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Illiquid describes an asset or security that cannot be sold quickly. Uncertainly the asset value is associated with the investment. This can be due to economic instability or issues relating to the asset. If the asset value declines, it becomes an illiquid asset due to the unclear value. It can be hard to locate a market for these products. This may lead to loss of the money.

An entrepreneur seeks venture capital financing under following circumstances: 

1. High risk: Ventures which involve high risk due to various reasons like technological, creativity and innovation, etc. are subjected to high risk related to returns. Here the venture capitalist comes forward. 

2. Seed funding: Seed money, is a form of securities offering in which an venture investor purchases part of a business. Interest of the venture capitalist for purchase of security is also a reason. 

3. Expansion: If the entrepreneur wants to expand then he goes for venture capital. 

4. Business skills: Lack of business skills also forces the entrepreneur to go for venture capital.

The Tourism Finance Corporation of India (TFCI) was born as a result of the Government of India’s decision, in 1987, to promote a separate all- India financial institution for providing financial assistance to tourism-related activities/projects. It was incorporated as a public limited company under the Companies Act, 1956 on 27 January, 1989. It became operational with effect from 1 February, 1989.It is a specialized all- India development financial institution to cater to the needs of the tourism industry. 

Functions: 

1. It provides financial assistance to enterprises for setting up or the development of tourism- related projects, facilities and services such as hotels, restaurants, holiday resorts, amusement parks, entertainment centres, education and sports, rope ways, cultural centres, convention halls,  Transport, travel and tour operating agencies, air services, tourism emporia and sports facilities. 

2. It provides advisory and merchant banking services in this field. 

3. The projects with a capital cost of Rs 1 crore or above are generally eligible for assistance from TFCI. Smaller projects would also be considered. 

(d) TFCI has sanctioned assistance to 2003 projects aggregating to Rs 5.2 billion during the last five years, resulting in more than 12,217 hotel rooms and direct employment to 22,938 people. 

Values: 

1. Universal and equality 

2. Resourcefulness 

3. Services to others 

4. Readiness to cooperate 

5. National awareness 

6. Employment opportunities 

7. Fulfilling the needs of the people 

8. Helpfulness and contributing to entrepreneur for the growth of the country.

Importance of stock exchange from the viewpoint of investors: 

1. Dissemination of useful information: Stock exchange publishes useful information regarding price lists, quotations, etc., of securities through newspapers and journals. The interested persons buy and sell their securities on the basis of information provided by the stock exchanges. 

2. Ready market: Persons desirous of converting their shares into cash may easily do so through a member of stock exchange. 

3. Investors’ interests protected:Stock exchanges formulate rules and regulations so that members may not exploit the investors. 

4. Genuine guidance about the securities listed: The investors can safely depend upon the information provided by the stock exchanges. 

5. Barriers of distance removed: Stock exchange removes the barriers of distance with regard to securities listed there. Without stock exchange the securities of a Delhi company may have a limited market in Delhi only. 

6. Knowledge of profit or loss on investments: The investors can estimate the profit or loss on the total amount of investments in securities, by comparing the original amount invested and the price of securities on a particular day.

Private placement means the direct sale by a company of its securities to a limited number of sophisticated investors. Entrepreneurs, herein, 

Raise funds by selling the issues mainly to the institutional investors like: 

1. Unit Trust of India 

2. Life Insurance Corporation of India 

3. General Insurance Corporation of India 

4. Army Group Insurance 

5. State Level Financial Corporations, etc. Entrepreneurs both from public limited and private limited sector, bank heavily upon raising funds through the issue of varied financial instruments under this segment as at times they do not wish to disclose information to the open market.

Offering shares for sale to its employers means firstly new securities are offered to an intermediary at a fixed price then it is further resold to general public at a higher price. 

Following values are promoted by a company: 

1. Self existent. 

2. Intermediaries can earn high amount of profits in future. 

3. Readiness to cooperate. 

4. Free from the tedious work of making public issue. 

5. Encouraging them for saving. 

6. Building a trust. 

7. It helps easily and directly in capital formation of the company. 

8. It is an easy method raising funds. 

9. Helpfulness. 

10. Faithfulness for utilization of their money.

1. Yes, the behaviour of the manager is unethical because rights issue is a method of raising additional finance from existing shareholders by offering securities to them on prorate basis i.e. giving them a right to a certain number of shares in proportion to the shares they are holding. 

