds are fixed-income instruments that are primarily issued by the centre and state governments,
municipalities, and even companies for financing infrastructural development or other types of projects.
It can be referred to as a loaning capital market instrument, where the issuer of the bond is known as the
borrower.
Bonds generally carry a fixed lock-in period. Thus, the bond issuers have to repay the principal amount on
the maturity date to the bondholders.
2. Debentures:
Debentures are unsecured investment options unlike bonds and they are not backed by any collateral.
The lending is based on mutual trust and, herein, investors act as potential creditors of an issuing
institution or company.
3. Derivatives:
Derivative instruments are capital market financial instruments whose values are determined from the
underlying assets, such as currency, bonds, stocks, and stock indexes.
The four most common types of derivative instruments are forwards, futures, options and interest rate
swaps:
 Forward: A forward is a contract between two parties in which the exchange occurs at the end of the
contract at a particular price.
 Future: A future is a derivative transaction that involves the exchange of derivatives on a determined
future date at a predetermined price.
 Options: An option is an agreement between two parties in which the buyer has the right to purchase or
sell a particular number of derivatives at a particular price for a particular period of time.
 Interest Rate Swap: An interest rate swap is an agreement between two parties which involves the
swapping of interest rates where both parties agree to pay each other interest rates on their loans in
different currencies, options, and swaps.
You can also learn future and options in detail from our mentors.
4. Exchange-Traded Funds:
Exchange-traded funds are a pool of the financial resources of many investors which are used to buy
different capital market instruments such as shares, debt securities such as bonds and derivatives.
Most ETFs are registered with the Securities and Exchange Board of India (SEBI) which makes it an
appealing option for investors with a limited expert having limited knowledge of the stock market.
ETFs having features of both shares as well as mutual funds are generally traded in the stock market in the
form of shares produced through blocks.
ETF funds are listed on stock exchanges and can be bought and sold as per requirement during the equity
trading time.
5. Foreign Exchange Instruments:
Foreign exchange instruments are financial instruments represented on the foreign market. It mainly
consists of currency agreements and derivatives.
Based on currency agreements, they can be broken into three categories i.e spot, outright forwards and
currency swap.
Primary Market

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The primary market is the financial market where new securities are issued and become available for
trading by individuals and institutions. The trading activities of the capital markets are separated into the
primary market and secondary market.

In a Primary Market, securities are created for the first time for investors to purchase. New securities are
issued in this market through a stock exchange, enabling the government as well as companies to raise
capital.

For a transaction taking place in this market, there are three entities involved. It would include a company,
investors, and an underwriter. A company issues security in a primary market as an initial public
offering (IPO), and the sale price of such a new issue is determined by a concerned underwriter, which may
or may not be a financial institution.

An underwriter also facilitates and monitors the new issue offering. Investors purchase the newly issued
securities in the primary market. Such a market is regulated by the Securities and Exchange Board of India
(SEBI).

The entity which issues securities may be looking to expand its operations, fund other business targets or
increase its physical presence among others. Primary market example of securities issued includes notes,
bills, government bonds or corporate bonds as well as stocks of companies.

Functions of Primary Market

The functions of such a market are manifold –

 New Issue Offer

The primary market organizes offer of a new issue which had not been traded on any other exchange
earlier. Due to this reason, it is also called a New Issue Market.

Organizing new issue offers involves a detailed assessment of project viability, among other factors. The
financial arrangements for the purpose include considerations of promoters’ equity, liquidity ratio, debt-
equity ratio and requirement of foreign exchange.

 Underwriting Services

Underwriting is an essential aspect while offering a new issue. An underwriter’s role in a primary
marketplace includes purchasing unsold shares if it cannot manage to sell the required number of shares
to the public. A financial institution may act as an underwriter, earning a commission on underwriting.

Investors rely on underwriters for determining whether undertaking the risk would be worth its returns. It
may so happen that an underwriter ends up buying all the IPO issue, and subsequently selling it to
investors.

 Distribution of New Issue

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A new issue is also distributed in a primary marketing sphere. Such distribution is initiated with a new
prospectus issue. It invites the public at large to buy a new issue and provides detailed information on the
company, issue, and involved underwriters.

Types of Primary Market Issuance

After the issuance of securities, investors can purchase such securities in various ways. There are 5 types of
primary market issues.

