| MANAGING NEW ISSUES
Existing as well as new companies raise funds through various sources for implementing their projects. one of the sources of raising funds is mobilizing capital by issuing securities. This can be done in the following three ways:
Public Issue: The most common method of raising funds from public at large is called public issue. Public issue is made by a company through prospectus for a fixed number of shares at: (i) a stated price which may be at par or premium, and (ii) a rate determined by the issuer on the basis of market demand (book building mechanism). The prospectus has to disclose all material and essential factors about the company to the intending purchasers of shares. Securities and Exchange Board of India has laid down guidelines for raising funds from the public. The guidelines relate to adequate disclosures in the prospectus so that the investors can take informed decision while making an investment in a company.
Right Issue: Right issues are issues of new shares in which existing shareholders are given preemptive rights to subscribe to new issue of shares. Such additional shares are offered in proportion to the capital paid-up on the shares held by them at the date of such offer. The shareholders to whom the offer is made are not under any legal obligation to accept the offer. On the other hand, they have right to renounce the offer in favour of any person. Right shares are usually offered on terms advantageous to the shareholders. For example, shares of the face value of Rs. 10 may be offered at par value, while market price of the share at the time of offer may be Rs. 15 or more.
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