Group

Pratik Marathe Ajinkya More Vinay chaurasiya

FINANCIAL ACCOUNTING

Primary issue
 Capital Markets deals with new securities.  Securities issued directly to investors.  New security certificates.(Share Certificate)  Establishing & Expanding New business.  To obtain required financing share issued in the primary market.

CASE STUDY
 In Jan 2008,Reliance Anil Dhirubhai-Ambani group offered IPO through Reliance Power Limited to garner $3 billion.  In order to finance their projects company came up with the IPO to sell out 260 million shares of INR 10 each  Price : Rs 405-450 per share.  The issue got over-subsided by 73 times of shares offered and generated the demand worth more than $196 billion.

Subsequent issue
 An offering of additional shares after IPO  Also called as Follow on public offer (FPO).  Offered by companies to refinance or raise capital for growth.  These shares are traded on stock exchange.

CASE STUDY
Power Grid Corporation of India Limited (PGCIL)  Issue Open: Nov 09, 2010 - Nov 12, 2010 Issue Type: 100% Book Built Issue FPO Issue Size: 841,768,246 Equity Shares of Rs. 10 Issue Size: Rs. 7,442.34 Crore Face Value: Rs. 10 Per Equity Share Issue Price: Rs. 85 - Rs. 90 Per Equity Share  Minimum Order Quantity: 65 Shares Listing At: BSE, NSE

Bonus issue
 Free share of stock given to current shareholders in a company.  Increases total number of shares issued and owned.  Not increase value of the company  The ratio of number of shares held by each shareholder remains constant  E.g. The company may give 5:1 ratio bonus share.

CASE STUDY

 June 7,2006- The Rs 15,000 cr. engineering and construction major Larsen and Toubro Ltd ( L & T) declared a bonus issue to its existing shareholders in the ratio of 1:1.  The last issue of bonus shares in the ratio of 3:5 was declared in 1986 . L & Ts first issue of bonus shares was in 1973 , when one bonus share was issued for every three shares .  Subsequent, bonus issues were made in 1977 (1:2) and 1982 (3:5)

Right issue
 Issue of Additional shares to raise capital under a seasoned equity offering.  Existing shareholders have the privilege to buy.  A specified no. of new shares from the firm at a specified price within a specified time  Often transferable.  Allow the holder to sell them on the open market.

CASE STUDY
 19 July 2002- Kingfisher launched the largest underwritten rights issue in UK corporate history, as the retailer asked existing investors for 2 billion of new equity to help finance its 5.1 billion (3.3 billion) bid for the remaining minority stake in Castorama.

 Terms offered- Shareholders were offered one new share for each share held, at 155p each. This price represented a 50 per cent discount to Kingfisher's trading share price just prior to the announcement of the rights issue.

Buy back of shares

 Re-purchase of outstanding shares (repurchase) to reduce the number of shares in the market.  Reduce in supply.  Eliminate threats by shareholders.  It is done in two ways:- Open Offer Purchase - Tender Offer

CASE STUDY

 Mumbai, June 11 ,2010: At a meeting of the Board of Directors of the company HUL , the board approved buy back of shares.  The buy back of the companys equity shares at a price not exceeding Rs 280 per share and up to an aggregate amount of Rs. 630 cr., being within 25% of the total paid-up capital and free reserves as per the audited Balance Sheet as at March 31, 2010.