Professor

& Lawyer
Puttu Guru
Prasad
MEFA -
VVIT
 CONTENTS
Introduction.
Types of capital market instrument
Equity share
Preference share
Debenture
Bonds
Difference between equity- debt securities
Conclusion
Reference
 INTRODUCTION

The capital market is the market for securities

where companies and the government can rise long
term fund.

It is a place where buyers and sellers of securities

can enter into transactions to purchase and sell
shares, bonds and debentures.
BASIC CAPITAL MARKET
INSTRUMENTS
 EQUITY SHARES

According to the Companies Act 1956, equity shares

are that part of the share capital of the company,
which are not preference shares.
They are called as ordinary shares or common stock
or voting share.
These shareholder are the real owner of the
company.
The return on equity shares depends on the
performance profitability of the company.
 MERITS OF EQUITY SHARES

A permanent source of finance to the company

No fixed rate of dividend

Easy liquidity and marketability

 LIMITATIONS OF EQUITY
SHARES

No guarantee on returns to shareholders

Loss of managerial control

 PREFERENCE SHARES

Preference shares are known as preferred stock.

Preference share capital has two priorities i.e.,

in the repayment of capital and payment of
dividend.

Preferred stocks usually carry no voting rigths.

TYPES OF PREFERENCE SHARE
MERITS OF PREFERENCE SHARE CAPITAL

From Companys point of view

Hybrid security

Absence of voting rights

No dilution of control

Fixed return
LIMITATIONS OF PREFERENCE SHARES

From Investor s point of view

Not secured

Not an attractive investment

No right to participate in the management

 DEBENTURES

When a corporation is in need of fund in addition

to share capital it borrows money by issuing
debentures.

The debenture holder gets interest which is fixed

at the time of issue.
 TYPES OF DEBENTURES

Redeemable Convertible Secured Bearer

or or non- or or
irredeemable convertible unsecured registered
 MERITS OF DEBENTURES

No loss of managerial control

A Flexible source of finance

Reduces burden of tax of the company

 LIMITATION OF DEBENTURES

Fixed rate on interest

Companies may have to mortgage their assets

Not an attractive investment from companys

point of view.
 BONDS

Bonds are issued by public authorities, credit

institutions, companies and super national institutions
in the primary market.

A bond is a negotiable certificate which entitles the

holder of repayment of the principal sum plus interest.

The most common process of issuing bonds is through

underwriting.
 TYPES OF BONDS

Bearer bonds
Registered bonds
Callable bonds
Convertible bonds
Zero coupon bonds
Fixed rate bonds
 DIFFERENCE BETWEEN

EQUITY SECURITY DEBT SECURITY

Owner of the company. Creditor of the company.

Get Dividend only when . in come to the

Provides steady
company earns sufficient profits. investors.

Have voting rights. No voting rights.

Not secured. Secured in nature.

Share capital of the company. Borrowed capital of the company.

 CONCLUSION

Capital market plays an important role in

ensuring the emergence of a vigorous and efficient
economy.

It facilitates the internationalization of an

economy by linking it with the rest of the world.
 REFERENCE

BIBLIOGRAPHY WEBLIOGRAPHY

Financial Markets www.inc.com/ency

And Financial clopedia
Services In India- www.martinfowler.
Benson Kunjukuju com

Equity Market-II-
Anita Bobade.