5 Hybrid security Common shares Non-payment of dividend does not force the company to go bankrupt Dividends are not tax deductible In some cases, there is no fixed maturity date. Obligation The dividend rate is fixed Pref shareholders do not share in residual profits They are entitled to income and assets before ordinary shareholders Art. 39 Bond redemption reserve: The obligation requires that the systematic repayment of the bond be made at maturity. Call-and-put commission: Call/buyback offers the issuing company the opportunity to redeem the bond before maturity at a certain price. The put option is the bondholder`s right to request redemption at a specified time at a predetermined price. Convertibility of securities Credit rating Right to income and wealth Art. 38 Attributes Trust deed: This is a long and complex legal document that specifies the conditions under which a bond was issued. It contains the specific terms and conditions such as the description of the obligation, the rights of the bondholder, the rights of the issuing company and the responsibilities of the trustees. Trustees are a bank or financial institution acting as a third party to the obligation to ensure that the issue does not meet its contractual obligations to bondholders. Interest: The bond has a fixed interest rate, the payment of which is legally binding Maturity: it specifies the duration of the repayment 27 Preferential allocation, An issue of equity or equity-related instruments by a listed company to predetermined investors, who may or may not be the company`s existing shareholders at a predetermined price, is called preferential allocation.
Justification for obtaining equity participation from those whom the company deems desirable, but who might otherwise find it very expensive or impractical to purchase a large portion of the shares on the market. 3 Types of shares CapitalShares Capital Preferred shares Capital: The preferred share is one that meets the following criteria As for the dividend, it is associated with a preferential right, which can be a fixed amount or a fixed interest rate. In case of liquidation or repayment of capital, a preferential right to repayment of the amount. Company actions. Equity financing When shares are sold to raise funds for the company`s long-term financing needs. Object of the inventory. Art. 24 Issue of share subscription rightsThis is the sale of common shares to existing shareholders. Indian law stipulates that new ordinary shares must first be issued in proportion to existing shareholders.
of rights = existing share / new share 2 The definition of common share represents the interest in the company. Holders of common shares are referred to as shareholders and are the rightful owners of the Corporation. A share also refers to the right to participate in a company`s profits while it continues to operate and declares dividends, and to the company`s assets upon liquidation. A share is defined as the consolidated value of a member`s fully paid-up shares. 20 Eligibility for an IPO A company may make 100% retail issuances, provided it meets all of the following conditions. It has a tangible net asset value of at least Rs 3 crore in each of the last three years. It has a history of distributable profit for at least three out of 5 years immediately. He has a net worth of at least Rs1 crore in each of the previous 3 financial years. The issue volume (offer by offer document + firm award + contribution by the promoter by means of the offer document) does not exceed five times the net assets before the issue 11 Share issue price: the price at which the share is issued on the market. Paid-up share capital = issue price * Number of common shares. The issue price consists of two components Nominal value Share premium The par value is the price per common share specified in the articles of association.
Generally, they are in denominations of 10 or 100. Any amount above the nominal value is called the share premium. Equity = paid-up share capital + premium + reserves and surplus = net assets Book value per share = net assets / number of common shares The market value of a stock is the price at which it is traded in the market. It is usually based on expectations regarding the development of the economy in general and the company in particular. 7 Voting rights of preferred shareholdersEach member of a corporation holding preferred shares has only one voting right in resolutions submitted to the corporation that have a direct effect on its preferred shares. Voting rights Voting rights of preferred shareholders if the dividend has not been paid for two years, cumulative and non-cumulative. Art. 16 Issue of shares at a discountIssue of shares at a premium Convocation of shares: application, allocation and other calls Forfeiture of shares 14 Method of raising capitalBy issuing a prospectus Issue of rights to subscribe for shares. Private Placement of Shares 25 Private Placement of SharesThis is the sale of shares (or other securities) by a company to a few selected investors, especially institutional investors such as Unit Trust of India (UTI), Life Insurance Corporation of India (LIC), IDBI, etc. Private placement has the following advantages It is useful to raise small funds It`s cheaper It`s a much faster way to raise funds.
6 Types of Preferred SharesParticipating Preferred Shares.:- You have the right to participate in excess profit with shareholders after the dividend has been paid to shareholders at a certain rate. Cumulative and non-cumulative shares Redemptive Preferred Shares Fully or partially convertible Preferred Shares. 22 Option Greenshoe A provision contained in a takeover agreement that gives the underwriter`s bank the right to sell more shares to investors than originally intended by the issuer. This would normally happen if the demand for a security issue turns out to be higher than expected. Legally called over-allotment option. It provides additional price stability for a security issue because the subscriber has the ability to increase supply and compensate for price fluctuations as demand increases. Greenshoe options typically allow underwriters to sell up to 15% more shares than the number initially set by the issuer. However, some issuers prefer not to include greenshoe options in their subscription agreements in certain circumstances, such as when the issuer wants to fund a particular project with a fixed cost and does not want more capital than it was originally looking for. The term derives from the fact that Green Shoe Company was the first to issue this type of option. 19 TYPE OF ISSUE OFFER PRICE PAYMENT ON DEMAND SUBJECT TO A FIXED PRICE Issues The price at which the securities are offered and would be allocated will be communicated to investors in advance The demand for the securities offered is known only after the completion of the issue A 100% advance payment must be made by investors at the time of application.
50% of the shares offered are reserved for applications below Rs. 1 lakh and the rest to applications of a higher amount. Book construction issues The issuer offers a 20% price range within which investors can bid and the final price will not be determined by the issuer until the offering closes. Demand for securities offered at different prices is available in real time on the BSE website during the tender period. QIBs must make a 10% advance payment with the application, while other categories of investors must pay a 100% advance with the application. 50% of the shares offered are reserved for QIBS, 35% for retail investors and the rest for all other investors. 23 Size of public offer: 2,00,000 shares of Rs 10 each Number of oversubscribed periods: 3 times Total No. Number of shares requested: 6,000,000 shares S.No number of shares requested for category No. Number of candidates Total number Number of shares applied Pro-rata allocation number Number of shares awarded by district Number of successful candidates Total number of shares awarded 1 100 1500 15000 50 000 500 500 +3300 2 200 400 80 000 26 700 267 26700 3 300 90 000 30 000 4 1 20 000 40 000 5 1 00 000 33 300 6 600 60 000 20 000 6 000 000 2 00 000 28 By-laws Special Resolution – The Corporation must pass a Special Resolution – The Government must require special authorization under section 81 (1A) Price – The price must not be less than the greater of the average of the weekly highest and lowest closing price of the listed shares six months before the relevant date or two weeks before the relevant date.