Unit V

Operations

Q1) What are financial assets?        5

A1) An economic asset is an asset that consequences from a contractual settlement on destiny coins flows or from proudly owning a inventory manufactured from some other entity. A economic device is a agreement that creates a economic asset in one of the events worried and a inventory commodity or economic legal responsibility in some other entity.

The essential distinction among economic belongings and PP & E belongings (generally which include land, homes and machinery) is the presence of counterparties. Financial belongings may be labelled as either modern or non-modern belongings at the employer's stability sheet.

Understand financial assets

Most belongings are categorised as bodily, economic, or intangible. Real belongings are bodily belongings that derive cost from materials and belongings which includes treasured metals, land, actual property, soybeans, wheat, oil, iron and different commodities.

Intangible belongings are precious belongings that aren't bodily in nature. They encompass patents, trademarks, and highbrow property.

Financial belongings are among the alternative  belongings. Financial belongings can seem intangible (non-bodily) and most effective display the cost on paper, which includes greenback payments or lists on laptop screens. However, the paper or listing represents a declare of possession of an entity which includes a public employer, or a contractual proper to payment, which includes hobby earnings from a bond. A economic asset derives its cost from a contractual declare at the underlying asset.

This underlying asset is both actual or intangible. For example, commodities are the real underlying belongings which can be constant to economic belongings which includes commodity futures, contracts, or a few exchange-traded funds (ETFs). Similarly, actual property is a actual asset related to a inventory of a actual property funding trust (REIT). REITs are economic belongings and indexed agencies that personal actual property portfolios.

The Internal Revenue Service (IRS) calls for groups to document economic and bodily belongings collectively as tangible tax belongings. Grouping tangible belongings is become independent from intangible belongings

Q2) Explain the types of financial assets.       5

A2) The different types of assets are:

1. Cash and cash equivalents

These are financial assets that are liquid assets of the business, such as the cash balance of the business, the balance of the bank account of the business, checks received from the parties but not yet cleared by the bank, and commercial paper.

2. Fixed deposit

A fixed deposit is the amount of money you deposit in another entity in the hope of earning such money deposited in the form of interest. For example, Z Incorporation has deposited $ 50,000 in a bank as a one-year fixed deposit, and in return the bank has promised Z Incorporation an annual interest rate of 10%. Therefore, the time deposit certificate is given by the bank to the investor; the certificate is a proof of fixed deposit, and the contract between Z Corporation and the bank where the bank pays $ 55,000 (deposit amount of $ 50,000 and interest of $ 5,000). Serves as the above agreement. ) After the completion of the one-year period.

3. Common stock

Shares are the financial assets of a company when that company purchases shares issued by another company. This will be the financial assets of the company that purchased the shares and the shares of the owner of the company that issued such shares. This financial asset establishes the right to receive dividends paid by the issuer to investors. For example, ABC Incorporation buys $ 500 worth of PQR Incorporation shares. This investment gives the establishment of ABC the right to receive dividends from the establishment of PQR and the right to vote on the issue of establishment of PQR.

4. Preferred stock

Like equity stock, preferred stock gives holders the right to receive dividends, but liquidation of the issuing company according to the amount of stock purchased by the owner of the company issuing the preferred stock (issuing company). Later, the preferred stockholder has the right to receive the issuer's assets before the assets are allocated to the shareholders.

5. Corporate bonds

A bond is a financial asset that gives a bondholder the right to receive interest on a specified date of investment at a given interest rate. At maturity of the bonds, the investment will also be repaid to the bondholders, who have the right to claim the issuer's assets in front of the preferred and shareholders at the time of liquidation of the issuer.

6. Accounts receivable

When a sale is made on a credit basis, the selling party has the right to receive payment from the party purchasing the product (called the debtor). Therefore, for the seller, the debtor is the head of accounts receivable. In short, these are assets that create the right to receive money in return for a credit sale made by a business within a given credit period and indicate the right to receive interest if payment is delayed, that is, if payment is delayed. Is. If not received within the allowed credit days, the purchaser (debtor) must repay the purchase price plus the interest amount calculated at the rate determined at the time the goods were sold.

7. Investment trust

An investment trust is a fund managed by an asset management company that asks small investors to provide funds and, in return, provides a unit of investment trust. Therefore, after collecting money from such investors, investment trusts invest them in the financial markets and create a diverse portfolio of stocks. The trust then provides the investor with a profit in the form of capital valuation and dividends / interest.

8. Derivatives

Derivatives are financial instruments or contracts between two parties that derive their value from an underlying asset whose underlying asset may be an index, commodity, stock, interest rate, currency, etc. The most commonly used derivative products are optional. , Futures, swaps, etc.

9. Insurance contract

Insurance contracts are another type of financial asset, with the right of one party (called the policyholder) to pay the insurance company premiums and receive compensation in the event of uncertain future events that result in loss. Get it. For example, if the policyholder has a policy of giving the policyholder the right to compensation in the event of a fire, the insurance company will cover the loss incurred in the business in the event of a fire in the business.

Q3) Write a short note on issue of debentures.     5

A3) The provisions regarding bonds are stipulated in Article 71 of the Act as follows.

(1) The company may issue bonds with the option to convert such bonds.

In whole or in part at the time of redemption:

Provided, however, that the issuance of bonds with the option to convert such bonds into shares shall be approved, in whole or in part, by a special resolution passed at the General Assembly.

