Notes On Marketing Of Securities:

Different Classes Of Security Buyers. Their Role In Marketing Of Securities.

       The security buyers can be broadly classified into two:

  1. I. Individual Investors or Buyers and
  2. II. Institutional Investors
I. Individual Investors or Buyers:

       Individual Investors includes buyers of securities who invest their own funds. The investment decisions of individual investors are governed by their expectations about the future earnings.

       Individual Investors may be classified into the following groups:

1. Existing Shareholders:

       The existing shareholders of the company are important buyers of its new security issue. The existing shareholders of the company get the privilege to subscribe for the new shares of the company and the company also has some advantages in this respect.

  1. The company is assured of the funds
  2. Cost of raising funds stands low
  3. It minimizes the scope of speculations.

2. Creditors:

       The creditors of the company sometimes buy its shares as a manifestation of their trust towards the concern. At the time of liquidations and formation of a new company, the creditors of the old company are offered shares of the new company in full settlement of their debts.

3. Employees:

       In some cases companies have been found selling their shares to their employees. This helps to create a sense of belonging among the employees and makes them feel that their interests are best served.

4. Customers:

       Some times the issuing company also offers their new shares to their customers. This helps the company not only to secure funds economically but also helps to achieve the cooperation of the customers in many respects.

5. Friends of Management:

      In case of a newly setup organisation with no creditors or employees, the management finds it easier to approach their friends for procuring the required funds.

6. Speculators:

       Speculators are not real investors. They invest in securities with the hope of earning income from the anticipated change in the value of the share prices. Their intention is to make profits from the fluctuations of the share prices.

II. Institutional Investors:

1. Private Institutional Investors:

       They comprise of such institutions which are owned by private enterprises. They can be divided into two groups. The first group includes those that invest their own funds. E.g. banks, general insurance companies etc and the second group includes those investors who invest on behalf of their clients. E.g. Stock brokers, underwriting firms etc.

2. Public Institutional Investors:

       They comprise of institutions which are owned by Central and State Government. E.g. I.D.B.I., L.I.C.I., S.F.C.

       A comparative analysis of the individual and institutional investors reveals that in the recent years the institutional investors are playing a dominant role as security buyer in the Indian Capital Market. It is also desired by the issuing company to sell their securities to the institutional investors because of the following inbuilt advantages:

  1. The issuing company gets the desired amount at one time.
  2. The institutional investors are thoroughly aware of the functioning of the capital market.