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 required ₹ 100 crores. The Chief Executive Officer of ‘Tech Work’ consulted the Finance Manager, who suggested that there is a market which facilitates 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 @ ₹ 200 per share for the first time.

1. Name the type of capital market through which ‘Tech Work’ decided to raise funds for its expansion.
2. State three features of the market identified in (i) above.

Answer 1

1. The Primary Market is the type of capital market that ‘Tech Work’ chose to use to raise money.
2. The features of the primary market are:
   1. New issues: The main market is where new securities are sold. One thing that makes the main market unique is that ‘Tech Work’ is issuing equity shares for the first time.
   2. Direct capital formation: The primary market is where businesses raise capital directly from investors. This makes it easier to create direct capital because the money raised is used to grow and improve the business.
   3. Banks, insurance companies, mutual funds, and people are among the investors in this market.