To understand the basic Structure and Concept of Various sources of Finance in Indian Financial Market

1. SOURCES OF FINANCE
PROF. SHIVGANGA MAINDARGI
BHARATI VIDYAPEETH (DEEMED TO BE) UNIVERSITY -
BVAKIMSS-SOLAPUR

2. CONTENTS
1. Overview of Financial Management &Market
2. Importance of -Sources of Finance
3. Process of Acquisition of Fund/Finance
4. Players in Financial Market
5. Types of Sources of Finance

3. FINANCIAL MANAGEMENT
• Is concerned with procurement of the least cost funds and its effective utilization for
maximization of the net wealth of the firm.
• It is a management of binding agreement for monitory /credit arrangement.
It includes;
 Estimation of Financial Requirement.
 Selection of the right sources of Fund.
 Allocation of fund
 Analyzing and interpretation of financial performance
 Fair return to investor
 Maintaining liquidity and wealth maximization

4. FINANCIAL MANAGEMENT
Anticipation of Fund
Acquisition of Funds
Allocation of
Fund
Financial Management

5. IMPORTANCE - SOURCES OF FINANCE
• Identify the Need of the finance and according making provision of Finance at ;
RIGHT TIME, RIGHT QUANTITY FOR RIGHT PURPOSE FROM RIGHT SOURCE WITH LOW COST
OF CAPITAL.
• The firm need funds for the acquisition of fixed assets and current assets for establishment and smooth
functioning of its operation.
• So, the financial manager has to arranged funds from Financial Market as numerous sources to meet the
various financial requirement; like
 Business expansion
 Modernization/diversification
 New innovation/project
 acquisition of fixed assets and current assets

6. PROCESS OF – ACQUISITION OF FUND/FINANCE
Anticipation of Funds : Need, Purpose, Period etc
Identifying potential Players in Financial Market
Identified various sources of finance in financial market
Formation of/ Design Capital structure (Combination of
Capital)

7. Players In Financial
Markets
Banks
Financial
Institution's
Stock
Exchange/Market
Investment
Bankers
(MB)
Foreign
Institutional
Investors

8. SOURCES OF FINANCE
Ownership Security
Long Term& Medium Term
Public Deposit
Venture Capital
Retained Earning
Short Term Loans & Adv.
Bank Credit
Secured Bank Loans
Miscellaneous sources
Trade Credit
Long Term & Medium Term Short Term
Creditor ship Security

9. Long Term Sources of
Finance
Ownership Securities
Preference share
Capital
Equity Share Capital
Public Deposits
Venture Capital
Creditorship
Securities
Debenture Capital
Loan’s Advances

10. OWNERSHIP SECURITIES SHARE CAPITAL
Preference
Share Capital
Fixed Dividend &pay
Before Equity Shareholders
but after debenture
holders
No Voting
Rights
Dividend is not
Tax –Deductible
No Capital
Appreciation

11. TYPES OF PREFERENCE SHARE CAPITAL
1
• Cumulative Pre.Share
• Non Cumulative Pre.Share
2
• Participative Pre.Share
• Non Participative Pre.Share
3
• Redeemable Pre.Share
• Irredeemable Pre.Share
4
• Convertible Pre.Share
• Non Convertible Pre.Share

12. OWNERSHIP SECURITIES/SHARE CAPITAL
Equity Share
Capital
No Fixed Dividend & pay
after Pre.Share holders
Voting rights
Dividend Tax
–Deductible
Capital
Appreciation

13. PUBLIC DEPOSITS
1. A Company Can Obtain Deposits From Investing Public.
2. Obtaining Deposits Only For 36 Months .
3. It Is Clean Deposits and not covered by any Security, thus they are the Unsecured
Creditors of the Company.
4. Normally Interest Payable On Deposits Is Lower Than The Interest Usually Payable
On Loans From Bank And Financial Institutions

14. VENTURE CAPITAL
• Venture capital funding is increasingly becoming a popular – even essential – source for
raising capital, especially if they lack access to capital markets, bank loans or other debt
instruments.
• Venture capital is a form of private equity and a type of financing that investors provide
to startup companies and small businesses that are believed to have long-term
growth potential.
• Venture capital generally comes from well-off investors, investment banks and any other
financial institutions. However, it does not always take a monetary form; it can also be
provided in the form of technical or managerial expertise.
• Venture capital is typically allocated to small companies with exceptional growth potential, or
to companies that have grown quickly and appear poised to continue to expand.

15. CREDITOR SHIP SECURITY
Debenture
capital
Fixed Interest & pay
Before Pre.Share holders
No Voting
rights
Interest non
Tax –Deductible
No Capital
Appreciation

16. TYPES OF DEBENTURE CAPITAL
1
• Registered
• Unregistered
2
• Secured
• Unsecured
3
• Redeemable Debenture
• Irredeemable Debenture
4
• Convertible debenture
• Non Convertible debenture

17. Long Term Loans
and Advances
Term Loan Market Mortgages Market
Financial
Guarantees Market
Long Term Loan

18. SHORT TERM SOURCES OF FINANCE
Trade Credit
Short Term Credit
Bank Credit
Secured Loan
Miscellaneous Sources