SHARETIPSINFO >> Articles Directory >>Concept of bourse, bridge funding and broad based funds in Indian stock market
Bourse – get your stocks:
Bourse is the most commonly used term for a stock exchange. Stock brokers seek the help of Bourse to trade stocks or securities from companies. Income and stock payments can be made through Bourse. The dividends are issued by stock exchanges. Shares, bonds and unit trusts are traded with the help of Bourse.
In modern market, every transaction takes place through electronic media. There speed and accuracy really matters. Hence, physical connection with a central repository is not possible. Still there needs a centre where all the details and records are kept and maintained centrally. The exchange and the transactions done in the bourse are mainly done by the members. The entities need to be registered in the central record. These entities are only allowed to be sold and taken for transaction.
The dividend is given away to the investors for the first time through the primary market. Brouse is the most important part of a stock market. The price of the stocks is greatly affected by various factors. This price of the stock has a great influence on the demand in the brouse. This in turn affects the supply of the stocks in the brouse.
Bourse has a great role in the economy of the nation. When people are investing in fixed deposits, the money is left idle without being used for any productive purposes. But with the help of a bourse, the money is transformed into a productive purpose. It is used to develop business. They are in turn making profit when the company's income increases. At the same time the total economy is benefitted.
Another great advantage of Bourse is that companies get chance to give away their share to the public. The public get a role in the company's growth and at the same time the company get a capital that is needed for the initial investment and thereby its growth.
Bourse allows the small-scale investors to have a role in the economy of the nation. Other wise they are not getting a chance to compete in the larger market where the investors are quite big in size. Bourse is working under the legal control of the government. They are acting according to the interests of the investors. The shareholders get a role in the working of the company. Hence, they are reliable as well. The share price falls greatly in a bourse. This can affect the behavior of the investors and there by the total wealth of the economy. Thus, the role of bourse in the financial growth of the company is high.
Bridge funding- get an easy capital:
Bridge funding is used to describe the funding for a company in the most basic definition. It is also referred to as Mezzanine funding. It is mainly used in the case of companies that are in between an initial phase or an Independent public Offering. It usually takes the form of debts or equity transactions. If it is a debt, the funding usually appears as a stand-alone debt. The loan is started with an interest. After that in case the loan is not paid back to the lender, the role of the lender will be changed as an equity owner.
The interest rate incurred by the bridge funding will be usually high. This is mainly because of the risk encountered in the business. Most evidently, the risk has to be taken by both the lender and the investor. But the main reason why the companies go for bridge funding is that it is much easier to get. The bank loans might take more time and the entire processing is lengthy. Hence, if the users are trying to get a bridge fund, the capital needed to run a business can be procured much easily.
The growth opportunity with Bridge funding is much higher than any other financing cases. A management level buy out is possible with Bridge funding. Bridge funding has a great role in the financial status of a company. Hence the funding hence goes well with the economical condition of the firm as well as the role it has in the company throughout its growth. Once committed the risk involved in bridge funding is much less as compared to the starting phases.
There is the flexibility to work without a security in the case of bridge funding. The return can be in the form of royalties also. This is usually replacing the conventional methods of funding along with the growth of the company. It can be used in places where the source of fund comes from a conventional method and an equity transaction. The combined effect can be replaced by a bridge funding.
The main target of bridge funding is towards large-scale business. Well-established business is mostly taking benefit from bridge funding. Yet there are small-scale business benefited from the bridge funding. This is mainly because of the great advantages felt from this despite the high risks associated with it. Bridge funding allows the companies to get rid of the financial dealings used by other financers. This helps them to get enough capital required to run their business.
Broad based funds – with minimum resources:
Broad based funds are funds, which have at least 20 shareholders. The shareholders are not holding more than 10% of the total shares. None of the shareholders can hold units, which are more than 10% of the total units. This is a sub account. Another type of sub account is a Proprietary fund. Proprietary funds cannot be invested as a broad based fund. In the case that the shareholders are having more than 10% of the shares, they have to be changed as broad based funds. Foreign individuals are not asked to broad base their funds.
Broad based funds are sub-accounts. Hence, it is possible to break it into smaller accounts. This in turn creates a number of accounts, which help to keep track of the expenses. The sub accounts include all the details like the foreign individuals and corporate. But they need not be changed into broad based accounts. The broad based funds are basically funded outside India. They can be established outside India or are incorporated there.
There are flexibilities allowed with a broad based fund. The funds can take institutional investors. These funds have no bound on the number of the investors. They can have a still lesser number of investors. If the institutional investor is having more than 10% of the shares as against the case of broad based funds, the investor is considered to be broad based.
In a broad based fund, the investors need not invest maximum financial resources. Yet with the limited number of investors, they can make the maximum benefit. They can earn as much as a large investor without any limitations in the market is earning. They can get as much number of stocks as an investor normally earns. It can reflect the changes in the entire market. This is because the broad based funds track the stocks from different markets. They can bring together the stocks in various industries and markets. The stock market rates of different industries are thus compared on an effective basis.
The smallest broad based fund is with the Dow Jones. Their industrial average is with 30 stocks from the market. Largest is the Russell with 3000 stocks. Here investors get the maximum diversities in their stocks. They can get the maximum number of stocks from various sectors. They can look into the reviews and comparisons plotted in various sites before going to purchase a broad based fund.
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