Sun Ltd. offers new shares to the public. It enters into an agreement with the stock exchange and appoints SEBI registered brokers to accept applications and place orders with the company. Asha gets 200 shares in this issue and later sells them to Vikram through her broker on the stock exchange. Identify the method used by Sun Ltd. and the market in which Asha sold her shares.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → e-IPO; secondary market
Option (1) e-IPO; secondary market — Correct. Sun Ltd. signs an agreement with the stock exchange and appoints SEBI registered brokers, so it uses an e-IPO. Asha later resells existing shares to Vikram, a secondary market deal.
Option (2) e-IPO; primary market — Incorrect. The method is right. But Asha resells shares that already exist, so the sale takes place in the secondary market.
Option (3) Offer through prospectus; secondary market — Incorrect. The market is right. But an offer through prospectus appeals to the public through advertisements in newspapers and magazines. Sun Ltd. instead signs an agreement with the stock exchange and appoints SEBI registered brokers, which is an e-IPO.
Option (4) Offer through prospectus; primary market — Incorrect. Both parts are wrong: the method is an e-IPO, and Asha’s sale is a secondary market deal.
NCERT (Pre-rationalised Edition): “SECONDARY MARKET The secondary market is also known as the stock market or stock exchange. It is a market for the purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to enter the market. It also provides liquidity and marketability to existing securities. …” “4. Rights Issue 5. e-IPOs: A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the”
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