To run and maintain their Business, the most important requirement is Cash or Capital but in some cases the benefit gained from selling their products or may be Goods or Services isn’t sufficient to meet the necessities for the business. Thus, organizations welcome individuals like you and me to finance or invest some cash into their business with the goal that they can run it effectively and consequently financial backers or investors get a portion of anything benefit they make.
Now let’s Understand What is Share Market.
Stock market is:
- Set of markets and exchanges where purchases, sales and issues of shares in public companies take place on a regular basis.
- Place where shares of the listed companies are being bought and sold by different financial investors or institutions or Traders during specific hours of the day.
Share Market is a fundamental and also the most important part of an economy. It is platform where publicly listed companies’ stocks are traded, permitting financial institutions/investors/individuals to purchase portions of their company’s share. The financial market or the Stock Market is a crucial sign of the general strength of the economy, as the show of Companies performance on the financial market displays the ongoing economic conditions of the nation.
At the point when an organization opens up to the world, it issues shares of stock that are then exchanged on the stock market. The worth of these shares’ fluctuations will be as per the demand and supply, with the cost going up when more individuals need to purchase the stock and the cost going down when more individuals need to sell.
Furthermore, the worth of a stock can be impacted by different factors like the growth and performance of the company, financial circumstances, any corporate events like Mergers & Acquisitions, Government Policies and sentiments of the investors etc.
Why do companies come to Share Market?
Listing of Company on the stock market or stock exchange is a method where the shares of a company become accessible to the public for trading or investing. Any company getting listed in stock exchange or stock market will make public to know about their business and any interested investors will invest some part of capital into the business expecting to gain returns in future.
Listing on Stock Exchange offers various benefits to the Companies which helps them to raise fund for the public for expansion of business, improve liquidity and financial position, merger and acquisitions, Brand Awareness etc.
Companies can list into the Stock Exchanges through IPO (Initial Public Offer) where company issue its share to public.
Companies need to consent to SEBI (the Regulator or Market Controller) standards before their IPO application. When the IPO is permitted or when application for Initial public offering is acknowledged, interested financial investors, subscribe to Initial public offering and invest amount into their shares.
Advantages or Benefits of Stock Market
There might be various reasons for the company to go Public and list in the Stock Market but here, we will cover some of the common reasons and its benefits for the company:
- Adequate Funds or Capital for Expansion: One of the major reasons why companies go to Public is to Raise funds or the get adequate capital from public to meet their business requirements and this will also help to expand their business.
At some point Companies may reach at a level where they need more capital for the growth of the business and this is the method where Companies get recognized and get opportunity to raise capital.
- Recognize in the Market: When any company get list into the Stock Market then the company be recognized and gets visibility to the public and most importantly those companies will be watched by the Investors no matter whether they are Retail investors or Institutional Investors. This will be a huge opportunity to attract big Investors in National or International Market by highlighting their business model and future growth plans with strong fundamentals and financials.
- Enhance Regulation of the Company: Companies listing in stock exchange will be controlled and been regulated by SEBI with stringent norms and regulations that aims shareholders safety and investors interest with proper efficiency and transparency of the company.
- Reputation: Companies listed in the stock markets increases their reputation of their business and also should have media coverage with positive impact to the investor over all financial markets.
- Increase Liquidity: Companies listed in the stock markets strengthens the Liquidity and will make easier to the Investors to execute the trades or Investments in the market and have the potential to take the market value to upward direction and attract more investors to invest into their business.
- Exit for Current Investors: The shares of a privately owned businesses are held by a few partners including the organization’s Promoters and confidential financial backers. If such financial backers have any wish to sell their stake somewhat or totally, listing on the stock exchange can give them an answer. The current financial backers of the organization can offer their shares to general society or Public through a Proposal available to be purchased i.e OFS (Offer for Sale) and sell their share to Public.
- Merger and Acquisitions: This is also one of the major reasons why companies List to stock markets which gives companies to have adequate funds to acquire the smaller companies with similar kind of business for further growth and expansion of the business. This will help the organization to increase the volumes and also the funding which will increase the profitability of the company.
- Diversification: Another important reason why companies come to stock market is to Diversify their business which makes their core business to grow more and even make more successful. The objective of this is to reduce the risk of the core business and to generate more revenue. A decent expansion procedure can launch a striving business and likewise broaden the progress of currently beneficial business.