2. As a legal advisor of the company, I advice that he should not be given that right of extra shares. 

3. As a manager his responsibility is to develop and analyse information

The role of transferring financial resources from the surplus units to the deficit units is referred to as “Financial Intermediation”.

Stock options or offering shares to the employees has gained much popularity in many countries of the world. This method enables employees to become shareholders and share the profits of the company leading to: 

1. Higher efficiency 

2. Low labour turnover 

3. Better industrial locations 

4. Low floatation cost 

5. Wider/higher generation of funds.

Importance of stock exchange to investors: 

1. Dissemination of useful Information: Stock exchange publish useful information regarding price lists, quotations, etc., of securities through newspapers and journals. The interested persons buy and sell their securities on the basis of information provided by the stock exchanges. 

2. Ready Market: Persons desirous of converting their shares into cash may easily do so through a member of stock exchange. 

3. Investors’ Interests Protected: Stock exchanges formulate rules and regulations so that members may not , exploit the investors.

1. Pre-start up and start up finance: A business plan is presented by the entrepreneur to the VC firm. A management team is being formed to run the venture. If the company has a board of directors, a person from the VC firms wall take seats at the board of directors. The VC firm monitors the feasibility of the product and the capability of the management-team from the board of directors. 

2. Second round financing: This is the first encounter with the rest of the market. The entrepreneur, at this stage, needs assistance from the Venture Capitalist for expansion, modernization, diversification so that the economies of scale and stability could be attained.

State Financial Corporations (SFCs) guaranteeing loans raised by industrial concerns which are repayable within a period not exceeding 20 years.

Any transaction in shares or debentures subsequent to its primary offering is called “Secondary Transaction”. Thus, the secondary capital market, which is also known as old securities market or stock exchange deals- with buying and selling of old securities i.e. the market securities issued earlier are sold by existing investors in this market.

Advantages of financial institutions for an entrepreneur 

1. Borrowing money from the bank is one of the simplest ways to get needed funds to start or grow your business. 

2. To grant loans and advances. 

3. To underwrite or to subscribe to shares or debentures of industrial concerns. 

4. To guarantee loans raised by industrial concerns in the market. 

5. To provide consultancy and merchant banking services in or outside India. 

6. To provide technical, legal, marketing and administrative assistance to any industrial concern or person for promotion, management or expansion of any industry. 

7. Co-ordination, regulation and supervision of the working of other financial institutions such as IFCI, ICICI.

8. To act as trustee for the holders of debentures or other securities. 

9. To provide long and medium-term credit to industrial concerns engaged in manufacturing, mining, shipping and electricity generation and distribution. 

10. The bank will serve as a financing institution for institutional credit such as long-term, short-term, and for the promotion of activities in rural areas. 

11. Provides financial assistance to enterprises for setting up or the development of tourism-related projects.

Disadvantages: Procurement of finance involves risk and formalities to comply: 

1. State Financial Corporations only provide long and medium-term loan repayment ordinarily within a period not exceeding 20 years. 

2. Some financial institutions provide financial assistance generally to those industrial concerns whose paid up share capital and free reserves do not exceed Rs 3 crore. 

3. Rate of interest is too high sometimes not able to pay the debt amount and its interest.

At State Level State Financial Corporation (SFCs): 

To meet the financial needs of small and medium enterprises, the government of India passed the State Financial Corporation Act in 1951, empowering the state governments to establish development banks for their respective I regions. There are 18 SFCs at present. 

Objectives: The objectives of State Financial Corporations are as under: 

1. Provide financial assistance to small and medium industrial concerns. These may be from corporate or co-operative sectors as in case of IFCI or may be partnership, individual or Joint Hindu family business, engaged not only in the manufacture, preservation or processing of goods. 

2. Provide long and medium-term loan repayment ordinarily within a period not exceeding 20 years.

3. Grant financial assistance to any single industrial concern under corporate or co-operative sector with an aggregate upper limit of r rupees Sixty lakhs. In any other case(partnership, sole proprietorship or Joint Hindu family) the upper limit is rupees thirty lakhs. 

