Answer the Question based on following case study.

Mr. Raj is working as finance Manager is Amaira Company. Company has a capital Base of ₹50 lacs of Equity shares of ₹100 each. Now Company wants to enter into a new project for which it requires capital of ₹40 lacs. There are two options available to him.First to invite subscription from public through issue of prospectus and second to go for long term borrowing by issuing debentures. But Issue of debentures will not be suitable as the rate of return of company is less than Interest Rate of debentures. So the final decision was to issue Equity shares.

Under which market securities are sold by the company to the investors directly?

Primary Market

The correct answer is option (2)- Primary Market.

Securities are sold by the company to the investors directly in the Primary Market.

Primary Market is the market for the sale of securities by new companies or further (new issues of securities by existing companies to investors). Securities are sold by the company to the investor directly (or through an intermediary). The flow of funds is from savers to investors, i.e. the primary market directly promotes capital formation. Only buying of securities takes place in the primary market, securities cannot be sold there. Prices are determined and decided by the management of the company. There is no fixed geographical location.