a ppt on financial system win - 7 version

7/31/2019 A Ppt on Financial System Win - 7 Version

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A

PRESENTATION ONFINANCIAL SYSTEM

With Special Focus To CAPITAL MARKET

PREPARED BY :

DR. BHAWIN PATELCORE FACULTY - FINANCE

NSVKMS MBA COLLEGE, VISNAGAR.EMAIL: [email protected]

1 A Presentation by Dr. Bhawin Patel (Asst. Professor - Finance)


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y ( )

FINANCIAL SYSTEM

What is Financial System? Financial system is a set of Financial

Markets , Financial Intermediaries andFinancial Instruments (products) .

A Presentation by Dr. Bhawin Patel(Asst. Professor - Finance)

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FINANCIAL MARKETS

CAPITAL MARKET

1. PRIMARY MARKET

2. SECONDARY MARKET MONEY MARKET COMMODITIES MARKET

DEBT MARKET FOR-EX MARKET DERIVATIVE MARKET


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FINANCIAL INSTRUMENTS

Banking Products Insurance Policies

Mutual Funds Bonds and Debentures Shares of all types Govt. Securities etc


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CAPITAL MARKETCAPITAL MARKET MEANINGCapital Market is market for long-term funds.

PRIMARY MARKET OR NEW ISSUE MARKET (NIM)

MEANING AND FUNCTIONS

SECONDARY MARKET OR STOCK EXCHANGE (SE)

MEANING AND FUNCTIONS

ISSUE MECHANISMSEBI

LISTING OF SECURITIESA Presentation by Dr. Bhawin Patel

(Asst. Professor - Finance)6


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PRIMARY MARKET

It is also known as New Issue Market. The Primary Market is that part of the capital

market that deals with the issueance of new securities .

Companies, governments or public sectorinstitutions can obtain funding or finance throughthe sale of a new stock or bond issue .

The New Issues by Companies in Primary Market is called as Initial Public Offerings (IPO) .


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http://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Security_(finance)http://en.wikipedia.org/wiki/Fundinghttp://en.wikipedia.org/wiki/Stock_issuehttp://en.wikipedia.org/wiki/Bond_issuehttp://en.wikipedia.org/wiki/Bond_issuehttp://en.wikipedia.org/wiki/Bond_issuehttp://en.wikipedia.org/wiki/Bond_issuehttp://en.wikipedia.org/wiki/Stock_issuehttp://en.wikipedia.org/wiki/Fundinghttp://en.wikipedia.org/wiki/Security_(finance)http://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Capital_market


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FEATURES OF PRIMARY MARKETS This is the market for new long term equity capital . The

primary market is the market where the securities are soldfor the First Time . Therefore it is also called the new issuemarket (NIM).

In a primary issue, the securities are issued by thecompany directly to investors.

The company receives the money and issues new securitycertificates to the investors.

Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizingthe existing business.

The primary market performs the crucial function of facilitating capital formation in the economy.


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http://en.wikipedia.org/wiki/Equity_capitalhttp://en.wikipedia.org/wiki/Equity_capitalhttp://en.wikipedia.org/wiki/Equity_capitalhttp://en.wikipedia.org/wiki/Equity_capital


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SECONDARY MARKET

Secondary Market is also known as Stock Exchangelike BSE and NSE.

The secondary market , is a part of Capital Market inwhich previously issued shares, bonds , options ,and futures are bought and sold.

The term "secondary market" is also used to refer tothe market for any used goods or assets.

In Secondary Market the existing shares are bought and sold by investors and thus its provide liquidity toinvestors indirectly .


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http://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Used_goodshttp://en.wikipedia.org/wiki/Used_goodshttp://en.wikipedia.org/wiki/Used_goodshttp://en.wikipedia.org/wiki/Used_goodshttp://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Bond_(finance)


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FUNCTIONS OF SECONDARY MARKET

MARKET PLACE- PROVIDE LIQUIDITY, AND MARKETABILITY TO INVESTORS

CONTINUOUS PRICE FORMATION

BASED ON DD/SS POSITIONWHAT OTHER FACTORS AFFECTS ?ECONOMIC /INTERNATIONAL /POLITICAL / RIOTS/ NATURAL

CALAMITIES/ EXCHANGE RATES/ GOVT.POLICIES/ INTEREST

RATE STRUCTURE/ MARKET RUMORS/ WAR / POLITICAL

DISPUTES / INFLATION / CORPORATE RESULTS AND SO ON .