4. Provide financial assistance generally to those industrial concerns whose paid up share capital and free reserves do not exceed Rs 3 crore. 

5. To lay special emphasis on the development of backward areas and small scale industries.

Functions: 

1. Grant of loans and advances to or subscribe to debentures of, industrial concerns repayable within a period not exceeding 20 years. 

2. Guaranteeing deferred payments due from an industrial concern for purchase of capital goods in India. 

3. Underwriting of the issue of stock, bonds or debentures by industrial concerns. 

4. Subscribing to, or purchasing of, the stock, shares, bonds or debentures of an industrial concern subject to a maximum of 30 per cent of the subscribed capital, or 30 per cent of paid up share capital and free reserve, whichever is less. 

5. Act as agent of the Central government, State government, IDBI, IFCI or any other financial institution in the matter of grant of loan or business of IDBI, IFCI or financial institution. Tourism Finance Corporation of India (TFCI): The Tourism Finance Corporation of India (TFCI) was born as a result of the Government of India’s decision, in 1987, to promote a separate all- India financial institution for providing financial assistance to tourism-related activities/projects.

Functions: 

1. TFCI provides financial assistance to enterprises for setting up or the development of tourism-related projects, facilities and services such as hotels, restaurants, holiday resorts, amusement parks, entertainment centres, education and sports, rope ways, cultural centres, convention halls, transport, travel and tour operating agencies, air services, tourism emporia and sports facilities. 

2. It also provides advisory and merchant banking services in this field. 

3. The projects with a capital cost of Rs 1 crore or above are generally eligible for assistance from TFCI. Smaller projects would also be considered.

State Industrial Development Corporation (SIDCs): Incorporated under the Companies Act, 1956 SIDCs were set up in different states as wholly owned companies for promoting industrial development in their respective states. The main functions of SIDCs are as follows: 

1. Providing term finance to all small, medium, and large industrial enterprises set up in the state. 

2. Underwriting and directly subscribing to shares, and debentures of industrial enterprises being set up in the state. 

3. Preparing feasibility studies, conducting market surveys and motivating private entrepreneurs to set up their industrial ventures in the state. 

4. Collaborating with private entrepreneurs to set up industrial ventures in joint and assisted sectors. 

5. Implementing IDBI’s scheme of seed capital in the state.

Finance can be procured, just like any other resource, against a cost. Procurement of finance involves risk and formalities to comply with. Entrepreneurs need a careful attitude, to sensibly make a choice of sources to generate funds. No one source can be deemed to be the best source. Thus, it is always advisable to select a combination of sources so that both cost and risk can be kept at lowest. 

1. Tourism Finance Corporation of India (TFCI) 

2. State Industrial Development Corporations (SIDC)

As SFIs provide developmental finance, that is, finance for investment in fixed assets, they are also known as ‘development banks’ or ‘development financial institutions’. 

Establishing of SFIs facilitated: 

1. Provision of sufficient long-term funds in the desired sectors in accordance with planned priorities to the industrial units and entrepreneurs. 

2. New and small entrepreneurs in setting up industry. 

3. Development of: (i) Small scale industry, and (ii) Projects in backward areas. 

4. Provision of technical and managerial advice to the entrepreneurs, facilitating thus, in identification, evaluation and execution of new investment enterprises. 

5. Underwriting of and direct subscription to the issue of shares and debentures in the capital market of the upcoming ventures. 

6. Establishment of enterprises which require extraordinarily large amount of finance for their projects with a long-gestation period.

Venture capital finance has the following features: 

1. It is basically equity finance in relatively new companies. 

2. It is long-term investment in growth- oriented small or medium firms. 

3. Venture capitalists not only provide capital but also business skills to investee firms. 

4. It involves high risk-return spectrum. 

5. It is a subset of private equity. 

6. The venture capital institutions have a continuous involvement in the business after making the investment. 

7. Such institutions disinvest the holdings either to the promoters or in the market.

Industrial Investment Bank of India Ltd. (IIBI) was set up by IDBI at the instance of the Government of India in April 1971 for rehabilitation of sick industrial companies.

When companies securities that are registered and traded in stock exchange are known as “Listed Securities”.