(2) No company shall issue corporate bonds with voting rights.

(3) Secured bonds can be issued by the company in accordance with the prescribed conditions.

(4) If a company issues corporate bonds under this section, the company shall create a corporate bond redemption reserve account from the profits of the company that can be used to pay dividends, and the amount credited to such account shall be: Redemption of bonds.

(5) The company appoints one or more bonds trustees prior to the issuer's offer, issues a prospectus, or subscribes to the bond to Kosha or its members, unless conditions are set. Do not make more offers or invitations. Those governing the appointment of such trustees must be prescribed.

(6) Bond trustees must take steps to protect the interests of bondholders and correct their dissatisfaction in accordance with the prescribed rules.

(7) The provisions contained in the trust deed to secure the issuance of bonds or the provisions contained in the contract with the bondholder secured by the trust deed will be invalid as long as the trustee is exempted. Suppose. I will indemnify him for liability for the breach of trust. He did not show the degree of due diligence and attention he needed as a trustee,

Trust deed provisions that give him power, authority or discretion:

However, bond trustee liability is subject to an exemption that may be agreed by a majority of bond holders holding a value of three-quarters or more of the total bond at a meeting held for that purpose.

(8) The Company shall pay interest and redeem the bonds in accordance with the conditions of issuance.

(9) Whenever the bond trustee comes to the conclusion that the company's assets are in short supply or may be insufficient to repay the principal, when the due date comes. Bond Trustees further liability by the company if the court and the court, after hearing the views of the company and others interested in the matter,, by order, deem the court necessary for the benefit of the bondholders. You can impose such restrictions on the occurrence of.

(10) If the company does not redeem the bonds on the maturity date, or does not pay interest on the bonds when the due date arrives, the referee will file an application for either or all of the bond holders or bond trustees. Correspondingly, after hearing the opinions of the parties concerned, the company will, by order, instruct the bonds to be redeemed immediately upon payment of principal and interest.

(11) In the event of a default pursuant to a court order under this section, all officers of the defaulting company shall be punished by imprisonment with work for a period of up to three years or a fine. It is 2 rupees, but can be expanded up to 5 rupees or both.

(12) The contract with the company to underwrite and pay the company's bonds may be enforced by certain performance laws.

(13) The central government has procedures for securing the issuance of corporate bonds, the format of corporate bond trust certificates, procedures for corporate bond holders to view trust certificates and obtain copies of them, and preparations for redemption of corporate bonds that need to be prepared. The amount of gold can be specified. And such other matters.

Q4) What are debentures? What are its features?     5

A4) Bonds are the means used by lenders, such as banks, to provide capital to businesses and individuals. This allows the lender to secure loan repayment for the borrower's assets even if they neglect to pay.

Bonds can be charged a fixed or variable rate. Fixed fees are usually paid for tangible assets such as real estate. This allows the lender to take ownership of the borrower's assets and sell them in the event of a default payment. At a fixed rate, the borrower cannot sell the asset without the consent of the lender.

Variable fees that accompany assets such as stocks, raw materials, and intellectual property usually mean that the assets can change over time, and the borrower can sell them without the intervention of the lender. However, if the borrower defaults, variable fees may be fixed.

The word "corporate bond" itself is derived from the Latin word "debere" and means to borrow or borrow. Bonds are a written means of debt issued by a company under a common seal. They are similar to loan certificates.

Bonds are generally issued as a repayment contract for borrowed money. These bonds have a fixed term and fixed interest rate and can be paid annually or semi-annually. Bonds, like stocks, are open to the public. Bonds are actually the most common way for large corporations to borrow money.

According to the Companies Act 2013, corporate bonds may typically include stocks, bonds and other commodities. These products should serve as proof of debt.

In addition, they may or may not constitute a claim for the company's assets.

The definition under the law also states that corporate bonds cannot hold any voting rights. Therefore, corporate bonds differ from stocks in this respect. Now that the meaning of bonds is clear, let's take a look at their features.

Bonds typically have the following features:

1. Corporate bonds are nothing but documents. In other words, they have documentary value.

2. These documents are proof of debt. This indicates that the company is in debt to the bondholders.

3. Interest on corporate bonds is always paid at a fixed interest rate. In addition, the company must pay interest regardless of whether it makes a profit or not.

4. The company can even repay debt or convert corporate bonds into stocks or other corporate bonds.

5. Bonds may or may not be billed to the company's assets.

6. Finally, corporate bonds are generally transferable. Bondholders can sell them on the stock exchange at any price.

Q5) What are debentures? What are the types of debentures?   8

A5) Bonds are the means used by lenders, such as banks, to provide capital to businesses and individuals. This allows the lender to secure loan repayment for the borrower's assets even if they neglect to pay.

Bonds can be charged a fixed or variable rate. Fixed fees are usually paid for tangible assets such as real estate. This allows the lender to take ownership of the borrower's assets and sell them in the event of a default payment. At a fixed rate, the borrower cannot sell the asset without the consent of the lender.

Variable fees that accompany assets such as stocks, raw materials, and intellectual property usually mean that the assets can change over time, and the borrower can sell them without the intervention of the lender. However, if the borrower defaults, variable fees may be fixed.

The word "corporate bond" itself is derived from the Latin word "debere" and means to borrow or borrow. Bonds are a written means of debt issued by a company under a common seal. They are similar to loan certificates.