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RELATIONSHIP BETWEEN

NEW ISSUE MARKET (NIM)ANDSTOCK EXCHANGE (SE) MAJOR DIFFRENCES:1. NEW V/s OLD SECURITIES2. NATURE OF FINANCING3. ORGANISATIONAL DIFFERENCES (LOCATION)

THE NIM HAS NO GEOGRAPHICAL EXISTANCE

MAJOR SIMILARITIES:1. STOCK EXCHANGE LISTING2. ECONOMIC INTERDEPENDENCE- BOTH MARKETS DEALING WITH INDUSTRIAL SECURITIES- ACTIVITY IN THE NIM AND THE MOVEMENT IN THE PRICES OF STOCK EXCHANGE SECURITIES ARE BROADLY RELATED; NEW ISSUE S INCREASE WHEN SHARE VALUES ARE RISING AND VICE VERSA


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SECURITIES MARKET INFRASTRUCTURE GOVERNMENT:

GIVING THE RIGHT DIRECTION TO THE MARKET, PREPARING MARKETFRIENDLY LAWS.

REGULATORS: ENABLING STRUCTURES TO BE PUT IN PLACE, FACILITATING A VIBRANT

MARKET.

EXCHANGES: CREATING INFRASTRUCTURE FOR TRADING.

DEPOSITORIES: CREATING INFRASTRUCTURE FOR SETTLEMENT.

BANKS: ENABLING THE MOVEMENT OF FUNDS

MARKET INTERMEDIARIES: BUILDING INFRASTRUCTURE ACROSS THE COUNTRY.


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ISSUE MECHANISM

PUBLIC ISSUE THROUGH PROSPECTUS

TENDER/BOOK BUILDING METHOD

OFFER FOR SALE

- COMP > MERCHANT BANK/INVESTMENT BANK > INVESTORS

PLACEMENT METHOD

- PRIVATE PLACEMENT > SHARES ISSUED TO FRIENDS/RELATIVES ETC

- PREFERENTIAL ALLOTMENT > SHARES ISSUED TO QIBs

RIGHT/BONUS ISSUE


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SEBI SECURITY EXCHANGE BOARD OF INDIA

Securities & Exchange Board of India (SEBI) formedunder the SEBI Act, 1992 with the prime objective of

Protecting the interests of investors in securities, Promoting the development of, and Regulating, the securities market and for matters

connected therewith or incidental thereto.

Focus being the greater investor protection, SEBI hasbecome a vigilant watchdog.


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FUNCTIONS OF SEBI: Regulation of Business of the Stock Exchanges.

A review of the market operations, organizationalstructure and administrative control of the exchange.

Registration and regulation of the working of MerchantBankers, Underwriters, Portfolio Managers, StockBrokers etc.

Regulates the working of the Depositories [Participants],

Custodians of Securities, FII, Credit Rating Agencies andsuch other Intermediaries in the Primary and SecondaryMarket.

Other functions...A Presentation by Dr. Bhawin Patel

(Asst. Professor - Finance)15


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LISTING OF SECURITIES

Admission of the securities for dealing on arecognized stock exchange.

Security may be of Company, Central or State

Government, Quasi government organizations.

A Presentation by Dr. Bhawin Patel (Asst.Professor - Finance)

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The Objectives Of Listing

Provide LIQUIDITY TO SECURITIES.

MOBILIZE SAVINGS for economic development

Protect INTEREST OF INVESTORS by ensuring fulldisclosures.


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Listing Process: Minimum Listing Requirements for new companies Minimum Listing Requirements for companies listed on other

stock exchanges Minimum Requirements for companies delisted by this

Exchange seeking relisting of this Exchange

1. Permission to use the name of the Exchange in an IssuerCompany's prospectus

2. Submission of Letter of Application3. Allotment of Securities

4. Trading Permission5. Requirement of 1% Security Deposit6. Payment of Listing Fees7. Compliance with Listing Agreement


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Listing requirements prescribed byStock Exchange

Minimum Listing Requirements:

A. For NEW COMPANIES:

1. In respect of Large Cap Company and2. In respect of Small Cap Company

B. Minimum Listing Requirements for companies listed

on other stock exchanges

C. Minimum Requirements for companies delisted bythis Exchange seeking relisting of this Exchange


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A. Minimum Listing Requirements forNEW COMPANIES.

IN RESPECT OF LARGE CAP COMPANIES: The minimum post-issue paid-up capital of the

applicant company shall be Rs. 3 crores.

The minimum issue size shall be Rs. 10 crores;

and

The minimum market capitalization of the Companyshall be Rs. 25 crores


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Listing of Security:IN RESPECT OF SMALL CAP COMPANY

The minimum issue size shall be Rs. 3 crores.

