The Primary Market is the segment of the capital market where new securities are issued and offered to investors for the very first time. It serves as a direct channel for companies and governments to mobilize funds from the public, which are used for business expansion, debt repayment, or infrastructure development. This market acts as the foundation of the financial system, as it creates investment opportunities and supports economic growth.
🔄 Process & Flow
- A company decides to raise capital and appoints merchant bankers/underwriters.
- Offer documents are filed with the regulator (SEBI in India) for approval.
- Securities are issued through methods like IPO, FPO, rights issue, or private placement.
- Investors subscribe, and securities are allotted after closing of the issue.
- The money collected is transferred directly to the issuing company.
📌 Key Aspects
- Purpose – Raising fresh capital and supporting industrial/economic growth.
- Instruments Issued – Equity shares, preference shares, debentures/bonds, government securities.
- Participants – Issuers, investors, underwriters, regulators.
- Pricing Methods – Fixed price issue or book-building.
- Regulation – SEBI monitors disclosure, prospectus approval, and investor protection.
- Funds Flow – From investors → directly to the company.
- Example – Reliance launching an IPO on NSE to raise funds for expansion.