Bonds are generally issued as a repayment contract for borrowed money. These bonds have a fixed term and fixed interest rate and can be paid annually or semi-annually. Bonds, like stocks, are open to the public. Bonds are actually the most common way for large corporations to borrow money.

According to the Companies Act 2013, corporate bonds may typically include stocks, bonds and other commodities. These products should serve as proof of debt.

In addition, they may or may not constitute a claim for the company's assets.

There are various types of corporate bonds that a company can issue, based on security, holding period, convertibility, and so on. Let's take a look at some of these types of corporate bonds.

Secured Bonds: These are corporate bonds that are secured against the company's assets / assets. This means that if the repayment of such bonds becomes the default, such assets will be charged. Therefore, if the company does not have sufficient funds to repay such bonds, the assets will be sold to pay such a loan. Fees can be fixed, that is, for a specific asset / asset, or variable, that is, for all assets of the company.

Unsecured Bonds: These are not secured by any claim on the company's assets and are neither fixed nor variable. Generally, such types of corporate bonds are not issued by Indian companies.

Redeemable Bonds: These bonds are paid at the end of that period. This means that you will be paid either in one lump sum or in instalments over a period of time at the end of the specified period. Such bonds can be redeemed at face value, premium, or discount.

Non-redeemable bonds: Such bonds are inherently permanent. There is no fixed date when they will be paid. They are redeemable when the company enters the liquidation process. Alternatively, it can be redeemed after a long, unspecified time interval.

Fully Convertible Bonds: These shares can be converted into shares at the option of the bondholder. Therefore, if he so desires, after a specified time interval, all his shares will be converted into shares and he will become a shareholder.

Partial Convertible Bonds: Here, holders of such bonds are given the option to partially convert the bonds into shares. If he chooses to convert, he will be both a creditor and a shareholder of the company.

Non-Convertible Bonds: As the name implies, such bonds do not have the option to convert into stocks or stocks of any kind. These bonds will survive until maturity and will not be converted. These are the most common types of corporate bonds.

Q6) What are the advantages and disadvantages of debentures?  8

A6) Issuing corporate bonds from the issuer's point of view has several different advantages. These benefits are:

1. Bonds can easily facilitate a company's long-term financing.
2. Financing through corporate bonds is relatively easy compared to other long-term financing alternatives.
3. Raising funds through fixed income is also considered a viable option as it provides financial protection and peace of mind for directors and their personal funding.
4. Bonds have a fixed interest rate that accrues over time, making it relatively easy to estimate the financial cost of the amount you will have to pay during the holding period.
5. From the creditor's point of view, corporate bonds usually have a higher repayment priority than other users. In this regard, it is essential to take into account the fact that there is a particular pecking order that needs to be maintained at the time of clearing. In this regard, corporate bond holders are also in line with these payments. This serves as an incentive for investors.
6. Bonds do not dilute ownership and do not change the voting rights or voting structure within the company. Therefore, companies can raise a significant amount of money without worrying about these aspects.
7. This means that they are not entitled to a portion of the profit, as bond payments (interest payments) must be paid regardless of the amount of profit. They are entitled to a flat interest rate on the market.
8. No collateral is required to issue bonds. Therefore, it is relatively easy to raise funds through corporate bonds compared to traditional bank loans.

Disadvantages of bonds

Despite the fact that bonds are considered a very important source of income for a company, we find that there are certain shortcomings and limitations that need to be taken into account. These drawbacks are:

1. Each company has a certain amount of borrowing capacity to cooperate with. Therefore, this option may not be readily available to companies that already have high gear ratios.
2. You must pay interest regardless of the level of profit that your company operates.
3. Bonds have been extended to most businesses based on their history and reputation, so it turns out that this option may not be immediately available to recently established businesses.
4. Finding an investor who is willing to make such a long-term deal with a bond issuer can be difficult. Most corporate bonds are issued for 10 years and have a fixed interest rate. Therefore, risk-averse investors prefer to invest in these ventures. However, contrary to the interest rates already set, it can be difficult to put them into long-term arrangements.

Q7) What are equity shares? Explain its types.     8

A7) Stocks are also called common stocks. They are a form of partial or partial ownership in which shareholders bear the greatest business risk as split owners. The holder of the shares is a member of the company and has voting rights. Stocks are an important source for raising long-term capital.

Shares represent ownership of a company, and the capital raised by the issuance of such shares is known as owned capital or the owner's funds. They are the basis for establishing a company.

Shareholders are paid on the basis of the company's profits and do not receive fixed dividends. They are called "residual owners". They receive what remains after all other claims regarding the company's income and assets have been resolved. These shareholders have the right to participate in the management of the company through voting rights.

Types of Equity shares

Initially, there was only one type of stock, the common stock. However, over time, many other types of sharing with different features have begun to emerge. This is beneficial for both the company and the investor. There are free options for investors, others are at the discretion of the company. Below are some types of stocks.

1. Right stock

This is a type of stock that a company issues to existing shareholders. Before the company puts a new class of shares on the market, it will provide the shares to existing shareholders at a rate. This offer is valid for a specific period of time and holders have the option of exercising or denying the option. The price at which they are issued is lower than the market price.

2.     Bonus share

Bonus shares will be issued in lieu of dividends. If a company is making high and stable profits, it may prefer to issue shares to shareholders for free rather than paying cash dividends. The main purpose is to take advantage of the company's retained earnings. It will also be issued as a percentage of the shares held. Issuing bonus shares has proven to be beneficial to our shareholders by increasing the number of issued shares.