The minimum post-issue paid-up capital of the Companyshall be Rs. 3 crores

The minimum market capitalization of the Company shall beRs. 5 crores

The minimum income/turnover of the Company should beRs. 3 crores in each of the preceding three years.

Minimum number of shareholders after the issue shall be1000.


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B. Minimum Listing Requirements for companies

listed on other stock exchanges:

Criterias: The company should have minimum issued and paid up equity

capital of Rs. 3 crores. The Company should have profit making track record for last

THREE years. Minimum net worth of Rs. 20 crores (net worth includes

Equity capital and free reserves excluding revaluationreserves).

Minimum market capitalization of the listed company shouldbe at least two times of the paid up capital.

The company should have a dividend paying track record forthe last 3 consecutive years and the minimum dividend

should be at least 10%.A Presentation by Dr. Bhawin Patel (Asst.Professor - Finance) 22


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B. Minimum Listing Requirements for companieslisted on other stock exchanges:

Criterias

Cont

Minimum 25% of the company's issued capital should be with

Non-Promoters shareholders as per Clause 35 of the ListingAgreement.

The company should have at least two years listing recordwith any of the Regional Stock Exchange.

The company should sign an agreement with CDSL & NSDL for

D-MAT trading.

*** CDSL = Central Depository Services (India) Limited*** NSDL = National Securities Depository Limited


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C. Minimum Requirements for companies delisted by

this Exchange seeking relisting of this Exchange

The companies delisted by this Exchange and seeking

relisting are required to make a fresh public offer/issue

and comply with the prevailing SEBI's and BSE's

guidelines regarding initial public offerings.


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STEPS OF LISTING OF SECURITY:1. Submission of Letter of Application

As per Section 73 of the Companies Act, 1956, acompany seeking listing of its securities on the Exchangeis required to submit a Letter of Application to all the

Stock Exchanges where it proposes to have its securitieslisted before filing the prospectus with the Registrar of Companies.


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Listing of Security:2. Allotment of Securities

As per Listing Agreement, a company is required to completeallotment of securities offered to the public within 30 days of the date of closure of the subscription list and approach the

Regional Stock Exchange for approval of the basis of allotment.

In case of Book Building issue, Allotment shall be made notlater than 15 days from the closure of the issue failing whichinterest at the rate of 15% shall be paid to the investors.


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Listing of Security:3. Trading Permission

As per SEBI Guidelines, the issuer company shouldcomplete the formalities for trading at all the StockExchanges where the securities are to be listed within 7

working days. Time limit for all securities and dispatch of Allotment

Letter /D MAT form /Share Certificates if any in a duetime.

Manage the Refund Orders in due time, if any.


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Listing of Security:4. Payment of Listing Fees

All companies listed on the Exchange have to pay AnnualListing Fees by the 30th April of every financial year to theExchange.

Initial Listing Fee (One Time): Rs.20,000 Annual Listing Fee : (Paid Capital Up To Rs 5 cr.): Rs.10,000 (Above Rs.5 Cr And Up To Rs.10 Cr):Rs.15,000 (Above Rs. 10 Cr And Up To Rs. 20 Cr): Rs. 20,000 Companies which have a paid-up capital* of more than

Rs. 20 crores will pay additional fee of Rs. 750/- for every

increase of Rs. 1 crores. A Presentation by Dr. Bhawin Patel (Asst.Professor - Finance) 28


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Listing of Security:

5. Requirement of 1% Security Deposit

The companies making public/rights issues are required to

deposit 1% of issue amount with the Regional Stock Exchange

before the issue opens.

This amount is liable to be forfeited in the event of the

company not resolving the complaints of investors regarding

delay in sending refund orders/share certificates, non-payment of commission to underwriters, brokers, etc.


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Listing of Security:

6. Compliance with Listing Agreement

The companies desirous of getting their securities listed arerequired to enter into an agreement with the Exchange calledthe Listing Agreement and they are required to make certaindisclosures and perform certain acts like

A. To forward copies of annual reports and balance sheets tothe shareholders

B. To furnish financial results on a quarterly basis to SEBI

C. To comply with the conditions of corporate governance

D. To provide facilities for prompt transfer of shares

E. The requirement of minimum number of shareholders

F. To comply with listing regulations from time to time etc.A Presentation by Dr. Bhawin Patel (Asst.

Professor - Finance)30


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TO BE CONTD

A Presentation by Dr. Bhawin Patel (Asst.f )

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