 Public Issue
 As the name suggests, this method allows anyone belonging to any part of India to subscribe for the
securities or invest in the particular company’s stocks. When an offer is made by the company so
that more and more people become a part of the shareholder’s family, it is known as a public issue.

 Public Issue is further divided into:

 Initial Public Offer (IPO)

 Through Initial Public Offer or IPO, only a certain amount of the securities that the company has
fixed is made public. The specific securities are available for subscription to the public for the very
first time. The Initial Public Offering had many methods making it public, including fixed price
method, book building method, or an amalgamation of both.

 Further Public Offer (FPO)

 It also goes by the name, Seasoned or Subsequent Public Offer. Through this, an Indian company
makes a fresh set of securities available to the public for subscription. It is also termed as “Follow
On Public Offer”.

 Private Placement

When a company offers its securities to a small group of investors, it is called private placement. Such
securities may be bonds, stocks or other securities, and the investors can be both individual and
institutional.

Private placements are easier to issue than initial public offerings as the regulatory stipulations are
significantly less. It also incurs reduced cost and time, and the company can remain private.

Such issuance is suitable for start-ups or companies which are in their early stages. The company may place
this issuance to an investment bank or a hedge fund or place before ultra-high net worth individuals (HNIs)
to raise capital.

 Preferential Issue

A preferential issue is one of the quickest methods available to companies for raising capital. Both listed
and unlisted companies can issue shares or convertible securities to a select group of investors. However,
the preferential issue is neither a public issue nor a rights issue.

The shareholders in possession of preference shares stand to receive the dividend before the ordinary
shareholders are paid.

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  Qualified Institutional Placement

Qualified institutional placement is another kind of private placement where a listed company issues
securities in the form of equity shares or partly or wholly convertible debentures apart from such warrants
convertible to equity shares and purchased by a Qualified Institutional Buyer (QIB).

QIBs are primarily such investors who have the requisite financial knowledge and expertise to invest in the
capital market.

Some QIBs are –

 Foreign Institutional Investors registered with the Securities and Exchange Board of India.
 Foreign Venture Capital Investors.
 Alternate Investment Funds.
 Mutual Funds.
 Public Financial Institutions.
 Insurers.
 Scheduled Commercial Banks.
 Pension Funds.

Issuance of qualified institutional placement is simpler than preferential allotment as the former does not
attract standard procedural regulations like submitting pre-issue filings to SEBI. The process thus becomes
much easier and less time-consuming.

 Rights and Bonus Issues

Another issuance in the primary market is rights and bonus issue, in which the company issues securities to
existing investors by offering them to purchase more securities at a predetermined price (in case of rights
issue) or avail allotment of additional free shares (in case of bonus issue).

For rights issues, investors retain the choice of buying stocks at discounted prices within a stipulated
period. Rights issue enhances control of existing shareholders of the company, and also there are no costs
involved in the issuance of these kinds of shares.

For bonus issues, stocks are issued by a company as a gift to its existing shareholders. However, the
issuance of bonus shares does not infuse fresh capital.

SEBI guidelines for primary market

 New company: the new company which has not completed 12 months of commercial operations is
not allowed to involve in the issue of share at a premium.
 New company set up by existing company: any old company with a good track record in terms of
profit for at least 5 years if promoting any new company, then the new company is allowed to price
its issue.

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  Private and closely held companies: the private and closely held companies having a track record
of earning profit for at least three years are allowed to price their issues freely. These prices will be
determined by the issuer by consulting with the lead manager.
 Existing listed companies: the existing listed companies are allowed to freely raise fresh capital to
expand market with the promoter contribution of 50% on the first 100 crore, 40% on the next 100
crore i.e. on 200 crores, 30% on the next 100 crore(300 crore) and 15 % on the balance issue
amount.

Before a public issue, a draft of the prospectus should be given to the SEBI.

The new company share should be listed with OTCEI or any other stock exchange.

Marketing Strategies for a Successful Initial Public Offering IPO

1. Defining an IPO
An IPO is a type of public offering where shares of a company are sold to investors in order to raise capital.
The term IPO stands for initial public offering. IPOs are often used by companies to raise money in order to
expand their businesses, pay off debt, or finance other projects.

When a company decides to go public, it will usually hire an investment bank to help with the process. The
investment bank will help the company determine how many shares to sell and at what price. They will
also help promote the IPO to potential investors.