3.     Voting and non-voting shares

Common stock means holding voting rights at the annual general meeting of shareholders. However, over time, new types of non-voting shares have been introduced. Most shares still grant voting rights, but shares may be issued subject to a difference (DVR) or no voting rights.

4.     Sweat stock

This term is usually misunderstood as ESOP, but it is not the same. Sweat Equity Shares are provided to directors and other employees of an organization to provide intellectual property rights, know-how, or value to the company. This is usually assigned to cash or non-cash consideration. The company may not issue more than 15% of the existing paid-in capital in Sweat Equity.

5.     Employee Stock Option Plan (ESOP)

Employers use a variety of tools to reward and motivate their employees. One such tool is the ESOP. It is a plan that gives employees the option to buy shares in the company in which he works. The price offered is lower than the market price and will only be offered for a specific period of time. Employers believe that offering this option will instill a sense of ownership in the minds of their employees.

6.     Value stock

This is a type of stock that trades at a price lower than its intrinsic value. Value stocks are considered high risk because the market is sceptical of them. Value stocks are usually more likely to have higher long-term returns than growth stocks because of the potential risks.

7.     Growth stock

These are stocks of companies whose expected growth is much higher than the average growth of the market. These companies are focused on long-term growth. Therefore, they do not like to pay dividends. Instead, they cultivate the profits they earn and invest in the company. Growth stocks are one of the safest stocks to invest in. Holders earn in the form of capital valuations.

8.     Dividend stock

As the name implies, these are stocks for which regular dividends are paid. Needless to say, these are companies with stable income. Most dividends are paid quarterly, but some are paid even once in the form of monthly, annual or special dividends. One way to find dividend stocks is to calculate the dividend payment rate.

Q8) What are equity shares? Write its features.      5

A8) Stocks are also called common stocks. They are a form of partial or partial ownership in which shareholders bear the greatest business risk as split owners. The holder of the shares is a member of the company and has voting rights. Stocks are an important source for raising long-term capital.

Shares represent ownership of a company, and the capital raised by the issuance of such shares is known as owned capital or the owner's funds. They are the basis for establishing a company.

Shareholders are paid on the basis of the company's profits and do not receive fixed dividends. They are called "residual owners". They receive what remains after all other claims regarding the company's income and assets have been resolved. These shareholders have the right to participate in the management of the company through voting rights.

Features of common stock:

1. Stock Maturity: Stocks have a permanent nature of capital and have no maturity period. Shares cannot be redeemed for the life of the company.
2. Remaining Income Claims: Equity shareholders have the right to earn just-out income after paying a fixed dividend rate to their preferred shareholders. The income available to shareholders is equal to the profit after tax minus the preferred dividend.
3. Remaining Claims on Assets: If the company suffers damage, shareholders have the right to obtain the remaining claims on the assets. These rights are accessible to shareholders.
4. Control: Shareholders are the actual owners of a company, which is why they have the authority to direct the management of the company and make all decisions regarding the operation of the business.
5. Voting Rights: Shareholders have voting rights and therefore have voting rights at company meetings. They can also make a difference in determining business concerns. Shareholders not only have voting rights in the company, but can also exercise voting rights on behalf of shareholders.
6. Pre-emptive rights: Shareholders also have preemptive rights. Preemptive rights are the legal rights of current shareholders. This is the main opportunity for a company to buy additional shares in proportion to its current holding capacity.
7. Limited Liability: Shareholders have limited liability only for the value of the shares used for purchase. Shareholders are not liable to anyone if they hold fully paid shares. Example: When a shareholder buys 100 shares for rupees. For each face value 10, he paid only rupees. 900 and his responsibility is only Rs. 100.

Q9) Write the advantages and disadvantages of equity shares.   5

A9) Advantages of common stock:

1. No fixed dividend: Shares are not responsible for paying a fixed dividend rate. If the company is profitable, the shareholders are entitled to profit or receive dividends, but cannot retain dividends from the company.
2. Asset Billing: You can issue shares without incurring a bill for your company's assets.
3. Repayment: Stocks are a permanent source of funding. The company must repay the shares except during the liquidation period.
4. Voting Rights: Shareholders are the actual owners of all voting companies. This type of authority is only accessible to shareholders.
5. Real Earners: Whenever profits are made, shareholders become real profit earners in the form of increased dividends and realization of the value of the shares.
6. Permanent Sources: Equity capital belongs to a permanent source of long-term funding in nature and can be used for long-term or fixed capital requirements of business concerns.
7. Cost of capital reduction: Cost of capital is one of the key factors that makes a difference in the value of a company. If a company wants to increase its value, it needs to use more equity capital because it has a lower cost of capital (ke) compared to other sources of funding.
8. Retained earnings: In situations where the company has additional equity capital, retained earnings will benefit from a less costly source of funding compared to other sources of funding.

Disadvantages of stocks:

1. Equity Trading, Not Allowed: If a company increases its capital solely with equity support, the company will not be able to enjoy the benefits of equity trading.
2. Non-redeemable: Shares cannot be redeemed for the duration of the business concern. In the case of over capitalization, that is the greatest risk.
3. Management Barriers: Equity shareholders can place barriers to management through their influence and their gathering. They are powerful enough to make a difference in decisions against shareholder wealth.
4. Speculation Results: During prosperity, you have to pay more dividends, which results in higher stock value in the market, which causes speculation.
5. Limited Income to Investors: Investors who want to invest in secure securities with stable income are not interested in stocks.

