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CS Professional · Strategic Management and Corporate Finance · Raising of Funds - Private Funding

Arjun Engineering Ltd raises Rs 50 crore through a private equity investment, issuing 25 lakh equity shares to the investor at Rs 200 per share. The firm had 75 lakh shares outstanding before the issue. What is the investor's percentage shareholding after the issue, and does the issue amount reconcile?

The investor holds 25% and the amount reconciles at Rs 50 crore. Issue proceeds are 25 lakh shares times Rs 200, which is Rs 50 crore, and post-issue shares total 100 lakh, so 25 of 100 lakh gives 25 percent.

  1. A25% holding; amount reconciles at Rs 50 croreCorrect
  2. B33.33% holding; amount reconciles at Rs 50 crore
  3. C25% holding; amount is Rs 5 crore
  4. D33.33% holding; amount is Rs 500 crore

Explanation

Amount raised = 25,00,000 x Rs 200 = Rs 50,00,00,000 = Rs 50 crore. Post-issue shares = 75 lakh + 25 lakh = 100 lakh, so holding = 25/100 = 25%. The 33.33% figure wrongly divides by the old share count (25/75).

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