What are Primary Markets cs executive capital and security market notes
Introduction to Primary Markets article notes
Most listed companies are usually started privately by their promoter(s). However,the promoters’ capital and the borrowings from banks and financial institutionsmay not be sufficient for setting up or running the business over a long term.So, companies invite the public to contribute towards the equity and issueshares to individual investors. The way to invite the public to subscribe tothe share capital of the company is through a ‘Public Issue’. Once this isdone, the company allots shares to the applicants as per the prescribedguidelines laid down by SEBI.
The Primary Market is, hence, the market that provides a channel for the saleof new securities to issuers, which may can be the Government or corporates, toraise resources to meet their fund raising requirements. The securities may beissued at face value, or at a discount/premium and may take a variety of formssuch as equity, debt etc. They may be issued in the domestic and/orinternational market.
Capital market can be defined as a market where long-term funds can be raised.They are a part of the broader financial markets, which include forwardmarkets, swap markets etc. Capital markets can be further sub-divided intoequity markets and debt markets, where equity and debt are traded respectively.
Any capital market can be either a primary market or a secondary market. Thuswe have primary and secondary markets for both debt and equity. The distinctionbetween primary and secondary market is that in the former, the securities areissued by the original fund-raiser i.e. the company raising the funds, whereasin the latter, the securities are traded among the investors/speculators.