It is also been explained above in the zero coupon bonds but this kind of bond is used to sell in discount from par value. In this the bond which is selling at a discount from par value has less rates of fixed income and securities then other bonds and it also has risk profile as well. This also contains the market price of 20% or more but it is below its face value. They are a bit riskier than other similar bonds. They are also termed as low-coupon bonds and are used in long term.
Zero coupon bonds is also termed as discount bond or deep discount bond which is been bought at a price lower than its face value which will be given back at the time of maturity. This type of bond doesn't make payments of interest in periods. It has already been paid when the bond reaches to the maturity level and its investors are in great advantage of receiving huge about of sum equal to the initial investment Example includes U.S. Treasury bills. It is used or both long term and short term investments.
i.) Listed Company
Promoters in the listed company participate either at least of 20% of proposed issue or holding the post-shares to the extent of 20% of the post-issue capital. In this the participation of the promoter is done when the issue is being passed publicly.
ii.) Unlisted Company
Promoters in the unlisted companies contribute at most 20% of post-issue capital. Promoters also help in shareholding which offers for sale and it shouldn't be less than 20%. In the unlisted companies also securities which are issued to promoters at a low price which is lower than the equity gets offered to public and it doesn't remain eligible for promoters contribution. Contribution of the promoters are considered by post-issue capital where the promoter contributes through some optional convertible security and it is also been there to public.
Capital market is the market in which financial securities have been traded between the individuals and the institutions. These institutions sell securities on capital markets in public and private sectors to raise funds. This market is composed of both primary and secondary markets. The parts of capital markets are both stock and bond markets.
Large Corporation grow by doing innovations and by raising the capital to finance expansion. Corporations have five primary methods which are used to raise funds in capital market.
1) Issue of bonds : - Bond is an amount of money which has to be given at a certain date or dates in future. Bondholders receive interest payments at fixed rate and specific dates. Corporate issues bonds because interest rates which must pay investors are lower than rates of borrowing and holders can sell bonds to someone else before they due.
2) Issue of preferred stock : - company choose this to raise capital. If a company have financial trouble the buyers of shares gets special status. If profits are limited then owners will be paid the dividend after bondholders receive the interest payments.
3) Sell of common stock : - if financial condition of the company is good then it can raise the capital issue the common stock. Bank helps the companies to do the investment and issue stock. Investors' gets interested if the company pays large dividends and offers steady income. Value of shares increases if investor expects the corporate earning to rise.
4) Borrowing:- companies used to raise short term capital by getting the loans from banks or other sources. After good market run the profits which the company gets can be used to finance their operating by retaining their earnings.
The rights and duties of shareholders are defined from time to time of issue of shares. The rights of shareholders are fixed which can't be altered unless the Companies Act gets modified.
Right issue which shareholders hold of a company under Companies Act, 1956 are as follows:-
1) Rights attached to shares of any class can be varied with the consent of shareholders holding not less then 75% of issued shares.
2) Rights of Dissenting Shareholders: Protection by Companies Act is given to the shareholders who doesn't consent to or vote for variation of their rights. If there is any variance in any rights of any class of shareholders then holders of not less than 10% of shares of that class can apply to the court to have the variation cancelled. It won't have any affect till it is been approved by the court.
3) Voting rights of the members: - Every member of public company which have the shares holding equity have votes in proportions to his share in paid up equity capital.
4) Preference shareholders don't have any voting rights. They can vote only on matters which are directly related to the rights attached to preference share capital.
The eligibility criteria which have to be satisfied by the Unlisted Company to make public issue are as follows:
1. Pre-issue networth of company should not be less than Rs. 1 crore and it should be maintained for last 3 out of 5 years with minimum networth.
2. The networth should be met for upcoming 2 years.
3. Tracking of the records of profits has to be maintained for at least 3 years out of immediately upcoming 5 years.
4. Issue size should not be more than 5 times its pre-issue networth.
5. Incase these requirements are not satisfied then the company can issue through book-building process, it has to allot at least 60% of issue size to Qualified Institutional Buyers.
The eligiblity criteria which need to be satisfied by the listed company to make a public issue are as follows:-
1. If the issue size which is a collective combination of offer document, firm allotment, and promoters' contribution is less than 5 times its pre-issue net worth.
2. The listed company goes through the book building process and allot 60% of the issue size to Qualified Institutional Buyers if issue size is more than or equal to 5 times of pre-issue net worth.
Yes, a company can make public issue of equity shares if partly paid shares are not fully paid as equity shares are that part of share capital of company which is not been included in the preference shares. The condition which has to be considered for this is that at any time after 2 years of expiray from the date of starting of company or after 1 year of shares allotment, public company shares the issues within the authorised area, and directors must decide to offer shares to existing holder of equity shares in proportion to capital which has been paid up on the holder's shares at the time of further issue.
Minimum application which is required if equity shares are being issued at par is that the company should have a nationwide trading terminal for the duration of at least 1 year. The other applications which are necessary for doing this are as follows:
1. Issue of prospectus: For a company to raise capital by issue of shares for public requires the public to accept the offer to buy shares
2. When the prospectus is being read by the public then according to the public satisfaction they can apply to company for purchase of the company's share.
3. When the shares are used through cash then the issued at par share can have the discounted and this can be payed either in lump sum along with the application or in installments at different stages.
4. Issues are at par when their price is equal to the face value. For example if share is of Rs. 30 is issued at Rs. 30 then it is been said that they have been issued at par.
a.) Listed Company : Listed company issues the pricing by making it free for the equity shares securities through the public/rights issue. It makes composite issue of capital (public and right basis which is been made through the offer document in which allotment for both public and rights components is proposed which are used to issue securities at different prices.
b.) Unlisted Company : Unlisted company also does the same as the listed company does as it is used to exachange within the recognised stock. It is also not easy to find rights issues as shareholders are unable to raise funds to take the rights which might not have the aletrnate available as the firm's shares are also not listed. In this a company has to rely on the profits which they have got as their main source of equity or they can seek to raise venture capital or can also take debt from others.