The organisation, management, membership and functioning of stock exchanges in India are governed by the provisions of The Securities Contracts (Regulation) Act, 1956.

Capital market is a place where savers as well as investors get maximum satisfaction. The capital market satisfies the tastes of savers and the needs of investors through its various financial instruments and institutions. As per entrepreneurs requirement they enter either of the following markets available under capital market.

It is the composition or mix of different types of long-term capital whether owned or borrowed. It includes all the long term funds consisting of share capital, debentures, bonds, loans and reserves.

Primary market refers to the market where issue of securities (shares, debentures and bonds) being issued for the first time by new companies or new issue of securities by existing companies to investors. It is basically to facilitate transfer of resources from the savers to entrepreneur for seeking more funds.

The help of capital market is for:

1. Industry

2. Trade

3. Finance

4. Government.

Geeta Ram should contact National Bank for Agricultural and Rural development (NABARD) for starting his factory.

A capital market may be defined as an organized mechanism meant for effective and smooth transfer of money capital or financial resources from the investors to the entrepreneurs.

We are even aware that not all of them are equally appropriate to all enterprises at all times as these different sources carry very different: 

1. Obligations 

2. Responsibilities 

3. Opportunities.

In the primary market the flow of funds is from savers to investors, that directly promotes capital formation. At the same time secondary market enhances the marketability of securities and thereby provides liquidity to investments. It indirectly promotes capital formation.

Venture capital can best be characterized as a long-term investment discipline, usually occurring over a five-year period that helps in the creation of

1. early-stage companies,

2. the expansion and revitalization of existing businesses, and

3. the financing of leveraged buyouts of existing divisions of major or privately owned enterprises.

Yes, an entrepreneur can raise the required capital in the primary market. 

The various methods of raising the funds in the primary market by an entrepreneur are as follows :

1. Public Issue

2. Rights Issue

3. Private Placement

4. Offer to the employees

1. Public Issue/Going Public: Public issue is the most popular method of raising capital these days by the entrepreneurs. This involves raising of funds directly from the public through the issue of prospectus. An entrepreneur organizing itself as public limited company can raise the required funds commonly by adopting prospectus.

2. Right Issues: It is an offer of new securities by a listed company to its existing shareholders only. The right issues are done always on the pro-rata basis (giving them a right to a certain number of shares in proportion to the shares they are holding.)

• The companies send the letter of offer (circular) to all those existing shareholders

whose names are recorded in the books on a particular date to issue rights.

• The time given to accept the right offer should not be less than 15 days.

• The circular/notice issued to the shareholder must state the right of the shareholder to renounce the offer in favour of others.

• After the expiry of the time mentioned in the notice, the Board of Directors has the right to dispose the unsubscribed shares in any manner as per the benefit of the company. The existing shareholders whose names are there in the list has four options:

• They can exercise the rights.

• They can renounce the rights and sell them the same in the open market in favour of another person.

• They can renounce part of the rights and exercise the other part.

• Doing nothing.

This method of issuing securities is considered to be inexpensive as it does not require any brokers, agents, underwriters, prospectus or enlistment, etc.

3. Private Placement: It refers to the direct sale of newly issued securities by the company to a small number of institutional investors through merchant bankers. They are generally selected clients. 

• Unit Trust of India 

• Life Insurance Corporation of India 

• General Insurance Corporation of India 

• Army Group Insurance 

• State Level Financial Corporations 

Advantages: 

• Less time taken to issue these shares. 

• Comparatively less amount of cost of capital is req*fired. 

• These issues are tailor-made to suit the requirement of both the parties. 

• Less formalities are required. 

4. Offer to employees: Stock options to the employees refers to the offer given by the company to the employees to become shareholders. This method facilitates the employees to become shareholder and can earn a part of the share of profits.

Capital markets are the most important source of raising finance for the entrepreneurs. 

This market: 

1. Mobilises the financial resources on a nation-wide scale. 

2. Secures the much required foreign capital and know-how to promote economic growth at a faster rate. 

3. Ensures the most effective allocation of the mobilized financial resources by directing the same either to such projects which are capable of the highest yield or to the under developed priority areas where there is an urgent need to promote balanced and diversified industrialization. The needs of entrepreneurs who actually use the savings for productive purposes are varied. The capital market satisfies the tastes of savers and the needs of investors through its financial instruments and institutions.

