Question

Tech Work, an Artificial Intelligence (AI) startup, started in 2024. It was earning good profits. It wanted to expand its business and for its research and development, it 27 required 100 crores. The Chief Executive Officer of Tech Work consulted the Finance Manager who suggested that there is a market which facilitates the transfer of investible funds from savers to entrepreneurs seeking to establish new enterprises or expand existing ones through the issue of securities. The management of Tech Work decided to raise funds from the investors by issuing equity shares at 200 per share for the first time.
(i) Name the type of capital market through which ”Tech Work” decided to raise funds for its expansion.
(ii) State three features of the market identified in (i) above.

Answer 1

(i) Type of Capital Market: The type of capital market through which Tech Work decided to raise funds for its expansion is the Primary Market. The primary market deals with the issuance of new securities, where companies raise capital for the first time by offering equity shares to the public (also known as an Initial Public Offering or IPO).

(ii) Three Features of the Primary Market: 1. New Issue of Securities: The primary market facilitates the issuance of new securities (equity shares, bonds, etc.) by companies to raise capital. This is where companies first offer their shares to the public. 2. Capital Raising for Companies: It provides a platform for companies to raise capital for business expansion, research, development, or other projects, as seen in the case of Tech Work. 3. Direct Transfer of Funds: In the primary market, funds are directly transferred from investors to the company. The money raised from the issue of shares goes directly to the company, which will use it for its operations or expansion