Marketing of Securities - Sources of Business Finance, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com

you
the second topic is securities market
okay now we have already understood what
is securities say coyotes are any
financial instrument which has a market
for trading okay now let us try and
understand different type of
participants which is there in this
market okay so so different type of
participants in this market now we know
there is a top of all we have a
regulator okay the regulator as you said
for securities market was Securities
Exchange Board of India say B okay now
the motive of this market is to
channelize resource from savers to
deploy us but predominantly being into
capital market segments it is to give
growth on your investments on your on
your savings on your capitals so being a
market which you have understood could
be of okay taking risk because unless
until your take risk your returns does
not grow okay so say B was incorporated
with the mean objective of taking care
of investors interest okay so see B is
at the helm of the entire affair as far
as secretaries is concerned and they
govern the entire process then time
mechanism even the stock exchanges they
do have a right to all the stock
exchange being the self ability
organizations will have their own bylaws
but then they can overrule them okay so
say B is the regulator and then we have
issuers of capitals which normally are
corporates
okay so they are issue of securities
they give shares in return they take
money okay investor gives money and that
money is used by the company to give you
added returns okay
and there are investors and securities
which are investors okay any individual
okay and there is hell lot of
intermediaries okay stockbroker
merchant banker lead manager
relationship manager your private equity
manager your banker your okay of anyone
anyone who is into the business of
helping with your investments and in
return charge for a commission for his
brokerage would be an intermediary but
they are also governed by CV so CB is
predominantly incorporated with the
motive of taking care of investors
interests and to protect that they would
have rules regulations that a company
should be following to be able to
extract money from investors as well as
the participants or the intermediaries
who were there in the system okay their
procedural issues their operational
issues there are restrictions that
licensing licensing everything would be
a part of a series domain okay
now when there is an interaction with an
investor okay
as an issuer directly you get in touch
with the investor without any
intermediary being into the picture okay
that is what we say is private placement
okay so private placement is the biggest
buzz would wear company prefer of doing
so predominantly because the cost of
raising capital is minimized with no
intermediaries into the picture there is
no requirement to be paying commissions
brokerages extra cost of mobilizing
those capital so as a company you can
directly come up with proposals for
individuals institutions okay and you
can raise your debt and equity
whichever way you want a capital to be
done and when you do so without any
intermediate ease involvement we call
them private placements okay which is
again a part of new issue if a company
is doing for the first time okay but
then private placement is when there is
no role of intermediaries been involved
and I said is the biggest buzzword last
few years if it has been observed
predominantly seventy seventy five
percent of capital mobilized in private
mark and in primary market is done
through private placements so any
company would prefer that but then there
will be some restrictions okay the
biggest restriction that SEBI has put
into private placement is that the
moment you need more than 50 individual
had comes to mobilize funds as a company
ok so then it doesn't remain private it
has to be then public and then you have
to go through the regulations that is
governing the new issue market
ok so unless and until uh if if you if
you are going to channelize your
resource ok by less than 50 individuals
then it could be a private placement so
there is that some challenges all there
is a preferred route but then the
biggest challenge is that with lesser
number of individuals there is always a
chance that the fund providers the
capital providers could collude could
form a cartel could know each other and
they could intervene your datura
operation so as a company you have some
intervention in your daily operations ok
that might be a reason why a company
would not go for private placements but
then private placements are the most
preferred options ok so when an issuer
subsequently as an issuer you take help
of some intermediary or lead managers
and through them you okay mobilize funds
through investors then that becomes a
part of your public issue primary market
ok where the company needs funds they
take lead managers merchant bankers
banker to any show ok ristar to any show
different different intermediaries are
involved underwriter to an issue and
through them you go and channelize your
money through general public so that is
where you talk of primary market okay
again under the preview of say be okay
and already issued securities as we said
is traded in secondary market so
secondary market is just the involvement
of investors with intermediaries there
is no involvement of company so if
you're buying and selling shares through
secondary market not a single pass all
of this goes to the company okay it's
entirely your profit or your loss
the company was only involved in primary
issue primary market where they got
their funds and then it subsequently
your money your profit your loss if you
want to liquidate if you want to exit
your investments then you can go and do
it in a secondary market finding some
other buyer okay and for that we need
some intermediaries involved as a broker
the unit of broker thrown from which you
can do it trading unitary depository you
need a banker okay but then there is no
involvement of company so that is why
the moment I see a company getting
involved with secondary market savvy has
a very strict guideline that its insider
trading and it's totally prohibited okay
so the participants all participants
under securities market is governed by
