Share Market Basics.

All shares have a face value at which they are usually traded. But the public is not always given these shares at the face value. A company can give out shares to the market and general public investors at a higher or premium  price. This difference in the price is called the premium and the issue thus called a premium issue.

As per the SEBI guidelines, to provide a premium issue:

• The promoter company has a 3 years consistent record of profitable working.
• The promoter takes up at least 50 per cent of the shares in the issue.
• All parties applying to the issue should be offered the same instrument at the same terms, especially regarding the premium.
• The propectus should provide justification for the propose premium. On the other hand, exisiting companies can make a premium issue without the above restrictions.

The company issuing premium can take advantage of the additional cash inflow when required. In a good and a market in highs, its easy to gain a high premium for companies.