Q10) Explain unlisted company and listed company.    8

A10) Unlisted company

An unlisted company may make an initial public offering (IPO) of a stock or other security if all of the following conditions are met: These securities may be converted or exchanged for shares at a later date.

(A) The company holds at least 3 chlores of net tangible assets over the last 3 years (12 months each), of which less than 50% are held in monetary assets.

However, if more than 50% of the net tangible assets are held in monetary assets, the issuer is committed to using such excess monetary assets in a business or project. In addition, if the public offering is made entirely through the sale, the 50% limit on monetary assets shall not apply.

(B) The company has a minimum average pre-tax operating profit of Rs 15 on a recalculated and consolidated basis in the most profitable three of the last five years.

(C) The company has a net worth of at least Rs 100 million in each of the last three years (12 months each).

(D) The sum of the size of the proposed issue and all previous issues issued in the same fiscal year does not exceed five times the pre-issue net worth on the audited balance sheet of the previous fiscal year.

(E) If the company changes its name within the last year, at least 50% of the revenue for the previous year will come from the activity proposed by the new name.

Listed companies

Listed companies are eligible for public issuance of shares or other securities at a later date. These securities are the sum of all previous issuances made at a later date in the same fiscal year as the proposed issuance. In terms of size, the issue size does not exceed five times the pre-issue net assets on the audited balance sheet for the previous fiscal year.

However, if the name of the issuing company is changed within the past year from the date of submission of the recruitment documents, the revenue from the activity proposed under the new name will be the total revenue for the past year.

In order to provide ample flexibility and ensure that real companies do not suffer due to parameter rigidity, SEBI has a problem with the book building process and publishers qualify at least 75% of the public offering. If you assign to an institutional investor and do not make the above minimum allocation to a qualified institutional investor, we promise to refund the full amount of your subscription. The issuer shall not make an allotment based on public issues if the number of members of the allottee is less than 1,000. In addition, the issuer shall not make an initial public offering if it has issued convertible securities or other rights and gives any person the option to receive shares.

Initial public offering of shares means the sale or marketing of shares for subscription by the general public by issuing a prospectus. In order to raise public funds by issuing shares, public companies must comply with the Companies Act and the Securities Contract (Regulatory) Act of 1956. Authorities, stock exchanges, SEBI, etc.

Companies can raise money from the primary market in a variety of ways.

(A) Public Issuance: When a security is issued / provided to a new investor in order to be part of the family of the issuer's shareholders, it is called a public issuance. Public offerings can be further divided into initial public offerings (IPOs) and additional public offerings (FPOs). The key features of each type of publishing issue are listed below.

1. Initial Public Offering (IPO): When an unlisted company issues a new security, sells an existing security, or both are offered to the public for the first time, it is called an IPO. This paves the way for the issuer's securities to be listed and traded on the stock exchange.
2. Further Public Offering (FPO) or Follow-on Offer: When a company that is already listed issues a new security or makes a public offering, it is called an FPO.

(B) Rights issue (RI): When an issuer issues a security to a shareholder who exists on a specific date (record date) set by the issuer, it is called a rights issue. Rights are provided at a specific ratio to the number of securities held as of the record date.

(C) Bonus issuance: When an issuer issues securities to existing shareholders on the record date without consideration, it is called a bonus issuance. Shares are issued from our gratis reserve or stock premium account at a specific ratio to the number of securities held on the record date.

(D) Private Placement: A security is issued to a selected group of no more than 49 issuers, which is neither a rights issue nor a public offering, is called a private placement. There are two types of private placement of shares or convertible securities by listed issuers:

i. Preferred Allocation: When a listed issuer issues shares or convertible securities to a group selected under the provisions  of the SEBI (ICDR) Regulations, it is called a preferred allocation. Issuers are required to comply with various provisions, including pricing, notice disclosure, lock-in, etc., in addition to the requirements specified in the Companies Act 2013.

Ii.  Qualified Institutional Placement (QIP): The listed issuer issues shares or convertible securities to the Qualified Institutional Buyer (QIB) only with respect to the provisions of Chapter VIII of the SEBI (ICDR) Regulations. If so, it is called QIP. ..

Iii.               Institutional Investor Program (IPP): When a listed issuer makes a further public offering of shares, or when a listed issuer's promoter / promoter group offers to sell shares, such share offer allocation and The allocation will be made. For the purpose of achieving a minimum public offering, only for QIB with respect to Chapter VIIIA of the 2009 SEBI (ICDR) Regulations is referred to as IPP.

Q11) What are equity shares? State the mandatory requirements for common stock rights issues.                                                                                                                5

A11) Stocks are also called common stocks. They are a form of partial or partial ownership in which shareholders bear the greatest business risk as split owners. The holder of the shares is a member of the company and has voting rights. Stocks are an important source for raising long-term capital.

Shares represent ownership of a company, and the capital raised by the issuance of such shares is known as owned capital or the owner's funds. They are the basis for establishing a company.

Shareholders are paid on the basis of the company's profits and do not receive fixed dividends. They are called "residual owners". They receive what remains after all other claims regarding the company's income and assets have been resolved. These shareholders have the right to participate in the management of the company through voting rights.

