Read the following Case Study and answer, question

Aryan is a CEO of RS Infotech Ltd., which is a company working in the technology sector for the last 55 years. The company is doing very well in this sector and now has a growth plan of entering into cosmetics market.

Keeping in view the changing tastes and preferences Of customers, it is planning to enter organic products market.

The company targets to achieve 20% of market share in the first 2 years of its entry.

For financial issues, Aryan consulted his chief finance officer, Raj and found that it requires 50 crores of additional capital for setting up a separate cosmetics division.

The Company plans to arrange this money by issuing equity shares in the market but it lacks sufficient cash to bear the floatation cost and hence planned to approach the financial market for the same.

When the company wants to issue new shares, which financial market it is going to approach ?

Primary Market

The correct answer is option (3) : Primary Market

(3) Primary Market.

• The primary market is the market where new securities, such as stocks or bonds, are issued for the first time. Companies issue new shares in the primary market to raise fresh capital for various purposes, including business expansion, new projects, or meeting financial requirements for organizational growth.

(1) Capital Market:

• The capital market is a broader market that includes both the primary and secondary markets. It is the market where buyers and sellers engage in trading of financial securities such as stocks, bonds, and derivatives. While the primary market is a part of the capital market, the company, in this case, is specifically planning to issue new shares, which relates to the primary market.

(2) Money Market :

• The money market is a component of the financial market where short-term borrowing and lending of funds occur. It deals with short-term debt securities and financial instruments with maturities typically less than one year. Issuing equity shares does not typically fall under the purview of the money market.

(4) Secondary Market:

• The secondary market is where existing securities are bought and sold among investors, and it facilitates the trading of previously issued securities. Once the company has issued Its shares in the primary market and they are subsequently traded among investors, it falls under the secondary market. However, the process of issuing new shares initially takes place in the primary market.