saving okay and to broadly understand
that the issuer's of capital
predominantly corporate bodies or
governments or okay state bodies the
intermediaries in the form of Reed
managers banker to initial merchant
bankers investment bankers stockbrokers
underwriters okay and then we have
investors so predominantly say be is
there with a motive of taking care of
investors interest okay and with that
objective all other rules are there
prevailing in the system to govern your
issuer the corporates or the
intermediaries okay in the system but
then all mobilization that is happening
from an individual or an institution to
the issuer of a capital
okay is all governed by say B so say B
is the regulator at the helm of the
affair and then it covers the
participants if there is a direct
involvement by the issuer and the
investor then we call them private
placements if it's a company with
intermediary and the investors involved
then it's a primary market okay and if
it's only the intermediary and the
investors company is out of the picture
then we call them secondary markets okay
so a continent for the the basic
functions of a security market as we
said is a linkage between investments
and savings okay again predominantly the
savings which has a motive of growing or
giving your regular income not just a
equities there are debts being traded
that's also securities so that
instrument has would give you a regular
income where in equity would give you a
capital appreciation okay and dividends
as another cash inflows but then the
function of a secondary or securities
market is again linkages between savings
and investments it's a marketplace for
purchase and sale of securities okay
because I said only if there is a market
for buying and selling of securities
it's a security otherwise it becomes a
non security so any financial instrument
which has a market for trading is a
security so securities market is a place
where securities can be bought and sold
okay
liquidity that means any investment by
nature should be liquid okay otherwise
it has a limited scope okay takers of
those instruments would be very very
limited liquidity by by liquidity we
mean that whenever change of ownership
is happening okay there should be
minimum loss of capital okay so if you
have a company's share and you're want
your money you want to exit a fraud of
the investment you go to the market to
sell so anything worth 100 while selling
you're able to sell it off at 99 you
lose one rupee as capital so
lesser loss of capital the more liquidy
investment is similarly if you go to buy
something hundred worth of some equity
and you end up giving 101 then you loss
of capital is one okay so the minimum
loss of capital is very say investment
is more liquid so any securities by
nature should be a liquid security that
means whenever a person is wanting to
exit there should be minimum loss of
capital okay they can exit it through a
marketplace where it can be bought and
sold so if you are wanting to buy
something I should be paying less over
and above what is what it is ideally
worth for and if I want to sell
something that I should be getting okay
the most as to what idol price would be
so if it's hundred rupees worth of
shares I want to sell then I should get
100 if not 100 then maybe as less of
loss as possible maybe 99.5 zero or
something okay so all investments in
security should be all securities
instruments should be liquid instruments
and since it's channelized through
investors the issuers are taking money
and giving you ownership in the form of
equity or okay which has a market for
trading so invariably the entire
mechanism is with the objective of
sharing the increased wealth so
company's capitalisation increases the
company's value increases the company's
wealth increases in proportion of your
ownership your value also increases of
your investments okay and to help you
diversify okay as an investor by taking
different different type of investments
okay creating a portfolio which is able
to be diversified you minimize your risk
okay
so predominantly securities water
securities securities are any financial
instrument which has a market for
trading okay and we need to understand
different participants predominantly the
role of SEBI okay into this entire
mechanism and then what is the function
of okay so from this topic if in case we
see the most frequent
type of doubt that probably pops up or
the type of coefficient that normally
has been asked again a concept question
for for Ord Marx okay to explain but
then you will get questions like a
distinguished
between securities and non securities
okay so clearly you have to bring out
okay that how security decision from non
security is non signal to any financial
instrument which does no have a marker
for trading but still it has a potential
to make your capital grow or in the form
of appreciation or giving you regular
income so it's still a part of capital
market but in order securities because
it's not able to be traded in the market
so we have to bring that aspect okay
while discussing this question and the
second type of question that normally is
is to pop up when somebody is talking
about this topic or generally been asked
frequently is discuss the functions of a
securities market okay so you have to
bring out all those things that we have
been discussing okay you have to bring
out the aspect of being liquid okay
being able to diversify raise been able
to channelize resources so their savings
are links to investment okay and a place
where you can buy and sell shares the
more efficient so those all functions
has to be brought up and discussion so
these are the two prominent points that
comes up in this topic a small topic in
the sense that broadly as a concept it
could probably again fall under over
your financial system only that there is
a securities market there is an on
secretary market as a part of capital
market okay but there are some
instruments which does not market for
trading so it could not classified as a
securities but then still it serves the
purpose of what securities does being a
part of capital market that is to grow
your capital so it has to be discussed
in the capital market okay so these two
points under this chapter would probably
be the takeaway that you should take
from this discussion
you