Mandatory requirements for common stock rights issues

1. Hold a board meeting on stock rights issues.
2. In a stock rights issue, the stock will be offered to our shareholders in proportion to the capital paid to the stock as of the offering date. [Section 62 (1) (a)]
3. The offer will be deemed to have been rejected if the number of shares offered is specified and a period of 15 to 30 days is set from the offer date and the offer is not accepted. .. [Section 62 (1) (a) (i)]
4. Unless otherwise provided in our Articles, a rights issue offer is deemed to allow a party to exercise its right to waive any shares offered in its favour to another, and the notice shall include: will do. Statement of this right. [Section 62 (1) (a) (ii)]
   
5. If, after the period set forth in the above notice has expired, or if an early notice is received from the notified person to refuse acceptance of the shares provided, the Board of Directors will otherwise dispose of them. Can. Disadvantageous to shareholders and the company. [Section 62 (1) (a) (iii)]
6. Board resolutions regarding stock rights issues cannot be passed by circulation. [Section 179 (3) (c)]

Q12) Write the post activity of issue of equity shares.   8

A12) Follow the steps below for a stock rights issue.

1. Check authorized capital and increase, if necessary.

If the rights issue is not included in the total authorized capital of the company, take the necessary steps to increase the authorized capital of the company.

2.     Board Convocation [according to Section 173 and Secretarial Criteria-1 (SS-1)]:

1. Issue a board notice to all directors of the company at the address registered with the company at least 7 days prior to the date of the board of directors. For urgent businesses, you can issue shorter notifications.
2. If you are a listed company, please contact the stock exchange about the board of directors at least 2 business days in advance. [Rule 29 of the 2015 SEBI (LODR) Rule]
3. Attach the agenda, notes to the agenda, and the resolution to the notice.
4. We will hold a board of directors meeting to consider a rights issue proposal for stocks.
5. Pass the board resolution required for a stock rights issue.
6. Allows the company secretary or director to sign the relevant form and submit it to the company registrar to take any action, act, or matter necessary to validate the board's decisions.
7. Within 15 days of the end of the board of directors, we will draft the minutes and circulate them by hand / speed post / registration post / courier / email for comment from all directors. [See the steps for preparing and signing the minutes of the board]
   

3.     Board Disclosure [Rules 30 and 46 (3) of the 2015 SEBI (LODR) Regulations]

In the case of a listed company, it shall first be disclosed and renewed to the listed stock exchange within 24 hours from the end of the board of directors, as soon as reasonably possible. On the company website within 2 business days.

4.     Shipment of offer letter [Section 62 (2)]:

Offer letters are sent to all existing shareholders via registered mail or speed post, or through electronic mode or courier, or any other mode that has proof of delivery to all existing shareholders at least 3 days prior to opening will do.

5.     Submit MGT-14 to ROC:

If you are a public company, please submit the MGT-14 to the company registrar with a fee within 30 days of passing the board resolution on the rights issue of the shares. However, for private companies, submission of MGT-14 is not mandatory.

6.     Acceptance and Refusal from Shareholders [Section 62 (1) (a) (iii)]:

If the Board of Directors refuses to accept the shares offered after the period set forth in the notice has expired or upon early notice from the person who has been notified, the Board of Directors will dispose of them in a manner deemed appropriate can do. This is not a disadvantage for shareholders or the company.

7.     Hold a second board meeting on the allocation of share rights issues [according to Section 173 and Secretarial Criteria-1 (SS-1)]:

1. Issue a board notice to all directors of the company at the address registered with the company at least 7 days prior to the date of the board of directors. For urgent businesses, you can issue shorter notifications.
2. If you are a listed company, please contact the stock exchange about the board of directors at least 2 business days in advance. [Rule 29 of the 2015 SEBI (LODR) Rule]
3. Attach the agenda, notes to the agenda, and the resolution to the notice.
4. Hold a board of directors meeting of the Company and allocate a rights issue for shares.
5. Pass a board resolution on the allocation of equity share rights issues.
6. Approve that directors and company secretaries sign and submit relevant forms to perform any act, act, or matter that may be necessary to implement the decisions of the board of directors.
7. Within 15 days of the end of the board of directors, we will draft the minutes and circulate them by hand / speed post / registration post / courier / email for comment from all directors.

8.     Submission of Form PAS-3 to the ROC [Company Section 39 (4) and Rule 12 (Prospectus and Securities Allocation) Rule]:

1. Please submit Form PAS-3 to the Company Registrar within 30 days of the allocation of the rights issue of the shares by the company with equity capital, along with the following documents as fees and attachments.
2. A list of allottees and their list, including name, address, occupation (if any), and the number of securities allocated to each allottee, is complete and correct by the signatories of Form PAS-3 according to the following records: It shall be proved as a thing.
3. A registered expert witness report on the assessment of consideration must also be attached.
4. For securities allocated as paid in full or in part as non-cash consideration, form PAS-3, buy or sell when the security is related to real estate or assets, or contract for services or other consideration.
5. Resolve rights issue approval and allocation of shares.
6. Other documents as needed.

9.     Intimacy with the Depositary [Provision of Section 56 (4)]:

If the rights issue of the allotted shares is handled by a depositary institution, the company shall notify the depository of the details of the allocation of securities immediately after the allotment of the securities.