The shares of the company are then sold on a stock exchange. The price of the shares is determined by
supply and demand. The first day that the shares are traded is known as the IPO date.

After the IPO, the shares of the company are traded on the stock exchange just like any other publicly-
traded company. The price of the shares will go up and down based on supply and demand.

There are many different factors that can affect the success of an IPO. These include the financial condition
of the company, the overall market conditions, and the level of interest from potential investors.

IPOs can be a great way for companies to raise money. However, they also come with a lot of risk. There is
no guarantee that the shares will be successful after they are first sold to the public.

When considering an IPO, it is important to work with an experienced investment bank and to understand
all of the risks involved.

2. The Role of Investment Banks

When a company goes public through an initial public offering (IPO), it hires an investment bank (also
called an underwriter) to help with the process. Investment banks typically provide three main services to
companies during an IPO:

1) Helping to value the company and set the initial share price: This is perhaps the most important service
that investment banks provide. They use their experience and knowledge of the markets to help the
company set a share price that will attract investors and maximize the amount of money raised.

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2) Selling the shares to investors: Once the share price is set, the investment bank will work to sell the
shares to institutional and individual investors. This includes marketing the IPO to potential investors and
providing guidance on how many shares to buy.

3) Providing post-IPO support: After the IPO, the investment bank will continue to support the company by
helping to market its shares and providing advice on issuing new shares and debt.

The role of investment banks has come under scrutiny in recent years, as some have questioned whether
they are always acting in the best interests of their clients. For example, there have been instances where
investment banks have encouraged companies to set unrealistic share prices in order to win higher fees.
However, overall, investment banks still play an important role in helping companies successfully go public.

Developing a Marketing Strategy

When a company goes public through an IPO, it is essential to have a well-developed marketing strategy in
place. The goal of the marketing campaign is to generate interest and excitement in the stock, which will
help drive up the price on the first day of trading.

There are a number of different marketing strategies that can be used to promote an IPO. One common
approach is to target institutional investors, such as hedge funds and mutual funds, who are more likely to
be active in the market for new stocks.

Another strategy is to focus on individual investors who may be interested in buying shares of the new
stock. This can be done through online advertising, direct mail, or even television commercials.

Finally, it is important to generate buzz among the general public about the upcoming IPO. This can be
done through social media, traditional media, or even word-of-mouth.

The most important thing is to make sure that the marketing campaign is well-planned and targeted to the
right audience. By doing so, companies can increase the chances of a successful IPO.

4. Creating a Prospectus
It is important to remember that a prospectus is not a promotional piece. Its purpose is to provide
potential investors with essential information about your company and the offering, so that they can make
an informed decision about whether or not to invest.

The first step in creating a prospectus is to gather all of the pertinent information about your company and
the offering. This includes financial statements, information about the management team, details about
the products or services offered, and anything else that would be relevant to potential investors.

Once you have all of the necessary information, you will need to write the prospectus itself. This document
should be clear and concise, and it should avoid using any jargon or technical terms that might not be
readily understood by the average reader.

Once the prospectus is complete, you will need to have it reviewed by a securities lawyer to ensure that it
complies with all applicable laws and regulations. Once it has been approved, you will be ready to start
marketing your IPO to potential investors.

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There are a number of different marketing strategies that you can use to reach potential investors. One of
the most effective is to hold a road show, during which you will travel to various cities and meet with
potential investors in person. This is an excellent way to build interest in your offering and to answer
any questions that potential investors may have.

Another effective marketing strategy is to run ads in financial publications or on websites frequented by
investors. You can also distribute the prospectus through investment banks and brokerages.

Once you have generated interest among potential investors, you will need to hold a final bake-off
meeting, during which the investment banks that are underwriting your offering will present their final
terms to you. At this point, you will need to choose the bank that you want to work with and sign the
underwriting agreement.

After the underwriting agreement is in place, your company will be ready to go public. The IPO process can
be complex and time-consuming, but if you follow these steps and use effective marketing strategies, you
can increase your chances of success.

5. Hiring an Investor Relations Firm

An Initial Public Offering (IPO) is a critical moment for any company. A successful IPO can mean the
difference between a company's long-term success or failure. That's why its important to have a
solid marketing strategy in place to ensure your IPO is a success.

One important aspect of your marketing strategy should be hiring an Investor Relations (IR) firm. An IR firm
can help you manage your relationship with investors, both before and after your IPO.