SIDBI provide venture capital assistance to the entrepreneurs for their innovative ventures if they have a sound management team, long term competitive advantage.

1. Association of persons: A stock exchange is an association of persons or body of individuals which may be registered or unregistered.

2. Recognition from central government: Stock exchange is an organized market. It requires recognition from the Central Government. 

3. Market for securities: Stock exchange is a market, where securities of corporate bodies, government and semi-government bodies are bought and sold. 

4. Deals in second hand securities: It deals with shares, debentures, bonds and such securities already issued by the companies. In short, it deals with existing or second hand securities and hence it is called secondary market. 

5. Regulates trade in securities: Stock exchange does not buy or sell any securities on its own account. It merely provides the necessary infrastructure and facilities to its members and brokers who trade in securities. It regulates the trade activities so as to ensure free and fair trade. 

6. Allow dealings only in listed securities: In fact, stock exchanges maintain an official list of securities that could be purchased and sold on its floor. Securities which do not figure in the official list of stock exchange are called unlisted securities. Such unlisted securities cannot be traded in the stock exchange. 

7. Transactions effected only through members: All the transactions in securities at the stock exchange are effected only through its authorized brokers and members. Outsiders or direct investors are not allowed to enter in the trading circles of the stock exchange. Investors have to buy or sell the securities at the stock exchange through the authorized brokers only. 

8. Working as per rules: Buying and selling transactions in securities at the stock exchange are governed by the rules and regulations of stock exchange as well as SEBI Guidelines. No deviation from the rules and guidelines is allowed in any case. 

9. Specific location: Stock exchange is a particular market place where authorized brokers come together daily (i.e. on working days) on the floor of market called trading circles and conduct trading activities. The price of different securities traded are shown on electronic boards. After the working hours market is closed. All the working of stock exchange is conducted and controlled through computers and electronic system. 

10. Financial barometers: Stock exchanges are the financial barometers and development indicators of national economy of the country. Industrial growth and stability is reflected in the index of stock exchange.

NSE (National Stock Exchange of India) and OTCEI (Over the Counter Exchange of India)

SEBI has been vested with the following powers: 

1. To make and approve by-laws of stock exchanges. 

2. To enquire the stock exchange to amend their by-laws. 

3. Inspect the books of accounts and call for periodical returns from recognized stock exchanges. 

4. Inspect the books of accounts of financial intermediaries. 

5. Compel certain companies to list their shares in one or more stock exchanges. 

6. Levy fees and other charges on the intermediaries for performing its functions. 

7. Grant license to any person for the purpose of dealing in certain areas. 

8. Delegate powers exercisable by it. 

9. Prosecute and judge directly the violation of certain provisions of the Companies Act. 

10. Power to impose monetary penalties.

1. Stock exchanges are the financial barometers and development indicators of national economy of the country. 

2. It help businesses to raise capital and give investors opportunities to back new and established enterprises. 

3. It also help business and entrepreneurs to come together to buy and sell trade shares for the purpose to raise more capital. 

4. Continuous growth of industries is reflected in the index of stock exchange. 

5. Rising stock market, through rising prices, more investors can create a sense of confidence and gives positive direction in the growth of an economy.

SEBI has quasi-legislative capacity as it makes rules and regulations. It has rulemaking authority related to the matters of securities in India. SEBI is a quasi-judicial body as it has an entity such as an arbitrator or tribunal board, and has powers and procedures resembling those of a court. SEBI is quasi-executive as it functions like an executive but that is not really an executive.

SEBI is managed by its members, which consists of following:

1. Chairman who is nominated by Union Government of India.

2. Two members, i.e. Officers from Union Finance Ministry.

3. One member from Reserve Bank of India.

4. The remaining 

5 members are nominated by Union Government of India, out of them at least 3 shall be whole-time members.

The Securities and Exchange Board of India or SEBI is the regulator for the securities market in India. 

Role of SEBI: 

1. It is a supervising and regulatory body to check certain malpractices and works for promoting the securities markets in India. 