10. For physical stock certificates [Company (Stock Capital and Bonds) Rule Section 56 (4) (b), Rule 5 (2)]

Certificates of all shares shall be at or near Form No. SH.1 and be named within two months of the allocation date for any allocation of that share (s). ) The person for whom the certificate was issued, the shares to which the certificate is associated, and the amount paid for the certificate.

11. Stamp duty attachment

All rights issue shares shall be subject to stamp duty in accordance with the provisions of the Indian Stamp Duty Law.

12. Maintaining Stock Registration [Company Rule 5 (4) (Stock Capital and Bonds) Rule]

Details of all issued share certificates shall be entered in the Membership Register, which is maintained with the date of issue, along with the name of the person who issued the certificate.

Q13) What are securities and securities markets?    5

A13) Securities are monetary merchandise issued with the aid of using agencies, establishments, etc., and feature economic cost. Securities are widely categorized as follows.

1. Shares, or stocks typically called stocks, constitute a percentage of possession of a corporation. Investors who spend money on corporation inventory are known as shareholders and are entitled to all company income, along with dividends, from the income of the corporation. Investors also are entitled to vote on the corporation's preferred assembly at the corporation's decision-making process.
2. Debt securities constitute the cash that a corporation / organization has to borrow from and pay off to the investor. Debt securities also are known as company bonds or bonds. Investors making an investment in debt securities are entitled to hobby bills and major repayments (that is, the cash invested). Debt securities are issued for a length of time, and then the company of the safety can redeem the safety. Debt securities may be secured (secured) or unsecured.
3. Derivatives are monetary units whose cost relies upon at the cost of every other asset, consisting of a inventory or bond. The important styles of exchange-traded derivatives are futures and options.
4. An funding agree with is a form of monetary product that includes a pool of cash accrued from many buyers. These price range / mutual price range spend money on securities consisting of stocks, bonds, cash marketplace merchandise and different assets.
   

The securities marketplace is an area wherein agencies can boost price range with the aid of using issuing securities consisting of stocks, bonds, derivatives, and funding trusts to buyers (public establishments), and buyers can boost numerous securities (stocks, bonds, etc.). When a inventory (or securities) is usually issued, the corporation ought to listing the inventory (or securities) on an permitted inventory exchange. The securities marketplace is a part of the capital marketplace.

The important feature of the securities marketplace is to permit the distribution of financial savings from buyers to people who want it. This is accomplished while an investor invests withinside the securities of a corporation / entity that desires price range. Investors have the proper to income consisting of hobby, dividends, capital valuations and bonuses. Such funding contributes to the financial improvement of the country.

The securities marketplace has interdependent and inseparable elements.

Q14) What are primary markets?        5

A14) This marketplace is likewise known as a brand new issue market wherein agencies / establishments boost price range (capital) New securities (stocks, company bonds, bonds)

There are important styles of securities issuers.

An enterprise entity (corporation) that especially problems fairness merchandise (stocks) and debt merchandise (bonds, company bonds, etc.)

Governments (crucial and state) issuing debt securities (dated securities and Treasury securities). The styles of issues that arise within side the number one marketplace are:

A. Public issue: Securities are issued to all people, anyone can subscribe. Initial public imparting of stocks

It may be categorized as follows.

A preliminary public imparting (IPO) wherein the primary public imparting of stocks is made with the aid of using the corporation. The IPO has the subsequent format:

-Issuing new stocks wherein the corporation problems new stocks to public buyers. In this form of trouble, the investor's cash is going to the corporation for use for the cause wherein the trouble takes place.

-A sale when an existing shareholder or other person, such as a promoter or financial institution, goes public. In this kind of problem, the investor's money goes to the seller of such stock, not the company.

Ii. Public Offering (FPO) Follow-up: This is created by an issuer / company that has already done an IPO in the past and has a new public offering.

B. Preferential Issuance: In this issuance mode, securities are issued to a specific set of investors such as promoters, strategic investors and employees.

C. Rights Issue: When we give existing shareholders the right to subscribe for newly issued shares in proportion to their existing shareholding, it is called a rights issue.

D. Bonus Issuance: When an existing shareholder of a company issues additional free shares in proportion to its existing shareholding at no additional cost, it is called a bonus issue. In order to raise public funds, the company must submit. SEBI offer document called draft red herring

Prospectus or draft prospectus. The prospectus contains details such as company history, promoter details, business model, company financial history, business risks, funding objectives, issuance terms and other useful information. An investor who makes informed decisions about investing in the company. Securities issued in the primary market will be listed on the approved stock exchange within 6 business days of the end of issuance. The shares are then listed on the approved stock exchange, where further transactions of the shares take place.

Shares allocated by the company will be credited to Demat investor accounts managed by depository institutions through SEBI Registered Depositary Participants (DP).

Investors can sell their shares on the stock exchange.

SEBI registers a stock broker and receives money.

Q15) What are secondary markets?       5

A15) After the security is issued in the primary in the market, they are listed on the stock exchange and investors. You can buy and sell these listed securities through these stocks exchange. The stock exchange has two main segments-cash market segment and derivatives market segment.

The secondary market allows securities holders to adjust their holdings in response to changes in risk and return valuations. We also sell securities in cash to meet our liquidity needs. A price signal that includes all the information about the issuer and his business, including the associated risks that occur in the secondary market, helps the primary market allocate funds.

The secondary market basically consists of stock exchanges that provide a platform for investors to buy and sell securities. The trading platform of the stock exchange is accessible only through brokers, and trading of securities is limited to the stock exchange.