Here are four reasons why hiring an IR firm is a smart marketing strategy for your IPO:

1. They Have Experience with IPOs

An experienced IR firm will have a deep understanding of the IPO process. They can help you navigate the
often-complex world of securities regulations and ensure that you are taking all the necessary steps to
prepare for your IPO.

2. They Can Help You Tell Your Story

An IR firm can help you craft a compelling story about your company that will appeal to investors. They can
also help you develop the materials you will need to tell your story, such as an investor deck and pitch
book.

3. They Have Relationships with Investors

IR firms have existing relationships with potential investors, which can give you a leg up in the fundraising
process. They can also help you target specific investors that may be a good fit for your company.

4. They Can Help You Manage Your Investor Relations

After your IPO, an IR firm can help you manage your relationships with investors. This includes providing
regular updates, responding to investor inquiries, and organizing investor roadshows and conference calls.
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Hiring an IR firm is a smart marketing strategy for any company preparing to go public. An experienced IR
firm can help you navigate the complex world of securities regulations, tell your story, and manage your
relationships with investors.

6. Going on the Road show

An IPO is a significant event for any company, and the road show is a key part of the process. The road
show is an opportunity for the company to tell its story to potential investors and to generate interest in
the offering.

The road show is also a chance for the underwriters to get a better sense of investor interest and to gauge
demand for the offering. This information is used to set the final price of the offering.

The road show typically lasts for two weeks and includes stops in major cities around the country (and
sometimes internationally). The company will meet with hundreds of potential investors during this time.

A successful road show will result in strong demand for the offering and a high price per share. A weak
road show can lead to a lower price per share and a less successful IPO.

1. Tell A Compelling Story.

The road show is an opportunity to tell your company's story and to generate excitement about the IPO.
You need to have a clear and compelling message that you can deliver in a short amount of time. Practice
your presentation so that you can deliver it confidently and without notes.

2. Focus On The Future.

Investors are interested in what your company will do next, not what it has done in the past. Focus your
presentation on your plans for growth and how you will generate shareholder value in the future.

3. Be Prepared To Answer Tough Questions.

Investors will want to know about your business model, your competition, your financial projections, and
your plans for using the proceeds from the IPO. Be prepared to answer these questions clearly and
concisely.

4. Have A Good Team Supporting You.

Your investment bankers and lawyers will be with you on the roadshow, and they should be well prepared
to answer questions from investors. Make sure you have a good team supporting you so that you can focus
on delivering your presentation.

5. Make Sure Your Financials Are In Order.

Investors will closely scrutinize your financials, so it is important to make sure that they are in order before
you start the road show. Your auditors should have signed off on your financial statements, and you should
be comfortable with your projections.

6. Don't Over-Promise.
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It is important to be realistic about your plans and projections. Don't over-promise and then disappoint
investors after the IPO. Be honest about the risks and challenges that your company faces.

7. Be Flexible.

The road show is a dynamic process, and you need to be prepared to make changes on the fly. If investor
interest is weaker than expected, you may need to adjust your price range or your projected use of
proceeds. Be flexible and be prepared to make changes as needed.

8. Have A Plan B.

If your road show is not going well, you may need to consider delaying or cancelling the offering. Have a
plan B in place so that you can quickly pivot if necessary.

9. Stay Focused.

The road show can be exhausting, but it is important to stay focused throughout the process. Get enough
rest and eat healthy meals so that you can stay sharp throughout the two-week period.

10. Enjoy The Ride.

The road show is a once-in-a-lifetime experience, so make sure to enjoy it! This is a exciting time for your
company, and you should savor every moment of the process.

7. Pricing the IPO

When a company goes public, it completes an IPO by selling shares of ownership to the public through an
investment bank. The company must determine how many shares to sell and at what price. The
investment bank works with the company to come up with a target price, but it’s ultimately up to the
company to set the price. Here are some factors to consider when pricing an IPO:

The market: The investment bank will look at recent IPOs and how they’ve performed in the market to
come up with a target price for your company. They will also look at the overall market conditions to see if
its a good time to go public. If the market is hot, you may be able to price your IPO higher.

The industry: The investment bank will also look at how other companies in your industry are performing. If
your industry is doing well, you may be able to price your IPO higher.

The company: The investment bank will look at your company's financials, growth prospects, and
competitive landscape to come up with a target price. they will also look at your management team and
Board of Directors to see if they are experienced and reputable.

