Following are the main financial products/instruments dealt in the Secondary market which may be divided broadly into Shares and Bonds: Shares:
Equity Shares: An equity share, commonly referred to as ordinary share, represents the form of fractional ownership in a business venture.
Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at a ratio to those already held, at a price. For e.g. a 2:3 rights issue at Rs. 125, would entitle a shareholder to receive 2
shares for every 3 shares held at a price of Rs. 125 per share.
Bonus Shares: Shares issued by the companies to their shareholders free of cost based on the number of shares the shareholder owns.
Preference shares: Owners of these kind of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid in respect of equity share. They also enjoy priority over the equity shareholders in payment of surplus. But in the event of liquidation, their claims rank below the claims of the company’s creditors, bondholders/debenture holders.
Cumulative Preference Shares: A type of preference shares on which dividend accumulates if remained unpaid. All arrears of preference dividend have to be paid out before paying dividend on equity shares.
Cumulative Convertible Preference Shares: A type of preference shares where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company.
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