The stock or secondary market guarantees free marketability, negotiability, and price release. For these reasons, the stock market is called the center of the capital markets, reflecting economic trends and investors' wishes, aspirations and anxieties.

There are two more components to this secondary market. One is the spot market where securities are traded for immediate delivery and payment, and the other is the futures market where securities are traded for future delivery and payment. Another variant is the options market where securities are traded for conditional future deliveries. In general, there are two types of options traded in the options market. Put options allow the owner to sell securities to the option writer at a given price prior to a specific date, and call options allow the buyer to purchase securities from the option writer prior to a specific date.

Also known as the aftermarket is a continuation of public offerings in the market. This is where previously issued stocks, bonds, options and futures are bought and sold. Simply put, it is the market where previously issued securities are bought and sold.

The secondary market promotes the liquidity and marketability of securities. For company management, it acts as a monitoring and control channel by:

Promote value building management activities,

Accumulate information by market capitalization

The secondary market provides a real-time valuation of securities based on supply and demand.

The secondary market definition itself states that if a previously issued security is bought or sold, it is a second-hand market.

Now let's look at what the secondary market is for the average investor. The secondary market is a place that provides an efficient platform for securities trading. In other words, it provides liquidity for converting investments into cash.

Q16) Explain the types and products in secondary markets.   8

A16) Types of secondary markets:

1. Over-the-counter market:

The OTC market is the process by which a security is traded in an informal manner, that is, it is not listed on a formal exchange.

Under this, securities that did not meet the requirements for listing on a standard market exchange. This is a bilateral contract involving two parties, an investor and a dealer.

Stocks traded on the OTC market are basically those of SMEs that cannot meet the exchange requirements for formal exchange.

2.     Exchange Traded Fund:

Exchange Traded Funds, also known as the Auction Market, are where all transactions are routed through a central source (exchange) and are entirely responsible as an intermediary between buyers and sellers.

Various products in the secondary market

Commodities traded on the secondary market consist of fixed income commodities, variable income commodities, and hybrid commodities.

1. Bond products

Bonds are primarily debt securities that guarantee regular payment methods such as interest, and the principal is repaid at maturity. Examples of bonds include corporate bonds, bonds, and preferred stock.

Bonds are unsecured debt products. That is, it is not secured by collateral. Therefore, the revenue generated from corporate bonds depends on the credibility of the issuer.

When it comes to bonds, it's essentially a two-party contract, and the government or company issues these financial instruments. When an investor buys these bonds, the issuer can secure a large amount of money in this way. Investors are paid interest at regular intervals and the principal is repaid at maturity.

Individuals who own the company's preferred stock receive dividends before paying shareholders. If a company goes bankrupt, preferred shareholders are entitled to be paid before other shareholders.

b.    Variable income products

Investing in variable return products produces an effective rate of return to investors, and various market factors determine the amount of such return. These securities expose investors to higher risk and higher rewards. Examples of variable return products are equity and derivatives.

Stocks are a way for companies to raise money. In addition, investors who hold shares have a claim on the company's net profit along with its assets when the company is liquidated.

With respect to derivatives, they are contractual obligations between two different parties, including in return for the prescribed performance.

c.     Hybrid equipment

Two or more different financial products are combined to form a hybrid product. Convertible bonds serve as an example of hybrid products.

Convertible bonds can be used as loan securities or debt securities that may be converted into shares after a given period of time.

d.    Distribution market function

The stock exchange provides a platform for investors to trade bonds, stocks, corporate bonds and other financial products.

You can trade at any time and the market is active, so you can buy or sell instantly with little price fluctuations from transaction to transaction. In addition, trading is continuous, increasing the liquidity of assets traded in this market.

Investors find a suitable platform, such as an organized exchange, for liquidating their holdings. The securities they hold can be sold on various stock exchanges.

The secondary market acts as a medium for determining the pricing of assets in transactions that match supply and demand. Information about transaction prices is in the public domain, which allows investors to make decisions accordingly.

It also shows the country's economy and also serves as a link between savings and investment. Like, savings are mobilized through investment in securities.

Q17) What are the merits and demerits of secondary market?   5

A17) Secondary marketplace benefits

1. Investors can without difficulty alleviate liquidity troubles withinside the secondary marketplace. Similarly, buyers who want liquid coins can promote their stocks very without difficulty because of the big wide variety of consumer’s withinside the secondary marketplace.
2. The secondary marketplace gives a benchmark for honest valuation of a specific enterprise.
3. Price changes for securities withinside the secondary marketplace take location in a brief time period as new statistics approximately the enterprise turns into available.
4. Investor finances continue to be quite secure because of the stern rules governing the secondary inventory marketplace. Regulations are strict due to the fact markets are a supply of liquidity and capital formation for each buyers and businesses.
5. Investor cash is held withinside the shape of securities, making it less difficult to mobilize savings.

Disadvantages of the secondary marketplace

1. The costs of securities withinside the secondary marketplace are exceptionally volatile, and such charge fluctuations can bring about surprising and unpredictable losses for buyers.
2. Before shopping for or promoting at the secondary marketplace, buyers have to well entire the applicable procedures. This is mostly a time eating process.
3. Investor income margins may also enjoy dents because of brokerage expenses charged on every transaction of purchasing and promoting securities.
4. Investment in secondary capital markets is at excessive hazard because of the affect of a couple of outside elements and present valuations are issue to alternate inside minutes.