Once you've determined a target price, you need to set a share price. The share price is the price of each
individual share of stock. The shares are then sold to the public at this price. There are a few things to
consider when setting the share price:

The demand for the stock: If there's high demand for your stock, you may be able to price the shares
higher.

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The supply of the stock: If you're only selling a small number of shares, you may be able to price the shares
higher.

The tick size: The tick size is the minimum amount that the stock price can change. For example, if the tick
size is $0.01, the stock price can’t go up or down by less than $0.01. The tick size is set by the exchange
where the stock will be traded.

Once you've determined the share price, you need to decide how many shares to sell. This is typically a
decision made by the investment bank and the company. The investment bank will look at how much
money the company needs to raise and how much demand there is for the stock. They will also look at
how dilutive the offering will be to existing shareholders.

After all of these decisions have been made, the company will file an S-1 with the SEC. This is a document
that discloses all of the information about the company and the offering. Once the SEC has reviewed and
approved the S-1, the company can start marketing the offering to potential investors.

The goal of marketing an IPO is to generate interest in the stock and create demand for the shares. The
investment bank will typically hire a PR firm to help with this process. they will also hold road shows where
management teams travel around and meet with potential investors.

If you're considering an IPO, its important to work with an experienced investment bank. They can help
you determine a target price, set a share price, and market the offering to potential investors.

8. after the IPO the First Few Weeks

The first few weeks after an IPO are critical for a company. They set the tone for how the public and
investors will perceive the company going forward. Here are a few marketing strategies to ensure a
successful first few weeks post-IPO:

1. Keep the momentum going. The weeks leading up to an IPO are intense, so it's important to keep the
momentum going afterwards. This means maintaining regular communication with investors, analysts, and
the media. Keep them updated on your progress and let them know what to expect next.

2. Focus on the long term. An IPO is just one step in a company's journey. It's important to keep focused on
the long-term goals and not get caught up in the short-term hype. This means having a solid business plan
and execution strategy in place.

3. Build relationships. The key to success post-IPO is building and maintaining relationships with key
stakeholders. This includes shareholders, employees, customers, partners, and suppliers. It's important to
keep them updated on your progress and show them that you're committed to their success as well.

4. Manage expectations. The weeks after an IPO can be a roller coaster ride. There will be ups and downs,
so it's important to manage expectations accordingly. Be realistic about what you can achieve in the short-
term and set achievable goals.

5. Stay flexible. The markets are constantly changing, so it's important to stay flexible in your plans. Be
prepared to pivot if necessary and always be open to new opportunities.

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By following these marketing strategies, you can ensure a successful first few weeks post-IPO.

9. Maximizing the Long Term Potential of an IPO

If you're a startup planning to go public, there are a lot of things to consider. An IPO can be a great way to
raise capital and expand your business, but it's also a big decision that comes with a lot of risks. Before you
take the plunge, it's important to have a solid understanding of the IPO process and what you need to do
to ensure a successful offering.

The first step is to make sure your financials are in order. This means having audited financial statements
for at least the past three years. You'll also need to have a good handle on your current financial situation
and projections for the future. Potential investors will want to see that you have a solid plan in place for
how you'll use their money.

Once your financials are in order, you'll need to start working on your marketing strategy. This is critical to
ensuring a successful IPO. You'll need to create a strong brand that will appeal to investors and the general
public. You'll also need to come up with a plan for how you'll generate buzz and interest in your offering.

One of the most important things to remember when marketing your IPO is that you're selling more than
just shares of your company. You're also selling the potential for future growth. Investors want to see that
you have a solid plan in place for how you'll use their money to grow the business. They're also looking for
companies that have strong management teams in place who have a track record of success.

It's important to remember that an IPO is just one step in the journey of taking your company public. Once
your offering is successful, you'll need to continue to work hard to grow your business and create value for
shareholders. But if you focus on the long-term potential of your business and put together a solid
marketing strategy, an IPO can be a great way to take your company to the next level.

