27 July 2015
Listing provides an exclusive privilege to securities in the stock ex¬change. Only listed shares are quoted on the stock exchange. Stock exchange facilitates transparency in transactions of listed securities in perfect equality and competitive conditions. Listing is beneficial to the company, to the investor, and to the public at large.
The important advantages of listing are listed below Fund Raising and exit route to investors Listing provides an opportunity to the corporates / entrepreneurs to raise capital to fund new projects/undertake expansions/diversifications and for acquisitions. Listing also provides an exit route to private equity investors as well as liquidity to the ESOP-holding employees. Ready Marketability of Security Listing brings in liquidity and ready marketability of securities on a continuous basis adding prestige and importance to listed companies. Ability to raise further capital An initial listing increases a company's ability to raise further capital through various routes like preferential issue, rights issue, Qualified Institutional Placements and ADRs/GDRs/FCCBs, and in the process attract a wide and varied body of institutional and professional investors. Supervision and Control of Trading in Securities The transactions in listed securities are required to be carried uniformly as per the rules and bye-laws of the exchange. All transactions in se¬curities are monitored by the regulatory mechanisms of the stock exchange, preventing unfair trade practices. It improves the confidence of small investors and protects them. Fair Price for the Securities The prices are publicly arrived at on the basis of demand and supply; the stock exchange quotations are generally reflective of the real value of the security. Thus listing helps generate an independent valuation of the company by the market. Timely Disclosure of Corporate Information The listing agreement signed with the exchange provides for timely dis¬closure of information relating to dividend, bonus and right issues, book clo¬sure, facilities for transfer, company related information etc by the company. Thus providing more transparency and building investor confidence. Collateral Value of Securities Listed securities are acceptable to lenders as collateral for credit facili¬ties. A listed company can also borrow from financial institutions easily as it is rated favorably by lenders of capital; the company can also raise additional funds from the public through the new issue market with a greater degree of assurance. Better Corporate Practice Since the violation of the listing agreement entails the de-listing/suspension of securities from the rings of the exchange, the listed companies are ex¬pected to follow fair practices to the advantage of investors and public. Benefits to the Public The data daily culled out by the stock exchange in the form of price quotations and others; provide valuable information to the public which can be used for project and research studies. The stock exchange prices can be an index of the state of the economy. Financial institutions, NRl, individual investor’s etc. can take wise decisions before making investments. Subdivision and Consolidation of Holdings Stock exchange bye-laws provide for explicit rules for sub division and consolidation of securities as desired by the investors. There is special trading sessions in the exchange for conversion of odd lots into market lots arranged by financial and institutional investors. Thus listing helps to provide flexibility to investors in the subdivision and consolidation of their holdings with speed and earnestness.
CAclubindia
