What is meant by Primary Market? Explain the four methods used by an entrepreneur to raise the required capital in the Primary Market.

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**Primary Market** (also known as New Issues Market) is basically to facilitate the transfer of resources from savers to entrepreneurs seeking funds for setting up new enterprises, expanding, or diversifying. The 'new issues' may be issued by new companies (initial issues) or old companies (further issues).

The four methods used by an entrepreneur to raise the required capital in the Primary Market are:

1. **Public Issue / Going Public:** This is the most popular method of raising capital. It involves raising funds directly from the public through the issue of a prospectus. An enterprise organizing itself as a public limited company can raise the required funds commonly by preparing a prospectus. The primary advantage is access to capital that does not have to be repaid and does not involve an interest charge. Other advantages include mergers and acquisitions capability, higher valuations, benchmark trading price, capital formation, employee incentives, liquidity, and prestige.

2. **Rights Issue:** This is a method of raising additional finance from existing shareholders by offering securities to them on a pro-rata basis, i.e., giving them a right to a certain number of shares in proportion to the shares they are holding. Normally, through a circular, rights issues are proposed to the existing shareholders, and in case they are not willing to subscribe, they can renounce the same in favour of another person. This method is considered inexpensive as it does not require brokers, agents, underwriters, prospectus, or enlistment.

3. **Private Placement:** This means the direct sale by a company of its securities to a limited number of sophisticated investors. Entrepreneurs raise funds by selling the issues mainly to institutional investors like UTI, LIC, GIC, Army Group Insurance, State Level Financial Corporations, etc. This method is useful when the company does not wish to disclose information to the open market.

4. **Offer to Employees:** Stock options or offering shares to employees has gained much popularity. This method enables employees to become shareholders and share the profits of the company, leading to higher efficiency, low labour turnover, better industrial relations, low flotation cost, and wider generation of funds.