Intermediaries in Primary Market

The following market intermediaries are involved in the primary market:

1. Merchant Bankers/Lead Managers

2. Registrars and Share Transfer Agents
3. Underwriters
4. Bankers to the Issue
5. Debenture Trustees etc.
Merchant Bankers

 Merchant Bankers play an important role in the issue management process. Merchant Bankers are
mandated by SEBI to manage public issues (as lead managers) and open offers in take-overs.
 Apart from these, they have other diverse services and functions. These include organizing and
extending finance for investment in projects, assistance in financial management, acceptance
house business, raising Euro-dollar loans and issue of foreign currency bonds.
 Lead Managers (Category 1 merchant bankers) has to ensure correctness of the information
furnished in the offer document.

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  They have to ensure compliance with the SEBI Rules and regulations and also guidelines for
Disclosure and Investor Protection. To this effect, they have are to submit to SEBI a Due Diligence
Certificate confirming that disclosures made in the draft prospectus or letter of offer are true, fair
and adequate to enable the prospective investors to make a well-informed investment decision.

Regulation:

Merchant Bankers are one of the major intermediaries between the issuer and the investors, hence their
activities are regulated by

1. SEBI (Merchant Bankers) Regulations, 1992

2. Guidelines of SEBI and Ministry of Finance
3. Companies Act 1956.
4. Securities Contracts (Regulation) Act, 1956. and so on.
Criteria for Merchant Banker:

Regulation 3 of SEBI (Merchant Bankers) Regulations, 1992 lays down that the application by a person
desiring to become merchant banker shall be made to SEBI in the prescribed form seeking a grant of a
certificate of registration along with a non-refundable application fee as specified.

 The applicant shall be a body corporate other than NBFC

 The applicant has the necessary infrastructure like adequate office space, equipment’s and
manpower to effectively discharge his activities.
 The applicant has in his employment a minimum of two persons who have the experience to
conduct the business of the merchant banker.
 The applicant shall be a net worth of not less than 5 Crore rupees.
 The applicant, his director, partners, or principal officer is not involved in any litigation connected to
securities market
 The applicant, his director, partner, or principal officer has not any time been convicted for any
offence involving moral turpitude or has been found guilty of any offence.
 The applicant has the professional qualification from an institution recognized by the Government
of Finance, Law or Business Management.
 the applicant is fit and proper person
 Grant of certificate to the applicant is in the interest of investors.

Registrars and transfer agents

 R & T agents form an important link between the investor and issuer in the Securities Market.
 R & T agent is appointed by the issuer to act on its behalf to service the investors in respect of all
corporate actions like sending out notices and other communications to the investors as well as
dispatch of dividends and other non-cash benefits.
 R & T agents perform an equally important role in the depository system as well.
 R & T agents are registered with SEBI in the terms of SEBI (Registrars to the Issue and Share
Transfer Agents) Rules and Regulations, 1993.

Underwriters

 Underwriting services are provided by some large specialist’s financial institutions such as banks,
insurance or investment houses, whereby they guarantee payment in case of damage or financial
loss and accept the financial risk for liability arising from such guarantee.

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  Securities underwriting is the process by which investment banks raise investment capital from
investors on behalf of corporations and governments that are issuing securities (both equities and
debt capital). The services are typically used during a public offering in the primary market.
 Underwriters are required to register with SEBI in terms of SEBI (Underwriters) Rules and
Regulations, 1993.

Bankers to the Issue

Bankers to an Issue mean a scheduled bank carrying on all of the following activities:

 acceptance of application and application money

 acceptance of allotment of call money
 refund of application money
 Payment of dividends or interest warrants etc.

The activities of the Banker to an issue in the Indian Capital Market are regulated by SEBI (Bankers to an
issue) Regulations, 1994

Debenture Trustees

Debenture Trustee means a Trustee of a Trust deed for securing any issue of debentures.

 Debenture trustees call for periodical reports from the body corporate
 takes possession of trust property in accordance with the provisions of the trust deed
 enforce security in the interest of debenture holders
 do such acts as necessary in the event the security becomes enforceable
 Carry out such acts as are necessary for the protection of debenture holders and to do all things
necessary in order to resolve the grievances of the debenture holders.
 ascertain and specify that debenture certificates have been discharged within 30 days of
registration of the charge with ROC
 ascertain and specify that debenture certificates have been discharged in accordance with the
provisions of the Company Act
 Ascertain and specify that interest warrants for interest due on the debentures have been
dispatched to the debenture holders on or before the due date and so on.
 To inform SEBI in case of breach of Trust Deed and take measures accordingly.
The activities of Debenture Trustee in the Indian Capital Market are regulated by SEBI (Debenture Trustees)
Regulations, 1993.

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