2. It has three functions rolled into one body  quasi-legislative, quasi-judicial and quasiexecutive. 

3. It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes rulings and orders.

Yes, an entrepreneur can raise the required capital in the primary market. 

An entrepreneur can raise the required capital in the primary market by the following methods: 

(i). Public Issue 

(ii). Rights Issue 

(iii) Private Placement 

(iv) Offer to the employees 

(i) Public Issue/Going Public: Public issue is the most popular method of raising capital these days by the entrepreneurs. This involves raising of funds directly from the public through the issue of prospectus. An entrepreneur organising itself as public limited company can raise the required funds commonly by adopting prospectus. 

(ii) Right Issues: It is an offer of new securities by a listed company to its existing shareholders only. The right issues are done always on the pro-rata basis (giving them a right to a certain number of shares in proportion to the shares they are holding). 

(a) The companies send the letter of offer (circular) to all those existing shareholders whose names are recorded in the books on a particular date to issue rights. 

(b) The time given to accept the right offer should not be less than 15 days. 

(c) The circular/notice issued to the shareholder must state the right of the shareholder to renounce the offer in favour of others. 

(d) After the expiry of the time mentioned in the notice, the Board of directors has the right to dispose the unsubscribed shares in any manner as per the benefit of the company. 

The existing shareholders whose names are there in the list has four options: 

• They can exercise the rights. 

• They can renounce the rights and sell them in the open market in favour of another person. 

• They can renounce part of the rights and exercise the other part. 

• Doing nothing. 

This method of issuing securities is considered to be inexpensive as it does not require any brokers, agents, underwriters, prospectus or enlistment, etc.

(iii) Private Placements: It refers to the direct sale of newly issued securities by the company to a small number of institutional investors through merchant bankers. 

They are generally selected clients. 

(a) Unit Trust of India 

(b) Life Insurance Corporation of India 

(c) General Insurance Corporation of India 

(d) Army Group Insurance 

(e) State Level Financial Corporations 

Advantages: 

(a) Less time taken to issue these shares. 

(b) Comparatively less amount of cost of capital is required. 

(c) These issues are tailor-made to suite the requirement of both the parties. 

(d) Less formalities are required. 

(iv) Offer to Employees: Stock options to the employees refers to the offer given by the company to the employees to become shareholders. This method facilitates the employees to become shareholder and can earn a part of the share of profits.

Value Points: 

• Proper utilization of time. 

• Understanding each other and making the issues tailor-made so that the it can suite the requirements of both the parties. 

• To prevent the use of paper and save precious natural resources. 

• Choice to exercise the rights. 

• Truthfulness. 

• Disciplined as the issues are for the existing shareholders and issues can be till prescribed date only. 

• Stock options to the employees shows the company’s respect to the employees. 

• Raising of funds through existing shareholder shows the awareness of responsibility of employees towards company and showing helpfulness. 

• Help to protect company’s property. 

• Team spirit and team work to ensure the growth of the company. 

• Ownership quality by the shareholders. 

• Initiative by Board of Directors and the existing shareholders to protect the company.

Business angel or informal investor or an angel investor, is an affluent individual who provides capital for a business start¬up and early stage companies having a high-risk, highreturn matrix usually in exchange for convertible debt or ownership equity. Features of Angel Investors: Providing start-up finance to the needy who want to start a small own business. The main people involved to provide funds are “friends and family”, (it can be seed funding and formal venture capital). But raising of funds cannot be more than a few thousands from friends and family, even the venture capitalist are least interested to make investments. 

Thus, angel investments is a common second round of financing for high-growth start-ups or early stage companies. 

1. Most angel investors are current or retired executives, business owners or high net worth individuals who have the knowledge, expertise, and funds that help start-ups match up to industry standards. 

2. They bear extremely high risk and are usually subject to dilution from future investment rounds. 

3. They expect a very high return on investment. 

4. Apart from investing funds, most angels provide proactive advice, guidance, industry connections and mentoring start-ups in its early days. 

5. Their objective is to create great companies by providing value creation, and simultaneously helping investors realize a high return on investments. 

6. They have a sharp inclination to keep abreast of current developments in a particular business arena, mentoring another generation of entrepreneurs by making use of their vast experience.

