CSEET · Economic and Business Environment · Indian Financial Markets
A listed company offers new shares only to its existing shareholders in proportion to their current holdings. This method of raising capital in the primary market is called:
This method is a rights issue. New shares are offered to existing shareholders in proportion to the shares they already hold, and they pay for them. It differs from a bonus issue, where free shares are given out of reserves and the company raises no funds.
- ARights issueCorrect
- BBonus issue
- CFollow-on public offer to the general public
- DOffer for sale
Explanation
A rights issue offers new shares to existing shareholders in proportion to their holdings, usually for cash. A bonus issue gives free shares by capitalising reserves and raises no money, so it is not the answer.
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