India’s largest domestic investor | Class 12 Business Studies Chapter Financial Markets, Financial Markets NCERT Solutions

Welcome to the NCERT Solutions for Class 12 Business Studies - Chapter Financial Markets. This page offers a step-by-step solution to the specific question from Exercise 3, Question 4: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.

Question 4:

India’s largest domestic investor Life Insurance Corporation of India has once again come to government’s rescue by subscribing 70% of Hindustan Aeronautics’ ₹4,200-crore initial public offering.

a. Which market is being reflected in the above case?
b. State which method of floatation in the above identified market is being highlighted in the case? (Primary Market)
c. Explain any two other methods of floatation. (Private Placement, Offer through prospectus, offer for sale).

Answer:

a. Which market is being reflected in the above case?

Ans. The market that has been reflected in the above case is Primary Market. Primary Market is also known as the new issues market, as this market deals with the new securities issued for the first time.

b. State which method of floatation in the above identified market is being highlighted in the case?

Ans. The floatation method that has been highlighted in this case is Right Issue. This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. The shareholders are offered the ‘right’ to buy new shares in proportion to the number of shares they already possess. This right is called the ‘pre-emptive right’ of the existing shareholders.

c. Explain any two other methods of floatation.

Ans. Methods of flotation are:

1. Offer Through Prospectus: Under this method, a company invites public to subscribe for its shares through issue of prospectus, which makes a direct appeal to investors to invest in the company, through an advertisement in the newspapers and magazines.

  • The contents of prospectus must be according to the provisions of Companies Act and SEBI guidelines.
  • The issue must be listed on at least one stock exchange.
  • The issue may be underwritten to save the company from under subscription.

2. Private Placement: Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It is considered beneficial because:

  • It helps to raise funds more quickly than a public issue.
  • The cost of flotation, which is quite expensive in other alternatives, is saved.


Study Tips for Answering NCERT Questions:

NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:

  • Read the question carefully and focus on the core concept being asked.
  • Reference examples and data from the chapter when answering questions about Financial Markets.
  • Review previous year question papers to get an idea of how such questions may be framed in exams.
  • Practice answering questions within the time limit to improve your speed and accuracy.
  • Discuss your answers with your teachers or peers to get feedback and improve your understanding.

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Welcome to the NCERT Solutions for Class 12 Business Studies - Chapter . This page offers a step-by-step solution to the specific question from Excercise 3 , Question 4: India’s largest domestic investor Life Insurance Corporation of India has once again come to g....