The various limitations/obligations’ are as follows:

1. Increasing accountability to public shareholders.

2. Need to maintain dividend and profit growth trends.

3. Becoming more vulnerable to an unwelcome takeover.

4. Need to observe and adhere strictly to the rules and regulations by governing bodies.

5. Increasing costs in complying with higher level of reporting requirements.

6. Relinquishing some control of the company following the public offering.

7. Suffering a loss of privacy as a result of media interest.

1. SEBI was officially established by The Government of India in the year 1988 and given statutory powers in 1992 with SEBI Act, 1992 being passed by the Indian Parliament. 

2. SEBI has it’s Headquarter at the business district of Bandra Kurla Complex in Mumbai, and has Northem, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai and Ahmedabad respectively. 

3. Initially, SEBI was a non-statutory body without any statutory power. However, in the year of 1995, SEBI was given additional statutory powers by the Government of India through an amendment to the Securities and Exchange Board of India Act, 1992. In April, 1998 the SEBI was constituted as the regulator of capital markets in India under a resolutionof the Government of India. SEBI’s Establishment: SEBI was established as a supervising and regulatory body to curb certain malpractices and to promote the Securities Markets in India.

Following are the features of stock exchange:

1. Association of persons: It is an association of persons or body of individuals which may be registered or unregistered. 

2. Recognition from central government: It is an organized market. It requires recognition from the Central Government. 

3. Market for securities: It is a market, where securities of corporate bodies, government and semi-government bodies are bought and sold. 

4. Deals in second hand securities: It deals with shares, debenture, bonds and such securities already issued by the companies. In short, it deals with existing or second hand securities and hence it is called secondary market. 

5. Regulates trade in securities: It does not buy or sell any securities on its own account. It merely provides the necessary infrastructure and facilities to its members and brokers who trade in securities. It regulates the trade activities so as to ensure free and fair trade. 

6. Allow dealings only in listed securities: It always maintain an official list of securities that could be purchased and sold on its floor. 

7. Transactions effected only through members: All the transactions in securities at the stock exchange are effected only through its authorized brokers and members. No outsiders or direct investors are allowed to enter in the trading circles of the stock exchange. 

8. Working as per rules: Buying and selling transactions in securities at the stock exchange are governed by the rules and regulations of stock exchange as well as SEBI Guidelines. No deviation from the rules and guidelines is allowed in any case. 

9. Specific location: It is a particular market place where authorized brokers come together daily (i.e. on working days) on the floor of market called trading circles and conduct trading activities. The price of different securities traded are shown on electronic boards. After the working hours market is closed. All the working of stock exchange is conducted and controlled through computers and electronic system. 

10. Financial barometers: Stock exchanges are the financial barometers and development indicators of national economy of the country. Industrial growth and stability is reflected in the index of stock exchange.

Meaning of Public Issues: This involves raising of funds directly from the public through the issue of prospectus. When an entrepreneur decides to go public and become a public company, he/ she tends to be in advantageous position because of reaping the following benefits: 

Access to capital or raising funds: 

1. An entrepreneur stands to gain by going public in access to capital. 

2. Generally, the capital is paid off at the liquidation of a company or not to be repaid immediately and does not involve an interest charge. 

3. The only reward the IPO investors seek is an appreciation of their investment by getting dividends. 

Entrepreneur can use the capital raised for a variety of purposes including: 

1. growth and expansion, 

2. retiring existing debt, 

3. corporate marketing and development, 

4. acquisition capital. 

Other advantages: 

1. Mergers and acquisitions: Public stock of a company can be used for businesses to grow through acquisitions. 

2. Higher valuations: Public companies are typically valued more than private companies. 

3. Benchmark trading price: The trading price of a public company’s stock serves as a benchmark of the offer price of other securities. 

4. Capital formation: Raising capital later is typically easier because of the extra liquidity for the investors. 

5. Incentives: Stock options and stock incentives can be very helpful in attracting employees. 

6. Reduced business requirements: While an underwritten initial public offering requires significant earnings, the lack of earnings does not keep a private company from going public. 

7. Less dilution: There is less dilution of ownership control compared to an IPO. 

8. Liquidity: A public company provides liquidity for management, minority shareholders, and investors. 

9. Prestige: Added prestige and visibility with customers, suppliers, as well as the financial community.