primary markets - 203 - Financial Markets MEANING OF NEW...

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Financial Markets
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MEANING OF NEW ISSUE MARKET It refers to the set-up which helps the industry to raise the funds by issuing different types of securities. These securities are issued directly to the investors (both individuals as well as institutional) through the mechanism called primary market or new issue market. The securities take birth in this market.
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FUNCTIONS OF NEW ISSUE MARKET The main function of new issue market is to facilitate transfer resources from savers to the users. The main function of new issue market can be divided into three service functions:
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Origination It refers to the work of investigation, analysis and processing of new project proposals. Origination starts before an issue is actually floated in the market. It includes a careful study of the technical, economic and financial viability to ensure the soundness of the project and provides advisory services.
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Underwriting It is an agreement whereby the underwriter promises to subscribe to a specified number of shares or debentures in the event of public not subscribing to the issue. Thus it is a guarantee for the marketability of shares. Underwriters may be institutional and non- institutional.
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Distribution It is the function of sale of securities to ultimate investors. Brokers and agents who maintain regular and direct contract with the ultimate investors, perform this service .
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METHODS OF FLOATING NEW ISSUES
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Public issues or Initial public offering (IPO) The issuing company directly offers to the general public/institutions a fixed number of
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  • Spring '17
  • SEBI

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